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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):
December 22, 1997 (December 5, 1997)
RECYCLING INDUSTRIES, INC.
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(Exact name of registrant as specified in its charter)
Colorado 0-20179 84-1103445
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(State or other (Commission (I.R.S. Employer
jurisdiction File Number) Identification No.)
of incorporation)
9780 South Meridian Boulevard, No. 180
Englewood, Colorado 80112
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(Address of principal executive offices)(Zip Code)
Registrant's telephone number, including area code: (303) 790-7372
384 Inverness Drive South
Suite 211
Englewood, CO 80112
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(Former name or former address, if changed since last report.)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On December 5, 1997 and December 8, 1997, the Registrant completed the
following six acquisitions:
ACQUISITION OF THE ASSETS OF GROSSMAN BROTHERS COMPANY AND MILWAUKEE METAL
BRIQUETTING CO., INC.
On December 5, 1997, Recycling Industries of Wisconsin, Inc., a
wholly-owned subsidiary of the Registrant, acquired substantially all of the
scrap metals recycling assets and business of Grossman Brothers Company, Inc.
and Milwaukee Metal Briquetting Co., Inc. (collectively "Grossman").
Grossman was a privately held metals recycler with operations in the
Milwaukee, Wisconsin area.
The assets acquired from Grossman consist of heavy equipment, tools and
rolling stock used in the business of recycling ferrous and non-ferrous
metals. The Registrant is leasing, with an option to purchase, the real
property, buildings and leasehold improvements used in the metals recycling
business.
The total purchase price for Grossman was $3,987,000, comprised of
$3,727,000 of cash and the assumption of $260,000 of Grossman's liabilities.
The purchase price was financed, in part, from the proceeds of the Senior
Secured Credit Facility, Subordinated Notes and Sale of Common Stock
described in Item 5, below. The purchase price was determined through arm's
length negotiations and based upon an independent appraisal.
The Registrant will continue the metals recycling operations of
Grossman.
ACQUISITION OF THE ASSETS OF CENTRAL METALS COMPANY, INC.
On December 5, 1997, Recycling Industries of Atlanta, Inc., a
wholly-owned subsidiary of the Registrant, acquired substantially all of the
scrap metals recycling assets and business of Central Metals Company, Inc.
("Central"), a privately held metals recycler with operations in the Atlanta,
Georgia area.
The assets acquired from Central consist of heavy equipment, tools and
rolling stock used in the business of recycling ferrous and non-ferrous
metals. The real property and buildings owned and used by Central in the
metals recycling business have been placed into escrow and are being leased
by the Registrant until Central can provide clear title to these assets, at
which time the Registrant will complete the purchase of the real property and
buildings. The Registrant is leasing certain equipment used in the metals
recycling business from an affiliate of Central.
The total purchase price for Central was $30,979,000, comprised of
$20,679,000 of cash and 800,000 shares of the Registrant's common stock,
$.001 par value per share (the "Common
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Stock") having an agreed value of $12.50 per share or $10,000,000. The
Registrant also assumed $300,000 of Central's liabilities.
The Registrant has guaranteed that the aggregate market value of the
800,000 shares of Common Stock issued to Central will be at least $10,000,000
on December 4, 1999. If the market value of the Common Stock is less than
$10,000,000, the Registrant will issue shares of Common Stock to Central
having a market value equal to the difference between $10,000,000 and the
market value of the 800,000 shares of Common Stock initially issued to
Central.
In connection with the acquisition, Central was issued warrants to
acquire up to 200,000 shares of the Registrant's common stock for $15.00 per
share, exercisable upon satisfaction of certain financial performance
conditions related to the operations of Recycling Industries of Atlanta, Inc.
(the "Contingent Warrants"). The exercise price per share of the Contingent
Warrants is subject to adjustment at the time of exercise so that the aggregate
spread between the exercise price of all Contingent Warrants and the market
value of the Common Stock received upon exercise of the Contingent Warrants
is not less than $1,000,000. The Registrant also granted "piggyback"
registration rights to the holders of the Contingent Warrants with respect to
the shares of Common Stock received upon their exercise.
The cash portion of the purchase price was financed, in part, from the
proceeds of the Senior Secured Credit Facility, Subordinated Notes and Sale
of Common Stock described in Item 5, below. The purchase price was
determined through arm's length negotiations and based upon an independent
appraisal.
The Registrant will continue the metals recycling operations of Central.
ACQUISITION OF THE ASSETS OF MONEY POINT LAND HOLDING CORPORATION AND MONEY
POINT DIAMOND CORPORATION
On December 5, 1997, Recycling Industries of Chesapeake, Inc., a
wholly-owned subsidiary of the Registrant, acquired substantially all of the
scrap metals recycling assets and business of Money Point Land Holding
Corporation and Money Point Diamond Corporation (collectively "Money Point").
Money Point was a privately held metals recycler with operations in the
Chesapeake, Virginia area.
The assets acquired from Money Point consist of heavy equipment, tools
and rolling stock used in the business of recycling ferrous and non-ferrous
metals. The Registrant also purchased from Money Point certain real property,
buildings and leasehold improvements used in the metals recycling business.
The total purchase price for Money Point was $19,900,000, comprised of
$16,900,000 of cash and 10,000 shares of the Registrant's Series E Redeemable
Convertible Preferred Stock (the "Series E Preferred") having a stated value
of $3,000,000.
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The cash portion of the purchase price was financed, in part, from the
proceeds of the Senior Secured Credit Facility, Subordinated Notes and Sale
of Common Stock described in Item 5, below. The purchase price was
determined through arm's length negotiations and based upon an independent
appraisal.
If not earlier redeemed or converted, on December 5, 2000, the Series E
Preferred will automatically convert into that number of shares of Common
Stock having an aggregate market value on the date of conversion of not less
than $3,000,000. Unless Money Point elects to retain the shares of Common
Stock received upon conversion of the Series E Preferred (the "Series E
Conversion Shares"), the Registrant will assist Money Point in selling the
Series E Conversion Shares on or before January 4, 2001. If the sale of the
Series E Conversion Shares yields net proceeds of less than $3,000,000, the
Registrant will pay the difference to Money Point. The Registrant has
granted "piggyback" registration rights to the holders of the Series E
Preferred with respect to the Series E Conversion Shares.
The Registrant will continue the metals recycling operations of Money
Point.
ACQUISITION OF WM. LANS SONS' CO., INC.
On December 8, 1997, the Registrant acquired from Bertram Lans, Bruce
Lans and Scott Lans all of the issued and outstanding capital stock of Wm.
Lans Sons' Co., Inc. ("Lans"), a privately held metals recycler with
operations in the South Beloit, Illinois, area.
The assets owned by Lans consist of heavy equipment, tools and rolling
stock used in the business of recycling ferrous and non-ferrous metals. The
Registrant also purchased from an affiliate of Lans certain real property,
buildings and leasehold improvements used in the metals recycling business.
The total purchase price for Lans was $25,500,000, comprised of
$22,000,000 of cash and 10,000 shares of the Registrant's Series I 8%
Redeemable Convertible Preferred Stock (the "Series I Preferred") having a
stated value of $3,500,000.
The cash portion of the purchase price was financed, in part, from the
proceeds of the Senior Secured Credit Facility Subordinated Notes and sale
of Common Stock described in Item 5, below. The purchase price was
determined through arm's length negotiations and based upon an independent
appraisal.
If not earlier redeemed or converted, on December 8, 1999, the Series I
Preferred will automatically convert into that number of shares of Common
Stock having a market value on the date of conversion of not less than
$3,500,000. The Registrant has agreed to register on or before December 5,
2000 the shares of Common Stock received upon conversion of the Series I
Preferred.
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The Registrant will continue the metals recycling operations of Lans.
ACQUISITION OF THE ASSETS OF THE BRENNER COMPANIES, INC.
On December 5, 1997, Recycling Industries of Winston-Salem, Inc., a
wholly-owned subsidiary of the Registrant, acquired substantially all of the
scrap metals recycling assets and business of the Brenner Companies, Inc.
("Brenner"), a privately held metals recycler with operations in the
Winston-Salem, North Carolina area.
The assets acquired from Brenner consist of heavy equipment, tools and
rolling stock used in the business of recycling ferrous and non-ferrous
metals. The Registrant also purchased from Brenner certain real property,
buildings and leasehold improvements used in the metals recycling business.
The total purchase price for the Brenner assets was $23,773,000,
comprised of $15,683,000 of cash, 14,000 shares of the Registrant's Series F
6 1/2% Redeemable Convertible Preferred Stock (the "Series F Preferred")
having a stated value of $3,500,000, 14,000 shares of the Registrant's Series
G 6 1/2% Redeemable Convertible Preferred Stock (the "Series G Preferred")
having a stated value of $3,500,000 and the assumption of $1,090,000 of
Brenner's deferred compensation labilities.
The cash portion of the purchase price was financed, in part, from the
proceeds of the Senior Secured Credit Facility, Subordinated Notes and Sale
of Common Stock described in Item 5, below. The purchase price was
determined through arm's length negotiations and based upon an independent
appraisal.
If not earlier redeemed or converted, on December 5, 2000, the Series F
Preferred will automatically convert into that number of shares of Common
Stock having an aggregate market value on the date of conversion of not less
than $3,500,000. Brenner has the right to require the Registrant to find a
purchaser of the shares of common stock received upon conversion of the
Series F Preferred (the "Series F Conversion Shares") on or before December
5, 2000. If the sale of the Series F Conversion Shares yields net proceeds
of less than $3,500,000, the Registrant will pay the difference to Brenner.
The Registrant has agreed to register on or before December 5, 2000 the
Series F Conversion Shares, unless such shares may be sold by the holder
thereof pursuant to Rule 144(k) promulgated under the Securities Act of 1933,
as amended (the "Securities Act") or any equivalent provision then in effect.
If not earlier redeemed or converted, on December 5, 2000, the Series G
Preferred will automatically convert into that number of shares of Common
Stock having an aggregate market value on the date of conversion of not less
than $3,500,000. The Registrant has agreed to register on or before December
5, 2000 the shares of Common Stock received upon conversion of the Series G
Preferred, unless such shares may be sold by the holder thereof pursuant to
Rule 144(k) promulgated under the Securities Act or any equivalent provision
then in effect.
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The Registrant will continue the metals recycling operations of Brenner.
ACQUISITION OF THE ASSETS OF UNITED METAL RECYCLERS, INC.
On December 5, 1997, Recycling Industries of Greensboro, Inc., a
wholly-owned subsidiary of the Registrant, acquired substantially all of the
scrap metals recycling assets and business of United Metal Recyclers, Inc.
("United"), a privately held metals recycler with operations in the
Kernersville, North Carolina area.
The assets acquired from United consist of heavy equipment, tools and
rolling stock used in the business of recycling ferrous and non-ferrous
metals. The Registrant also purchased from United certain real property,
buildings and leasehold improvements used in the metals recycling business
and United's 50% interest in another metals recycling facility located in the
Greensboro, North Carolina area.
The total purchase price for the United assets was $41,664,000,
comprised of $35,975,000 of cash and 12,000 shares of the Registrant's Series
H 6% Secured Redeemable Convertible Preferred Stock having a stated value of
$5,689,000.
The cash portion of the purchase price was financed, in part, from the
proceeds of the Senior Secured Credit Facility, Subordinated Notes and Sale
of Common Stock described in Item 5, below. The purchase price was
determined through arm's length negotiations and based upon an independent
appraisal.
If not earlier redeemed or converted, on December 5, 2000, the Series H
Preferred will automatically convert into that number of shares of Common
Stock having an aggregate market value on the date of conversion of not less
than $6,000,000. United has the right to require the Registrant to find a
purchaser of the shares of common stock received upon conversion of the
Series H Preferred (the "Series H Conversion Shares") on or before December
5, 2000. If the sale of the Series H Conversion Shares yields net proceeds
of less than $6,000,000, the Registrant will pay the difference to United.
The Registrant has agreed to register on or before December 5, 2000 the
Series H Conversion shares, unless such shares may be sold by the holder
thereof pursuant to Rule 144(k) promulgated under the Securities Act or any
equivalent provision then in effect.
The Registrant will continue the metals recycling operations of United.
ITEM 5. OTHER EVENTS.
The acquisitions described in Item 2, above, were financed, in part, by
the following:
SENIOR SECURED CREDIT FACILITY
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On December 5, 1997, the Registrant and its subsidiaries entered into a
$150 million Senior Secured Credit facility with General Electric Capital
Corporation as agent for the lenders (the "Credit Facility"). The Credit
facility is comprised of (i) a $45 million revolving credit facility; (ii) a
$40 million term loan due December 5, 2003, with accrued interest and
principal payable quarterly; (iii) a $40 million term loan due on the earlier
of December 5, 2005 or six months prior to the maturity of the Subordinated
Notes discussed below; and (iv) a $25 million acquisition line of credit due
December 5, 2003, with accrued interest and principal payable quarterly
Loans made under the Credit Facility bear interest at either (i) the
higher of (a) the Prime Rate quoted in the WALL STREET JOURNAL plus .75%, and
(b) the Federal Funds rate plus 50 basis points per annum plus .75%, or (ii)
at the option of the Registrant upon satisfaction of certain conditions, the
LIBOR rate plus 2.25%. The Credit facility is secured by substantially all
of the Registrant's assets.
SUBORDINATED NOTES
On December 5, 1997, the Registrant issued $60 million of 13% Senior
Subordinated Notes due 2005 to a group of investors including Sun America
Life Insurance Company.
SALE OF COMMON STOCK
In connection with the Credit Facility and the issuance of the
Subordinated Notes, the Company sold 1,666,666 shares of its Common Stock for
an aggregate of $10 million to various accredited investors in a transaction
exempt from the registration requirements of the Securities Act of 1933, as
amended.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED.
Financial Statements for the businesses acquired as described in Item 2,
above, will be filed by amendment to this Form 8-K.
(b) PRO-FORMA FINANCIAL INFORMATION.
Pro-Forma financial information reflecting the effect of the businesses
acquired as described in Item 2, above, will be filed by amendment to this
Form 8-K.
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(c) EXHIBITS
Exhibit
Number Description
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2.1 Agreements related to the Acquisition of the Assets of Grossman
Brothers Company and Milwaukee Metal Briquetting Co., Inc.
2.1.1 Asset Purchase Agreement dated October 31, 1997, by and
among Recycling Industries of Wisconsin, Inc., a
Colorado corporation, Recycling Industries, Inc., a
Colorado corporation, Grossman Brothers Company, Inc.,
a Wisconsin corporation, Milwaukee Metal Briquetting
Co., Inc., a Wisconsin corporation, and Arthur
Grossman.*
2.1.2 Amendment to Asset Purchase Agreement dated December 5,
1997, by and among Recycling Industries of Wisconsin,
Inc., Recycling Industries, Inc., Grossman Brothers
Company, Inc. and Milwaukee Metal Briquetting Co., Inc.
2.2 Asset Purchase Agreement dated December 4, 1997 by and among
Recycling Industries, Inc., a Colorado corporation, Recycling
Industries of Atlanta, Inc., a Colorado corporation, and Central
Metals Company, Inc., a Georgia corporation.*
2.3 Asset Purchase Agreement dated December 5, 1997 by and among
Recycling Industries of Chesapeake, Inc., a Colorado corporation,
Recycling Industries, Inc., a Colorado corporation, Money Point
Land Holding Corporation, a Virginia corporation, Money Point
Diamond Corporation, a Virginia corporation, George B. Ginsburg,
the Fred Jacobson Revocable Trust, a Virginia trust, and the
Dorothy G. Jacobson Revocable Trust, a Virginia trust.*
2.4 Stock Purchase Agreement dated December 8, 1997, by and among
Recycling Industries, Inc., a Colorado corporation, Wm. Lans
Sons' Co., Inc., an Illinois corporation, Bertram Lans, Bruce
Lans and Scott Lans.*
2.5 Asset Purchase Agreement dated December 4, 1997 by and among
Recycling Industries of Winston-Salem, Inc., a Colorado
corporation, Recycling Industries, Inc., a Colorado corporation,
Brenner Companies, Inc., a North Carolina corporation, Frank
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Brenner, Mike Brenner and the Shareholder of the Brenner
Companies, Inc.*
2.6 Asset Purchase Agreement dated December 4, 1997 by and among
Recycling Industries of Greensboro, Inc., a Colorado corporation,
Recycling Industries, Inc., a Colorado corporation, United Metal
Recyclers, a North Carolina general partnership, Brenner
Companies, Inc., a North Carolina corporation, and Levin
Brothers, Inc., a North Carolina corporation.*
3(i).1 Articles of Amendment to the Amended and Restated Articles of
Incorporation of Recycling Industries, Inc. - Designation of
Preferences, Limitations and Relative Rights of the Series E
Redeemable Convertible Preferred Stock of Recycling Industries,
Inc.
3(i).2 Articles of Amendment to the Amended and Restated Articles
of Incorporation of Recycling Industries, Inc. - Designation
of Preferences, Limitations and Relative Rights of the
Series F 6 1/2% Redeemable Convertible Preferred Stock of
Recycling Industries, Inc.
3(i).3 Articles of Amendment to the Amended and Restated Articles
of Incorporation of Recycling Industries, Inc. - Designation
of Preferences, Limitations and Relative Rights of the
Series G 6 1/2% Redeemable Convertible Preferred Stock of
Recycling Industries, Inc.
3(i).4 Articles of Amendment to the Amended and Restated Articles of
Incorporation of Recycling Industries, Inc. - Designation of
Preferences, Limitations and Relative Rights of the Series H 6%
Secured Redeemable Convertible Preferred Stock of Recycling
Industries, Inc.
3(i).5 Articles of Amendment to the Amended and Restated Articles of
Incorporation of Recycling Industries, Inc. - Designation of
Preferences, Limitations and Relative Rights of the Series I 8%
Redeemable Convertible Preferred Stock of Recycling Industries,
Inc.
4.1 Indenture dated December 4, 1997.
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10.1 Credit Agreement dated December 4, 1997, among Recycling
Industries, Inc., a Colorado corporation, Nevada Recycling, Inc.,
a Nevada corporation, NR Holdings, Inc., a Nevada corporation,
Recycling Industries of Texas, Inc., a Colorado corporation,
Recycling Industries of Missouri, Inc., a Colorado corporation,
Recycling Industries of Georgia, Inc., a Colorado corporation,
Recycling Industries of Atlanta, Inc., a Colorado corporation,
Weissman Industries, Inc., an Iowa corporation, Recycling
Industries of South Carolina, Inc., a Colorado corporation,
Recycling Industries of Chesapeake, Inc., a Colorado corporation,
Recycling Industries of Greensboro, Inc., a Colorado corporation,
Recycling Industries of Winston-Salem, Inc., a Colorado
corporation, William Lans Sons Company, an Illinois corporation,
Recycling Industries of Wisconsin, Inc., a Colorado corporation,
and General Electric Capital Corporation, a New York corporation,
and BankBoston, N.A.
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* Exhibit has been filed without exhibits, schedules or attachments.
Upon request, the Registrant will furnish supplementally to the
Commission any of the omitted exhibits, schedules or attachments.
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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: December 22, 1997 By /s/ Thomas J. Wiens
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Thomas J. Wiens, Chairman and
CEO
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ASSET PURCHASE AGREEMENT
BY AND AMONG
RECYCLING INDUSTRIES OF WISCONSIN, INC., a Colorado corporation
AND
RECYCLING INDUSTRIES, INC., a Colorado corporation
AND
GROSSMAN BROTHERS COMPANY, a Wisconsin corporation
AND
MILWAUKEE METAL BRIQUETTING CO., INC., a Wisconsin corporation
AND
ARTHUR GROSSMAN
October 31 1997
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TABLE OF CONTENTS
Page
1. Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. Asset and Stock Purchase . . . . . . . . . . . . . . . . . . . . . . . 6
(a) Purchase and Sale of Assets . . . . . . . . . . . . . . . . . . . 6
(b) Real Estate . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(c) The Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(d) Deliveries at the Closing . . . . . . . . . . . . . . . . . . . . 8
3. Representations and Warranties of the Sellers. . . . . . . . . . . . . 9
(a) Organization of the Sellers . . . . . . . . . . . . . . . . . . . 9
(b) Authorization of Transaction. . . . . . . . . . . . . . . . . . . 9
(c) Noncontravention. . . . . . . . . . . . . . . . . . . . . . . . . 10
(d) Brokers' Fees . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(e) Title to Acquired Assets. . . . . . . . . . . . . . . . . . . . . 11
(f) Condition of Acquired Assets and Inventory. . . . . . . . . . . . 11
(g) Financial Statements. . . . . . . . . . . . . . . . . . . . . . . 11
(h) Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(i) Events Subsequent to Most Recent Financial Statements . . . . . . 12
(j) Legal Compliance. . . . . . . . . . . . . . . . . . . . . . . . . 13
(k) Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(l) Real Property . . . . . . . . . . . . . . . . . . . . . . . . . . 14
(m) Intellectual Property . . . . . . . . . . . . . . . . . . . . . . 15
(n) Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
(o) Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
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(p) Employee Benefits . . . . . . . . . . . . . . . . . . . . . . . . 17
(q) Certain Business Relationships Concerning the
Seller Stockholder. . . . . . . . . . . . . . . . . . . . . . . . 17
(r) Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . 18
(s) Labor Matters . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(t) Environmental and Safety Matters. . . . . . . . . . . . . . . . . 19
(u) Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(v) Product Liability . . . . . . . . . . . . . . . . . . . . . . . . 19
(w) Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
4. Representations and Warranties of the Buyer. . . . . . . . . . . . . . 19
(a) Organization of the Buyer . . . . . . . . . . . . . . . . . . . . 19
(b) Authorization of Transaction. . . . . . . . . . . . . . . . . . . 19
(c) Brokers' Fees . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(d) Noncontravention. . . . . . . . . . . . . . . . . . . . . . . . . 20
5. Regulatory Compliance. . . . . . . . . . . . . . . . . . . . . . . . . 20
(a) Bulk Sales Compliance . . . . . . . . . . . . . . . . . . . . . . 20
(b) Hart-Scott-Rodino Act . . . . . . . . . . . . . . . . . . . . . . 20
(c) The WARN Act. . . . . . . . . . . . . . . . . . . . . . . . . . . 20
(d) COBRA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6. Preclosing Covenants . . . . . . . . . . . . . . . . . . . . . . . . . 20
(a) General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
(b) Notice and Consents . . . . . . . . . . . . . . . . . . . . . . . 21
(c) Operation of Business . . . . . . . . . . . . . . . . . . . . . . 21
(d) Full Access . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
(e) Environmental Studies . . . . . . . . . . . . . . . . . . . . . . 21
(f) Exclusivity . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
7. Conditions to Obligation to Close. . . . . . . . . . . . . . . . . . . 22
(a) Conditions to Obligation of the Buyer and the Parent. . . . . . . 22
(b) Conditions to Obligation of the Sellers
and the Seller Stockholder. . . . . . . . . . . . . . . . . . . . 23
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8. Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
(a) By Seller Parties . . . . . . . . . . . . . . . . . . . . . . . . 23
(b) Procedures. . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
(c) Third Party Claims. . . . . . . . . . . . . . . . . . . . . . . . 24
(d) By Buyer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
(e) Limitations . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
(f) Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
(g) Treatment of Indemnification. . . . . . . . . . . . . . . . . . . 26
9. Review and Termination . . . . . . . . . . . . . . . . . . . . . . . . 26
(a) Review Period . . . . . . . . . . . . . . . . . . . . . . . . . . 26
(b) Term of Agreement . . . . . . . . . . . . . . . . . . . . . . . . 26
(c) Effect of Termination . . . . . . . . . . . . . . . . . . . . . . 27
10. Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
11. Nonassignable Permits. . . . . . . . . . . . . . . . . . . . . . . . . 28
(a) Seller to Use All Reasonable Efforts. . . . . . . . . . . . . . . 28
(b) If Waivers or Consents are not Obtained . . . . . . . . . . . . . 28
12. Dispute Resolution . . . . . . . . . . . . . . . . . . . . . . . . . . 28
13. Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
(a) Press Releases and Public Announcements . . . . . . . . . . . . . 30
(b) No Third-Party Beneficiaries. . . . . . . . . . . . . . . . . . . 30
(c) Entire Agreement. . . . . . . . . . . . . . . . . . . . . . . . . 30
(d) Succession and Assignment . . . . . . . . . . . . . . . . . . . . 30
(e) Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . 30
(f) Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
(g) Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
(h) Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . 31
iii
<PAGE>
(i) Amendments and Waivers. . . . . . . . . . . . . . . . . . . . . . 32
(j) Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . 32
(k) Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
(l) Construction. . . . . . . . . . . . . . . . . . . . . . . . . . . 32
(m) Incorporation of Exhibits and Schedules . . . . . . . . . . . . . 32
(n) Attorneys' Fees . . . . . . . . . . . . . . . . . . . . . . . . . 32
(o) Further Assurances. . . . . . . . . . . . . . . . . . . . . . . . 32
Exhibit A--Assumed Contracts
Exhibit B--Net Lease
Exhibit C--Legal Description
Exhibit D--Forms of Assignments
Exhibit F--Allocation Schedule
Exhibit G--Historical Financial Statements
Exhibit H--Form of Opinion of Counsel to the Sellers
Exhibit I--Form of Opinion of Counsel to the Buyer
Exhibit J--Real Estate Purchase Contract
Exhibit K--Employment Agreement
iv
<PAGE>
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT is entered into as of October 31 1997,
by and among Recycling Industries of Wisconsin, Inc., a Colorado corporation
("Buyer"), Recycling Industries, Inc., a Colorado corporation ("Parent"),
Grossman Brothers Company, a Wisconsin corporation ("Grossman"), and Milwaukee
Metal Briquetting Co, Inc., a Wisconsin corporation ("MMB") (Grossman and MMB
are hereinafter each referred to individually as a "Seller", and collectively as
"Sellers"), and Arthur Grossman ("Seller Stockholder"). The Buyer, the Parent,
the Sellers and the Seller Stockholder are referred to collectively herein as
the "Parties."
This Agreement contemplates a transaction in which Buyer, a wholly
owned subsidiary of the Parent, will purchase substantially all of the assets of
Sellers for aggregate consideration of cash in the amount of $2,000,000 and the
assumption of certain liabilities of Sellers.
Now, therefore, in consideration of the premises and the mutual
promises herein made, and in consideration of the representations, warranties
and covenants herein contained, the Parties agree as follows:
1. DEFINITIONS.
(a) "ACQUIRED ASSETS" means, with respect to each Seller, all of
the right, title and interest in and to all of the assets of such Seller,
including, without limitation, all of its
(i) leaseholds and subleaseholds therein, improvements,
fixtures and fittings thereon but excluding attached overhead cranes;
(ii) tangible personal property (such as machinery,
equipment, computer hardware, inventories of raw materials and supplies,
manufactured and purchased parts, tooling, goods in process and finished goods,
furniture, vehicles, tools, molds, jigs, and dies);
(iii) Intellectual Property, goodwill associated therewith,
licenses and sublicenses granted and obtained with respect thereto, and rights
thereunder, remedies against infringements, misappropriations and violations
thereof and rights to protection of interests therein under the laws of all
jurisdictions;
(iv) personal property leases, subleases and rights
thereunder (but not those covering real property);
(v) agreements, contracts, purchase orders, back orders,
open orders or contracts from customers, indentures, mortgages, instruments,
Security
<PAGE>
Interests, guaranties, other similar arrangements and rights thereunder
identified or referred to on Exhibit A as "Assumed Contracts";
(vi) Receivables (as defined below), accounts, notes and
any other receivables;
(vii) claims, deposits, prepayments, refunds, causes of
action, choses in action, rights of recovery, rights of set off and rights of
recoupment (other than any such item relating to Taxes);
(viii) computer documentation, computer files, accounting
and other software, telephone numbers, computer disks, computer tapes and all
information stored on computer media used in connection with the business of
Sellers;
(ix) franchises, approvals, permits, licenses, orders,
registrations, certificates, variances and similar rights obtained from
governments and governmental agencies to the extent assignable by the Sellers in
connection with a transfer of the Business ("Permits");
(x) books, records, ledgers, files, documents,
correspondence, lists, plats, architectural plans, drawings and specifications,
creative materials, advertising and promotional materials, customer and supplier
lists, studies, reports and other similar printed or written materials; and
(xi) all rights with respect to the name "Grossman
Brothers Company" and all reasonable derivations thereof.
Notwithstanding the foregoing, the Acquired Assets shall not
include, with respect to each Seller, (i) the corporate charter, qualifications
to conduct business as a foreign corporation, arrangements with registered
agents relating to foreign qualifications, taxpayer and other identification
numbers, seals, minute books, stock transfer books, blank stock certificates and
other documents relating to the organization, maintenance and existence of such
Seller as a corporation, (ii) any of the rights of such Seller under this
Agreement (or under any side agreement between such Seller on the one hand and
any Buyer on the other hand entered into on or after the date of this Agreement)
and (iii) any of the Excluded Assets of such Seller.
(b) "ASSUMED CONTRACTS" means those contracts, leases and
agreements specifically assumed by Buyer on the Closing Date, copies of which
are listed and attached hereto as Exhibit A and which shall be assigned pursuant
to an Assignment and Assumption Agreement in the form attached hereto as Exhibit
D.
(c) "ASSUMED LIABILITIES" means, with respect to Sellers, those
trade payables incurred by Sellers in the Ordinary Course of Business identified
by Buyer, which Buyer has agreed to assume pursuant to paragraph 2(a)(ii) below.
The aggregate amount of such Assumed Liabilities shall not exceed $250,000 and
shall be subject to adjustment pursuant to paragraph 2(a)(iv).
<PAGE>
(d) "BUSINESS" means the business and operations as conducted by
Sellers on September 15, 1997, as a going concern.
(e) "BUYER INDEMNIFIED PARTIES" means the Buyer, Parent, and
their respective affiliates, officers, directors, stockholders, employees,
agents, representatives, successors and assigns.
(f) "BUYER" has the meaning set forth in the preface above.
(g) "CASH" means cash and cash equivalents.
(h) "CERCLA" means the Comprehensive Environmental Response,
Compensation, and Liability Act, as it may be amended from time to time.
(i) "CLOSING" has the meaning set forth in paragraph 2(c) below.
(j) "CODE" means the Internal Revenue Code of 1986, as amended.
(k) "DISCLOSURE SCHEDULE" has the meaning set forth in
paragraph 3 below.
(l) "EMPLOYEE BENEFIT PLAN" has the meaning set forth in
paragraph 3 below.
(m) "EMPLOYMENT AGREEMENT" means the Employment Agreement to be
entered into at Closing by and between Buyer and Seller Stockholder in the form
attached hereto as Exhibit K.
(n) "ENVIRONMENTAL, HEALTH AND SAFETY LAWS" means all statutes,
regulations, ordinances, treaties, rules, codes, decrees and other provisions or
requirements having the force or effect of federal, state, local and foreign
law, all judicial and administrative orders and determinations, and all common
law concerning worker health and safety or the pollution or protection of the
environment, including without limitation CERCLA, the Resource Conservation and
Recovery Act, the Clean Water Act, the Clean Air Act and the Occupational
Safety & Health Act, each as it may be amended from time to time.
(o) "ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
(p) "EXCLUDED ASSETS" means, with respect to each Seller, all
(i) Cash of such Seller; (ii) Excluded Contracts; and (iii) assets of such
Seller set forth on the Schedule of Excluded Assets.
<PAGE>
(q) "EXCLUDED CONTRACTS" means any contract, agreement, purchase
order, back order, open order, indenture, mortgage, instrument, Security
Interest, or guaranty which is not specifically identified as an Assumed
Contract.
(r) "EXCLUDED LIABILITIES" means, with respect to each Seller,
all liabilities and obligations of such Seller, whether known or unknown,
whether asserted or unasserted, whether absolute or contingent, whether accrued
or unaccrued, whether liquidated or unliquidated and whether due or to become
due, except those trade payables specifically identified in paragraph 1(f) of
the Disclosure Schedule as Assumed Liabilities.
(s) "FINANCIAL STATEMENT" has the meaning set forth in
paragraph 3(g) below.
(t) "GAAP" means United States generally accepted accounting
principles as in effect from time to time.
(u) "HART-SCOTT-RODINO ACT" means the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended.
(v) "HAZARDOUS MATERIAL" shall mean 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.
(w) "INDEBTEDNESS FOR BORROWED MONEY" means, with respect to any
Person at any date, without duplication: (i) all obligations of such Person for
borrowed money or in respect of loans; (ii) all obligations of such Person
evidenced by bonds, debentures, notes or other similar instruments; (iii) all
obligations in respect of letters of credit, whether or not drawn, and bankers'
acceptances issued for the account of such Person; (iv) all capitalized lease
liabilities of such Person; (v) all interest rate protection agreements of such
Person (valued on a market quotation basis); (vi) all obligations of such Person
secured by a contractual lien; and (vii) all guarantees of such Person in
connection with any of the foregoing.
(x) "INTELLECTUAL PROPERTY" means (a) all inventions (whether or
not patentable and whether or not reduced to practice), all improvements thereto
and all patents, patent applications and patent disclosures, together with all
reissuances,
<PAGE>
continuations, continuations-in-part, revisions, extensions and reexaminations
thereof; (b) all trademarks, service marks, trade dress, logos, trade names and
corporate names, together with all translations, adaptations, derivations and
combinations thereof and including all goodwill associated therewith and all
applications, registrations and renewals in connection therewith; (c) all
copyrightable works, all copyrights and all applications, registrations and
renewals in connection therewith; (d) all mask works and all applications,
registrations and renewals in connection therewith; (e) all trade secrets and
confidential business information (including ideas, research and development,
know-how, formulas, compositions, manufacturing and production processes and
techniques, technical data, designs, drawings, specifications, customer and
supplier lists, pricing and cost information and business and marketing plans
and proposals); (f) all computer software (including data and related
documentation); (g) all other proprietary rights; and (h) all copies and
tangible embodiments in any of the foregoing (in whatever form or medium).
(y) "KNOWLEDGE" means actual knowledge together with such
knowledge that an individual would obtain after making reasonable inquiry with
respect to the matter in question. With respect to any Seller, Knowledge shall
mean actual knowledge of any officer, director or majority stockholder, together
with such knowledge that an such individual would obtain after making reasonable
inquiry with respect to the matter in question.
(z) "NET LEASE AGREEMENT" means the Net Lease Agreement to be
entered into at Closing by and between Buyer and Seller Stockholder doing
business as AJGFA Enterprise in the form attached hereto as Exhibit B.
(aa) "LEASED PREMISES" means the real property on which the
Business of Sellers is conducted (including the attached overhead cranes), which
property is leased by Sellers from Arthur Grossman doing business as AJGFA
Enterprise pursuant to an oral lease described in paragraph 3(e) of the
Disclosure Schedule.
(bb) "MOST RECENT FINANCIAL STATEMENTS" has the meaning set forth
in paragraph 3(g) below.
(cc) "ORDINARY COURSE OF BUSINESS" means the ordinary course of
business consistent with past custom and practice.
(dd) "PARTY" has the meaning set forth in the preface above.
(ee) "PERSON" means an individual, a partnership, a limited
liability company, a corporation, an association, a joint stock company, a
trust, a joint venture, an unincorporated organization, or a governmental entity
(or any department, agency, or political subdivision thereof).
(ff) "PURCHASE PRICE" means the Asset Purchase Price set forth in
paragraph 2 below.
<PAGE>
(gg) "REAL PROPERTY" means the real property on which the
Business of Sellers is conducted, a legal description of which is attached
hereto as Exhibit C, together with all improvements thereon.
(hh) "RECEIVABLES" shall mean third-party receivables arising in
the Ordinary Course of Business of Sellers.
(ii) "RCRA" shall mean the Resource Conservation and Recovery
Act, as it may be amended from time to time.
(jj) "RELEASE" shall have the meaning set forth in CERCLA.
(kk) "SECURITY INTEREST" means any mortgage, pledge, lien,
encumbrance, charge, or other security interest.
(ll) "SELLERS INDEMNIFIED PARTIES" means the Sellers and their
affiliates, officers, directors, stockholders, employees, agents,
representatives, successors and assigns.
(mm) "SELLER STOCKHOLDER" has the meaning set forth in the
preface above.
(nn) "TAX" OR "TAXES" means (A) any federal, state, local, or
foreign income, franchise or other tax, of any kind whatsoever, gross receipts,
sales, use, value added or alternative or added on minimum tax, including any
interest, penalty, or addition thereto, whether disputed or not; (B) the
liability of any Seller for the payment of any amounts of the type described in
clause (A) as a result of any express or implied obligation to indemnify or
otherwise assume or succeed to the liability of any other Person. Tax shall not
include any duty or similar fee imposed by any federal, state, local or foreign
governmental agency.
(oo) "TAX RETURN" means any return, declaration, report, claim
for refund, or information return or statement relating to Taxes, including any
schedule or attachment thereto.
2. ASSET PURCHASE.
(a) Purchase and Sale of Assets.
(i) PURCHASE AND SALE OF ASSETS. On and subject to the
terms and conditions of this Agreement, Buyer agrees to purchase from Sellers
and Sellers agree to sell, transfer, convey and deliver to Buyer, all of the
Acquired Assets at the Closing for the consideration specified in clauses (ii)
and (iii) below (the "Asset Purchase Price"). Sellers' sale, conveyance,
assignment and transfer of the Acquired 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.
<PAGE>
(ii) ASSUMPTION OF LIABILITIES OF SELLERS. On and
subject to the terms and conditions herein, Buyer agrees to assume and become
liable for the Assumed Liabilities of Sellers at the Closing. Buyer will not
assume or have any responsibility, however, with respect to any liabilities of
Sellers other than the Assumed Liabilities. Subject to adjustment as set forth
in paragraph (iv) below, Buyer shall, in its sole discretion, identify $250,000
or more of trade payables from Sellers' schedule of payables which Buyer will
assume and which payables will constitute a portion of the Assumed Liabilities.
The amount, if any, of accrued but unpaid utility charges and personal property
taxes as of the Closing Date that are not yet overdue shall be prorated through
the Closing Date.
(iii) CASH AT CLOSING. Buyer agrees to pay to Sellers
$2,000,0000 in Cash at the Closing, subject to adjustment pursuant to paragraph
(iv) of this paragraph 2.
(iv) CLOSING ADJUSTMENT TO ASSET PURCHASE PRICE FOR
INVENTORY AND RECEIVABLES. Within 10 days prior to Closing, the parties shall
conduct an appraisal and valuation of the inventory to be purchased by Buyer
hereunder (the "Inventory Valuation") in accordance with the procedures set
forth in paragraph (v) below. Notwithstanding Buyer's previous due diligence,
the Purchase Price shall be reduced on a dollar-for-dollar basis to the extent
that the net asset value of the inventory, as shown on such Inventory Valuation,
together with the aggregate Receivables, is less than $2,000,0000. Such
reduction shall be effectuated by a corresponding reduction in the Assumed
Liabilities which Buyer is obligated to assume hereunder. The reduction to the
Purchase Price hereunder shall be limited to the aggregate value of the Assumed
Liabilities. Similarly, the Purchase Price shall be increased on a
dollar-for-dollar basis to the extent that the net asset value of Receivables
and inventory (as shown on the Inventory Valuation) exceeds $2,000,000. Buyer
shall pay to Sellers any such surplus in cash at the Closing, subject to
adjustment pursuant to paragraph (iv) of this paragraph 2.
(v) INVENTORY VALUATION. All unprepared inventory
will be valued at the lowest of (i) the average price paid for inventory of
similar grades by Seller in the ten business days immediately preceding the
Closing, or (ii) the average price at which inventory of similar grades was sold
by Seller in the ten business days immediately preceding the Closing, or (iii)
at the mutually agreed upon fair market value for such grades of unprepared
inventory if the Seller has not purchased or sold any particular grade within
such time period; and all prepared inventory will be valued at market prices as
of the Closing less a to be agreed upon amount for shipping and handling.
(vi) COLLECTION OF ACCOUNTS RECEIVABLE; POST CLOSING
ADJUSTMENT TO ASSET PURCHASE PRICE.
(a) Commencing at the Closing and continuing for a
period of 120 days thereafter (the "Collection Period"), Buyer shall attempt in
good faith to collect all of the Receivables. All payments received shall be
applied on an invoice by invoice
<PAGE>
basis per the customer's remittance. If no invoices are indicated, payments
shall first be applied to the oldest outstanding balance, then to each newer
balance.
(b) All payments received by Buyer on the Receivables
shall be retained by Buyer as Acquired Assets hereunder. Any Receivable which
remains unpaid at the end of the Collection Period shall be deemed delinquent (a
"Delinquent Receivable"). At Buyer's option, within 30 days after the end of
the Collection Period, Buyer may designate any or all Delinquent Receivables as
uncollectable (an "Uncollectable Receivable"). Sellers shall reimburse Buyer on
a dollar-for-dollar basis for any Uncollectable Receivable. Sellers shall pay
to Buyer by wire transfer or cashier's check, the full amount on account of
Uncollectable Receivables within five days following notice to Sellers by Buyer
of such amount and, upon such payment, all of such Uncollectable Receivables
automatically shall be deemed reassigned to the appropriate Seller.
(vii) ALLOCATION. The Parties agree to allocate the
aggregate Asset Purchase Price (and all other capitalizable costs) between each
of the Sellers and among the Acquired Assets for all purposes (including
financial accounting and tax purposes) in accordance with the allocation
schedule attached hereto as Exhibit F.
(b) REAL ESTATE. Simultaneously with the Closing of the
transactions contemplated herein, Buyer and Seller Stockholder shall enter into
a Net Lease Agreement in the form attached hereto as Exhibit B. Pursuant to the
Net Lease Agreement, Buyer shall lease from Seller Stockholder, and Seller
Stockholder shall lease to Buyer, the Real Property. Additionally, the parties
shall enter into a Commercial Offer to Purchase in the form attached hereto as
Exhibit J (the "Real Estate Purchase Contract") whereby Buyer shall agree to
purchase, and Seller Stockholder shall agree to sell, the Real Property, for the
purchase price and upon the terms and conditions set forth therein. The parties
hereby acknowledge that their respective obligations under the Net Lease
Agreement and the Real Estate Purchase Contract are partial consideration for
the obligations of the respective parties herein, and if any party fails to
satisfy the obligations set forth in either the Net Lease Agreement or the Real
Estate Purchase Contract, such failure shall be deemed to be a default under
this Agreement and, subject to the notice and cure provisions set forth therein
and herein, shall entitle the non-defaulting party to exercise any remedy
contained herein in addition to the remedies available pursuant to the Net Lease
Agreement and the Real Estate Purchase Contract, including without limitation
the right of setoff.
(c) THE CLOSING. The closing of the transactions contemplated
by paragraph 2(a) of this Agreement (the "Closing") shall take place at the
offices of Reinhart, Boerner, Van Deuren, Norris & Rieselbach, s.c. in
Milwaukee, Wisconsin, on October 31, 1997, or such other date as Buyer and
Sellers may mutually determine (the "Closing Date"); provided, however that the
Closing Date shall be no later than November 30, 1997.
<PAGE>
(d) DELIVERIES 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:
(i) Sellers shall deliver duly executed transfer
documents and/or instruments of assignment;
(ii) Buyer shall deliver to Sellers the consideration set
forth in 2(a)(ii) and (iii) above;
(iii) Seller Stockholder shall deliver to Buyer and the
Parent the Employment Agreement, duly executed by the parties thereto;
(iv) Buyer shall deliver to Seller Stockholder and Seller
Stockholder shall deliver to Buyer the Net Lease Agreement and the Real Estate
Purchase Contract, duly executed by the parties thereto;
(v) Sellers shall deliver the written consents to the
assumption by Buyer of the Assumed Contracts;
(vi) Sellers shall deliver to Buyer duly executed titles
to all vehicles, machinery and equipment included in the Acquired Assets free
and clear of any Security Interests;
(vii) Sellers shall deliver to Buyer such other instruments
of sale, transfer, conveyance and assignment as the Buyer and their counsel
reasonably may request; and
(viii) Sellers and Buyer shall deliver the Assignment and
Assumption Agreement.
3. REPRESENTATIONS AND WARRANTIES OF THE SELLERS. The Sellers and
the Seller Stockholder hereby jointly and severally represent and warrant that
all of the representations and warranties set forth in this paragraph 3 are true
and correct as of the date of this Agreement and as of the Closing, except as
set forth in the disclosure schedule accompanying this Agreement as the same may
be updated, revised or supplemented by the Sellers at any time or times prior to
the Closing (the "Disclosure Schedule"). The Disclosure Schedule will be
arranged in paragraphs corresponding to the lettered and numbered paragraphs
contained in this paragraph 3.
(a) ORGANIZATION OF THE SELLERS. Each of the Sellers is a
corporation duly organized, validly existing and in "current" status under the
laws of the State of Wisconsin and is qualified to do business in every
jurisdiction in which its ownership of property or conduct of business requires
it to qualify. Each Seller possesses all requisite corporate power and
authority and all material licenses, permits and
<PAGE>
authorizations necessary to own and operate its properties, to carry on its
businesses as now conducted and presently proposed to be conducted and to carry
out the transactions contemplated by this Agreement.
(b) AUTHORIZATION OF TRANSACTION. Each of the Sellers has full
corporate power and authority to execute and deliver this Agreement and to
perform its obligations hereunder. Without limiting the generality of the
foregoing, the board of directors of each of the Sellers and the stockholders of
each of the Sellers have duly authorized the execution, delivery and performance
of this Agreement by the Sellers. This Agreement constitutes the valid and
legally binding obligation of each Seller, enforceable in accordance with its
terms and conditions, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting creditors' rights generally and by general equitable principles.
(c) NONCONTRAVENTION. 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 Sellers to enter into and perform their obligations under
this Agreement, and neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will, except as set forth
in paragraph 3(c) of the Disclosure Schedule:
(i) be in violation of the Articles of Incorporation,
Bylaws or other organizational document of either Seller, or constitute a breach
of any evidence of indebtedness or material agreement to which either Seller is
a party;
(ii) to the knowledge of Sellers, violate any constitution,
statute, regulation, rule, injunction, judgment, order, decree, ruling, charge
or other restriction of any government, governmental agency or court to which
either of the Sellers is subject;
(iii) conflict with, result in a breach of, constitute a
default under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify or cancel, or require any notice under any
material agreement, contract, lease, license, instrument or other arrangement to
which either of the Sellers is a party or by which they are bound or to which
any of the Acquired Assets are subject (or result in the imposition of any
Security Interest upon any of the Acquired Assets);
(iv) cause a default under any mortgage or deed of trust or
other lien, charge or encumbrance to which any of the Acquired Assets is subject
or under any material contract to which either Seller is a party, or permit the
termination of any such contract by another person;
(v) result in the creation or imposition of any Security
Interest upon any of the Acquired Assets under any agreement or commitment to
which Sellers or the Acquired Assets are bound;
<PAGE>
(vi) conflict with or result in the breach of any writ,
injunction or decree of any court or governmental instrumentality; or
(vii) to the knowledge of the Sellers violate or cause any
revocation of, or limitation on, any permit, license or consent necessary or
required in the operation of the Business.
(d) BROKERS' FEES. Neither Seller has any liability or
obligation to pay any fees or commissions to any broker, finder or agent with
respect to the transactions contemplated by this Agreement for which the Buyer
could become liable or obligated.
(e) TITLE TO ACQUIRED ASSETS. Each of the Sellers has good
title to, or a valid leasehold interest in or license to use, all of the
Acquired Assets free and clear of any Security Interest or restriction on
transfer. The Acquired Assets and the leased Premises, as of the time
immediately following the Closing, will constitute all assets necessary for
Buyer to conduct the business and operations of Sellers as currently conducted
other than cash and other working capital and other than any Permits which are
not assignable.
(f) CONDITION OF ACQUIRED ASSETS AND INVENTORY. Each
tangible asset included in the Acquired Assets is reflected on the Most Recent
Financial Statement has been maintained in accordance with normal industry
practice and is in good operating condition and repair (reasonable wear and tear
excepted). All ferrous and non-ferrous inventory is held by Sellers in the
Ordinary Course of Business and to the knowledge of the Sellers the possession
of such inventory does not violate any existing law or any health, safety or
other ordinance, code or regulation.
(g) FINANCIAL STATEMENTS. Attached hereto as Exhibit G are the
following financial statements (collectively the "Financial Statements"):
(i) combined balance sheets and statements of income,
changes in stockholders' equity and cash flow as of and for the fiscal years
ended December 31, 1994, December 31, 1995 and December 31, 1996 for each
Seller, each of which has been reviewed by Sellers' respective certified public
accountants; and
(ii) an unaudited combined balance sheet and statements of
income and changes in stockholders equity and cash flow as of and for the seven
month period ended August 31, 1997 for the Sellers (the "Most Recent Financial
Statements").
Except as set forth in paragraph 3(g) of the Disclosure Schedule,
the Financial Statements (including the notes thereto) have been prepared from
the books and records of the applicable Seller in accordance with GAAP applied
on a consistent basis throughout the periods covered thereby and present fairly
the financial condition of the applicable Sellers as of such dates and the
results of operations and cash flows of the
<PAGE>
Sellers for such periods; provided, however, that the unaudited Financial
Statements, including the Most Recent Financial Statements, are subject to
normal year-end adjustments and lack footnotes and other presentation items.
(h) LIABILITIES. Neither Seller has any existing liability,
except for (i) liabilities disclosed or reserved for in the Most Recent
Financial Statements; (ii) liabilities which have arisen after the date of the
Most Recent Financial Statements in the Ordinary Course of Business; and
(iii) liabilities disclosed under any paragraph of the Disclosure Schedule which
liabilities are not being assumed by Buyer unless so designated.
(i) EVENTS SUBSEQUENT TO MOST RECENT FINANCIAL STATEMENTS.
Since September 30, 1997, there has not been any material adverse change in the
business, financial condition and results of operations of the Sellers taken as
a whole. Without limiting the generality of the foregoing, since that date,
except as set forth in paragraph 3(i) of the Disclosure Schedule or as
contemplated by this Agreement and the transactions contemplated hereby:
(i) neither Seller has sold, leased, transferred or
assigned any of its assets, tangible or intangible, other than for a fair
consideration in the Ordinary Course of Business;
(ii) neither Seller has entered into any material
agreement, contract, lease or license (or series of related agreements,
contracts, leases and licenses) outside the Ordinary Course of Business;
(iii) neither Seller has accelerated, terminated, modified
or canceled any material agreement, contract, lease or license (or series of
related agreements, contracts, leases and licenses) to which any of the Sellers
is a party or by which any of them is bound outside the Ordinary Course of
Business;
(iv) neither Seller has imposed any Security Interest
upon any of its assets, tangible or intangible;
(v) neither Seller has made any capital expenditure (or
series of related capital expenditures) outside the Ordinary Course of Business;
(vi) neither Seller has made any capital investment in,
any loan to, or any acquisition of the securities or assets of, any other Person
(or series of related capital investments, loans and acquisitions) outside the
Ordinary Course of Business;
(vii) neither Seller has issued any note, bond or other
debt security or created, incurred, assumed or guaranteed any Indebtedness for
Borrowed Money or capitalized lease obligation either involving more than $1,000
singly or $5,000 in the aggregate;
<PAGE>
(viii) neither Seller has delayed or postponed the payment
of accounts payable and other liabilities outside the Ordinary Course of
Business;
(ix) neither Seller has accelerated receipt of payment of
accounts receivable or other current assets outside the Ordinary Course of
Business;
(x) neither Seller has delayed investments in or
advancements to other persons outside the Ordinary Course of Business;
(xi) neither Seller has canceled, compromised, waived or
released any right or claim (or series of related rights and claims) outside the
Ordinary Course of Business;
(xii) neither Seller has granted any license or sublicense
of any rights under or with respect to any Intellectual Property;
(xiii) neither Seller has made any loan to, or entered into
any other transaction with, any of its directors, officers and employees outside
the Ordinary Course of Business;
(xiv) neither Seller has granted any increase in the base
compensation of any of its directors, officers and employees outside the
Ordinary Course of Business;
(xv) neither Seller has made any material change in
employment terms for any of its directors, officers and employees outside the
Ordinary Course of Business;
(xvi) neither Seller has entered into any employment
contract or collective bargaining agreement or materially modified the terms of
any existing such contract or agreement;
(xvii) neither Seller has adopted, amended, modified or
terminated any bonus, profit sharing, incentive, severance or other plan,
contract or commitment for the benefit of any of its directors, officers and
employees (or taken any such action with respect to any other Employee Benefit
Plan);
(xviii) neither Seller has made or pledged to make any
material charitable or other capital contribution outside the Ordinary Course of
Business.
(j) LEGAL COMPLIANCE. To the knowledge of the Sellers, each of
the Sellers has complied with all applicable laws (including rules, regulations,
codes, plans, injunctions, judgments, orders, decrees, rulings and charges
thereunder) of federal, state, local and foreign governments (and all agencies
thereof), including all
<PAGE>
Environmental, Health and Safety Laws, and to the knowledge of Sellers, each
Seller has obtained all permits, licenses, and consents necessary or required in
the operation of its business, except as set forth in paragraph 3(j) of the
Disclosure Schedule.
(k) TAX MATTERS.
(i) Each of the Sellers has filed all Tax Returns that it
was required to file, and has paid all Taxes currently due and owing. All such
Tax Returns were prepared in all material respects in compliance with all
applicable laws and regulations, and are correct and complete in all material
respects.
(ii) Paragraph 3(k) of the Disclosure Schedule lists all
Tax Returns filed with respect to each of the Sellers for taxable periods ended
on or after December 31, 1994, indicates those Tax Returns that have been
audited, indicates those Tax Returns that currently are the subject of audit and
contains a list of each state, territory and jurisdiction (whether foreign or
domestic) in which to the knowledge of Sellers each Seller is required to file
Tax Returns. The Sellers have delivered to the Buyer correct and complete
copies of all federal Tax Returns, examination reports and statements of
deficiencies assessed against or agreed to by any of the Sellers since December
31, 1994.
(iii) Neither Seller has waived any statute of limitations
in respect of Taxes or agreed to any extension of time with respect to a Tax
assessment, collection or deficiency.
(iv) Neither Seller is a party to any Tax allocation or
sharing agreement.
(v) Each of the Sellers has withheld and paid all taxes
required to have been withheld and paid in connection with amounts paid or owing
to any employee in connection with his or her employment with the Sellers.
(vi) No deficiency or proposed adjustment which has not
been settled or otherwise resolved for any amount of Tax has been proposed,
asserted or assessed by any taxing authority against any Seller and there is no
action, suit, taxing authority proceeding or audit now in progress, pending or,
to the Knowledge of the Seller Stockholder, threatened against or with respect
to either Seller. No claim has ever been made by a taxing authority in a
jurisdiction where either Seller does not file Tax Returns that such Seller is
or may be subject to Taxes assessed by such jurisdiction. There are no liens
for Taxes (other than for current Taxes not yet due and payable) upon the
Acquired Assets of the Sellers as of immediately prior to the Closing.
(l) REAL PROPERTY.
(i) The Sellers do not own, and have never owned, any real
property used in connection with the Business.
<PAGE>
(ii) The Leased Premises constitutes the only real property
leased or subleased to any of the Sellers. The Sellers have delivered to the
Buyer correct and complete copies of the leases or a description of the
subleases listed on paragraph 3(l)(ii) of the Disclosure Schedule (collectively,
the "Leases"). Each of the Leases is legal, valid, binding, enforceable and in
full force and effect. The Sellers are not in breach or default of such Lease
and no event has occurred which, with notice or lapse of time, would constitute
such a breach or default by Sellers or permit termination, modification or
acceleration under the Leases. No Seller nor any other party to any Lease has
repudiated any provision thereof and there are no material disputes, oral
agreements or forbearance programs in effect as to any Lease. The Leases have
not been modified in any material respect, except to the extent that such
modifications are disclosed by the documents delivered to Buyer, and the Sellers
have not assigned, transferred, conveyed, mortgaged, deeded in trust or
encumbered any interest in the Leases. All buildings and all components of all
buildings, structures and other improvements included within leased or subleased
property are in good condition and repair (reasonable wear and tear excepted)
and adequate to operate such facilities as currently used. There are no
proceedings in eminent domain or other similar proceedings pending or, to the
Knowledge of Seller Stockholder, threatened, affecting any portion of the leased
or subleased property, and there exists no writ, injunction, decree, order or
judgment outstanding, nor any litigation, pending or threatened, relating to the
ownership, lease, use, occupancy or operation by any person of the leased or
subleased property. All facilities leased or subleased under the Leases have
received all approvals of governmental authorities (including licenses and
permits) required in connection with the operation thereof and have been
operated and maintained in all material respects in accordance with applicable
laws, rules and regulations.
(m) INTELLECTUAL PROPERTY.
(a) Except as described in paragraph 3(m) of the Disclosure
Schedule, all material Intellectual Property is owned outright by Sellers, free
and clear of any Security Interest and there exist no obligations with respect
to any Intellectual Property requiring Sellers to make any payment in respect of
its use or otherwise. Neither Seller has ever agreed to indemnify any Person
for or against any interference, infringement, misappropriation or other
conflict with respect to the Intellectual Property.
(b) Sellers and Seller Stockholder are not aware of any
patent, invention, trade secret, trademark, service mark, trade name or
copyright of any other Person that is infringed by Sellers, 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 Sellers, and
Sellers and Seller Shareholder know of no basis for any such charge or claim.
(o) CONTRACTS. Paragraph 3(o) of the Disclosure Schedule lists
the following executory oral and written contracts to which either of the
Sellers is a party:
<PAGE>
(i) any agreement (or group of related agreements) for
the lease of personal property to or from any Person providing for lease
payments in excess of $25,000 per annum;
(ii) any agreement (or group of related agreements) for
the purchase or sale of raw materials, commodities, supplies, products or other
personal property, or for the furnishing or receipt of services, the performance
of which will extend over a period of more than one year or involve
consideration in excess of $25,000;
(iii) any agreement concerning a partnership or joint
venture;
(iv) any agreement (or group of related agreements) under
which either any Seller has created, incurred, assumed or guaranteed any
Indebtedness for Borrowed Money, or any capitalized lease obligation in excess
of $25,000 or under which it has imposed a Security Interest on any of its
assets, tangible or intangible;
(v) any agreement restricting either Seller's ability to
compete with another Person;
(vi) any agreement involving Seller Stockholder involving
consideration in excess of $25,000;
(vii) any agreement with any other Seller outside the
Ordinary Course of Business;
(viii) any profit sharing, stock option, stock purchase,
stock appreciation, deferred compensation or severance plan for the benefit of
its current or former directors, officers and employees;
(ix) any collective bargaining agreement;
(x) any agreement for the employment of any individual on
a full-time, part-time, consulting or other basis providing annual compensation
in excess of $25,000 or providing severance benefits in excess of $25,000;
(xi) any agreement under which a Seller has advanced or
loaned any amount to any of its directors, officers and employees in excess of
$25,000; and
(xii) any other contract entered into outside the Ordinary
Course of Business (or group of related agreements) the performance of which
involves consideration in excess of $25,000.
The Sellers have delivered or made available to the Buyer a
correct and complete copy of each written contract or other agreement listed in
paragraph 3(o) of the Disclosure Schedule (as amended to date). With respect to
each such agreement, (i) to the knowledge of Sellers, the agreement is legal,
valid, binding,
<PAGE>
enforceable and in full force and effect; (ii) the Sellers are not, and to the
Knowledge of the Sellers the other party to such contract is not, in breach or
default of such agreement, and no event has occurred which with notice or lapse
of time would constitute a breach or default, or permit termination,
modification or acceleration, under the agreement; and (iii) the Sellers have
not, and to the Knowledge of the Sellers no other party to such agreement has,
repudiated any provision of the agreement.
(p) LITIGATION. Paragraph 3(p) of the Disclosure Schedule sets
forth each instance in which either Seller (i) is subject to any outstanding
injunction, judgment, order, decree, ruling or charge or (ii) is a party or, to
the Knowledge of the Sellers, is threatened to be made a party to any action,
suit, proceeding, hearing or investigation of, in or before any court or
quasi-judicial or administrative agency of any federal, state, local or foreign
jurisdiction.
(q) EMPLOYEE BENEFITS.
(i) Paragraph 3(q) of the Disclosure Schedule sets
forth an accurate and complete list of (A) each "employee benefit plan" (as such
term is defined in section 3(3) of ERISA) at any time contributed to, maintained
or sponsored by any of the Sellers; and (B) each other deferred compensation,
severance, stock, bonus, incentive, insurance and any other similar employee
benefit arrangement (including, without limitation, each employment,
compensation, or severance agreement) of any kind contributed to, maintained or
sponsored by any of the Sellers for the benefit of any present employee,
consultant, officer or director of any of the Sellers. Each such item listed in
paragraph 3(q) of the Disclosure Schedule pursuant to this subparagraph (i) is
referred to herein as an "EMPLOYEE BENEFIT PLAN."
(ii) No Employee Benefit Plan is required or intended
to be qualified within the meaning of section 401(a) of the Code. Each Employee
Benefit Plan and any related trust, insurance contract or fund has been
maintained, funded and administered in compliance in all material respects with
its respective terms and in compliance in all material respects with all
applicable laws and regulations, including, but not limited to, ERISA and the
Code, and all required premiums, contributions, deposits and reimbursement under
each such Employee Benefit Plan as of the Closing Date have been properly made.
To the Knowledge of the Sellers, there are no pending or threatened actions,
suits, investigations or claims with respect to any Employee Benefit Plan (other
than routine claims for benefits).
(iii) Neither Seller has at any time contributed to,
maintained, sponsored or incurred any liability with respect to any "employee
pension benefit plan" (as such term is defined in section 3(2) of ERISA) or any
"multiemployer plan" (as such term is defined in section 3(37) of ERISA).
(iv) Except as set forth in paragraph 3(r) of the
Disclosure Schedule, none of the Employee Benefit Plans obligates either of the
Sellers to
<PAGE>
pay any separation, severance, termination or similar benefit in excess of
$25,000 solely as a result of any transaction contemplated by this Agreement or
solely as a result of a change in control or ownership within the meaning of
section 280G of the Code.
(r) CERTAIN BUSINESS RELATIONSHIPS CONCERNING THE SELLER
STOCKHOLDER. Except as set forth on paragraph 3(r) of the Disclosure Schedule,
neither Seller Stockholder nor any affiliate of Seller Stockholder, is involved,
or has been involved within the past five years, in any material business
arrangement or relationship with either Seller or any supplier, customer,
licensee, licensor or lessor of either Seller (or any affiliate of such Person).
Except for the Leased Premises, neither Seller Stockholder nor any affiliate of
Seller Stockholder, owns any material asset, tangible or intangible, which is
used in the business of either Seller. Without limiting the generality of the
foregoing, except for the Leased Premises, neither Seller Stockholder nor any
affiliate of Seller Stockholder, has any material economic interest in any
supplier, customer, licensee, licensor or lessor of either Seller (or any
affiliate of such Person) or has made payments of any kind to, has received
payments of any kind from, has made any loans or advances to, or guarantees for
the benefit of, or borrowed amounts from any supplier, customer licensee,
licensor or lessor of either Seller (or any Affiliate of such Person).
(s) ACCOUNTS RECEIVABLE. The accounts receivable of the Sellers
as reflected on the Most Recent Financial Statements have arisen from bona fide
transactions in the Ordinary Course of Business and Sellers believe they are
collectible net of any applicable reserves set forth on the Most Recent
Financial Statements.
(t) LABOR MATTERS. The Sellers are not a party to or bound by
any union or collective bargaining agreement. The Sellers are not a party to
any pending arbitration or grievance proceeding or other claim relating to any
labor contract nor, to the Knowledge of the Sellers, is any such action
threatened. Except as set forth on paragraph 3(t) on the Disclosure Schedule,
within the previous 12 months, the Sellers have not experienced any labor
disputes, attempts or any work stoppage due to labor disagreements in connection
with their business, and there is currently no labor strike, request for
representation, slowdown or stoppage actually pending, or to the Knowledge of
the Sellers, threatened against the Sellers. Except as set forth in
paragraph 3(t) of the Disclosure Schedule, to the Knowledge of the Sellers, no
key executive employee and no group of employees or independent contractors of
any Seller currently intends to terminate his, her or its employment or
relationship as an independent contractor with any Seller. Each Seller has
complied in all material respects with all applicable laws relating to the
employment of personnel and labor, including provisions thereof relating to
wages, hours, equal opportunity, collective bargaining and the payment of social
security and other taxes, the Worker Adjustment and Retraining Act, and the
Immigration Reform and Control Act of 1986. The Sellers have provided to Buyer
all written employment agreements with employees of the Sellers which are
presently in effect.
(u) ENVIRONMENTAL AND SAFETY MATTERS.
(i) To the Knowledge of Sellers, the Sellers have complied
and are in compliance with all Environmental, Health and Safety Laws.
<PAGE>
(ii) Except as described in paragraph 3(c) of the
Disclosure Schedule, neither Seller has received any written or oral notice,
report or other information regarding any liabilities (whether accrued,
absolute, contingent, unliquidated or otherwise), including any investigatory,
remedial or corrective obligations arising under Environmental, Health and
Safety Laws, relating to either Seller, the facilities of either Seller or the
Leased Premises.
(iii) Except as described in paragraph 3(c) of the
Disclosure Schedule, neither Seller has treated, stored, disposed of, arranged
for or permitted the disposal of, transported, handled or Released any
substance, including without limitation any Hazardous Material, or owned or
operated any facility or property, so as to give rise to liabilities of either
Seller for response costs, natural resource damages or attorneys fees pursuant
to CERCLA or other Environmental, Health and Safety Laws.
(v) INSURANCE. Paragraph 3(v) of the Disclosure Schedule lists
and briefly describes each insurance policy maintained by each Seller with
respect to its properties, assets and business. All of such insurance policies
are in full force and effect, and neither Seller is in default with respect to
its obligations under any such insurance policies.
(w) PRODUCT LIABILITY. Neither Seller has received any written
claim in the three-year period prior to the date of this Agreement arising out
of any injury to individuals or property as a result of the ownership,
possession or use of any product manufactured, sold, leased or delivered by any
of the Sellers.
(x) DISCLOSURE. Neither the representations and warranties
contained in this Agreement nor the statements made in the Disclosure Schedule
contain any untrue statement of a material fact or, to the Knowledge of the
Sellers, omit, when considered as a whole, a material fact necessary to make the
statements contained herein or therein, in light of the circumstances in which
they were made, not misleading.
4. REPRESENTATIONS AND WARRANTIES OF THE BUYER AND PARENT. The
Buyer and the Parent hereby make the representations and warranties set forth in
this paragraph 4 as of the date of this Agreement to the Sellers and the Seller
Stockholder.
(a) ORGANIZATION. Each of Buyer and Parent is a corporation
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization.
(b) AUTHORIZATION OF TRANSACTION. Each of Buyer and Parent has
full corporate power and authority to execute and deliver this Agreement and the
Net Lease Agreement and the Real Estate Purchase Agreement and to perform its
obligations hereunder and thereunder. This Agreement, the Real Estate Purchase
Agreement, and the Net Lease Agreement constitute the valid and legally binding
obligations of Buyer, enforceable in accordance with their terms and conditions,
except such enforceability may
<PAGE>
be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws
generally affecting creditors' rights generally and by general equitable
principles.
(c) BROKERS' FEES. Buyer has no liability or obligation to pay
any fees or commissions to any broker, finder or agent with respect to the
transactions contemplated by this Agreement for which the Sellers or the Seller
Stockholder could become liable or obligated, except as contemplated by this
Agreement.
(d) NONCONTRAVENTION. 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 in order to enable Buyer and Parent to enter into and perform their
obligations under this Agreement and the Net Lease Agreement, and neither the
execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will be in violation of the Articles of
Incorporation, By-Laws or other organizational documents of the Buyer or Parent,
or constitute a breach of any material agreement to which either the Buyer or
Parent is a party, or, to the knowledge of the Buyer and Parent, violate any
constitution, statute, regulation, rule, injunction, judgment, order, decree,
ruling, charge or other restriction of any government, governmental agency or
court to which either the Buyer or Parent is subject or violate any material
agreement, contract, lease, license, instrument or other arrangement to which
either Buyer or Parent is a party or by which either of them is bound.
5. REGULATORY COMPLIANCE.
(a) BULK SALES COMPLIANCE. Buyer and the Parent hereby
waive compliance by Sellers with the provisions of the bulk sales law of the
State of Wisconsin, if applicable to the transfer of the Acquired Assets, and
Sellers agree to indemnify and hold Buyer and the Parent harmless from any
liability, other than Assumed Liabilities, incurred as a result of the failure
to so comply.
(b) 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 contemplated hereby.
(c) THE WARN ACT. Sellers will comply with the Wisconsin
Mass Layoff Business Closing Law Section 109.07 Wisconsin Statutes, if such
provisions apply to the transaction contemplated hereunder. Sellers 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.
(d) COBRA. Sellers 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 contemplated hereby. After the Closing Date, Buyer or the
Parent will act as administrator for Sellers' obligations related to COBRA
coverage for persons who cease employment with either Seller on or before the
Closing and, under the provisions of COBRA, elect to continue to
<PAGE>
pay premiums for insurance coverage under Sellers' insurance policy. Sellers
have complied with all COBRA requirements for all persons who ceased to be
employees of Sellers prior to the Closing Date and any liabilities for any COBRA
claims arising out of transactions occuring prior to the Closing Date shall be
the sole responsibility of Sellers.
6. PRE-CLOSING COVENANTS. The Parties agree as follows with respect
to the period between the execution of this Agreement and the Closing Date.
(a) GENERAL. Each of the Parties will use its reasonable best
efforts to take all action and to do all things necessary, proper or advisable
in order to consummate and make effective the transactions contemplated by this
Agreement (including satisfaction, but not waiver, of the closing conditions set
forth in paragraph 7 below).
(b) NOTICES AND CONSENTS. The Sellers and Sellers Stockholders
will give any notices to third parties, and the Sellers and Sellers Stockholders
will use their reasonable best efforts to obtain any third-party consents, that
the Buyer reasonably may request in connection with the matters referred to in
paragraph 2(d)(v) and paragraph 11. Each of the Parties will give any notices
to, make any filings with and use its reasonable best efforts to obtain any
authorizations, consents and approvals of governments and governmental agencies
in connection with the matters referred to in paragraph 3(c) and paragraph 3(u)
above.
(c) OPERATION OF BUSINESS. The Sellers will not enter into any
material transaction outside the Ordinary Course of Business. Except as
contemplated by this Agreement, the Sellers will not declare, set aside or pay
any dividend or make any distribution with respect to their capital stock or
redeem, purchase or otherwise acquire any of their capital stock. The Sellers
will use their reasonable best efforts to keep their Business and property
substantially intact, including its present operations, physical facilities,
working conditions and relationships with lessors, licensors, suppliers,
customers and employees, to operate their Businesses in accordance with
applicable laws, to pay their obligations in the Ordinary Course of Business and
to collect their accounts receivable only in the Ordinary Course of Business.
(d) FULL ACCESS. The Sellers will permit representatives of the
Buyer to have full access at all reasonable times, and in a manner so as not to
interfere with the normal business operations of the Sellers and their
Subsidiaries, to all premises, properties, personnel, books, records (including
tax records), contracts and documents of or pertaining to each of the Sellers.
The Buyer will treat and hold as such any Confidential Information it receives
from any of the Seller Stockholder and the Sellers in the course of the reviews
contemplated by this paragraph 6(d), will not use any of the Confidential
Information except in connection with this Agreement and, if this Agreement is
terminated for any reason whatsoever, will return to the Sellers all tangible
embodiments (and all copies) of the Confidential Information which are in its
possession.
<PAGE>
(e) ENVIRONMENTAL STUDIES.
(i) At least 15 days prior to the Closing Date, and in
no event later than October 15, 1997, Sellers shall deliver to the Parent and
Buyer completed ASTM Phase I and Phase II Environmental Site Assessments, a
completed ASTM Transaction Screen Process and an environmental audit of the
Leased Premises prepared by Baumgartner and Associates (the "Environmental
Studies"). The cost of the Environmental Studies shall be borne solely by Buyer
and/or Parent.
(ii) If the Environmental Studies indicate that
environmental remediation is required to ensure that the Leased Premises meet
and comply with all Environmental Laws, Buyer shall retain an environmental
engineering firm acceptable to Sellers to determine the cost of remediation.
The estimated cost of any remediation plus an additional amount as agreed upon
by the parties shall be deducted from the Purchase Price to be paid at Closing.
Notwithstanding the above, if the estimated remediation costs exceed $50,000,
and if Buyer requires either or both Seller to pay for such remediation, Sellers
shall be entitled to terminate this Agreement without any liability to Buyer or
Parent, in which event no party shall have any further obligations hereunder.
In the event the actual costs of the remediation are greater or less than the
estimated costs, the Purchase Price shall be adjusted accordingly. Buyer shall
have the right to offset any such remediation surplus against any amounts
payable to Seller Shareholder pursuant to the Net Lease Agreement.
(f) EXCLUSIVITY. The Sellers will not solicit, initiate or
encourage the submission of any proposal or offer from any Person relating to
the acquisition of all or substantially all of the capital stock or assets of
either of the Sellers (including any acquisition structured as a merger,
consolidation or share exchange), and will not participate in any discussions or
negotiations regarding, furnish any information with respect to, assist or
participate in or facilitate in any other manner, any effort or attempt by any
Person to do or seek any of the foregoing.
7. CONDITIONS TO OBLIGATION TO CLOSE.
(a) CONDITIONS TO OBLIGATION OF THE BUYER AND THE PARENT. The
obligation of Buyer and the Parent to consummate the transactions to be
performed by it in connection with the Closing is subject to satisfaction of the
following conditions:
(i) the representations and warranties set forth in
paragraph 3 above shall be true and correct in all material respects at and as
of the Closing;
(ii) the Sellers and the Seller Stockholder shall have
performed and complied with all of their covenants hereunder in all material
respects through the Closing;
(iii) the Sellers shall have procured all of the
third-party consents specified on paragraph 6(a)(iii) of the Disclosure
Schedule;
<PAGE>
(iv) the Sellers shall have obtained estoppel letters
reasonably satisfactory to Buyer from the lessors for each of the Leases set
forth in paragraph 3(e)(ii) of the Disclosure Schedule and shall have provided
copies thereof to the Buyer;
(v) the Buyer shall have received from counsel to the
Sellers and Seller Stockholder an opinion in form and substance as set forth in
Exhibit H attached hereto, addressed to the Buyer and dated as of the Closing;
(vi) the Buyer shall have been delivered the Net Lease
Agreement and the Real Estate Purchase Agreement executed by Seller Shareholder;
(vii) the relevant Parties shall have entered into each of
the agreements in form and substance as set forth in Exhibits B, J and K and the
same shall be in full force and effect;
(viii) any changes to the Disclosure Schedules shall be in
form and substance satisfactory to the Buyer.
(b) CONDITIONS TO OBLIGATION OF THE SELLERS AND THE SELLER
STOCKHOLDER. The obligation of each of the Sellers and each of the Seller
Stockholder to consummate the transactions to be performed by them in connection
with the Closing are subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in
paragraph 4 above shall be true and correct in all material respects at and as
of the Closing;
(ii) the Buyer and the Parent shall have performed and
complied with all of their covenants hereunder in all material respects through
the Closing;
(iii) the Sellers, the Seller Stockholder and the Buyer
shall have received all other authorizations, consents and approvals of
governments and governmental agencies referred to in paragraph 3(c) and
paragraph 3(u) above;
(iv) the relevant Parties shall have entered into each of
the agreements in form and substance as set forth in Exhibits B, J and K and the
same shall be in full force and effect;
(v) the Sellers and the Seller Stockholder shall have
received from counsel to the Buyer an opinion in form and substance as set forth
in Exhibit I attached hereto, addressed to the Sellers and the Seller
Stockholder and dated as of the Closing.
<PAGE>
8. INDEMNIFICATION.
(a) BY SELLER PARTIES. Subject to the limitations set forth in
this paragraph 8, each of the Sellers and Seller Stockholder will indemnify each
of the Buyer Indemnified Parties and hold each of the Buyer Indemnified Parties
harmless from and against any loss, liability, claim, damage, costs or expenses
(including, but not limited to, interest, penalties, costs of preparation and
investigation, and the reasonable fees, disbursements and expenses of attorneys,
accountants and other professional advisors) (collectively, "Losses") which any
Buyer Indemnified Party may suffer, sustain or become subject to, resulting
from, arising out of or caused by:
(i) any inaccuracy in or breach of any representation or
warranty of Seller pursuant to this Agreement in any respect, whether or not the
Buyer Indemnified Parties relied thereon or had knowledge thereof, including
schedules and documents delivered pursuant hereto;
(ii) any failure of either Seller to duly perform or
observe any term, provision, covenant or agreement to be performed or observed
by such Seller pursuant to this Agreement or documents contemplated by this
Agreement; or
(iii) any and all liabilities or obligations of Seller other
than the Assumed Liabilities (including any such liability that becomes a
liability of Buyer under any bulk transfer law of any jurisdiction, under any
common law doctrine of de facto merger or successor liability, or otherwise by
operation of law);
The obligations of the Sellers to indemnify and hold Purchaser's
Indemnified Persons harmless as described herein shall survive Closing and the
consummation of the transactions contemplated by this Agreement.
(b) PROCEDURES. The Buyer Indemnified Parties shall give
Sellers and Seller Stockholder prompt notice of any written claim, demand,
assessment, action, suit or proceeding to which the indemnity set forth in this
section 8 applies. If the document evidencing such claim or demand is a court
pleading, Buyer shall give such notice within 10 days of receipt of such
pleading, otherwise, Buyer shall give such notice within 30 days of the date it
receives written notice of such claim. Failure to give timely notice of a
matter which may give rise to an indemnification claim shall not affect the
rights of the Buyer Indemnified Parties to collect such Loss from Sellers or
Seller Stockholder so long as such failure to so notify does not materially
adversely affect Sellers' ability to defend such Loss against a third party.
(c) THIRD PARTY CLAIMS. If the Buyer Indemnified Parties'
request for indemnification arises from the claim of a third party, the written
notice shall permit Sellers to assume control of the defense of any such claim,
or any litigation resulting from such claim. Failure by Sellers to notify the
Buyer Indemnified Parties of its election to defend a complaint by a third party
within 5 days shall be a waiver by Sellers of its right to respond to such
complaint and within 20 days after notice thereof shall be a
<PAGE>
waiver by Sellers of its right to assume control of the defense of such claim or
action. If Sellers assume control of the defense of such claim or litigation
resulting therefrom, Sellers shall take all reasonable steps necessary in the
defense or settlement of such claim or litigation resulting therefrom and
Sellers shall hold the Buyer Indemnified Parties, to the extent provided in this
section 8, harmless from and against all Losses arising out of or resulting from
any settlement approved by Sellers or any judgment in connection with such claim
or litigation. Notwithstanding Sellers' assumption of the defense of such
third-party claim or demand, the Buyer Indemnified Parties shall have the right
to participate in the defense of such third-party claim or demand at its own
expense. Sellers shall not, in the defense of such claim or litigation, consent
to entry of any judgment or enter into any settlement, except in either case
with written consent of the Buyer Indemnified Parties, which consent shall not
be unreasonably withheld. The Buyer Indemnified Parties shall furnish Sellers
in reasonable detail all information such party may have with respect to any
such third-party claim and shall make available to Sellers and their
representatives all records and other similar materials which are reasonably
required in the defense of such third-party claim and shall otherwise cooperate
with and assist Sellers in the defense of such third-party claim.
If Sellers do not assume control of the defense of any such
third-party claim or litigation resulting therefrom, the Buyer Indemnified
Parties may defend against such claim or litigation in such manner as it may
reasonably deem appropriate, and Sellers shall indemnify the Buyer Indemnified
Parties from any Loss indemnifiable under section 8(a) incurred in connection
therewith.
(d) BY BUYER. Subject to the limitations set forth in this
paragraph 8, the Buyer and the Parent will indemnify the Seller Indemnified
Parties and hold them harmless from and against any Losses which any Seller
Indemnified Party may suffer, sustain or become subject to, resulting from,
arising out of or caused by:
(i) any inaccuracy or breach by Buyer or Parent of any
representation or warranty pursuant to this Agreement;
(ii) any liability or obligation of the Sellers which is an
Assumed Liability; or
(iii) any failure of Buyer or Parent to perform any of the
covenant or agreement to be performed by it under this Agreement or the Lease
Purchase Agreement.
The obligations of the Buyer and Parent to indemnify and
hold the Seller Indemnified Parties harmless as described herein shall survive
Closing and the consummation of the transactions contemplated by this Agreement.
<PAGE>
The procedural rules set forth in paragraph (b) shall apply
with respect to indemnification by Buyer except that the parties' respective
obligations under paragraph (b) and (c) shall be reversed as appropriate.
(e) LIMITATIONS. Notwithstanding the foregoing, the Parties
liability pursuant to this paragraph 8 will be subject to the following
limitations:
(i) BASKET. Neither the Seller Parties nor the Buyer will
be liable for any Losses described in paragraph 8(a) or 8(d) above unless and
until the aggregate amount of all such Losses described in such paragraph
exceeds $50,000, after which point the indemnifying party will be obligated, to
the extent required by this paragraph 8, to indemnify the indemnified parties
for all such amounts incurred (including the first $50,000).
(ii) SURVIVAL. The representations and warranties of each
of the Parties under this Agreement shall survive the Closing Date for a period
of three years; provided, however, that the representations contained in
paragraph 3(k) shall survive the Closing Date for the statute of limitations
applicable to such Taxes.
(iii) CAP. Neither the Seller Parties nor the Buyer will be
liable for any Losses described in paragraph 8(a)(i) or 8(d)(i) above in excess
of $3,000,000.
(f) PAYMENT. The Buyer Indemnified Parties shall be entitled to
recover any Losses pursuant to this Section 8 by means of set-off of any such
Losses against payments or amounts due to Sellers or Seller Stockholder under
the Real Estate Purchase Agreement. If the obligation to indemnify occurs after
all payments have been made under the Real Estate Purchase Agreement, then Buyer
may pursue such rights as may be available to it either in law or in equity.
(g) TREATMENT OF INDEMNIFICATION. Each Party will treat all
payments made pursuant to this paragraph 8(e) as adjustments to the Purchase
Price for all purposes.
9. REVIEW AND TERMINATION.
(a) REVIEW PERIOD. For a period of 15 business days after
receipt by the Buyer and Parent of the last schedule, documents and/or exhibit
required to be delivered with and included as part of the Disclosure Schedule
(the "Review Period"), the Buyer 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 Buyer, Parent or their counsel or accountants could
have a material adverse affect on the operations of the Business, Buyer, or
Parent ("Adverse Items"). The Review Period shall be extended for a period of
ten business days after the receipt of any additional schedule or document
requested. If, in their sole and absolute discretion, the Buyer and Parent are
unable to satisfy themselves that any Adverse Item will not have a material
adverse effect on the
<PAGE>
operations of the Business, Buyer or Parent, they shall have the right to
either: (i) terminate this Agreement; or (ii) request a reduction in the
Consideration sufficient cover the estimated liability for any Adverse Item.
(b) TERMINATION OF AGREEMENT. In addition to termination during
the Review Period, certain of the Parties may terminate this Agreement as
provided below:
(i) the Buyer, the Sellers and the Seller Stockholder may
terminate this Agreement by mutual written consent at any time prior to the
Closing;
(ii) the Buyer may terminate this Agreement by giving
written notice to the Sellers and the Seller Stockholder at any time prior to
the Closing Date [a] in the event the Sellers or the Seller Stockholder have
breached any material representation, warranty or covenant contained in this
Agreement in any material respect, the Buyer have notified the Sellers and the
Seller Stockholder of the breach and the breach has continued without cure for a
period of 30 days after the notice of breach or [b] if the Closing shall not
have occurred on or before November 30, 1997, by reason of the failure of any
condition precedent under paragraph 7(a) hereof (unless the failure results
primarily from any Buyer itself breaching any representation, warranty or
covenant contained in this Agreement); and
(iii) the Sellers or Seller Stockholder may terminate this
Agreement by giving written notice to the Buyer at any time prior to the Closing
[a] in the event the Buyer have breached any material representation, warranty
or covenant contained in this Agreement in any material respect, the Sellers or
Seller Stockholder have notified the Buyer of the breach and the breach has
continued without cure for a period of 30 days after the notice of breach or
[b] if the Closing shall not have occurred on or before November 30, 1997, by
reason of the failure of any condition precedent under paragraph 7(b) hereof
(unless the failure results primarily from the Sellers or Seller Stockholder
themselves breaching any representation, warranty or covenant contained in this
Agreement).
(iv) the Sellers or Seller Stockholder may terminate this
Agreement pursuant to paragraph 6(f)(ii) above.
(c) EFFECT OF TERMINATION. If any Party terminates this
Agreement pursuant to paragraph 9(b) above, all rights and obligations of the
Parties hereunder shall terminate without any liability of any Party to any
other Party (except for any liability of any Party then in breach); provided,
however, that the confidentiality provisions contained in paragraph 10 below
shall survive termination.
10. CONFIDENTIALITY.
<PAGE>
(a) Both prior to the consummation of the transactions
contemplated by this Agreement and thereafter if the transactions contemplated
by this Agreement are not consummated, the Buyer and Parent will maintain the
confidentiality of (except as required by law or legal process) any Confidential
Information regarding the Sellers or the Seller Shareholders, will not use any
of such Confidential Information except in connection with this Agreement and,
if this Agreement is terminated for any reason whatsoever, will return to the
Sellers all tangible embodiments (and all copies) of such Confidential
Information which are in their possession. Whether or not the transactions
contemplated hereby are consummated, the Seller Stockholder and the Sellers
maintain the confidentiality of all Confidential Information they obtain
regarding the Buyer and their Affiliates. If the transactions contemplated by
this Agreement are consummated, the Seller Stockholder agrees to use its best
efforts to maintain the confidentiality of all Confidential Information
regarding the Sellers. In the event of the breach of any of the provisions of
this paragraph 10, the non-breaching party, in addition and supplementary to
other rights and remedies existing in its favor, may apply to any court of law
or equity of competent jurisdiction for specific performance and/or injunctive
or other relief (without the posting of bond or other security) in order to
enforce or prevent any violations of the provisions hereof.
(b) In the event that any Party reasonably believes after
consultation with counsel that it is required by law to disclose any
Confidential Information described in this paragraph 10, the disclosing party
will (i) provide the other Party with prompt notice before such disclosure in
order that such other Party may attempt to obtain a protective order or other
assurance that confidential treatment will be accorded such confidential
information and (ii) cooperate with the other Party in attempting to obtain such
order or assurance.
(c) Notwithstanding the above, after consultation with the
Seller Stockholder, Buyer and Parent may make such disclosures as are necessary
to comply with any federal or state securities laws applicable to Parent.
11. NONASSIGNABLE PERMITS.
(a) SELLER TO USE ALL REASONABLE EFFORTS. Set forth on
paragraph 11 to the Disclosure Schedules, Seller shall, at its expense, use all
reasonable efforts, and Buyer shall cooperate with Seller, to obtain the
consents and waivers and to resolve the impracticalities of assignment of any
contracts and to obtain any other consents and waivers necessary.
(b) IF WAIVERS OR CONSENTS CANNOT BE OBTAINED. To the extent
that the consents and waivers referred to in section 11(a) are not obtained by
Seller, or until the impracticalities of transfer referred to therein are
resolved, Seller shall use all reasonable efforts, at its expense, to
(i) provide to Buyer the benefits of any contract, license or other agreement,
all as referred to in section 11(a), and set forth on SCHEDULE 11(a),
(ii) cooperate in any reasonable and lawful arrangement designed to provide such
benefits to Buyer without incurring any financial obligation to Buyer, and
(iii) enforce for the account of Buyer any rights of Seller arising from the
contracts or
<PAGE>
other agreements referred to in section 11(a) against such issuer thereof or
other party or parties thereto (including the right to elect to terminate in
accordance with the terms thereof on the advice of Buyer).
12. DISPUTE RESOLUTION. Any dispute, controversy, or claim arising
under or relating to this Agreement ("Dispute") shall be resolved by final and
binding arbitration administered by the American Arbitration Association ("AAA")
under its Commercial Arbitration Rules, subject to the following:
(i) Any party to a Dispute may demand that any Dispute be submitted
to binding arbitration. The demand for arbitration shall be in writing, shall
be served on the other party in the manner prescribed herein for the giving of
notices, and shall set forth a short statement of the factual basis for the
claim, specifying the matter or matters to be arbitrated.
(ii) The arbitration shall be conducted by an arbitrator appointed by
the AAA (the "Arbitrator") who shall conduct such evidentiary or other hearings
as such Arbitrator deems necessary or appropriate and thereafter shall make a
final determination as soon as practicable. Any arbitration pursuant hereto
shall be conducted by the Arbitrator as the parties may mutually agree or, if
the parties do not so agree, under the guidance of the Federal Rules of Civil
Procedure and the Federal Rules of Evidence, but the Arbitrator shall not be
required to comply strictly with such Rules in conducting any such arbitration.
All such arbitration proceedings shall take place in Milwaukee, Wisconsin.
(iii) Except as provided herein:
(A) each party shall bear its own "Costs and Fees," which are
defined as all reasonable pre-award expenses of the arbitration, including
travel expenses, out-of-pocket expenses (including, but not limited to, copying
and telephone), witness fees, and, except as provided in (B) below, reasonable
attorneys' fees and expenses;
(B) the fees and expenses of the Arbitrator and all other costs
and expenses incurred in connection with the arbitration ("Arbitration
Expenses") shall be borne equally by the parties, except that the Arbitrator
shall have the discretion to award to the Party which substantially prevails in
its claim its reasonable attorneys' fees; and
(C) notwithstanding the foregoing, the Arbitrator shall be
empowered to require any one or more of the parties to bear all or any portion
of such Costs and Fees and/or the fees and expenses of the Arbitrator in the
event that the Arbitrator determines such party has acted unreasonably or in bad
faith.
(iv) The Arbitrator shall have the authority to award any remedy or
relief that a Court of the State of Wisconsin could order or grant, including,
without limitation, specific performance of any obligation created under the
Asset Purchase
<PAGE>
Agreement, the awarding of punitive damages, the issuance of an injunction, or
the imposition of sanctions for abuse or frustration of the arbitration process.
The decision of the Arbitrator and any award pursuant thereto shall be in
writing and counterpart copies thereof shall be delivered to each party. The
decision and award of the Arbitrator shall be binding on all parties. In
rendering such decision and award, the Arbitrator shall not add to, subtract
from or otherwise modify the provisions of this Section 12. Either party to the
arbitration may seek to have judgment upon the award rendered by the Arbitrator
entered in any court having jurisdiction thereof.
(v) Each party agrees that it will not file any suit, motion,
petition or otherwise commence any legal action or proceeding for any matter
which is required to be submitted to arbitration as contemplated herein except
in connection with enforcement of an award rendered by the Arbitrator and except
to seek non-monetary equitable relief including, with limitation, the issuance
of an injunction or temporary restraining order pending a final determination by
the Arbitrator. Upon the entry of an order dismissing or staying an action or
proceeding filed contrary to the preceding sentence, the party which filed such
action or proceeding shall promptly pay to the other party the reasonable
attorneys' fees, costs and expenses incurred by such other party prior to the
entry of such order.
13. MISCELLANEOUS.
(a) PRESS RELEASES AND PUBLIC ANNOUNCEMENTS. Except as is
required by federal securities laws applicable to Parent as a publicly held
company, no Party shall issue any press release or make any public announcement
relating to the subject matter of this Agreement without the prior written
approval of the other Parties.
(b) NO THIRD-PARTY BENEFICIARIES. This Agreement shall not
confer any rights or remedies upon any Person other than the Parties and their
respective successors and permitted assigns.
(c) ENTIRE AGREEMENT. This Agreement (including the documents
referred to herein) constitutes the entire agreement between the Parties and
supersedes any prior understandings, agreements or representations by or between
the Parties, written or oral, to the extent they related in any way to the
subject matter hereof.
(d) SUCCESSION AND ASSIGNMENT. This Agreement shall be binding
upon and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement or
any of its rights, interests or obligations hereunder without the prior written
approval of the other Parties.
(e) COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
<PAGE>
(f) HEADINGS. The paragraph headings contained in this
Agreement are inserted for convenience only and shall not affect in any way the
meaning or interpretation of this Agreement.
(g) NOTICES. All notices, requests, demands, claims and other
communications hereunder will be in writing. Any notice, request, demand, claim
or other communication hereunder shall be deemed duly given if (and then two
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:
If to the Sellers or the Seller Stockholder:
Mr. Arthur Grossman
8040 North Beach Drive
Milwaukee, Wisconsin 53217
with a copy to:
Samuel J. Recht, Esq.
Quarles & Brady
411 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
telephone: 414-277-5335
facsimile: 414-271-3552
If to the Buyer:
Thomas J. Wiens, Chairman and CEO
Recycling Industries, Inc.
Recycling Industries of Wisconsin, Inc.
384 Inverness Drive South, Suite 211
Englewood, Colorado 80112
telephone: 303-790-7372
facsimile: 303-790-4252
<PAGE>
with a copy to:
Chester P. Schwartz, Esq.
Reinhart, Boerner, Van Deuren, Norris & Rieselbach, P.C.
1700 Lincoln Street, Suite 3725
Denver, CO 80203
telephone: 303-831-0909
facsimile: 303-831-4805
Any Party may send any notice, request, demand, claim or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail or electronic mail), but no such notice, request,
demand, claim or other communication shall be deemed to have been duly given
unless and until it actually is received by the intended recipient. Any Party
may change the address to which notices, requests, demands, claims and other
communications hereunder are to be delivered by giving the other Parties notice
in the manner herein set forth.
(h) GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the domestic laws of the State of Wisconsin without
giving effect to any choice or conflict of law provision or rule (whether of the
State of Wisconsin or any other jurisdiction) that would cause the application
of the laws of any jurisdiction other than the State of Wisconsin.
(i) AMENDMENTS AND WAIVERS. No amendment of any provision of
this Agreement shall be valid unless the same shall be in writing and signed by
the Buyer, the Sellers and Seller Stockholder. The Sellers may consent to any
such amendment at any time prior to the Closing with the prior authorization of
each of their respective Boards of Directors. No waiver by any Party of any
default, misrepresentation or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation or breach of warranty or covenant hereunder or affect
in any way any rights arising by virtue of any prior or subsequent such
occurrence.
(j) SEVERABILITY. Any term or provision of this Agreement that
is invalid or unenforceable in any situation in any jurisdiction shall not
affect the validity or enforceability of the remaining terms and provisions
hereof or the validity or enforceability of the offending term or provision in
any other situation or in any other jurisdiction.
(k) EXPENSES. Except as otherwise provided herein, the Buyer,
the Sellers and the Seller Stockholder will each pay all of their own expenses
(including fees and expenses of legal counsel, accountants, investment bankers,
brokers or other representatives and consultants and appraisal fees and
expenses) incurred in connection with the negotiation of this Agreement and the
other agreements contemplated hereby and the performance of its or their
obligations hereunder and thereunder, and the
<PAGE>
consummation of the transactions contemplated hereby and thereby (whether
consummated or not).
(l) CONSTRUCTION. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
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" shall mean including without limitation.
(m) INCORPORATION OF EXHIBITS AND SCHEDULES. The exhibits and
schedules identified in this Agreement are incorporated herein by reference and
made a part hereof.
(n) ATTORNEYS' FEES. In any action brought to enforce the terms
and conditions of this Agreement, the prevailing party shall be entitled, as
part of its award, to reasonable attorneys' fees incurred.
(o) 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. Sellers, at any time and from time to time on and after the
Closing, upon request by Buyer 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 Buyer or the Parent
for the better conveying, transferring, assigning, delivering, assuring and
confirming the Acquired Assets to Buyer.
GROSSMAN BROTHERS COMPANY
BY /s/ Arthur Grossman
-----------------------------------
Its President
-----------------------------------
MILWAUKEE METAL BRIQUETTING CO., INC.
BY /s/ Arthur Grossman
-----------------------------------
Its President
-----------------------------------
/s/ Arthur Grossman
-----------------------------------
Arthur Grossman, individually
[SIGNATURES CONTINUE]
<PAGE>
RECYCLING INDUSTRIES OF WISCONSIN, INC.
BY /s/ Harold J. Rouster
-----------------------------------
Its Vice Chairman
-----------------------------------
RECYCLING INDUSTRIES, INC.
BY /s/ Harold J. Rouster
-----------------------------------
Its Vice Chairman
-----------------------------------
<PAGE>
AMENDMENT TO
ASSET PURCHASE AGREEMENT
This Amendment to the Asset Purchase Agreement entered into as of
October 31, 1997 (the "Purchase Agreement") by and among Recycling Industries of
Wisconsin, Inc., Recycling Industries, Inc., Grossman Brothers Company, and
Milwaukee Metal Briquetting Co., Inc., is entered into as of December 5, 1997.
This Amendment Agreement amends and restates the Purchase Agreement as
specified below. Except as amended by this Amendment Agreement, all of the
terms and conditions of the Purchase Agreement will remain in full force and
effect and all of the definitions provided in the Purchase Agreement are
incorporated herein.
1. CASH AT CLOSING. Buyer agrees to pay to Sellers $3,726,203 in
cash at Closing, subject to adjustment pursuant to paragraph (iv) of this
paragraph 2.
2. Section 2(a)(iv) shall be amended to read as follows:
[1] CLOSING ADJUSTMENT TO ASSET PURCHASE PRICE FOR
INVENTORY AND RECEIVABLES. The parties have conducted an appraisal
and evaluation of the inventory to be purchased by Buyer hereunder
(the "Inventory Evaluation") in accordance with procedures set forth
in paragraph (b) below. Notwithstanding Buyer's previous due
diligence, the Purchase Price shall be reduced on a dollar-for-dollar
basis to the extent that the net asset value of the inventory as shown
on such inventory evaluation, together with the aggregate Receivables,
is less than $3,726,203. Such reduction shall be affectuated by a
corresponding reduction in the Assumed Liabilities which Buyer is
obligated to assume hereunder. The reduction to the Purchase Price
hereunder shall be limited to the aggregate value of the Assumed
liabilities. Similarly, the Purchase Price shall be increased on a
dollar-for-dollar basis to the extent that the net asset value of
Receivables and inventory (as shown on the Inventory Evaluation)
exceeds $3,726,203. Buyer shall pay to Sellers any such surplus
within five business days of the final determination of the Inventory
Evaluation, subject to adjustment pursuant to paragraph (vi) of this
paragraph 2.
[2] The parties acknowledge that during the period December 1 to
December 5, 1997, Sellers have operated the Business as
<PAGE>
agents for the Buyer. As promptly as possible, but in no event later than
ten days after the Closing, Sellers and Buyer shall exchange information
sufficient to determine the net amount due from Sellers to Buyer or from
Buyer to Sellers as a result of such transactions (the "Stub Period
Adjustment"). Without limiting the generality of the foregoing, Buyer
shall receive the benefit of all receivables, inventory and cash (except
that applied to Assumed Payables) and shall pay all expenses related to the
Business except Excluded Liabilities and payments to Art Grossman or
employees in excess of ordinary wages and salaries.
3. Section 5(d) shall be revised to read as follows:
COBRA. Sellers 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 contemplated hereby. Sellers have
complied with all COBRA requirements for all persons who ceased to be
employees of Sellers prior to the Closing Date and any liabilities for
any COBRA claims under any medical plan of Sellers arising out of
transactions occurring prior to the Closing Date shall be the sole
responsibility of Sellers.
4. The following provision shall be added as section 13(p) of the
Agreement.
(p) 401(k) INDEMNIFICATION. Sellers agree to indemnify
Buyer for any costs, taxes, liabilities or penalties Buyer incurs as a
result of Buyer adopting Seller's 401(k) retirement plan, to the
extent that such costs, taxes, liabilities or penalties are
attributable to the operation or documentation of Seller's 401(k)
retirement plan prior to Buyer's adoption of the plan. Sellers will
reimburse Buyer for the amount of any "top-heavy minimum contribution"
the Buyer is required to make to the 401(k) retirement plan for the
1997 plan year.
5. The parties agree to a Closing Date of December 5, 1997, with the
Closing effective as of December 1, 1997.
2
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Amendment Agreement
as of the date first written above.
GROSSMAN BROTHERS COMPANY
BY /s/ Arthur Grossman
---------------------------------
Its President
------------------------------
MILWAUKEE METAL
BRIQUETTING CO., INC.
BY /s/ Arthur Grossman
---------------------------------
Its President
------------------------------
ARTHUR GROSSMAN, individually
/s/ Arthur Grossman
-----------------------------------
RECYCLING INDUSTRIES OF
WISCONSIN, INC.
BY /s/ Thomas J. Wiens
---------------------------------
Its Chairman and CEO
------------------------------
RECYCLING INDUSTRIES, INC.
BY /s/ Thomas J. Wiens
---------------------------------
Its Chairman and CEO
------------------------------
3
<PAGE>
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the "Agreement") dated as of the 4th day of
December, 1997, is made and entered into among RECYCLING INDUSTRIES, INC. (the
"Parent"), a Colorado corporation, RECYCLING INDUSTRIES OF ATLANTA, INC.
("RIA"), a Colorado corporation, with each such corporation having a business
address at 384 Inverness Drive South, Suite 211, Englewood, Colorado 80122
(collectively, the "Buyer") on the one hand, and CENTRAL METALS COMPANY, INC., a
Georgia corporation (the "Seller") having a business address at 950 Marietta
Street, NW, Atlanta, Georgia 30318, on the other hand.
RECITALS
A. The Seller is engaged in the business (the "Business") of acquiring,
processing and selling recyclable metals and other recyclable materials in the
Atlanta, Georgia area.
B. Each of Parent and RIA is a Colorado corporation. Parent, through its
subsidiaries, engages in the recycling business in various locations throughout
the United States. RIA is a newly-formed and wholly-owned subsidiary of Parent
organized for the purpose of acquiring certain of the Seller's assets and
conducting the Business following the consummation of the transactions
contemplated by this Agreement.
C. The Board of Directors of each of Parent and RIA has approved the
purchase of assets from the Seller pursuant to this Agreement, and the Board of
Directors of Seller and each of Alan Cohen, Mark Cohen and Martin Kogon
(collectively, the "Shareholders" and individually a "Shareholder"),
representing all of the shareholders of the Seller, has approved Seller's sale
of certain of its assets to Buyer as contemplated by this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein, and for other good and valuable consideration, receipt of
which is hereby acknowledged, the Parties hereto, intending to be legally bound,
hereby agree as follows:
Article I
Definitions
As used herein, the following terms will have the meanings ascribed thereto
in this Article I:
"ACCOUNTS RECEIVABLE" means all of Seller's accounts receivable immediately
prior to Closing representing Obligations due Seller from any sale in the
Ordinary Course of Business, including any amounts so due which may be evidenced
by a promissory note or other instrument.
"ACCOUNTS RECEIVABLE VALUE" has the meaning set forth in Section 3.1.1.
"ACQUIRED ASSETS" has the meaning set forth in Section 2.1.
"ADVERSE ITEMS" has the meaning set forth in Section 11.1.
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"AFFILIATE", with respect to any Person, shall mean, (a) any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such Person, and (b) any other Person beneficially owning or
holding 20% or more of any class of voting securities of such Person or any
corporation, partnership, limited liability company or other Person of which
such Person owns or holds, in the aggregate, 20% of more of any class of voting
securities.
"AGREEMENT" has the meaning set forth in the preamble above.
"ASTM" means the American Society for Testing and Materials.
"ASSUMED LIABILITIES" has the meaning set forth Section 2.2.3.
"ASSUMED CONTRACTS" has the meaning set forth in Section 2.1.3.
"AVERAGE PRICE" means the average closing price of Common Stock for the ten
trading days prior to the date on which the value of Common Stock is to be
determined for a purpose as provided hereunder.
"AVERAGE CAPITAL GAIN RATE" means that percentage determined by dividing
(a) the amount of federal Income Taxes paid by the Shareholders with respect to
Seller's sale of assets as contemplated by this Agreement, by (b) the total gain
recognized by the Shareholders pursuant to such asset sale consistent with the
allocation of the Purchase Price among the Acquired Assets in accordance with
the Purchase Price Allocation.
"AVON" shall mean the Real Property owned by Seller and located at 934 and
972 Avon Avenue, and that certain .248 acre tract adjoining the west side of the
tract of land known as 972 Avon Avenue, and which is all of the land owned by
Seller on Avon Avenue.
"BAD DEBT RESERVE" has the meaning set forth in Section 3.1.1.
"BILL OF SALE AND ASSIGNMENT" has the meaning set forth in Section 4.3.6.
"BUSINESS" has the meaning set forth in Recital A.
"BUYER" has the meaning set forth in the preamble above, provided that
title to assets shall pass as between Parent and RIA as set forth in Section 2.1
below.
"BUYER DISCLOSURE SCHEDULE" means that "Disclosure Schedule" prepared by
Buyer as provided in Section 6.6.
"BUYER'S KNOWLEDGE" means to the actual knowledge of Thomas J. Wiens,
Michael McCloskey, Jerry Misukanis or Michael Stallings, each a senior executive
of, or consultant to, Recycling Industries, Inc.
"CASH CONSIDERATION" has the meaning set forth in Section 2.2.
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"CLOSING" or "CLOSING DATE" has the meaning set forth in Section 2.5.
"COBRA" has the meaning set forth in Section 8.6.2.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMMON STOCK" means the common stock of Buyer (of which there is a single
class authorized and outstanding), $.001 par value.
"CONFIDENTIAL INFORMATION" means any information pertaining to the
business, operations, marketing, customers, financing, forecasts and plans
concerning any of the Parties, including any Trade Secrets. Information shall
be treated as Confidential Information whether such information has been marked
"confidential" or in a similar manner.
"CONSIDERATION" means, in the aggregate, the Cash Consideration, the Share
Consideration and the Contingent Warrants as set forth in Section 2.1.
"CONTINGENT WARRANTS" has the meaning set forth in Section 2.2.2.
"CURRENT ASSET SCHEDULE" has the meaning set forth in Section 3.1.1.
"CURRENT ASSET VALUE" has the meaning set forth in Section 3.1.1.
"DEEDS" means Limited Warranty Deeds in a form approved by Buyer for
transfer of the Real Property from Seller to RIA.
"DIFFERENTIAL" has the meaning set forth in Section 3.1.2.
"EMPLOYMENT AGREEMENT" has the meaning set forth in Section 4.4.1.
"EMPLOYEE BENEFIT PLAN" means any: (a) nonqualified deferred compensation
or retirement plan or arrangement which is an Employee Pension Benefit Plan; (b)
qualified defined contribution retirement plan or arrangement which is an
Employee Pension Benefit Plan; (c) qualified defined benefit retirement plan or
arrangement which is an Employee Pension Benefit Plan; or (d) Employee Welfare
Benefit Plan.
"EMPLOYEE PENSION BENEFIT PLAN" has the meaning set forth in ERISA Section
3(2).
"EMPLOYEE WELFARE BENEFIT PLAN" has the meaning set forth in ERISA Section
3(1).
"ENCUMBRANCE" means any right, title or interest in property other than the
right, title and interest of the owner thereof who has possession and control
over the property. The term "Encumbrance" includes Liens, contracts of sale,
restrictions on use or transfer, consignments, powers of attorney or
appointment, adverse claims and claims of infringement and defects in title,
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and, with respect to the Real Property, such other matters as may be referenced
in Section 5.1.8(a) hereof.
"ENVIRONMENTAL LAW OR LAWS" means any and all federal, state, local or
municipal laws, rules, orders, regulations, statutes, ordinances, codes,
decrees, or requirements of any governmental authority regulating, relating to
or imposing liability or standards of conduct concerning environmental
protection, as they may now exist, 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 they may have been
amended.
"ENVIRONMENTAL PROBLEM" has the meaning set forth in Section 10.6.3.
"ENVIRONMENTAL REPRESENTATIONS" means any and all representations and
warranties of the Seller relating to Seller's compliance with Environmental Laws
prior to the Closing.
"ENVIRONMENTAL STUDIES" has the meaning set forth in Section 8.9.1.
"EPA" means the United States Environmental Protection Agency.
"EQUIPMENT LEASE" has the meaning set forth in Section 4.6.
"EQUIPMENT LESSOR" shall mean Cohen/Kogon Equipment Leasing, LLC, a Georgia
limited liability company.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ESCROW AGENT" has the meaning set forth in Section 8.9.8.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"EXCLUDED CONTRACTS" has the meaning set forth in Section 2.1.3.
"EXCLUDED LIABILITIES" has the meaning set forth in Section 2.3.2.
"EXCLUDED PERSONAL PROPERTY" has the meaning set forth in Section 2.1.2.
"EXCLUDED ASSETS" has the meaning set forth in Section 2.3.1.
"EXCLUDED REAL PROPERTY" has the meaning set forth in Section 2.3.1.
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"EXCLUDED REAL PROPERTY HOLDERS" shall mean Marietta Real Estate
Properties, LLC, and Jefferson Real Estate Properties, LLC, each a Georgia
limited liability company.
"FMLA" has the meaning set forth in Section 8.6.2.
"FMLA PERSON" has the meaning set forth in Section 8.6.2.
"GAAP" means Generally Accepted Accounting Principles consistently applied,
and as applied in the United States.
"GOVERNMENTAL BODY" means any domestic or foreign national, state or
municipal or other local government or multi-national body (including, but not
limited to, the European Economic Community), any subdivision, agency,
commission or authority thereof, or any quasi-governmental or private body
exercising any regulatory or taxing authority thereunder.
"HAZARDOUS MATERIALS" means any substance (a) which is defined as a
"hazardous substance," "hazardous material," "hazardous waste", "pollutant" or
"contaminant" under any Environmental Law, (b) which is toxic, explosive,
corrosive, flammable, radioactive, carcinogenic, mutagenic, or otherwise
hazardous and is regulated by any governmental authority under any Environmental
Law, (c) poses or threatens to pose a hazard to the health of persons on or
about any real property, and/or (d) which contains urea-formaldehyde,
polychlorinated biphenyls, asbestos or asbestos containing materials, radon,
petroleum, petroleum products, PCB's, pesticides, herbicides, sludge, slag,
acids, metals, solvents, tailings or wastewaters.
"INCOME TAXES" means (a) those Taxes imposed on Seller or the Shareholders
by the Code with respect to income, and (b) those Taxes imposed on Seller or the
Shareholders by any state, county, city or political subdivision thereof on the
basis of income, or on the basis either of income or net worth, whichever yields
the higher Tax under applicable law.
"INCOME TAX LIABILITIES" means any amount due, including interest,
penalties and additions to tax, for Income Taxes to the Internal Revenue Service
or to any applicable state or local taxing authority.
"INTELLECTUAL PROPERTY" means all: (a) foreign and domestic patents,
patent applications, patents pending, patent disclosures, including all
inventions disclosed therein, and improvements, reissues, substitutions,
continuations, continuations-in-part, and divisionals relating to the same, and
all rights under the Paris Convention for the Protection of Industrial Property;
(b) Trademarks, trademark applications, service marks, trade dress, logos, trade
names and corporate names, together with that part of the good-will of the
business associated with the use of and symbolized by each of the foregoing
marks and names, all registrations and applications for registration thereof,
specifically including the name "Central Metals Company" or any derivation
thereof; (c) copyrights and registrations and applications for registration
thereof; (d) mask works and registrations and applications for registration
thereof; (e) operating and application computer software, databases and
documentation; (f) Trade Secrets and confidential business information including
ideas, formulas, compositions, inventions (whether patentable or unpatentable
and whether or not reduced to practice), know-how, manufacturing and production
processes and techniques, research and
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development information, drawings, specifications, designs, plans, proposals,
technical data, copyrightable works, financial, marketing and business data,
pricing and cost information, business and marketing plans, and customer and
supplier lists and information; (g) other proprietary rights; and (h) copies and
tangible embodiments thereof (in whatever form or medium).
"INVENTORY" means any and all of the Seller's Processed Inventory,
Unprocessed Inventory and inventory-in-process. Inventory does not include any
Supply Inventory.
"INVENTORY DATE" has the meaning set forth in Section 3.3.
"INVENTORY VALUE" has the meaning set forth in Section 3.3.
"JAMS" has the meaning set forth in Section 12.9.6.
"LEASE AND PURCHASE AND SALE AGREEMENT" has the meaning set forth in
Section 2.1.1.
"LENDER" shall mean Buyer's Primary Lender or equity participant relating
to the transactions contemplated by this Agreement.
"LIEN" means a charge against or an interest in property to secure payment
of a debt or performance of an Obligation, and includes a Security Interest, a
judicial lien obtained by legal or equitable process or litigation, a common law
lien, a statutory lien or any other right of any Person in property granting the
Person an interest of any nature in property to secure the payment of a debt or
performance of an Obligation (including any creditor right existing or
continuing by reason of the failure of the Parties to comply with any applicable
bulk sales law).
"MARIETTA" shall mean the Real Property owned by Seller and located on
Marietta Street, other than the Excluded Real Property.
"MAXIMUM CAPITAL GAIN RATE" shall be 24.5%.
"MAXIMUM RATE" shall be 44.5%.
"MOST RECENT SELLER FISCAL MONTH END" has the meaning set forth in Section
5.2.1(b).
"NON-COMPETITION COVENANT" has the meaning set forth in Section 8.5.1.
"OBLIGATION" means any obligation that a specified Person has to pay money,
transfer any asset or property, render services or perform or refrain from any
act, whether it was created by law, order of any court, administrative agency,
arbitrator or private tribunal, or by contract and whether or not it is legal or
equitable, reduced to judgment, liquidated or unliquidated, contingent or fixed,
matured or unmatured, disputed or undisputed, known or unknown, secured or
unsecured. The term "Obligation" does not include the general obligation that
Persons have to obey the laws of any Governmental Body having jurisdiction over
them, but it does include damages, fines and penalties arising out of violations
of such laws and obligations to pay Taxes, including interest, penalties and
additions to tax thereon.
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"ORDINARY COURSE OF BUSINESS" means the ordinary course of Seller's
business consistent with past custom and practice (including with respect to
quantity and frequency).
"PARKING SERVICES AGREEMENT" has the meaning set forth in Section 4.3.3.
"PARTY" means Parent, RIA and Seller and each of the Shareholders to the
extent provided for herein.
"PERMITTED LIENS" means only those Liens or Encumbrances described in
Section 5.1.8(a) which appear on a preliminary title report which Buyer accepts,
or any Lien or Encumbrance attributable to the Assumed Liabilities.
"PERSON" means any individual, corporation, partnership, joint venture,
trust, associated, unincorporated organization, other entity or Governmental
Body.
"POST-CLOSING ADJUSTMENTS" has the meaning set forth in Section 3.2
"PRE-CLOSING QUALIFIED BENEFICIARIES" has the meaning set forth in Section
8.6.2.
"PRIME RATE" means at any date the "prime rate" as stated in the "money
rates" section of the WALL STREET JOURNAL.
"PROCESSED INVENTORY" means all ferrous and non-ferrous Inventory that has
been processed by Seller and is ready for shipment to the Seller's customers.
"PURCHASE PRICE" has the meaning set forth in Section 2.1.
"PURCHASE PRICE ALLOCATION" has the meaning set forth in Section 8.10.
"REAL PROPERTY" means the real property and improvements located at those
locations which are more particularly described in Exhibit 2.1.1.
"REAL PROPERTY ESCROW AGREEMENT" has the meaning set forth in Section
8.7.2.
"REAL PROPERTY HOLD-BACK AMOUNT" has the meaning set forth in Section
2.1.1.
"REAL PROPERTY CLOSING DATE" has the meaning set forth in Section 8.7.2.
"RECIPROCAL" means that percentage determined by subtracting the Maximum
Capital Gain Rate from One, the Reciprocal being 80%.
"REMEDIATION ESCROW" has the meaning set forth in Section 8.9.8.
"REMEDIATION ESCROW AGREEMENT" has the meaning set forth in Section 8.9.8.
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"RESIDUAL REAL PROPERTY OPTION AGREEMENT" has the meaning set forth in
Section 4.5.
"RESTRICTED AREA" has the meaning set forth in Section 8.5.2(a).
"RESTRICTED BUSINESS" has the meaning set forth in Section 8.5.2(b).
"RESTRICTED PERIOD" has the meaning set forth in Section 8.5.2(c).
"REVIEW PERIOD" has the meaning set forth in Section 11.1.
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SECURITIES FILINGS" means all filings made by Buyer as required by the
Exchange Act or the Securities Act.
"SECURITY INTEREST" means any mortgage, pledge, security interest,
encumbrance, charge, claim, or other lien, other than: (a) mechanic's,
materialmen'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 or by operation of
law and not incurred in connection with the borrowing of money.
"SELLER DISCLOSURE SCHEDULE" has the meaning set forth in Section 5.1.
"SELLER FINANCIAL STATEMENTS" has the meaning set forth in Section 5.2.1.
"SELLER'S EMPLOYEES" has the meaning set forth in Section 8.6.1.
"SELLER'S HEALTH PLAN" has the meaning set forth in Section 8.6.2.
"SELLER'S KNOWLEDGE" means to the actual knowledge of each or any of the
Shareholders or to the actual knowledge of each or any of Richard Commerford,
Randy Goodman or Fred Hayes, each of which is a managerial employee of Seller.
"SHAREHOLDERS" has the meaning set forth in Recital C.
"SHARE CONSIDERATION" has the meaning set forth in Section 2.2.
"SHARE PRICE GUARANTY AGREEMENT" has the meaning set forth in Section
2.2.1(c).
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"SUPPLY INVENTORY" means all of the parts, equipment, fuel, lubricants,
office supplies or other items consumed by or used in the operations of Seller
or the repair and maintenance of the Seller's vehicles, machinery and equipment.
"SUPPLY AGREEMENT" has the meaning set forth in Section 4.4.2.
"SURVEY" has the meaning set forth in Section 8.8.
"TAX OR TAXES" 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, or other tax, including any interest, penalty or addition thereto,
whether disputed or not.
"TITLE COMMITMENT" has the meaning set forth in Section 8.7.
"TITLE COMPANY" means Southeastern Land Title Co., Inc.
"TITLE POLICY" has the meaning set forth in Section 8.7.
"TRADE SECRET" means information not generally known about a Party's
business which is the subject of efforts that are reasonable under the
circumstances to maintain its secrecy or confidentiality and from which such
Party derives economic value from the fact that the information is not generally
known to other Persons. Trade Secrets include, but are not limited to,
technical or non-technical data, compilations, programs and methods, techniques,
drawings, processes, financial data, financial plans, product plans, lists of
actual customers and potential customers, customer route books, cards or lists
containing the names, addresses, buying habits and business locations of past,
present and prospective customers of such Party, sales reports, service reports,
price lists, product formulae, computer programs and source codes, merchandising
practices, and methods and procedures relating to products manufactured or sold
by such Party.
"UNPROCESSED INVENTORY" means all scrap ferrous metal comprised of
obsolete, discarded or abandoned machinery, appliances, equipment, automobiles
or other by-products to be processed by Seller for resale and all scrap
non-ferrous metal comprised of non-magnetic alloys of copper, brass, aluminum
and other related metals to be processed by Seller for resale. Unprocessed
Inventory does not include any ferrous or non-ferrous materials contained in the
residual materials resulting from Seller's operations or contained within dirt
or other non-processable medium within the Real Property of Seller.
"WASTE RESIDUE" has the meaning set forth in Section 7.2.
Article II
Purchase and Sale of the Assets
Section 2.1 PURCHASE AND SALE. Upon the terms and subject to the
conditions hereof, Buyer shall purchase from the Seller at the Closing, and
Seller shall sell to the Buyer at the Closing
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as provided below, all of the "Acquired Assets" for the "Purchase Price." The
"Purchase Price" shall consist of the sum of the Cash Consideration, plus the
Share Consideration, plus the three Contingent Warrants, as set forth in Section
2.2, plus the Assumed Liabilities as set forth in Section 2.2.3. Seller shall
convey fee simple title to the Real Property to Buyer by way of a Limited
Warranty Deed in a form reasonably acceptable to Buyer and Buyer's counsel,
which conveyance shall be free and clear of all Liens and Encumbrances except
for Permitted Liens. Seller shall convey good and marketable title to all
tangible and intangible personal property by way of a Bill of Sale and
Assignment substantially in the form set forth in Exhibit 4.3.6, which
conveyance shall be free and clear of all Liens and Encumbrances, except, as
applicable, the Permitted Liens. The "Acquired Assets" shall consist of:
2.1.1 REAL PROPERTY. The real property (the "Real Property")
described in Exhibit 2.1.1; provided, however, that until the Title Policy (as
provided in Section 8.7) and the Survey (as provided in Section 8.8) are ready
to be delivered to Buyer, (a) RIA shall lease the Real Property from Seller
under that certain agreement (the "Lease and Purchase and Sale Agreement")
substantially in the form set forth in Exhibit 2.1.1A for the sum of $1 per
year, and (b) Buyer shall withhold that amount of the Cash Consideration equal
to $1,500,000 (the "Real Property Hold-Back Amount") and not deliver such amount
at the Closing but deliver such amount into escrow to be held and delivered
under the provisions of the Real Property Escrow Agreement. Section 8.7.2
provides for the terms and conditions and time of transfer of the Real Property,
the delivery of the Deeds and other documents or instruments relating to the
Real Property and the delivery to Seller of the Real Property Hold-Back Amount
(or portion thereof to which Seller is entitled under this Agreement) under the
Real Property Escrow Agreement;
2.1.2 PERSONAL PROPERTY. All tangible and intangible personal
property owned, leased or licensed by Seller at the time of Closing (including,
without limitation, contractual rights and undertakings of third parties),
except for those assets consisting of personal property (the "Excluded Personal
Property") as set forth on Exhibit 2.1.2 attached. Seller and Buyer shall
mutually execute and deliver the Bill of Sale and Assignment evidencing the sale
and conveyance of Seller's personal property (other than the Excluded Personal
Property) to Buyer; and
2.1.3 ASSUMED CONTRACTS. The benefit of those contracts (the
"Assumed Contracts"), including all necessary consents to the assignment of the
Assumed Contracts as obtained by Buyer, to which Seller is a party and which are
(a) listed on Schedule 5.1.11 and/or (b) which are not required to be listed on
Schedule 5.1.11 but which otherwise arise from purchase and sale transactions in
the Ordinary Course of Business; provided, however, that Buyer shall not assume
and is not assuming any contract (the "Excluded Contracts") listed on Exhibit
2.1.3 attached hereto even though such contracts are listed on Schedule 5.1.11.
In consideration of the delivery by Parent of the Share Consideration and the
Contingent Warrants, the Seller shall deliver to Parent, at Parent's direction,
a portion of the Acquired Assets in the nature of good will (and, as necessary,
Intellectual Property) up to a value equal to the value of the Share
Consideration and the Contingent Warrants, which good will or other Intellectual
Property Parent shall promptly assign to RIA. The balance of the Acquired
Assets shall be acquired directly by, and transferred by Seller directly to,
RIA.
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Section 2.2 CONSIDERATION. In consideration of the purchase of the
Acquired Assets from Seller, Buyer shall deliver to the Seller the following:
(a) Twenty Million Dollars ($20,000,000) by wire transfer or other immediately
available funds (the "Cash Consideration"), adjusted as provided in Article III
below; (b) 800,000 shares of Common Stock, subject to adjustment as provided in
Section 2.2.1(b) and Section 2.2.1(c) (the "Share Consideration"); and (c) three
"Contingent Warrants" in the form set forth in Exhibit 2.2.2 permitting the
purchase by the Seller (or its assignees), under certain conditions, of a total
of 200,000 shares of Common Stock at a price of $15.00 a share, as such price
may be adjusted as set forth in the Contingent Warrants; and Buyer shall further
assume the Assumed Liabilities. Buyer consents to Seller's assignment and
transfer of one-third of the Share Consideration (except for the shares of
Common Stock being placed in the Remediation Escrow) and a Contingent Warrant to
each of the Shareholders following the Closing pursuant to a plan of liquidation
adopted or to be adopted by Seller, provided, however, that each of the
Shareholders shall (x) make the representations regarding investment intent and
related matters with respect to the Common Stock and the Contingent Warrants to
be received by such Shareholders as provided herein, and (y) agree in writing to
be bound by the terms of the respective Contingent Warrant.
2.2.1 SHARE CONSIDERATION.
(a) The Share Consideration shall initially consist of
800,000 shares (subject to adjustment as provided in Section 2.2.1(b) and
Section 2.2.1(c)) of Common Stock; [CONFIDENTIAL TREATMENT REQUESTED BY
REGISTRANT]
(b) If the Average Price at the Closing Date is greater
than $12.50 a share, then the Share Consideration shall not be 800,000 shares,
but shall be that number of shares of Common Stock determined by dividing
$10,000,000 by such Average Price, [CONFIDENTIAL TREATMENT REQUESTED BY
REGISTRANT]
(c) Buyer shall guaranty the aggregate market value of all
Common Stock issued as Share Consideration to be $10,000,000 on the second
anniversary date of the Closing (regardless of whether 800,000 shares of Common
Stock are issued or the number of shares issued as Share Consideration is
determined under Section 2.2.1(b)) pursuant to the provisions of that certain
Share Price Guaranty Agreement ("Share Price Guaranty Agreement") in the form
attached as Exhibit 2.2.1(c) which the Parties shall execute and deliver at the
Closing.
(d) In the event of any stock dividend, stock split,
reclassification, recapitalization, combination or exchange of shares with
respect to, or rights issued in respect of, the outstanding Common Stock after
the date hereof but prior to the Closing, the number of shares of Common Stock
to be issued under this Section 2.2.1 shall be adjusted accordingly, as is
appropriate to reflect the intent of this Agreement.
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2.2.2 CONTINGENT WARRANTS. Buyer and Seller shall execute and
mutually deliver at the Closing the Contingent Warrants (the "Contingent
Warrants") in the form attached as Exhibit 2.2.2 pursuant to which Seller shall
be entitled to acquire additional shares of Common Stock if one of the four
contingencies set forth therein is met.
2.2.3 ASSUMED LIABILITIES. Buyer shall assume only those
Obligations (the "Assumed Liabilities") (a) represented by the accounts payable
as set forth in Exhibit 2.2.3 attached, which accounts payable shall in all
events not exceed $300,000, (b) Obligations arising under the Assumed Contracts
which accrue or relate to periods, circumstances and events on and after the
Closing Date, the incurrence or existence of which do not breach any
representation or warranty of Seller or any of the Shareholders contained herein
or in any document delivered pursuant to this Agreement, (c) Obligations arising
in connection with the operation of the Business previously conducted by Seller
in the Ordinary Course of Business accruing and relating to periods,
circumstances and events on and after the Closing Date, the incurrence or
existence of which do not breach any representation or warranty of Seller or any
of the Shareholders contained herein or in any document delivered pursuant to
this Agreement, (d) Obligations under Seller's Health Plan as set forth in
Section 8.6 and (e) Permitted Liens. The Bill of Sale and Assignment shall
provide for Buyer's assumption of the Assumed Liabilities.
Section 2.3 EXCLUDED ASSETS AND EXCLUDED LIABILITIES.
2.3.1 EXCLUDED ASSETS. The excluded assets (the "Excluded
Assets") are all assets of Seller other than the Acquired Assets. The Excluded
Assets are comprised of the Excluded Personal Property as set forth on Exhibit
2.1.2, the Excluded Contracts as set forth on Exhibit 2.1.3 and those parcels of
real property (the "Excluded Real Property") as set forth on Exhibit 2.3.1.
2.3.2 EXCLUDED LIABILITIES. Other than the Assumed Liabilities as
set forth in Section 2.2.3, Seller shall retain all, and Buyer shall not assume
any, liabilities and Obligations of Seller of any nature, whether known, or
unknown, fixed or contingent or choate or inchoate, and whether arising out of
any state of facts, occurrences or circumstances prior to, at or after the
Closing Date (the "Excluded Liabilities"). Excluded Liabilities shall include,
but are not limited to, any liability or Obligation of any nature arising under
any capital lease, operating lease, license Obligations, any oral or written
employment, consulting or similar agreement or arrangement for services or other
contractual Obligation which does not arise under or pursuant to an Assumed
Contract. Buyer is further not continuing or assuming any Employee Benefit Plan
of Seller other than Seller's Health Plan and Excluded Liabilities include,
without limitation, any liabilities or Obligations arising out of or with
respect to any Employee Benefit Plan of Seller (other than liabilities or
Obligations arising out of or with respect to Seller's Health Plan, which Buyer
is assuming).
Section 2.4 ASSISTANCE IN CONSUMMATION OF THE PURCHASE AND SALE. Each
of Buyer, the Shareholders and Seller shall provide all reasonable assistance
to, and shall cooperate with, each other to bring about the consummation of the
purchase and sale as soon as practicable in accordance with the terms and
conditions of this Agreement.
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Section 2.5 CLOSING. The closing (the "Closing") of the transaction
contemplated by this Agreement shall take place at the offices of Arnall, Golden
and Gregory, LLP at 10:00 A.M. local time on the day which is not more than one
business day after the day on which the last of all conditions set forth in this
Agreement have been fulfilled, or at such other time and place as Buyer and the
Shareholders shall agree in writing (the "Closing Date").
Article III
Adjustments to Consideration
Section 3.1 ADJUSTMENTS TO CASH CONSIDERATION AT CLOSING. The
Consideration to be paid at Closing as set forth in Section 2.2 shall be
adjusted as follows:
3.1.1 DETERMINATION OF VALUE OF CURRENT ASSETS. The Buyer and
Seller shall mutually prepare effective as of the close of business on November
22, 1997, a Schedule (the "Current Asset Schedule") which sets forth an amount
equal to the sum (the "Current Asset Value") of (a) the Inventory Value (such
value to be determined as provided in Section 3.3 and set forth on Exhibit 3.3
attached) and (b) the "Accounts Receivable Value," which amount shall be the
face amount of Seller's accounts receivable as of the close of business on
November 22, 1997, reduced by an applicable reserve for bad debts (the "Bad Debt
Reserve"), which Bad Debt Reserve shall be determined in accordance with GAAP.
A compilation of information and entries (including, without limitation, trial
balances and accrual work papers or similar items), used in the preparation of
the Current Asset Schedule and the book values and other values recorded thereon
shall be made available to Buyer, as Buyer reasonably requests. The Current
Asset Schedule shall be attached as Exhibit 3.1.1.
3.1.2 REDUCTIONS IN CASH CONSIDERATION AT CLOSING, IF ANY. The
Consideration shall be adjusted at Closing by reducing the Cash Consideration by
the sum of (a) the amount by which $5,700,000 exceeds the Current Asset Value,
plus (b) the accounts payable which are part of the Assumed Liabilities as set
forth on Exhibit 2.2.3. If the Current Asset Value exceeds $5,700,00 but the
excess of the Current Asset Value over $5,700,000 (the "Differential") is less
than the Assumed Liabilities referenced in subclause (b) immediately above, then
the Cash Consideration at Closing shall be reduced by the amount determined by
subtracting the Differential from such Assumed Liabilities. An example of these
calculations is set forth in Exhibit 3.1.2.
3.1.3 INCREASE OF CASH CONSIDERATION AT CLOSING, IF ANY. If the
Current Asset Value at Closing exceeds $5,700,000 by an amount greater than the
accounts payable which are part of the Assumed Liabilities as set forth on
Exhibit 2.2.3, then the Consideration at Closing shall be increased by an amount
equal to (I) the excess of the Current Asset Value over $5,700,000, reduced by
(II) such Assumed Liabilities. An example of these calculations is set forth in
Exhibit 3.1.3.
Section 3.2 POST-CLOSING ADJUSTMENTS TO CONSIDERATION. The
Consideration delivered at Closing, as adjusted pursuant to Section 3.1, shall
be further adjusted after the Closing by those payments provided for in this
Section 3.2 (the "Post-Closing Adjustments"):
3.2.1 EXCESS COLLECTIONS OF ACCOUNTS RECEIVABLE. If within 60
days of Closing Buyer collects from the Accounts Receivable which Seller assigns
to Buyer pursuant to this
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Agreement an amount which exceeds the Accounts Receivable Value as set forth on
the Current Asset Schedule, then Buyer shall promptly pay to Seller the excess
of the amounts so collected over the Accounts Receivable Value (including,
without limitations, proceeds of such excess collections of Accounts Receivables
as collected after such 60 day period). The provisions of this Section 3.2.1
shall not be subject to the basket and cap amounts provided in Section 10.5.
3.2.2 DEFICIENT COLLECTIONS. If within 60 days of Closing Buyer
has not collected from the Accounts Receivable which Seller assigns to Buyer
pursuant to this Agreement an amount which equals or exceeds the Accounts
Receivable Value as set forth on the Current Asset Schedule, then Seller shall
promptly pay to Buyer an amount equal to the difference between such Accounts
Receivable Value and the amounts so collected. Upon Buyer's receipt of Seller's
payment, Buyer shall assign to Seller all of its right, title and interest in
and to all remaining uncollected accounts receivable which Seller assigned to
Buyer at the Closing. The provisions of this Section 3.2.2 shall not be subject
to the basket and cap amounts provided in Section 10.3.1.
Section 3.3 VALUATION OF INVENTORY. For purposes of the adjustments to
the consideration provided for in this Article III, Inventory shall be valued
(the "Inventory Value") as follows effective as of the close of business on
November 22, 1997: (a) Processed Inventory shall be valued by grade at the
market value of such inventory as of the Closing Date less $9.35 per ton for
ferrous materials, and $.016 per pound for non-ferrous materials; and (b) the
value of the Unprocessed Inventory shall be agreed upon by the parties as of the
close of business November 22, 1997, based upon a physical inventory taken as of
such date (the "Inventory Date") and the weighted average purchase price for the
Unprocessed Inventory for the ten business day period immediately preceding the
Inventory Date. The value so determined shall be set forth on Exhibit 3.3
hereto. Not later than 60 days following the Closing, the Inventory Value shall
be (i) increased by any purchases of inventory after the Inventory Date but on
or before the Closing Date; and (ii) decreased by any sales of inventory after
the Inventory Date but on or before the Closing Date, and the net difference
between the Inventory Value as determined as of the Inventory Date, and the
Inventory Value after taking into account the adjustments set forth above, shall
be promptly paid from Buyer to Seller, if such amount is positive, and shall be
promptly paid from Seller to Buyer, if such amount is negative. Such purchases
and sales of inventory shall be valued in the fashion as set forth in this
Section 3.3.
Article IV
Deliveries at Closing
Section 4.1 SELLER DELIVERIES TO BUYER. At the Closing Seller shall
deliver the following to Buyer:
4.1.1 DISCLOSURE SCHEDULE. The Updated Disclosure Schedule and
related certificate as required by Section 9.1.2;
4.1.2 CERTIFICATE CONCERNING REPRESENTATIONS. The Certificate
concerning representations as required by Section 9.1.1;
4.1.3 CERTIFICATE CONCERNING COVENANTS. The Certificate
concerning covenants as required by Section 9.1.3;
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4.1.4 OPINION. The Opinion of Counsel for Seller and the
Shareholders as set forth in Section 9.1.7;
4.1.5 CORPORATE DOCUMENTS. The corporate documents for Seller as
required in the Disclosure Schedule; and
4.1.6 FIRPTA CERTIFICATE. The Certificate required under Section
897 of the Code certifying that Seller is not a foreign person.
Section 4.2 BUYER DELIVERIES. At the Closing, Parent and RIA shall
deliver the following to Seller:
4.2.1 CASH CONSIDERATION. RIA shall deliver the Cash
Consideration, adjusted as provided in Section 3.1.2 or Section 3.1.3, as the
case may be;
4.2.2 SHARE CONSIDERATION. Parent shall deliver the stock
certificates representing the shares of Common Stock comprising the Share
Consideration as set forth in Section 2.2.1(a), or, if applicable, Section
2.2.1(b);
4.2.3 RESOLUTIONS. The Resolutions of Buyer approving and
ratifying this transaction as set forth in Section 9.2.5; and
4.2.4 OPINION. The Opinion of Counsel for Buyer as set forth in
Section 9.2.4.
Section 4.3 MUTUAL DELIVERIES OF PARENT AND/OR RIA AND SELLER. At the
Closing Parent and/or RIA, as the case may be, and Seller shall mutually execute
and deliver the following:
4.3.1 CONTINGENT WARRANTS. The Contingent Warrants in the form
set forth in Exhibit 2.2.2;
4.3.2 SHARE PRICE GUARANTY AGREEMENT. The Share Price Guaranty
Agreement in the form set forth in Exhibit 2.2.1(c);
4.3.3 PARKING SERVICES AGREEMENT. The Parking Services Agreement
in the form set forth in Exhibit 4.3.3;
4.3.4 LEASE AND PURCHASE AND SALE AGREEMENT. The Lease and
Purchase and Sale Agreement in the form set forth in Exhibit 2.1.1A;
4.3.5 REMEDIATION ESCROW AGREEMENT. The Remediation Escrow
Agreement in the form set forth in Exhibit 8.9.8; and
4.3.6 BILL OF SALE AND ASSIGNMENT. The Bill of Sale and
Assignment substantially in the form of Exhibit 4.3.6.
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Section 4.4 MUTUAL DELIVERIES OF RIA AND SHAREHOLDERS. At the Closing
RIA and the Shareholders shall mutually execute and deliver the following:
4.4.1 EMPLOYMENT AGREEMENTS. Employment agreements (the
"Employment Agreements" or, in the singular, the "Employment Agreement") for
each Shareholder in the form set forth in Exhibit 4.4.1; and
4.4.2 SUPPLY AGREEMENT. The Supply Agreement between RIA, the
Shareholders and Pull-A-Part, Inc. in the form set forth in Exhibit 4.4.2.
Section 4.5 MUTUAL DELIVERIES OF THE EXCLUDED REAL PROPERTY HOLDERS AND
RIA. At the Closing, each of the Excluded Real Property Holders and RIA shall
mutually execute and deliver a "Residual Real Property Option Agreement" in the
form set forth in Exhibit 4.5.
Section 4.6 MUTUAL DELIVERIES OF THE EQUIPMENT LESSOR AND RIA. At the
Closing, the Equipment Lessor and RIA shall mutually execute and deliver the
"Equipment Lease" in the form set forth in Exhibit 4.6.
Section 4.7 DELIVERIES INTO ESCROW.
4.7.1 SELLER DELIVERIES TO TITLE COMPANY. Seller shall deliver
the Deeds to the Title Company to be held in escrow pursuant to the terms of the
Real Property Escrow Agreement;
4.7.2 BUYER DELIVERIES TO TITLE COMPANY. Buyer shall deliver to
the Title Company the Real Property Hold-Back Amount, which amount the Title
Company shall place in an interest bearing account acceptable to Seller to be
held in escrow pursuant to the terms of the Real Property Escrow Agreement; and
Section 8.7.2; and
4.7.3 BUYER DELIVERIES TO REMEDIATION ESCROW. [CONFIDENTIAL
TREATMENT REQUESTED BY REGISTRANT] to the Escrow Agent subject to the terms
of the Remediation Escrow as provided in Section 8.9.8.
Article V
Representations of Seller
Section 5.1 REPRESENTATIONS OF SELLER - IN GENERAL. Seller represents
to Buyer that the statements contained in this Section 5.1 are 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 was
substituted for the date of this Agreement throughout this Section 5.1).
Attached to this Agreement as Exhibit V shall be "Seller's Disclosure Schedule"
which shall set forth those items as described below in this Article V. Matters
pertaining to Hazardous Materials and compliance of the Real Property with the
Environmental Laws are dealt with exclusively in Section 5.1.19 and Section 8.9
and are excluded from any Section of this Article V other than Section 5.1.19.
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5.1.1 AUTHORIZATION OF TRANSACTIONS. Seller has full power and
authority (including full corporate power and authority) to execute and deliver
this Agreement, to execute, deliver and perform all agreements which Seller is
to execute and deliver at Closing as set forth in Section 4.3 and to perform all
of its Obligations hereunder and under any agreement executed and delivered in
connection with this Agreement. This Agreement, and all agreements to which
Seller is a party referred to in this Agreement, constitute the valid and
legally binding Obligation of Seller, enforceable in accordance with its terms
and conditions. Each Affiliate of Seller which is executing and delivering any
agreement or other instrument pursuant to this Agreement has full power and
authority (including full corporate or limited liability company power and
authority, as the case may be) to execute and deliver such collateral
agreements, contracts and instruments and to perform all of the Obligations of
any such Affiliate under any such agreement or instrument executed and delivered
in connection with this Agreement. All agreements which are executed and
delivered in connection with this Agreement by any such Affiliate of Seller
constitute the valid and legally binding Obligations of any such Affiliate,
enforceable in accordance with its terms and conditions.
5.1.2 [ INTENTIONALLY DELETED ].
5.1.3 [ INTENTIONALLY DELETED ].
5.1.4 BROKERS' FEES. Seller has no liability or Obligation to pay
any fees or commissions to any broker, finder or agent with respect to the
transactions contemplated by this Agreement for which Seller or Buyer could
become liable or obligated.
5.1.5 ORGANIZATION, QUALIFICATION AND CORPORATE POWER. Seller is
a corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation. Seller is duly authorized to
conduct business and is in good standing under the laws of each jurisdiction in
which the nature of its businesses or the ownership or leasing of its properties
requires such qualification, except where the lack of such qualification would
not have a material adverse effect on the financial condition of Seller. Seller
has full corporate power and authority to carry on the businesses in which it is
engaged and to own and use the properties owned and used by it.
5.1.6 NONCONTRAVENTION. Except as set forth in the Seller's
Disclosure Schedule, neither the execution and delivery of this Agreement, nor
consummation of the transactions contemplated hereby, by Seller will:
(a) Violate any statute, regulation, rule, judgment, order,
decree, stipulation, injunction, charge or other restriction of any government,
governmental agency or court to which Seller is subject or any provision of the
charter or bylaws of Seller which, if violated, either singly or collectively
would have a material adverse effect on the financial condition of Seller; or
(b) To Seller's Knowledge, conflict with, result in a
breach of, constitute a default under, result in the acceleration of, create in
any Person the right to accelerate, terminate, modify or cancel, or require any
notice under any contract, lease, sublease, license, sublicense, franchise,
permit, indenture, agreement or mortgage for borrowed money, instrument of
indebtedness, Security Interest or other arrangement to which Seller is a party
or by which it is
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bound or to which any of its assets is subject (or result in the imposition of
any Security Interest upon any of its assets), except where the violation,
conflict, breach, default, acceleration, termination, modification,
cancellation, failure to give notice, or Security Interest would not have a
material adverse effect on the financial condition of Seller or on the ability
of the Parties to consummate the transactions contemplated by this Agreement.
To Seller's Knowledge, Seller does not need to give any notice to, make any
filing with, or obtain any authorization, consent, or approval of any government
or governmental agency in order for the Parties to consummate the transactions
contemplated by this Agreement.
5.1.7 TITLE TO ASSETS. Seller has good and marketable title to,
or a valid leasehold interest or license interest in, and is conveying and
assigning good and marketable title to, or a valid leasehold interest or license
interest in, all of the Acquired Assets pursuant to the Deeds and Bill of Sale
and Assignment free and clear of any Lien or Encumbrance or any other
restriction or limitation other than Permitted Liens. Except as set forth in
Section 5.1.7 of the Disclosure Schedule, there are no contracts, agreements or
arrangements to which any of the Acquired Assets are subject or to which they
are bound which, either singly or taken collectively, will have a material
adverse impact on (a) Buyer or the conduct of the Business in the Ordinary
Course of Business after the Closing, or (b) Buyer's title to or its interest as
the lessee or licensee in the assets owned, leased or licensed which are
conveyed to Buyer by Seller pursuant to this Agreement.
5.1.8 REAL PROPERTY. Exhibit 2.1.1 lists the Real Property. With
respect to the Real Property:
(a) Seller has good and marketable fee title to the Real
Property, free and clear of all Liens and Encumbrances or other restriction,
except for: (I) installments of general property taxes and special assessments
not yet delinquent and other statutory liens (if any); (II) recorded easements
(including utility easements), covenants, zoning restrictions and other
restrictions of record; and (III) any matters shown on the Survey to be
delivered in accordance with this Agreement;
(b) The Real Property has access to public roads and is
supplied with utilities and other services necessary and adequate for the
conduct of Seller's business as now conducted or as presently proposed to be
conducted, including electricity, potable water, telephone, and sewage; and the
parcels of Real Property located on the west side of Marietta Street, and at
Avon Avenue, have direct access to an operational railroad spur and to Seller's
Knowledge, there is no upcoming change with respect to such matters;
(c) To Seller's Knowledge, Seller is not in violation of
any applicable zoning ordinance or other law, regulation or requirement relating
to the operation of any of the Real Property, and neither any Shareholder nor
Seller has received any notice of any such violation or the existence of any
condemnation proceeding with respect to any of the Real Property;
(d) There are no leases, subleases, licenses, contracts,
rights of first approval, concessions or other agreements granting to any Person
or Persons the right of use, occupancy, or possession of any of the Real
Property;
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(e) There are no outstanding options or rights of first
refusal to purchase the Real Property, or any portion thereof or interest
therein;
(f) To the Seller's Knowledge there are no improvements
made or contemplated to be made by any public or private authority, the costs of
which are to be assessed as special taxes or assessments against any of the Real
Property and there are no present assessments; and
(g) No Lien, Encumbrance or other restriction which is not
disclosed in the preliminary title report delivered by the Title Company but
which is by the Survey upon its completion shall have a material adverse impact
on the Buyer's conduct of the Business in the Ordinary Course of Business after
the Closing, and to Seller's Knowledge there are no Liens or Encumbrances with
respect to the Real Property except as disclosed in the Preliminary Title Report
or as set forth in Section 5.1.8(a)(I) or (II).
5.1.9 BUILDINGS, MACHINERY AND EQUIPMENT. Section 5.1.9 of the
Disclosure Schedule lists all of the material buildings, machinery and equipment
owned or leased by Seller which are necessary to Seller's conduct of its
Business in the Ordinary Course of Business. Seller's ownership of all other
machinery and equipment which it owns but is not listed in Section 5.1.9 of the
Disclosure Schedule has been reflected in the books and records of Seller in
accordance with Seller's past practices consistently applied. Except as set
forth in Section 5.1.9 of the Disclosure Schedule, with respect to all items of
buildings, machinery and equipment owned or leased by Seller:
(a) All of the buildings, machinery and equipment and other
tangible assets owned and leased and used in Seller's Business (I) are in good
working order and condition (with respect to machinery, equipment and other
tangible assets), ordinary wear and tear excepted; (II) are being used for their
intended purpose and, to Seller's Knowledge, within their designed capacity; and
(III) to the Seller's Knowledge there are no material defects in such assets or
other conditions, including any delayed maintenance, which adversely effects the
operation or value of such equipment; and
(b) The leases for the machinery, equipment and other
tangible assets, if any, are in full force and effect and Seller holds a valid
and existing leasehold interest under each of the leases. Seller has delivered
to Buyer complete and accurate copies of each of the leases described under this
Section, and none of such leases has been modified in any respect, except to the
extent that such modifications are disclosed by the copies delivered to Buyer.
Seller is not in default, and no circumstances exist which, if unremedied, would
either with or without notice or the passage of time or both, result in such
default under any of such leases, nor, to the Seller's Knowledge, is any other
party to any of such leases in default.
5.1.10 INTELLECTUAL PROPERTY. Except as set forth on Section
5.1.10 of the Disclosure Schedule, all of the Intellectual Property is
assignable, and to the Seller's Knowledge, Seller owns or has the right to use
pursuant to license, sublicense, agreement or permission all Intellectual
Property necessary for the operation of its Businesses as presently conducted
and Seller has not granted any license or sublicense under or with respect to
any Intellectual Property.
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5.1.11 CONTRACTS. Section 5.1.11 of the Disclosure Schedule is
comprised of a complete and accurate list in all material respects of all
written or oral contracts, understandings, agreements and other arrangements
(except for those oral arrangements arising in the Ordinary Course of Business)
executed by an officer or duly authorized employee of Seller or to which Seller
is a party either:
(a) Involving more than $25,000, exclusive of normal and
ordinary purchase orders or sale agreements;
(b) In the nature of a collective bargaining agreement,
employment agreement, or severance agreement with any of its directors, officers
and employees; or
(c) Involving more than $5,000 and with respect to which
Seller or any of the Shareholders has received notice that there is a dispute or
complaint regarding any amount due or owing under any such Agreement. The
Shareholders have delivered or made available to Buyer a copy of each contract,
agreement, and other written arrangement listed in Section 5.1.11 of the
Disclosure Schedule and a brief description of each oral agreement listed
thereon. Except as disclosed in Section 5.1.11 of the Disclosure Schedule,
there are no disputes or complaints with respect to, nor has any Shareholder or
Seller received any notices (whether oral or in writing) that any other party to
such agreements is terminating, intends to terminate or is considering
terminating, any of the contracts, agreements or understandings listed or
required to be listed in Section 5.1.11 of the Disclosure Schedule.
5.1.12 INVENTORY. The Inventory and Supply Inventory which Seller
is selling to Buyer consists of Processed and Unprocessed Inventory,
manufactured and purchased parts and supplies, substantially all of which is
merchantable and fit for the purpose for which it was procured or manufactured,
subject to only the reserve for inventory writedown set forth in the Seller
Financial Statements, as adjusted for the passage of time through the Closing
Date in accordance with past custom and practice of Seller. The piles of
Unprocessed and Processed Inventory observed and measured on the Inventory Date
are primarily located on level ground and are comprised substantially,
throughout the pile, of the quality and grade of material visible on the outer
surface of the pile.
5.1.13 ACCOUNTS RECEIVABLE. The Accounts Receivable have arisen in
the Ordinary Course of Business and represent valid Obligations due to Seller.
To the Seller's Knowledge, the Accounts Receivable (net of any Bad Debt Reserve)
are collectible in accordance with their terms, in the Ordinary Course of
Business and in the aggregate recorded amounts thereof. To the Seller's
Knowledge, such Accounts Receivable are not subject to any material set-offs or
material counterclaims.
5.1.14 LITIGATION. To the Seller's Knowledge, Section 5.1.14 of
the Disclosure Schedule sets forth each instance in which any of the Acquired
Assets:
(a) is subject to any unsatisfied judgment, order, decree,
stipulation, injunction of any court or Governmental Body; or
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(b) is the subject of any charge, complaint, action, suit,
proceeding or hearing of or in any court or quasi-judicial or administrative
agency of any federal, state, local or foreign jurisdiction.
5.1.15 INSURANCE. Section 5.1.15 of the Disclosure Schedule is
comprised of a complete description or copies of all policies of insurance of
any kind or nature, including, but not limited to, fire, liability, workmen's
compensation and other forms of insurance owned or held by or covering Seller or
all or any portion of its property and assets.
5.16 LABOR RELATIONS. Section 5.1.16 of the Disclosure Schedule
lists all employees of Seller, including their current positions and
compensation, and lists any sums presently owing to or accrued for and on behalf
of any employee for, benefits, vacation, sick leave, bonuses or other similar
items. Seller is not a party to any collective bargaining or similar agreement.
To the Seller's Knowledge, there are no strikes, work stoppages, unfair labor
practice charges or grievances pending or threatened against Seller by any
employee of Seller or any other person or entity.
5.1.17 LEGAL COMPLIANCE. To the Seller's Knowledge, Seller is in
material compliance with all laws (including rules and regulations thereunder)
of any Governmental Bodies having jurisdiction over Seller, including any
requirements relating to antitrust, consumer protection, currency exchange,
equal opportunity, health, occupational safety, pension and securities matters.
5.1.18 PERMITS. Section 5.1.18 of the Disclosure Schedule is
comprised of a listing of all licenses, permits, orders or approvals held by
Seller from Governmental Bodies required for the conduct of Seller's business
other than such incidental licenses, permits and other authorizations which
would be readily obtainable by any qualified applicant without undue burden
other than such licenses, permits and authorizations which, if not obtained,
would not have a material adverse effect, individually and collectively, upon
the financial condition of Seller. To Seller's Knowledge, Seller has all
licenses, permits, orders or approvals from Governmental Bodies required for the
conduct of its business as presently conducted other than such licenses, permits
and authorizations which, if not obtained, would not have a material adverse
effect on the financial condition of Seller, and Seller is not in material
violation of any such license, permit, order or approval. To Seller's
Knowledge:
(a) All such licenses, permits, orders and approvals are in
full force and effect; and
(b) No suspension or cancellation thereof has been
threatened.
5.1.19 ENVIRONMENTAL LAWS. Seller represents that, except as set
forth in Section 5.1.19 of the Disclosure Schedule or as may be disclosed in the
Environmental Studies:
(a) Seller is in compliance with all applicable
Environmental Laws regarding any disposal, or with respect to arranging with a
transporter for disposal, of any Hazardous Material owned or possessed by
Seller(i) at any facility which is owned or operated by another party or entity
(other than Seller, the Shareholders or any Affiliates of Seller) or (ii) from
the Real Property to the Excluded Real Property or to any other facility owned
or operated by the Shareholders or any Affiliates of Seller, and no judicial
proceedings, governmental administrative
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actions, investigations or internal or non-public agency proceedings are pending
or threatened against Seller with respect to such compliance (or lack thereof)
as set forth above in this Section 5.1.19(a), nor are there any consent decrees,
or other decrees, consent orders, or administrative orders outstanding to which
Seller is a party relating to any such disposal; and
(b) Seller has incurred no liability under any
Environmental Law, including under 42 U.S.C. Section 9607(a)(3), as a result of
arranging for disposal or treatment, or arranging with a transporter for
transport for disposal or treatment, of Hazardous Materials owned or possessed
by Seller at any facility which is either (i) owned or operated by another party
or entity (other than the Seller, the Shareholders or any Affiliates of the
Seller), or (ii) which involves the disposal or transport from the Real Property
to the Excluded Real Property or to any other facility owned or operated by the
Shareholders or any Affiliates of the Seller.
Matters pertaining to the environmental status of or remediation of the Real
Property are not dealt with in this Section 5.1.19. Procedures relating to any
environmental remediation with respect to the Real Property are set forth in
Section 8.9, which Section 8.9 is the exclusive provision of this Agreement
dealing with the application of the Environmental Laws to the Real Property and
the remediation of environmental problems regarding the Real Property.
5.1.20 EMPLOYEE BENEFITS. Section 5.1.20 of the Disclosure
Schedule lists all Employee Benefit Plans maintained by Seller or to which it
contributes for the benefit of any of their current or former employees.
(a) To Seller's Knowledge each Employee Benefit Plan (and
each related trust or insurance contract) complies in form and in operation in
all material respects with the applicable requirements of ERISA and the Code;
(b) All contributions (including all employer contributions
and employees salary reduction contributions) which are due have been paid to
each Employee Benefit Plan and all such plans are adequately funded;
(c) To Seller's Knowledge, no unsatisfied liability has
been incurred by CMC or any ERISA affiliate and there is no material risk that
such liability will be incurred;
(d) To Seller's Knowledge, no charge, complaint, action,
suit, proceeding, hearing, investigation, claim, or demand with respect to the
administration or the investment of the assets of any Employee Benefit Plan
(other than routine claims for benefits) is pending;
(e) Seller does not provide any medical or other similar
benefits to employees beyond retirement;
(f) Seller has delivered to Buyer copies of the plan
documents and summary plan descriptions, the most recent Form 5500 Annual
Report, and all related trust agreements, insurance contracts, and other funding
agreements which implement each Employee Benefit Plan; and
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(g) Seller has complied with all COBRA requirements for all
persons who were participants in the Seller Health Plan prior to the Closing
Date or who became eligible for COBRA due to a qualifying event that occurred
under the Seller Health Plan prior to the Closing Date.
5.1.21 CONTRACTS. Except as otherwise disclosed in Section 5.1.21
of the Disclosure Schedule, each Assumed Contract: (a) is in full force and
effect and is the enforceable Obligation of the parties thereto, and (b) to
Seller's Knowledge does not require the consent of any Person to be assigned to
Buyer.
5.1.22 AFFILIATE TRANSACTIONS. Except as disclosed in Section
5.1.22 of the Disclosure Schedule, no Shareholder, and no other officer,
director, or employee of Seller or any member of the immediate family of any
such Shareholder, officer, director or employee, or any entity in which any of
such persons owns any beneficial interest (other than any publicly-held
corporation whose stock is traded on a national securities exchange or in the
over-the-counter market and less than one percent of the stock of which is
beneficially owned by any of such persons), has any agreement with Seller or any
interest in any of their property of any nature, used in or pertaining to the
business of Seller (other than the ownership of capital stock of Seller and the
ownership of the equipment which is the subject of the Equipment Lease). None
of the foregoing Persons has any direct or indirect interest in any competitor,
supplier or customer of Seller or in any Person from whom or to whom Seller
leases any property or transacts business of any nature (other than as disclosed
in Section 5.1.22 of the Disclosure Schedule and/or any Person or Persons who
own the equipment which is the subject of the Equipment Lease).
5.1.23 CUSTOMERS AND SUPPLIERS. Section 5.1.23 of the Disclosure
Schedule lists the 10 largest customers and suppliers of Seller in terms of
dollar volume of business (without identification by name) for the fiscal year
ended December 31, 1996, including the amount and percentage of net sales or
purchases by Seller attributable to such customer or supplier for the period
indicated. Since the most recent Seller Fiscal Month End, no customer or
supplier listed on Section 5.1.23 of the Disclosure Schedule has indicated in
writing or orally to Seller or the Shareholders that it will stop or decrease
the rate of purchases or sales from or to Seller.
Section 5.2 REPRESENTATIONS OF SELLER WITH RESPECT TO FINANCIAL
STATEMENTS AND RECENT EVENTS. Seller represents to Buyer that the statements
contained in this Section 5.2 are 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 was substituted for the date of this
Agreement throughout this Section 5.2).
5.2.1 SELLER FINANCIAL STATEMENTS. Section 5.2.1 of the
Disclosure Schedule is comprised of the following financial statements
(collectively, the "Seller Financial Statements"):
(a) Unaudited balance sheets and statements of income,
changes in stockholders' equity and cash flow as of and for each of the years
ended December 31, 1996, 1995 and 1994, for Seller; and
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(b) Unaudited balance sheets and statements of income,
changes in stockholders' equity and cash flow as of and for the month ended
October 31, 1997 (the "Most Recent Seller Fiscal Month End") for Seller.
The Seller Financial Statements present fairly the financial condition of Seller
as of such dates and the results of operations of Seller for such periods in all
material respects, accurately record the assets and transactions of Seller in
all material respects, reflect the use of consistent accounting practices for
all periods and are consistent with the books and records of Seller (which books
and records are correct and complete in all material respects).
5.2.2 EVENTS SUBSEQUENT TO MOST RECENT SELLER FISCAL MONTH END.
Since the Most Recent Seller Fiscal Month End, and except as disclosed on
Section 5.2.2 of the Disclosure Schedule or as otherwise contemplated by this
Agreement, there has not been, occurred or arisen, with respect to Seller:
(a) Any material damage, destruction or loss of any of its
properties or assets (whether or not covered by insurance), except in the
Ordinary Course of Business;
(b) Any sale, lease, transfer, or assignment of any of its
assets, tangible or intangible, other than (i) sales of Inventory in the
Ordinary Course of Business, (ii) other distributions permitted by this
Agreement or any related agreement for a fair consideration in the Ordinary
Course of Business (with the parties stipulating that the Equipment Lease is a
lease in the Ordinary Course of Business for fair consideration);
(c) Any acceleration, termination, modification, or
cancellation of any agreement, contract, lease, or license (or series of related
agreements, contracts, leases, and licenses) involving more than $25,000 to
which it is a party or by which it is bound;
(e) Any grant of any license or sublicense of any rights
under or with respect to any Intellectual Property;
(f) Any sale, assignment or transfer (including transfers
to any employees, affiliates or shareholders) of any Intellectual Property;
(g) Any delay or postponement of the payment of accounts
payable or other liabilities, other than those being contested in good faith as
set forth in Section 5.2.2 of the Disclosure Schedule or as otherwise permitted
under this Agreement;
(i) Any spill of any Hazardous Materials other than in a DE
MINIMIS amount;
(j) Any material change in the Seller Financial Statements
or accounting principles not fully reflected on the Seller Financial Statements
and explained in the notes thereto;
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(k) Any taking of other action or entrance into any other
transaction other than in the Ordinary Course of Business, or entrance into any
transaction with any insider of Seller, except as disclosed or contemplated in
this Agreement and the Disclosure Schedule except with the advance consent of
Buyer;
(aa) Any other material adverse change in the business,
properties, assets, financial condition or results of operations of Seller
(whether or not similar to any of the foregoing); or
(bb) Any agreement or commitment, whether in writing or
otherwise, to do any of the foregoing.
Section 5.3 DISCLOSURE. The representations and warranties of the
Seller contained in this Agreement do not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements and information contained herein not misleading.
Section 5.4 INVESTMENT REPRESENTATION.
5.4.1 SELLER REPRESENTATIONS. Seller represents and understands
(a) that the shares of Common Stock comprising the Share Consideration, the
Contingent Warrants and any shares of Common Stock to be issued upon the
exercise of the Contingent Warrants have not been, and will not be, registered
under the Securities Act, or under any state securities laws, and are being
offered and sold in reliance upon federal and state exemptions for transactions
not involving any public offering; (b) that it is acquiring shares of Common
Stock, the Contingent Warrants and any shares of Common Stock to be issued upon
the exercise of the Contingent Warrants for its own account for investment
purposes and not with a view to the distribution thereof, provided that Seller
intends to transfer the Share Consideration and the Contingent Warrants to the
Shareholders pursuant to a plan of liquidation adopted or to be adopted by
Seller (and not as part of a plan to effect the distribution of such securities)
who are Accredited Investors and who agree to make the same representations as
set forth in this Section 5.4.1 as a condition to their receipt of such Common
Stock and Contingent Warrants from Seller; (c) that it is an "Accredited
Investor" within the meaning of Rule 501(a) promulgated under the Securities
Act; (d) that it has received certain information concerning Buyer and has had
the opportunity to ask questions and to obtain additional information as desired
in order to evaluate the merits and risks inherent in holding shares of the
Common Stock; and (e) that it acknowledges that any information concerning Buyer
is based on historical data and any projections were made as good faith
estimates.
5.4.2 LEGENDS ON SHARES AND CONTINGENT WARRANTS ISSUED TO SELLERS.
Seller further acknowledges and understands that any certificates evidencing the
ownership of any shares of Common Stock received as Share Consideration, any
certificate or agreement evidencing the ownership of the Contingent Warrants and
any shares of Common Stock received upon exercise of the Contingent Warrants
shall bear the legend contained below, or in the Contingent Warrants in the form
attached as Exhibit 2.2.2, as the case may be:
THE SHARES OF COMMON STOCK EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933,
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AS AMENDED, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO,
OR FOR RESALE IN CONNECTION WITH ANY DISTRIBUTION THEREOF. NO SALE OR
OTHER DISPOSITION OF THESE SHARES MAY BE MADE WITHOUT AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR UNLESS AN EXEMPTION FROM
SUCH REGISTRATION IS AVAILABLE.
5.4.3 SHAREHOLDER REPRESENTATIONS. Each Shareholder represents
and understands (a) that the shares of Common Stock comprising the Share
Consideration, the Contingent Warrants and any shares of Common Stock to be
issued upon the exercise of the Contingent Warrants have not been, and will not
be, registered under the Securities Act, or under any state securities laws, and
are being offered and sold in reliance upon federal and state exemptions for
transactions not involving any public offering; (b) that he is acquiring shares
of Common Stock, the Contingent Warrants and any shares of Common Stock to be
issued upon the exercise of the Contingent Warrants for his own account for
investment purposes and not with a view to the distribution thereof, such
receipt by the Shareholder occurring solely as a result of liquidating
distributions made or to be made pursuant to a plan of liquidation adopted or to
be adopted by Seller as a consequence of which the form of each Shareholder's
investment is to be changed such that the Shareholder shall hold his investment
in Buyer directly rather than indirectly through Seller; (c) that he is an
"Accredited Investor" within the meaning of Rule 501(a) promulgated under the
Securities Act; (d) that he has received certain information concerning Buyer
and has had the opportunity to ask questions and to obtain additional
information as desired in order to evaluate the merits and risks inherent in
holding shares of the Common Stock; (e) that he acknowledges that any
information concerning Buyer is based on historical data and any projections
were made as good faith estimates, and (f) that he agrees, as a condition to
Buyer's consent to the transfer of the shares of Common Stock comprising the
Share Consideration and a Contingent Warrant to the Shareholder pursuant to a
plan of liquidation adopted or to be adopted by Seller, to be bound with respect
to the Share Consideration, the Contingent Warrants and any shares of Common
Stock issued upon the exercise of the Contingent Warrants in the same manner and
to the same extent as Seller under this Agreement or any other Agreement
executed and delivered in connection with this Agreement.
5.4.4 LEGENDS ON SHARES AND CONTINGENT WARRANTS ISSUED TO
SHAREHOLDERS PURSUANT TO SELLER'S PLAN OF LIQUIDATION. Each of the Shareholders
further acknowledges and understands that any certificates evidencing the
ownership of any shares of Common Stock received as Share Consideration shall
also bear the legend as set forth above in Section 5.4.2 and that the Contingent
Warrants, and any certificates evidencing the ownership of any shares of Common
Stock received upon the exercise of the Contingent Warrants shall also bear the
legend as set forth in Section 5.4.2.
Article VI
Representations of Buyer
Each of Parent and RIA jointly and severally represent to Seller that the
statements contained in this Article VI are 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 was substituted for the date of
this Agreement throughout this Article VI).
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Section 6.1 ORGANIZATION. RIA is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation. Parent is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its organization. Each of
Parent and RIA is duly authorized to conduct business and is in good standing
under the laws of each jurisdiction in which the nature of its businesses or the
ownership or leasing of its properties requires such qualification, except where
the lack of such qualification would not have a material adverse effect on the
financial condition of Parent or RIA. Each of Parent and RIA has full corporate
power and authority to carry on the businesses in which it is engaged and to own
and use the properties owned and used by it.
Section 6.2 AUTHORIZATION OF TRANSACTION. Each of RIA and Parent has
full power and authority (including full corporate power and authority) to
execute and deliver this Agreement and to perform its Obligations hereunder.
This Agreement constitutes the valid and legally binding Obligation of each of
RIA and Parent, enforceable in accordance with its terms and conditions.
Neither RIA nor Parent needs to give any notice to, make any filing with or
obtain any authorization, consent or approval of any government or governmental
agency in order to consummate the transactions contemplated by this Agreement
except for such notice filings as may be required under federal or applicable
state securities laws and except for any filings pursuant to the Securities Act,
which may be required in connection with Parent's financing of the transactions
contemplated by this Agreement or in connection with the issuance to the
Shareholders of the Share Consideration or the Contingent Warrants.
Section 6.3 NONCONTRAVENTION. Neither the execution and delivery of
this Agreement, nor consummation of the transactions contemplated hereby, will
(a) violate any statute, regulation, rule, judgment, order, decree, stipulation,
injunction, charge or other restriction of any government, governmental agency
or court to which either RIA or Parent is subject or any provision of its
charter or bylaws; or (b) conflict with, result in a breach of, constitute a
default under, result in the acceleration of, create in any Person the right to
accelerate, terminate, modify or cancel, or require any notice under any
contract, lease, sublease, license, sublicense, franchise, permit, indenture,
agreement or mortgage for borrowed money, instrument of indebtedness, Security
Interest, or other arrangement to which either RIA or Parent is a party or by
which either is bound or to which any of the assets of either is subject.
Section 6.4 BROKERS' FEES. Neither RIA nor Parent has any Obligation to
pay any fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which the Shareholders could
become liable or obligated.
Section 6.5 SHARES TO BE DELIVERED. The Share Consideration (including,
without limitation, any shares to be issued pursuant to the Share Price Guaranty
Agreement) and the Contingent Warrants (together with the shares of Common Stock
to be issued upon the exercise thereof), will be duly authorized, validly
issued, fully paid and non-assessable securities of Parent, and the Shareholders
will be the sole registered and beneficial owners thereof.
Section 6.6 BUYER DISCLOSURE SCHEDULE. Except as set forth in Exhibit
6.6 ("Buyer's Disclosure Schedule") there is no litigation or claim made against
Buyer which would be required to
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be disclosed on Form 10-K if such Form 10-K were required to be filed
immediately before the execution and delivery of this Agreement. Seller
acknowledges that Seller has received from Parent certain information relating
to other pending acquisitions of Parent and its subsidiaries, and the terms of
Parent's financing for such acquisitions. Except to the extent that Parent or
RIA may be contractually bound or subject to any other legal requirement not to
disclose information, all information contained in the Buyer Disclosure Schedule
and all other information delivered to Seller by Parent regarding its pending
acquisition and financing transactions is true, correct and complete.
Article VII
Pre-Closing Covenants
The Parties agree as follows with respect to the period between the
execution of this Agreement and the Closing:
Section 7.1 GENERAL. Each of the Parties will use his or its
commercially reasonable efforts to take all action and to do all things
necessary, proper or advisable in order to consummate and make effective the
transactions contemplated by this Agreement (including satisfying the closing
conditions set forth in Article IX).
Section 7.2 WASTE RESIDUE. Seller shall, at Seller's sole cost and
expense and prior to or within a reasonable time following the Closing Date (not
to exceed 15 days after Closing), have all non-recyclable waste material
resulting from Seller's operation of its shredder (the "Waste Residue"), which
material consists of all material commonly referred to as "shredder fluff" and
all drums and barrels containing oils and other contaminants resulting from
Seller's operation of the shredder.
Section 7.3 OPERATION OF BUSINESS. Seller shall not cause or permit
Seller to engage in any practice, take any action, embark on any course of
inaction, or enter into any transaction outside the Ordinary Course of Business.
Section 7.4 FULL ACCESS. During the Review Period, Seller will permit
representatives of Buyer, including counsel, lenders, appraisers and
accountants, to have full access, during normal business hours and in a manner
so as not to interfere with the normal business operations of Seller, to all
premises, properties, books, records, contracts, tax records and documents of or
pertaining to Seller. Except as otherwise expressly set forth in this
Agreement, no review, examination or investigation by Buyer shall diminish or
obviate any of the representations, warranties, covenants or agreements of
Seller or the Shareholders under this Agreement.
Section 7.5 CONFIDENTIALITY. Buyer will treat and hold confidential any
Confidential Information of Seller or the Shareholders it receives from Seller
or the Shareholders, will not use any of such Confidential Information except in
connection with this Agreement, and, if this Agreement is terminated for any
reason whatsoever, will return to Seller and the Shareholders all tangible
embodiments (and all copies) of such Confidential Information which are in its
possession and will thereafter continue to hold confidential any such
Confidential Information received; PROVIDED, HOWEVER, that this sentence shall
not apply to any information which, at the time of disclosure, is available
publicly; which, after disclosure, becomes available publicly through no failure
of Buyer;
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which Buyer knew or to which Buyer had access prior to disclosure; and further
provided that in the event that Buyer is requested or required (by oral question
or request for information or documents in any legal proceeding) to disclose any
such Confidential Information, Buyer will notify Seller promptly of the request
or requirement so that Seller may seek an appropriate protective order or waive
compliance with the provisions of this Section 7.5, and if in the absence of a
protective order or the receipt of a waiver hereunder, Buyer is, on the advice
of counsel, compelled to disclose any such Confidential Information to any
tribunal or else stand liable for contempt, Buyer may disclose such Confidential
Information to the tribunal, provided that Buyer shall use its reasonable
efforts to obtain, at the reasonable request and expense of Seller, an order or
other assurance that confidential treatment will be accorded to such portion of
such Confidential Information required to be disclosed as Seller shall
designate.
Section 7.6 NOTICE OF EVENTS. Seller shall within two days thereafter
notify Buyer of 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 any event, occurrence, transaction or other item which would
have been required to have been disclosed on any Schedule or Exhibit attached
hereto 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 adversely alter any of the representations, warranties or other agreements
of Seller or the Shareholders.
Section 7.7 NO NEGOTIATION. Until the earlier of the Closing Date or
the date of termination of this Agreement, neither Seller nor the Shareholders
shall, directly or indirectly through any officer, director, employee or agent:
7.7.1 Solicit, initiate or encourage the submission of inquiries,
proposals or offers from any person relating to any acquisition or purchase of
substantially all the assets of, or any equity interest in, Seller or any
exchange offer, purchase and sale, consolidation, liquidation, dissolution or
similar transaction involving Seller;
7.7.2 Enter into or participate in any discussions or negotiations
regarding any of the foregoing, or with the intent to facilitate any of the
foregoing, furnish to any person (other than Buyer, its representatives) any
information with respect to Seller; or
7.7.3 Otherwise cooperate in any way with any Person, other than
Buyer, to do or seek any of the foregoing.
Seller will notify Buyer within 24 hours if any such communication with respect
to any of the foregoing 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 VIII
Post-Closing Covenants
The Parties (or each of them, as applicable) agree as follows with respect
to the period following the Closing:
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Section 8.1 GENERAL. In case at any time after the Closing any further
action is necessary or desirable to carry out the purposes of this Agreement,
each of the Parties will use commercially reasonable efforts to take such
further action (including the execution and delivery of such further instruments
and documents) as any other Party reasonably may request, all at the sole cost
and expense of the requesting Party.
Section 8.2 TRANSITION. The Shareholders will take no action that is
primarily designed or intended to have the effect of discouraging any lessor,
licensor, customer, supplier or other business associate of Seller from
maintaining the same business relationships with Seller after the Closing as it
maintained with Seller prior to the Closing.
Section 8.3 ACCESS TO BOOKS AND RECORDS. For a period of two years
after the Closing Date, Seller and the Shareholders shall have access to the
Seller's books and records for the purpose of preparing the Shareholders'
individual income Tax returns and to file an appropriate Subchapter S corporate
return. Thereafter, the Shareholders shall have commercially reasonable access
to such books and records (to the extent they are available) for the purpose of
addressing any dispute with or inquiry by any Governmental Body; PROVIDED,
HOWEVER, that such access does not require Buyer to retain any of Seller's books
and records for a period of greater than four years. Buyer and Seller
acknowledge that Buyer is acquiring the originals of all such books and records
and that Seller is retaining a copy (and not the original) of all such books
and records.
Section 8.4 CONFIDENTIALITY. Seller and the Shareholders will treat and
hold confidential any Confidential Information of Buyer that they receive from
Buyer and will not use any such Confidential Information except in connection
with this Agreement, and, if this Agreement is terminated for any reason
whatsoever, will return to Buyer all tangible embodiments (and all copies) of
such Confidential Information which are in their possession and will thereafter
continue to hold confidential any such Confidential Information received;
PROVIDED, HOWEVER, that this sentence shall not apply to any information which,
at the time of disclosure, is available publicly; which, after disclosure,
becomes available publicly through no failure of Seller or the Shareholders;
which Seller or the Shareholders knew or to which they had access prior to
disclosure; and further provided that in the event that Seller or any
Shareholders is requested or required (by oral question or request for
information or documents in any legal proceeding) to disclose any such
Confidential Information, Seller or the Shareholders will notify Buyer promptly
of the request or requirement so that Buyer may seek an appropriate protective
order or waive compliance with the provisions of this Section 8.4, and if in the
absence of a protective order or the receipt of a waiver hereunder, Sellers or
the Shareholders are, on the advice of counsel, compelled to disclose any such
Confidential Information to any tribunal or else stand liable for contempt,
Seller or the Shareholders may disclose such Confidential Information to the
tribunal, provided that Seller or the Shareholders shall use its reasonable
efforts to obtain, at the reasonable request and expense of Buyer, an order or
other assurance that confidential treatment will be accorded to such portion of
such Confidential Information required to be disclosed as Buyer shall designate.
Section 8.5 COVENANT NOT TO COMPETE.
8.5.1 COVENANT NOT TO COMPETE. Each of Seller and the
Shareholders hereby covenants and agrees (the "Non-Competition Covenant"), on
behalf of itself or himself and its or his
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Affiliates, that during the Restricted Period neither it, he nor any Affiliate
shall, directly or indirectly, unless acting with the prior written consent of
Buyer:
(a) Engage or participate within the Restricted Area in any
business that comprises a Restricted Business;
(b) Without limitation of the provisions of Section
8.5.1(a), serve as an officer, director, agent, or employee of, or as a
consultant to or investor in (directly or indirectly including, without
limitation, through one or more Affiliates), or otherwise be or become entitled
to receive compensation in respect of, any Person which directly or indirectly,
engages in or competes with the Restricted Business within the Restricted Area;
provided, however, that nothing contained in this Section 8.5 shall restrict any
of the Shareholders from being an investor in any corporation or other business
entity which engages in a Restricted Business within the Restricted Area so long
as (a) such corporation or other business entity has at least 500 shareholders
or other equity holders and its equity securities are traded on the NASDAQ
market or a recognized securities exchange, and (b) a Shareholder does not own
more than 1% by vote or value of the outstanding equity securities of such
corporation or other business entity;
(c) For himself, or on behalf of or in conjunction with any
other Person, hire or endeavor to recruit or hire, as an employee, consultant,
agent or representative, any Person who is now or hereafter becomes an employee
of Seller, Buyer or any Affiliate of Buyer, PROVIDED, HOWEVER, that nothing in
this provision shall apply to the recruitment or hiring of any Person more than
one year after such Person ceases to be employed by any of Seller, Buyer or any
Affiliate of Buyer; and
(d) Discourage or otherwise attempt to prevent any Person
from doing business with Seller, Buyer or any Affiliate of Buyer, or any
successor to any of the foregoing.
8.5.2 DEFINITIONS APPLICABLE TO NON-COMPETITION COVENANT. For
purposes of this Section 8.5:
(a) "Restricted Area" means that area within a 200 mile
radius of the Marietta Property.
(b) "Restricted Business" means any business substantially
similar to and competitive with any business conducted by Seller at any time
within the three year period prior to the Closing Date.
(c) "Restricted Period" means a period of five years from
the Closing Date.
8.5.3 NO SEPARATE CONSIDERATION. Each of the Shareholders is
entering into the Non-Competition Covenant as part of the inducement to, and as
part of the consideration for, Buyer's agreement to enter into this Agreement
and to deliver to the Shareholders the Consideration, and there is no separately
bargained for consideration requested by the Shareholders, or any of them,
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for the Non-Competition Covenant and Buyer has not bargained for nor paid any
separate consideration therefor.
8.5.4 REFORMATION. In the event that the provisions of the
Non-Competition Agreement set forth in this Section 8.5 should ever be deemed to
exceed the time or geographic limitations permitted by applicable law, then such
provisions shall be deemed reformed to the maximum time or geographic
limitations permitted by applicable law.
8.5.5 INJUNCTIVE RELIEF. Each of the Shareholders specifically
acknowledges and agrees that the remedy at law for any breach of the provisions
of the Non-Competition Covenant contained in this Section 8.5.5 will be
inadequate and that Buyer, in addition to any other remedy or relief available
to it in law or at equity, shall be entitled to temporary and permanent
injunctive relief without the necessity of proving actual damage.
Section 8.6 CERTAIN EMPLOYEE MATTERS; EMPLOYEE BENEFIT PLANS.
8.6.1 EMPLOYEES. As of the Closing Date, RIA will offer
employment to all of Seller's employees (the "Seller's Employees") for wages and
salaries substantially the same as may have been paid by Seller to such
employees prior to Closing. Except with respect to Seller's Health Plan as set
forth in Section 8.6.2 below, neither RIA nor Parent is assuming any Obligation
under any Employee Benefit Plan or any Obligations under any employment
contract, consulting agreement or other arrangement for services to which Seller
is a party. RIA's offer of employment to any of Seller's Employees shall be for
"at will" employment, except as otherwise may be provided in any written
employment contract entered into between RIA and an employee, and no inference
shall be made from any such offer of employment as described above that any of
Seller's Employees shall have any continued right to employment by RIA after the
Closing Date.
8.6.2 SELLER'S HEALTH PLAN; COBRA. RIA shall assume and continue
Seller's existing plans or agreements relating to medical insurance and medical
benefits (the "Seller's Health Plan") and shall maintain the benefits thereof
for a reasonable period after the Closing. From and after the Closing Date RIA
shall provide "Continuation Coverage" within the meaning of Section 4980B of the
Code and Part 6 of Subtitle B of Title I of ERISA (such statutory provisions are
referred to herein collectively as "COBRA") to all current or former Seller
employees (and their eligible dependents) who either (a) have experienced a
"qualifying event" (within the meaning of COBRA) prior to the Closing Date and
for whom the period of Continuation Coverage required by COBRA has not, as of
the Closing Date, expired (such persons are hereinafter referred to as
"Pre-Closing Qualified Beneficiaries"), and (b) are employees of Seller as of
the Closing Date but do not become employees of RIA as of the Closing Date or do
not otherwise receive group health coverage from RIA as of the Closing Date.
In addition, RIA shall provide group health coverage to employees of Seller (and
their eligible dependents)who are, as of the Closing Date, on a leave of absence
governed by the Family Medical Leave Act of 1993, as amended ("FMLA"); such
Persons being hereinafter referred to as "FMLA Persons"), in accordance with the
requirements of FMLA and COBRA. Exhibit 8.6.2 contains the name of each
Pre-Closing Qualified Beneficiary and each FMLA Person.
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8.6.3 TERMINATION COSTS. Neither Parent nor RIA is assuming any
Employee Benefit Plan or Employee Welfare Plan of Seller other than Seller's
Health Plan (and, in connection with the assumption of Seller's Health Plan, the
assumption of certain related COBRA and FMLA Obligations as provided in Section
8.6.2). Buyer shall, however, contribute to Seller up to Seven Thousand Five
Hundred Dollars ($7,500) in the aggregate such time as may be requested by
Seller, to cover the costs of terminating such Employee Benefit Plans or
Employee Welfare Plans of Seller as Seller may determine.
Section 8.7 Certain Real Property Matters.
8.7.1 TITLE INSURANCE. Seller will cooperate with Buyer in
obtaining a title insurance commitment (the "Title Commitment") with respect to
the Real Property in such amount as Buyer may reasonably determine to be the
fair market value of such real property, including all improvements located
thereon, insuring title to such real property to be in Seller as of the Real
Property Closing Date, subject only to such exceptions and exclusions as
provided in this Agreement and/or are otherwise acceptable to "Buyer. At the
closing of the transactions with respect to the Real Property, as provided in
the Real Property Escrow Agreement, Buyer shall be issued an Owner's Title
Insurance Policy and any one or more of the lenders of Buyer who are obtaining
any mortgage interest in the Real Property shall be issued a Mortgage Title
Insurance Policy (such policies hereinafter collectively being referred to as
the "Title Policy") consistent with the Title Commitment and subject only to
exceptions and exclusions approved by Buyer. The delivery of the Title Policy
to Buyer shall occur at the closing of the transactions with respect to the Real
Property, as provided in the Real Property Escrow Agreement, and Buyer shall pay
the costs and premium for the Title Policy.
8.7.2 REAL PROPERTY ESCROW. The Real Property Hold-Back Amount,
along with all Deeds and other instruments relating to the conveyance of the
Real Property to RIA, shall be placed in escrow with the Title Company, to be
held pursuant to the terms and conditions of that certain Real Property Escrow
Agreement in the form attached as Exhibit 8.7.2 (the "Real Property Escrow
Agreement"). Such escrow shall terminate, and the Real Property Hold-Back
Amount (or applicable portion thereof) shall be delivered to Seller and the
Deeds and related instruments shall be delivered to Buyer, upon such terms and
at the time set forth in the Real Property Escrow Agreement (the "Real Property
Closing Date").
Section 8.8 SURVEY. Seller will cooperate with Buyer in obtaining a
current survey of the Real Property certified to Buyer, any mortgagee of Buyer,
and the title insurer issuing the Title Policy prepared by a licensed surveyor
and conforming to the minimum ALTA standards, disclosing the location of all
improvements, easements, party walls, sidewalks, roadways, utility lines,
setback requirements, and other matters customarily shown on such surveys, and
showing access affirmatively to public streets and roads (the "Survey"). Buyer
shall pay the cost of the Survey.
Section 8.9 ENVIRONMENTAL STUDIES; REMEDIATION.
8.9.1 PERFORMANCE OF ENVIRONMENTAL STUDIES. Buyer has prepared
for its own information and at its expense updated and current ASTM Phase I and
Phase II Environmental Site Assessments and Transaction Screen Process of the
Real Property and operations of Seller prepared
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by an environmental engineering firm mutually acceptable to Shareholders and
Buyer (the "Environmental Studies"). The cost of the Environmental Studies
shall be paid by Buyer. Buyer shall not disclose to Seller or the Shareholders
the Environmental Studies or the results of the environmental investigation
unless Seller so requests in writing prior to Closing. Immediately following
the Closing, Buyer shall cause its environmental consultant(s) to deliver to
Seller the Environmental Studies, including all sampling and analytical data,
boring logs and other pertinent technical information.
8.9.2 FURTHER GROUNDWATER SAMPLING. Promptly following the
Closing, Buyer shall cause its environmental consultant, at Buyer's expense, to
conduct whatever further studies are reasonably necessary with regard to the
presence of metals in the groundwater at Marietta to determine if, in fact,
metals are present in the groundwater at levels that exceed the
naturally-occurring background concentration. Buyer shall deliver the results
of this supplemental sampling and analysis to Seller.
8.9.3 HSRA NOTIFICATION; PROCEDURES. If there exists at either or
both of Marietta or Avon any releases or levels of substances requiring
notification to the Georgia Department of Natural Resources, Environmental
Protection Division ("EPD"), pursuant to Ga. Comp. R. & Regs. r. 391-3-19-.04,
Buyer shall provide such notice(s) within the time provided for by law. Buyer
shall work in good faith with Seller and its counsel to complete any required
notification forms and collect the necessary information, and Seller shall have
the right to approve of such notice(s) prior to its(their) submittal. Buyer
shall promptly inform Seller of any communication from EPD regarding the
above-described notices.
8.9.4 DETERMINATION BY EPD NOT TO PLACE EITHER MARIETTA OR AVON ON
THE HSI. If EPD determines, pursuant to Ga. Comp. R. & Regs. r. 391-3-19-.05,
that the reported release(s) do(es) not exceed a reportable quantity, and
therefore does not place either Marietta or Avon on the Georgia Hazardous Site
Inventory ("HSI"), Seller shall have no liability to Buyer, and Buyer waives all
rights it has or may have against Seller arising out of the environmental
conditions of Marietta and Avon, or relating to the presence of or release of
Hazardous Substances at Marietta or Avon.
8.9.5 DETERMINATION BY EPD TO PLACE AVON OR MARIETTA ON THE HSI.
If EPD determines, pursuant to Ga. Comp. R. & Regs. r. 391-3-19-.05, that the
reported releases do exceed a reportable quantity at Avon and/or Marietta, and
therefore places either or both of Avon or Marietta on the HSI, then the funds
set forth in the Remediation Escrow shall become available for assessment,
remediation, and similar, required tasks including the cost of further
environmental testing (collectively "Remediation"). Seller shall have the
right, (but not the duty), to assume responsibility for completing any and all
actions that may be required as a result of the placement of Avon and/or
Marietta on the HSI, and shall use the funds set aside in the Remediation Escrow
to accomplish and pay for said tasks. Seller's funding of the Remediation
Escrow shall be its sole responsibility, legally and financially, to address or
respond to any Obligations or costs arising out of, or related to, the placement
of Avon and/or Marietta on the HSI, and Buyer agrees to indemnify, defend and
hold harmless Seller for any costs, liabilities or expenses that exceed the
amounts set forth in 8.9.5(a) through (d).
(a) If EPD determines, pursuant to Ga. Comp. R. & Regs. r.
391-3-19-.05, that the reported releases do exceed a reportable quantity at Avon
or Marietta, but not both properties, and places one, but not both of the
properties on the HSI, [CONFIDENTIAL TREATMENT REQUESTED BY REGISTRANT]
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(b) The contents of the Remediation Escrow shall be
available as follows: (i) If EPD lists Avon on the HSI, and if, as a
result, EPD requires Remediation of the soils at Avon, up to [CONFIDENTIAL
TREATMENT REQUESTED BY REGISTRANT] of the Remediation Escrow may be used to
pay such costs. If these Avon soil Remediation costs exceed [CONFIDENTIAL
TREATMENT REQUESTED BY REGISTRANT], all such excess costs shall be borne
solely by Buyer and Seller shall have no liability for such further costs.
(c) If EPD lists Avon on the HSI, and if, as a result, EPD
requires Remediation of the groundwater at Avon, up to [CONFIDENTIAL TREATMENT
REQUESTED BY REGISTRANT] of the Remediation Escrow may be used to pay such
costs. If these Avon groundwater Remediation costs exceed [CONFIDENTIAL
TREATMENT REQUESTED BY REGISTRANT], all such excess costs shall be borne
solely by Buyer, and Seller shall have no liability for such further costs.
(d) If EPD lists Marietta on the HSI, and if, as a
result, EPD requires Remediation of either the soils or groundwater at
Marietta, up to [CONFIDENTIAL TREATMENT REQUESTED BY REGISTRANT] of the
Remediation Escrow may be used to pay such costs. If these Marietta soil and
groundwater Remediation costs exceed [CONFIDENTIAL TREATMENT REQUESTED BY
REGISTRANT], all such excess costs shall be borne solely by Purchaser, and
Seller shall have no liability for such further costs.
8.9.6 REMEDIATION ESCROW NOT AVAILABLE FOR LEGAL FEES. Although
Seller shall have the right, (but not the duty), to challenge, either
administratively or in the courts, any actions required by EPD under HSRA, the
legal fees incurred to carry out such challenge(s) shall not be paid out of the
Remediation Escrow but shall be borne solely by Seller, nor shall any legal fees
which Seller elects to incur in connection with the preparation of any notice to
the EPD be paid out of the Remediation Escrow.
8.9.7 TERMINATION OF THE REMEDIATION ESCROW. If, and when, Avon
or Marietta (or both properties, if both were listed) is(are) removed from the
HSI, whether pursuant to Ga. Comp. R. & Regs. r. 391-3-19-.06, r. 391-3-19-.07,
or otherwise, or EPD otherwise communicates, in writing, that no further
Remediation need occur at the listed property(ies), then the Remediation Escrow
shall terminate as follows:
(a) If Avon and Marietta are both on the HSI, and either
Avon or Marietta, but not both, are removed from the HSI (the "Released
Property"), [CONFIDENTIAL TREATMENT REQUESTED BY REGISTRANT] LESS any amounts
expended with respect to the Released Property in accordance with the provisions
of Section 8.9.5(a)-(d), to Seller.
(b) If Avon and Marietta are both on the HSI, and both Avon
and Marietta are removed from the HSI, then the Remediation Escrow shall
terminate, and the Escrow Agent shall deliver the remaining contents thereof to
Seller.
8.9.8 REMEDIATION ESCROW. Buyer and Seller have mutually agreed
[CONFIDENTIAL TREATMENT REQUESTED BY REGISTRANT] shall be placed by Buyer in
escrow (the "Remediation Escrow") and not delivered to Seller at the Closing
pending the completion of any and all Remediation. The Remediation Escrow
shall have co-Escrow Agents (collectively, the "Escrow Agent") and all actions
of the Escrow Agent shall require the approval of both co-Escrow Agents. The
co-Escrow Agents shall be Wayne H. Lazarus and David J. Lyon. The terms and
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conditions of the Remediation Escrow shall be as set forth in an escrow
agreement (the "Remediation Escrow Agreement") in the form set forth in Exhibit
8.9.8. Buyer and Seller agree to be subject to all of the terms and conditions
as set forth in the Remediation Escrow Agreement. Seller, or the Shareholders
as successors to Seller, shall be treated as the beneficial and record owners of
the shares held in the Remediation Escrow. Until such time as such shares or
sold or transferred to Buyer, Seller (or the Shareholders if Seller has
transferred any of these shares to its Shareholders) shall be entitled to vote
such shares and to receive any dividends or distributions made with respect
thereto as the record owner of such shares. The Seller shall have all of the
rights relating to the Remediation as set forth in Section 3 of the Remediation
Escrow Agreement. The Remediation Escrow shall terminate in the manner provided
in Section 8.9.7 above.
Section 8.10 PURCHASE PRICE ALLOCATION; TAX REPORTING COVENANT. The
Purchase Price shall be allocated among the Acquired Assets for federal and
state income tax reporting purposes in accordance with the purchase price
allocation (the "Purchase Price Allocation") as set forth in Exhibit 8.10. Each
of Seller, the Shareholders and Buyer agrees to determine his or its respective
federal taxable income, and, as applicable, his or its respective state taxable
income for any state income or franchise tax purpose, strictly and fully in
accordance with the Purchase Price Allocation and to prepare and file all
applicable Tax returns, information returns, forms, and other Tax reports and
documents (and attachments thereto) in a manner wholly consistent with the
Purchase Price Allocation including, without limitation, any reports or returns
required under Section 1060 of the Code and the accompanying regulations
thereunder.
Section 8.11 TRANSFER TAXES. Buyer shall be solely responsible for, and
shall indemnify and hold Seller and the Shareholders harmless from and against,
any and all liability for any sales or use Taxes, if any, arising by reason of
Seller's transfer to Buyer of the Acquired Assets and imposed upon, or by
reference to, the value of some or any of the Acquired Assets so transferred.
Section 8.12 FURTHER ASSURANCES. Each of Seller and Buyer shall further
execute and deliver, as the other Party may from time to time reasonably
request, such additional assignments, documents, instruments, agreements or
other items which are necessary or desirable to accomplish the transfer of the
Acquired Assets as provided herein, or are otherwise necessary or desirable to
consummate the transactions contemplated by this Agreement.
Section 8.13 SURVIVAL. All of the covenants contained in Article VIII of
this Agreement or in any certificate, agreement or other document delivered in
connection herewith shall survive the execution, delivery and performance of
this Agreement and the consummation of the transactions to be performed under
this Agreement for either (a) the period for which the covenant is to be
performed if such a period is specified, or (b) for an indefinite period if no
specific period is set forth.
Article IX
Conditions to Obligation to Close
Section 9.1 CONDITIONS TO OBLIGATION OF BUYER. The Obligation of Buyer
to consummate the transactions to be performed by them in connection with the
Closing is subject to satisfaction of the following conditions, any of which may
be waived by Buyer only in writing:
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9.1.1 REPRESENTATIONS. The representations and warranties of
Seller set forth in Article V above shall be true and correct in all material
respects at and as of the Closing Date and Buyer shall have received a
certificate from Seller to that effect;
9.1.2 CERTIFICATE REGARDING DISCLOSURE SCHEDULE. The Shareholders
and Seller shall have delivered all updates or supplements to the Disclosure
Schedule to make the information contained therein not misleading and Buyer
shall have received a certificate from Seller to that effect;
9.1.3 CERTIFICATE REGARDING COVENANTS. Seller and each
Shareholder shall have performed and complied with all of the covenants made by
it or him hereunder in all material respects through the Closing Date and Buyer
shall have received a certificate from Seller that such covenants shall have
been performed and complied with through the Closing Date;
9.1.4 EMPLOYMENT AGREEMENTS. Each Shareholder shall have entered
into an employment agreement with RIA in the form attached as Exhibit 4.4.1.
9.1.5 RATIFICATION. The Board of Directors of Seller shall have
approved, and the Shareholders shall unanimously have approved, ratified and
confirmed the transactions contemplated hereby in all material respects;
9.1.6 FINANCING. Buyer shall have obtained financing from the
Lender for all or a portion of Cash Consideration on terms reasonably
satisfactory to Buyer in its sole discretion;
9.1.7 OPINION. At the Closing, Buyer shall have received from
counsel to Seller an opinion in form and content substantially similar to
Exhibit 9.1.7 addressed to Buyer and dated as of the Closing Date;
9.1.8 NO MATERIAL ADVERSE CHANGE. There shall be no material
adverse change in the business of Seller taken as a whole, financial or
otherwise, or, to Seller' Knowledge, its 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 Seller,
fire, explosion, accident, casualty, labor trouble, flood, riot, storm,
condemnation or act of God or otherwise, and Seller shall have delivered to
Buyer a certificate, dated the Closing Date, to such effect;
9.1.9 ACTIONS SATISFACTORY. All actions to be taken by Seller in
connection with consummation of the transactions contemplated hereby and all
certificates, opinions, instruments and other documents required to effect the
transactions contemplated hereby shall be reasonably satisfactory in form and
substance to Buyer;
9.1.10 NO INJUNCTION. As of the Closing, there shall not be any
injunction, order or decree in effect preventing the consummation of the
transactions contemplated by this Agreement;
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9.1.11 CORPORATE DOCUMENTS. At or prior to the Closing, Seller
shall have delivered to Buyer the originals of the corporate documents included
in Section 9.1.11 of the Disclosure Schedule; and
9.1.12 SHARE PRICE GUARANTY AGREEMENT. At or prior to the Closing,
Seller shall have executed and delivered the Share Price Guaranty Agreement.
Section 9.2 CONDITIONS TO OBLIGATION OF SELLER. The Obligation of
Seller to consummate the transactions to be performed by them in connection with
the Closing is subject to satisfaction of the following conditions any of which
may be waived by Seller only in writing:
9.2.1 REPRESENTATIONS. The representations set forth in Article
VI shall be true and correct in all material respects at and as of the Closing
Date and Seller shall have received a certificate from the appropriate officer
or officers of Buyer to such effect;
9.2.2 CERTIFICATE REGARDING COVENANTS. Buyer shall have performed
and complied with all of its covenants hereunder in all material respects
through the Closing Date and Seller shall have received a certificate from the
appropriate officer or officers of Buyer to such effect;
9.2.3 EMPLOYMENT AGREEMENTS. RIA shall have entered into
employment agreements with each Shareholder in the form attached as Exhibit
4.4.1.
9.2.4 OPINION. Seller shall have received from counsel to Buyer
an opinion in form and content substantially similar to Exhibit 9.2.4, addressed
to Seller and dated as of the Closing Date;
9.2.5 RATIFICATION. The Board of Directors of Buyer shall have
approved, ratified and confirmed the transactions contemplated hereby in all
material respects;
9.2.6 NO INJUNCTION. As of the Closing, there shall not be any
injunction, order or decree in effect preventing the consummation of the
transactions contemplated by this Agreement;
9.2.7 SHARE PRICE GUARANTY AGREEMENT. At or prior to Closing,
Parent shall have executed and delivered the Share Price Guaranty Agreement; and
9.2.8 CONTINGENT WARRANT. At or prior to Closing, Parent shall
have executed and delivered the Contingent Warrants.
Article X
Remedies
Section 10.1 SURVIVAL. All of the representations and warranties of the
Parties contained in this Agreement, and all covenants contained in this
Agreement (other than covenants contained in Article VIII which shall survive
for the period set forth in Section 8.13), shall survive and continue in full
force and effect for a period of two years from the Closing Date, except all
covenants of
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Buyer with respect to Tax matters, which shall survive for a period of time
which is equal to the statute of limitations with respect to any Tax liability
which may be, or is being, asserted and may be covered by any indemnity
hereunder. Such survival shall include the survival and enforceability of such
representations, warranties and covenants regardless of whether an applicable
statute of limitations has expired relating to such item (including, without
limitation, the existence of any statute of limitations arising by reason of the
statutory liquidation of Seller).
Section 10.2 INDEMNIFICATION PROVISIONS BY SELLER FOR BENEFIT OF THE
BUYER. Subject to the terms of this Section 10.2 and Section 10.3, Seller and
each of the Shareholders hereby agree, jointly and severally, to indemnify,
defend, reimburse and hold harmless Buyer from and against any and all claims,
demands, penalties, fines, liabilities, Obligations, losses, settlements,
damages, costs and expenses resulting from:
10.2.1 Any breach of any representation and warranty or
nonfulfillment of any covenant on the part of Seller contained in this Agreement
other than any breach of a representation or warranty, or a failure to fulfill
any covenant or condition other than (a) such breaches which to Buyer's
Knowledge exist at or before the Closing and which Buyer has not disclosed to
Seller at or before the Closing, or (b) which Buyer has waived in writing at or
before the Closing;
10.2.2 Any misrepresentation in or omission from or nonfulfillment
of any covenant on the part of Seller contained in any other agreement,
certificate or other instrument furnished by Seller pursuant to this Agreement
other than any breach of a representation or warranty, or a failure to fulfill
any covenant or condition, which to Buyer's Knowledge existed at or before the
Closing or which Buyer has waived in writing on or before the Closing; and
10.2.3 Reasonable fees and disbursements of counsel incident to any
of the foregoing.
If Seller (or any of the Shareholders) is required to pay any indemnity
Obligation under this Section 10.2, then, at the option of Seller (or the
applicable Shareholder), up to one-half of any liability or Obligation required
by this Section 10.2 (or elsewhere in this Agreement) may be met by the delivery
of shares of Common Stock held by Seller (or the applicable Shareholder), such
shares to be valued at the greater of $12.50 per share or the Average Price on
the date delivered in satisfaction of an indemnity Obligation hereunder. At
least one-half of the indemnity Obligation of each Shareholder as required by
this Section 10.2 shall be paid by the delivery of immediately available funds.
Section 10.3 LIMITS ON SELLER AND SHAREHOLDERS' INDEMNITY.
10.3.1 BASKET AND CAP. Notwithstanding any other provision of this
Agreement to the contrary, (a) Seller and the Shareholders shall not be required
to indemnify Buyer under Section 10.2 unless the aggregate of all amounts for
which indemnity would otherwise be due under Section 10.2 from Seller and the
Shareholders exceeds $350,000, in which case Seller shall be responsible only
for such indemnifiable amounts in excess of $350,000, and (b) the aggregate
amount for which Seller shall be liable under Section 10.2 shall not exceed
$2,500,000.
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10.3.2 ENVIRONMENTAL REMEDIATION UNDER SECTION 8.9.
Notwithstanding any other provision of this Agreement to the contrary, Seller's
responsibility for indemnity and contribution with respect to any Remediation
relating to the Real Property shall be exclusively dealt with under the
provisions of Section 8.9 and, except as provided therein, Seller shall have no
liability with respect to the subject matter of that Section. The provisions of
Section 10.3.1 shall further not apply to any amounts expended for Remediation
pursuant to Section 8.9. Nothing contained in this Section 10.3.2 shall limit
any liability which Seller may have with respect to any breach of an
Environmental Representation under the provisions of Section 5.1.19 and any
breach of the representations set forth in said Section shall be subject to the
other provisions of this Article X, including, without limitation, Section
10.3.1, relating to indemnity.
Section 10.4 INDEMNIFICATION PROVISIONS FOR BENEFIT OF SELLER. Subject
to the terms of this Section 10.4 and Section 10.5, Buyer shall indemnify,
defend, reimburse and hold harmless Seller and the Shareholders from and against
any and all claims, demands, penalties, fines, liabilities, Obligations, losses,
settlements, damages, costs and expenses resulting from:
10.4.1 Any breach of any representation and warranty or
nonfulfillment of any covenant on the part of Buyer contained in this Agreement
other than any breach of a representation or warranty, or a failure to fulfill
any covenant or condition other than (a) such breaches which to Seller's
Knowledge exist at or before the Closing and which Seller has not disclosed to
Buyer at or before the Closing, or (b) which Seller has waived in writing at or
before the Closing;
10.4.2 Any misrepresentation in or omission from or nonfulfillment
of any covenant on the part of Buyer contained in any other agreement,
certificate or other instrument furnished by Buyer pursuant to this Agreement
other than any breach of a representation or warranty, or a failure to fulfill
any covenant or condition, which to Seller's Knowledge existed at or before the
Closing or which Seller has waived in writing on or before the Closing;
10.4.3 The operation of the business of Buyer and any successor or
assign thereof after the Closing Date; and
10.4.5 Reasonable fees and disbursements of counsel incident to any
of the foregoing.
The indemnification of Seller provided by this Section 10.4 shall be in addition
to the indemnification for the benefit of Seller set forth in Section 10.6.
Section 10.5 LIMITS ON BUYER'S INDEMNITY. Notwithstanding any other
provision of this Agreement to the contrary, (a) Buyer shall not be required to
indemnify Seller or the Shareholders under Section 10.4 unless the aggregate of
all amounts for which indemnity would otherwise be due under Section 10.4
exceeds $350,000, in which case Buyer shall be responsible only for such
indemnifiable amounts in excess of $350,000, and (b) the aggregate amount for
which Buyer shall be liable under Section 10.4 shall not exceed $2,500,000.
Notwithstanding the foregoing, in no event shall Buyer's or Parent's liability
for any breach of its Obligations under the Contingent Warrants, the Share Price
Guaranty Agreement or the Executive Employment Agreements (including
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the Obligations of the Parent to issue options thereunder) be limited in any
fashion by the provisions of this Section 10.5 or any other provision of this
Article X.
Section 10.6 INDEMNITY FOR SELLER WITH RESPECT TO CERTAIN TAX MATTERS.
10.6.1 INDEMNITY IF BUYER BREACHES TAX REPORTING COVENANT. If (a)
Buyer breaches the covenant as to Tax reporting as set forth in Section 8.10,
(b) as a result of any federal or state Income Tax audit the allocation of the
Consideration to the assets of Seller shall, upon a final determination by the
appropriate taxing authority or any court having final jurisdiction over such
matter, be made in a manner different than the Purchase Price Allocation, and
(c) as a result of such reallocation Seller, or any of them, are required to
recognize any portion of the Consideration paid for the Seller Common Stock by
reason of the Election as or any corresponding state income tax law, then Buyer
shall indemnify and hold each Shareholder harmless from the consequences of such
reallocation as follows. Buyer shall pay to each Shareholder whose Income Taxes
are increased by reason of a reallocation of the Purchase Price under the
circumstances described in this Section 10.6.1 an amount equal to difference
between (a) the total Income Taxes with respect to the receipt of the sum of (x)
the Consideration, plus (y) the payments made to such Shareholder under this
Section 10.6.1, and (b) the total Income Taxes which the Shareholder would have
paid with respect to the receipt of the Consideration if the Purchase Price
Allocation had been respected by the applicable Taxing authority.
10.6.2 INDEMNITY IF BUYER DOES NOT BREACH TAX REPORTING COVENANT.
If (a) Buyer is in compliance with its covenant in Section 8.10 as to Tax
reporting in a manner consistent with the Purchase Price Allocation, (b) upon
any federal or state Income Tax audit the allocation of the Consideration to the
assets of Seller shall, upon a final determination by the appropriate taxing
authority or any court having jurisdiction over such matter, be made in a manner
different than the Purchase Price Allocation, and (c) as a result of such
reallocation Seller, or any of them, recognize any portion of the Consideration
paid as ordinary income rather than capital gain, then Buyer shall indemnify
and hold Seller harmless from the consequences of such reallocation as follows:
(a) So long as the total increase in the allocation of
Purchase Price to assets the gain from which is recognized as ordinary income to
a Shareholder does not exceed $667,000, Buyer shall pay to each Shareholder
whose Income Taxes are increased by reason of the Shareholder's recognition of
ordinary income resulting from an increase in the allocation of the
Consideration to assets which result in ordinary income and a decrease in the
allocation of the Consideration to assets which result in capital gain an amount
determined as follows:
(I) An amount shall first be determined by multiplying
the ordinary income so allocated to a Shareholder (up to a limit of
$667,000) by that percentage which is the difference between the Maximum
Rate and the Average Capital Gain Rate;
(II) An amount shall next be determined by (x) dividing
the amount determined in the immediately preceding subparagraph (I) by the
Reciprocal (i.e., 80%), and (y) subtracting from the amount so determined
the amount determined in the immediately preceding subparagraph (I).
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Buyer shall then pay to each Shareholder the sum of (i) the amount determined in
the immediately preceding subparagraph (I), and (ii) the amount determined in
the immediately preceding subparagraph (II).
(b) In addition to the indemnity to be paid as provided in
Section 10.6.2(a), Buyer shall pay to each Shareholder whose Income Taxes are
increased by reason of the Shareholder's recognition of ordinary income
resulting from an increase in the allocation of the Purchase Price to assets the
gain from which is recognized as ordinary income to the Shareholder in excess of
$1,333,000 and a corresponding decrease in the allocation of the Consideration
to assets which result in capital gain an amount determined as follows:
(I) An amount shall first be determined by multiplying
the ordinary income allocated to each Shareholder in excess of $1,333,000
by that percentage which is the difference between the Maximum Rate and the
Average Capital Gain Rate;
(II) An amount shall next be determined by (x) dividing
the amount determined in the immediately preceding subparagraph (I) by the
Reciprocal (i.e., 80%), and (y) subtracting from the amount so determined
the amount determined in the immediately preceding subparagraph (I).
Buyer shall then pay to each Shareholder (in addition to any amounts due under
Section 10.6.2(a)) the sum of (i) the amount determined in the immediately
preceding subparagraph (I), and (ii) the amount determined in the immediately
preceding subparagraph (II).
(c) Buyer shall be responsible for and assume the defense
and control all aspects of any such inquiry, investigation or audit, and any
related litigation, involving the attempt by any Governmental Body to allocate
the Purchase Price in a manner other than as agreed by the Parties as set forth
in the Purchase Price Allocation, and shall be responsible for all costs and
expenses in connection therewith. Seller shall cooperate with Buyer in
connection with any such inquiry, investigation or audit, and any related
litigation. To the extent necessary, Buyer shall engage legal counsel with
respect to such issues that is reasonably acceptable to Seller. Buyer shall
keep Seller reasonably informed of the status of any such investigation, inquiry
or audit, including any settlement, appeal, payment of sums due or other
agreement arising out of such investigation, inquiry or audit, or any related
litigation.
Except as set forth above in this Section 10.6 or as otherwise specifically
provided for in this Agreement, Tax liabilities subject to indemnification under
this Agreement shall be governed by the general procedures for indemnification
set forth in this Article X.
10.6.3 BUYER INDEMNITY WITH RESPECT TO CERTAIN ENVIRONMENTAL
MATTERS. Subject to the provisions of Section 8.9 and the application of
amounts placed in the Remediation Escrow as provided therein, and excepting any
breach of Seller's representations and warranties set forth in Section 5.1.19,
Buyer agrees that it will defend, indemnify, reimburse and hold harmless the
Seller for any all (a) damages, losses, liabilities, litigations, penalties,
claims, sums paid in settlement of claims, demands, defenses, judgments, suits,
proceedings, costs, disbursements, fines, encumbrances, liens, and expenses of
any kind or of any nature whatsoever; and (b) any cost or expense incurred by
Seller to contain, remove,
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remediate, treat, cleanup or abate any release of Hazardous Materials that may
at any time be imposed upon, incurred by, or asserted or awarded against, Seller
or any such officers, directors, shareholders, employees, or agents of Seller
and that arise directly or indirectly from or out of any Environmental Problem
(defined below), regardless of whether or not that Environmental Problem is or
was the fault of the Seller, and regardless of whether or not the Environmental
Problem was disclosed to Buyer. For the purposes of this paragraph, the term
"Environmental Problem" shall mean any of the following: (i) the presence,
suspected presence, or alleged presence of any Hazardous Materials on, in, or
under all or any portion of the Real Property; (ii) the release, threatened
release, or migration of any Hazardous Materials from the Real Property as a
result of the conduct of activities at the Real Property; (iii) the violation,
or alleged violation of any Environmental Law with respect to the Real Property,
or (iv) the failure or alleged failure to obtain or to abide by the terms or
conditions of any permit or approval required under any Environmental Law with
respect to the Real Property or Seller. The indemnity herein shall not be
subject to the limitation on the time limit of Buyer's indemnity set forth in
Section 10.1, or the limitations as set forth in Section 10.5.
Section 10.7 INDEMNIFICATION PROCEDURE FOR THIRD PARTY CLAIMS. The Party
seeking indemnification 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
this Article X. If the Party obligated to indemnify wishes to defend such claim
for which such Party is or may be liable, then such Party may, at its own
expense, defend such claim; PROVIDED, HOWEVER, that the indemnitee or
indemnitees may retain counsel (at the indemnitee's expense) to monitor the
defense of such claim. 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, subject to the right of the indemnifying Party to
assume the defense of such claim at any time prior to settlement, compromise or
final determination thereof.
Section 10.8 PAYMENT OF SUMS DUE. After any final non-appealable
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 sum is due.
Section 10.9 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.
Section 10.10 FEES AND EXPENSES. In the event of any dispute or
controversy, 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.
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Section 10.11 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
any transaction contemplated hereunder, or 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 of Seller, 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 Section
10.11.
Section 10.12 SOLE REMEDY. The parties hereby agree that the rights and
remedies set forth in this Article X shall constitute each Party's sole remedy
against each of the other Parties after the Closing for the breach of any
representation, warranty or covenant herein made by such other party including,
without limitation, each Party's sole remedy with respect to any violation or
breach of any Environmental Laws and each Party waives any rights which he or it
may have for cost recovery or contribution from the other Parties under the
Environmental Laws.
Article XI
Review Period and Termination
Section 11.1 REVIEW PERIOD. For a period ending on the earlier of (i) 15
business days after receipt by Buyer of notice from Seller that the last
schedule, documents and/or exhibit required to be delivered with and included as
part of the Disclosure Schedule has been provided by Seller hereunder, or (ii)
the Closing Date (the "Review Period"), Buyer 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 Buyer, its counsel or accountants could have a material
adverse affect on the operations of Buyer and/or Seller ("Adverse Items"). The
Review Period shall be extended for a period of the lesser of (i) ten business
days, or (ii) until the Closing Date after the receipt of any additional
schedule or document requested. If, in its sole and absolute discretion, Buyer
is unable to satisfy itself that any Adverse Item will not have a material
adverse effect on the operations of Buyer and/or Seller, Buyer shall have the
right to either terminate this Agreement; or request a reduction in the purchase
and sale Consideration sufficient cover the estimated liability for any Adverse
Item.
Section 11.2 TERMINATION OF AGREEMENT. In addition to termination during
the Review Period, the Parties may terminate this Agreement prior to Closing by
the mutual written consent of Buyer and Seller.
Section 11.3 EFFECT OF TERMINATION. If any Party terminates this
Agreement pursuant to this Article XI, all rights and Obligations of the Parties
hereunder shall terminate without any liability of any Party to any other Party
except for the Obligations of the Parties under Sections 7.5 and 8.4 and shall
survive any such termination and except that this Section 11.3 shall not relieve
any Party or liability hereunder as a result of a breach of this Agreement by
such Party.
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Article XII
Miscellaneous
Section 12.1 PRESS RELEASES AND ANNOUNCEMENTS. No Party shall issue any
press release or public announcement relating to the subject matter of this
Agreement until after the Closing without the prior written approval of the
other Party; PROVIDED, HOWEVER, that any Party may make any public disclosure in
a filing with the Securities and Exchange Commission or any state securities
commission that it believes in good faith is required by law or regulation (in
which case the disclosing Party will advise the other Party prior to making the
disclosure). The terms of this Section 12.1 shall not prevent Seller from
communicating with the employees and lenders of Seller regarding the content of
this Agreement.
Section 12.2 NO THIRD PARTY BENEFICIARIES. This Agreement shall not
confer any rights or remedies upon any person other than the Parties and their
respective successors and permitted assigns.
Section 12.3 ENTIRE AGREEMENT. This Agreement (including the documents
referred to herein including without limitation the Contingent Warrant, the
Share Price Guaranty Agreement and the Employment Agreements) constitutes the
entire agreement between the Parties and supersedes any prior understandings,
agreements or representations by or between the Parties, written or oral, that
may have related in any way to the subject matter hereof.
Section 12.4 SUCCESSION AND ASSIGNMENT. This Agreement shall be binding
upon and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement or
any of its rights, interests or Obligations hereunder without the prior written
approval of Buyer and Seller except as provided herein or by operation of law.
Notwithstanding the foregoing, Buyer may assign its rights and Obligations under
this Agreement for the benefit of its Lender, provided that Buyer shall remain
liable for its Obligations set forth in this Agreement as if such assignment had
not occurred hereunder and Buyer may assign its rights hereunder to a
wholly-owned subsidiary of Buyer, provided that Buyer shall remain liable for
its Obligations set forth in this Agreement as if such assignment had not
occurred hereunder.
Section 12.5 COUNTERPARTS. This Agreement may be executed and delivered
in one or more counterparts, each of which shall be deemed an original, but all
of which together will constitute one and the same instrument.
Section 12.6 HEADINGS. The section headings contained in this Agreement
are inserted for convenience only and shall not in any way affect the meaning or
interpretation of this Agreement.
Section 12.7 NOTICES. Any and all notices required or permitted
hereunder shall be deemed to be received when (i) personally delivered to the
recipient, (ii) upon receipt if delivered by means of a nationally-recognized
overnight delivery service; or (iii) five (5) business days after mailing by
certified or registered mail with proper first class postage affixed thereto to
the Parties hereto, as follows:
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If to Seller:
Messrs. Mark and Alan Cohen
and Martin Kogon
950 Marietta Street, NW
Atlanta, Georgia 30318
Telephone: (404) 874-7564
Facsimile: (404) 885-7515
With copies to:
Arnall, Golden & Gregory, L.L.P.
2800 One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309
Telephone: 404-873-8602
Facsimile: 404-873-8603
Attention: S. Jarvin Levison, Esq.
If to Buyer:
Mr. Thomas J. Wiens, Chairman and Chief Executive Officer
Recycling Industries, Inc.
Recycling Industries of Atlanta, Inc.
384 Inverness Drive South, Suite 211
Englewood, Colorado 80112
Telephone: (303) 790-7372
Facsimile: (303) 790-4252
With a copy to:
Fabian & Clendenin
215 South State Street, 12th Floor
Salt Lake City, Utah 84111
Telephone: (801) 323-2270
Facsimile: (801) 596-2814
Attention: David J. Lyon
Any notice required to be made within a stated period of time shall be
considered timely mailed if deposited before midnight of the last day of the
stated period. Any Party may change the address to which notices, requests,
demands, claims or other communications hereunder are to be delivered by giving
the other Party notice in the manner set forth herein.
Section 12.8 GOVERNING LAW. This Agreement shall in all respects be
governed by and construed in accordance with the internal laws (and not the law
of conflicts) of the State of Colorado.
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Section 12.9 DISPUTE RESOLUTION, CONSENT TO JURISDICTION AND VENUE. Any
dispute among the Parties either with respect to the application of any
provision of this Agreement or with respect to the performance by any party of
his, its, or their respective duties, Obligations, and responsibilities
hereunder shall be resolved in the following manner:
12.9.1 Upon the written request of a Party, each of the Parties
will appoint a designated representative who has not devoted substantial time to
the subject in dispute whose task it will be to meet for the purpose of
endeavoring to resolve such dispute.
12.9.2 The designated representatives shall meet as often as the
parties reasonably deem necessary in order to gather and furnish to the other
all information with respect to the matter in issue which the parties believe to
be appropriate and germane in connection with its resolution.
12.9.3 Such representatives shall discuss the problem and negotiate
in good faith in an effort to resolve the dispute without the necessity of any
formal proceeding relating thereto.
12.9.4 During the course of such negotiation, all reasonable
requests made by one party to the other for non-privileged information
reasonably related to the subject in dispute will be honored in order that each
of the Parties may be fully advised of the other's position.
12.9.5 The specific format for such discussions will be left to the
discretion of the designated representatives but may include the preparation of
agreed upon statements of fact or written statements of position furnished to
the other Party.
12.9.6 If the designated representatives cannot resolve the dispute
within thirty (30) days after the initial request to negotiate such dispute,
then either Party may refer the dispute to the Judicial Arbitration & Mediation
Service, Inc. ("JAMS"), Atlanta, Georgia, for a voluntary settlement conference
and the other Party will be deemed to have consented to such conference. The
Parties may alternatively request non-binding mediation or a binding settlement
conference, but nothing contained herein and no course of dealing of the Parties
shall require either Party to consent to any binding settlement conference or
other binding arbitration. In the absence of agreement the procedure shall be
non-binding mediation. If JAMS does not maintain an office in Fulton County at
such time, then either party may request the American Arbitration Association to
be substituted for JAMS.
12.9.7 If the procedure set forth in subparagraph 12.19.6 above
utilized by the Parties is a nonbinding procedure, then a Party who is not
satisfied with the proposed resolution of the dispute may, after the expiration
of not less than thirty (30) days from the date of the conclusion of the
proceeding, initiate formal proceedings in the Superior Court of Fulton County,
Georgia, or the United States District Court for the Northern District of
Georgia for a judicial resolution of such dispute. Notwithstanding the
foregoing, a Party may proceed to initiate formal proceedings in the Superior
Court of Fulton County, Georgia, if there are less than thirty (30) days before
the statute of limitations governing any cause of action relating to such
dispute would expire.
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12.9.8 Except where clearly prevented by the subject in dispute,
the Parties agree to continue performing their respective Obligations under this
Agreement while the dispute is being resolved.
12.9.9 Seller and the Shareholders on the one hand, and Buyer each
represent and warrant to the other that it or they is/are not entitled, to
immunity from judicial proceedings and agree that, should any party bring any
judicial proceedings to enforce any Obligation or liability of the other under
this Agreement, no immunity from such proceedings will be claimed by or on
behalf of such other party or with respect to their assets or property. The
parties agree that any suit, action or proceeding arising out of or relating to
this Agreement may be instituted only in the Superior Court, Fulton County,
Georgia or the Federal District Court for the Northern District of Georgia,
they waive any objection which a party may have nor or hereafter to the laying
of venue of any such suit, action or proceeding, and irrevocably consent and
submit to the jurisdiction of such court in any such suit, action or proceeding.
12.9.10 If any action or proceeding relating to this Agreement or
the enforcement of any provision of this Agreement is brought against any Party
hereto, the prevailing Party shall be entitled to recover reasonable attorneys'
fees, costs and disbursements (in addition to any other relief to which the
prevailing Party may be entitled).
Section 12.10 AMENDMENTS AND WAIVERS. No amendment of any provision of
this Agreement shall be valid unless the same shall be in writing and signed by
Buyer and Seller. No waiver by any Party of any default, misrepresentation or
breach hereunder, whether intentional or not, shall be deemed to extend to any
prior or subsequent default, misrepresentation or breach hereunder or in any way
affect any rights arising by virtue of any prior or subsequent such occurrence.
Section 12.11 SEVERABILITY. Any term or provision of this Agreement that
is invalid or unenforceable in any situation in any jurisdiction shall not
affect the validity or enforceability of the remaining terms and provisions
hereof or the validity or enforceability of the offending term or provision in
any other situation or in any other jurisdiction. If the final judgment of a
court of competent jurisdiction declares that any term or provision hereof is
invalid or unenforceable, the Parties agree that the court making the
determination of invalidity or unenforceability shall have the power to reduce
the scope, duration or area of the term or provision, to delete specific words
or phrases or to replace any invalid or unenforceable term or provision with a
term or provision that is valid and enforceable and that comes closest to
expressing the intention of the invalid or unenforceable term or provision, and
this Agreement shall be enforceable as so modified after the expiration of time
within which the judgment may be appealed.
Section 12.12 EXPENSES. Each of the Parties will bear his, her or its own
costs and expenses (including legal fees and expenses) incurred in connection
with this Agreement and the transactions contemplated hereby.
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Section 12.13 CONSTRUCTION. Time is of the essence of this Agreement.
The language used herein will be deemed to be the language chosen by the Parties
to express their mutual intent, and no rule of strict construction shall be
applied against any Party. 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.
Section 12.14 INCORPORATION OF EXHIBITS AND SCHEDULES. The Exhibits and
Schedules identified in this Agreement are incorporated herein by reference and
made a part hereof.
Section 12.15 LITIGATION. In the event of litigation arising of or
connected with the transactions contemplated by this Agreement, the prevailing
Party in any such action shall be entitled to recover of the other Party all
costs of court, including attorneys' fees and court costs.
Section 12.16 SHAREHOLDERS AS PARTIES. A number of the provisions of this
Agreement consist of agreements, representations, warranties and covenants of
the Shareholders. Each Shareholder is, and shall be considered, for all
purposes of this Agreement as a Party to this Agreement and each Shareholder, by
the execution and delivery of this Agreement, agrees to be bound by the terms
and conditions of this Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the Parties have executed and delivered this Agreement
as of the date first above written.
RECYCLING INDUSTRIES, INC.
By: /s/ Michael J. McCloskey
-----------------------------------------
Michael J. McCloskey, Vice President
RECYCLING INDUSTRIES OF ATLANTA, INC.
By: /s/ Michael J. McCloskey
-----------------------------------------
Michael J. McCloskey, Vice President
CENTRAL METALS COMPANY, INC.
By: /s/ Martin Kogon
-----------------------------------------
Martin Kogon, Chairman
Each of the Shareholders hereby acknowledges that he is a party to this
Asset Purchase Agreement and agrees to be bound by the terms hereof as provided
in Section 12.16.
/s/ Alan Cohen
--------------------------------------------
Alan Cohen
/s/ Mark Cohen
--------------------------------------------
Mark Cohen
/s/ Martin Kogon
--------------------------------------------
Martin Kogon
50
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EXHIBITS
51
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ASSET PURCHASE AGREEMENT
------------------------
BY AND AMONG
RECYCLING INDUSTRIES, INC.
a Colorado corporation
("Parent")
AND
MONEY POINT LAND HOLDING CORPORATION
a Virginia corporation
("MP Holding")
AND
MONEY POINT DIAMOND CORPORATION
a Virginia corporation
("MP Diamond")
AND
GEORGE B. GINSBURG ("Ginsburg")
AND
FRED JACOBSON REVOCABLE TRUST
a Virginia trust
("FJ Trust")
AND
DOROTHY G. JACOBSON REVOCABLE TRUST
a Virginia trust
("DGJ Trust")
DECEMBER 4, 1997
<PAGE>
TABLE OF CONTENTS
ARTICLE 1
DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .-2-
ARTICLE 2
ACQUISITION OF MONEY POINT ASSETS. . . . . . . . . . . . . . . . . . . . . .-6-
2.1 PURCHASE AND SALE OF THE MONEY POINT ASSETS . . . . . . . . . . . . .-6-
2.2 EXCLUDED ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . .-8-
2.3 ASSUMED CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . .-9-
2.4 ASSUMPTION OF LIABILITIES . . . . . . . . . . . . . . . . . . . . . .-9-
2.5 COLLECTION OF ACCOUNTS RECEIVABLE . . . . . . . . . . . . . . . . . .-9-
ARTICLE 3
PURCHASE PRICE AND CLOSING . . . . . . . . . . . . . . . . . . . . . . . . -10-
3.1 PURCHASE PRICE FOR MONEY POINT ASSETS . . . . . . . . . . . . . . . -10-
3.2 VALUATION OF INVENTORY AND ACCOUNTS RECEIVABLE. . . . . . . . . . . -10-
3.3 ADJUSTMENT OF THE PURCHASE PRICE. . . . . . . . . . . . . . . . . . -11-
3.4 REIMBURSEMENT OF BID DEPOSITS . . . . . . . . . . . . . . . . . . . -11-
3.5 ALLOCATION OF THE PURCHASE PRICE. . . . . . . . . . . . . . . . . . -11-
3.6 CLOSING OF THE PURCHASE . . . . . . . . . . . . . . . . . . . . . . -11-
ARTICLE 4
REPRESENTATIONS OF MONEY POINT AND SHAREHOLDERS. . . . . . . . . . . . . . -12-
4.1 DUE ORGANIZATION AND QUALIFICATION. . . . . . . . . . . . . . . . . -12-
4.2 TITLE TO PROPERTY . . . . . . . . . . . . . . . . . . . . . . . . . -12-
4.3 AUTHORITY OF MONEY POINT; CONSENTS. . . . . . . . . . . . . . . . . -12-
4.4 FINANCIAL STATEMENTS. . . . . . . . . . . . . . . . . . . . . . . . -13-
4.5 NO TAX LIENS; NO WAIVER . . . . . . . . . . . . . . . . . . . . . . -14-
4.6 COMPLIANCE WITH LAWS. . . . . . . . . . . . . . . . . . . . . . . . -14-
4.7 PERMITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -15-
4.8 LITIGATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . -15-
4.9 CONTRACTS AND OTHER AGREEMENTS. . . . . . . . . . . . . . . . . . . -15-
4.10 NOTES AND ACCOUNTS RECEIVABLE . . . . . . . . . . . . . . . . . . . -16-
4.11 TANGIBLE PROPERTY . . . . . . . . . . . . . . . . . . . . . . . . . -16-
4.12 INVENTORY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -16-
4.13 INTELLECTUAL PROPERTY . . . . . . . . . . . . . . . . . . . . . . . -16-
4.14 REAL PROPERTY . . . . . . . . . . . . . . . . . . . . . . . . . . . -17-
4.15 LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . -17-
4.16 SUPPLIERS AND CUSTOMERS . . . . . . . . . . . . . . . . . . . . . . -18-
4.17 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . -18-
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4.18 CURTAILMENT OF OPERATIONS . . . . . . . . . . . . . . . . . . . . . -18-
4.19 EMPLOYEE RELATIONS. . . . . . . . . . . . . . . . . . . . . . . . . -19-
4.20 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -19-
4.21 RELATIONSHIPS . . . . . . . . . . . . . . . . . . . . . . . . . . . -19-
4.22 NO MATERIAL CHANGES PRIOR TO CLOSING DATE . . . . . . . . . . . . . -19-
4.23 BROKER'S OR FINDER'S FEES . . . . . . . . . . . . . . . . . . . . . -19-
4.24 EMPLOYEE TRANSITION . . . . . . . . . . . . . . . . . . . . . . . . -19-
4.25 ENVIRONMENTAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . -20-
4.26 COMPLIANCE WITH ADA . . . . . . . . . . . . . . . . . . . . . . . . -20-
4.27 DISCLOSURE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . -20-
4.28 BEST EFFORTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . -20-
ARTICLE 5
REPRESENTATIONS OF RECYCLING . . . . . . . . . . . . . . . . . . . . . . . -21-
5.1 DUE INCORPORATION AND QUALIFICATION OF RII SUB. . . . . . . . . . . -21-
5.2 DUE INCORPORATION AND QUALIFICATION OF THE PARENT . . . . . . . . . -21-
5.3 ARTICLES OF INCORPORATION AND BYLAWS. . . . . . . . . . . . . . . . -21-
5.4 AUTHORITY OF RII SUB AND THE PARENT . . . . . . . . . . . . . . . . -21-
5.5 STOCK CONSIDERATION . . . . . . . . . . . . . . . . . . . . . . . . -22-
5.6 BROKER'S OR FINDER'S FEES . . . . . . . . . . . . . . . . . . . . . -22-
5.7 DISCLOSURE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . -22-
5.8 BEST EFFORTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . -22-
5.9 HART-SCOTT-RODINO ACT . . . . . . . . . . . . . . . . . . . . . . . -23-
ARTICLE 6
REPRESENTATIONS OF THE PARENT RELATED TO THE
STOCK CONSIDERATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . -23-
6.1 STATUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -23-
6.2 1934 ACT REGISTRATION . . . . . . . . . . . . . . . . . . . . . . . -23-
6.3 PUBLIC REPORTS. . . . . . . . . . . . . . . . . . . . . . . . . . . -23-
ARTICLE 7
REGULATORY COMPLIANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . -24-
7.1 BULK SALES COMPLIANCE . . . . . . . . . . . . . . . . . . . . . . . -24-
7.2 COBRA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -24-
7.3 OTHER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -24-
ARTICLE 8
COVENANTS TO BE PERFORMED PRIOR TO THE CLOSING . . . . . . . . . . . . . . -24-
8.1 ENVIRONMENTAL STUDIES . . . . . . . . . . . . . . . . . . . . . . . -24-
8.2 TITLE INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . -25-
-ii-
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8.3 SURVEY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -25-
8.4 ASSUMED CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . -25-
8.5 CONDUCT OF BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . -26-
8.6 PRESERVATION OF BUSINESS. . . . . . . . . . . . . . . . . . . . . . -26-
8.7 NOTICE OF EVENTS. . . . . . . . . . . . . . . . . . . . . . . . . . -26-
8.8 EXAMINATIONS AND INVESTIGATIONS . . . . . . . . . . . . . . . . . . -26-
8.9 NO NEGOTIATION BY MONEY POINT OR THE SHAREHOLDERS . . . . . . . . . -27-
8.10 REMOVAL OF WASTE MATERIALS. . . . . . . . . . . . . . . . . . . . . -28-
ARTICLE 9
CONDITIONS PRECEDENT TO THE OBLIGATION
OF RECYCLING TO CLOSE. . . . . . . . . . . . . . . . . . . . . . . . . . . -28-
9.1 REPRESENTATIONS, WARRANTIES AND OTHER AGREEMENTS. . . . . . . . . . -28-
9.2 GOVERNMENTAL PERMITS AND APPROVALS. . . . . . . . . . . . . . . . . -28-
9.3 THIRD PARTY CONSENTS. . . . . . . . . . . . . . . . . . . . . . . . -28-
9.4 LITIGATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . -29-
9.5 REAL PROPERTY . . . . . . . . . . . . . . . . . . . . . . . . . . . -29-
9.6 NO MATERIAL ADVERSE CHANGE. . . . . . . . . . . . . . . . . . . . . -29-
9.7 SUBSCRIPTION AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . -29-
9.8 TRANSFER DOCUMENTS. . . . . . . . . . . . . . . . . . . . . . . . . -29-
9.9 LEGAL OPINION . . . . . . . . . . . . . . . . . . . . . . . . . . . -29-
9.10 ENVIRONMENTAL ESCROW AGREEMENT. . . . . . . . . . . . . . . . . . . -29-
9.11 ASSIGNMENT OF CONTRACTS . . . . . . . . . . . . . . . . . . . . . . -29-
9.12 SATISFACTION WITH DUE DILIGENCE, FINANCIAL PERFORMANCE AND APPROVAL -29-
9.13 EMPLOYMENT AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . -30-
9.14 NON-COMPETITION AGREEMENTS. . . . . . . . . . . . . . . . . . . . . -30-
9.15 CERTIFICATES, ETC. OF SHAREHOLDERS AND MONEY POINT. . . . . . . . . -30-
9.16 PAYMENT OF SALES OR USE TAXES BY MONEY POINT. . . . . . . . . . . . -30-
9.17 APPROVAL OF COUNSEL TO RECYCLING. . . . . . . . . . . . . . . . . . -30-
ARTICLE 10
CONDITIONS PRECEDENT TO THE OBLIGATION OF MONEY POINT
AND SHAREHOLDERS TO CLOSE. . . . . . . . . . . . . . . . . . . . . . . . . -30-
10.1 REPRESENTATIONS, WARRANTIES AND OTHER AGREEMENTS. . . . . . . . . . -30-
10.2 GOVERNMENTAL PERMITS AND APPROVALS. . . . . . . . . . . . . . . . . -31-
10.3 THIRD PARTY CONSENTS. . . . . . . . . . . . . . . . . . . . . . . . -31-
10.4 NO MATERIAL ADVERSE CHANGE. . . . . . . . . . . . . . . . . . . . . -31-
10.5 LITIGATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . -31-
10.6 SATISFACTION WITH DUE DILIGENCE . . . . . . . . . . . . . . . . . . -31-
10.7 DESIGNATION OF STOCK CONSIDERATION. . . . . . . . . . . . . . . . . -31-
10.8 LEGAL OPINION . . . . . . . . . . . . . . . . . . . . . . . . . . . -31-
10.9 THE PURCHASE PRICE. . . . . . . . . . . . . . . . . . . . . . . . . -31-
10.10 ASSUMPTION OF ASSUMED CONTRACTS . . . . . . . . . . . . . . . . . . -31-
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10.11 ENVIRONMENTAL ESCROW AGREEMENT. . . . . . . . . . . . . . . . . . . -32-
10.12 EMPLOYMENT AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . -32-
10.13 APPROVAL OF COUNSEL TO MONEY POINT AND THE SHAREHOLDERS . . . . . . -32-
ARTICLE 11
ACTIONS TO BE TAKEN AT THE CLOSING . . . . . . . . . . . . . . . . . . . . -32-
11.1 TRANSFER DOCUMENTS. . . . . . . . . . . . . . . . . . . . . . . . . -32-
11.2 ASSIGNMENT AND ASSUMPTION AGREEMENT . . . . . . . . . . . . . . . . -32-
11.3 THE PURCHASE PRICE. . . . . . . . . . . . . . . . . . . . . . . . . -32-
11.4 SUBSCRIPTION AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . -32-
11.5 NON-COMPETITION AGREEMENTS. . . . . . . . . . . . . . . . . . . . . -32-
11.6 EMPLOYMENT AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . -32-
11.7 ENVIRONMENTAL ESCROW AGREEMENT. . . . . . . . . . . . . . . . . . . -33-
11.8 CLOSING ON REAL PROPERTY. . . . . . . . . . . . . . . . . . . . . . -33-
11.9 CERTIFICATES OF MONEY POINT . . . . . . . . . . . . . . . . . . . . -33-
11.10 CERTIFICATE OF THE SHAREHOLDERS . . . . . . . . . . . . . . . . . . -33-
11.11 CERTIFICATE OF RECYCLING. . . . . . . . . . . . . . . . . . . . . . -33-
11.12 LEGAL OPINION DELIVERED TO RECYCLING. . . . . . . . . . . . . . . . -34-
11.13 LEGAL OPINION DELIVERED TO MONEY POINT AND THE SHAREHOLDERS . . . . -34-
11.14 TITLES TO VEHICLES. . . . . . . . . . . . . . . . . . . . . . . . . -34-
ARTICLE 12
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION. . . . . . . . -34-
12.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . -34-
12.2 INDEMNITY AGREEMENTS OF MONEY POINT AND THE SHAREHOLDERS. . . . . . -34-
12.3 INDEMNITY AGREEMENT OF RII SUB AND THE PARENT . . . . . . . . . . . -37-
12.4 INDEMNIFICATION PROCEDURE FOR THIRD PARTY CLAIMS. . . . . . . . . . -38-
12.5 GOOD FAITH EFFORTS TO SETTLE DISPUTES . . . . . . . . . . . . . . . -39-
12.6 FEES AND EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . -39-
12.7 LITIGATION SUPPORT. . . . . . . . . . . . . . . . . . . . . . . . . -39-
12.8 INDEMNIFICATION OBLIGATIONS DEDUCTIBLE. . . . . . . . . . . . . . . -40-
12.9 ADJUSTMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . -40-
12.10 EXCLUSIVE REMEDY. . . . . . . . . . . . . . . . . . . . . . . . . . -40-
ARTICLE 13
TERMINATION OF AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . -40-
13.1 TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . -40-
13.2 SURVIVAL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -41-
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ARTICLE 14
CERTAIN ADDITIONAL AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . -41-
14.1 PUBLIC STATEMENTS; CONFIDENTIALITY OF INFORMATION . . . . . . . . . -41-
14.2 REASSIGNMENT OF MONEY POINT RECEIVABLES . . . . . . . . . . . . . . -42-
14.3 EXPENSES; SALES TAX . . . . . . . . . . . . . . . . . . . . . . . . -42-
14.4 WAIVERS AND CONSENTS. . . . . . . . . . . . . . . . . . . . . . . . -42-
14.5 NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -43-
14.6 MONEY POINT 401(K) PLAN; MONEY POINT HEALTH INSURANCE COVERAGE. . . -44-
14.7 CONVERSION OF THE SERIES E PREFERRED STOCK AND ARRANGED SALE. . . . -45-
14.8 COVENANT TO PAY ALL UNASSUMED DEBTS . . . . . . . . . . . . . . . . -45-
14.9 FURTHER ASSURANCES. . . . . . . . . . . . . . . . . . . . . . . . . -46-
14.10 RETENTION OF/ACCESS TO BUSINESS RECORDS . . . . . . . . . . . . . . -46-
14.11 AUDIT BY RII SUB AND PARENT . . . . . . . . . . . . . . . . . . . . -46-
14.12 ENTIRE AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . -46-
14.13 CONSTRUCTION. . . . . . . . . . . . . . . . . . . . . . . . . . . . -46-
14.14 RIGHTS OF THIRD PARTIES . . . . . . . . . . . . . . . . . . . . . . -47-
14.15 HEADINGS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -47-
14.16 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . -47-
14.17 SUBMISSION TO JURISDICTION; WAIVERS . . . . . . . . . . . . . . . . -47-
14.18 PARTIES IN INTEREST . . . . . . . . . . . . . . . . . . . . . . . . -48-
14.19 COUNTERPARTS AND FACSIMILE SIGNATURES . . . . . . . . . . . . . . . -48-
14.20 SEVERABILITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . -48-
14.21 CORPORATE AUTHORITY . . . . . . . . . . . . . . . . . . . . . . . . -48-
LIST OF EXHIBITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -50-
LIST OF SCHEDULES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . -51-
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<PAGE>
ASSET PURCHASE AGREEMENT
THIS AGREEMENT is made as of the ___ day of December, 1997, by and among
Recycling Industries of Chesapeake, Inc., a Colorado corporation ("RII Sub"),
RECYCLING INDUSTRIES, INC., a Colorado corporation ("Parent"), MONEY POINT LAND
HOLDING CORPORATION, a Virginia corporation ("MP Holding"), MONEY POINT DIAMOND
CORPORATION, a Virginia corporation ("MP Diamond"), GEORGE B. GINSBURG,
President and an individual shareholder of MP Holding and MP Diamond
("Ginsburg"), the FRED JACOBSON REVOCABLE TRUST, a Virginia trust and
shareholder of MP Holding and MP Diamond (the "FJ Trust"), and the DOROTHY G.
JACOBSON REVOCABLE TRUST, a Virginia trust and shareholder of MP Holding and MP
Diamond (the "DGJ Trust"). Throughout this Agreement, RII Sub and the Parent
may be collectively referred to as "Recycling;" MP Holding and MP Diamond may be
collectively referred to as "Money Point;" and Ginsburg, the FJ Trust and the
DGJ Trust may be collectively referred to as the "Shareholders." 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.
WITNESSETH:
WHEREAS, RII Sub is a wholly-owned subsidiary of the Parent;
WHEREAS, RII Sub desires to acquire certain assets of Money Point
consisting of substantially all of the tangible and intangible assets used in
the ferrous and non-ferrous metals recycling business conducted by Money Point
at its facility located in Chesapeake, Virginia, and those certain
administrative office and other assets, as hereinafter identified, used in
connection with the operation of Money Point's facility (collectively the "Money
Point Assets");
WHEREAS, Money Point desires to sell the Money Point Assets;
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; and
WHEREAS, the Shareholders 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:
<PAGE>
ARTICLE
1
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.
1.1 "Acquisition" means the acquisition of the Money Point Assets from
Money Point.
1.2 "Assumed Contracts" means those contracts, leases and other agreements
to which Money Point is a party or beneficiary or which otherwise affect the
Business, including, but not limited to, open orders to purchase raw materials
or services in accordance with the Business' normal operating procedures, leases
of real or personal property relating to the Business, all purchase orders, back
orders, open orders or contracts from customers, including the backlog and parts
manufactured for or assigned to Money Point; PROVIDED, HOWEVER, that RII Sub and
Parent expressly are not assuming the obligations of Money Point, the
Shareholders or others in connection with that certain asset purchase agreement
dated August 23, 1985 with The Union Corporation and settlement agreement dated
March 22, 1994 entered into in connection therewith. SCHEDULE 1.2 lists all
Assumed Contracts other than (a) contracts which do not require payment by Money
Point of $20,000 or more per year and which otherwise are not material to the
Business, (b) contracts in the Ordinary Course of Business which do not require
expenditures by Money Point of $20,000 or more per year, and (c) contracts
terminable upon notice of 60 days or less and which do not require expenditures
by Money Point of $20,000 or more per year (collectively the "Material Assumed
Contracts").
1.3 "Assumed Liabilities" means the Liabilities of Money Point under the
Assumed Contracts and such other Liabilities as are expressly assumed by RII Sub
hereunder.
1.4 "Business" means the metals recycling business and business operations
as historically conducted by Money Point as a going concern.
1.5 "Closing" has the meaning set forth in Section 3.6.
1.6 "Closing Date" has the meaning set forth in Section 3.6.
1.7 "Employee Benefit Plan" means any: (a) nonqualified deferred
compensation or retirement plan or arrangement which is an Employee Pension
Benefit Plan; (b) qualified defined contribution retirement plan or arrangement
which is an Employee Pension Benefit Plan; (c) qualified defined benefit
retirement plan or arrangement which is an Employee Pension Benefit Plan; or (d)
Employee Welfare Benefit Plan or material fringe benefit plan or program.
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<PAGE>
1.8 "Employee Pension Benefit Plan" has the meaning set forth in ERISA
Section 3(2).
1.9 "Employee Welfare Benefit Plan" has the meaning set forth in ERISA
Section 3(1).
1.10 "Environmental Claims" has the meaning set forth in Section 12.2(b).
1.11 "Environmental Law or Laws" means any and all federal, state, local
or municipal laws, common 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"), the Clean Water Act
("CWA"), the Endangered Species Act ("ESA"), the Federal Insecticide, Fungicide,
Rodenticide Act ("FIFRA") and the Occupational Safety and Health Act of 1970
("OSHA"), all as may have been amended.
1.12 "Environmental Liabilities" means any and all liabilities for the
violation of, or required remediation under, any Environmental Laws.
1.13 "ERISA" means Employee Retirement Income Security Act of 1974, as
amended from time to time.
1.14 "Excluded Assets" has the meaning set forth in Section 2.2.
1.15 "GAAP" means generally accepted accounting principles consistently
applied in the United States.
1.16 "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) and requires
investigation, removal or remediation under any Environmental Law or common
law, (b) which is defined as a "hazardous substance," "hazardous material,"
"hazardous waste," "pollutant" or "contaminant" under any Environmental Law,
(c) which is toxic, explosive, corrosive, flammable, infectious, radioactive,
carcinogenic, mutagenic, or otherwise hazardous and is regulated by any
governmental authority under any Environmental Law, (d) which is toxic,
explosive, corrosive, flammable, infectious, radioactive, carcinogenic,
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mutagenic, or otherwise hazardous and the presence of which causes or threatens
to cause a nuisance or trespass upon real property or to the adjacent properties
or poses 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.
1.17 SECTION INTENTIONALLY DELETED
1.18 "Inventory Date" shall have the meaning set forth in Section 4.12.
1.19 "IRC" means the Internal Revenue Code of 1986, as amended.
1.20 "Knowledge" means actual knowledge without independent investigation
with respect to the Shareholders, and with respect to Recycling and Money Point,
actual knowledge without independent investigation of their respective officers
and directors.
1.21 "Lender" means Recycling's primary lender or equity participant
relating to the Transaction.
1.22 "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 reasonably be expected to affect the Money Point Assets
or the Business, including any liability for Taxes.
1.23 "Market Price" when referring to the Parent Common Stock, means the
closing price for the Parent 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 prices for the Parent Common Stock as reported on
the Nasdaq system or on the electronic bulletin board or, if none, the National
Quotation Bureau, Inc.'s "Pink Sheets" or, if such quotations are unavailable,
the value determined by the Parent's Board of Directors in accordance with its
discretion in making a bona fide, good faith determination of fair market value.
1.24 "Material Adverse Effect" means a material adverse effect on the
business, assets or financial condition of Money Point or Recycling, as
applicable.
1.25 "Money Point Offices" means the administrative offices of Money Point
located at 4300 Buell Street, Chesapeake, Virginia 23324.
1.26 "Money Point Receivables" has the meaning set forth in Section 2.5.
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1.27 "Ordinary Course of Business" or "Ordinary Course" means the ordinary
course of business consistent with past custom and practice of Money Point
(including with respect to quantity and frequency).
1.28 "Owned Facilities" means the real property and associated fixtures
owned by Money Point as specifically described on SCHEDULE 2.1(a).
1.29 "Parent Common Stock" means the common stock, $.001 par value per
share, of Recycling Industries, Inc., a Colorado corporation.
1.30 "Parent Series E Preferred Stock" means the Convertible Preferred
Stock of Parent described in the Designation of Series E Redeemable Convertible
Preferred Stock attached hereto as EXHIBIT A.
1.31 "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.
1.32 "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.
1.33 "Prepared Inventory" means all ferrous and non-ferrous Inventory that
has been processed by Money Point as of the Closing Date and is ready for
shipment to Money Point's customers, including, without limitation, saleable
ferrous or non-ferrous materials contained in Shredder Residue determined at a
recovery rate for such materials from the last six significant shipments of
Shredder Residue by Money Point to an unaffiliated third party processor.
1.34 "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.
1.35 "Shredder Residue" means the by-product generated from the operation
of a shredder which may or may not contain Hazardous Materials.
1.36 "Tangible Property" shall include the property described in Sections
2.1(a), 2.1(b), 2.1(e), 2.1(f), 2.1(g), 2.1(h) and 2.1(i).
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1.37 "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 any other tax, including any interest,
penalty or addition thereto, whether disputed or not.
1.38 "Transaction" means the transactions contemplated by this Agreement
and the other Transaction Documents.
1.39 "Transaction Documents" means, collectively, (i) this Agreement, (ii)
any Schedule or Exhibit to this Agreement, and (iii) any certificate or other
document delivered at Closing.
1.40 "Unprepared Inventory" means: (i) all scrap ferrous metal comprised
of obsolete, discarded or abandoned machinery, appliances, equipment,
automobiles, metal manufacturing, casting and fabricating waste materials or
other consumer and industrial steel goods or by-products to be processed by
Money Point for resale; and (ii) scrap non-ferrous metal comprised of
non-magnetic alloys of copper, brass, aluminum, stainless steel, zinc die-cast,
insulated wire (aluminum and copper) and other related metals to be processed by
Money Point for resale. Unprepared Inventory does not include any non-saleable
ferrous or non-ferrous materials contained in Shredder Residue or the other
non-saleable residual materials resulting from Money Point's operations or
contained within dirt or other non-processable medium within the Owned Facility.
1.41 "1933 Act" means the Securities Act of 1933, as amended.
1.42 "1934 Act" means the Securities Exchange Act of 1934, as amended.
ARTICLE 2
ACQUISITION OF MONEY POINT ASSETS
2.1 PURCHASE AND SALE OF THE MONEY POINT ASSETS. At the Closing and
subject to the terms and conditions stated herein, Money Point agrees to sell,
assign, convey and transfer to RII Sub, and RII Sub agrees to purchase from
Money Point, the Money Point 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 Money Point Assets shall include all of the items enumerated in
subparagraphs (a) through (m) below:
(a) The Owned Facilities, including all buildings situated thereon
and all leasehold improvements and all rights in easements, driveways and signs,
as legally described on SCHEDULE 2.1(a).
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(b) All vehicles, machinery and equipment, tools, furniture,
leasehold improvements, fixtures, vehicles, dies, jigs, scales (provided that
the software for the scales is licensed and not owned and the license will be
transferred as an Assumed Contract) and supplies, or any related capitalized
items and other tangible property owned by Money Point located at the Owned
Facilities and 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 dies, jigs, supplies, tools and spare parts
are included in the Money Point Assets whether or not listed on SCHEDULE 2.1(b).
(c) All of Money Point's right, title and interest in and to the
names "Money Point Land Holding Corporation," "Money Point Diamond Corporation,"
"Jacobson Metal Company" and any variations thereof.
(d) All of Money Point's right, title and interest in and to
telephone number (757) 543-2066 and facsimile number (757) 543-6632.
(e) Copies of all business and financial records (exclusive of tax
records) relating to the Business for the past three years, 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 Money Point will not be required to make copies to
the extent copies have been delivered prior to the Closing.
(f) Those specific assets relating to the operation of the Business
and Money Point located at the Money Point Offices and listed on SCHEDULE
2.1(f).
(g) 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 or used at the Money Point Offices
in connection with the operation of the Business.
(h) All of Money Point's right, title and/or interest in accounting
and other computer software, including without limitation, the software for the
scales, relating to the Business owned by or licensed to Money Point, including
information interfaced with those systems, as maintained by Money Point at the
Owned Facilities or the Money Point Offices, all of which are listed on SCHEDULE
2.1(h); PROVIDED, HOWEVER, that Money Point shall not warrant title to any
software and, to the extent the software is licensed rather than owned, the
interest transferred hereunder shall be the license rights.
(i) All copies of customer and supplier lists, signs, advertising,
catalogues and brochures relating to the Business.
(j) All rights of Money Point under the Assumed Contracts.
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(k) All goodwill and other general intangibles related to the Money
Point Assets.
(l) All claims, deposits, prepayments, refunds, causes of action,
cases in action, rights of recovery, rights of set-off and rights of recoupment
related to the Money Point Assets or the Business.
(m) All other assets of any nature useful and/or beneficial to the
Business and located at the Owned Facilities, whether owned or leased by Money
Point, unless specifically described in Section 2.2 or on SCHEDULE 2.2 as an
Excluded Asset.
Money Point's sale, conveyance, assignment and transfer of the Money Point
Assets shall be free and clear of any Security Interest, liabilities or
obligations other than the Assumed Liabilities.
2.2 EXCLUDED ASSETS. On the Closing Date, RII Sub shall not purchase the
following assets owned by Money Point, each to the extent described in more
detail on SCHEDULE 2.2 (the "Excluded Assets"):
(a) Any cash, marketable securities (including all shares of capital
stock of Trigon Healthcare, Inc.) and cash equivalents of Money Point and
the account receivable to Money Point from National Exchange in the
approximate amount of $375,518.06;
(b) The real property owned by MP Holding, the legal description of
which is set forth in SCHEDULE 2.2, which consists of approximately thirty
acres situated adjacent to the Owned Facilities;
(c) The corporate charter, qualifications to conduct business as a
foreign corporation, arrangements with registered agents relating to
foreign qualifications, taxpayer and other identification numbers, seals,
minute books, stock transfer books, stock certificates and other documents
relating to the organization, maintenance and existence of Money Point as
corporations; PROVIDED, HOWEVER, that Money Point will not have the right
to continue using its current corporate names following the Closing;
(d) Any of the rights of Money Point under this Agreement and any
other Transaction Document entered into on or after the date of this
Agreement;
(e) Rights to refunds of insurance premiums paid by Money Point on
the insurance policies referenced in Section 4.20 prior to the Closing, as
identified on SCHEDULE 2.2, and the rights to the insurance proceeds from
the damage caused to the crane referenced on SCHEDULE 4.11;
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(f) Certain personal assets and other items owned by the Shareholders
as identified on SCHEDULE 2.2;
(g) Any and all rights of Money Point under the lawsuit styled MONEY
POINT DIAMOND CORPORATION T/A JACOBSON METAL CO. V. CLARK & STANT, P.C., CL
96-675-M, in the Circuit Court of the City of Chesapeake, Virginia;
(h) The following vehicles and all Liabilities associated therewith;
(1) 1997 Chrysler leased by MP Holding pursuant to a lease
agreement dated June 10, 1997;
(2) 1996 Volvo leased by MP Holding pursuant to a lease agreement
dated June 12, 1996; and
(3) 1995 Dodge Caravan leased by MP Holding pursuant to a lease
agreement dated March 15, 1996.
(i) Tax refunds of any nature whatsoever; and
(j) Any other assets of Money Point set forth on SCHEDULE 2.2.
2.3 ASSUMED CONTRACTS. RII Sub shall assume the obligations of Money
Point under the Assumed Contracts.
2.4 ASSUMPTION OF LIABILITIES. Except with respect to the indemnity
obligations of Recycling under Section 12.3 and the obligations of Money Point
under Assumed Contracts, RII Sub shall not assume any Liabilities or
Environmental Liabilities of Money Point arising on or before the Closing or
with respect to any action, event or occurrence of any party on or prior to the
Closing.
2.5 COLLECTION OF ACCOUNTS RECEIVABLE.
(a) If, after Closing, Money Point receives payment on any of the
accounts receivable included in the Money Point Assets other than the receivable
from National Exchange as referenced in Section 2.2(a) ("Money Point
Receivables"), Money Point shall forthwith forward the same to RII Sub within
five business days after receipt thereof.
(b) RII Sub shall have the right, upon five business days prior
written notice and during the normal business hours of Money Point, to review
records of Money Point solely to determine compliance with the provisions of
Section 2.5(a).
(c) The provisions of this Section 2.5 shall survive the Closing.
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ARTICLE 3
PURCHASE PRICE AND CLOSING
3.1 PURCHASE PRICE FOR MONEY POINT ASSETS.
(a) RII Sub shall pay the total amount of $19,100,000, subject to the
adjustments, as determined in accordance with Section 3.3 below (the "Purchase
Price") to Money Point for the purchase of the Money Point Assets. The Purchase
Price shall be payable as follows:
(1) $12,000,000, as adjusted in accordance with Section 3.3
below, in immediately available funds at Closing (the "Cash Consideration");
(2) $3,000,000 stated value of Parent Series E Preferred Stock
(the "Stock Consideration") delivered at Closing pursuant to the terms of a
customary subscription agreement (the "Subscription Agreement"). The form of
Subscription Agreement is attached hereto as EXHIBIT B.
(3) Payment and release of indebtedness not to exceed $4,100,000,
as specifically identified on SCHEDULE 3.1(a)(3); PROVIDED, HOWEVER, that to the
extent that the indebtedness of Money Point paid by RII Sub pursuant to this
Section 3.1(a)(3) is less than $4,100,000, the difference shall be added to the
Cash Consideration payable by RII Sub to Money Point; and, PROVIDED, FURTHER,
that if the indebtedness intended to be released pursuant to this Section
3.1(a)(3) exceeds $4,100,000, the difference shall be paid at the Closing by
Money Point from the Cash Consideration.
3.2 VALUATION OF INVENTORY AND ACCOUNTS RECEIVABLE. The aggregate value
of the inventory and accounts receivable has been determined jointly by
representatives of Money Point and Recycling prior to the Closing Date, and such
value is set forth on SCHEDULE 3.2, initialed by Money Point and Recycling.
This valuation shall be updated to the Closing Date by adjusting for all
shipments in and out and changes in accounts receivable which occur through the
close of business the date immediately preceding the Closing Date. For purposes
of calculating the value of inventory, Unprepared Inventory shall be valued at a
price equal to the average price Money Point has paid for comparable material
received across its scales in the ten business days immediately preceding the
valuation, and Prepared Inventory shall be valued at market price, less the cost
of shipping.
If the parties are not able to mutually determine the value of the
inventory and receivables, an independent third party shall be jointly selected
by Money Point and Recycling to determine such value. The value determination
by such third party shall be binding on Money Point and Recycling. The Closing
shall occur as soon as practicable after third party value
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determination, if such is required, provided all other conditions to Closing are
satisfied or waived.
3.3 ADJUSTMENT OF THE PURCHASE PRICE.
(a) PRE-CLOSING ADJUSTMENT. The aggregate value of the inventory and
accounts receivable included in the Money Point Assets, as determined in
accordance with Section 3.2 shall not be less than $5,470,000 on the Closing
Date. If the value of the inventory and accounts receivable exceeds or is less
than this amount, the Purchase Price shall be adjusted accordingly and the Cash
Consideration shall be increased or decreased, as appropriate, to reflect the
adjustment.
(b) POST-CLOSING ADJUSTMENT. If the parties are not able to complete
the adjustments contemplated by Sections 3.2 and 3.3(a) immediately prior to the
Closing, within 21 days after the Closing such adjustments shall be completed
and an adjustment payment, in immediately available funds, will be made by the
party who is determined to be responsible therefor no later than the 30th day
after the Closing. If there are any remaining costs related to the preparation
of the Environmental Studies which are to be reimbursed 50% to Money Point by
RII Sub, the reimbursement shall be made in connection with the post-closing
adjustment.
3.4 REIMBURSEMENT OF BID DEPOSITS. RII Sub shall reimburse Money Point
for bid deposits totalling $81,776.71 as described on SCHEDULE 3.4. The
reimbursement shall be made in connection with the post-closing adjustment
contemplated in Section 3.3(b) and, if there is no such post-closing adjustment
because all adjustments are able to be made on or before the Closing, RII Sub
shall make the reimbursement payment to Money Point by company check not later
than 30 days after the Closing.
3.5 ALLOCATION OF THE PURCHASE PRICE.
(a) The Purchase Price shall be allocated among the Money Point
Assets as set forth on SCHEDULE 3.5.
(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 3.5.
(c) RII Sub and Money Point 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.
3.6 CLOSING OF THE PURCHASE. The closing of the Transaction (the
"Closing") shall take place on December 4, 1997, at the offices of Lawyers Title
Insurance Corporation, Southeastern Virginia Beach Office, Norfolk, Virginia,
tel 757-627-9868/fax 757-623-4058, or at such other place as selected by the
Lender, in its sole and absolute discretion, on the date
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mutually agreed to by the parties (the "Closing Date"). The Closing Date shall
be no later than December 31, 1997, unless mutually extended by the parties.
ARTICLE 4
REPRESENTATIONS OF MONEY POINT AND SHAREHOLDERS
As an inducement to Recycling to enter into this Agreement and to complete
the Transaction, and with the knowledge that Recycling will rely thereon, Money
Point and the Shareholders, jointly and severally, represent and warrant to
Recycling that all of the representations and warranties in this Article 4 are
true, correct and complete as of the date of this Agreement.
4.1 DUE ORGANIZATION AND QUALIFICATION.
(a) MP Holding and MP Diamond each is a corporation duly organized,
validly existing and in good standing under the laws of the Commonwealth of
Virginia, and has the corporate power and lawful authority to carry on its
business as now being conducted.
(b) MP Holding and MP Diamond each is duly qualified or otherwise
authorized to transact business in each jurisdiction, listed in SCHEDULE 4.1(b),
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. Except for the exceptions noted in the title
insurance policy to be obtained by RII Sub for the Closing and encumbrances,
covenants, conditions, restrictions, reservations and easements filed of record,
Money Point has good, valid and insurable title to all real property, and except
as set forth SCHEDULE 4.2 Money Point has good, valid and marketable title to
its personal property included in the Money Point Assets (tangible and
intangible), in each case, other than set forth above, subject to no Security
Interest, option, right of first refusal, or other restriction of any kind or
character.
4.3 AUTHORITY OF MONEY POINT; CONSENTS.
(a) MP Holding and MP Diamond each has full power and authority to
execute and deliver this Agreement and the other Transaction Documents and to
carry out the Transaction and MP Holding and MP Diamond each has taken all
requisite corporate or other action to authorize the execution, delivery and
performance of this Agreement and the other Transaction Documents.
(b) This Agreement and the other Transaction Documents are valid and
binding agreements of MP Holding and MP Diamond, enforceable in accordance with
their terms.
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(c) Except as described in SCHEDULE 4.3(c), 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 either MP Holding or MP Diamond to enter into
and perform its respective obligations under this Agreement and the other
Transaction Documents, and neither the execution and delivery of this Agreement
and the other Transaction Documents nor the consummation of the Transaction by
MP Holding or MP Diamond will:
(1) Be in violation of its respective Articles of Incorporation,
Bylaws or any other organizational document, or constitute a breach of any
evidence of indebtedness or agreement to which it is a party, except where such
breach would not have a Material Adverse Effect on either the Business or the
Money Point Assets;
(2) Cause a default under any mortgage or deed of trust or other
lien, charge or encumbrance to which any of the Money Point Assets is subject or
under any contract to which it is a party, or permit the termination of any such
contract by another person, except where such default or termination would not
have a Material Adverse Effect on the Business or the Money Point Assets;
(3) Result in the creation or imposition of any Security Interest
upon any of the Money Point Assets under any agreement or commitment to which it
or the Money Point Assets are bound;
(4) Conflict with or result in the breach of any writ, injunction
or decree of any court or governmental instrumentality; or
(5) Violate any statute, law or regulation of any jurisdiction as
such statute, law or regulation related to the Money Point Assets.
4.4 FINANCIAL STATEMENTS.
(a) The following financial statements of Money Point are attached
hereto as SCHEDULE 4.4:
(1) A copy of the audited financial statements for Money Point
for its fiscal years ended December 31, 1994, 1995 and 1996, each prepared in
accordance with GAAP (the "Audited Financial Statements").
(2) A copy of its unaudited financial statements prepared
substantially in accordance with GAAP in the same manner which they are
currently prepared for the period from January 1, 1997 through October 31, 1997
(the "Unaudited Financial Statements").
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The Audited Financial Statements and the Unaudited Financial Statements
collectively are referred to herein as the "Money Point Financial Statements."
The Audited Financial Statements have been prepared in accordance with GAAP and
the Unaudited Financial Statements have been prepared substantially in
accordance with GAAP and present fairly the financial condition of Money Point
as of such dates and the results of operations of Money Point for such periods;
PROVIDED, HOWEVER, that the Unaudited Financial Statements are subject to normal
year-end adjustments and lack footnotes and other presentation items.
(b) Since December 31, 1996, there has been no (1) material adverse
change in the assets or liabilities, or in the business, financial condition or
in the results of operations of the Business or on the Owned Facilities,
whether, to the Knowledge of Money Point and the Shareholders, as a result of
any legislative or regulatory change, or whether as a result of revocation of
any Permits, fire, explosion, accident, casualty, labor trouble, flood, drought,
riot, storm, condemnation or act of God; and (2) no change in the assets or
liabilities, or in the Business, financial condition, or in the results of
operations, or, to the Knowledge of Money Point and the Shareholders, any loss
of customers of Money Point, except in the Ordinary Course which have not, in
the aggregate or individually, had a Material Adverse Effect on the Business.
4.5 NO TAX LIENS; NO WAIVER.
(a) None of the Money Point 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 RII Sub as purchaser under the
IRC or any comparable provision of state or local law, except for real estate
taxes which are not yet due and payable.
(b) Money Point has not waived any statute of limitations with
respect to the assertion of any liability under any federal, state, or local tax
law.
(c) Money Point 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 Money
Point and the Shareholders, contemplated.
(d) Copies of Money Point's federal and state income tax returns for
its tax years ended December 31, 1993, 1994, 1995 and 1996 are attached hereto
as SCHEDULE 4.5(d).
4.6 COMPLIANCE WITH LAWS. Except as set forth on SCHEDULE 4.6,
(a) Neither Money Point nor any of the Shareholders is in violation of
or has violated since January 1, 1994, any applicable order, judgment,
injunction, award or decree relating to the Money Point Assets, except where
such violation would not have a Material
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Adverse Effect. To the Knowledge of Money Point and the Shareholders, except as
otherwise disclosed in the Environmental Studies, neither Money Point nor the
Shareholders is in violation of or has violated since January 1, 1994, 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 Money Point Assets, except where such violation would not have
a Material Adverse Effect.
(b) Except with respect to any encumbrances noted on the title
insurance policy to be obtained by RII Sub and/or covenants, conditions,
restrictions, reservations and easements filed of record, and/or the survey to
be obtained by RII Sub, to the Knowledge of Money Point and the Shareholders,
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 Money Point and the Shareholders, there is not pending or
threatened any notification of any governmental authority that Money Point is
not in material compliance with applicable laws and regulations respecting
employment and employment practices, occupational safety and health laws and
regulations, and Environmental Laws, and (3) neither Money Point nor any
Shareholder has received, since January 1, 1994, any such notification of past
violations of such laws or regulations.
4.7 PERMITS. SCHEDULE 4.7 lists all Permits required by any governmental
entity related to the Business or operations of Money Point that are material to
the operation of the Business. Except as described on SCHEDULE 4.7, Money Point
validly holds all Permits that are material to the operation of the Business and
all Permits are in full force and effect and no proceeding to revoke or modify
in a materially detrimental way any of such Permits is pending or, to the
Knowledge of Money Point or any Shareholder, threatened.
4.8 LITIGATION. Except as described in SCHEDULE 4.8, there are no
outstanding orders, judgments, injunctions, awards or decrees of any court,
governmental or regulatory body or arbitration tribunal against or involving the
Money Point Assets or the Business. Except as set forth on SCHEDULE 4.8, there
are no actions, suits or claims against Money Point or any Shareholder, or, to
the Knowledge of Money Point or any Shareholder, investigations (whether or not
the defense thereof or liabilities in respect thereof are covered by insurance)
pending or, to the Knowledge of Money Point or any Shareholder, threatened
against or involving the Money Point Assets or the Business.
4.9 CONTRACTS AND OTHER AGREEMENTS.
(a) Except for the Assumed Contracts or the contracts, leases, and
other agreements which will be completed or cancelled at or prior to the
Closing, and except as otherwise disclosed on SCHEDULE 4.9(a), Money Point 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
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retirement arrangement, (5) lease for real or personal property, (6) partnership
or joint venture agreement, or (7) other material contract, agreement or
commitment.
(b) All of the Assumed Contracts are valid and binding upon Money
Point in accordance with their terms, and Money Point is not in default nor has
it received any notice of default under, or with respect to any Assumed
Contracts, except for such defaults that would not or do not, individually or in
the aggregate, have a Material Adverse Effect.
(c) Except as otherwise disclosed on SCHEDULE 4.3(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. Money Point
is not in the process of negotiating or entering into any contracts, leases, or
other agreements described in this Section 4.9.
4.10 NOTES AND ACCOUNTS RECEIVABLE. The Money Point Receivables are
reflected properly in the books and records of Money Point, and were incurred in
the Ordinary Course, are current (not over 60 days old) and are collectible
without setoffs or counterclaims, subject only to the reserve for bad debts set
forth on the balance sheet included in the Unaudited Financial Statements, as
adjusted, for operations and transactions through the Closing Date in accordance
with the past custom and practice of Money Point. The Money Point Receivables
not collected within 60 days after the Closing shall be subject to reassignment
to Money Point in accordance with Section 14.2.
4.11 TANGIBLE PROPERTY. Except as described in SCHEDULE 4.11, all Tangible
Property is in good operating condition and repair in all material respects,
subject only to normal wear and tear. With respect to the crane referenced in
SCHEDULE 4.11, Money Point has ordered the part necessary for repair and, at
Money Point's expense, will restore the crane to good operating condition within
a reasonable period of time following receipt of the part. Since January 1,
1994 neither Money Point nor any of the Shareholders has received written 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.
4.12 INVENTORY. The piles of Unprepared Inventory observed and measured on
November 21, 1997 (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.
4.13 INTELLECTUAL PROPERTY.
(a) Money Point does not own any intellectual property, inventions,
discoveries, trade secrets, designs, prototypes, formulas, or any other
proprietary information related to the Business, other than the rights to the
names "Money Point Land Holding Corporation," "Money Point Diamond Corporation"
and "Jacobson Metal Company." Other
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than as required under shrink wrap software licenses for computers and/or the
scales, Money Point has never agreed to indemnify any Person for or against any
interference, infringement, misappropriation or other conflict with respect to
any intellectual property.
(b) Neither Money Point nor any of the Shareholders has Knowledge of
any patent, invention, trade secret, trademark, service mark, trade name or
copyright of any other Person that is infringed by Money Point, nor do they have
notice of any infringement claim of any other Person relating to any
intellectual property or any process or confidential information of Money Point.
4.14 REAL PROPERTY. The Owned Facilities include all real property
included in the Money Point Assets. To the Knowledge of Money Point and the
Shareholders, with respect to each parcel of owned real property included within
the Owned Facilities:
(a) Except as otherwise disclosed on SCHEDULE 4.7 or in the
Environmental Studies, since January 1, 1994, Money Point has possessed all
approvals of governmental authorities (including licenses and permits ) required
which are material to the ownership or operation of the Business. The Owned
Facilities, since January 1, 1994, have been operated and maintained, in all
material respects, in accordance with applicable laws, rules and regulations.
(b) Except as otherwise disclosed on SCHEDULE 4.14(b), there are no
leases, subleases, licenses, easements, 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 Money Point in possession of the
Owned Facilities or any portion thereof.
(e) The Owned Facilities are supplied with utilities and other
services necessary for their present operation, including electricity, water,
telephone, and sewage disposal, all of which services are 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 benefiting the Owned Facilities.
4.15 LIABILITIES. Except as set forth in SCHEDULE 4.15 or otherwise in
this Agreement or any other Schedule hereto, to the Knowledge of Money Point and
the Shareholders, the Business has no Liabilities other than (a) Liabilities
fully and adequately reflected or reserved against in the Financial Statements,
(b) Liabilities under Assumed Contracts, (c) Liabilities incurred since December
31, 1996 in the Ordinary Course, and (d) Liabilities which do not, individually
or in the aggregate, have a Material Adverse Effect on the Business.
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4.16 SUPPLIERS AND CUSTOMERS. SCHEDULE 4.16 sets forth a list of (1) all
suppliers from whom Money Point has purchased $25,000 or more in the fiscal year
ended December 31, 1996 and/or during the period from January 1, 1997 through
the date of this Agreement, and (2) all customer whose annual purchases from the
Business exceeded $25,000 in the fiscal year ended December 31, 1996 and/or
during the period from January 1, 1997 through the date of this Agreement.
There are no agreements or understandings, either written or oral, with any
customers of the vendors to Money Point as to adjustments in pricing or cost
which would reduce the profit margin of any existing or contemplated contract or
other relationship.
4.17 EMPLOYEE BENEFIT PLANS. SCHEDULE 4.17 lists all Employee Benefit
Plans maintained by Money Point or to which it contributes for the benefit of
any of its current or former employees.
(a) To the Knowledge of Money Point and the Shareholders, each
Employee Benefit Plan (and each related trust or insurance contract) complies in
all material respects in form and in operation in all respects with the
applicable requirements of ERISA and the IRC;
(b) All contributions (including all employer contributions and
employees salary reduction contributions) which are due have been paid to each
Employee Benefit Plan and all such plans are adequately funded;
(c) No material unsatisfied liability has been incurred by Money Point
or any ERISA affiliate of Money Point and there is no material risk that such
liability will be incurred;
(d) To the Knowledge of Money Point and the Shareholders, no charge,
complaint, action, suit, proceeding, hearing, investigation, claim, or demand
with respect to the administration or the investment of the assets of any
Employee Benefit Plan (other than routine claims for benefits) is pending;
(e) Money Point does not provide any medical or other similar benefits
to employees beyond retirement, other than group health care continuation
required by COBRA; and
(f) Money Point has delivered to RII Sub and Parent correct and
complete copies of the plan documents and summary plan descriptions, the most
recent Form 5500 Annual Report, and all related trust agreements, insurance
contracts, and other funding agreements which implement each Employee Benefit
Plan.
4.18 CURTAILMENT OF OPERATIONS. No labor disputes or work stoppages
involving the Business are pending or, to the Knowledge of Money Point and the
Shareholders, threatened which, either singly or in the aggregate, might have a
Material Adverse Effect
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on the Business. To the Knowledge of Money Point and the Shareholders, no
material customer of or supplier to the Business is involved in, or affected by,
any dispute, arbitration, lawsuit, or administrative proceedings which might
have a Material Adverse Effect on the Business.
4.19 EMPLOYEE RELATIONS. Money Point is not a party to a collective
bargaining agreement and, to its and the Shareholders' Knowledge, Money Point 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 Money Point has not and is not engaged in
any unfair labor practice. To the Knowledge of Money Point and the
Shareholders, there have been no organization efforts by any trade unions within
the last five years.
4.20 INSURANCE. SCHEDULE 4.20 lists all insurance policies maintained by
Money Point relating to the Business or the Owned Facilities, copies of which
have been provided to RII Sub, which cover the Money Point Assets or the
Business, the nature of such policies, the amount and types of coverage, and the
name of the insurers and expiration dates. Money Point 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.
4.21 RELATIONSHIPS. Except as described on SCHEDULE 4.21, no officer or
director of Money Point possesses, directly or indirectly, any financial
interest in, or is a director, officer, 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. The Business is not indebted to any officer,
director, partner, or employee of Money Point except with respect to accrued but
unpaid compensation and other Ordinary Course employment benefits or except as
described on SCHEDULE 4.21 (which are not being assumed by RII Sub hereunder),
to any entity in which any such Person has a financial interest.
4.22 NO MATERIAL CHANGES PRIOR TO CLOSING DATE. Up until the Closing Date,
the Business will be operated in the Ordinary Course of Business.
4.23 BROKER'S OR FINDER'S FEES. No agent, broker, Person or firm acting on
behalf of Money Point or the Shareholders 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.
4.24 EMPLOYEE TRANSITION. SCHEDULE 4.24 lists all employees of Money Point
who work or are customarily stationed at the Owned Facilities, their term of
employment, compensation history (including bonus, if any), benefits and accrued
vacation and other
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amounts payable to each employee. On or before the first day subsequent to the
Closing Date, Money Point will terminate all employees of the Business who will
not be hired by RII Sub and will pay all compensation due such employees on or
before the first day subsequent to the Closing. RII Sub will not assume or
otherwise be responsible for any salaried or hourly health and life insurance
obligations incurred prior to the Closing for any employee not hired by the RII
Sub, nor for payment of claims to insureds, or payment of any premiums for
coverage prior to the Closing Date; PROVIDED, HOWEVER, that, following the
Closing Date, RII Sub has agreed to assume the obligation to provide group
health care insurance continuation coverage as required by COBRA to qualified
former employees of Money Point and/or their family members, with the premiums
being covered by such former employees of Money Point and/or their family
members. Except as provided in the foregoing sentence, RII Sub will not assume
any liabilities either to former Money Point employees or the employees of Money
Point who are hired by RII Sub after the Closing. Money Point agrees that all
liabilities of the Business to terminated employees will be retained by Money
Point, including those accruing by reason of termination by Money Point. RII
Sub shall have the right, in its sole discretion, to determine which of Money
Point's employees it will hire following the Closing.
4.25 ENVIRONMENTAL MATTERS. Except as may be provided in the Environmental
Studies to be performed as contemplated by Section 8.1 of this Agreement, copies
of which will be delivered to RII Sub prior to the Closing as provided in
Section 8.1, or disclosed on SCHEDULE 4.25, Money Point and the Shareholders
have no Knowledge of any Environmental Liabilities, actual or expected, relating
to the Business or the Owned Facilities, or of any environmental conditions on
any other real property that could reasonably be expected to result in an
Environmental Liability to the Business.
4.26 COMPLIANCE WITH ADA. Money Point has complied with the Americans with
Disabilities Act of 1991, 42 U.S.C. Sections 12111, 12112 and 12209, as amended,
and any similar applicable state regulations, except where the failure to so
comply would not have a Material Adverse Effect.
4.27 DISCLOSURE. None of the Transaction Documents issued by Money Point
or the Shareholders and furnished or to be furnished to Recycling, to the
Knowledge of Money Point and the Shareholders, contains or will contain any
untrue statement of a material fact or omits any statement of a material fact
necessary in order to make the statements contained therein not misleading.
4.28 BEST EFFORTS. Money Point and the Shareholders will use their best
efforts to timely apply for and obtain all permits, consents and approvals, to
complete any due diligence deemed necessary by Money Point and the Money Point
Shareholders and take such other actions in order to complete the Transaction by
the Closing Date. Money Point and the Shareholders will execute and deliver
such instruments and take such other action
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as may be reasonable or appropriate to carry out the Acquisition and the
intentions of this Agreement.
ARTICLE 5
REPRESENTATIONS OF RECYCLING
As an inducement to Money Point and the Shareholders to enter into this
Agreement and to complete the Transaction and with the knowledge that Money
Point and the Shareholders will rely thereon, RII Sub and the Parent jointly and
severally represent and warrant to Money Point and the Shareholders that all of
the representations and warranties in this Article 5 are true, correct and
complete as of the date of this Agreement.
5.1 DUE INCORPORATION AND QUALIFICATION OF RII SUB. RII Sub 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,
RII Sub will be duly qualified or otherwise authorized as a foreign corporation
to transact business and will be in good standing in the Commonwealth of
Virginia.
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. On or before the Closing Date,
RII Sub and the Parent will deliver to Money Point true and complete copies of
their respective Articles of Incorporation and Bylaws, each as certified by the
Parent's corporate secretary, as then in effect.
5.4 AUTHORITY OF RII SUB AND THE PARENT. RII Sub and the Parent have full
power and authority to execute and deliver this Agreement and the other
Transaction Documents and to carry out the Transaction and Recycling has taken
all requisite corporate action to authorize the execution, delivery and
performance of this Agreement and the other Transaction Documents. This
Agreement and the other Transaction Documents are valid and binding agreements
of RII Sub 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 RII Sub or the
Parent to enter into and perform its obligations under this Agreement and the
other Transaction Documents, and neither the execution and delivery of this
Agreement and the other Transaction Documents nor the completion of the
Transaction will, with respect to RII Sub and the Parent, individually:
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(a) Be in violation of its Articles of Incorporation or Bylaws or any
other organizational document, or constitute a breach of any evidence of
indebtedness or agreement to which it is a party, except where such breach would
not have a Material Adverse Effect;
(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, except where such default or termination would not have a
Material Adverse Effect;
(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 STOCK CONSIDERATION. The Stock Consideration when issued, and the
Parent Common Stock issuable upon conversion of the Stock Consideration, will be
duly authorized, fully paid and non-assessable and not subject to any preemptive
rights.
5.6 BROKER'S OR FINDER'S FEES. No agent, broker, Person or firm acting on
behalf of RII Sub 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. None of the Transaction Documents issued by RII Sub or
the Parent and furnished or to be furnished to Money Point and the Shareholders,
to the Knowledge of RII Sub or the Parent, contains or will contain any untrue
statement of a material fact or omits any statement of a material fact necessary
in order to make the statements contained therein not misleading.
5.8 BEST EFFORTS. RII Sub and the Parent will use their best efforts to
timely apply for and obtain all permits, consents and approvals, to complete any
due diligence deemed necessary by RII Sub and the Parent, and to take such other
actions in order to
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complete the Transaction by the Closing Date. RII Sub 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.
5.9 HART-SCOTT-RODINO ACT. The total assets and annual net sales of
Recycling are such that the provisions of the Hart-Scott-Rodino Act, 15 U.S.C.
Sections 18a and any similar state statute, are inapplicable to the
Transaction.
ARTICLE 6
REPRESENTATIONS OF THE PARENT RELATED TO THE
STOCK CONSIDERATION
As an inducement to Money Point and the Shareholders to enter into this
Agreement and to consummate the transactions contemplated hereby, and with the
knowledge that Money Point and the Shareholders will rely thereon, the Parent
represents and warrants the following to Money Point and the Shareholders:
6.1 STATUS. The Parent is a corporation duly organized, validly existing
and in good standing under the laws of the State of Colorado. The Parent is
authorized to issue preferred stock and common stock. The Parent has taken all
necessary corporate action to create the Parent Series E Preferred Stock and to
reserve a sufficient number of shares of common stock which may be issued upon
conversion thereof. The preferred stock, when issued in accordance with the
provisions of this Agreement will be lawfully issued as fully paid,
nonassessable preferred shares of the Parent, and the common stock issuable upon
conversion of the Parent Series E Preferred Stock, when issued in accordance
with the conversion terms of said preferred stock, will be lawfully issued as
fully paid, nonassessable common shares of the Parent.
6.2 1934 ACT REGISTRATION. The common stock of the Parent is registered
under Section 12(g) of the 1934 Act, and in accordance therewith the Parent
files periodic reports, proxy statements, and other informational reports
required under the 1934 Act. The Parent has filed with the SEC all reports it
is required to file under the 1934 Act. The Parent's common stock is traded
publicly in the over-the-counter market and quoted on the Nasdaq National Market
under the symbol "RECY."
6.3 PUBLIC REPORTS. The Parent has made all filings with the SEC that it
has been required to make under the 1933 Act and 1934 Act (collectively, the
"Public Reports"). Each of the Public Reports was complete and accurate when
filed and complied in all material respects with the requirements of the 1933
Act or 1934 Act, as applicable. At the time each Public Report was filed, it
did not contain any untrue statement of a material fact or omit to state any
material fact necessary, in order to make the statements made therein, in light
of the circumstances under which they were made, not misleading.
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ARTICLE 7
REGULATORY COMPLIANCE
7.1 BULK SALES COMPLIANCE. Recycling hereby waives compliance by Money
Point of the provisions of the bulk sales or bulk transfer law of the
Commonwealth of Virginia, subject to the indemnification provided in Section
12.2(a)(5).
7.2 COBRA. Money Point has complied in all material respects 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 its former
employees who became eligible for COBRA coverage on or before the Closing Date
and, under the provisions of COBRA, elected to continue to pay premiums for
insurance coverage under Money Point's health insurance plan. Subject to the
indemnification provided in Section 12.2(a)(9), RII Sub or the Parent will
assume Money Point's obligations related to the provision of COBRA coverage, in
the sole discretion of RII Sub and the Parent either through coverage under
Money Point's health insurance plan as in effect on the Closing Date or under
the Parent's health insurance plan; PROVIDED, THAT, the premiums are timely paid
by the former employees of Money Point.
Notwithstanding anything in this Agreement or any of the other
Transaction Documents to the contrary, neither RII Sub nor the Parent will
assume any liabilities related to COBRA benefits administered or COBRA claims
paid or arose on or prior to the Closing Date.
7.3 OTHER. The parties shall prepare and promptly file all reports,
documents or notices with appropriate regulatory or other governmental
authorities, as may be required of them.
ARTICLE 8
COVENANTS TO BE PERFORMED PRIOR TO THE CLOSING
The parties hereto covenant and agree that between the date hereof and the
Closing Date:
8.1 ENVIRONMENTAL STUDIES.
(a) Prior to the Closing Date, Money Point will deliver to Recycling
updated and current Phase I and Phase II Environmental Site Assessments and
Transaction Screen Process of the Owned Facilities and the Business prepared by
a mutually agreed upon environmental engineering firm, which shall be attached
hereto as SCHEDULE 8.1
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(the "Environmental Studies"). The costs of the Environmental Studies will be
paid by Money Point; PROVIDED, HOWEVER, that Recycling shall reimburse Money
Point for one-half of the costs if the Transaction is completed.
(b) The parties shall enter into a Environmental Escrow Agreement
substantially in the form attached as EXHIBIT C hereto. The Environmental
Escrow shall be funded solely with the Stock Consideration.
8.2 TITLE INSURANCE. Money Point has delivered to Recycling its most
recent title policy with respect to the Owned Facilities. Money Point will
cooperate with Recycling as necessary to allow it to obtain a title insurance
commitment, at RII Sub's expense in accordance with custom in the Commonwealth
of Virginia, including obligations to issue endorsements as may be required by
RII Sub, with respect to the Owned Facilities, using a current Commonwealth of
Virginia standard form of American Land Title Association Owner's Title
Insurance Commitment issued by a title insurer satisfactory to RII Sub in the
amount allocated by the parties on SCHEDULE 3.5 to the Owned Facilities,
insuring title to the Owned Facilities to be in RII Sub as of the Closing Date,
subject only to encumbrances, covenants, conditions, restrictions, reservations
and easements filed of record and such exceptions and exclusions as provided in
this Agreement as are acceptable to RII Sub. Such title commitment is to
contain a complete copy of each easement, restriction, limitation, or condition
of title which is referred to therein that burdens or benefits said real
property and shall insure against all possible contractors', suppliers' and
mechanics' lien claims. The costs and premium for the owner's policy of title
insurance, including the cost of any endorsements to the owner's policy of title
insurance which may be requested by Recycling and the cost of the mortgagee's
policy of title insurance shall be paid by RII Sub or the Parent.
8.3 SURVEY. Money Point has delivered to Recycling its most recent survey
with respect to the Owned Facilities. Money Point will cooperate with Recycling
to the extent necessary to allow Recycling to obtain an updated survey of the
Owned Facilities, at RII Sub's expense in accordance with custom in the
Commonwealth of Virginia, certified to RII Sub, any mortgagee of RII Sub, and
the title insurer issuing title insurance in the Transaction as provided in
Section 8.2, prepared by a licensed surveyor and conforming to Minimum Technical
Standards adopted by the Virginia Society of Professional Surveyors, disclosing
the location of all improvements, easements, party walls, sidewalks, roadways,
utility lines, setback requirements, and other matters customarily shown on such
surveys, and showing access affirmatively to public streets and roads.
8.4 ASSUMED CONTRACTS. Money Point will use its best efforts obtain the
written consent to the assumption by RII Sub of each of the Assumed Contracts
which require such consent.
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8.5 CONDUCT OF BUSINESS. After execution of this Agreement and continuing
up to the Closing, Money Point will:
(a) operate the Business only in the Ordinary Course and without
consent of RII Sub (which consent will not be unreasonably withheld or delayed),
will not (i) make any capital expenditures which individually are greater than
$25,000 or which in total aggregate more than $50,000 or (ii) enter into any
contract which is not terminable upon less than 60 days notice;
(b) provide prompt notice to RII Sub of any material change, including
but not limited to the institution of legal proceedings by or against Money
Point; and
(c) provide Recycling with such additional financing and other
information as may be reasonably requested by Recycling and available to Money
Point without undue expense.
8.6 PRESERVATION OF BUSINESS. Money Point shall exert reasonable efforts
in the Ordinary Course 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. Money Point will provide to RII Sub a
mailing list of all customers whose annual purchases from the Business were
$25,000 or more either in the year ended December 31, 1996 or during 1997 to
date, and a listing of their accounts on the Closing Date to permit RII Sub to
send announcements to the customers after the Closing Date.
8.7 NOTICE OF EVENTS. Money Point and the Shareholders shall promptly
notify RII Sub 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 material 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 Money
Point or the Shareholders materially misleading.
8.8 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, Recycling shall be entitled, upon
prior reasonable written notice to Money Point, through its 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 Recycling deems necessary. No review, examination
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or investigation by Recycling shall diminish or obviate any of the
representations, warranties, covenants or agreements of Money Point and the
Shareholders under this Agreement.
(b) Recycling will treat and hold any information or documents
obtained from Money Point concerning the Business or the Money Point Assets as
confidential and will not use any of such confidential information except in
connection with this Agreement. If this Agreement is terminated for any reason
whatsoever, Recycling will return to Money Point all tangible embodiments (and
all copies) of such confidential information which are in its possession. In
the event Recycling is requested or required (by oral question or request for
information or documents in any legal proceeding, interrogatory, subpoena, civil
investigation, demand, or similar process), to disclose any such confidential
information, Recycling will notify Money Point promptly of the request so that
Money Point may seek an appropriate protective order or waive compliance with
the provisions of this Section 8.8(b). If, in the absence of a protective order
or the receipt of a waiver hereunder, Recycling is, on the advice of counsel,
compelled to disclose any confidential information to any tribunal or else stand
liable for contempt, Recycling may disclose such information to the tribunal;
provided, however, that Recycling shall use its best efforts to obtain, at the
reasonable request of Money Point, an order or other assurance that confidential
treatment will be accorded to such portion of such information required to be
disclosed as Money Point shall designate. For purposes of this Section 8.8(b),
the term "confidential information" shall not include information and
documentation that (i) was already known to Recycling or its representatives or
available to Recycling on a non-confidential basis when received, (ii) hereafter
becomes lawfully obtainable from other sources, or (iii) is disclosed by Money
Point or the Shareholders in any document filed with a government agency or
authority and available for public inspection.
8.9 NO NEGOTIATION BY MONEY POINT OR THE SHAREHOLDERS. Between the date
hereof and the earlier of (1) the Closing Date; and (2) the date of termination
of this Agreement, neither the Shareholders nor Money Point shall, directly or
indirectly:
(a) Solicit, initiate or encourage the submission of inquiries,
proposals or offers from any Person (other than Recycling) relating to any
acquisition or purchase of assets (other than sales of Inventory in the Ordinary
Course) of, or any equity interest in, the Money Point Assets or any exchange
offer, merger, consolidation, purchase of assets, liquidation, dissolution or
similar transaction involving the Money Point 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 Recycling
and its representatives) any information with respect to the Money Point Assets,
other than in the Ordinary Course of Business; or
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(c) Otherwise cooperate in any way with, or assist or participate in,
facilitate or encourage, any effort or attempt by any Person (other than
Recycling) to do or seek any of the foregoing.
Money Point and the Shareholders will notify Recycling 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.
8.10 REMOVAL OF WASTE MATERIALS. Money Point shall remove, at its cost,
all trash, fluff (other than that which constitutes or is included in the
Unprepared Inventory), tires and any other similar waste materials from the
Owned Facilities prior to the Closing.
ARTICLE 9
CONDITIONS PRECEDENT TO THE OBLIGATION
OF RECYCLING TO CLOSE
The obligation of Recycling to enter into and to complete the Transaction
is subject to the fulfillment on or prior to the Closing Date (or such earlier
date as is set forth in this Agreement) of the following conditions, any one or
more of which may be waived by Recycling only in writing:
9.1 REPRESENTATIONS, WARRANTIES AND OTHER AGREEMENTS. The
representations, warranties and other agreements of Money Point and the
Shareholders contained in this Agreement shall be true, correct and complete in
all material respects on and as of the Closing Date, with the same force and
effect as though made on and as of the Closing Date. Money Point and the
Shareholders shall have performed and complied in all material respects with all
covenants and agreements required by this Agreement to be performed or complied
with by them on or prior to the Closing Date. Money Point and the Shareholders
shall have delivered to Recycling 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 and all shall have been transferred to the
name of RII Sub.
9.3 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 the parties of their respective obligations under this
Agreement or the continuance of any Assumed Contracts or other agreements
without material modification after the Closing Date shall have been obtained.
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9.4 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 the Transaction, or that has or could reasonably be expected to
have a Material Adverse Effect on the Money Point Assets or the Business.
9.5 REAL PROPERTY. RII Sub shall receive good and insurable title by
special warranty deed for the Owned Facilities in proper form for recording in
the Commonwealth of Virginia and the Owned Facilities shall be free and clear of
any Security Interest (other than those to be discharged at Closing pursuant to
Section 3.1(a)(3)), but subject to (i) installments of special assessments not
yet delinquent, (ii) covenants, conditions, restrictions, reservations and
easements filed of record, (iii) matters shown by the survey and title policy
contemplated by Sections 8.3 and 8.2, and (iv) other restrictions which do not
impair the current use or occupancy, or the marketability of title, of the
property subject thereto.
9.6 NO MATERIAL ADVERSE CHANGE. There shall be no material adverse change
in the business, financial condition or results of operations of Money Point.
9.7 SUBSCRIPTION AGREEMENT. The Parent shall have received from Money
Point the Subscription Agreement for the Consideration Stock in the form
attached hereto as EXHIBIT B.
9.8 TRANSFER DOCUMENTS. RII Sub shall have received assignments and such
other instruments of sale, transfer, conveyance and assignment transferring all
of the Money Point Assets from Money Point to RII Sub, each in proper legal form
to transfer the Money Point assets under applicable law.
9.9 LEGAL OPINION. Recycling shall have received from legal counsel to
Money Point in the form attached hereto as EXHIBIT D.
9.10 ENVIRONMENTAL ESCROW AGREEMENT. RII Sub shall have received from
Money Point the Environmental Escrow Agreement in the form attached hereto as
EXHIBIT C.
9.11 ASSIGNMENT OF CONTRACTS. Money Point shall have delivered to RII Sub
written consents to the assignment or assumption of each of the Assumed
Contracts as provided by Section 8.4 to the extent such consents are required by
the terms of the Assumed Contracts.
9.12 SATISFACTION WITH DUE DILIGENCE, FINANCIAL PERFORMANCE AND APPROVAL.
Recycling shall be satisfied, in its reasonable discretion, with (a) the results
of its legal, accounting and financial due diligence investigation of Money
Point and its operations,
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including, without limitation, the results of the Environmental Studies, and (b)
Money Point's financial performance up to the Closing Date. Further, the terms
and conditions of this Agreement shall have been approved by Recycling's senior
management, its Board of Directors, and the Lender, each in their sole
discretion.
9.13 EMPLOYMENT AGREEMENTS. In order to allow for a smooth transition in
ownership of business, RII Sub or Parent shall have entered into employment or
consulting agreements with Ginsburg and Prakash S. Talreaja in the forms
attached as EXHIBIT E.
9.14 NON-COMPETITION AGREEMENTS. Recycling shall have received from George
Ginsburg and Russell Baer, executed Non-Competition Agreements in the forms
attached as EXHIBIT F.
9.15 CERTIFICATES, ETC. OF SHAREHOLDERS AND MONEY POINT. The Shareholders
and Money Point shall have delivered all certified resolutions, certificates,
documents or instruments with respect to Money Point's authority and such other
matters as RII Sub's and the Parent's counsel may have reasonably requested
prior to the Closing Date.
9.16 PAYMENT OF SALES OR USE TAXES BY MONEY POINT. Money Point shall have
paid all sales or use taxes, payable under the laws of the Commonwealth of
Virginia, as a result of the completion of the Transaction.
9.17 APPROVAL OF COUNSEL TO RECYCLING. All actions and proceedings
hereunder and all documents or other papers required to be delivered by Money
Point 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 Recycling, as to their form, which
approval shall not be unreasonably withheld or delayed.
ARTICLE 10
CONDITIONS PRECEDENT TO THE OBLIGATION OF MONEY POINT
AND SHAREHOLDERS TO CLOSE
The obligations of Money Point and the Shareholders 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 Money Point and the
Shareholders only in writing:
10.1 REPRESENTATIONS, WARRANTIES AND OTHER AGREEMENTS. The
representations, warranties and other agreements of Recycling contained in this
Agreement shall be true, correct and complete in all material respects on and as
of the Closing Date with the same force and effect as though made on and as of
the Closing Date. Recycling shall have
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performed and complied, in all material respects, with all covenants and
agreements required by this Agreement to be performed or complied with by it on
or prior to the Closing Date. Recycling shall have delivered to Money Point
certificates, dated the Closing Date, to such effect.
10.2 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.
10.3 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 the parties of their respective obligations under this
Agreement or the continuance of any Assumed Contracts without material
modification after the Closing Date shall have been obtained.
10.4 NO MATERIAL ADVERSE CHANGE. There shall be no material adverse change
in the business, financial condition or results of operations of RII Sub or the
Parent on a consolidated basis.
10.5 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 the Transaction, or that has or could reasonably be expected to
have a Material Adverse Effect on the assets, properties, businesses, operations
or financial condition of RII Sub or the Parent.
10.6 SATISFACTION WITH DUE DILIGENCE. Money Point shall be satisfied, in
its reasonable discretion with the results of its due diligence investigation of
Recycling.
10.7 DESIGNATION OF STOCK CONSIDERATION. There shall have been delivered
to Money Point and the Shareholders a certified copy of the Certificate of
Designations, Rights and Preferences of the Parent Series E Preferred Stock.
10.8 LEGAL OPINION. Money Point shall receive an opinion from counsel to
the Parent in the form attached hereto as EXHIBIT G.
10.9 THE PURCHASE PRICE. RII Sub and the Parent shall have paid to Money
Point the full Purchase Price for the Money Point Assets and executed and
delivered all documents related thereto.
10.10 ASSUMPTION OF ASSUMED CONTRACTS. Money Point shall have received
RII Sub's signed Assignment and Assumption Agreement related to the Assumed
Contracts.
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10.11 ENVIRONMENTAL ESCROW AGREEMENT. Money Point and the Shareholders
shall have received from RII Sub the Environmental Escrow Agreement in the form
attached hereto as EXHIBIT C.
10.12 EMPLOYMENT AGREEMENTS. RII Sub or Parent shall have entered into
employment agreements with George Ginsburg and Prakash S. Talreaja in the forms
attached as EXHIBIT E.
10.13 APPROVAL OF COUNSEL TO MONEY POINT AND THE SHAREHOLDERS. All
actions and proceedings hereunder and all documents or other papers required to
be delivered by RII Sub and the Parent hereunder or in connection with the
completion of the Transaction, and all other related matters shall have been
approved by Kaufman & Canoles, P.C., counsel to Money Point and the Shareholders
as to their form, which approval shall not be unreasonably withheld or delayed.
ARTICLE 11
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:
11.1 TRANSFER DOCUMENTS. Money Point shall deliver duly executed transfer
documents and/or instruments of assignment, including without limitation a Bill
of Sale.
11.2 ASSIGNMENT AND ASSUMPTION AGREEMENT. Money Point shall deliver any
required written consents to the assumption by RII Sub of the Assumed Contracts
and Money Point and Recycling will enter into an assignment and assumption
agreement with respect to such Assumed Contracts.
11.3 THE PURCHASE PRICE. RII Sub shall deliver to Money Point the Purchase
Price.
11.4 SUBSCRIPTION AGREEMENT. Money Point shall deliver to the Parent the
Subscription Agreement.
11.5 NON-COMPETITION AGREEMENTS. George Ginsburg and Russell Baer shall
deliver to RII Sub and the Parent their duly executed Non-Competition
Agreements.
11.6 EMPLOYMENT AGREEMENTS. RII Sub and Ginsburg and RII Sub and Prakash
S. Talreaja shall enter into employment agreements for continuation of
employment of Ginsburg and Prakash S. Talreaja following the Closing.
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11.7 ENVIRONMENTAL ESCROW AGREEMENT. RII Sub, Money Point and the
Shareholders shall enter into the Environmental Escrow Agreement with a third
party escrow agent and the Stock Consideration shall be delivered into the
Environmental Escrow created thereby.
11.8 CLOSING ON REAL PROPERTY. Immediately prior to the Closing, the
documents set forth below in subsections (a) through (d) shall have been duly
executed and delivered to Lawyer's Title and Lawyer's Title shall conduct the
Closing as it relates to the purchase of the Owned Facilities and shall deliver
to the appropriate parties the executed documents related thereto. All of the
documents delivered in connection with the sale and conveyance of the Owned
Facilities shall be deemed to be part of the "Transaction Documents" as defined
in Section 1.39.
(a) The Exchange Agreement, the Assignment, Acceptance and Notice -
Purchase Agreement and the Reassignment and Assumption Agreement and related
letters of instruction which are being entered into for the purpose of the FJ
Trust and the DJG Trust entering into a tax-deferred exchange as recognized
under IRC Section 1031.
(b) The special warranty deed for the Owned Facilities in proper form
for recording in the Commonwealth of Virginia, conveying the Owned Facilities to
RII Sub.
(c) The owner's Title Insurance Policy Commitment provided by Lawyer's
Title, including the list of endorsements to be issued in connection therewith.
(d) A funds flow statement (the "Funds Flow Statement") prepared
jointly by the attorneys for Recycling and Money Point at least one business day
prior to the Closing which shall detail the gross proceeds and all adjustments
related to allocation of expenses to the parties at the Closing.
11.9 CERTIFICATES OF MONEY POINT. Money Point shall deliver to RII Sub a
closing certificate dated the Closing Date, in a form reasonably satisfactory to
RII Sub, as contemplated by Section 9.1. Such certificate shall be signed on
behalf of Money Point by Ginsburg as President of Money Point.
11.10 CERTIFICATE OF THE SHAREHOLDERS. The Shareholders shall deliver
to RII Sub a closing certificate dated the Closing Date, in a form reasonably
satisfactory to RII Sub, as contemplated by Section 9.1.
11.11 CERTIFICATE OF RECYCLING. Recycling shall deliver to Money Point
certificates dated the Closing Date, in a form reasonably satisfactory to Money
Point, as contemplated by Section 10.1. Said certificate shall be signed on
behalf of Recycling by an executive officer of Recycling.
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11.12 LEGAL OPINION DELIVERED TO RECYCLING. Recycling shall have
received from Kaufman & Canoles, P.C., legal counsel to Money Point and the
Shareholders, the legal opinion required by Section 9.9.
11.13 LEGAL OPINION DELIVERED TO MONEY POINT AND THE SHAREHOLDERS.
Money Point and the Shareholders shall have received from Friedlob Sanderson
Raskin Paulson & Tourtillott, LLC, counsel to RII Sub and the Parent, the legal
opinion required by Section 10.8.
11.14 TITLES TO VEHICLES. Money Point shall deliver to RII Sub duly
executed assignments of titles to all vehicles included in the Money Point
Assets free and clear of any Security Interests, other than vehicles leased
pursuant to Assumed Contracts.
ARTICLE 12
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
12.1 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 Sections 4.5 and
5.9, which shall survive for a period of time which is equal to the statute of
limitations period applicable to the respective Tax liability or liability under
the Hart-Scott-Rodino Act or similar state law being asserted.
12.2 INDEMNITY AGREEMENTS OF MONEY POINT AND THE SHAREHOLDERS.
(a) Money Point and the Shareholders, jointly and severally, shall
indemnify, defend, reimburse and hold harmless RII Sub 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 or
warranty or nonfulfillment of any covenant on the part of Money Point or the
Shareholders contained in this Agreement;
(2) any misrepresentation in or omission from or nonfulfillment
of any covenant on the part of Money Point or the Shareholders contained in any
Transaction Document furnished to RII Sub or the Parent by Money Point or the
Shareholders;
(3) all federal, state, county, local, foreign and other taxes,
including income taxes, excise taxes, sales taxes, use taxes, gross receipts
taxes, franchise
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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 Money Point or the Shareholders relating to
the Business through the Closing Date which are not paid by either Money Point
or the Shareholders and which RII Sub or the Parent pays;
(4) any and all negligence claims relating to the Business or the
Money Point Assets arising out of occurrences and events prior to the Closing
Date;
(5) the failure of Money Point or the Shareholders to comply with
the bulk sales or bulk transfer laws of the Commonwealth of Virginia;
(6) any liability of Money Point not expressly assumed by RII
Sub;
(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 by Money Point prior to the
Closing Date unless subsequently modified by RII Sub in a manner which renders
the product to be infringing;
(8) any liabilities to employees of the Business that arise as a
result of actions of Money Point prior to the Closing Date;
(9) any liabilities which RII Sub or Parent or the insurer of the
Parent's medical insurance plan incurs on or after the Closing as a result of
Money Point's administration of Money Point's COBRA obligations prior to the
Closing, as contemplated under Section 7.2;
(10) any liabilities, including any costs, taxes or penalties
incurred by Recycling as a result of RII Sub or Parent adopting and continuing
Money Point's 401(k) Plan as provided in Section 14.6(a), to the full extent
that such liabilities are attributable to the operation or documentation of
Money Point's 401(k) Plan prior to RII Sub or Parent's adoption of such plan;
and
(11) reasonable fees and disbursements of counsel incident to any
of the foregoing.
Notwithstanding anything in this Section 12.2(a) to the contrary, no
indemnification claim which could have been asserted by Recycling under Sections
12.2(a)(1) or 12.2(a)(2), but for materiality or Knowledge qualifiers may be
asserted under Sections 12.2(a)(3) through 12.2(a)(8).
(b) ENVIRONMENTAL INDEMNITY. Money Point and the Shareholders,
jointly and severally, shall indemnify, defend, reimburse and hold harmless
Recycling from and
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against any and all claims, demand, penalties, fines, liabilities, obligations,
losses, settlements, damages, costs and expenses actually incurred by Recycling
that are the result of (i) the violation by Money Point or the Shareholders of
any Environmental Laws or any orders, requirements, or demands of any
governmental authorities related thereto or (ii) any Environmental Liabilities
arising under Environmental Laws, in each case related to events or
circumstances of, involving, relating or affecting in any manner whatsoever
Money Point, the Business, the Money Point Assets, the Shareholders or other
parties from whom Money Point or the Shareholders assumed or are otherwise
responsible for their liabilities (including The Union Corporation and Robert O.
Copeland and others, if any, as disclosed in SCHEDULE 4.15) occurring on or
before the Closing Date (collectively, "Environmental Claims"), subject to the
following limitations and conditions:
(1) REPRESENTATIONS AND WARRANTIES. For those Environmental
Claims resulting from an inaccuracy in or breach by Money Point or the
Shareholders of any representation or warranty contained in this Agreement, or
from a breach by Money Point or the Shareholders of any covenant contained in
this Agreement if such inaccuracy or breach relates to Environmental Laws or
Environmental Liabilities, Money Point and the Shareholders shall indemnify
Recycling for such Environmental Claims; PROVIDED, HOWEVER, that the
indemnification obligations pursuant to this subsection shall terminate three
years after the Closing Date except with respect to claims under this subsection
(1) which have been asserted, whether or not resolved.
(2) DISCLOSED/ON-SITE. For those Environmental Claims identified
in the Environmental Studies, or which have otherwise been disclosed to
Recycling in writing in this Agreement or the Exhibits or Schedules hereto, and
which involve matters or conditions at or about the Owned Facilities, the sole
and exclusive remedy of Recycling shall be as provided in the Environmental
Escrow Agreement; PROVIDED, HOWEVER, that Recycling's sole and exclusive remedy
under this subsection (2) shall be the Stock Consideration; and, PROVIDED
FURTHER, THAT the indemnification obligations pursuant to this subsection (2)
shall terminate three years after the Closing Date except with respect to claims
under this subsection which have been asserted, whether or not resolved.
(3) DISCLOSED/OFF-SITE. For those Environmental Claims
identified in the Environmental Studies or which are otherwise identified on
SCHEDULE 12.2(b)(3) have otherwise been disclosed in writing to Recycling in
this Agreement or the Exhibits or Schedules thereto, and which involve matters
or conditions off-site from the Owned Facilities, Money Point and the
Shareholders shall indemnify Recycling for such Environmental Claims.
(4) UNKNOWN/ON-SITE. For those Environmental Claims involving
matters or conditions on or about the Owned Facilities of which Money Point and
the Shareholders had no Knowledge on the Closing Date, Money Point and the
Shareholders shall indemnify Recycling for 50% of such Environmental Claims;
PROVIDED, HOWEVER, that
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Recycling's sole and exclusive remedy under this subsection (4) shall be the
Stock Consideration; and, PROVIDED FURTHER, THAT the indemnification obligations
pursuant to this subsection (4) shall terminate three years after the Closing
Date except with respect to claims under this subsection which have been
asserted, whether or not resolved.
(5) UNKNOWN/OFF-SITE. For those Environmental Claims involving
matters or conditions off-site from the Owned Facilities of which Money Point
and the Shareholders had no Knowledge on the Closing Date, Money Point and the
Shareholders shall indemnify Recycling for such Environmental Claims; PROVIDED,
HOWEVER, that Recycling's sole and exclusive remedy under this subsection (5)
shall be the Stock Consideration; and, PROVIDED FURTHER, THAT the
indemnification obligations pursuant to this subsection (5) shall terminate
three years after the Closing Date except with respect to claims under this
subsection which have been asserted, whether or not resolved.
Recycling acknowledges and agrees that its sole and exclusive remedy with
respect to the Environmental Claims shall be as set forth in this Section
12.2(b) and the terms and conditions of Section 12.2(a) shall not apply with
respect to any Environmental Claim.
12.3 INDEMNITY AGREEMENT OF RII SUB AND THE PARENT. RII Sub and the Parent
shall jointly and severally indemnify, defend, reimburse and hold harmless Money
Point and the Shareholders from and against:
(a) any and all claims, demands, penalties, fines, liabilities,
obligations, losses, settlements, damages, costs and expenses pertaining to the
Money Point 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 RII Sub or the Parent
contained in this Agreement;
(2) any misrepresentation in or omission from or nonfulfillment
of any covenant on the part of RII Sub or the Parent contained in any
Transaction Document furnished or to be furnished to Money Point by RII Sub or
the Parent pursuant to this Agreement;
(3) any Liability of Money Point arising out of the Assumed
Contracts;
(4) any Environmental Claim in excess of the amount or beyond the
time limitations for which Recycling is entitled to indemnification pursuant to
Sections 12.2(b)(2), 12.2(b)(4) and 12.2(b)(5), and any Environmental Claims
which are the result of events, actions, occurrences or the operation of the
Business after the Closing Date other than those Environmental Claims
encompassed by Section 12.2(b)(3);
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(5) 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 by Recycling after the
Closing Date;
(6) any liabilities to employees of the Business that arise as a
result of actions of RII Sub or the Parent after the Closing Date;
(7) any and all Liabilities relating to the Business or the Money
Point Assets arising out of occurrences and events after the Closing Date;
(8) 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 RII Sub relating to the Business
after the Closing Date which are not paid RII Sub or the Parent and which Money
Point or the Shareholders pay;
(9) any and all negligence claims relating to the Business or the
Money Point Assets arising out of occurrences and events after the Closing Date;
and
(10) reasonable fees and disbursement of counsel incident to any
of the foregoing.
Notwithstanding anything in this Section 12.3 to the contrary, no
indemnification claim which could have been asserted by Money Point or the
Shareholders under Sections 12.3(a)(1) or 12.3(a)(2), but for materiality or
Knowledge qualifiers may be asserted under Sections 12.3(a)(3) through
12.3(a)(9).
12.4 INDEMNIFICATION PROCEDURE FOR THIRD PARTY CLAIMS.
(a) NOTICE OF CLAIM AND DEFENSE.
(1) The party seeking indemnification under this Article 12 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 12.2 or Section 12.3,
and the party obligated to indemnify will undertake the defense thereof by
representatives chosen by the party obligated to indemnify but reasonably
acceptable to the party seeking indemnification.
(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
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obligated to indemnify to assume the defense of such claim at any time prior to
settlement, compromise or final determination thereof.
(1) PAYMENT OF SUMS DUE. After any final, non-appealable
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.
(2) In no event will the party seeking indemnification consent
to the entry of any judgment or enter into any settlement with respect to any
third party claim without the prior written consent of the party obligated to
indemnify, which consent shall not be unreasonably withheld or delayed.
12.5 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.
12.6 FEES AND EXPENSES. Notwithstanding any other provision in this
Article 12, but subject to the limitations on indemnification obligations
provided in Section 12.2(b) and Section 12.8, 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 12.5.
12.7 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
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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 12.
12.8 INDEMNIFICATION OBLIGATIONS DEDUCTIBLE. With respect to
indemnification claims other than for Environmental Claims, notwithstanding
anything in this Article 12 to the contrary, Money Point shall not have the
obligation to indemnify Recycling, and Recycling shall not have the obligation
to indemnify Money Point: (i) until the indemnified party has suffered claims,
demands, penalties, fines, liabilities, obligations, losses, settlements,
damages, costs and expenses in excess of a $75,000 aggregate deductible (after
which point the indemnifying party will only have indemnification obligations in
excess of such deductible).
12.9 ADJUSTMENTS. The parties shall make appropriate adjustments for tax
benefits and insurance coverage, to the extent actually received, in determining
the extent to which a party is obligated to indemnify under this Article 12.
12.10 EXCLUSIVE REMEDY. The parties acknowledge and agree that the
foregoing indemnification provisions in this Article 12 shall be the exclusive
remedy of the parties with respect to each other and the Transaction.
ARTICLE 13
TERMINATION OF AGREEMENT
13.1 TERMINATION. This Agreement may be terminated prior to or on the
Closing Date as follows:
(a) At the election of RII Sub 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 Recycling to close has not been fulfilled as of the Closing
Date or such earlier date as provided in the applicable provision; or, if Money
Point or the Shareholders has breached any material representation or warranty,
or failed to perform any material covenant or agreement contained in this
Agreement PROVIDED, HOWEVER, Money Point and the Shareholders shall have, at the
election of Money Point and the Shareholders, at least 15 days' notice to cure
any such breach and the Closing Date shall be extended by each day of such cure
period.
(b) At the election of Money Point or the Shareholders at any time
prior to Closing if:
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(1) any one or more of the material conditions precedent to the
obligation of Money Point and the Shareholders to close has not been fulfilled
as of the Closing Date;
(2) Money Point is unable to obtain any required consent to the
assignment of any of the Assumed Contracts and such failure would constitute a
breach of the Assumed Contract; or
(3) RII Sub or the Parent has breached any material
representation or warranty, or failed to perform any material covenant or
agreement contained in this Agreement; provided, however, RII Sub and the Parent
shall have at least 15 days' notice to cure any such breach, except that in no
event shall Closing Date be extended by virtue thereof.
(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.
(e) At any time after December 31, 1997, time being of the essence,
unless extended pursuant to Section 3.6, at the election of Money Point or
Recycling.
13.2 SURVIVAL. If this Agreement is terminated pursuant to Section 13.1,
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.
ARTICLE 14
CERTAIN ADDITIONAL AGREEMENTS
14.1 PUBLIC STATEMENTS; CONFIDENTIALITY OF INFORMATION.
(a) No party will make any public disclosure (including, without
limitation, disclosure to Money Point's employees or customers) of this
Agreement, the Acquisition, the Purchase Price or the other terms and conditions
of the Transaction without the prior
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written 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.
(b) Subject to the Parent's obligation as a public company to issue
appropriate public announcements of material events, and subject to this Section
14.1 hereof, each party will maintain the confidentiality of all non-public
information obtained from any other party.
(c) Notwithstanding anything in this Agreement to the contrary, the
Environmental Studies and Remediation Estimate described in this Agreement under
Section 8.1 above, shall remain confidential and Recycling shall not make any
disclosures of these studies or estimates to any Person (other than its legal
counsel, independent accountants and lenders) without the prior written approval
of Money Point.
14.2 REASSIGNMENT OF MONEY POINT RECEIVABLES. On the 65th day after the
Closing Date, RII Sub shall have the right to reassign to Money Point any or all
of the Money Point Receivables which have not been collected within 60 days of
the Closing as provided in Section 4.10. Such reassignment shall only occur
upon delivery of documentation reasonably acceptable to Money Point which
transfers all right, title and interest in the Money Point Receivables to Money
Point. RII Sub agrees not to compromise any Money Point Receivable and to use
commercially reasonable efforts to collect the Money Point Receivables during
the 60 day period, but shall not be required to engage a collection agent or
commence arbitration or litigation to collect. Within 15 days after
reassignment of any of Money Point Receivables under this provision, Money Point
shall reimburse RII Sub dollar-for-dollar for the Money Point Receivables so
reassigned with such payment being made in immediately available funds.
14.3 EXPENSES; SALES TAX. 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 completion
of the Transaction whether or not the Transaction is completed. Money Point
shall pay all sales or use taxes, payable under the laws of the Commonwealth of
Virginia, as a result of the Transaction; PROVIDED, HOWEVER, that Recycling
shall pay all sales, retitling or other taxes assessable by the Virginia
Department of Motor Vehicles with respect to the Transaction.
14.4 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.
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14.5 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
automatic confirmation has been received, addressed in each case as follows:
IF TO RII SUB OR THE PARENT:
Thomas J. Wiens, Chairman and CEO
Recycling Industries, Inc.
Recycling Industries of Virginia, Inc.
384 Inverness Drive South, Suite 211
Englewood, Colorado 80112
telephone: 303-790-7372
facsimile: 303-790-4252
WITH A COPY TO:
Gerald Raskin, Esq.
Mary M. Maikoetter, Esq.
Friedlob Sanderson Raskin Paulson & Tourtillott, LLC
1400 Glenarm Place, Suite 300
Denver, Colorado 80202
telephone: 303-571-1400
facsimile: 303-595-3970
IF TO MONEY POINT OR THE SHAREHOLDERS:
George B. Ginsburg, President
Money Point Diamond Corporation
Money Point Land Holding Corporation
4300 Buell Street
Chesapeake, VA 23324
telephone: 757-543-2066
facsimile: 757-543-6632
and
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Dorothy G. Jacobson, Trustee of
the FJ and DGJ Trusts
1741 Indian River Road
Virginia Beach, VA 23456
telephone: 757-721-5239
facsimile: c/o James G. Steiger, Esq., Kaufman & Canoles, P.C.
757-624-3169
WITH A COPY TO:
James G. Steiger, Esq.
Michael E. Barney, Esq.
Kaufman & Canoles, P.C.
P.O. Box 3037
Norfolk, VA 23514
telephone: 757-624-3234
facsimile: 757-624-3169
Any party may change its address by giving notice to every other party.
14.6 MONEY POINT 401(k) PLAN; MONEY POINT HEALTH INSURANCE COVERAGE. RII
Sub or Parent hereby agrees and covenants as follows.
(a) 401(k) PLAN. Subject to the indemnification provided in Section
12.2(a)(10), RII Sub or Parent shall assume sponsorship of Money Point's 401(k)
Plan on the Closing Date and shall continue sponsorship of such plan, and to
maintain the tax qualification of such plan, through the earlier of December 31,
1998 or the date on which RII Sub or Parent has in place a 401(k) plan in which
the former Money Point employees hired by RII Sub following the Closing are
eligible to participate. Neither RII Sub nor the Parent shall assume or
otherwise be responsible for liabilities resulting from any actions, mistakes or
claims of any nature related to Money Point's or its agent's establishment or
maintenance of the Money Point 401(k) Plan prior to the Closing Date. Money
Point will reimburse RII Sub or Parent the full amount of any "top-heavy minimum
contribution" (as defined in IRC Section 416) that RII Sub or Parent is required
to make to Money Point's 401(k) Plan for the 1997 Plan year, with reimbursement
being made within ten business days after RII Sub or Parent provides Money Point
with documentation of the amount it was required to pay as a "top-heavy minimum
contribution," if any.
(b) MONEY POINT MEDICAL INSURANCE PLAN. RII Sub shall continue Money
Point's Medical Insurance Plan, with Blue Cross Blue Shield, through December
31, 1997, for the former Money Point employees hired by RII Sub after the
Closing and RII shall pay the premiums for such continuing coverage to the same
extent Money Point paid such premiums prior to the Closing. Commencing at 12:01
a.m. on January 1, 1998, the former
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Money Point employees hired by RII Sub shall have continuing and uninterrupted
medical insurance coverage provided by the Parent's medical insurance carrier
without regard to any eligibility, waiting periods or any other requirements and
without any exclusion or limitation for preexisting conditions.
14.7 CONVERSION OF THE SERIES E PREFERRED STOCK AND ARRANGED SALE. At
least 30 days prior to the third year anniversary of the Closing Date, Money
Point and the Shareholders shall notify the Parent if they elect to retain the
shares of Parent Common Stock issuable upon automatic conversion of the Series E
Preferred Stock (the "Conversion Shares"). If Money Point and the Shareholders
elect to receive the Conversion Shares, upon delivery of the Conversion Shares
to them, the Parent will have no further obligation to Money Point or the
Shareholders with respect to the Conversion Shares other than piggy back
registration rights as provided for in the Subscription Agreement, which may
continue if the Conversion Shares are not eligible for resale under Rule 144(k)
of the rules and regulations under the 1933 Act.
If no such notice is given to the Parent in accordance with Section
14.5, the Parent shall use its best efforts to assist Money Point and the
Shareholders in selling the Conversion Shares within 30 days after the date of
conversion. If the assisted sale is completed within 30 days of the date of
conversion, the Parent will not be required to pay any interest. If the
assisted sale is not accomplished within 30 days after the date of conversion,
the Parent shall pay Money Point and the Shareholders interest from the date of
conversion, at the prime lending rate of its principal lender, payable monthly
within five days after the end of each month, with the first interest payment
being due within thirty five days after the date of conversion. Further, if the
arranged sale has not been accomplished by the 90th day after the date of
conversion, the interest rate shall be increased to one percent above the prime
lending rate of the Parent's primary lender commencing on the 91st day and
continuing at that rate until the assisted sale is accomplished. If the
assisted sale of the Conversion Shares does not yield proceeds of $3,000,000
(after adjustment for any Series E Preferred Shares disposed of under the
Environmental Escrow Agreement), the Parent shall pay to Money Point and the
Shareholders, as applicable, the shortage within ten business days after receipt
by the Parent of the notice of shortage. If the shortage is not paid within ten
business days after receipt by the Parent of the notice of shortage, the amount
of the shortage shall accrue interest at one percent above the prime lending
rate of the Parent's primary lender commencing on the 11th business day and
continuing at that rate until the shortage and all interest thereon is paid.
14.8 COVENANT TO PAY ALL UNASSUMED DEBTS. To the extent Money Point owes
debts to any third parties after the Closing other than the Assumed Liabilities,
which could affect the Money Point Assets, Money Point and the Shareholders
hereby covenant to pay such debts timely as they become due.
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14.9 FURTHER ASSURANCES. From and after the date of this Agreement, each
of the parties hereto will cooperate with each other and will use their best
efforts without undue cost to obtain all necessary waivers and consents from
third parties and to implement the transactions contemplated under this
Agreement and the other Transaction Documents. Money Point and the
Shareholders, at any time and from time to time on and after the Closing, upon
request by RII Sub 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 RII Sub or the Parent for the
better conveying, transferring, assigning, delivering, assuring and confirming
the Money Point Assets to RII Sub.
14.10 RETENTION OF/ACCESS TO BUSINESS RECORDS. For at least six years
following the Closing Date, Money Point shall retain all business records,
including tax records, related to the Money Point Assets or the Business which
are not delivered to RII Sub. During this period, from time to time on and
after the Closing, upon reasonable prior written request by RII Sub or the
Parent and without further consideration, Money Point shall provide RII Sub or
the Parent access to or copies of said business records. Likewise, for at least
six years following the Closing Date, RII Sub shall retain all business records
related to the Money Point Assets or the Business and, during this period, from
time to time on and after the Closing, upon reasonable prior written request by
Money Point or the Shareholders and without further consideration, RII Sub shall
provide Money Point or the Shareholders access to or copies of said business
records.
14.11 AUDIT BY RII SUB AND PARENT. For a period of five years after
the Closing, Money Point and the Shareholders shall give Parent and RII Sub'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.
14.12 ENTIRE AGREEMENT. This Agreement, including all Schedules and
Exhibits hereto, and the other Transaction 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. Any and all previous agreements, representations
and understandings between or among the parties regarding the subject matter
hereof, whether written or oral, are superseded by this Agreement. Each of the
Schedules and Exhibits to this Agreement are incorporated herein by this
reference and expressly made a part hereof.
14.13 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
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<PAGE>
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.
14.14 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.
14.15 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.
14.16 GOVERNING LAW. The interpretation and construction of this
Agreement, and all matters relating hereto, shall be governed by the internal
laws of the Commonwealth of Virginia, without regard to principles of conflicts
or choice of law, except that Colorado law shall govern the terms of the Stock
Consideration.
14.17 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 Commonwealth of Virginia
located in Norfolk, Virginia, the courts of the United States of America for the
Eastern District of Virginia, Norfolk 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
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<PAGE>
mail), postage prepaid, to the party against whom the action or proceeding is
brought at its address set forth in Section 14.5.
14.18 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.
14.19 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.
14.20 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.
14.21 CORPORATE AUTHORITY. The undersigned have executed this
Agreement with all requisite corporate authority.
[THE BALANCE OF THIS PAGE INTENTIONALLY LEFT BLANK]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused their names to be
hereunto subscribed, all as of the day and year first above written.
"RII SUB"
RECYCLING INDUSTRIES OF CHESAPEAKE, INC.
Dated: December 4, 1997 By /S/ LUKE F. BOTICA
--------------------------------------
Luke F. Botica, Vice Chairman
"PARENT"
RECYCLING INDUSTRIES, INC.
Dated: December 4, 1997 By /S/ LUKE F. BOTICA
--------------------------------------
Luke F. Botica, Vice Chairman
"MP HOLDING"
MONEY POINT LAND HOLDING CORPORATION
Dated: December 4, 1997 By /S/ GEORGE B. GINSBURG
--------------------------------------
George B. Ginsburg, President
"MP DIAMOND"
MONEY POINT DIAMOND CORPORATION
Dated: December 4, 1997 By /S/ GEORGE B. GINSBURG
--------------------------------------
George B. Ginsburg, President
"GINSBURG"
Dated: December 4, 1997 /S/ GEORGE B. GINSBURG
----------------------------------------
George B. Ginsburg
"FJ TRUST"
Dated: December 4, 1997 By /S/ DOROTHY G. JACOBSON
--------------------------------------
Dorothy G. Jacobson, Trustee of the
Fred Jacobson Revocable Trust
"DGJ TRUST"
Dated: December 4, 1997 By /S/ DOROTHY G. JACOBSON
--------------------------------------
Dorothy G. Jacobson, Trustee of the
Dorothy G. Jacobson Revocable Trust
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<PAGE>
LIST OF EXHIBITS
Exhibit A Certificate of Designations, Rights and Preferences of
the Series E Redeemable Convertible Preferred Stock of
Recycling Industries, Inc.
Exhibit B Form of Subscription Agreement
Exhibit C Environmental Escrow Agreement
Exhibit D Legal Opinion from Counsel to Money Point and the
Shareholders
Exhibit E Employment Agreements
Exhibit F Non-Competition Agreements
Exhibit G Legal Opinion from Counsel for RII Sub and Parent
-50-
<PAGE>
LIST OF SCHEDULES
SCHEDULE 1.2 Material Assumed Contracts
SCHEDULE 2.1(a) Owned Facilities - Legal Description
SCHEDULE 2.1(b) Equipment
SCHEDULE 2.1(f) Office Assets
SCHEDULE 2.1(h) Software for Computers and Scales
SCHEDULE 2.2 Excluded Assets under Subsections (b), (f) and (j)
SCHEDULE 3.1(a)(3) Payment and Release of Indebtedness
SCHEDULE 3.2 Accounts Receivable and Inventory Valuations
SCHEDULE 3.4 Bid Deposits
SCHEDULE 3.5 Allocation of Purchase Price
SCHEDULE 4.1(b) Jurisdictions in which MP Holding and MP Diamond are
qualified to transact business
SCHEDULE 4.2 Property Title Exceptions
SCHEDULE 4.3(c) Consents and Approvals
SCHEDULE 4.4 Money Point Financial Statements
SCHEDULE 4.5(d) Money Point State and Federal Income Tax Returns
SCHEDULE 4.6 Compliance with Laws
SCHEDULE 4.7 Permits
SCHEDULE 4.8 Litigation
SCHEDULE 4.9(a) Contracts and Other Agreements
SCHEDULE 4.11 Damage to Tangible Property
SCHEDULE 4.14(b) Leases, Etc. of Owned Facilities
SCHEDULE 4.15 Liabilities
SCHEDULE 4.16 Suppliers and Customers
SCHEDULE 4.17 Employee Benefit Plans
SCHEDULE 4.20 Insurance Policies
SCHEDULE 4.21 Certain Relationships
SCHEDULE 4.24 Employee Information
SCHEDULE 4.25 Environmental Matters
SCHEDULE 8.1 Environmental Studies
SCHEDULE 12.2(b)(3) Disclosed/Off-Site Environmental Claims
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<PAGE>
STOCK PURCHASE AGREEMENT
BY AND AMONG
RECYCLING INDUSTRIES, INC., a Colorado corporation
AND
WM. LANS SONS' CO. INC., an Illinois corporation
AND
BERTRAM LANS, BRUCE LANS AND SCOTT LANS, as Sellers
<PAGE>
December 8, 1997
1
<PAGE>
TABLE OF CONTENTS
Page
1. Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. Purchase and Sale of Stock . . . . . . . . . . . . . . . . . . . . 5
(a) Basic Transaction . . . . . . . . . . . . . . . . . . . . . 5
(b) Consideration . . . . . . . . . . . . . . . . . . . . . . . 5
(c) Adjustment to Purchase Price for Balance Sheet Changes. . . 6
(d) Adjustments to Purchase Price for Section 338 Election. . . 7
(e) Allocation of Purchase Price. . . . . . . . . . . . . . . . 8
(f) Real Estate . . . . . . . . . . . . . . . . . . . . . . . . 7
(g) The Closing . . . . . . . . . . . . . . . . . . . . . . . . 8
(h) Dispute Resolution. . . . . . . . . . . . . . . . . . . . . 8
(i) Deliveries at Closing . . . . . . . . . . . . . . . . . . . 8
3. Representations and Warranties of the Sellers. . . . . . . . . . . 9
(a) Authorization of Transaction. . . . . . . . . . . . . . . . 9
(b) Noncontravention. . . . . . . . . . . . . . . . . . . . . . 9
(c) Transfer of Shares. . . . . . . . . . . . . . . . . . . . .10
(d) Organization, Qualification and Corporate Power . . . . . .10
(e) S Corporation . . . . . . . . . . . . . . . . . . . . . . .10
(f) Capitalization. . . . . . . . . . . . . . . . . . . . . . .10
(g) Brokers' Fees . . . . . . . . . . . . . . . . . . . . . . .11
(h) Condition of Acquired Assets and Inventory. . . . . . . . .11
(i) Financial Statements. . . . . . . . . . . . . . . . . . . .11
(j) Liabilities . . . . . . . . . . . . . . . . . . . . . . . .11
(k) Events Subsequent to Most Recent Financial Statements . . .11
(l) Legal Compliance. . . . . . . . . . . . . . . . . . . . . .13
(m) Tax Matters . . . . . . . . . . . . . . . . . . . . . . . .13
(n) Real Property . . . . . . . . . . . . . . . . . . . . . . .14
(o) Intellectual Property . . . . . . . . . . . . . . . . . . .14
(p) Contracts . . . . . . . . . . . . . . . . . . . . . . . . .15
(q) Litigation. . . . . . . . . . . . . . . . . . . . . . . . .16
(r) Employee Benefit Plans. . . . . . . . . . . . . . . . . . .16
(s) Certain Business Relationships Concerning the Sellers . . .18
(t) Accounts Receivable . . . . . . . . . . . . . . . . . . . .18
(u) Labor Matters . . . . . . . . . . . . . . . . . . . . . . .18
(v) Environmental and Safety Matters. . . . . . . . . . . . . .19
(w) Insurance . . . . . . . . . . . . . . . . . . . . . . . . .19
(x) Product Liability . . . . . . . . . . . . . . . . . . . . .19
(y) Disclosure. . . . . . . . . . . . . . . . . . . . . . . . .20
i
<PAGE>
4. Representations and Warranties of the Buyer. . . . . . . . . . . .20
(a) Organization. . . . . . . . . . . . . . . . . . . . . . . .20
(b) Authorization of Transaction. . . . . . . . . . . . . . . .20
(c) Brokers' Fees . . . . . . . . . . . . . . . . . . . . . . .20
(d) Noncontravention. . . . . . . . . . . . . . . . . . . . . .20
(e) Securities Filings. . . . . . . . . . . . . . . . . . . . .21
(f) Corporate Documents . . . . . . . . . . . . . . . . . . . .21
5. Indemnification; Environmental Remediation . . . . . . . . . . . .21
(a) By Seller Parties . . . . . . . . . . . . . . . . . . . . .21
(b) Procedures. . . . . . . . . . . . . . . . . . . . . . . . .22
(c) Third Party Claims. . . . . . . . . . . . . . . . . . . . .22
(d) By Buyer. . . . . . . . . . . . . . . . . . . . . . . . . .23
(e) Limitations . . . . . . . . . . . . . . . . . . . . . . . .24
(f) Payment . . . . . . . . . . . . . . . . . . . . . . . . . .25
(g) Treatment of Indemnification. . . . . . . . . . . . . . . .26
(h) Environmental Remediation . . . . . . . . . . . . . . . . .26
(i) Indemnity With Respect to Certain Tax Matters . . . . . . .28
6. Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . . .29
7. Nonassignable Permits. . . . . . . . . . . . . . . . . . . . . . .29
(a) Sellers to Use All Reasonable Efforts . . . . . . . . . . .29
(b) If Waivers or Consents Cannot be Obtained . . . . . . . . .29
8. Arbitration. . . . . . . . . . . . . . . . . . . . . . . . . . . .30
9. Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . .30
(a) Press Releases and Public Announcements . . . . . . . . . .30
(b) No Third-Party Beneficiaries. . . . . . . . . . . . . . . .30
(c) Entire Agreement. . . . . . . . . . . . . . . . . . . . . .30
(d) Succession and Assignment . . . . . . . . . . . . . . . . .30
(e) Counterparts. . . . . . . . . . . . . . . . . . . . . . . .31
(f) Headings. . . . . . . . . . . . . . . . . . . . . . . . . .31
(g) Notices . . . . . . . . . . . . . . . . . . . . . . . . . .31
(h) Governing Law . . . . . . . . . . . . . . . . . . . . . . .32
(i) Amendments and Waivers. . . . . . . . . . . . . . . . . . .32
(j) Severability. . . . . . . . . . . . . . . . . . . . . . . .32
(k) Expenses. . . . . . . . . . . . . . . . . . . . . . . . . .32
(l) Construction. . . . . . . . . . . . . . . . . . . . . . . .33
(m) Incorporation of Exhibits and Schedules . . . . . . . . . .33
(n) Attorneys' Fees . . . . . . . . . . . . . . . . . . . . . .33
(o) Further Assurances. . . . . . . . . . . . . . . . . . . . .33
(p) Removal of Personal Items . . . . . . . . . . . . . . . . .34
ii
<PAGE>
Exhibit A -- Legal Description
Exhibit B -- Terms of Preferred Stock
Exhibit C -- Environmental Escrow Agreement
Exhibit D -- Allocation Schedule
Exhibit E -- Real Estate Purchase Agreement
Exhibit F -- Form of Opinion of Counsel to the Sellers
Exhibit G -- Form of Opinions of Counsel to the Buyer
Exhibit H -- Historical Financial Statements
Exhibit I -- Employment Agreement
iii
<PAGE>
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT is entered into as of December 8, 1997,
by and among Recycling Industries, Inc. ("Buyer"), Wm. Lans Sons' Co. Inc., an
Illinois corporation (the "Corporation"), Bertram Lans, Bruce Lans, and Scott
Lans, each an executive of the Corporation and collectively the holders of all
of the issued and outstanding capital stock of the Corporation (each a "Seller"
and collectively the "Sellers"). The Buyer, the Corporation, and the Sellers
are referred to collectively herein as the "Parties."
This Agreement contemplates a transaction in which Buyer will purchase
from the Sellers all of the issued and outstanding capital stock of the
Corporation (the "Stock"), thereby acquiring the Corporation's business, assets
and properties as a going concern.
Now, therefore, in consideration of the premises and the mutual
promises herein made, and in consideration of the representations, warranties
and covenants herein contained, the Parties agree as follows:
1. DEFINITIONS.
(a) "AFFILIATE" means, with respect to any Person, any other
Person directly or indirectly controlling, controlled by, or under direct or
indirect common control with, such Person. A Person shall be deemed to control
another Person if such first Person possesses, directly or indirectly, the power
to direct or cause the direction of the management and policies of such other
Person, whether through ownership of voting securities, by contract, or
otherwise.
(b) "BUSINESS" means the business and operations as conducted by
the Corporation on December 1, 1997, as a going concern.
(c) "BUYER INDEMNIFIED PARTIES" means the Buyer and its officers
and directors.
(d) "CASH" means cash and cash equivalents.
(e) "CERCLA" means the Comprehensive Environmental Response,
Compensation, and Liability Act, as it may be amended from time to time.
(f) "CLOSING" has the meaning set forth in section 2(g) below.
(g) "CODE" means the Internal Revenue Code of 1986, as amended.
(h) "CONFIDENTIAL INFORMATION" means any information pertaining
to the business, operations, marketing, customers, financing, forecasts and
plans concerning any of the Parties which is not generally known. Information
shall be treated
<PAGE>
as Confidential Information irrespective of its source or whether such
information has been marked "confidential" or in a similar manner.
(i) "DISCLOSURE SCHEDULE" has the meaning set forth in section 3
below.
(j) "EMPLOYEE BENEFIT PLAN" has the meaning set forth in section
3(r) below.
(k) "EMPLOYMENT AGREEMENTS" means the Employment Agreements to
be entered into at Closing by and between the Corporation and each of the
Sellers in the form attached hereto as Exhibit I.
(l) "ENVIRONMENTAL, HEALTH AND SAFETY LAWS" means all statutes,
regulations, ordinances, rules, codes, decrees of federal, state, and local law,
all judicial and administrative orders and determinations, and all common law
concerning worker health and safety or the pollution or protection of the
environment, including without limitation CERCLA, the Resource Conservation and
Recovery Act, the Clean Water Act, the Clean Air Act and the Occupational
Safety & Health Act, as in effect as of the date of this Agreement.
(m) "ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
(n) "FINANCIAL STATEMENT" has the meaning set forth in
section 3(i) below.
(o) "GAAP" means United States generally accepted accounting
principles as in effect as of the date of this Agreement.
(p) "HART-SCOTT-RODINO ACT" means the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended.
(q) "HAZARDOUS MATERIAL" shall mean 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 defined as a "hazardous
substance," "hazardous material," "hazardous waste", "pollutant" or
"contaminant" under any Environmental Law in effect as of the date of this
Agreement, and/or (c) which is toxic, explosive, corrosive, flammable,
infectious, radioactive, carcinogenic, mutagenic, or otherwise hazardous and is
regulated by any governmental authority under any Environmental Law in effect as
of the date of this Agreement, (d) the presence of which causes or which
reasonably could be expected to cause a nuisance or trespass upon real property
or to adjacent properties or poses or which reasonably could be expected to pose
a hazard to the environment, and/or (e) which contains urea-formaldehyde,
polychlorinated biphenyls, asbestos or asbestos containing materials, radon,
petroleum and petroleum products.
(r) "INDEBTEDNESS FOR BORROWED MONEY" means, with respect to any
Person at any date, without duplication: (i) all obligations of such Person for
<PAGE>
borrowed money or in respect of loans; (ii) all obligations of such Person
evidenced by bonds, debentures, notes or other similar instruments; (iii) all
obligations in respect of letters of credit, whether or not drawn, and bankers'
acceptances issued for the account of such Person; (iv) all lease liabilities of
such Person required to be capitalized under GAAP; (v) all interest rate
protection agreements of such Person (valued on a market quotation basis);
(vi) all obligations of such Person secured by a contractual lien; and (vii) all
guarantees of such Person in connection with any of the foregoing.
(s) "INTELLECTUAL PROPERTY" means (a) all inventions (whether or
not patentable and whether or not reduced to practice), all improvements thereto
and all patents, patent applications and patent disclosures, together with all
reissuances, continuations, continuations-in-part, revisions, extensions and
reexaminations thereof; (b) all trademarks, service marks, trade dress, logos,
trade names and corporate names, including without limitation the name "William
Lans Sons Company," or the name "Wm. Lans Sons' Co. Inc." together with all
translations, adaptations, derivations and combinations thereof and including
all goodwill associated therewith and all applications, registrations and
renewals in connection therewith; (c) all copyrightable works, all copyrights
and all applications, registrations and renewals in connection therewith;
(d) all mask works and all applications, registrations and renewals in
connection therewith; (e) all trade secrets and confidential business
information (including ideas, research and development, know-how, formulas,
compositions, manufacturing and production processes and techniques, technical
data, designs, drawings, specifications, customer and supplier lists, pricing
and cost information and business and marketing plans and proposals); (f) all
computer software (including data and related documentation) other than
non-customized software useful or necessary by the Corporation in the ordinary
course of business; (g) all other proprietary rights; and (h) all copies and
tangible embodiments in any of the foregoing (in whatever form or medium).
(t) "KNOWLEDGE" means actual knowledge of an individual without
any obligation to make a reasonable inquiry with respect to the matter in
question.
(u) "LEASED PREMISES" means the real property on which the
Business is conducted, which property is leased by the Corporation from Idal
Realty Company pursuant to a lease dated January 1, 1994.
(v) "MOST RECENT BALANCE SHEET" has the meaning set forth in
section 3(i) below.
(w) "MOST RECENT FINANCIAL STATEMENTS" has the meaning set forth
in section 3(i) below.
(x) "ORDINARY COURSE OF BUSINESS" means the ordinary course of
business consistent with past custom and practice of the Corporation.
(y) "PARTY" has the meaning set forth in the preface above.
(z) "PERSON" means an individual, a partnership, a limited
liability company, a corporation, an association, a joint stock company, a
trust, a joint
<PAGE>
venture, an unincorporated organization, or a governmental entity (or any
department, agency, or political subdivision thereof).
(aa) "PURCHASE PRICE" means the Purchase Price set forth in
section 2 below.
(bb) "REAL PROPERTY" means the real property on which the
Business is conducted, whether owned or leased from Idal Realty Company by the
Corporation, a legal description of which is attached hereto as Exhibit A,
together with all improvements thereon.
(cc) "REAL ESTATE PURCHASE AGREEMENT" means the Commercial
Contract to Buy and Sell Real Estate to be entered into at Closing by and
between Buyer and Idal Realty Company, an Affiliate of the Corporation, in the
form attached hereto as Exhibit E.
(dd) "RECEIVABLES" shall mean third-party receivables arising in
the Ordinary Course of Business of the Corporation.
(ee) "RCRA" shall mean the Resource Conservation and Recovery
Act, as in effect on the date of this Agreement.
(ff) "RELEASE" shall have the meaning set forth in CERCLA as in
effect on the date of this Agreement.
(gg) "SECURITY INTEREST" means any mortgage, pledge, lien,
encumbrance, charge, or other security interest.
(hh) "SELLERS INDEMNIFIED PARTIES" means the Sellers and their
heirs, agents, and representatives.
(ii) "TAX" OR "TAXES" means (A) any federal, state, local, or
foreign income, franchise or other tax, of any kind whatsoever, gross receipts,
sales, use, value added or alternative or added on minimum tax, including any
interest, penalty, or addition thereto, whether disputed or not; (B) the
liability of the Corporation for the payment of any amounts of the type
described in clause (A) as a result of any express or implied obligation to
indemnify or otherwise assume or succeed to the tax liability of any other
Person. Tax shall not include any duty or similar fee imposed by any federal,
state, local or foreign governmental agency.
(jj)(A) "Tax Equalization Payment" shall be, except as
modified below, with respect to each Seller, the amount of cash payment, if
any, by which (a) the amount of all Taxes (including reasonable attorneys'
fees and accounting fees incurred in connection with the determination and/or
defense of any such asserted Taxes) payable as a result of the Code Section
338(h)(10) election exceeds (b) the amount of state and federal income Taxes
that would have been payable by the Sellers if no Code Section 338(h)(10)
election were made and instead the portion of the Purchase Price received by
each Seller (excluding the portion thereof which is a Tax Equalization
Payment) was received for his stock in a transaction which was treated as a
taxable sale or exchange pursuant to Section <PAGE>
1001 of the Code; all as the foregoing amount is "grossed up" for the Taxes each
Seller will pay upon such amount, plus the Taxes each Seller must pay on such
"gross up" payment. Notwithstanding the foregoing, the parties agree that no
Tax Equalization Payment shall be due and payable hereunder as a result of and
to the extent that the allocations of the Purchase Price to the assets of the
Corporation as provided in Section 2(e) hereof and Exhibit D hereof do not
exceed $3,000,000 to the scrap inventory of the Corporation, or $500,000 to
replacement parts inventory of the Corporation.
(B) "Estimated Tax Equalization Payment" shall mean the
estimated amount, if any, of the Tax Equalization Payment paid to Seller at
Closing.
(kk) "TAX RETURN" means any return, declaration, report, claim
for refund, or information return or statement relating to Taxes, including any
schedule or attachment thereto.
2. PURCHASE AND SALE OF STOCK.
(a) BASIC TRANSACTION. On and subject to the terms and
conditions of this Agreement, Buyer agrees to purchase from each of the Sellers
and each of the Sellers agree to sell, transfer, convey and deliver to Buyer,
all of such Seller's Stock for the aggregate purchase price of $20,400,000 plus
the Tax Equalization Payment payable as specified in section (b) below (the
"Purchase Price") and subject to adjustment pursuant to sections (c) and (d)
below. Sellers' sale, conveyance, assignment and transfer of the Stock shall be
free and clear of all Liens other than Liens created or arising from actions
taken by Buyer.
(b) CONSIDERATION. The Purchase Price to be delivered to
the Sellers at the Closing, allocated among the Sellers in proportion to their
respective holdings of Stock as set forth in Schedule 2(b), shall be paid as
follows:
(i) CASH. Buyer shall pay to Sellers $16,900,000 in
Cash by wire transfer at the Closing consisting of $16,900,000 in Cash and $0
for the Estimated Tax Equalization Payment.
(ii) PREFERRED STOCK OF BUYER. Buyer shall deliver to
Reinhart, Boerner, Norris, Van Deuren & Rieselbach, P.C. as Escrow Agent
("Escrow Agent") 3,300 shares of Series I Preferred Stock of Buyer, with the
rights, preferences and designations as set forth on the Terms of Preferred
Stock attached hereto as Exhibit B, which terms will be incorporated into a
Certificate of Designation to be filed with the Colorado Secretary of State
immediately after Closing. The Preferred Stock shall be held by Escrow Agent
pursuant to the terms and conditions of the Environmental Escrow Agreement in
the form as attached hereto as Exhibit C.
(c) ADJUSTMENT TO PURCHASE PRICE FOR BALANCE SHEET CHANGES.
<PAGE>
(i) The parties hereby acknowledge that the Purchase
Price was established based upon the assumption that the Balance Sheet Values
(as defined below) would equal $4,000,000 at Closing. The Corporation's
accountant shall prepare and complete a balance sheet (the "Estimated Balance
Sheet") of the Corporation. The Estimated Balance Sheet shall be prepared in
accordance with accounting principles and conventions historically employed by
the Corporation in the preparation of its monthly balance sheets.
Notwithstanding Buyer's previous due diligence, the Purchase Price shall be
reduced at Closing on a dollar-for-dollar basis to the extent that the Balance
Sheet Values is less than $4,000,000. Such reduction shall be effectuated by a
corresponding reduction in the amount of shares of Preferred Stock that are
issued to Sellers pursuant to section (b)(ii) above. Similarly, the Purchase
Price shall be increased on a dollar-for-dollar basis at Closing to the extent
that the Balance Sheet Values exceeds $4,000,000. Buyer shall pay to Sellers
any such surplus in additional shares of Preferred Stock at Closing. For
purposes of this section, "Balance Sheet Values" shall mean (A) the sum of (i)
Total Current Assets and (ii) Total Other Assets less (B) the sum of (i) the
portion of long term investments related to the Partnership (as defined below);
(ii) Inventory, and (iii) Total Liabilities. All items shall be based upon the
Book Value as reflected on the Interim Balance Sheet.
(ii) POST CLOSING ADJUSTMENT. As soon as practicable,
but not later than 30 days after the Closing, Sellers' accountants shall
prepare, complete, and deliver to the Buyer and Sellers a balance sheet of the
Corporation in accordance with accounting principles and conventions
historically employed by the Corporation in the preparation of its monthly
balance sheets (the "Closing Balance Sheet") as of the Closing Date. Thereupon,
within 30 days of receipt of the Closing Balance Sheet, the Buyer and Sellers
shall meet in an attempt to stipulate to any adjustment to the Closing Balance
Sheet. To the extent that the Balance Sheet Values as shown on the Closing
Balance Sheet are not the same as the Balance Sheet Values as shown on the
Estimated Balance Sheet and as agreed to by Buyer and Sellers, the Purchase
Price shall be further reduced or increased by on a dollar-for-dollar basis to
the extent of such deficit or surplus, respectively. Such agreed-to reduction
or increase shall be effectuated by a corresponding reduction or increase in the
number of shares of Preferred Stock that are issued to Sellers pursuant to
section (b)(ii) above. If within 30 days after the Closing, the parties cannot
agree on the Closing Balance Sheet, the dispute shall be resolved as provided in
section 2(h).
(d) ADJUSTMENT TO PURCHASE PRICE FOR SECTION 338 ELECTION.
(i) Sellers and Buyer shall jointly execute an
election pursuant to Section 338(h)(10) of the Code and any comparable election
required to effect such similar election for state and local Tax purposes, if
applicable, with the transactions contemplated herein. Sellers and Buyer agree
not to take any action before or after the Closing inconsistent with or intended
to affect such election. Sellers acknowledge that pursuant to Section
338(h)(10) of the Code, the sale of the Shares will be reported for federal
income tax purposes as a sale of the assets of the Corporation in a taxable
transaction, with the gain or loss from such transaction being included in the
income tax return of the Sellers, as shareholders of the Corporation. The
parties agree that $3,000,000 of the purchase price shall be allocated to scrap
inventory and $500,000
<PAGE>
shall be allocated to the replacement parts inventory and that such allocation
shall not result in the payment by Buyer of any Tax Equalization Payment.
(ii) To the extent that the Sellers are required to
record a gain on the deemed sale of the assets of the Corporation resulting from
the 338(h)(10) election (except to the extent of the agreed upon allocations
with respect to the scrap inventory and replacement parts inventory as set forth
in sections 1(jj)(A) and 2(d)(i) above) allocations, Buyer shall pay the Sellers
in cash the Tax Equalization Payment. Such Estimated Tax Equalization Payment,
if any, shall be reviewed as part of the post-Closing adjustment described in
section 2(b)(ii) above. To the extent that the Tax Equalization Payment as so
reviewed after the Closing is greater or lesser than the Estimated Tax
Equalization Payment paid to Seller at Closing, the difference shall be either
promptly paid by Buyer to Seller in cash, or paid by Seller to Buyer in cash, as
appropriate. If within 75 days after the Closing, the parties do not agree on
the amount of the Tax Equalization Payment, the dispute shall be resolved as
provided in section 2(h).
(e) ALLOCATION OF PURCHASE PRICE. If Buyer elects to make
an election under 338(h)(10) of the Code, the Buyer shall allocate the
Consideration among the assets of the Corporation in accordance with the
agreement with the Sellers after taking into account the applicable regulations
under the Code and the fair market value of such items. The Sellers agree that
the Buyer shall prepare for filing all statements that may be required to be
filed with respect to the transactions contemplated under this Agreement,
including any filings that may be required pursuant to Code Sections 338 and
1060, any regulation promulgated under such sections of the Code, or any other
similar provision of the Code any similar applicable foreign, state or local tax
law or regulation. Sellers and Buyer agree that they will not, nor cause the
Corporation to, take any tax or other position inconsistent with the allocation
set forth in Exhibit D and that they will execute and file such statements and
returns (including a final S corporation tax return, which Sellers will cause to
be filed within 75 days following the Closing) and tax information on a basis
that is consistent with Exhibit D. The Buyer and Sellers agree to exchange such
information as may be required for the preparation and filing of any of the
foregoing.
(f) REAL ESTATE. Simultaneous with the execution of this
Agreement, Buyer and Idal Realty Company (the "Partnership") will enter into the
Real Estate Purchase Agreement in the form attached hereto as Exhibit E. If any
party fails to satisfy the obligations set forth in the Real Estate Purchase
Agreement, such failure shall be deemed to be a default under this Agreement
and, subject to the notice and cure provisions set forth herein, shall entitle
the non-defaulting party to exercise any remedy contained herein.
(g) THE CLOSING. The closing of the transactions
contemplated by section 2(a) of this Agreement (the "Closing") shall take place
at the offices of Reinhart, Boerner, Van Deuren, Norris & Rieselbach, s.c. in
Milwaukee, Wisconsin as of even date herewith (the "Closing Date"), and shall be
deemed to be effective as of 11:59 p.m. on such date.
<PAGE>
(h) DISPUTE RESOLUTION. If the Sellers and the Buyer
cannot stipulate to the amount of the Closing Balance Sheet or the Tax
Equalization Payment within the 75-day period referenced above, the matter with
respect to which no stipulation can be reached shall be submitted to and
resolved by a firm of independent certified public accounts mutually agreeable
to Sellers and Buyer, whose determination shall be final and nonappealable.
Upon receipt of such accountants' determination, the Sellers and Buyer shall
comply therewith. The cost of such accountants shall be divided equally between
Sellers and the Corporation.
(i) DELIVERIES AT THE CLOSING. The following actions shall
be taken at the time of execution of this Agreement, each of which shall be
conditioned on completion of all the others and all of which shall be deemed to
have taken place simultaneously:
(i) Sellers shall deliver the stock certificates
representing of their shares of the Corporation, duly endorsed for transfer or
accompanied by duly executed stock powers endorsed in blank;
(ii) Buyer shall deliver to Sellers the consideration
set forth in 2(b)(i) and (ii) above;
(iii) Each Seller shall deliver to the Corporation the
respective Employment Agreement, duly executed by the parties thereto;
(iv) Buyer shall deliver to the Partnership and the
Partnership shall deliver to Buyer the closing documents as are required
pursuant to the Real Estate Purchase Agreement, duly executed by the parties
thereto;
and
(v) Buyer shall have received from counsel to the
Sellers and the Corporation an opinion in form and substance as set forth in
Exhibit F attached hereto, addressed to the Buyer and dated as of the Closing.
(vi) Sellers shall have received from counsel to the
Buyer opinions in form and substance as set forth in Exhibit G attached hereto,
addressed to the Sellers and dated as of the Closing.
(vii) Sellers shall deliver to Buyer such other
instruments of sale, transfer, conveyance and assignment as the Buyer and their
counsel reasonably may request.
3. REPRESENTATIONS AND WARRANTIES OF THE SELLERS. The Sellers
hereby jointly and severally represent and warrant that all of the
representations and warranties set forth in this section 3 are true and correct
as of the date of this Agreement, except as set forth in the disclosure schedule
accompanying this Agreement (the "Disclosure Schedule"). The Disclosure
Schedule will be arranged in sections corresponding to the lettered and numbered
sections contained in this section 3.
<PAGE>
(a) AUTHORIZATION OF TRANSACTION. Each of the Sellers has the
necessary power and authority to execute and deliver this Agreement and to
perform his obligations hereunder. This Agreement constitutes the valid and
legally binding obligation of each Seller, enforceable in accordance with its
terms and conditions except as such enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws generally affecting
creditors' rights generally and by general equitable principles. To the
Knowledge of the Sellers, no Seller needs to give any notice to, make any filing
with, or obtain any authorization, consent or approval of any government or
governmental agency in order to consummate the transactions contemplated herein.
(b) NONCONTRAVENTION. To the Knowledge of the Sellers, no
consent, authorization or approval of, or declaration, filing or registration
with, any governmental or regulatory authority (except any filing and approval
relating to the provisions of the Hart-Scott-Rodino Act relating to antitrust
review by the federal government and any similar state statute) or any consent,
authorization or approval of any other third party is required to enable Sellers
to enter into and perform their obligations under this Agreement, and neither
the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby, except as set forth in section 3(b) of the
Disclosure Schedule:
(i) to the Knowledge of the Sellers, violates any
constitution, statute, regulation, rule, injunction, judgment, order, decree, or
ruling of any government, governmental agency or court to which the Corporation
or any of the Sellers is subject;
(ii) to the Knowledge of the Sellers, conflict with, result
in a breach of, constitute a default under, result in the acceleration of,
create in any party the right to accelerate, terminate, modify or cancel, or
require any notice under any material agreement, contract, lease (except for the
Lease Agreement described in the Disclosure Statement), license, instrument or
other arrangement to which the Corporation or any Seller is a party or by which
they are bound or to which any of the assets of the Corporation are subject (or
result in the imposition of any Security Interest upon any of the assets of the
Corporation);
(iii) to the Knowledge of the Sellers, violates or causes any
revocation of, or limitation on, any permit, license or consent necessary or
required in the operation of the Business.
(c) TRANSFER OF SHARES. Each Seller is the lawful owner of the
shares of the Corporation to be sold, transferred and delivered by him to the
Buyer hereunder, and the sale, transfer and delivery of such shares to the Buyer
will transfer to the Buyer valid title thereto, free and clear of all Security
Interests whatsoever. The shares of the Corporation to be sold, transferred and
delivered to the Buyer hereunder represent all of the issued and outstanding
capital stock of the Corporation.
(d) ORGANIZATION, QUALIFICATION AND CORPORATE POWER. The
Corporation is a corporation duly organized, validly existing and in good
standing status under the laws of the State of Illinois and is to the Knowledge
of Sellers and except as set
<PAGE>
forth on the Disclosure Schedule, qualified to do business in every
jurisdiction in which its ownership of property or conduct of business
requires it to qualify except where failure to qualify has no material
adverse effect on the Corporation. The Corporation possesses all requisite
corporate power and authority and, to the Knowledge of the Sellers, all
material licenses, permits and authorizations necessary to own and operate
its properties, to carry on its businesses as now conducted and presently
proposed to be conducted and to carry out the transactions contemplated by
this Agreement. Schedule 3(d) lists the directors and officers of the
Corporation. The Sellers have furnished to the Buyer true and correct copies
of (i) the Articles of Incorporation and the bylaws of the Corporation, as
amended; and (ii) the minute book of the Corporation. The Corporation does
not have any subsidiaries.
(e) S CORPORATION. The Corporation has filed an S Corporation
election, and since December 29, 1986 has been filing returns consistent with
such election.
(f) CAPITALIZATION. The entire authorized capital stock of the
Corporation consists of 35,000 shares of Class A common stock having a par value
of $.50 per share, of which 9,231.25 shares are issued and outstanding and
300,000 shares of Class B common stock having a par value of $.50 per share, of
which 175,393.75 shares are issued and outstanding. All of the Corporation's
issued and outstanding shares of common stock have been duly authorized, are
validly issued, fully paid and nonassessable, and are held of record by the
respective Sellers as set forth on Schedule 3(f). There are no outstanding or
authorized options, warrants, rights, contracts, calls, puts, rights to
subscribe, conversion rights or other agreements or commitments to which the
Corporation is a party or which are binding upon the Corporation providing for
the issuance, disposition or acquisition of any of its capital stock, nor any
outstanding or authorized stock appreciation, phantom stock or similar rights
with respect to the Corporation.
(g) BROKERS' FEES. The Sellers have no liability or obligation
to pay any fees or commissions to any broker, finder or agent with respect to
the transactions contemplated by this Agreement for which the Buyer could become
liable or obligated.
(h) CONDITION OF ACQUIRED ASSETS AND INVENTORY. To the
Knowledge of the Sellers, each tangible asset owned by the Corporation reflected
on the Most Recent Financial Statement has been maintained in accordance with
the Corporation's historical maintenance, which maintenance was reasonably
performed in a manner necessary to maintain the operation of the assets of the
Corporation.
(i) FINANCIAL STATEMENTS. Attached hereto as Exhibit H are the
following financial statements (collectively the "Financial Statements"):
(i) balance sheets and statements of income, changes in
stockholders' equity and cash flow as of and for the fiscal years ended June 30,
1994, June 30, 1995, June 30, 1996, and June 30, 1997 for the Corporation, each
of which has been compiled by the Corporation's accountants; and
<PAGE>
(ii) an unaudited balance sheet ("Most Recent Balance
Sheet") and statements of income and changes in stockholders equity and cash
flow as of and for the period ended October 31, 1997 for the Corporation (the
"Most Recent Financial Statements").
To the Knowledge of the Sellers, except as set forth in
section 3(i) of the Disclosure Schedule, the Financial Statements (including the
notes thereto) have been prepared from the books and records of the Corporation
and accurately reflect the results of operations in accordance with the
accounting principles and conventions historically employed by the Corporation.
(j) LIABILITIES. To the Knowledge of the Sellers, the
Corporation does not have any existing liability, except for (i) liabilities
disclosed or reserved for in the Most Recent Financial Statements;
(ii) liabilities which have arisen after the date of the Most Recent Financial
Statements in the Ordinary Course of Business; and (iii) liabilities disclosed
under any section of the Disclosure Schedule.
(k) EVENTS SUBSEQUENT TO MOST RECENT FINANCIAL STATEMENTS.
Except for the removal of personal items and memorabilia, since October 31,
1997, to the Knowledge of the Sellers, there has not been any material adverse
change in the business, financial condition and results of operations of the
Corporation taken as a whole. Without limiting the generality of the foregoing,
since that date, except as set forth in section 3(k) of the Disclosure Schedule
or as contemplated by this Agreement and the transactions contemplated hereby,
to the Knowledge of the Sellers, the Corporation has not:
(i) sold, leased, transferred or assigned any of its
assets, tangible or intangible, other than for a fair consideration in the
Ordinary Course of Business;
(ii) entered into any material agreement, contract, lease or
license (or series of related agreements, contracts, leases and licenses)
outside the Ordinary Course of Business;
(iii) accelerated, terminated, modified or canceled any
material agreement, contract, lease or license (or series of related agreements,
contracts, leases and licenses) to which the Corporation is a party or by which
it is bound outside the Ordinary Course of Business;
(iv) has imposed any Security Interest upon any of its
assets, tangible or intangible;
(v) made any capital expenditure (or series of related
capital expenditures) outside the Ordinary Course of Business;
(vi) made any capital investment in, any loan to, or any
acquisition of the securities or assets of, any other Person (or series of
related capital investments, loans and acquisitions) outside the Ordinary Course
of Business;
<PAGE>
(vii) issued any note, bond or other debt security or
created, incurred, assumed or guaranteed any Indebtedness for Borrowed Money or
capitalized lease obligation either involving more than $10,000 singly or
$50,000 in the aggregate;
(viii) delayed or postponed the payment of accounts
payable and other liabilities outside the Ordinary Course of Business;
(ix) accelerated receipt of payment of accounts
receivable or other current assets outside the Ordinary Course of Business;
(x) delayed investments in or advancements to other
persons outside the Ordinary Course of Business;
(xi) canceled, compromised, waived or released any right
or claim (or series of related rights and claims) outside the Ordinary Course of
Business;
(xii) granted any license or sublicense of any rights
under or with respect to any Intellectual Property;
(xiii) made any loan to, or entered into any other
transaction with, any of its directors, officers and employees outside the
Ordinary Course of Business;
(xiv) granted any increase in the base compensation of
any of its directors, officers and employees outside the Ordinary Course of
Business;
(xv) made any material change in employment terms for
any of its directors, officers and employees outside the Ordinary Course of
Business;
(xvi) entered into any employment contract or collective
bargaining agreement or materially modified the terms of any existing such
contract or agreement;
(xvii) adopted, amended, modified or terminated any bonus,
profit sharing, incentive, severance or other plan, contract or commitment for
the benefit of any of its directors, officers and employees (or taken any such
action with respect to any other Employee Benefit Plan other than in the
Ordinary Course of Business);
(xviii) made or pledged to make any material charitable or
other capital contribution outside the Ordinary Course of Business.
(l) LEGAL COMPLIANCE. To the Knowledge of the Sellers, the
Corporation has not violated applicable laws (including rules, regulations,
codes, plans, injunctions, judgments, orders, decrees and rulings thereunder) of
federal, state, and local governments (and all agencies thereof), excluding all
Environmental, Health and Safety Laws (no representations and warranties shall
be inferred from any section of this
<PAGE>
Agreement regarding Environmental, Health and Safety laws except as contained in
Section 3(v) and the corresponding Disclosure Schedule), and to the Knowledge of
Sellers, the Corporation has obtained all permits, licenses, and consents
necessary or required in the operation of its business, except as set forth in
section 3(l) of the Disclosure Schedule.
(m) TAX MATTERS.
(i) The Corporation and each of the Sellers has filed all
Tax Returns required to be filed, and paid all Taxes currently due and owing.
All such Tax Returns were prepared in all material respects in compliance with
all applicable laws and regulations, and are correct and complete in all
material respects.
(ii) Section 3(m) of the Disclosure Schedule lists all Tax
Returns filed with respect to each of the Sellers for taxable periods ended on
or after December 31, 1994, indicates those Tax Returns that have been audited,
indicates those Tax Returns that currently are the subject of audit and contains
a list of each state, territory and jurisdiction (whether foreign or domestic)
in which to the Knowledge of Sellers each Seller is required to file Tax
Returns. The Sellers have delivered to the Buyer correct and complete copies of
all Corporate federal Tax Returns, examination reports and statements of
deficiencies assessed against or agreed to by any of the Sellers since December
31, 1994.
(iii) No Seller has waived any statute of limitations in
respect of Taxes or agreed to any extension of time with respect to a Tax
assessment, collection or deficiency.
(iv) No Seller is a party to any Tax allocation or sharing
agreement.
(v) Each of the Sellers has withheld and paid all taxes
required to have been withheld and paid in connection with amounts paid or owing
to any employee in connection with his or her employment with the Sellers.
(vi) No deficiency or proposed adjustment which has not been
settled or otherwise resolved for any amount of Tax has been proposed, asserted
or assessed by any taxing authority against any Seller and there is no action,
suit, taxing authority proceeding or audit now pending or, to the Knowledge of
the Sellers, threatened against the Corporation or any Seller. No claim has
ever been made by a taxing authority in a jurisdiction where the Corporation
does not file Tax Returns that the Corporation or the Sellers are or may be
subject to Taxes assessed by such jurisdiction. There are no liens for Taxes
(other than for current Taxes not yet due and payable) upon the assets of the
Corporation as of immediately prior to the Closing.
(n) REAL PROPERTY.
(i) Except as disclosed on Schedule 3(n), the Corporation
does not own, and has not owned in the last 25 years, any real property used in
connection with the Business.
<PAGE>
(ii) Except as disclosed in the Disclosure Statement, the
Leased Premises constitutes the only real property leased or subleased to the
Corporation. Except as disclosed in the Disclosure Statement, neither the
Corporation nor any Sellers is a party to any other lease for real property used
in connection with the Business.
(o) INTELLECTUAL PROPERTY.
(i) To the Knowledge of the Sellers, except as described on
the Disclosure Schedule, all material Intellectual Property is owned (and not
licensed) outright by the Corporation, free and clear of any Security Interest
and there exist no obligations with respect to any Intellectual Property
requiring the Corporation to make any payment in respect of its use or
otherwise. To the Knowledge of the Sellers, neither the Corporation nor any
Seller has ever agreed to indemnify any Person for or against any interference,
infringement, misappropriation or other conflict with respect to the
Intellectual Property.
(ii) To the Knowledge of the Sellers, the Corporation is not
infringing upon any patent, invention, trade secret, trademark, service mark,
trade name or copyright of any other Person, nor do they have Knowledge of any
infringement claim of any other Person relating to any of the Intellectual
Property or any process or confidential information of the Corporation and
Sellers have no Knowledge of any basis for any such charge or claim.
(p) CONTRACTS. Section 3(p) of the Disclosure Schedule lists
the following executory oral and written contracts to which the Corporation, to
the Knowledge of the Sellers, is a party:
(i) any agreement (or group of related agreements) for the
lease of personal property to or from any Person providing for lease payments in
excess of $25,000 per annum per agreement or per group of related agreements
with the same Person;
(ii) any agreement (or group of related agreements) for the
purchase or sale of raw materials, commodities, supplies, products or other
personal property, or for the furnishing or receipt of services, the performance
of which will extend over a period of more than one year and involve
consideration in excess of $25,000 per agreement or per group of related
agreements with the same Person;
(iii) any agreement concerning a partnership or joint
venture;
(iv) any agreement (or group of related agreements) under
which the Corporation has created, incurred, assumed or guaranteed any
Indebtedness for Borrowed Money, or any capitalized lease obligation in excess
of $25,000 or under which it has imposed a Security Interest on any of its
assets, tangible or intangible;
(v) any agreement restricting the Corporation or any
Sellers' ability to compete with another Person;
<PAGE>
(vi) any agreement not elsewhere required to be disclosed in
this section, including but not exclusive to (ii) above, involving the
Corporation involving consideration in excess of $25,000 which is not cancelable
upon one month's notice without penalty or forfeiture to the Corporation;
(vii) any agreement between the Corporation and any Seller
outside the Ordinary Course of Business;
(viii) any profit sharing, stock option, stock purchase, stock
appreciation, deferred compensation or severance plan for the benefit of its
current or former directors, officers and employees;
(ix) any collective bargaining agreement;
(x) any agreement other than those that are terminable at
will, for the employment of any individual on a full-time, part-time, consulting
or other basis providing annual compensation in excess of $25,000 or providing
severance benefits in excess of $25,000;
(xi) any agreement under which the Corporation has advanced
or loaned any amount to any of its directors, officers and employees in excess
of $25,000; and
(xii) any other contract entered into to or from another
Person outside the Ordinary Course of Business (or group of related agreements)
the performance of which involves consideration in excess of $25,000.
The Sellers have delivered or made available to the Buyer a
correct and complete copy of each written contract or other agreement listed in
section 3(p) of the Disclosure Schedule (as amended to date). Except as set
forth on the Disclosure Schedule and to the Knowledge of the Sellers, with
respect to each such agreement, (i) the agreement is legal, valid, binding,
enforceable and in full force and effect; (ii) the Corporation is not, and the
other party to such contract is not, in material breach or default of such
agreement, and no event has occurred which with notice or lapse of time would
constitute a material breach or default, or permit termination, modification or
acceleration, under the agreement; and (iii) the Corporation has not, and no
other party to such agreement has, repudiated any provision of the agreement.
(q) LITIGATION. To the Knowledge of the Sellers, section 3(q)
of the Disclosure Schedule sets forth each instance in which either the
Corporation or any Seller (i) is subject to any outstanding injunction,
judgment, order, decree, ruling or (ii) is a party or is threatened to be made a
party to any action, suit, proceeding, hearing or investigation of, in or before
any court or quasi-judicial or administrative agency of any federal, state or
local jurisdiction in each case relating to the Corporation and its assets,
liabilities and general business operations.
(r) EMPLOYEE BENEFIT PLANS.
<PAGE>
(i) To the Knowledge of the Sellers, Schedule 3(r)
identifies each employee benefit plan, fund, program, contract, policy or
arrangement covering or benefiting employees of the Corporation ("Corporation
Employees"), including, but not limited to, all "employee benefit plans" as
defined in section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended, ("ERISA"), and specifically including each retirement, pension,
profit sharing, stock bonus, savings, thrift, bonus, medical, health,
hospitalization, welfare, life insurance, disability, accident insurance, group
insurance, sick pay, holiday and vacation programs, executive or deferred
compensation plans or contracts, stock purchase, stock option or stock
appreciation rights plans or arrangements, employment and consulting contracts,
and severance agreements or plans. The items described in the foregoing
sentence are hereinafter referred to collectively as "Employee Benefit Plans"
and each individually as an "Employee Benefit Plan."
(ii) To the Knowledge of the Sellers, except as set
forth in the Disclosure Schedule, the Corporation does not maintain or
contribute to, and has never maintained or contributed to, an Employee
Benefit Plan that is subject to Title IV of ERISA. To the Knowledge of the
Sellers, the Corporation does not contribute and has never contributed (or
been obligated to contribute) to a multiemployer plan as defined in section
4001(a)(13) of ERISA. To the Knowledge of the Sellers, no liability under any
defined benefit pension plan has been satisfied with the purchase of a
contract from an insurance company that is not rated AAA by Standard & Poor's
Corporation or the equivalent by another nationally recognized rating agency.
To the Knowledge of the Sellers, the Corporation is not, and has never been,
a member of (i) a controlled group of corporations, (ii) a group of trades or
businesses under common control, or (iii) an affiliated service group,
within the meaning of Sections 414(b), (c) or (m), respectively.
(iii) To the Knowledge of the Sellers, neither the
Corporation nor any Employee Benefit Plan maintained or contributed to by the
Corporation provides or has any obligation to provide (or contribute toward the
cost of) post-retirement welfare benefits with respect to current or former
employees of the Corporation or any other entity (including, without limitation,
post-retirement medical, dental, life insurance, severance or any other similar
benefit, whether provided on an insured or self-insured basis) other than (A)
coverage mandated by applicable law, (B) death benefits or retirement benefits
under any "employee pension benefit plan," as that term is defined in Section
3(2) of ERISA, (C) except for certain payments to Bertram Lans, as set forth in
the Disclosure Statement, deferred compensation benefits accrued as liabilities
on the books of the Corporation, or (D) benefits, the full cost of which is
borne by the current or former employee (or his or her beneficiary).
(iv) To Sellers' Knowledge, with respect to each Employee
Benefit Plan: (i) all payments due from any such plan (or from the Corporation
with respect to any such plan) have been made, and all amounts properly accrued
to date as liabilities of the Corporation which have not been paid have been
properly recorded on the books of the Corporation; (ii) the Corporation has
complied with, and each such Employee Benefit Plan conforms in form and
operation to, all applicable laws and
<PAGE>
regulations, including but not limited to ERISA and the Internal Revenue Code
in all material respects, and all reports and information relating to such
Employee Benefit Plans required to be filed with any governmental entity have
been timely filed; (iii) all reports and information required to be disclosed
or provided to participants or their beneficiaries have been timely disclosed
or provided; (iv) there have been no prohibited transactions within the
meaning of Sections 406 and 407 of ERISA or section 4975 of the Code with
respect to any Employee Benefit Plan; (v) no event or omission has occurred
in connection with any Employee Benefit Plan that would subject the
Corporation or any Employee Benefit Plan to a fine, penalty, tax or
liability, whether pursuant to any agreement, instrument, indemnification,
obligation, or statute, regulation or rule of law; and (vi) there are no
actions, suits or claims pending (other than routine claims for benefits) or
threatened with respect to any Employee Benefit Plan or against the assets of
such Employee Benefit Plan.
(v) To Sellers' Knowledge, the Corporation has complied
with the continuation coverage requirements of section 601 through 608 of ERISA,
and the requirements of any similar State law regarding continued insurance
coverage, and the Corporation has incurred no liability with respect to its
failure to offer or provide continued coverage in accordance with the foregoing
requirements, nor is there any suit or action pending or threatened with respect
to such requirements.
(s) CERTAIN BUSINESS RELATIONSHIPS CONCERNING THE SELLERS.
Except as set forth on section 3(s) of the Disclosure Schedule, to the Sellers'
Knowledge, no Seller has been involved within the past five years in any
material business arrangement or relationship with the Corporation or any
supplier, customer, licensee, licensor or lessor of the Corporation (or any
affiliate of such Person). Except for the Leased Premises and the assets of
Idal Realty Partnership leased to the Corporation, to the Sellers' Knowledge, no
Seller nor any Affiliate of Sellers, owns any material asset, tangible or
intangible, which is used in the business of the Corporation. Without limiting
the generality of the foregoing, except for the Leased Premises and the assets
of the Partnership, to the Sellers' Knowledge, no Seller has any material
economic interest in any supplier, customer, licensee, licensor or lessor of the
Corporation (or any affiliate of such Person) or has made payments of any kind
to, has received payments of any kind from, has made any loans or advances to,
or guarantees for the benefit of, or borrowed amounts from any supplier,
customer licensee, licensor or lessor of the Corporation (or any Affiliate of
such Person).
(t) ACCOUNTS RECEIVABLE. To the Sellers' Knowledge, and except
as set forth on the Disclosure Statement, the accounts receivable of the
Corporation as reflected on the Most Recent Financial Statements have arisen
from bona fide transactions in the Ordinary Course of Business and Sellers
believe they are collectible net of any applicable reserves set forth on the
Most Recent Financial Statements.
(u) LABOR MATTERS. The Corporation is not a party to or bound
by any union or collective bargaining agreement. The Corporation is not a party
to any pending arbitration or grievance proceeding or other claim relating to
any labor contract nor, to the Knowledge of the Sellers, is any such action
threatened. Except as set forth on
<PAGE>
section 3(u) on the Disclosure Schedule, within the previous 12 months, to the
Sellers' Knowledge, the Corporation has not experienced any labor disputes,
attempts or any work stoppage due to labor disagreements in connection with
their business, and there is currently no labor strike, request for
representation, slowdown or stoppage actually pending or threatened against the
Corporation. Except as set forth in section 3(u) of the Disclosure Schedule, to
the Knowledge of the Sellers, no key executive employee and no group of
employees or independent contractors of any Seller currently intends to
terminate his, her or its employment or relationship as an independent
contractor with the Corporation Seller. To the Sellers' Knowledge, the
Corporation has complied in all material respects with all applicable laws
relating to the employment of personnel and labor, including provisions thereof
relating to wages, hours, equal opportunity, collective bargaining and the
payment of social security and other taxes, the Worker Adjustment and Retraining
Act, and the Immigration Reform and Control Act of 1986. To the Sellers'
Knowledge, the Sellers have provided to Buyer all written employment agreements
with employees of the Corporation which are presently in effect.
(v) ENVIRONMENTAL AND SAFETY MATTERS.
(i) Except as set forth on the Disclosure Schedule, to
the Knowledge of Sellers, the Sellers have complied and are in compliance with
all Environmental, Health and Safety Laws.
(ii) To the Sellers' Knowledge, except as described in
section 3(v) of the Disclosure Schedule, the Corporation has not received any
written or oral notice, report or other information regarding any liabilities
(whether accrued, absolute, contingent, unliquidated or otherwise), including
any investigatory, remedial or corrective obligations arising under
Environmental, Health and Safety Laws, relating to the Corporation, the
facilities of the Corporation Seller, the Leased Premises, on any Partnership
realty.
(iii) To the Sellers' Knowledge, except as described in
section 3(v) of the Disclosure Schedule, the Corporation has not treated,
stored, disposed of, arranged for or permitted the disposal of, transported,
handled or Released any substance, including without limitation any Hazardous
Material, or owned or operated any facility or property, so as to give rise to
liabilities of the Corporation for response costs, natural resource damages or
attorneys fees pursuant to CERCLA or other Environmental, Health and Safety
Laws.
(w) INSURANCE. Section 3(w) of the Disclosure Schedule lists
and briefly describes each insurance policy maintained by the Corporation with
respect to its properties, assets and business. To the Sellers' Knowledge, all
of such insurance policies are in full force and effect, and the Corporation is
not in default with respect to its obligations under any such insurance
policies.
(x) PRODUCT LIABILITY. To the Sellers' Knowledge, the
Corporation has not received any written claim in the three-year period prior to
the date of this Agreement arising out of any injury to individuals or property
as a result of the ownership, possession or use of any product manufactured,
sold, leased or delivered by the Corporation.
<PAGE>
(y) DISCLOSURE. Neither the representations and warranties
contained in this Agreement nor the statements made in the Disclosure Schedule
contain any untrue statement of a material fact or, to the Knowledge of the
Sellers, omit, when considered as a whole, a material fact necessary to make the
statements contained herein or therein, in light of the circumstances in which
they were made, not misleading.
4. REPRESENTATIONS AND WARRANTIES OF THE BUYER. The Buyer hereby
makes the representations and warranties set forth in this section 4 as of the
date of this Agreement to the Sellers.
(a) ORGANIZATION. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of Colorado.
(b) AUTHORIZATION OF TRANSACTION. Buyer has full corporate
power and authority to execute and deliver this Agreement and the Real Estate
Purchase Agreement and to perform its obligations hereunder and thereunder.
This Agreement and the Real Estate Purchase Agreement constitute the valid and
legally binding obligations of Buyer, enforceable in accordance with their terms
and conditions, except such enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws generally affecting
creditors' rights and by general equitable principles.
(c) BROKERS' FEES. Buyer has no liability or obligation to pay
any fees or commissions to any broker, finder or agent with respect to the
transactions contemplated by this Agreement for which the Sellers could become
liable or obligated, except as contemplated by this Agreement.
(d) NONCONTRAVENTION. No consent, authorization or approval of,
or declaration, filing or registration with, any governmental or regulatory
authority (including, but not exclusive to any filing and approval relating to
the provisions of the Hart-Scott-Rodino Acts relating to antitrust review by the
federal government or any similar state statute) or any consent, authorization
or approval of any other third party is required in order to enable Buyer to
enter into and perform its obligations under this Agreement, and neither the
execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will be in violation of the Articles of
Incorporation, By-Laws or other organizational documents of the Buyer, or
constitute a breach of any material agreement to which Buyer is a party, or, to
the Knowledge of the Buyer, violate any constitution, statute, regulation, rule,
injunction, judgment, order, decree, ruling, charge or other restriction of any
government, governmental agency or court to which Buyer is subject or violate
any material agreement, contract, lease, license, instrument or other
arrangement to which Buyer is a party or is bound.
(e) SECURITIES FILINGS. The Buyer has delivered to the Sellers
a correct and complete copy of the Buyer's most recent form 10-Q and Form 10-K
as filed with the Securities and Exchange Commission.
(f) CORPORATE DOCUMENTS. The Buyer has delivered to the Sellers
a correct and complete copy of (i) its Articles of Incorporation together with
all
<PAGE>
amendments thereto, (ii) all Designations of Preferences adopted by Buyer, and
(iii) those Designations of Preferences currently being negotiated as of the
date hereof.
5. INDEMNIFICATION; ENVIRONMENTAL REMEDIATION.
(a) BY SELLER PARTIES. Subject to the limitations set
forth in this section 5, each of the Sellers will indemnify each of the Buyer
Indemnified Parties and hold each of the Buyer Indemnified Parties harmless from
and against any actual, direct and "out-of-pocket" costs or expenses (including,
but not limited to, interest, penalties, costs of preparation and investigation,
and the reasonable fees, disbursements and expenses of attorneys, accountants
and other professional advisors but excluding punitive, consequential or losses
calculated or measured by or based upon a damage theory involving a multiple of
lost profits or earnings or a multiple of lost anticipated profits or earnings)
(collectively, "Losses") which any Buyer Indemnified Party may suffer, sustain
or become subject to, resulting from, arising out of or caused by:
(i) any inaccuracy in or breach of any representation
or warranty of the Corporation or Sellers pursuant to this Agreement or the Real
Estate Purchase Agreement in any respect, including the disclosure schedules
delivered pursuant hereto or thereto; or
(ii) any failure of the Corporation or Sellers to duly
perform or observe any covenant to be performed or observed by the Corporation
or such Seller pursuant to this Agreement, the Real Estate Purchase Agreement,
or the Net Lease.
(iii) any claim by any third party against the
Corporation in its capacity as a general partner of Idal Realty Company arising
out of any activity or event of any kind occurring prior to the date hereof,
other than liabilities which have been booked and are reflected in the Balance
Sheet Values and environmental liabilities which are provided for separately in
Section 5(h). The parties intend that, except for environmental liabilities,
the Corporation be indemnified against any Loss suffered by the Corporation for
claims which arise because of the Corporation's liability as a general partner
of Idal Realty Company.
The obligations of the Sellers to indemnify and hold
Purchaser's Indemnified Persons harmless as described herein shall survive
Closing and the consummation of the transactions contemplated by this Agreement
for the periods specified in section 5(e)(iii).
(b) PROCEDURES. The Buyer Indemnified Parties shall give
Sellers prompt written notice of any written claim, demand, assessment, action,
suit, proceeding or awareness of facts which might lead to such a claim or
notice of any claim of a third party that may reasonably be expected to result
in a claim by Buyer against Sellers to which the indemnity set forth in this
section 5 applies. If the document evidencing such claim or demand is a court
pleading, Buyer shall give such notice within 10 days of receipt of such
pleading, otherwise, Buyer shall give such notice within 30 days of the date it
receives written notice of such claim. Failure to give timely notice of a
<PAGE>
matter which may give rise to an indemnification claim shall not affect the
rights of the Buyer Indemnified Parties to collect such Loss from Sellers so
long as such failure to so notify does not materially adversely affect Sellers'
ability to defend such Loss against a third party. Such notice shall specify
the breach of representation or warranty or violation of covenant claimed by the
Buyer and the Losses incurred by, or imposed upon, the Buyer on account thereof.
If such Losses are liquidated in amount, the notice shall so state and such
amount shall be deemed the amount of the claim of the Buyer. If the amount is
not liquidated, the notice shall so state and in such event a claim shall be
deemed asserted against the Sellers on behalf of the Buyer, but no payment shall
be made on account thereof until the amount of such claim is liquidated and the
claim is finally determined.
If any of the Sellers shall object to any notice of claim seeking
recovery for a Loss (whether such claim arises from a third-party claim or
otherwise), (a "Notice of Claim") such Seller shall deliver to Buyer and the
other Sellers a written notice of objection (the "Notice of Objection") to the
Buyer. The Notice of Objection shall set forth the grounds upon which the
objection is based and state whether such Seller objects to all or only a
portion of the matter described in the Notice of Claim. If such claim or claims
shall not have been resolved or compromised within 60 days from the date of
delivery of the Notice of Objection, then such claims shall be settled by
arbitration pursuant to section 8 hereof. The arbitrator shall promptly obtain
such information regarding the matter the arbitrator deems necessary and shall
decide the matter and render a written award which shall be delivered to the
Buyer and the Sellers. Any award shall be a conclusive determination of the
matter and shall be binding upon the Buyer and the Sellers. If, by arbitration,
it shall be determined that the Buyer shall be entitled to any Indemnification
by reason of its claim or claims (a "Liquidated Indemnification Liability"),
such amount shall be paid to the Buyer in the manner provided in section 5(f) by
the Sellers without the necessity of further action.
(c) THIRD PARTY CLAIMS. If the Buyer Indemnified Parties'
request for indemnification arises from the claim of a third party (including a
federal or state regulatory auhority), the written notice shall permit Sellers
to assume control of the defense of any such claim, or any litigation resulting
from such claim. Failure by Sellers to notify the Buyer Indemnified Parties of
its election to defend a complaint by a third party within 20 days after notice
thereof shall be a waiver by Sellers of its right to assume control of the
defense of such claim or action. If Sellers assume control of the defense of
such claim or litigation resulting therefrom, Sellers shall take all reasonable
steps necessary in the defense or settlement of such claim or litigation
resulting therefrom and, if the claim is subject to indemnification of Buyer by
Sellers, Sellers shall hold the Buyer Indemnified Parties, to the extent
provided in this section 5, harmless from and against all Losses arising out of
or resulting from any settlement approved by Sellers or any judgment in
connection with such claim or litigation. Notwithstanding Sellers' assumption
of the defense of such third-party claim or demand, the Buyer Indemnified
Parties shall have the right to participate in the defense of such third-party
claim or demand at its own expense. The Buyer Indemnified Parties shall furnish
Sellers in reasonable detail all information such party may have with respect to
any such third-party claim and shall make available to Sellers and their
representatives all records and other similar materials which are
<PAGE>
reasonably required in the defense of such third-party claim and shall otherwise
cooperate with and assist Sellers in the defense of such third-party claim.
If the claim is subject to indemnification of Buyer by Sellers,
if Sellers do not assume control of the defense of any such third-party claim or
litigation resulting therefrom, the Buyer Indemnified Parties may defend against
such claim or litigation in such manner as it may reasonably deem appropriate,
and Sellers shall indemnify the Buyer Indemnified Parties from any Loss
indemnifiable under section 5(a) incurred in connection therewith.
No third party claim, demand, action or proceeding (including a
claim, demand, action or proceeeding by any federal or state regulatory
auhority) shall be settled without the prior written consent of the Sellers and
Buyer. Notwithstanding anything herein to the contrary, if a firm offer which
(i) involves the release of the Buyer Indemnified Parties from and against all
liability and (ii) does not require any material action other than the payment
of money damages, is made to settle any such third party claim, and the Buyer
Indemnified Parties refuse to consent to such settlement, then: (i) the Sellers
shall be excused from, and the Buyer Indemnified Parties shall be solely
responsible for, all further defense of such third party claim, demand, action
or proceeding; and (ii) the maximum liability of the Sellers relating to such
third party claim, demand, action, or proceeding shall be the amount of the
proposed settlement if the amount thereafter recovered on such third party
claim, demand, action, or proceeding is greater than the amount of the proposed
settlement.
(d) BY BUYER. Subject to the limitations set forth in this
section 5, the Buyer will indemnify the Seller Indemnified Parties and hold them
harmless from and against any Losses which any Seller Indemnified Party may
suffer, sustain or become subject to, resulting from, arising out of or caused
by:
(i) any inaccuracy or breach by Buyer of any
representation or warranty pursuant to this Agreement;
(ii) any liability or obligation of the Corporation
disclosed on the Closing Balance Sheet or the Disclosure Schedule; or
(iii) any failure of Buyer to perform any of the covenants
to be performed by it under this Agreement or the Real Estate Purchase
Agreement.
(iv) any future and historic environmental liability or
obligation of Sellers, the Corporation, the Idal Realty Company and its
individual partners as incurred in their capacity as officers, directors,
employees, managers, operators or owners of the Corporation, Idal Realty
Company, and the Real Property, except to the extent that Sellers have agreed to
pay for their share of Environmental Remedial Activities costs pursuant to
section 5(h).
The obligations of the Buyer to indemnify and hold the
Seller Indemnified Parties harmless as described herein shall survive Closing
and the consummation of the transactions contemplated by this Agreement.
<PAGE>
The procedural rules set forth in section (b) shall apply
with respect to indemnification by Buyer except that the parties' respective
obligations under sections (b) and (c) shall be reversed as appropriate.
(e) LIMITATIONS. Notwithstanding the foregoing, the Parties
liability pursuant to this section 5 will be subject to the following
limitations:
(i) BASKET. Neither the Sellers nor the Buyer will be
liable for any Losses described in section 5(a) or 5(d) above unless and until
the aggregate amount of all such Losses (exclusive of any liabilities for
Environmental Remedial Activities) described in such section exceeds $125,000,
after which point the indemnifying party will be obligated, to the extent
required by this section 5, to indemnify the indemnified parties for all such
amounts incurred in excess of such amount. Notwithstanding the above, a breach
of the representations contained in section 3(m) shall not be subject to such
deductible, and Sellers shall be liable for all Losses incurred by Buyer as a
result of a breach of such representations.
(ii) CAP. Notwithstanding the foregoing, the maximum amount
of indemnification payable by Sellers in no event shall exceed $22,000,000 plus
the return of any shares of Preferred Stock issued hereunder and any shares of
Common Stock issued to Sellers upon conversion of such Preferred Stock, or the
proceeds thereof.
(iii) SURVIVAL. All obligations to pay indemnity under this
Agreement shall survive the Closing Date until December 1, 1998; provided,
however, that the representations contained in section 3(m) shall survive the
Closing Date for the statute of limitations applicable to such Taxes and that
the obligations to indemnify under Sections 5(a)(iii), 5(d)(iv) and 5(i) shall
survive indefinitely.
(iv) LIMIT ON JOINT AND SEVERAL LIABILITY. Notwithstanding
the joint and several nature of the representations, warranties and
indemnification provided for in this section 5, Buyer acknowledges and agrees
that if Buyer Indemnified Parties bring any claim for indemnification against
any Seller pursuant to this section 5, no such Seller shall be liable to return
more shares of Series I Preferred Stock than were originally received by him in
the transactions, nor pay, in the aggregate of all such claims brought against
such Seller, more than the following amounts as a result of the matters giving
rise to such indemnification claim:
Bertram Lans $572,000
Scott Lans $10,714,000
Bruce Lans $10,714,000
(v) SOLE REMEDY; WAIVER OF KNOWN BREACHES. The
indemnification provisions of this section 5 shall be the exclusive remedy,
exclusive of all other remedies, causes of actions or claims (whether based upon
contract, tort or statute), of the Buyer or Sellers for any monetary relief or
monetary recovery against either of the Buyer or Sellers in connection with any
claim arising out of this Agreement or the Real Estate Purchase Agreement or the
transactions contemplated hereby or thereby.
<PAGE>
Furthermore, if the Buyer elects to close the transactions contemplated by this
Agreement, including the Real Estate Purchase Agreement, notwithstanding its
knowledge of any breach of a representation or warranty made by the Sellers
herein or therein, then such election to close shall constitute a complete
waiver and release of any claim by the Buyer against any of the Sellers for
indemnification or otherwise, with respect to such matter but only to the extent
of such actual knowledge of Buyer. Buyer shall not be deemed to have waived or
released any claim to the extent that Buyer did not have Knowledge of the
breach.
(f) PAYMENT. The Liquidated Indemnification Liabilities shall
be funded by Sellers and payable to Buyer Indemnified Parties as follows:
(i) First, pursuant to Section 5(b) of the Designation of
Preferences, Limitations and Relative Rights of the Series I Redeemable
Convertible Preferred Stock of the Corporation as in effect on the date of this
Agreement ("Designation of Preferences"), an amount of shares of Buyer's Series
I Preferred Stock will be converted into an amount of shares of Buyer's common
stock ("Common Stock") having an aggregate Market Price equal to the Liquidated
Indemnification Liability (subject to the limitation set forth in Section 5(e)).
For purposes hereof, the term "Market Price" shall have the meaning set forth in
Section 5(a) of the Designation of Preferences. Upon conversion, Sellers shall,
if legally permissible to do so, endeavor (realizing that such shares may be
restricted securities or may not be legally saleable) to immediately sell (into
the public market for the Market Price thereof) all of the shares of Common
Stock which have been issued to them upon such conversion and shall, within five
days of receipt of the proceeds of such sale, deliver all of such proceeds to
Buyer. Sellers, at no cost or liability to them, shall cooperate with Buyer and
Buyer's counsel in the execution of all documentation necessary or desirable for
the conversion of the Preferred Stock or the registration, if any, of the Common
Stock to be issued to Sellers upon such conversion. Buyer, at its sole cost and
expense, shall cooperate and assist Sellers in the execution of all
documentation necessary or desirable for the sale by Sellers of the Common Stock
as described above. If the Common Stock is not registered, Sellers shall, at no
costs or liability to them, sell the Common Stock to persons identified by Buyer
in a private transaction exempt from the registration requirements of the
Securities Act and applicable Blue Sky laws, in which event Sellers shall be
credited with the aggregate Market Price of such shares regardless of the actual
proceeds from the sale. In the event that (i) the Market Price of the Common
Stock is not ascertainable, or (ii) there is no public or private market for the
sale of the Common Stock, for purposes of funding a Liquidated Indemnification
Liability, Sellers shall be credited with an amount equal to the Share
Liquidation Value of the Preferred Stock, and Sellers shall surrender to Buyer
Indemnified Parties such amount of shares of Preferred Stock having an aggregate
Share Liquidation Value equal to the Liquidated Indemnification Liability. For
purposes of this section. "Stock Proceeds" shall mean either (a) the actual
proceeds from the sale of registered shares of Common Stock at the Market Price;
(b) the aggregate Market Price of shares of unregistered Common Stock sold in a
private transaction; or (c) the aggregate Share Liquidation Value of the
Preferred Stock surrendered to fund the Liquidated Indemnification Liability.
<PAGE>
(ii) Second, to the extent that the Stock Proceeds do
not satisfy the Liquidated Indemnification Liability, subject to the limitations
set forth in section 5(e) above, Sellers shall deliver the balance of the
Liquidated Indemnification Liability in cash to Buyer Indemnified Parties within
ten days of the final determination of the deficit funding obligation.
With respect to recovery of Sellers' share of Environmental
Remedial Activities costs pursuant to section 5(h) hereof, payment of any
recovery with respect thereto shall be as set forth in section 5(h).
(g) TREATMENT OF INDEMNIFICATION. Each Party will treat all
payments made pursuant to this section 5(e) as adjustments to the Purchase Price
for all purposes. Any indemnification recovery shall be calculated after full
consideration of (i) any benefits or burdens of income tax consequences of
payments hereunder and (ii) the amount of any insurance proceeds or other third
party recoveries to which the Company or any of the indemnified Parties becomes
entitled.
(h) ENVIRONMENTAL REMEDIATION. Sellers acknowledge that they
shall be economically responsible for the Environmental Remediation Activities
as defined in this section 5(h). Buyer and Sellers acknowledge their mutual and
individual commitment to use the most cost effective approach to obtain
applicable state regulatory agency site closure. The Environmental Remedial
Activities described on the attached report of Baumgartner & Associates Site
Assessment Report (the "Report") shall be conducted to the extent necessary to
meet state and federal soil and groundwater standards (the "Environmental
Remedial Activities"). Environmental Remedial Activities shall not include any
work not specifically reflected in the Report. The Environmental Remedial
Activities shall be conducted by Sellers' environmental consultant. The
environmental consultant shall be approved by Buyer; such approval shall not be
unreasonably withheld or conditioned. Buyer shall have the right of approval
(which approval shall not be unreasonably withheld or conditioned) of the
Environmental Remediation Activities remedial action plan ("RAP"); and Buyer
shall have the right to provide onsite oversight of Sellers' consultant's field
activities including splitting of soil and/or groundwater samples or duplicate
sampling. Sellers shall have the absolute authority to direct all
Environmental Remedial Activities provided that they are in accord with the RAP
and any modification approved by Buyer. The costs of Buyer's consultant and any
other duplicative expenses shall be at the expense of the Buyer. Buyer or the
Corporation shall pay for the Environmental Remedial Activities costs
("Remediation Costs") as the same are incurred; however, Sellers shall pay
Buyers for Sellers' share of such costs as herein provided. For purposes
hereof, Sellers' share of such costs shall be delivered in accordance with the
following:
As Remediation Costs are incurred, Buyer shall provide
Sellers with copies of invoices for such costs. At the end of each calendar
quarter (March 31, June 30, September 30 and December 31), Buyer shall deliver a
quarterly remediation report (the "Quarterly Report") which shall set forth the
aggregate Remediation Costs incurred during that period. Upon delivery of the
Quarterly Report and pursuant to the Designation of Preferences, a sufficient
amount of shares of Series I Preferred Stock held
<PAGE>
in the Environmental Escrow shall be converted into shares of Common Stock
having a Market Price equal to the amount of the Remediation Costs incurred
during the relevant period. For purposes hereof, the term "Market Price" shall
have the meaning set forth in Section 5(a) of the Designation of Preferences.
Sellers shall pay the Remediation Costs as follows: Sellers shall, if legally
permissible to do so, endeavor (realizing that such shares may be restricted
securities or may not be legally saleable) to immediately sell (into the public
market for the Market Price thereof) all of the shares of Common Stock which
have been issued to them upon the conversion by Buyer of the Series I Preferred
Stock and shall, within five days of receipt of the proceeds of such sale,
deliver all of such proceeds to Buyer (unless such proceeds are required to be
paid directly to the Escrow Agent pursuant to the Environmental Escrow
Agreement). Sellers, at no cost or liability to them, shall cooperate with
Buyer, Buyer's counsel, and the Escrow Agent in the execution of all
documentation necessary or desirable for the conversion of the Preferred Stock
or the registration, if any, of the Common Stock to be issued to Sellers upon
such conversion. Buyer, at its sole cost and expense, shall cooperate and
assist Sellers in the execution of all documentation necessary or desirable for
the sale by Sellers of the Common Stock as described above. If the Common
Stock is not registered, Sellers shall, at no cost or liability to them, sell
the Common Stock to persons identified by RII in a private transaction exempt
from the registration requirements of the Securities Act and applicable Blue Sky
laws, in which event Sellers shall be credited with the aggregate Market Price
of such shares regardless of the actual proceeds from the sale. In the event
that (i) the Market Price of the Common Stock is not ascertainable, or (ii)
there is no public or private market for the sale of the Common Stock, for
purposes of funding Remediation Costs, Sellers shall be credited with an amount
equal to the Share Liquidation Value of the Preferred Stock, and Sellers shall
surrender to Buyer such amount of shares of Preferred Stock having an aggregate
Share Liquidation Value equal to the Remediation Costs for the relevant period.
As of a date which is 30 days prior to the second
anniversary of this Agreement (the "Settlement Date"), if the Environmental
Remediation Activities have not yet been completed, the Buyer and Sellers
(together with their respective environmental consultants) shall meet and
endeavor to determine and agree upon (using a discount rate of 8%) the present
value of the Remediation Costs which the parties reasonably estimate remain to
be completed, if any (the "Estimated Remediation Completion Cost"). If the
Buyer and the Sellers can agree on the Estimated Remediation Completion Cost,
the Sellers shall pay Buyer in the manner set forth in the preceding paragraph
above. If the Buyer and the Sellers cannot agree on the Estimated Remediation
Completion Cost, then the parties shall resolve this issue pursuant to
arbitration in section 8 hereof (provided, however, that the arbitrator shall be
a reputable and independent environmental consultant) and, following the
determination of such arbitrator, the Sellers shall pay the Estimated
Remediation Completion Cost in the manner set forth in the preceding paragraph
above.
[CONFIDENTIAL TREATMENT REQUESTED BY REGISTRANT]
<PAGE>
(i) INDEMNITY WITH RESPECT TO CERTAIN TAX MATTERS.
(a) The Buyer (including the Buyer's successors and
assigns), shall forever indemnify, defend and hold the Sellers harmless from and
against the amount of Taxes (including reasonable attorneys' and accounting fees
incurred in connection with the determination or defense of any such asserted
Taxes) payable by the Sellers as a result of the Code Section 338(h)(10)
election set forth in Section 2(d)(i), above, to the extent, with respect to
each Seller, such Taxes in the aggregate exceed amount of state and federal
income Taxes that would have been payable by each Seller had no Code Section
338(h)(10) election been made and instead the entire Purchase Price (except the
portion thereof which is a Tax Equalization Payment) was deemed to be paid for
each Seller's stock in a transaction treated as a taxable sale or exchange under
Section 1001 of the Code. For purposes of this Agreement, the total amount of
such indemnity payment is referred to as the "Tax Indemnity Payment." In
addition to the Tax Indemnity Payment, Buyer shall make a payment to the Sellers
to "gross-up" the Sellers for the Taxes the Sellers must pay on such Tax
Indemnity Payment, plus the Taxes the Sellers must pay on the "gross-up"
payment. All such Tax Indemnity Payments (including the applicable "gross-up"
amounts) shall be made in cash. It is understood that the obligation of Buyer
(including its successors and assigns) to make a Tax Indemnity Payment to each
Seller may occur on more than one occasion, such as in the case of a payment
made as a result of a federal income tax audit, and then a subsequent payment
made as a result of a state income tax audit.
(b) The obligation to make payments to Sellers pursuant to
5(i)(a) is not subject to setoff by Buyer without express written consent of the
Sellers, which consent may be withheld for any reason whatsoever in Sellers'
sole discretion. The obligation of the Buyer to indemnify each Seller as
provided in this Section shall not be subject to the basket provision set forth
in Section 5(e)(i).
6. CONFIDENTIALITY.
(a) The Sellers shall maintain the confidentiality of all
Confidential Information they have or obtain regarding the Corporation, the
Buyer and their Affiliates except as otherwise required by law. The Buyer shall
maintain the confidentiality of all Confidential Information it obtains
regarding the Sellers, except as otherwise required by law. In the event of the
breach of any of the provisions of this section 6, the non-breaching party, in
addition and supplementary to other rights and
<PAGE>
remedies existing in its favor, may apply to any court of law or equity of
competent jurisdiction for specific performance and/or injunctive or other
relief (without the posting of bond or other security) in order to enforce or
prevent any violations of the provisions hereof.
(b) In the event that any Party reasonably believes after
consultation with counsel that it is required by law to disclose any
Confidential Information described in this section 6, the disclosing party will
(i) provide the other Party with prompt notice before such disclosure in order
that such other Party may attempt to obtain a protective order or other
assurance that confidential treatment will be accorded such confidential
information and (ii) cooperate with the other Party in attempting to obtain such
order or assurance.
(c) Notwithstanding the above, after consultation with the
Sellers, Buyer may make such disclosures as are necessary to comply with any
federal or state securities laws applicable to Buyer. The parties acknowledge
that Buyer has previously issued a press release disclosing the existence of a
letter of intent among the parties and that Buyer will issue another press
release immediately after the Closing.
7. NONASSIGNABLE PERMITS.
(a) SELLERS TO USE ALL REASONABLE EFFORTS. Sellers shall, at
their expense, use all reasonable efforts, and Buyer shall cooperate with
Sellers, to obtain the consents and waivers set forth on the Disclosure
Schedule, and to resolve the impracticalities of assignment of any contracts and
to obtain any other consents and waivers necessary.
(b) IF WAIVERS OR CONSENTS CANNOT BE OBTAINED. To the extent
that the consents and waivers referred to in section 7(a) are not obtained by
Sellers, or until the impracticalities of transfer referred to therein are
resolved, Sellers shall use all reasonable efforts, at Buyer's sole expense, to
(i) provide to Buyer the benefits of any contract, license or other agreement,
all as referred to in section 7(a), and set forth on SCHEDULE 7(A),
(ii) cooperate in any reasonable and lawful arrangement designed to provide such
benefits to Buyer without incurring any financial obligation to Buyer, and
(iii) enforce for the account of Buyer any rights of Seller arising from the
contracts or other agreements referred to in section 7(a) against such issuer
thereof or other party or parties thereto (including the right to elect to
terminate in accordance with the terms thereof on the advice of Buyer).
8. ARBITRATION. Any controversy or claim arising out of or
relating to this Agreement or the breach hereof (except as provided in Section
2(h) hereof), shall be settled by a panel of three arbitrators in arbitration
conducted in Milwaukee, Wisconsin in accordance with the Commercial Arbitration
Rules of the American Arbitration Association, and judgment upon the award
rendered by the arbitrator may be entered in any court having jurisdiction
thereof. Notwithstanding the foregoing, the parties hereto agree that no person
shall be selected as an arbitrator unless such person is knowledgeable and
experienced in the purchase of a closely-held business (such as a businessman,
whose business experience has included the purchase or sale of another business,
or attorneys or accountants whose practice regularly includes mergers and
acquisitions). The arbitrators'
<PAGE>
decision shall be in writing and shall be final and nonappealable. The
arbitrators' authority shall include the ability to render equitable types of
relief and, in such event, any aforesaid court may enter an order enjoining
and/or compelling such actions as found by the arbitrator.
9 MISCELLANEOUS.
(a) PRESS RELEASES AND PUBLIC ANNOUNCEMENTS. Except as is
required by federal securities laws applicable to Buyer as a publicly held
company, no Party shall issue any press release or make any public announcement
relating to the subject matter of this Agreement without the prior written
approval of the other Parties. Buyer shall provide advance notice of any press
release or public announcement of the subject matter of this Agreement to Seller
for Sellers' comment thereon.
(b) NO THIRD-PARTY BENEFICIARIES. This Agreement shall not
confer any rights or remedies upon any Person other than the Parties and their
respective successors and permitted assigns.
(c) ENTIRE AGREEMENT. This Agreement (including the documents
referred to herein) constitutes the entire agreement between the Parties and
supersedes any prior understandings, agreements or representations by or between
the Parties, written or oral, to the extent they related in any way to the
subject matter hereof.
(d) SUCCESSION AND ASSIGNMENT. This Agreement shall be binding
upon and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement or
any of its rights, interests or obligations hereunder without the prior written
approval of the other Parties.
(e) COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(f) HEADINGS. The section headings contained in this Agreement
are inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(g) NOTICES. All notices, requests, demands, claims and other
communications hereunder will be in writing. Any notice, request, demand, claim
or other communication hereunder shall be deemed duly given if (and then three
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:
If to the Sellers:
Mr. Bertram Lans
11164 Walton Drive
Roscoe, IL 61073
<PAGE>
with a copy to:
Robert J. Johannes, Esq.
Michael, Best & Friedrich LLP
Suite 3300
100 East Wisconsin Avenue
Milwaukee, WI 53202
telephone: 414-271-6560
facsimile: 414-277-0656
If to the Buyer:
Thomas J. Wiens, Chairman and CEO
Recycling Industries, Inc.
384 Inverness Drive South, Suite 211
Englewood, Colorado 80112
telephone: 303-790-7372
facsimile: 303-790-4252
<PAGE>
with a copy to:
Chester P. Schwartz, Esq.
Reinhart, Boerner, Van Deuren, Norris & Rieselbach, P.C.
1700 Lincoln Street, Suite 3725
Denver, CO 80203
Telephone No. 303-831-0909
Facsimile No. 303-831-4805
Any Party may send any notice, request, demand, claim or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail or electronic mail), but no such notice, request,
demand, claim or other communication shall be deemed to have been duly given
unless and until it actually is received by the intended recipient. Any Party
may change the address to which notices, requests, demands, claims and other
communications hereunder are to be delivered by giving the other Parties notice
in the manner herein set forth.
(h) GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the domestic laws of Wisconsin without giving
effect to any choice or conflict of law provision or rule (whether of the State
of Wisconsin or any other jurisdiction) that would cause the application of the
laws of any jurisdiction other than the State of Wisconsin.
(i) AMENDMENTS AND WAIVERS. No amendment of any provision of
this Agreement shall be valid unless the same shall be in writing and signed by
the Buyer, and the Sellers. The Sellers may consent to any such amendment at
any time prior to the Closing with the prior authorization of each of their
respective Boards of Directors. No waiver by any Party of any default,
misrepresentation or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation or breach of warranty or covenant hereunder or affect
in any way any rights arising by virtue of any prior or subsequent such
occurrence.
(j) SEVERABILITY. Any term or provision of this Agreement that
is invalid or unenforceable in any situation in any jurisdiction shall not
affect the validity or enforceability of the remaining terms and provisions
hereof or the validity or enforceability of the offending term or provision in
any other situation or in any other jurisdiction.
(k) EXPENSES. Except as otherwise provided herein, the Buyer,
and the Sellers will each pay all of their own expenses (including fees and
expenses of legal counsel, accountants, investment bankers, brokers or other
representatives and consultants) incurred in connection with the negotiation of
this Agreement and the other agreements contemplated hereby and the performance
of its or their obligations hereunder and thereunder, and the consummation of
the transactions contemplated hereby and thereby (whether consummated or not).
<PAGE>
(l) CONSTRUCTION. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
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" shall mean including without limitation.
(m) INCORPORATION OF EXHIBITS AND SCHEDULES. The exhibits and
schedules identified in this Agreement are incorporated herein by reference and
made a part hereof.
(n) ATTORNEYS' FEES. In any action brought to enforce the terms
and conditions of this Agreement, the party prevailing on substantially all of
the material portions of its claims shall be entitled, as part of its award, to
reasonable attorneys' fees incurred.
(o) 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. Sellers, at any time and from time to time on and after the
Closing, upon request by Buyer 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 Buyer for the better conveying,
transferring, assigning, delivering, assuring and confirming the Acquired Assets
to Buyer.
<PAGE>
(q) From and after the date of this Agreement, the Buyer
covenants that each of the Sellers shall be allowed to remove personal items and
memorabilia from the Corporation, including, but not exclusive to, artwork, and
personal effects. The Sellers shall not remove any such property that is
necessary for the continued business operations of the Corporation. Each Seller
shall be entitled to continue to use for his business and personal use the lap
top computer presently used by such Seller and owned by the Corporation. At
such time as any of the Sellers is no longer employed by the Corporation or the
Buyer, such Seller shall immediately return to the Buyer such Seller's lap top
computer.
WM. LANS SONS' CO., INC.
BY /s/ Bertram Lans
---------------------------
Its President
---------------------------
/s/ Bertram Lans
---------------------------------
Bertram Lans
/s/ Bruce Lans
---------------------------------
Bruce Lans
/s/ Scott Lans
---------------------------------
Scott Lans
RECYCLING INDUSTRIES, INC.
BY /s/ Thomas J. Wiens
---------------------------
Its Chairman and CEO
---------------------------
Stock Purchase Agreement
<PAGE>
ASSET PURCHASE AGREEMENT
BY AND AMONG
RECYCLING INDUSTRIES OF WINSTON-SALEM, INC.
RECYCLING INDUSTRIES, INC.
BRENNER COMPANIES, INC.
FRANK BRENNER
MICHAEL BRENNER
AND
THE SHAREHOLDERS OF THE BRENNER COMPANIES, INC.
DECEMBER 4, 1997
<PAGE>
TABLE OF CONTENTS
ARTICLE 1
DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . -1-
ARTICLE 2
ACQUISITION OF SELLER ASSETS . . . . . . . . . . . . . . . . . . -6-
2.1 PURCHASE AND SALE OF THE SELLER ASSETS . . . . . . . . . -6-
2.2 EXCLUDED ASSETS. . . . . . . . . . . . . . . . . . . . . -8-
2.3 ASSUMED CONTRACTS. . . . . . . . . . . . . . . . . . . . -8-
2.4 ASSUMPTION OF LIABILITIES. . . . . . . . . . . . . . . . -8-
2.5 DEFERRED COMPENSATION. . . . . . . . . . . . . . . . . . -8-
2.6 COLLECTION OF ACCOUNTS RECEIVABLE. . . . . . . . . . . . -9-
ARTICLE 3
PURCHASE PRICE AND CLOSING . . . . . . . . . . . . . . . . . . . -9-
3.1 PURCHASE PRICE FOR SELLER ASSETS . . . . . . . . . . . . -9-
3.2 ADJUSTMENT OF THE PURCHASE PRICE . . . . . . . . . . . . -10-
3.3 ALLOCATION OF THE PURCHASE PRICE . . . . . . . . . . . . -11-
3.4 CLOSING OF THE PURCHASE. . . . . . . . . . . . . . . . . -11-
ARTICLE 4
REPRESENTATIONS OF SELLER AND THE SELLER OFFICERS. . . . . . . . -11-
4.1 DUE ORGANIZATION AND QUALIFICATION . . . . . . . . . . . -11-
4.2 TITLE TO PROPERTY. . . . . . . . . . . . . . . . . . . . -12-
4.3 AUTHORITY OF SELLER; CONSENTS. . . . . . . . . . . . . . -12-
4.4 FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . -13-
4.5 OWNERSHIP. . . . . . . . . . . . . . . . . . . . . . . . -13-
4.6 NO TAX LIENS; NO WAIVER. . . . . . . . . . . . . . . . . -13-
4.7 COMPLIANCE WITH LAWS . . . . . . . . . . . . . . . . . . -14-
4.8 PERMITS. . . . . . . . . . . . . . . . . . . . . . . . . -14-
4.9 LITIGATION . . . . . . . . . . . . . . . . . . . . . . . -14-
4.10 PRODUCT WARRANTY . . . . . . . . . . . . . . . . . . . . -15-
4.11 PRODUCT LIABILITY. . . . . . . . . . . . . . . . . . . . -15-
4.13 NOTES AND ACCOUNTS RECEIVABLE. . . . . . . . . . . . . . -15-
4.14 TANGIBLE PROPERTY. . . . . . . . . . . . . . . . . . . . -16-
4.15 INVENTORY. . . . . . . . . . . . . . . . . . . . . . . . -16-
(i)
<PAGE>
4.16 FABRICATED STEEL INVENTORY . . . . . . . . . . . . . . . -16-
4.17 INTELLECTUAL PROPERTY. . . . . . . . . . . . . . . . . . -16-
4.18 REAL PROPERTY. . . . . . . . . . . . . . . . . . . . . . -16-
4.19 LIABILITIES. . . . . . . . . . . . . . . . . . . . . . . -17-
4.20 SUPPLIERS AND CUSTOMERS. . . . . . . . . . . . . . . . . -17-
4.21 EMPLOYEE BENEFIT PLANS . . . . . . . . . . . . . . . . . -17-
4.22 CURTAILMENT OF OPERATIONS. . . . . . . . . . . . . . . . -18-
4.23 EMPLOYEE RELATIONS . . . . . . . . . . . . . . . . . . . -18-
4.24 INSURANCE. . . . . . . . . . . . . . . . . . . . . . . . -18-
4.25 POWERS OF ATTORNEY . . . . . . . . . . . . . . . . . . . -18-
4.26 RELATIONSHIPS. . . . . . . . . . . . . . . . . . . . . . -19-
4.27 BROKER'S OR FINDER'S FEES. . . . . . . . . . . . . . . . -19-
4.28 EMPLOYEE TRANSITION. . . . . . . . . . . . . . . . . . . -19-
4.29 ENVIRONMENTAL MATTERS. . . . . . . . . . . . . . . . . . -19-
4.32 DISCLOSURE . . . . . . . . . . . . . . . . . . . . . . . -20-
4.33 BEST EFFORTS . . . . . . . . . . . . . . . . . . . . . . -20-
ARTICLE 5
REPRESENTATIONS OF RECYCLING . . . . . . . . . . . . . . . . . . -21-
5.1 DUE INCORPORATION AND QUALIFICATION OF RII SUB . . . . . -21-
5.2 DUE INCORPORATION AND QUALIFICATION OF THE PARENT. . . . -21-
5.3 ARTICLES OF INCORPORATION AND BYLAWS . . . . . . . . . . -21-
5.4 AUTHORITY OF RII SUB AND THE PARENT. . . . . . . . . . . -21-
5.5 STOCK CONSIDERATION. . . . . . . . . . . . . . . . . . . -22-
5.6 1934 ACT REGISTRATION. . . . . . . . . . . . . . . . . . -22-
5.7 BROKER'S OR FINDER'S FEES. . . . . . . . . . . . . . . . -22-
5.8 DISCLOSURE . . . . . . . . . . . . . . . . . . . . . . . -22-
5.9 BEST EFFORTS . . . . . . . . . . . . . . . . . . . . . . -22-
ARTICLE 6
REGULATORY COMPLIANCE. . . . . . . . . . . . . . . . . . . . . . -23-
6.1 BULK SALES COMPLIANCE. . . . . . . . . . . . . . . . . . -23-
6.2 HART-SCOTT-RODINO ACT. . . . . . . . . . . . . . . . . . -23-
6.3 THE WARN ACT . . . . . . . . . . . . . . . . . . . . . . -23-
6.4 COBRA. . . . . . . . . . . . . . . . . . . . . . . . . . -23-
6.5 OTHER. . . . . . . . . . . . . . . . . . . . . . . . . . -23-
ARTICLE 7
ENVIRONMENTAL MATTERS. . . . . . . . . . . . . . . . . . . . . . -24-
7.1 ENVIRONMENTAL STUDIES. . . . . . . . . . . . . . . . . . -24-
(ii)
<PAGE>
7.2 ON-SITE LIABILITIES. . . . . . . . . . . . . . . . . . . -24-
7.3 OFF-SITE LIABILITIES . . . . . . . . . . . . . . . . . . -25-
ARTICLE 8
COVENANTS TO BE PERFORMED PRIOR TO THE CLOSING . . . . . . . . . -26-
8.1 TITLE INSURANCE. . . . . . . . . . . . . . . . . . . . . -26-
8.2 SURVEY.. . . . . . . . . . . . . . . . . . . . . . . . . -27-
8.3 MATERIAL ASSUMED CONTRACTS . . . . . . . . . . . . . . . -27-
8.4 POWER OF ATTORNEY. . . . . . . . . . . . . . . . . . . . -27-
8.5 CONDUCT OF BUSINESS. . . . . . . . . . . . . . . . . . . -27-
8.6 PRESERVATION OF BUSINESS . . . . . . . . . . . . . . . . -27-
8.7 NOTICE OF EVENTS . . . . . . . . . . . . . . . . . . . . -27-
8.8 EXAMINATIONS AND INVESTIGATIONS. . . . . . . . . . . . . -28-
8.9 NO NEGOTIATION BY SELLER OR THE SELLER OFFICERS. . . . . -28-
ARTICLE 9
CONDITIONS PRECEDENT TO THE OBLIGATION
OF RECYCLING TO CLOSE. . . . . . . . . . . . . . . . . . . . . . -29-
9.1 REPRESENTATIONS, WARRANTIES AND OTHER AGREEMENTS . . . . -29-
9.2 GOVERNMENTAL PERMITS AND APPROVALS . . . . . . . . . . . -29-
9.3 THIRD PARTY CONSENTS . . . . . . . . . . . . . . . . . . -29-
9.4 LITIGATION . . . . . . . . . . . . . . . . . . . . . . . -29-
9.5 REAL PROPERTY. . . . . . . . . . . . . . . . . . . . . . -29-
9.6 NO MATERIAL ADVERSE CHANGE . . . . . . . . . . . . . . . -30-
9.7 TRANSFER DOCUMENTS . . . . . . . . . . . . . . . . . . . -30-
9.8 ACQUISITION OF UNITED METAL RECYCLERS. . . . . . . . . . -31-
9.9 ENVIRONMENTAL ESCROW AGREEMENT . . . . . . . . . . . . . -31-
9.11 POWER OF ATTORNEY. . . . . . . . . . . . . . . . . . . . -31-
9.12 SATISFACTION WITH DUE DILIGENCE, FINANCIAL
PERFORMANCE AND APPROVAL . . . . . . . . . . . . . . . . -31-
9.13 SUBSCRIPTION AGREEMENT . . . . . . . . . . . . . . . . . -31-
9.15 LEGAL OPINION. . . . . . . . . . . . . . . . . . . . . . -31-
9.16 BOOKS AND RECORDS. . . . . . . . . . . . . . . . . . . . -31-
9.17 RESOLUTIONS. . . . . . . . . . . . . . . . . . . . . . . -31-
9.18 CERTIFICATES, ETC. OF SELLER OFFICERS AND SELLER . . . . -31-
9.19 PAYMENT OF SALES OR USE TAXES BY SELLER. . . . . . . . . -32-
9.20 PAYMENT OF ACCOUNTS PAYABLE. . . . . . . . . . . . . . . -32-
9.21 APPROVAL OF COUNSEL TO RECYCLING . . . . . . . . . . . . -32-
ARTICLE 10
(iii)
<PAGE>
CONDITIONS PRECEDENT TO THE OBLIGATION OF SELLER AND THE
SELLER OFFICERS TO CLOSE . . . . . . . . . . . . . . . . . . . . -32-
10.1 REPRESENTATIONS, WARRANTIES AND OTHER AGREEMENTS . . . . -32-
10.2 ACQUISITION OF UNITED METAL RECYCLERS. . . . . . . . . . -32-
10.4 THIRD PARTY CONSENTS . . . . . . . . . . . . . . . . . . -32-
10.5 LITIGATION . . . . . . . . . . . . . . . . . . . . . . . -33-
10.6 NO MATERIAL ADVERSE CHANGE . . . . . . . . . . . . . . . -33-
10.7 RESOLUTIONS. . . . . . . . . . . . . . . . . . . . . . . -33-
10.8 DESIGNATIONS OF STOCK CONSIDERATION. . . . . . . . . . . -33-
10.9 LEGAL OPINION. . . . . . . . . . . . . . . . . . . . . . -33-
10.10 THE PURCHASE PRICE . . . . . . . . . . . . . . . . . . . -33-
10.12 APPROVAL OF COUNSEL TO SELLER AND THE SELLER OWNERS. . . -33-
ARTICLE 11
ACTIONS TO BE TAKEN AT THE CLOSING . . . . . . . . . . . . . . . -34-
11.1 TRANSFER DOCUMENTS . . . . . . . . . . . . . . . . . . . -34-
11.2 THE PURCHASE PRICE . . . . . . . . . . . . . . . . . . . -34-
11.3 SUBSCRIPTION AGREEMENT . . . . . . . . . . . . . . . . . -34-
11.4 NON-COMPETITION AGREEMENTS . . . . . . . . . . . . . . . -34-
11.6 GENERAL WARRANTY DEED. . . . . . . . . . . . . . . . . . -34-
11.8 CLOSING CERTIFICATE OF SELLER. . . . . . . . . . . . . . -34-
11.9 CLOSING CERTIFICATE OF THE SELLER OFFICERS . . . . . . . -34-
11.11 CERTIFICATE REGARDING RESOLUTIONS OF SELLER. . . . . . . -35-
11.12 CERTIFICATE REGARDING RESOLUTIONS OF RII SUB AND PARENT. -35-
11.13 LEGAL OPINIONS . . . . . . . . . . . . . . . . . . . . . -35-
11.14 REAL PROPERTY CLOSING. . . . . . . . . . . . . . . . . . -35-
11.15 TITLES TO VEHICLES, MACHINERY AND EQUIPMENT. . . . . . . -35-
ARTICLE 12
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION. . . -36-
12.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES . . . . . . . -36-
12.2 INDEMNITY AGREEMENTS OF SELLER AND THE SELLER OWNERS . . -36-
12.3 INDEMNITY AGREEMENT OF RII SUB AND THE PARENT. . . . . . -37-
12.4 INDEMNIFICATION PROCEDURE FOR THIRD PARTY CLAIMS . . . . -38-
12.6 GOOD FAITH EFFORTS TO SETTLE DISPUTES. . . . . . . . . . -39-
12.7 FEES AND EXPENSES. . . . . . . . . . . . . . . . . . . . -39-
12.8 LITIGATION SUPPORT . . . . . . . . . . . . . . . . . . . -40-
(iv)
<PAGE>
ARTICLE 13
TERMINATION OF AGREEMENT . . . . . . . . . . . . . . . . . . . . -40-
13.1 TERMINATION. . . . . . . . . . . . . . . . . . . . . . . -40-
13.2 SURVIVAL . . . . . . . . . . . . . . . . . . . . . . . . -41-
ARTICLE 14
CERTAIN ADDITIONAL AGREEMENTS. . . . . . . . . . . . . . . . . . -41-
14.1 PUBLIC STATEMENTS; CONFIDENTIALITY OF INFORMATION. . . . -41-
14.2 REASSIGNMENT OF SELLER RECEIVABLES . . . . . . . . . . . -42-
14.3 TERMINATION OF PENSION PLAN. . . . . . . . . . . . . . . -42-
14.4 CONTINUATION OF MEDICAL BENEFITS . . . . . . . . . . . . -42-
14.6 WAIVERS AND CONSENTS . . . . . . . . . . . . . . . . . . -43-
14.7 NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . -43-
14.8 FURTHER ASSURANCES . . . . . . . . . . . . . . . . . . . -44-
14.9 RETENTION OF/ACCESS TO BUSINESS RECORDS. . . . . . . . . -44-
14.10 AUDIT BY RII SUB AND PARENT. . . . . . . . . . . . . . . -44-
14.11 ENTIRE AGREEMENT . . . . . . . . . . . . . . . . . . . . -45-
14.12 CONSTRUCTION . . . . . . . . . . . . . . . . . . . . . . -45-
14.13 RIGHTS OF THIRD PARTIES. . . . . . . . . . . . . . . . . -45-
14.14 HEADINGS . . . . . . . . . . . . . . . . . . . . . . . . -45-
14.15 GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . -45-
14.16 SUBMISSION TO JURISDICTION; WAIVERS. . . . . . . . . . . -46-
14.17 PARTIES IN INTEREST. . . . . . . . . . . . . . . . . . . -46-
14.18 COUNTERPARTS AND FACSIMILE SIGNATURES. . . . . . . . . . -46-
14.19 SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . -46-
14.20 CORPORATE AUTHORITY. . . . . . . . . . . . . . . . . . . -46-
LIST OF EXHIBITS
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -49-
LIST OF SCHEDULES. . . . . . . . . . . . . . . . . . . . . . . . -50-
(v)
<PAGE>
ASSET PURCHASE AGREEMENT
THIS AGREEMENT is made as of the 4th day of December, 1997, by and among
Recycling Industries of Winston-Salem, Inc., a Colorado corporation ("RII Sub"),
RECYCLING INDUSTRIES, INC., a Colorado corporation ("Parent"), BRENNER
COMPANIES, INC., a North Carolina corporation ("Seller"), Frank Brenner, and an
individual owner of Seller ("FB"), Michael Brenner, and an individual owner of
Seller ("MB") and the Seller Owners, as defined herein. Throughout this
Agreement, RII Sub and the Parent may be collectively referred to as
"Recycling;" and FB and MB may be collectively referred to as the "Seller
Officers." 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, RII Sub is a wholly-owned subsidiary of the Parent;
WHEREAS, RII Sub desires to acquire certain assets of Seller consisting of
substantially all of the tangible and intangible assets used in the ferrous and
non-ferrous metals recycling business and steel fabrication business conducted
by Seller at its facility located in Winston-Salem, North Carolina, and those
certain administrative office and other assets, as hereinafter identified, used
in connection with the operation of Seller's facility (collectively the "Seller
Assets");
WHEREAS, Seller desires to sell the Seller Assets;
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 Stock Consideration referred to herein; and
WHEREAS, the Seller Officers and the Seller Owners, as defined below, 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:
ARTICLE 1
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 Seller Assets from
Seller.
1.2 "Assumed Contracts" means those contracts, leases and other
agreements to which Seller is a party or beneficiary or which otherwise affect
the Business, including, but not limited to, open orders to purchase raw
materials or services in accordance with the Business' normal operating
procedures, leases of real or personal property relating to the Business, all
purchase orders, back orders, open orders or contracts from customers, including
the backlog and parts manufactured for or assigned to Seller.
1.3 "Business" means the metals recycling and steel fabrication business
and business operations as conducted by Seller on October 8, 1997, and
subsequent thereto, as a going concern.
1.4 "Closing" has the meaning set forth in Section 3.4, below.
1.5 "Closing Date" has the meaning set forth in Section 3.4, below.
1.6 "Closing Documents" means the other agreements, documents of title,
certificates, opinions and other documents required to be executed and delivered
under this Agreement as provided in Article 11, hereof.
1.7 "Closing Notification" has the meaning set forth in Section 3.4,
below.
1.8 "Current Assets" means current assets as defined by GAAP, net of any
reserves, excluding cash and cash equivalents, marketable securities,
Fabrication Receivables and Fabrication Retainage.
1.9 "Employee Benefit Plan" means any: (a) nonqualified deferred
compensation or retirement plan or arrangement which is an Employee Pension
Benefit Plan; (b) qualified defined contribution retirement plan or arrangement
which is an Employee Pension Benefit Plan; (c) qualified defined benefit
retirement plan or arrangement which is an Employee Pension Benefit Plan; or (d)
Employee Welfare Benefit Plan or material fringe benefit plan or program.
1.10 "Employee Pension Benefit Plan" has the meaning set forth in ERISA
Section 3(2).
1.11 "Employee Welfare Benefit Plan" has the meaning set forth in ERISA
Section 3(1).
1.12 "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,
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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"), the Clean Water Act ("CWA") and the Occupational Safety
and Health Act of 1970 ("OSHA"), all as may have been amended.
1.13 "Environmental Liabilities" means any and all liabilities for the
violation of, or remediation under, any Environmental Laws.
1.14 "ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
1.15 "Fabricated Steel Inventory" means new steel stock, serial drops
(comprised of unused material from work-in-process), supplies, manufactured,
fabricated and purchased parts, work in process, finished steel and finished
fabricated work used and fabricated by Seller as part of its steel fabrication
business. Fabrication Inventory will not include material on construction job
sites.
1.16 "Fabrication Receivables" means any receivables of any nature,
including accounts and notes receivable generated from the metals fabrication
business conducted by Seller.
1.17 "Fabrication Retainage" means the amount withheld by Seller's
customers pursuant to contract for the fabrication of steel products until
completion of the construction project to which the contract relates.
1.18 "GAAP" means generally accepted accounting principles consistently
applied in the United States.
1.19 "Hazardous Materials" means any substance (a) the presence of which
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) 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 or
petroleum products.
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1.20 "HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, 15 U.S.C. Sections 18a.
1.21 "Intellectual Property" has the meaning set forth in Section 2.1(e).
1.22 "Inventory Date" has the meaning set forth in Section 3.2.
1.23 "IRC" means the Internal Revenue Code of 1986, as amended.
1.24 "Knowledge" with respect to corporations means knowledge of the
executive officers and directors of the corporation, PROVIDED, HOWEVER, the
knowledge of a particular party shall not be imputed to any other individual
party.
1.25 "Lender" means Recycling's primary lender or equity participant
relating to the Transaction.
1.26 "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 Seller Assets or the Business, including any
liability for Taxes.
1.27 "Market Price" when referring to the Parent Common Stock, means the
closing price for the Parent 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 the Parent Common Stock as reported on the
Nasdaq SmallCap System.
1.28 "Material Assumed Contracts" means all Assumed Contracts other than
(a) contracts which do not require payment by Seller of $20,000 or more per year
and which otherwise are not material to the Business, (b) contracts in the
Ordinary Course of Business which do not require expenditures by Seller of
$20,000 or more per year, and (c) contracts terminable upon notice of 60 days or
less and which do not require expenditures by Seller of $20,000 or more per
year. The Material Assumed Contracts are listed on Schedule 1.28.
1.29 "Ordinary Course of Business" or "Ordinary Course" means the
ordinary course of business consistent with past custom and practice of Seller
(including with respect to quantity and frequency).
1.30 "Owned Facilities" means the real property and associated fixtures
owned by Seller as specifically described on Schedule 2.1(a).
1.31 "Parent Common Stock" means the common stock, $.001 par value per
share, of Recycling Industries, Inc., a Colorado corporation.
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1.32 "Parent Series F Preferred" means the 6 1/2% Redeemable Convertible
Preferred Stock of Parent described in the Designation of Series F 6 1/2%
Redeemable Convertible Preferred Stock attached hereto as EXHIBIT A.
1.33 "Parent Series G Preferred" means the 6 1/2% Redeemable Convertible
Preferred Stock of Parent described in the Designation of Series G 6 1/2%
Redeemable Convertible Preferred Stock attached hereto as EXHIBIT B.
1.34 "Pension Plan" means the Brenner Companies, Inc. Retirement Plan.
1.35 "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.
1.36 "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.
1.37 "Prepared Inventory" means all ferrous and non-ferrous inventory
that has been processed or at the time of purchase was in a form that
historically was deemed saleable without processing by Seller and as of the
Closing Date is ready for shipment to Seller's customers.
1.38 "Scrap Receivables" mean any receivables of any nature, including
accounts and notes receivable generated from the metals recycling business
conducted by Seller.
1.39 "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.
1.40 "Seller Financial Statements" has the meaning set forth in Section
4.4(b), below.
1.41 "Seller Owners" means the individuals and entities listed on
Schedule 4.5, including, if not listed, the Seller Officers.
1.42 "Seller Payables" has the meaning set forth in Section 9.20, below.
1.43 "Seller Receivables" has the meaning set forth in Section 2.1(b),
below.
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1.44 "Supply Inventory" means all of the parts, equipment, fuel,
lubricants, office supplies or other items consumed by or used in the operations
of the Business or the repair and maintenance of the Seller's vehicles,
machinery and equipment.
1.45 "Tangible Property" shall include the property described in Sections
2.1(a), 2.1(d), 2.1(h), and 2.1(i), below.
1.46 "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.
1.47 "Transaction" means the transactions contemplated by this Agreement
and the Closing Documents.
1.48 "Unprepared Inventory" means: (i) all scrap ferrous metal
comprised of materials such as obsolete, discarded or abandoned machinery,
appliances, equipment, automobiles, metal manufacturing scrap, casting and
fabricating scrap materials or other consumer and industrial ferrous goods or
by-products to be processed by shearing, torching, baling or otherwise rendered
suitable by Seller for its customers' consumption; and (ii) scrap non-ferrous
metal comprised of various non-magnetic alloys or co-mingled ferrous and
non-ferrous which traditionally would be processed by Seller before shipment.
Unprepared Inventory does not include any non-saleable ferrous or non-ferrous
materials resulting from Seller's operations or contained within dirt or other
non-processable medium within the Owned Facilities.
1.49 "1934 Act" means the Securities Exchange Act of 1934, as amended.
ARTICLE 2
ACQUISITION OF SELLER ASSETS
2.1 PURCHASE AND SALE OF THE SELLER ASSETS. At the Closing and subject
to the terms and conditions stated herein, Seller agrees to sell, assign, convey
and transfer to RII Sub, and RII Sub agrees to purchase from Seller, the Seller
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 defined in Section 2.2. Without limitation, the Seller
Assets shall include all of the items enumerated in subparagraphs (a) through
(n) below (with the exception of the Excluded Assets):
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(a) The Owned Facilities, including all buildings situated
thereon and all real property leasehold improvements and all rights in
easements, driveways and signs, as legally described on Schedule 2.1(a).
(b) All receivables of any nature, including accounts and notes
receivable, but excluding any Scrap Receivables that have been outstanding for
more than 60 days as of the Closing Date, any Fabrication Receivables and any
Fabrication Retainage (the "Seller Receivables");
(c) All Unprepared Inventory, Processed Inventory and Supply
Inventory;
(d) All vehicles, machinery and equipment, tools, furniture,
leasehold improvements, fixtures, vehicles, dies, jigs, and supplies, or any
related capitalized items and other tangible property owned by Seller located at
the Owned Facilities and/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(d), provided that dies, jigs,
supplies, tools and spare parts are included in the Seller Assets whether or not
listed on Schedule 2.1(d).
(e) Schedule 2.1(e) sets forth all of the intellectual property,
proprietary and business information of Seller relating to the Business,
including, all of Seller's right, title and interest in and to (collectively the
"Intellectual Property"):
(1) the exclusive use of the name "Brenner Iron & Metal,"
"Brenner Steel," and any variations thereof;
(2) all transferrable Permits and telephone and facsimile
numbers used by Seller to the extent the same are transferrable by Seller;
(3) the exclusive right to all inventions, discoveries, trade
secrets, designs, prototypes, formulas and know-how relating to the
Business;
(f) All patents (whether issued or pending), copyrights,
trademarks and tradenames;
(g) All business, financial and tax records relating to the
Business, including all sales data, pricing and cost information, customer and
supplier lists, credit records, sales literature and business and marketing
plans relating to the Business.
(h) 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 or used at the Seller Offices in connection with
the operation of the Business.
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(i) All accounting and other computer software relating to the
Business owned by Seller, including information interfaced with those systems,
as maintained by Seller at the Owned Facilities or the Seller Offices, all of
which are listed on Schedule 2.1(i); provided, however, that Seller shall not
make any warranties with respect to any software.
(j) All rights to customer and supplier lists, signs,
advertising, catalogues and brochures relating to the Business.
(k) All goodwill and other general intangibles related to the
Seller Assets.
(l) All claims, deposits, prepayments, refunds, rights of Seller
under the Assumed Contracts, causes of action, choses in action, rights of
recovery, rights of set-off and rights of recoupment related to the Seller
Assets or the Business, except for any income or employment tax refunds.
(m) All other assets of any nature useful and/or beneficial to
the Business and located at the Owned Facilities whether owned or leased by
Seller unless specifically described in Section 2.2 or on Schedule 2.2 as an
Excluded Asset.
Seller's sale, conveyance, assignment and transfer of the Seller Assets
shall be free and clear of all Security Interests, encumbrances, liabilities or
other obligations, except for those that have been insured over in the title
insurance policy to be delivered pursuant to Section 8.1.
2.2 EXCLUDED ASSETS. On the Closing Date, RII Sub shall not purchase
the Seller's interest in United Metal Recyclers or the other assets of Seller on
the Closing Date as set forth on Schedule 2.2 (the "Excluded Assets").
2.3 ASSUMED CONTRACTS. RII Sub shall assume the obligations of Seller
under the Assumed Contracts.
2.4 ASSUMPTION OF LIABILITIES. Other than as provided in Sections 2.3,
2.5, 7.2 and 7.3, RII Sub shall not assume any Liabilities or Environmental
Liabilities of Seller 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 Seller Assets not yet due and payable
shall be pro-rated at Closing based on the preceding year's actual ad-valorem
taxes paid and RII Sub shall assume its pro-rata share of such taxes.
2.5 DEFERRED COMPENSATION. RII Sub shall assume the deferred
compensation liabilities of Seller to Ann Brenner and Abraham Brenner or his
assignee in an aggregate amount not to exceed $1,090,000 pursuant to the written
agreements attached as Schedule 2.5.
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2.6 COLLECTION OF ACCOUNTS RECEIVABLE.
(a) If Seller receives payment on any of the Seller Receivables
included in the Seller Assets, Seller shall forthwith forward the same to RII
Sub. RII Sub shall have the right, during the normal business hours of Seller,
to review records of Seller solely to determine compliance with the provisions
of Section 2.6(a).
(b) If RII Sub receives payment on any Fabrication Receivables
or any Fabrication Retainage, RII Sub shall forthwith forward the same to
Seller. Seller shall have the right, during the normal business hours of RII
Sub, to review records of RII Sub solely to determine compliance with the
provisions of this Section 2.6(b).
(c) The provisions of this Section 2.6 shall survive the
Closing.
ARTICLE 3
PURCHASE PRICE AND CLOSING
3.1 PURCHASE PRICE FOR SELLER ASSETS.
(a) At Closing, RII Sub shall pay the total amount of
$28,090,000, inclusive of the assumption of the deferred compensation liability
of Seller assumed pursuant to Section 2.5 and subject to the adjustments, as
determined in accordance with Section 3.2 below (the "Purchase Price") to Seller
for the purchase of the Seller Assets. The Purchase Price shall be payable as
follows:
(1) $20,000,000, as adjusted in accordance with Section 3.2
below, in immediately available funds (the "Cash Consideration"), of which
$100,000 shall be allocated and paid to Michael Brenner in exchange for his
Non-Competition Agreement described in Section 11.4;
(2) $1,090,000, through the assumption of the deferred
compensation liability as provided in Section 2.5;
(3) $3,500,000 of Parent Series F Preferred delivered at Closing
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 F
Preferred. The form of Subscription Agreement is attached hereto as
Exhibit C.
(4) $3,500,000 of Parent Series G Preferred delivered at Closing
pursuant to the terms of the Subscription Agreement containing mandatory
registration rights for the Parent Common Stock issuable upon conversion of
the Parent Series G Preferred.
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Collectively, the Parent Series F Preferred and the Parent Series G
Preferred is referred to as the "Stock Consideration."
3.2 ADJUSTMENT OF THE PURCHASE PRICE.
(a) At Closing, the aggregate value of the Current Assets
included in the Seller Assets shall not be less than $10,000,000 as shown on a
preliminary balance sheet ("Preliminary Closing Balance Sheet") dated as of the
Closing Date and prepared by Seller on a basis consistent with the Seller
Financial Statements, except that Inventory shall be valued as provided in
Sections 3.2(b),(c) and (d) below and various accruals are to be estimated. To
the extent the value of the Current Assets on the Preliminary Closing Balance
Sheet exceeds or is less than $10,000,000, the Purchase Price shall be adjusted
accordingly and the cash portion of the Purchase Price shall be increased or
decreased, as appropriate, to reflect the adjustment. For purposes of this
adjustment, inventory shall be valued based upon a physical inventory taken by
Seller and observed by Recycling and its representatives on a date not more than
fifteen business days preceding the Closing (the "Inventory Date"). The
physical quantities of inventory observed on the Inventory Date shall be valued
as follows:
(b) Unprepared Inventory shall be valued as provided in Schedule
3.2.
(c) Prepared Inventory shall be valued as provided in Schedule
3.2.
(d) Fabricated Steel Inventory shall be valued as provided in
Schedule 3.2.
(e) Within 30 days after the Closing Date, Recycling and Seller
shall mutually prepare a substitute closing balance sheet for the Preliminary
Closing Balance Sheet, prepared on a basis consistent with the Seller Financial
Statements, except for Inventory which shall be valued as provided in Sections
3.2(b), (c) and (d) above, and except that accruals which are estimated on the
Preliminary Closing Balance Sheet shall be determined based on actual experience
to the extent practicable. Such substitute balance sheet (the "Final Closing
Balance Sheet") shall reflect any and all adjustments that should properly have
been reflected in the Preliminary Closing Balance Sheet. The Current Assets as
shown on the Final Closing Balance Sheet shall be determinative for the purpose
of applying Section 3.2(a). If the payment to Seller at Closing (based on the
Preliminary Closing Balance Sheet) shall be greater than the payment to which
Seller is entitled under the Final Closing Balance Sheet, Seller shall refund to
RII Sub the amount of the overpayment, in immediately available funds, within 5
business days following demand therefor. If such payment to Seller at Closing
shall be less than the payment to which Seller is entitled under the Final
Closing Balance Sheet, RII Sub shall pay to Seller the amount of the
underpayment, in immediately available funds, within 5 business days following
demand therefor.
(f) In addition to any adjustment resulting from the preparation
of the Final Closing Balance Sheet, after Closing the value of the Seller
Receivables included in Current Assets at Closing will be adjusted to reflect
Ordinary Course adjustments for shortages, weight variations,
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quality and quantity. Any increase in the value of the Seller Receivables as a
result of the foregoing adjustments shall be paid to Seller by the RII Sub in
immediately available funds. Any decrease in the in the value of the Seller
Receivables as a result of the foregoing adjustments shall be paid to the RII
Sub by Seller in immediately available funds. Any payments required pursuant to
this Section 3.2(f) shall be paid within five days of the determination of the
adjustment amount.
3.3 ALLOCATION OF THE PURCHASE PRICE.
(a) The Purchase Price shall be allocated among the Seller
Assets 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. RII Sub shall provide to Seller a Treasury Form 8594 within 45
days following the Closing Date.
(c) RII Sub and Seller 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 Friedlob Sanderson Raskin Paulson
& Tourtillott, LLC, 1400 Glenarm Place, Third Floor, Denver, Colorado, or at
such other place as selected by the Lender, in its sole and absolute discretion,
on the date and at the time set forth in the Closing Notification, given by RII
Sub in accordance with this section (the "Closing Date"). The Closing Date
shall be no later than December 5, 1997.
ARTICLE 4
REPRESENTATIONS OF SELLER AND THE SELLER OFFICERS
As an inducement to Recycling to enter into this Agreement and to complete
the Transaction, and with the knowledge that Recycling will rely thereon, Seller
and the Seller Officers, jointly and severally, represent and warrant to
Recycling that all of the representations and warranties in this Article 4 are
true, correct and complete as of the date of this Agreement.
4.1 DUE ORGANIZATION AND QUALIFICATION. (a) Seller is a corporation
duly organized, validly existing and in good standing under the laws of North
Carolina, and has the corporate power and lawful authority to carry on its
business as now being conducted.
(b) Seller is duly qualified or otherwise authorized to
transact business in each jurisdiction, listed in Schedule 4.1(b), in which the
nature of the business conducted or the character or location of the properties
owned makes such qualification necessary.
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4.2 TITLE TO PROPERTY. Seller has good, valid and marketable title to
all real and personal property included in the Seller 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, other than those
exceptions acceptable to RII Sub in its reasonable discretion and included as an
exception to the title policy to be delivered pursuant to Section 8.1.
4.3 AUTHORITY OF SELLER; CONSENTS. (a) Seller has full power and
authority to execute and deliver this Agreement and the Closing Documents and to
carry out the Transaction and Seller 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 Seller enforceable in accordance with their terms.
(c) Except for compliance with the HSR Act and any necessary
consents to the Material Assumed Contracts, 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 Seller 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 by Seller will:
(1) Be in violation of its respective Articles of Incorporation,
Bylaws or any other organizational document, or constitute a breach of any
evidence of indebtedness or agreement to which it 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 Seller 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 Seller Assets under any agreement or commitment to
which it or the Seller Assets are bound;
(4) Conflict with or result in the breach of any writ,
injunction or decree of any court or governmental instrumentality;
(5) Violate any statute, law or regulation of any jurisdiction
as such statute, law or regulation related to the Seller Assets; or
(6) Violate or cause any revocation of, or limitation on, any
Permit.
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4.4 FINANCIAL STATEMENTS.
(a) Seller has furnished, or will furnish, to Recycling the following
financial information, Schedules, and other disclosures:
(1) Audited financial statements for Seller for its fiscal years
ended December 31, 1994, 1995 and 1996, each prepared in accordance with
GAAP (collectively the "Audited Financial Statements"). RII Sub and Parent
acknowledge receipt of the Audited Financial Statements prior to the
execution of this Agreement.
(2) Unaudited financial statements prepared for the period from
January 1, 1997 through September 30, 1997 and within 20 business days
after each month ending following the date of this Agreement, unaudited
financial statements prepared in the same manner which they are currently
prepared (collectively the "Unaudited Financial Statements").
(3) Copies of Seller's tax returns for its tax years ended in
1993, 1994, 1995 and 1996.
(b) The Audited Financial Statements have been prepared in
accordance with GAAP and the Unaudited Financial Statements will be or have been
prepared in the same manner which they are currently prepared and present fairly
the financial condition of Seller as of such dates and the results of operations
of Seller for such periods; PROVIDED, HOWEVER, that the Unaudited Financial
Statements are subject to normal year-end adjustments and lack footnotes and
other presentation items. The Audited Financial Statements and the Unaudited
Financial Statements are collectively referred to as the "Seller Financial
Statements."
(c) Since December 31, 1996, there has been (1) no material
adverse change in the assets or liabilities, or in the business or financial
condition 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 Seller, except in the Ordinary Course which have not, in the
aggregate or individually, had a material adverse effect on the Business.
4.5 OWNERSHIP. Schedule 4.5 lists all of the owners of the voting
securities of Seller. This Agreement constitutes the valid and legally binding
obligation of each Seller Owner, enforceable in accordance with its terms and
conditions.
4.6 NO TAX LIENS; NO WAIVER.
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(a) None of the Seller 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 RII Sub 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) Seller has not waived any statute of limitations with
respect to the assertion of any liability under any federal, state, or local tax
law.
(c) Except as provided on Schedule 4.6(c), Seller 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 Seller and the Seller Officers, contemplated.
4.7 COMPLIANCE WITH LAWS. Except as set forth on Schedule 4.7:
(a) Neither Seller nor any of the Seller Officers is in
violation or has violated any applicable order, judgment, injunction, award or
decree relating to the Seller Assets. To the Knowledge of Seller and the Seller
Officers, except as disclosed on Schedule 4.29 or otherwise disclosed in the
Environmental Studies, neither Seller nor the Seller Officers has violated or is
in violation of 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 Seller 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 on Schedule 4.29 or in the
Environmental Studies or other documents provided to Recycling's agent, W.Z.
Baumgartner and Associates ("Baumgartner"), there is not pending or threatened
any notification of any governmental authority that Seller 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 Seller nor any Seller Officer has Knowledge of
any basis therefor, and (3) except as disclosed on Schedule 4.29, neither Seller
nor any Seller Officer has received any such notification of past violations of
such laws or regulations which have not been resolved.
4.8 PERMITS. Schedule 4.8 lists all Permits required by any
governmental entity related to the Business or operations of Seller. Except as
described on Schedule 4.8 or in the Environmental Studies delivered pursuant to
Section 7.1, Seller 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 Seller or any Seller Officer, threatened.
4.9 LITIGATION. Except as set forth on Schedule 4.9, there are no
outstanding orders, judgments, injunctions, awards or decrees of any court,
governmental or regulatory body or
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arbitration tribunal against or involving the Seller Assets or the Business.
There are no actions, suits or claims against Seller or any Seller Officer, or,
to the Knowledge of Seller or any Seller Officer, investigations (whether or not
the defense thereof or liabilities in respect thereof are covered by insurance)
pending or, to the Knowledge of Seller or any Seller Officer, threatened against
or involving the Seller Assets or the Business, nor to the Knowledge of Seller
or any Seller Officer, is there any basis therefor. Other than as provided in
Article VII, responsibility for any litigation involving the Seller 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 Seller and the Seller Officers.
4.10 PRODUCT WARRANTY. Each product fabricated by Brenner Steel has been
in conformity with all contractual commitments and specifications and all
express and implied warranties, and Seller has no Liability (and there is no
basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim or demand against Seller giving rise to
any Liability) for replacement or repair thereof or other damages in connection
therewith.
4.11 PRODUCT LIABILITY. Seller has no Liability (and there is no basis
for any present or future action, suit, proceeding, hearing, investigation,
charge, complaint, claim or demand against Seller giving rise to any Liability)
arising out of any injury to individuals or property as a result of the
ownership, use, possession or incorporation into any structure of any product
fabricated or sold by Seller.
4.12 CONTRACTS AND OTHER AGREEMENTS.
(a) Except for the contracts and agreements listed on Schedule
4.12(a), the Assumed Contracts or the contracts, leases, and other agreements
which will be completed or canceled at or prior to the Closing, Seller 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.
(b) All of the contracts, leases and other agreements which
constitute a part of the Assumed Contracts are valid and binding upon Seller in
accordance with their terms, and Seller 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 are listed on Schedule 1.28
will continue in full force and effect following the completion of the
Transaction. Seller is not in the process of negotiating or entering into any
contracts, leases, or other agreements described in this Section 4.12.
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4.13 NOTES AND ACCOUNTS RECEIVABLE. The Seller Receivables are reflected
properly in the books and records of Seller, are valid receivables subject to no
setoffs or counterclaims, are current, not over 90 days old with respect to
Scrap Receivables, and are collectible and will be collected within 90 days
after the Closing with respect to Scrap Receivables, subject only to the reserve
for bad debts set forth on the face of the Seller Financial Statements. Seller
Receivables not timely collected as provided herein shall be subject to
reassignment to Seller in accordance with Section 14.2.
4.14 TANGIBLE PROPERTY. All Tangible Property being used in the Business
at the date hereof is in good operating condition and repair, subject only to
normal wear and tear. Neither Seller nor any of the Seller Officers 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.
4.15 INVENTORY. The piles of Unprepared and Prepared Inventory included
in the Seller Assets 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.
4.16 FABRICATED STEEL INVENTORY. The Fabricated Steel Inventory consists
of new steel stock, serial drops, supplies, manufactured, fabricated and
purchased parts, work in process, finished steel and finished fabricated work,
all of which is merchantable, fit for the purpose for which it was procured,
manufactured or fabricated and meeting the specifications required by the
contract for its fabrication, and none of which is slow-moving, obsolete,
damaged, unusable or defective, subject only to the reserve for inventory
writedown set forth on the face of the Seller Financial Statements.
4.17 INTELLECTUAL PROPERTY.
(a) All Intellectual Property is owned outright by Seller, free and
clear of any Security Interest and there exist no obligations with respect to
any Intellectual Property requiring Seller to make any payment in respect of its
use or otherwise. Seller has never agreed to indemnify any Person for or
against any interference, infringement, misappropriation or other conflict with
respect to the Intellectual Property.
(b) Neither Seller nor any of the Seller Officers is aware of
any patent, invention, trade secret, trademark, service mark, trade name or
copyright of any other Person that is infringed by Seller, 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 Seller, and
neither Seller nor the Seller Officers know of any basis for any such charge or
claim.
4.18 REAL PROPERTY. The Owned Facilities include all real property
included in the Seller Assets. To the Knowledge of Seller and the Seller
Officers, with respect to each parcel of owned real property included within the
Owned Facilities:
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(a) Except as otherwise disclosed herein or in the Environmental
Studies or documents provided to Baumgartner, 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, easements,
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,
other than those which do not materially affect RII Sub's right to full
enjoyment of the Owned Facilities, and except as reflected in the survey
described in Section 8.2.
(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 Seller 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 sewage disposal, all of which services are 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.
4.19 LIABILITIES. Except as otherwise set forth in this Agreement or any
Schedule hereto, to the Knowledge of Seller and the Seller Officers, the
Business has no Liabilities other than (a) Liabilities fully and adequately
reflected or reserved against in the Seller Financial Statements and (b)
Liabilities incurred since December 31, 1996, in the Ordinary Course of
Business.
4.20 SUPPLIERS AND CUSTOMERS. Schedule 4.20 lists the 20 largest
suppliers and 20 largest customers of the Business. All purchase orders and
customer contracts were issued by Seller in the Ordinary Course of Business.
Other than Ordinary Course adjustments for shortages, weight variations, quality
and quantity, there are no agreements or understandings with any customers of
the vendors to Seller as to adjustments in pricing or cost which would reduce
the profit margin of any existing or contemplated contract or other
relationship.
4.21 EMPLOYEE BENEFIT PLANS. Schedule 4.21 lists all Employee Benefit
Plans maintained by Seller or to which it contributes for the benefit of any of
its current or former employees.
(a) To the Knowledge of Seller and the Seller Officers, each
Employee Benefit Plan (and each related trust or insurance contract)
complies in form and in operation in all respects with the applicable
requirements of ERISA and the IRC;
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(b) All contributions (including all employer contributions and
employees salary reduction contributions) which are due have been paid to
each Employee Benefit Plan;
(c) No unsatisfied liability has been incurred by Seller or any
ERISA affiliate of Seller and there is no material risk that such liability
will be incurred;
(d) To the Knowledge of Seller and the Seller Officers, no
charge, complaint, action, suit, proceeding, hearing, investigation, claim,
or demand with respect to the administration or the investment of the
assets of any Employee Benefit Plan (other than routine claims for
benefits) is pending;
(e) Except as provided on Schedule 4.21(e), Seller does not
provide any medical or other similar benefits to employees beyond
retirement; and
(f) Seller has delivered to RII Sub and Parent correct and
complete copies of the plan documents and summary plan descriptions, the
most recent Form 5500 Annual Report, and all related trust agreements,
insurance contracts, and other funding agreements which implement each
Employee Benefit Plan.
4.22 CURTAILMENT OF OPERATIONS. 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. To the Knowledge of
Seller and the Seller Officers, 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.
4.23 EMPLOYEE RELATIONS. Seller is not a party to a collective
bargaining agreement and, to its and the Seller Officers' Knowledge, Seller 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 Seller has not and is not engaged in any
unfair labor practice. There have been no organization efforts by any trade
unions within the last five years.
4.24 INSURANCE. Schedule 4.24 lists all insurance policies maintained by
Seller relating to the Business or the Owned Facilities, copies of which have
been provided to RII Sub, which cover the Seller Assets or the Business, the
nature of such policies, the amount and types of coverage, and the name of the
insurers and expiration dates. Seller 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.
4.25 POWERS OF ATTORNEY. There are no outstanding powers of attorney
executed on behalf of Seller, except in connection with Employee Benefit Plans.
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4.26 RELATIONSHIPS. Except as described on Schedule 4.26, no officer or
director of Seller possesses, directly or indirectly, any financial interest in,
or is a director, officer, stockholder or employee of, any corporation, firm,
association or business organization which is a manufacturer for, or client,
supplier, customer, lessor, lessee, or competitor of the Business. The Business
is not indebted to any officer, director, partner, or employee of Seller or to
any entity in which any such Person has a financial interest.
4.27 BROKER'S OR FINDER'S FEES. No agent, broker, Person or firm acting
on behalf of Seller or the Seller Owners 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.
4.28 EMPLOYEE TRANSITION. Schedule 4.28 lists all employees of Seller
who work or are customarily stationed at the Owned Facilities, their current
employment compensation (including 1996 bonus, if any), and other amounts if any
payable to each employee. On or before the first day subsequent to the Closing
Date, Seller will terminate Abraham Brenner and Edith Plaster (the "Terminated
Employees") and RII Sub will hire all other employees of the Business upon
consummation of the Closing but is not obligated to employ such persons for any
specified length of time (except to the extent RII Sub shall agree contractually
to do so). Seller will pay all compensation due the Terminated Employees, other
than the Deferred Compensation Liability assumed by RII Sub pursuant to Section
2.5, on or before the first day subsequent to the Closing. RII Sub will not be
responsible for any salaried or hourly health and life insurance obligations
incurred prior to the Closing for any Terminated Employees, 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 Terminated Employees other than the
Deferred Compensation Liability assumed by RII Sub pursuant to Section 2.5, will
be retained by Seller, including those accruing by reason of termination by
Seller. All employees of Seller hired by RII Sub will receive credit for their
employment period with Seller for purposes of determining vesting and
eligibility under the terms of RII Sub's or the Parent's Employee Benefit Plans,
to the extent allowable under applicable law, and will be entitled to take
vacation time in accordance with the policies of Seller (including credit for
time employed by Seller).
4.29 ENVIRONMENTAL MATTERS. Except as may be provided in the
Environmental Studies to be performed as contemplated by Section 7.1 of this
Agreement, or in documents provided to Baumgartner, copies of which have been
delivered to RII Sub, or disclosed on Schedules 4.8 or 4.29, to the Knowledge of
Seller and the Seller Officers:
(1) No Hazardous Material has been disposed of on, released
to or from, threatened to be released to or from or is presently at, on,
beneath, in or upon any of the Owned Facilities or upon adjacent parcels of
real estate in amounts or concentrations which constitute or constituted a
violation of, or which could reasonably be expected to give rise to
liability under, any Environmental Law.
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(2) There has been no generation, production, refining,
processing, manufacturing, use, storage, disposal, treatment, shipment or
receipt of a Hazardous Material at or from the Owned Facilities or relating
to the operation of Seller in violation of or in a manner that could give
rise to liability under Environmental Laws.
(3) The operations of Seller are in compliance and have
been in compliance with all applicable Environmental Laws, and there is no
violation of any Environmental Law with respect to the Owned Facilities
which could interfere with continued operation Seller's business or impair
its fair saleable value.
(4) Neither Seller nor the Seller Officers have received
any notice of violation, alleged violation, non-compliance, liability or
potential liability regarding environmental matters or compliance with
Environmental Laws with regard to the Owned Facilities from any Person, nor
does Seller or any of the Seller Officers have Knowledge or reason to
believe that any such notice will be received from or is being threatened
by any Person.
(5) No judicial proceedings, governmental administrative
actions, investigations or internal or non-public agency proceedings are
pending or threatened, under any Environmental Law, to which Seller is or
will be named as a party, nor are there any consent decrees, or other
decrees, consent orders, agreements, administrative orders or other orders,
judicial or administrative requirements outstanding under any Environmental
Law with respect to Seller.
4.30 COMPLIANCE WITH ADA. Seller has substantially complied with the
Americans with Disabilities Act of 1991, 42 U.S.C. Sections 12111, 12112 and
12209, as amended, and any similar applicable state regulations.
4.31 GUARANTEES. Seller is not a guarantor or otherwise is liable for
any liability or obligation of any other person, except as described in Schedule
4.29.
4.32 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 has been supplied by or on behalf of Seller or the
Seller Officers 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.
4.33 BEST EFFORTS. Seller will use its best efforts to obtain all
permits, consents and approvals and take such other actions in order to complete
the Transaction by the Closing Date. Seller 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.
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ARTICLE 5
REPRESENTATIONS OF RECYCLING
As an inducement to Seller and the Seller Officers to enter into this
Agreement and to complete the Transaction and with the knowledge that Seller and
the Seller Officers will rely thereon, RII Sub and the Parent jointly and
severally represent and warrant to Seller and the Seller Officers the following
(both as of the date hereof and as of the Closing Date):
5.1 DUE INCORPORATION AND QUALIFICATION OF RII SUB. RII Sub 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,
RII Sub will be duly qualified or otherwise authorized as a foreign corporation
to transact business and will be in good standing in the State of North
Carolina.
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. On or before the Closing
Date, RII Sub and the Parent will deliver to Seller 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 RII SUB AND THE PARENT. RII Sub 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 RII Sub 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 RII Sub or the Parent to enter into and perform its obligations under the
Closing Documents, and neither the execution and delivery of the Closing
Documents nor the completion of the Transaction will, with respect to RII Sub
and the Parent, individually:
(a) Be in violation of its Articles 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;
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(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 STOCK CONSIDERATION. The Stock Consideration when issued, and the
Parent Common Stock issuable upon conversion of the Stock Consideration, will be
duly authorized, fully paid and non-assessable, and not subject to any
preemptive rights, and free and clear of any Security Interests or other
encumbrances, except for transfer restrictions required under federal and state
securities laws.
5.6 1934 ACT REGISTRATION. The common stock of the Parent is registered
under Section 12(g) of the 1934 Act, and in accordance therewith, the Parent
files periodic reports, proxy statements, and other informational reports
required under the 1934 Act. The Parent has made all filings with the
Securities and Exchange Commission that it has been required to make under the
1934 Act (collectively, the "Public Reports"). The Public Reports were complete
and accurate when filed and no material events have occurred subsequent to the
filing of the Public Reports which would require additional filings or other
disclosure, other than a press release or similar announcement which has been
made when required.
5.7 BROKER'S OR FINDER'S FEES. No agent, broker, Person or firm acting
on behalf of RII Sub 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.
5.8 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 has been supplied by or on behalf of RII Sub 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.
5.9 BEST EFFORTS. RII Sub 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 RII Sub and the Parent in order to
complete the Transaction by the Closing Date. RII Sub 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.
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ARTICLE 6
REGULATORY COMPLIANCE
6.1 BULK SALES COMPLIANCE. RII Sub and Parent hereby waive compliance
by Seller with the provisions of the bulk sales or bulk transfer law of the
State of North Carolina and Seller and the Seller Owners agree to indemnify and
hold RII Sub and Parent harmless from any liability incurred as a result of the
failure to so comply.
6.2 HART-SCOTT-RODINO ACT. As soon as practicable, but in no event
later than five days after the date hereof, each party shall make any and all
filings required to be made under the HSR Act. Each of the parties will assist
the other as may be reasonably requested in connection with the preparation of
the Notification and Report Forms and related materials that it may be required
to file pursuant to the HSR Act and will use its best efforts to obtain an early
termination of the applicable waiting period and will make any further filings
that may be necessary, proper or advisable in connection therewith. Recycling
will pay all costs of preparing and making each initial filing and any
additional filings under the HSR Act, other than the costs and expenses of
Seller and its personnel and legal fees incurred by Seller in connection with
such filings.
6.3 THE WARN ACT. Seller 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. Seller has complied 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 terminated prior to the Closing.
Recycling shall offer COBRA benefits to all persons who became eligible for
COBRA due to a qualifying event that occurred under Seller's medical benefit
plans prior to the Closing Date, and who elected to receive COBRA benefits prior
to the Closing Date (and are eligible to continue to receive such benefits
following the Closing Date) or who were notified in timely manner of their COBRA
rights (or were not so notified but the notice period has not expired prior to
the Closing Date) and did not so elect but remain eligible to elect to receive
such benefits following the Closing Date. Other than as provided in the
immediately preceding sentence, any liabilities for any COBRA claims arising out
of transactions occurring prior to the Closing Date shall be the sole
responsibility of Seller.
6.5 OTHER. The parties shall prepare and promptly file all reports,
documents or notices with appropriate regulatory or other governmental
authorities, as may be required of them.
ARTICLE 7
ENVIRONMENTAL MATTERS
With respect to matters governed by Environmental Laws, the Parties hereby
agree as follows:
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7.1 ENVIRONMENTAL STUDIES. Baumgartner has commenced preparation of
ASTM Phase I and Phase II Environmental Site Assessments and Transaction Screen
Process (the "Environmental Studies"). Upon completion, the Environmental
Studies shall be delivered to Recycling and attached hereto as Schedule 7.1.
Recycling shall pay for the costs of the Environmental Studies, except that
Recycling shall be reimbursed by Seller, out of assets other than the Seller
Assets, for the cost of the initial visual reconnaissance performed by
Baumgartner.
7.2 ON-SITE LIABILITIES
(a) The Parties will work together in good faith and will seek
to achieve consensus regarding how to respond to any "Environmental Claims" (as
defined below), and will mutually agree on the timing of any cleanup. Recycling
will have the right to incur response costs up to $5,000 per occurrence, limited
to no more than three occurrences per year, without approval by Seller or the
Seller Officers. Any other response costs must be approved by Seller or will be
resolved by arbitration, with each party paying one-half of the arbitration
costs (neither party's share of the arbitration costs will be from the
"Environmental Escrow Account," as defined below).
(b) Seller and the Seller Owners, jointly and severally, will
indemnify, defend, and hold harmless RII Sub, Parent, and their respective
officers, directors, successors and assigns, from and against any and all
claims, demands, suits, judgments, settlements, penalties, liabilities, cleanup
costs and expenses, including reasonable fees of counsel and environmental
consultants ("Environmental Claims"), arising out of or resulting from on-site
events or occurrences at the Owned Facilities on or before the Closing Date or
any migration of contamination onto or under the Owned Facilities prior to the
Closing Date (collectively, "On-Site Liabilities"). Seller and the Seller
Owners will have no liability or indemnification obligations, however, if they
do not receive notice of an Environmental Claim within four years after the
Closing Date. Notwithstanding the foregoing, Seller and the Seller Owners'
liability and indemnity obligation for all On-Site Liabilities shall not exceed
[CONFIDENTIAL TREATMENT REQUESTED BY REGISTRANT] in the aggregate. At Closing,
the Parties will create an escrow account, funded by [CONFIDENTIAL TREATMENT
REQUESTED BY REGISTRANT] (the "Environmental Escrow Account") (all of which
amounts will be contributed to the Environmental Escrow Account by Seller at the
Closing). The Environmental Escrow Account will be administered as provided in
the Environmental Escrow Agreement in the form attached hereto as Exhibit D.
Recycling will look solely to the Environmental Escrow Account to satisfy Seller
and the Seller Owners' indemnification obligations for On-Site Liabilities as
provided in this Section 7.2.
(c) RII Sub and Recycling will indemnify, defend, and hold
harmless Seller, the Seller Owners and their respective officers, directors,
successors and assigns, from and against any and all Environmental Claims
arising out of or resulting from: (i) on-site events or occurrences at the Owned
Facilities after the Closing Date, and (ii) On-Site Liabilities arising from
events or occurrences before the Closing Date if Seller and the Seller Owners'
indemnification obligations pursuant to Section 7.2(b), above, have expired.
7.3 OFF-SITE LIABILITIES
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(a) Subject to the following conditions, RII Sub and Parent will
indemnify, defend and hold harmless Seller, the Seller Owners, and their
respective officers, directors, successors and assigns, from and against any and
all Environmental Claims pertaining to any non-owned disposal sites (i.e. waste
disposal sites that neither Seller nor any controlled party of Seller had any
ownership interest in or control over)(referred to herein as "NODS"). The
aggregate indemnification obligation of RII Sub and Parent shall be limited to
[CONFIDENTIAL TREATMENT REQUESTED BY REGISTRANT] for all NODS, subject to a
maximum liability for any individual NODS of [CONFIDENTIAL TREATMENT REQUESTED
BY REGISTRANT], up to a maximum of eight NODS which must be identified by Seller
to Recycling on or before the Closing. For the foregoing indemnification to be
available for a NODS, that NODS must meet the following conditions on the
Closing Date, to the Knowledge of Seller and the Seller Officers:
(1) The NODS are not included on the National Priorities List or
subject to any ongoing investigation by the United States Environmental
Protection Agency (the "EPA") or equivalent state agencies;
(2) the NODS are in material compliance with currently
applicable EPA regulations; and
(3) The NODS has any Pollution Legal Liability Insurance if
currently required by law.
(b) RII Sub and Parent will have 45 days after the Closing to
investigate each facility identified in subsection (a) above by Seller. If RII
Sub and parent conclude that any listed facility fails to meet any of the three
conditions listed in subsection (a) (irrespective of whether or not Seller or
the Seller Officers had knowledge of such failure), it may notify Seller within
the 45-day period of its intention to remove that facility from the list.
Within 45 days after receipt of such notice, Seller will take either of the
following actions:
(1) It may identify a replacement facility for each facility
removed by RII Sub and Parent. In that event, RII Sub and Parent
will have an additional 45 days to investigate each replacement
facility in the same manner as if each such facility had been
designated at the Closing.
(2) If more than two facilities have already been removed from
the list, and if Seller disagrees with RII Sub's and parent's
conclusion that a particular facility does not meet one or more of
the three conditions in subsection (a) above, Seller may notify RII
Sub and Parent of its disagreement. In that event, the parties will
submit the issue to expedited, binding arbitration before a single
arbitrator, in accordance with the commercial arbitration rules and
procedures of the American Arbitration Association. If the
arbitrator concludes that the proposed facility does not meet any of
the three conditions listed in subsection (a) above, Seller will
have 45 days after receipt of the arbitrator's decision to identify
a replacement facility. The parties will follow the same procedure
set forth in this subsection (b) for review of the replacement
facility.
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By using the procedure outlined in this subsection (b), the parties will
reach agreement as to the eight facilities to which RII Sub's and Parent's
indemnification and defense obligations under this Section will apply.
(c) Except as provided in this Section 7.3, with respect to NODS
RII Sub and Parent do not assume any liability for off-site Environmental Claims
whether known or unknown, arising from Seller's operations on or before the
Closing Date.
(d) Subject to subsection (a) of this Section 7.3, Seller and
the Seller Owners, jointly and severally, will indemnify, defend, and hold
harmless RII Sub, Parent, and their respective officers, directors, successors
and assigns, from and against any and all off-site Environmental Claims arising
out of the operations of Seller on or before the Closing Date.
(e) RII Sub and Parent, jointly and severally, will indemnify,
defend, and hold harmless Seller and the Seller Owners from and against any and
all off-site Environmental Claims arising out of the operations of RII Sub or
Parent after the Closing Date.
ARTICLE 8
COVENANTS TO BE PERFORMED PRIOR TO THE CLOSING
The parties hereto covenant and agree that between the date hereof and the
Closing Date:
8.1 TITLE INSURANCE. Prior to the Closing, Seller will obtain a title
insurance commitment, including obligations to issue endorsements as may be
required by RII Sub, with respect to the Owned Facilities, using a current North
Carolina standard form of American Land Title Association Owner's Title
Insurance Commitment issued by a title insurer satisfactory to RII Sub in the
amount specifically allocated by the parties on Schedule 3.3 to the Owned
Facilities, insuring title to the Owned Facilities to be in RII Sub as of the
Closing Date, subject only to such exceptions and exclusions as provided in this
Agreement or set forth on Schedule 8.1, or are acceptable to RII Sub and
insuring against all possible contractors', suppliers' and mechanics' lien
claims. Such title commitment is to contain a complete copy of each easement,
restriction, limitation, or condition of title which is referred to therein that
burdens or benefits said real property. At the Closing, the costs and premium
for the owner's policy of title insurance shall be paid by Seller. RII Sub
shall pay the cost of any endorsements to the owner's policy of title insurance
which may be requested by it and the cost of the mortgagee's policy of title
insurance. When delivered, the title commitment shall be attached as Schedule
8.1.
8.2 SURVEY. Seller, at its expense, will deliver to RII Sub an updated
survey of the Owned Facilities, certified to RII Sub, any mortgagee of RII Sub,
and the title insurer issuing title insurance in the Transaction as provided in
Section 8.1, prepared by a licensed surveyor and conforming to Minimum Technical
Standards adopted by the North Carolina Society of Professional
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Surveyors, or equivalent professional body or licensing agency, disclosing the
location of all improvements, easements, party walls, sidewalks, roadways,
utility lines, setback requirements, and other matters customarily shown on such
surveys, and showing access affirmatively to public streets and roads.
8.3 MATERIAL ASSUMED CONTRACTS. Seller will use its best efforts obtain
the written consent to the assumption by RII Sub of each of the Material Assumed
Contracts listed on Schedule 1.28 which require such consent.
8.4 POWER OF ATTORNEY. The Seller Officers shall obtain a power of
attorney from each of the Seller Owners authorizing either of the Seller
Officers to execute this Agreement on behalf of each of the Seller Owners.
8.5 CONDUCT OF BUSINESS. Seller will not engage in any practice, take
any action, incur any Liabilities, dispose of any assets or enter into any
transaction outside the Ordinary Course of Business and 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, correct and complete
on and as of the Closing Date.
8.6 PRESERVATION OF BUSINESS. Seller will keep the Business and the
Seller Assets substantially intact, including its present operations, physical
facilities and working conditions, and will use its best efforts to maintain
relationships with lessors, licensors, suppliers, customers, and employees.
Seller will provide to RII Sub a mailing list of all customers and a listing of
their accounts within ten business days (or the earliest possible date) prior to
the Closing Date to permit RII Sub to send announcements to the customers on or
after the Closing Date.
8.7 NOTICE OF EVENTS. Seller and the Seller Officers shall promptly
notify RII Sub 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 Seller or
the Seller Officers misleading.
8.8 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, Recycling shall be entitled, through its 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 Recycling deems necessary. No review, examination
or investigation by Recycling shall diminish or obviate any of the
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representations, warranties, covenants or agreements of Seller and the Seller
Officers under this Agreement.
(b) If this Agreement terminates: (1) RII Sub shall keep
confidential and shall not use in any manner any information or documents
obtained from Seller concerning the Business or the Seller Assets, unless
readily ascertainable from public or published information, or trade sources, or
subsequently developed by RII Sub independent of any investigation of the
Business, or received from a third party not under an obligation to Seller to
keep such information confidential, and (2) any documents obtained from Seller
shall be promptly returned to it.
8.9 NO NEGOTIATION BY SELLER OR THE SELLER OFFICERS. Between the date
hereof and the earlier of (1) the Closing Date; and (2) the date of termination
of this Agreement, neither the Seller Officers nor Seller shall, directly or
indirectly:
(a) Solicit, initiate or encourage the submission of inquiries,
proposals or offers from any Person (other than Recycling) relating to any
acquisition or purchase of assets (other than Prepared Inventory) of, or any
equity interest in, the Seller Assets or any exchange offer, merger,
consolidation, purchase of assets, liquidation, dissolution or similar
transaction involving the Seller 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 Recycling
and its representatives) any information with respect to the Seller 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 Recycling) to do or seek any of the foregoing.
Seller and the Seller Officers will notify Recycling 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.
8.10 SAFETY AUDITS. If requested by Recycling, Seller shall have safety
audits at each of its facility sites performed by a consulting firm mutually
acceptable to the parties to ensure compliance with OSHA and any other
applicable safety standards. All costs related to these audits shall be borne
by Recycling.
8.11 REMOVAL OF WASTE MATERIALS. Seller shall remove, at its cost, all
waste materials from the Owned Facilities and Business (E.G. trash, fluff) prior
to the Closing.
8.12 EMPLOYMENT AGREEMENTS. Parent and RII Sub shall use their
reasonable best efforts to enter into Employment Agreements with the Seller
Officers and certain employees of Seller, substantially in the form attached as
Exhibit E.
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ARTICLE 9
CONDITIONS PRECEDENT TO THE OBLIGATION
OF RECYCLING TO CLOSE
The obligation of Recycling 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 Recycling only in writing:
9.1 REPRESENTATIONS, WARRANTIES AND OTHER AGREEMENTS. The
representations, warranties and other agreements of Seller and the Seller
Officers contained in this Agreement shall be true, correct and complete in all
material respects on and as of the Closing Date, with the same force and effect
as though made on and as of the Closing Date. Seller and the Seller Officers
shall have performed and complied in all material respects with all covenants
and agreements required by this Agreement to be performed or complied with by
them on or prior to the Closing Date. Seller and the Seller Officers shall have
delivered to Recycling 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, including early termination of the waiting period under the HSR
Act, shall have been obtained and all shall have been transferred to the name of
RII Sub to the extent such permits are transferrable.
9.3 THIRD PARTY CONSENTS. All consents, permits and approvals from
parties to any Material Assumed Contracts that may be required in connection
with the performance by Seller 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.
9.4 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 RII Sub or the Parent a materially adverse
effect on the Seller Assets or the Business.
9.5 REAL PROPERTY. Except as set forth on Schedules 2.1(a) and 8.1,
with respect to the Owned Facilities:
(a) RII Sub shall receive good and marketable title by general
warranty deed for the Owned Facilities in proper form for recording in the State
of North Carolina;
(b) The Owned Facilities shall be free and clear of any Security
Interest, easement, covenant, or other restriction, except for installments of
special assessments not yet
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delinquent and recorded easements, covenants, matters shown by the Survey
attached as Schedule 8.2 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 therefor 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 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 Facilities.
9.6 NO MATERIAL ADVERSE CHANGE. There shall be no material adverse
change in the Business or the Seller Assets taken as a whole, financial or
otherwise, or, to either Seller's or the Seller Officers' Knowledge, Seller'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 Seller, fire, explosion, accident, casualty, labor
trouble, flood, riot, storm, condemnation or act of God or otherwise, and Seller
shall have delivered to Recycling a certificate, dated the Closing Date, to such
effect.
9.7 TRANSFER DOCUMENTS. RII Sub shall have received assignments and
such other instruments of sale, transfer, conveyance and assignment transferring
all of the Seller Assets from Seller to RII Sub, each in proper legal form to
transfer the Seller assets under applicable law.
9.8 ACQUISITION OF UNITED METAL RECYCLERS. Parent or an entity
controlled by Parent shall have acquired or be simultaneously acquiring the
assets and business of United Metal Recyclers, a North Carolina general
partnership.
9.9 ENVIRONMENTAL ESCROW AGREEMENT. RII Sub shall have received from
Seller the Environmental Escrow Agreement in the form attached hereto as Exhibit
D.
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9.10 ASSIGNMENT OF CONTRACTS. Seller shall have delivered to RII Sub
written consents to the assignment or assumption of each of the Material Assumed
Contracts as provided by Section 8.3.
9.11 POWER OF ATTORNEY. The Seller Officers shall have delivered to RII
Sub the power of attorney executed by each of the Seller Owners as provided by
Section 8.4.
9.12 SATISFACTION WITH DUE DILIGENCE, FINANCIAL PERFORMANCE AND APPROVAL.
Recycling shall be satisfied, in its sole discretion, with (a) the results of
its legal, accounting and financial due diligence investigation of Seller and
its operations, including, without limitation, the results of the Environmental
Studies and any Safety Audits, and (b) Seller's financial performance up to the
Closing Date. Further, the terms and conditions of this Agreement shall have
been approved by Recycling's senior management, its Board of Directors, and the
Lender, each in their sole discretion.
9.13 SUBSCRIPTION AGREEMENT. The Parent shall have received from Seller
the Subscription Agreement for the Stock Consideration in the form attached
hereto as Exhibit C.
9.14 NON-COMPETITION AGREEMENT. Recycling shall have received from
Seller, Michael Brenner and Abraham Brenner, executed Non-Competition Agreements
in the form attached hereto as Exhibit F.
9.15 LEGAL OPINION. Recycling shall receive an opinion from counsel to
the Seller and the Seller Officers in the Form attached hereto as Exhibit G.
9.16 BOOKS AND RECORDS. RII Sub shall have received the books, books of
account, papers, records, correspondence and instruments of, or relating to, the
Seller Assets and/or Business including, but not limited to, the information set
forth in Section 4.4(a) above.
9.17 RESOLUTIONS. There shall have been delivered to RII Sub and the
Parent a copy of the resolutions duly adopted by the board of directors and
Owners of Seller, authorizing and approving the execution and delivery by Seller
of this Agreement, and the completion by Seller of the Transaction, certified by
the secretary of Seller, dated as of the Closing Date.
9.18 CERTIFICATES, ETC. OF SELLER OFFICERS AND SELLER. The Seller
Officers and Seller shall have delivered all certified resolutions,
certificates, documents or instruments with respect to Seller's authority and
such other matters as RII Sub's and the Parent's counsel may have reasonably
requested prior to the Closing Date.
9.19 PAYMENT OF SALES OR USE TAXES BY SELLER. Seller shall have paid all
sales, use or personal property taxes or other similar taxes payable as a result
of the completion of the Transaction.
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9.20 PAYMENT OF ACCOUNTS PAYABLE. Within 60 days of the Closing Date,
Seller 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 "Seller Payables").
9.21 APPROVAL OF COUNSEL TO RECYCLING. All actions and proceedings
hereunder and all documents or other papers required to be delivered by Seller
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 Recycling, as to their form, which approval shall
not be unreasonably withheld or delayed.
ARTICLE 10
CONDITIONS PRECEDENT TO THE OBLIGATION OF SELLER AND THE
SELLER OFFICERS TO CLOSE
The obligations of Seller and the Seller Officers 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 Seller and the Seller
Officers only in writing:
10.1 REPRESENTATIONS, WARRANTIES AND OTHER AGREEMENTS. The
representations, warranties and other agreements of Recycling 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. Recycling 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. Recycling shall have delivered to Seller certificates, dated the Closing
Date, to such effect.
10.2 ACQUISITION OF UNITED METAL RECYCLERS. Parent or an entity
controlled by Parent shall have acquired or be simultaneously acquiring the
assets and business of United Metal Recyclers, a North Carolina general
partnership.
10.3 GOVERNMENTAL PERMITS AND APPROVALS. All permits and approvals from
any governmental or regulatory body required for the lawful completion of the
Transaction, including early termination of the waiting period under the HSR
Act, shall have been obtained.
10.4 THIRD PARTY CONSENTS. All consents, permits and approvals from
parties to any Material Assumed Contracts that may be required in connection
with the performance by Seller 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.
10.5 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
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discovery order in connection with such Transactions, or that has or could
reasonably be expected to have, in the opinion of Seller, a materially adverse
effect on the assets, properties, businesses, operations or financial condition
of RII Sub or the Parent.
10.6 NO MATERIAL ADVERSE CHANGE. There shall be no material adverse
change in the business or operations of RII Sub or Parent taken as a whole,
financial or otherwise, regardless of reason, including those changes that are
as a result of any legislative or regulatory change, and RII Sub and Parent
shall have delivered to Seller a certificate, dated the Closing Date, to such
effect.
10.7 RESOLUTIONS. There shall have been delivered to Seller a copy of
the resolutions duly adopted by the respective boards of directors of RII Sub
and Parent, authorizing and approving the execution and delivery by RII Sub and
Parent of this Agreement, and the completion by RII Sub and Parent of the
Transaction, certified by the secretary of RII Sub and Parent, dated as of the
Closing Date.
10.8 DESIGNATIONS OF STOCK CONSIDERATION. There shall have been
delivered to Seller and the Seller Officers a certified copy of the Certificates
of Designations, Rights and Preferences of the Parent Series F Preferred and the
parent Series G Preferred.
10.9 LEGAL OPINION. Seller shall receive an opinion from counsel to
Parent and RII Sub in the Form attached hereto as Exhibit H.
10.10 THE PURCHASE PRICE. RII Sub and the Parent shall have paid to
Seller the full Purchase Price for the Seller Assets and executed and delivered
all documents related thereto.
10.11 ENVIRONMENTAL ESCROW AGREEMENT. Seller and the Seller Officers
shall have received from RII Sub the Environmental Escrow Agreement in the form
attached hereto as Exhibit D.
10.12 APPROVAL OF COUNSEL TO SELLER AND THE SELLER OWNERS. All actions
and proceedings hereunder and all documents or other papers required to be
delivered by RII Sub and the Parent hereunder or in connection with the
completion of the Transaction, and all other related matters shall have been
approved by Womble Carlyle Sandridge & Rice, PLLC, counsel to Seller and the
Seller Owners as to their form, which approval shall not be unreasonably
withheld or delayed.
ARTICLE 11
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:
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11.1 TRANSFER DOCUMENTS. Seller shall deliver duly executed transfer
documents and/or instruments of assignment.
11.2 THE PURCHASE PRICE.
(a) RII Sub shall deliver to Seller the Cash Consideration; and
(b) Parent shall deliver to Seller the Stock Consideration.
11.3 SUBSCRIPTION AGREEMENT. Seller shall deliver to the Parent the
Subscription Agreement.
11.4 NON-COMPETITION AGREEMENTS. Seller, Michael Brenner and Abraham
Brenner shall deliver to RII Sub and the Parent their duly executed
Non-Competition Agreements.
11.5 ENVIRONMENTAL ESCROW AGREEMENT. Seller and the Seller Officers
shall deliver to RII Sub and RII Sub shall deliver to Seller and the Seller
Officers the Environmental Escrow Agreement, duly executed by the parties
thereto.
11.6 GENERAL WARRANTY DEED. Seller shall deliver a general warranty deed
for the Owned Facilities in proper form for recording in the State of North
Carolina.
11.7 CONTRACT ASSUMPTIONS. Seller shall deliver the written consents to
the assumption by RII Sub of the Material Assumed Contracts.
11.8 CLOSING CERTIFICATE OF SELLER. Seller shall deliver to RII Sub a
closing certificate dated the Closing Date, in a form satisfactory to RII Sub.
Such certificate shall be signed on behalf of Seller by an executive officer of
Seller.
11.9 CLOSING CERTIFICATE OF THE SELLER OFFICERS. The Seller Officers
shall deliver to RII Sub a closing certificate dated the Closing Date, in a form
satisfactory to RII Sub.
11.10 CLOSING CERTIFICATE OF PARENT AND RII SUB. Parent and RII Sub shall
deliver to Seller a closing certificate dated the Closing Date, in a form
satisfactory to Seller. Said certificate shall be signed on behalf of RII Sub
by an executive officer of RII Sub.
11.11 CERTIFICATE REGARDING RESOLUTIONS OF SELLER. Seller shall deliver
to Recycling copies of resolutions certified as required by Section 9.17.
11.12 CERTIFICATE REGARDING RESOLUTIONS OF RII SUB AND PARENT. RII Sub
and Parent shall deliver to Seller copies of resolutions certified as required
by Section 10.7.
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11.13 LEGAL OPINIONS. Counsel to the Parent and to Seller and the Seller
Owners shall deliver their respective legal opinions as required by Sections
9.15 and 10.9.
11.14 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
Seller at least one business day prior to the Closing. Normal closing
adjustments shall be charged to the parties as follows:
(a) ADJUSTMENTS CHARGED TO SELLER. Seller 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 Seller to RII Sub and the closing costs associated for the
Owned Facilities which shall be paid by the RII Sub and Seller in
accordance with local custom for commercial real estate transactions.
11.15 TITLES TO VEHICLES, MACHINERY AND EQUIPMENT. Seller shall deliver
to RII Sub duly executed titles to all vehicles, machinery and equipment
included in the Seller Assets free and clear of any Security Interests.
ARTICLE 12
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
12.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All of the
representations and warranties of the parties contained in this Agreement shall
survive the Closing and continue until Recycling's independent public
accountants shall have completed their first audit of the RII Sub
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subsequent to the Closing (but in no event later than the 90th day after the
close of the first fiscal year of Parent following the Closing), except as
follows:
(a) the representations and warranties contained in Section 4.6,
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;
and
(b) the representations and warranties with respect to on-site
liabilities contained in Section 4.29 and Section 7.2, which shall survive for
a period of four years after the Closing Date.
12.2 INDEMNITY AGREEMENTS OF SELLER AND THE SELLER OWNERS.
(a) Seller and the Seller Owners, jointly and severally, shall
indemnify, defend, reimburse and hold harmless RII Sub 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 or
warranty or nonfulfillment of any covenant on the part of Seller or the
Seller Officers contained in this Agreement;
(2) any misrepresentation in or omission from or nonfulfillment
of any covenant on the part of Seller or the Seller Officers contained in
any other agreement, certificate or other instrument furnished or to be
furnished to RII Sub or the Parent by Seller or the Seller Officers
pursuant to Article 11 of 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
Seller or the Seller Owners relating to the Business through the Closing
Date which are not paid by either Seller or the Seller Owners and which RII
Sub or the Parent pays;
(4) any and all negligence claims arising out of occurrences and
events prior to the Closing Date, except for environmental matters as
provided in Sections 7.2 and 7.3;
(5) any and all product liability and warranty claims for
products manufactured, fabricated (in whole or in part) or sold prior to
the Closing Date;
(6) for Environmental Claims limited to the extent provided in
Sections 7.2 and 7.3;
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(7) the failure of Seller to comply with the bulk sales or bulk
transfer law of the State of North Carolina;
(8) any liability of Seller not assumed by RII Sub;
(9) 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
Date unless subsequently modified by RII Sub in a manner which renders the
product to be infringing, to the extent that RII Sub and Parent are not
otherwise entitled to indemnification from another party;
(10) any liabilities to employees of the Business terminated in
accordance herewith and any future related actions; and
(11) reasonable fees and disbursements of counsel incident to any
of the foregoing.
(b) Notwithstanding the foregoing, Seller and the Seller Owners
shall not be required to indemnify RII Sub and Parent until the amount of
indemnification for any individual matter equals or exceeds $15,000 and the
aggregate amount of indemnification for all matters equals or exceeds $100,000,
at which time Seller and the Seller Owners shall indemnify and reimburse RII Sub
and the Parent for all such amounts incurred for each matter in excess of
$15,000, up to an aggregate liability for all such claims of $3,500,000,
PROVIDED, HOWEVER, that the foregoing limitations shall not apply to any
Environmental Claims pursuant to Sections 7.2 and 7.3, claims arising out of the
Pension Plan as provided in Section 14.3, any obligation of Seller and Seller
Owners under Section 14.21, the reassignment of any Seller Receivables as
provided in Section 14.2, or the failure of Seller to comply with the bulk sales
or bulk transfer law of the State of North Carolina.
12.3 INDEMNITY AGREEMENT OF RII SUB AND THE PARENT. RII Sub and the
Parent shall jointly and severally indemnify, defend, reimburse and hold
harmless Seller and the Seller Owners from and against:
(a) any and all claims, demands, penalties, fines, liabilities,
obligations, losses, settlements, damages, costs and expenses pertaining to the
Seller 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 RII Sub or the
Parent contained in this Agreement;
(2) any misrepresentation in or omission from or nonfulfillment
of any covenant on the part of RII Sub or the Parent contained in any other
agreement, certificate
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or other instrument furnished or to be furnished to Seller by RII Sub or
the Parent pursuant to Article 11 of this Agreement;
(3) any liability of Seller arising out of the Assumed
Contracts, unless such liability is due to the actions of Seller, or other
action, events and occurrences prior to the Closing Date;
(4) for Environmental Claims limited to the extent provided in
Sections 7.2 and 7.3;
(5) any liability for tort claims which are the result of
actions, events, occurrences or the operation of the business by RII Sub on
or after the Closing Date; and
(6) reasonable fees and disbursement of counsel incident to any
of the foregoing.
(b) Notwithstanding the foregoing, RII Sub and Parent shall not
be required to indemnify Seller and the Seller Owners until the amount of
indemnification for any individual matter equals or exceeds $15,000 and the
aggregate amount of indemnification for all matters equals or exceeds $100,000,
at which time RII Sub and Parent shall indemnify and reimburse Seller and the
Seller Owners for all such amounts incurred for each matter in excess of
$15,000, up to an aggregate liability for all such claims of $3,500,000,
PROVIDED, HOWEVER, that the foregoing limitations shall not apply to any
Environmental Claims pursuant to Sections 7.2 and 7.3, to any claims for breach
of the Assumed Contracts, any failure by RII Sub to pay the deferred
compensation amount assumed pursuant to Section 2.5, or the failure of RII Sub
or Parent to deliver the Purchase Price as and when required herein.
12.4 INDEMNIFICATION PROCEDURE FOR THIRD PARTY CLAIMS.
(a) NOTICE OF CLAIM AND DEFENSE.
(1) The party seeking indemnification under this Article 12
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
12.2 or Section 12.3, 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.
(2) 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
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seeking indemnification to assume the defense of such claim at any time
prior to settlement, compromise or final determination thereof.
(3) If the claim for which indemnification is being sought is
the result of a breach of this Agreement by the party obligated to
indemnify, such party shall have a period of 45 days to cure such breach.
If the obligated party does not cure the breach within 45 days, the party
seeking indemnification may proceed with all remedies available under this
agreement.
(b) 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 after such 30 day
period, ten days prior to the date each such sums are due.
12.5 LIMIT ON OBLIGATIONS. In no event shall either party have any
indemnification obligation under this Section 12 unless the party from whom
indemnification is sought receives a notice of a claim for indemnification
within the survival period described in Section 12.1.
12.6 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.
12.7 FEES AND EXPENSES. Notwithstanding any other provision in this
Article 12, in the event of any dispute or controversy between any of the
parties to this Agreement, each party shall pay its own legal fees and
out-of-pocket costs incurred by such party in enforcing or defending its rights
hereunder.
12.8 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
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or defending party, unless the contesting or defending party is entitled to
indemnification therefor under this Article 12, exclusive of per diem or hourly
rates of any personnel of the other party.
ARTICLE 13
TERMINATION OF AGREEMENT
13.1 TERMINATION. This Agreement may be terminated prior to or on the
Closing Date as follows:
(a) At the election of RII Sub 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 Recycling to close has not been fulfilled as of the
Closing Date, or if Seller or the Seller Officers has breached any material
representation or warranty, or failed to perform any covenant or agreement
contained in this Agreement PROVIDED, HOWEVER, Seller and the Seller
Officers shall have, at the election of Seller and the Seller Officers, at
least 15 days' notice to cure any such breach and the Closing Date shall be
extended by each day of such cure period;
(2) within 15 days after the receipt of the Environmental
Studies as provided in Section 7.1;
(3) RII Sub 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
(4) Prior to the Closing, RII Sub 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 Seller or any other matters unacceptable to them, in
their sole discretion.
(b) At the election of Seller or the Seller Officers at any time
prior to Closing if:
(1) any one or more of the material conditions precedent to the
obligation of Seller to close has not been fulfilled as of the Closing
Date;
(2) Seller is unable to obtain any required consent to the
assignment of any of the Material Assumed Contracts and such failure would
constitute a breach of the Material Assumed Contract;
(3) RII Sub or the Parent has breached any material
representation or warranty, or failed to perform any covenant or agreement
contained in this Agreement;
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provided, however, RII Sub and the Parent shall have at least 15 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.
(e) At any time after January 1, 1998 unless extended pursuant
to Section 3.4, at the election of any party so long as such party is not in
default under the terms of this Agreement.
13.2 SURVIVAL. If this Agreement is terminated pursuant to Section 13.1,
this Agreement shall become void and of no further force and effect, except for
the provisions of Sections 8.8(b) and 14.4, 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.
ARTICLE 14
CERTAIN ADDITIONAL AGREEMENTS
14.1 PUBLIC STATEMENTS; CONFIDENTIALITY OF INFORMATION. (a) No party
will make any public disclosure (including, without limitation, disclosure to
Seller's employees or customers) of this Agreement, the Acquisition, the
Purchase Price or the other terms and conditions of the Transaction without the
prior written 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.
(b) Subject to the Parent's obligation as a public company to
issue appropriate public announcements of material events, and subject to this
Section 14.1 hereof, each party will maintain the confidentiality of all
non-public information obtained from any other party.
(c) Notwithstanding anything in this Agreement to the contrary,
the Environmental Studies described in this Agreement under Section 7.1 above,
shall remain confidential and Recycling shall not make any disclosures of these
studies or estimates to any Person (other than its legal counsel, independent
accountants and lenders) without the prior written approval of Seller.
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14.2 REASSIGNMENT OF SELLER RECEIVABLES. For 180 days following the
Closing Date, RII Sub shall have the right to reassign to Seller any or all of
the Scrap Receivables which have not been collected within 90 days of the
Closing, as provided in Section 4.13. Prior to the reassignment of any Seller
Receivable, RII Sub agrees to use commercially reasonable efforts to collect any
past due amount, but shall not be required to engage a collection agent or
commence arbitration or litigation to collect. Within 15 days after any
reassignment of any Seller Receivables, to the extent not paid Seller and/or the
Seller Officers shall reimburse RII Sub dollar-for-dollar for the Seller
Receivables so reassigned with such payment being made in immediately available
funds.
14.3 TERMINATION OF PENSION PLAN. Seller shall discharge its obligations
under the Pension Plan, whether arising before, on or after the Closing Date,
and terminate the Pension Plan within 120 days after Closing. Seller and the
Seller Officers represent and warrant to RII Sub and Parent that the accrual of
benefits under such plan has been frozen. Seller and the Seller Owners shall
indemnify and hold harmless RII Sub and Parent against any and all claims and
liabilities of any nature arising out of the Pension Plan. At all times after
the Closing, Buyer and Parent shall
(a) cooperate with Seller regarding the handling of such
obligations of Seller and to make all books, records and documents relating to
such claims in their possession available to Seller, or its representatives,
upon request, for inspection and copying, and
(b) with reasonable promptness, provide Seller with copies of
any correspondence or documents that RII Sub or Parent receives regarding
the Pension Plan.
14.4 CONTINUATION OF MEDICAL BENEFITS. RII Sub agrees to continue the
medical benefits for the retired employees of Seller listed on Schedule 4.21(e),
on the same terms as such benefits have been provided by Seller, until each such
employee reaches age 65 and for the disabled employee listed on Schedule 4.21(e)
until the earlier of (i) one year after the Closing Date or (ii) the date the
disabled employee becomes eligible for Social Security retirement benefits.
14.5 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 completion
of the Transaction whether or not the Transaction is completed.
14.6 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.
14.7 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
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overnight delivery service; or (4) when delivered by facsimile transmission for
which automatic confirmation has been received, addressed in each case as
follows:
IF TO RII SUB OR THE PARENT:
Thomas J. Wiens, Chairman and CEO
Recycling Industries, Inc.
Recycling Industries of Winston-Salem, Inc.
384 Inverness Drive South, Suite 211
Englewood, Colorado 80112
telephone: (303) 790-7372
facsimile: (303) 790-4252
WITH A COPY TO:
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 SELLER OR THE SELLER OFFICERS:
Michael Brenner, President
Brenner Companies, Inc.
Brenner Iron & Metal Co.
Brenner Steel
3415 Glenn Avenue
Winston-Salem, North Carolina 27105
telephone: (910) 725-8333
facsimile: (910) 721-4734
WITH A COPY TO:
William A. Davis II
Womble Carlyle Sandridge & Rice, PLLC
200 West Second Street, 17th Floor
Winston-Salem, North Carolina 27101
telephone: (910) 721-3624
facsimile: (910) 733-8364
Any party may change its address by giving notice to every other party.
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14.8 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.
Seller and the Seller Officers, at any time and from time to time on and after
the Closing, upon request by RII Sub 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 RII
Sub or the Parent for the better conveying, transferring, assigning, delivering,
assuring and confirming the Seller Assets to RII Sub.
14.9 RETENTION OF/ACCESS TO BUSINESS RECORDS. For at least three years
following the Closing Date, RII Sub shall retain all business records related to
the Seller Assets or the Business. Following such three-year retention period,
and until six years following the Closing Date, records shall be destroyed in
accordance with the policies mutually agreed upon by Seller or the Seller
Officers and RII Sub. Following such six-year period, such records shall be
destroyed in accordance with the policies of RII Sub. During the six-year
period following the Closing Date, upon reasonable request by Seller or the
Seller Officers from time to time, and without further consideration, RII Sub
shall provide Seller or the Seller Officers access to or copies of said business
records which have not been previously destroyed.
14.10 AUDIT BY RII SUB AND PARENT. For a period of five years after the
Closing, Seller and the Seller Officers shall give Parent and RII Sub'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.
14.11 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.
14.12 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. The parties intend that
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.
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14.13 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.
14.14 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.
14.15 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 North Carolina, without regard to principles of conflicts
or choice of law.
14.16 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 North Carolina
located in Winston-Salem, North Carolina, the courts of the United States of
America for the District of North Carolina, 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 14.7.
14.17 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.
14.18 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.
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14.19 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.
14.20 CORPORATE AUTHORITY. The undersigned have executed this Agreement
with all requisite corporate authority.
14.21 ADOPTION OF SELLER'S 401(k) PLAN. RII Sub agrees to adopt and
continue to maintain Seller's 401(k) Plan until the earlier of (i) the adoption
of a new plan by RII Sub or Parent, or (ii) December 31, 1998. Seller and
Seller Owners agree to indemnify Parent and RII Sub for any costs, taxes,
liabilities or penalties Parent and RII Sub incur as a result of RII Sub
adopting Seller's 401(k) retirement plan, to the extent that such costs, taxes,
liabilities or penalties are attributable to the operation or documentation of
Seller's 401(k) retirement plan prior to the Closing Date. Seller or the Seller
Owners will reimburse RII Sub for the amount of any "top-heavy minimum
contribution" RII Sub may be required to make to Seller's 401(k) retirement plan
for the 1997 plan year, including any resulting penalties.
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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.
"RII SUB"
RECYCLING INDUSTRIES OF WINSTON-SALEM, INC.
Dated December 4, 1997 By: /s/ Thomas J. Wiens
---------------------------------------------------
Thomas J. Wiens, Chairman and Chief Executive
Officer
"PARENT"
RECYCLING INDUSTRIES, INC.
Dated December 4, 1997 By: /s/ Thomas J. Wiens
---------------------------------------------------
Thomas J. Wiens, Chairman and Chief Executive
Officer
"SELLER"
BRENNER COMPANIES, INC.
Dated December 4, 1997 By: /s/ Michael Brenner
---------------------------------------------------
PRESIDENT
---------------------------------------------------
"FB"
Dated December 4, 1997 /s/ Frank Brenner
---------------------------------------------------
Frank Brenner
"MB"
Dated December 4, 1997 /s/ Michael Brenner
---------------------------------------------------
Michael Brenner
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"Seller Owners," with respect to their indemnification
obligations under Sections 7.2, 7.3, 12.2 and 14.3
Dated December 4, 1997 By: /s/ Michael Brenner as Attorney-in-Fact
---------------------------------------------------
Michael Brenner, as Attorney-in-Fact
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LIST OF EXHIBITS
Exhibit A Certificate of Designations, Rights and
Preferences of the Series F 6 1/2% Redeemable
Convertible Preferred Stock of Recycling
Industries, Inc.
Exhibit B Certificate of Designations, Rights and
Preferences of the Series G 6 1/2% Redeemable
Convertible Preferred Stock of Recycling
Industries, Inc.
Exhibit C Form of Subscription Agreement
Exhibit D Environmental Escrow Agreement
Exhibit F Non-Competition Agreement
Exhibit G Form of Legal Opinion from Counsel for
Seller, the Seller Officers and the Seller
Owners
Exhibit H Form of Legal Opinion from Counsel for RII
Sub and Parent
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LIST OF SCHEDULES
Schedule 1.28 Material Assumed Contracts
Schedule 2.1(a) Owned Facilities - Legal Description
Schedule 2.1(d) Equipment
Schedule 2.1(e) Intellectual Property
Schedule 2.1(i) Computer Software
Schedule 2.2 Excluded Assets
Schedule 2.5 Deferred Compensation
Schedule 3.2 Inventory Valuation
Schedule 3.3 Allocation of Purchase Price
Schedule 4.1(b) Jurisdictions of Seller
Schedule 4.5 Seller Owners
Schedule 4.6(c) Tax Matters
Schedule 4.7 Legal Compliance
Schedule 4.8 Permits
Schedule 4.9 Litigation
Schedule 4.12(a) Other Contracts and Agreements
Schedule 4.20 Suppliers and Customers
Schedule 4.21 Employee Benefit Plans
Schedule 4.21(e) Post-Retirement Benefits
Schedule 4.24 Insurance Policies
Schedule 4.26 Relationships
Schedule 4.28 Employee Information
Schedule 4.29 Environmental Matters
Schedule 7.1 Environmental Studies
Schedule 8.1 Title Commitment
-50-
<PAGE>
ASSET PURCHASE AGREEMENT
BY AND AMONG
RECYCLING INDUSTRIES OF GREENSBORO, INC.
RECYCLING INDUSTRIES, INC.
UNITED METAL RECYCLERS
LEVIN BROTHERS, INC.
AND
BRENNER COMPANIES, INC.
DECEMBER 4, 1997
<PAGE>
TABLE OF CONTENTS
ARTICLE 1
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . .-2-
ARTICLE 2
ACQUISITION OF SELLER ASSETS. . . . . . . . . . . . . . . . . . . .-6-
2.1 PURCHASE AND SALE OF THE SELLER ASSETS. . . . . . . . . . . .-6-
2.3 ASSUMED CONTRACTS . . . . . . . . . . . . . . . . . . . . . .-8-
2.4 ASSUMPTION OF LIABILITIES . . . . . . . . . . . . . . . . . .-8-
2.5 COLLECTION OF ACCOUNTS RECEIVABLE . . . . . . . . . . . . . .-9-
ARTICLE 3
PURCHASE PRICE AND CLOSING. . . . . . . . . . . . . . . . . . . . .-9-
3.1 PURCHASE PRICE FOR SELLER ASSETS. . . . . . . . . . . . . . .-9-
3.4 ALLOCATION OF THE PURCHASE PRICE. . . . . . . . . . . . . . -11-
3.5 CLOSING OF THE PURCHASE . . . . . . . . . . . . . . . . . . -11-
ARTICLE 4
REPRESENTATIONS OF SELLER AND THE OWNERS. . . . . . . . . . . . . -11-
4.1 DUE ORGANIZATION AND QUALIFICATION. . . . . . . . . . . . . -11-
4.2 TITLE TO PROPERTY . . . . . . . . . . . . . . . . . . . . . -11-
4.3 AUTHORITY OF SELLER; CONSENTS . . . . . . . . . . . . . . . -12-
4.5 NO TAX LIENS; NO WAIVER . . . . . . . . . . . . . . . . . . -13-
4.6 COMPLIANCE WITH LAWS. . . . . . . . . . . . . . . . . . . . -14-
4.7 PERMITS . . . . . . . . . . . . . . . . . . . . . . . . . . -14-
4.8 LITIGATION. . . . . . . . . . . . . . . . . . . . . . . . . -14-
4.9 CONTRACTS AND OTHER AGREEMENTS. . . . . . . . . . . . . . . -15-
4.11 TANGIBLE PROPERTY . . . . . . . . . . . . . . . . . . . . . -15-
4.12 INVENTORY . . . . . . . . . . . . . . . . . . . . . . . . . -15-
4.13 INTELLECTUAL PROPERTY . . . . . . . . . . . . . . . . . . . -15-
4.14 REAL PROPERTY . . . . . . . . . . . . . . . . . . . . . . . -16-
4.15 LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . -16-
4.16 SUPPLIERS AND CUSTOMERS . . . . . . . . . . . . . . . . . . -16-
4.17 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . -17-
4.18 CURTAILMENT OF OPERATIONS . . . . . . . . . . . . . . . . . -17-
4.19 EMPLOYEE RELATIONS. . . . . . . . . . . . . . . . . . . . . -17-
4.20 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . -18-
4.21 POWERS OF ATTORNEY. . . . . . . . . . . . . . . . . . . . . -18-
(i)
<PAGE>
4.22 RELATIONSHIPS . . . . . . . . . . . . . . . . . . . . . . . -18-
4.23 BROKER'S OR FINDER'S FEES . . . . . . . . . . . . . . . . . -18-
4.24 EMPLOYEE TRANSITION . . . . . . . . . . . . . . . . . . . . -18-
4.25 ENVIRONMENTAL MATTERS . . . . . . . . . . . . . . . . . . . -18-
4.28 DISCLOSURE. . . . . . . . . . . . . . . . . . . . . . . . . -19-
4.29 BEST EFFORTS. . . . . . . . . . . . . . . . . . . . . . . . -20-
ARTICLE 5
REPRESENTATIONS OF RECYCLING. . . . . . . . . . . . . . . . . . . -20-
5.1 DUE INCORPORATION AND QUALIFICATION OF RII SUB. . . . . . . -20-
5.2 DUE INCORPORATION AND QUALIFICATION OF THE PARENT . . . . . -20-
5.3 ARTICLES OF INCORPORATION AND BYLAWS. . . . . . . . . . . . -20-
5.4 AUTHORITY OF RII SUB AND THE PARENT . . . . . . . . . . . . -20-
5.5 STOCK CONSIDERATION . . . . . . . . . . . . . . . . . . . . -21-
5.7 BROKER'S OR FINDER'S FEES . . . . . . . . . . . . . . . . . -21-
5.8 DISCLOSURE. . . . . . . . . . . . . . . . . . . . . . . . . -21-
5.9 BEST EFFORTS. . . . . . . . . . . . . . . . . . . . . . . . -22-
ARTICLE 6
REGULATORY COMPLIANCE . . . . . . . . . . . . . . . . . . . . . . -22-
6.1 BULK SALES COMPLIANCE . . . . . . . . . . . . . . . . . . . -22-
6.2 HART-SCOTT-RODINO ACT . . . . . . . . . . . . . . . . . . . -22-
6.3 THE WARN ACT. . . . . . . . . . . . . . . . . . . . . . . . -22-
6.4 COBRA . . . . . . . . . . . . . . . . . . . . . . . . . . . -22-
6.5 OTHER . . . . . . . . . . . . . . . . . . . . . . . . . . . -23-
ARTICLE 7
ENVIRONMENTAL MATTERS . . . . . . . . . . . . . . . . . . . . . . -23-
7.1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -23-
ENVIRONMENTAL STUDIES . . . . . . . . . . . . . . . . . . . . . . -23-
7.2 ON-SITE LIABILITIES AT THE OWNED FACILITIES . . . . . . . . -23-
7.3 ON-SITE LIABILITIES AT THE GRIFFIN FACILITY . . . . . . . . -24-
7.4 OFF-SITE LIABILITIES. . . . . . . . . . . . . . . . . . . . -25-
ARTICLE 8
COVENANTS TO BE PERFORMED PRIOR TO THE CLOSING. . . . . . . . . . -26-
8.1 TITLE INSURANCE . . . . . . . . . . . . . . . . . . . . . . -26-
8.2 SURVEY. . . . . . . . . . . . . . . . . . . . . . . . . . -27-
8.3 MATERIAL ASSUMED CONTRACTS. . . . . . . . . . . . . . . . . -27-
8.4 CONDUCT OF BUSINESS . . . . . . . . . . . . . . . . . . . . -27-
(ii)
<PAGE>
8.5 PRESERVATION OF BUSINESS. . . . . . . . . . . . . . . . . . -27-
8.6 NOTICE OF EVENTS. . . . . . . . . . . . . . . . . . . . . . -27-
8.7 EXAMINATIONS AND INVESTIGATIONS . . . . . . . . . . . . . . -27-
8.8 NO NEGOTIATION BY SELLER OR THE OWNERS. . . . . . . . . . . -28-
ARTICLE 9
CONDITIONS PRECEDENT TO THE OBLIGATION
OF RECYCLING TO CLOSE . . . . . . . . . . . . . . . . . . . . . . -29-
9.1 REPRESENTATIONS, WARRANTIES AND OTHER AGREEMENTS. . . . . . -29-
9.2 GOVERNMENTAL PERMITS AND APPROVALS. . . . . . . . . . . . . -29-
9.3 THIRD PARTY CONSENTS. . . . . . . . . . . . . . . . . . . . -29-
9.4 LITIGATION. . . . . . . . . . . . . . . . . . . . . . . . . -29-
9.5 REAL PROPERTY . . . . . . . . . . . . . . . . . . . . . . . -30-
9.6 NO MATERIAL ADVERSE CHANGE. . . . . . . . . . . . . . . . . -30-
9.7 TRANSFER DOCUMENTS. . . . . . . . . . . . . . . . . . . . . -30-
9.10 ASSIGNMENT OF CONTRACTS . . . . . . . . . . . . . . . . . . -31-
9.11 SATISFACTION WITH DUE DILIGENCE, FINANCIAL PERFORMANCE
AND APPROVAL. . . . . . . . . . . . . . . . . . . . . . . . -31-
9.12 SUBSCRIPTION AGREEMENT. . . . . . . . . . . . . . . . . . . -31-
9.14 LEGAL OPINION . . . . . . . . . . . . . . . . . . . . . . . -31-
9.15 BOOKS AND RECORDS . . . . . . . . . . . . . . . . . . . . . -31-
9.16 CERTIFICATES, ETC. OF OWNERS AND SELLER . . . . . . . . . . -31-
9.17 PAYMENT OF SALES OR USE TAXES BY SELLER . . . . . . . . . . -31-
9.18 PAYMENT OF ACCOUNTS PAYABLE . . . . . . . . . . . . . . . . -32-
9.19 APPROVAL OF COUNSEL TO RECYCLING. . . . . . . . . . . . . . -32-
ARTICLE 10
CONDITIONS PRECEDENT TO THE OBLIGATION OF SELLER
AND THE OWNERS TO CLOSE . . . . . . . . . . . . . . . . . . . . . -32-
10.1 REPRESENTATIONS, WARRANTIES AND OTHER AGREEMENTS. . . . . . -32-
10.3 GOVERNMENTAL PERMITS AND APPROVALS. . . . . . . . . . . . . -32-
10.5 LITIGATION. . . . . . . . . . . . . . . . . . . . . . . . . -32-
10.8 DESIGNATION OF STOCK CONSIDERATION. . . . . . . . . . . . . -33-
10.9 LEGAL OPINION . . . . . . . . . . . . . . . . . . . . . . . -33-
10.10 THE PURCHASE PRICE. . . . . . . . . . . . . . . . . . . . . -33-
10.12 APPROVAL OF COUNSEL TO SELLER AND THE OWNERS. . . . . . . . -33-
ARTICLE 11
ACTIONS TO BE TAKEN AT THE CLOSING. . . . . . . . . . . . . . . . -33-
11.1 TRANSFER DOCUMENTS. . . . . . . . . . . . . . . . . . . . . -34-
11.2 THE PURCHASE PRICE. . . . . . . . . . . . . . . . . . . . . -34-
11.3 SUBSCRIPTION AGREEMENT. . . . . . . . . . . . . . . . . . . -34-
(iii)
<PAGE>
11.4 NON-COMPETITION AGREEMENTS. . . . . . . . . . . . . . . . . -34-
11.6 GENERAL WARRANTY DEED . . . . . . . . . . . . . . . . . . . -34-
11.8 CLOSING CERTIFICATE OF SELLER . . . . . . . . . . . . . . . -34-
11.9 CLOSING CERTIFICATE OF THE OWNERS . . . . . . . . . . . . . -34-
11.11 CERTIFICATE REGARDING RESOLUTIONS OF SELLER . . . . . . . . -34-
11.12 LEGAL OPINIONS. . . . . . . . . . . . . . . . . . . . . . . -34-
11.13 REAL PROPERTY CLOSING . . . . . . . . . . . . . . . . . . . -35-
11.14 TITLES TO VEHICLES, MACHINERY AND EQUIPMENT . . . . . . . . -35-
ARTICLE 12
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION . . . -35-
12.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. . . . . . . . . -35-
12.2 INDEMNITY AGREEMENTS OF SELLER AND THE OWNERS . . . . . . . -36-
12.3 INDEMNITY AGREEMENT OF RII SUB AND THE PARENT . . . . . . . -37-
12.4 INDEMNIFICATION PROCEDURE FOR THIRD PARTY CLAIMS. . . . . . -38-
12.5 LIMIT ON OBLIGATIONS. . . . . . . . . . . . . . . . . . . . -39-
12.6 GOOD FAITH EFFORTS TO SETTLE DISPUTES . . . . . . . . . . . -39-
12.7 FEES AND EXPENSES . . . . . . . . . . . . . . . . . . . . . -39-
12.8 LITIGATION SUPPORT. . . . . . . . . . . . . . . . . . . . . -39-
ARTICLE 13
TERMINATION OF AGREEMENT. . . . . . . . . . . . . . . . . . . . . -39-
13.1 TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . -39-
13.2 SURVIVAL. . . . . . . . . . . . . . . . . . . . . . . . . . -41-
ARTICLE 14
CERTAIN ADDITIONAL AGREEMENTS . . . . . . . . . . . . . . . . . . -41-
14.1 PUBLIC STATEMENTS; CONFIDENTIALITY OF INFORMATION . . . . . -41-
14.3 EXPENSES. . . . . . . . . . . . . . . . . . . . . . . . . . -42-
14.4 WAIVERS AND CONSENTS. . . . . . . . . . . . . . . . . . . . -42-
14.5 NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . -42-
14.6 FURTHER ASSURANCES. . . . . . . . . . . . . . . . . . . . . -43-
14.7 RETENTION OF/ACCESS TO BUSINESS RECORDS . . . . . . . . . . -43-
14.8 AUDIT BY RII SUB AND PARENT . . . . . . . . . . . . . . . . -44-
14.9 ENTIRE AGREEMENT. . . . . . . . . . . . . . . . . . . . . . -44-
14.10 CONSTRUCTION. . . . . . . . . . . . . . . . . . . . . . . . -44-
14.11 RIGHTS OF THIRD PARTIES . . . . . . . . . . . . . . . . . . -44-
14.12 HEADINGS. . . . . . . . . . . . . . . . . . . . . . . . . . -44-
14.13 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . -44-
14.14 SUBMISSION TO JURISDICTION; WAIVERS . . . . . . . . . . . . -45-
(iv)
<PAGE>
14.15 PARTIES IN INTEREST . . . . . . . . . . . . . . . . . . . . -45-
14.16 COUNTERPARTS AND FACSIMILE SIGNATURES . . . . . . . . . . . -45-
14.17 SEVERABILITY. . . . . . . . . . . . . . . . . . . . . . . . -45-
14.18 CORPORATE OR PARTNERSHIP AUTHORITY. . . . . . . . . . . . . -45-
LIST OF EXHIBITS
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -48-
LIST OF SCHEDULES . . . . . . . . . . . . . . . . . . . . . . . . -49-
(v)
<PAGE>
ASSET PURCHASE AGREEMENT
THIS AGREEMENT is made as of the 4th day of December, 1997, by and among
RECYCLING INDUSTRIES OF GREENSBORO, INC., a Colorado corporation ("RII Sub"),
RECYCLING INDUSTRIES, INC., a Colorado corporation ("Parent"), UNITED METAL
RECYCLERS, a North Carolina general partnership ("Seller") and the general
partners of Seller, BRENNER COMPANIES, INC., a North Carolina corporation
("BCI"), LEVIN BROTHERS, INC., a North Carolina corporation ("LBI") and FRANK
BRENNER, MICHAEL BRENNER, SEYMOUR M. LEVIN and JACK L. LEVIN, all individuals in
their capacities as equity owners, directors, officers, general partners and/or
managers of LBI and/or BCI. Throughout this Agreement, RII Sub and the Parent
may be collectively referred to as "Recycling;" LBI and BCI may be collectively
referred to as the "Owners;" and Frank Brenner, Michael Brenner and Jack Levin
may be referred to as the "Individuals." 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, RII Sub is a wholly-owned subsidiary of the Parent;
WHEREAS, LBI and BCI are the general partners in Seller and Seller has no
other general or limited partners;
WHEREAS, RII Sub desires to acquire certain assets of Seller consisting of
substantially all of the tangible and intangible assets of Seller, including,
without limitation, all of Seller's right, title and interest in the limited
liability company interest of United Metal-D. H. Griffin Recyclers, L.L.C., a
joint venture 50% owned by Seller and 50% owned by D. H. Griffin Family Limited
Partnership (collectively, the "Seller Assets");
WHEREAS, Seller desires to sell the Seller Assets;
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 Stock Consideration referred to herein; and
WHEREAS, the Owners and the Individuals 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:
<PAGE>
ARTICLE 1
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.
1.1 "Acquisition" means the acquisition by RII Sub of the Seller Assets
from Seller.
1.2 "Assumed Contracts" means those contracts, leases and other agreements
to which Seller is a party or beneficiary or which otherwise affect the
Business, including, but not limited to, open orders to purchase raw materials
or services in accordance with the Business' normal operating procedures, leases
of real or personal property relating to the Business, all purchase orders, back
orders, open orders or contracts from customers, including the backlog and parts
manufactured for or assigned to Seller.
1.3 "Business" means the metals recycling business and business operations
as conducted by Seller on October 8, 1997, and subsequent thereto, as a going
concern.
1.4 "Closing" has the meaning set forth in Section 3.5.
1.5 "Closing Date" has the meaning set forth in Section 3.5.
1.6 "Closing Documents" means the other agreements, documents of title,
certificates, opinions and other documents required to be executed and delivered
under this Agreement as provided in Article 11, hereof.
1.7 "Closing Notification" has the meaning set forth in Section 3.5.
1.8 "Current Assets" means the current assets as defined by GAAP, net of
any reserves, including the Griffin Note, excluding cash and cash equivalents,
marketable securities, and Retained Receivables. "Retained Receivables" means
those accounts receivable of Seller to be retained by Seller and not purchased
by RII Sub, as listed on Schedule 1.8..
1.9 "Employee Benefit Plan" means any: (a) nonqualified deferred
compensation or retirement plan or arrangement which is an Employee Pension
Benefit Plan; (b) qualified defined contribution retirement plan or arrangement
which is an Employee Pension Benefit Plan; (c) qualified defined benefit
retirement plan or arrangement which is an Employee Pension Benefit Plan; or (d)
Employee Welfare Benefit Plan or material fringe benefit plan or program.
1.10 "Employee Pension Benefit Plan" has the meaning set forth in ERISA
Section 3(2).
1.11 "Employee Welfare Benefit Plan" has the meaning set forth in ERISA
Section 3(1).
-2-
<PAGE>
1.12 "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"), the Clean Water Act
("CWA") and the Occupational Safety and Health Act of 1970 ("OSHA"), all as may
have been amended.
1.13 "Environmental Liabilities" means any and all liabilities for the
violation of, or remediation under, any Environmental Laws.
1.14 "ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
1.15 "GAAP" means generally accepted accounting principles consistently
applied in the United States.
1.16 "Griffin Note" means that Promissory Note between Seller and D.H.
Griffin Family Limited Partnership as maker dated April 30, 1996, a copy of
which is attached hereto as Schedule 1.16.
1.17 "Hazardous Materials" means any substance (a) the presence of which
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) 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 or
petroleum products.
1.18 "HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, 15 U.S.C. Sections 18a.
-3-
<PAGE>
1.19 "Intellectual Property" has the meaning set forth in Section 2.1(f).
1.20 "Inventory Date" has the meaning set forth in Section 3.3.
1.21 "IRC" means the Internal Revenue Code of 1986, as amended.
1.22 "Knowledge" with respect to corporations, shall mean knowledge of
the executive officers of the corporation and with respect to partnerships shall
mean knowledge of the partners and the general manager or operations manager of
the partnership; PROVIDED, HOWEVER, the knowledge of a particular party shall
not be imputed to any other individual party.
1.23 "Lender" means Recycling's primary lender or equity participant
relating to the Transaction.
1.24 "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 Seller Assets or the Business, including any
liability for Taxes.
1.25 "Market Price" when referring to the Parent Common Stock, means the
closing price for the Parent 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 the Parent Common Stock as reported on the
Nasdaq Market system.
1.26 "Material Assumed Contracts" means all Assumed Contracts other than
(a) contracts which do not require payment by Seller of $20,000 or more per year
and which otherwise are not material to the Business, (b) contracts in the
Ordinary Course of Business which do not require expenditures by Seller of
$20,000 or more per year, and (c) contracts terminable upon notice of 60 days or
less and which do not require expenditures by Seller of $20,000 or more per
year. The Material Assumed Contracts are listed on Schedule 1.26.
1.27 "Ordinary Course of Business" or "Ordinary Course" means the
ordinary course of business consistent with past custom and practice of Seller
(including with respect to quantity and frequency).
1.28 "Owned Facilities" means the real property and associated fixtures
owned by Seller as specifically described on Schedule 2.1(a).
1.29 "Parent Common Stock" means the common stock, $.001 par value per
share, of Recycling Industries, Inc., a Colorado corporation.
-4-
<PAGE>
1.30 "Parent Series H Preferred" means the 6% Secured Redeemable
Convertible Preferred Stock of Parent described in the Designation of Series H
6% Secured Redeemable Convertible Preferred Stock attached hereto as EXHIBIT A.
1.31 "Pension Plan" means the United Metal Recyclers Retirement Plan.
1.32 "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.
1.33 "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.
1.34 "Prepared Inventory" means all ferrous and non-ferrous Inventory
that has been processed by Seller or at time of purchase was in a form that
historically was deemed saleable without processing and which as of the Closing
Date is ready for shipment to Seller's customers. Prepared Inventory includes
the saleable ferrous or non-ferrous materials contained in Shredder Residue
which was either generated by Seller or purchased from other sources prior to
the Closing.
1.35 "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.
1.36 "Shredder Residue" means the by-product generated from the operation
of a shredder which may or may not contain Hazardous Materials.
1.37 "Supply Inventory" means all of the parts, equipment, fuel,
lubricants, office supplies or other items consumed by or used in the operations
of the Business or the repair and maintenance of the Seller's vehicles,
machinery and equipment.
1.38 "Tangible Property" shall include the property described in Sections
2.1(a), 2.1(e), 2.1(j), and 2.1(k), below.
1.39 "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,
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estimated, net worth, self-employment, Medicaid, or other tax, including any
interest, penalty or addition thereto, whether disputed or not.
1.40 "Transaction" means the transactions contemplated by this Agreement
and the Closing Documents.
1.41 "Seller Financial Statements" has the meaning set forth in Section
4.4(b) below.
1.42 "Seller Offices" means the administrative offices of Seller located
at 1426 West Mountain Street, Kernersville, North Carolina 27284.
1.43 "Seller Payables" has the meaning set forth in Section 9.18, below.
1.44 "Seller Receivables" has the meaning set forth in Section 2.1(c),
below.
1.45 "Unprepared Inventory" means: (i) all scrap ferrous metal comprised
of materials such as obsolete, discarded or abandoned machinery, appliances,
equipment, automobiles, metal manufacturing scrap, casting and fabricating scrap
materials or other consumer and industrial ferrous goods or by-products to be
processed by shredding, shearing, torching, baling or otherwise rendered
suitable for a customer's consumption by Seller; and (ii) scrap non-ferrous
metal comprised of various non-magnetic alloys or co-mingled ferrous and
non-ferrous (irony aluminum) which traditionally would be thermally-separated,
shredded or otherwise processed by Seller before shipment. Unprepared Inventory
does not include any ferrous or non-ferrous materials contained in Shredder
Residue, residual material resulting from Seller's operations, dirt or other
medium which are not economically processable within the Owned Facilities.
1.46 "1934 Act" means the Securities Exchange Act of 1934, as amended.
ARTICLE 2
ACQUISITION OF SELLER ASSETS
2.1 PURCHASE AND SALE OF THE SELLER ASSETS. At the Closing and subject
to the terms and conditions stated herein, Seller agrees to sell, assign, convey
and transfer to RII Sub, and RII Sub agrees to purchase from Seller, the Seller
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 defined in Section 2.2. Without limitation, the Seller
Assets shall include all of the items enumerated in subparagraphs 2.1(a) through
2.1(o) below (with the exception of the Excluded Assets):
(a) The Owned Facilities, including all buildings situated
thereon and all real property leasehold improvements and all rights in
easements, driveways and signs, as legally described on Schedule 2.1(a);
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(b) All rights of Seller under the Assumed Contracts;
(c) All receivables of any nature, including accounts and notes
receivable (including the Griffin Note), and excluding receivables that have
been outstanding for more than 90 days as of the Closing Date and Retained
Receivables (the "Seller Receivables").
(d) All Unprepared Inventory, Processed Inventory and Supply
Inventory;
(e) All vehicles, machinery and equipment, tools, furniture,
leasehold improvements, fixtures, vehicles, dies, jigs, and supplies, or any
related capitalized items and other tangible property owned by Seller located at
the Owned Facilities and/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(e); PROVIDED, HOWEVER, that dies,
jigs, supplies, tools and spare parts are included in the Seller Assets whether
or not listed on Schedule 2.1(e). Schedule 2.1(e) describes certain machinery
and equipment owned jointly with others and it is understood that RII Sub will
acquire only Seller's one-half interest in such machinery and equipment and that
following the Closing RII Sub will continue to share ownership thereof.
(f) Schedule 2.1(f) sets forth all of the intellectual property,
proprietary and business information of Seller relating to the Business,
including, all of Seller's right, title and interest in and to (collectively the
"Intellectual Property"):
(1) the exclusive use of the name "United Metal Recyclers" and
any variations thereof;
(2) all transferrable Permits and telephone and facsimile
numbers used by Seller to the extent the same are transferrable by Seller;
(3) the exclusive right to all inventions, discoveries, trade
secrets, designs, prototypes, formulas and know-how relating to the
Business;
(g) All patents (whether issued or pending), copyrights,
trademarks and tradenames;
(h) All business, financial and tax records relating to the
Business, including all sales data, pricing and cost information, customer and
supplier lists, credit records, sales literature and business and marketing
plans relating to the Business.
(i) All claims, deposits, prepayments, refunds, causes of
action, choses in action, rights of recovery, rights of set-off and rights of
recoupment related to the Seller Assets or the Business, except for any income
or employment tax refunds.
(j) All computer documentation, computer files, computer disks,
computer tapes and all information stored on computer media (whether written,
optical, or magnetic) used in
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connection with the operation of the Business and stored at the Owned Facilities
or used at the Seller Offices in connection with the operation of the Business.
(k) All accounting and other computer software relating to the
Business owned by Seller, including information interfaced with those systems,
as maintained by Seller at the Owned Facilities or the Seller Offices, all of
which are listed on Schedule 2.1(k); provided, however, that Seller shall not
make any warranties with respect to any software.
(l) All rights to customer and supplier lists, signs,
advertising, catalogues and brochures relating to the Business.
(m) All goodwill and other general intangibles related to the
Seller Assets.
(n) All of Seller's right, title and interest in UMR-Griffin
Recyclers, LLC, a limited liability company organized and existing under the
laws of the State of North Carolina, which represents a joint venture 50% owned
by Seller and 50% owned by D.H. Griffin Family Limited Partnership (the "LLC
Interest").
(o) All other assets of any nature useful and/or beneficial to
the Business and located at the Owned Facilities whether owned or leased by
Seller unless specifically described in Section 2.2 or on Schedule 2.2 as an
Excluded Asset.
Seller's sale, conveyance, assignment and transfer of the Seller Assets
shall be free and clear of all Security Interests, liabilities or other
obligations, except for those that have been insured over in the title insurance
policy to be delivered pursuant to Section 8.1.
2.2 EXCLUDED ASSETS. On the Closing Date, RII Sub shall not purchase
the assets of Seller as set forth on Schedule 2.2 (the "Excluded Assets").
2.3 ASSUMED CONTRACTS. RII Sub shall assume the obligations of Seller
under the Assumed Contracts.
2.4 ASSUMPTION OF LIABILITIES. Other than as provided in Sections 2.3,
7.2, 7.3, 7.4 and 7.5, RII Sub shall not assume any Liabilities or Environmental
Liabilities of Seller 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 Seller Assets not yet due and payable
shall be pro-rated at Closing based on the preceding year's actual ad-valorem
taxes paid and RII Sub shall assume its pro-rata share of such taxes.
2.5 COLLECTION OF ACCOUNTS RECEIVABLE.
(a) If Seller receives payment on any of the Seller Receivables
included in the Seller Assets, Seller shall forthwith forward the same to RII
Sub. RII Sub shall have the right,
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during the normal business hours of Seller, to review records of Seller
solely to determine compliance with the provisions of Section 2.5(a).
(b) If RII Sub receives payment on any Retained Receivables, RII
Sub shall forthwith forward same to Seller. Seller shall have the right, during
the normal business hours of RII Sub, to review the records of RII Sub solely to
determine compliance with the provisions of this Section 2.5(b).
(c) The provisions of this Section 2.5 shall survive the
Closing.
ARTICLE 3
PURCHASE PRICE AND CLOSING
3.1 PURCHASE PRICE FOR SELLER ASSETS. RII Sub shall pay the total
amount of $42,000,000, subject to adjustment determined in accordance with
Section 3.2 (the "Purchase Price") to Seller for the purchase of the Seller
Assets. The Purchase Price shall be payable as follows:
(a) $36,000,000, as adjusted in accordance with Section 3.2, in
immediately available funds at Closing (the "Cash Consideration") of which
$100,000 shall be allocated and paid to Frank Brenner in exchange for his
Non-Competition Agreement described in Section 11.4;
(b) $6,000,000 of Parent Series H Preferred (the "Stock
Consideration") delivered at Closing 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
Stock Consideration. The form of Subscription Agreement is attached hereto as
EXHIBIT B.
3.2 VALUE OF CURRENT ASSETS. On the Closing Date, the value of Current
Assets included in the Seller Assets will be at least $4,000,000, as shown on a
preliminary closing balance Sheet (the "Preliminary Closing Balance Sheet")
dated as of the Closing Date and prepared by Seller on a basis consistent with
the Seller Financial Statements, except that Inventory shall be valued as
provided in Section 3.3 below and various accruals are to be estimated. RII Sub
will acquire the first $7,000,000 of Seller's Current Assets and 50% of Seller's
Current Assets in excess of $10,000,000. Seller will retain Current Assets in
excess of $7,000,000 and not more than $10,000,000, and 50% of Current Assets in
excess of $10,000,000. The value of the Current Assets shall be adjusted as
follows:
(a) Within 30 days after the Closing Date, Recycling and Seller
shall mutually prepare a substitute closing balance sheet for the Preliminary
Closing Balance Sheet, prepared as of the Closing Date on a basis consistent
with the Seller Financial Statements, except for Inventory which shall be valued
as provided in Section 3.3 below, and except that accruals which were estimated
on the Preliminary Closing Balance Sheet shall be determined based on actual
experience
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to the extent practicable. Such substitute balance sheet (the "Final Closing
Balance Sheet") shall reflect any and all adjustments that should properly have
been reflected on the Preliminary Closing Balance Sheet. The Current Assets as
shown on the Final Closing Balance Sheet shall be determinative for the purpose
of applying this Section 3.2. If the payment to Seller at Closing (based on the
Preliminary Closing Balance Sheet) shall be greater than the payment to which
Seller is entitled under the Final Closing Balance Sheet, Seller shall refund to
RII Sub the amount of the overpayment, in immediately available funds, within
five business days following demand therefor. If such payment to Seller at
Closing shall be less than the payment to which Seller is entitled under the
Final Closing Balance Sheet, RII Sub shall pay to Seller the amount of the
underpayment, in immediately available funds, within five business days
following demand therefor.
(b) In addition to any adjustment resulting from the preparation
of the Final Closing Balance Sheet, after Closing the value of the Seller
Receivables included in Current Assets at Closing will be adjusted to reflect
Ordinary Course adjustments for shortages, weight variations, quality and
quantity. Any increase in the value of the Seller Receivables as a result of
the foregoing adjustments shall be paid to Seller by the RII Sub in immediately
available funds. Any decrease in the value of the Seller Receivables as a
result of the foregoing adjustments shall be paid to the RII Sub by Seller in
immediately available funds. Any payments required pursuant to this Section
3.2(b) shall be paid within five days of the determination of the adjustment
amount.
3.3 VALUATION OF INVENTORY. For purposes of determining Current Assets
included in the Seller Assets, inventory will be valued based upon a physical
inventory taken by Seller and observed by Recycling and its representatives on a
date not more than fifteen business days preceding the Closing (the "Inventory
Date") as follows:
(a) Unprepared Inventory will be valued pursuant to a mutually
agreed upon formula which formula will reasonably reflect the cost of such
material to Seller and similar operators in the local marketplace in the
ten business days immediately preceding the Closing; and
(b) Prepared ferrous and non-ferrous Inventory will be valued at
market prices f.o.b. shipping point as of the date of the Inventory
valuation, less $1.00 per ton for handling of ferrous Inventory and $50.00
per trailer load for handling of non-ferrous Inventory.
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3.4 ALLOCATION OF THE PURCHASE PRICE.
(a) The Purchase Price shall be allocated among the Seller
Assets as set forth on Schedule 3.4.
(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 3.4. RII Sub shall provide to Seller a Treasury Form 8594 at Closing.
(c) RII Sub and Seller 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.
3.5 CLOSING OF THE PURCHASE. The closing of the Transaction (the
"Closing") shall take place at the offices of Friedlob Sanderson Raskin Paulson
& Tourtillott, LLC, 1400 Glenarm Place, Third Floor, Denver, Colorado, or at
such other place as selected by the Lender, in its sole and absolute discretion,
on the date and at the time set forth in the Closing Notification, given by RII
Sub in accordance with this section (the "Closing Date"). The Closing Date
shall be no later than December 5, 1997.
ARTICLE 4
REPRESENTATIONS OF SELLER AND THE OWNERS
As an inducement to Recycling to enter into this Agreement and to complete
the Transaction, and with the knowledge that Recycling will rely thereon, Seller
and the Owners, jointly and severally, represent and warrant to Recycling that
all of the representations and warranties in this Article 4 are true, correct
and complete as of the date of this Agreement.
4.1 DUE ORGANIZATION AND QUALIFICATION. (a) Seller is a general
partnership duly organized, validly existing and in good standing under the laws
of North Carolina, and has the power and lawful authority to carry on its
business as now being conducted.
(b) Seller is duly qualified or otherwise authorized to
transact business in each jurisdiction, listed in Schedule 4.1(b), 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. Seller has good, valid and marketable title to
all real and personal property included in the Seller 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, other than those
exceptions acceptable to RII Sub in its reasonable discretion and included as an
exception to the title policy to be delivered pursuant to Section 8.1.
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4.3 AUTHORITY OF SELLER; CONSENTS. (a) Seller has full power and
authority to execute and deliver this Agreement and the Closing Documents and to
carry out the Transaction and Seller has taken all requisite 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 Seller enforceable in accordance with their terms.
(c) Except for compliance with the HSR Act and any necessary
consents to the Material Assumed Contracts, 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 Seller 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 by Seller will:
(1) Be in violation of its partnership agreement or any
other organizational document, or constitute a breach of any evidence of
indebtedness or agreement to which it 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 Seller 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 Seller Assets under any agreement or commitment to
which it or the Seller Assets are bound;
(4) Conflict with or result in the breach of any writ,
injunction or decree of any court or governmental instrumentality;
(5) Violate any statute, law or regulation of any
jurisdiction as such statute, law or regulation related to the Seller
Assets; or
(6) Violate or cause any revocation of, or limitation on,
any Permit.
4.4 FINANCIAL STATEMENTS.
(a) Seller has furnished, or will furnish, to Recycling the
following financial information, Schedules, and other disclosures:
(1) Audited financial statements for Seller for its fiscal
years ended December 31, 1994, 1995 and 1996, each prepared in accordance
with GAAP (collectively
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the "Audited Financial Statements"). RII Sub and Parent acknowledge
receipt of the Audited Financial Statements prior to the execution of this
Agreement.
(2) Unaudited financial statements prepared for the period
from January 1, 1997 through September 30, 1997 and within 20 business days
after each month ending following the date of this Agreement, unaudited
financial statements prepared in the same manner which they are currently
prepared (collectively the "Unaudited Financial Statements").
(3) Copies of Seller's tax returns for its tax years ended
in 1993, 1994, 1995 and 1996.
(b) The Audited Financial Statements have been prepared in
accordance with GAAP and the Unaudited Financial Statements will be or have been
prepared in the same manner which they are currently prepared and present fairly
the financial condition of Seller as of such dates and the results of operations
of Seller for such periods; PROVIDED, HOWEVER, that the Unaudited Financial
Statements are subject to normal year-end adjustments and lack footnotes and
other presentation items. The Audited Financial Statements and the Unaudited
Financial Statements are collectively referred to as the "Seller Financial
Statements."
(c) Since December 31, 1996, there has been (1) no material
adverse change in the assets or liabilities, or in the business or financial
condition 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 Seller, except in the Ordinary Course which have not, in the
aggregate or individually, had a material adverse effect on the Business.
4.5 NO TAX LIENS; NO WAIVER.
(a) None of the Seller 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 RII Sub 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) Seller has not waived any statute of limitations with
respect to the assertion of any liability under any federal, state, or local tax
law.
(c) Except as provided on Schedule 4.5(c), Seller 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
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review by any such authority is pending, or, to the Knowledge of Seller and the
Owners, contemplated.
4.6 COMPLIANCE WITH LAWS. Except as set forth on Schedule 4.6:
(a) Neither Seller nor any of the Owners is in violation or has
violated any applicable order, judgment, injunction, award or decree relating to
the Seller Assets. To the Knowledge of Seller and the Owners, except as
otherwise disclosed on Schedule 4.25 or otherwise disclosed in the Environmental
Studies, neither Seller nor the Owners has violated or is in violation of 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 Seller 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 on Schedule 4.25 or in the
Environmental Studies or other documents provided to Recycling's agent, W.Z.
Baumgartner and Associates ("Baumgartner"), there is not pending or threatened
any notification of any governmental authority that Seller 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 Seller nor any Owner has Knowledge of any basis
therefor, and (3) except as disclosed on Schedule 4.25, neither Seller nor any
Owner has received any such notification of past violations of such laws or
regulations which have not been resolved.
4.7 PERMITS. Schedule 4.7 lists all Permits required by any
governmental entity related to the Business or operations of Seller. Except as
described on Schedule 4.7 or in the Environmental Studies delivered pursuant to
Section 7.1, Seller 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 Seller or any Owner, 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 or arbitration tribunal against or involving the
Seller Assets or the Business. There are no actions, suits or claims against
Seller or any Owner, or, to the Knowledge of Seller or any Owner, investigations
(whether or not the defense thereof or liabilities in respect thereof are
covered by insurance) pending or, to the Knowledge of Seller or any Owner,
threatened against or involving the Seller Assets or the Business, nor to the
Knowledge of Seller or any Owner, is there any basis therefor. Responsibility
for any litigation involving the Seller Assets or the Business (other than as
provided in Article VII) pending or arising from acts that occurred prior to the
Closing and the satisfaction of judgments (including related costs and fees)
shall remain with Seller and the Owners.
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4.9 CONTRACTS AND OTHER AGREEMENTS.
(a) Except for the contracts and agreements listed on Schedule
4.9(a), the Assumed Contracts or the contracts, leases, and other agreements
which will be completed or canceled at or prior to the Closing, Seller 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.
(b) All of the contracts, leases and other agreements which
constitute a part of the Assumed Contracts are valid and binding upon Seller in
accordance with their terms, and Seller 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 are listed on Schedule 1.26
will continue in full force and effect following the completion of the
Transaction. Seller is not in the process of negotiating or entering into any
contracts, leases, or other agreements described in this Section 4.9.
4.10 NOTES AND ACCOUNTS RECEIVABLE. The Seller Receivables are reflected
properly in the books and records of Seller, are valid receivables subject to no
setoffs or counterclaims, are current--not over 90 days old--and are collectible
and will be collected within 90 days after the Closing, subject only to the
reserve for bad debts set forth on the face of the Seller Financial Statements.
Seller Receivables not timely collected as provided herein shall be subject to
reassignment to Seller in accordance with Section 14.2.
4.11 TANGIBLE PROPERTY. All Tangible Property being used in the Business
at the date hereof is in good operating condition and repair, subject only to
normal wear and tear. Neither Seller nor any of the Owners 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.
4.12 INVENTORY. The piles of Unprepared and Prepared Inventory included
in the Seller Assets 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.
4.13 INTELLECTUAL PROPERTY.
(a) All Intellectual Property is owned outright by Seller, free and
clear of any Security Interest and there exist no obligations with respect to
any Intellectual Property requiring Seller to make any payment in respect of its
use or otherwise. Seller has never agreed to indemnify any Person for or
against any interference, infringement, misappropriation or other conflict with
respect to the Intellectual Property.
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(b) Neither Seller nor any of the Owners is aware of any patent,
invention, trade secret, trademark, service mark, trade name or copyright of any
other Person that is infringed by Seller, 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 Seller, and neither
Seller nor the Owners know of any basis for any such charge or claim.
4.14 REAL PROPERTY. The Owned Facilities include all real property
included in the Seller Assets. To the Knowledge of Seller and the Owners, with
respect to each parcel of owned real property included within the Owned
Facilities:
(a) Except as otherwise disclosed herein, in the Environmental
Studies or documents provided to Baumgartner, 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, easements,
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,
other than those which do not materially affect RII Sub's right to full
enjoyment of the Owned Facilities, and except as reflected in the survey
described in Section 8.2.
(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 Seller 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 sewage disposal, all of which services are 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.
4.15 LIABILITIES. Except as otherwise set forth in this Agreement or any
Schedule hereto, to the Knowledge of Seller and the Owners, the Business has no
Liabilities other than (a) Liabilities fully and adequately reflected or
reserved against in the Seller Financial Statements and (b) Liabilities incurred
since December 31, 1996 in the Ordinary Course of Business.
4.16 SUPPLIERS AND CUSTOMERS. Schedule 4.16 lists the 20 largest
suppliers and the 20 largest customers of the Business. All purchase orders and
customer contracts were issued by Seller in the Ordinary Course of Business.
Other than Ordinary Course adjustments for shortages, weight variations, quality
and quantity, there are no agreements or understandings with any customers of
the
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vendors to Seller as to adjustments in pricing or cost which would reduce the
profit margin of any existing or contemplated contract or other relationship.
4.17 EMPLOYEE BENEFIT PLANS. Schedule 4.17 lists all Employee Benefit
Plans maintained by Seller or to which it contributes for the benefit of any of
its current or former employees.
(a) To the Knowledge of Seller and the Owners, each Employee
Benefit Plan (and each related trust or insurance contract) complies in
form and in operation in all respects with the applicable requirements of
ERISA and the IRC;
(b) All contributions (including all employer contributions and
employees salary reduction contributions) which are due have been paid to
each Employee Benefit Plan;
(c) No unsatisfied liability has been incurred by Seller or any
ERISA affiliate of Seller and there is no material risk that such liability
will be incurred;
(d) To the Knowledge of Seller and the Owners, no charge,
complaint, action, suit, proceeding, hearing, investigation, claim, or
demand with respect to the administration or the investment of the assets
of any Employee Benefit Plan (other than routine claims for benefits) is
pending;
(e) Seller does not provide any medical or other similar
benefits to employees beyond retirement; and
(f) Seller has delivered to RII Sub and Parent correct and
complete copies of the plan documents and summary plan descriptions, the
most recent Form 5500 Annual Report, and all related trust agreements,
insurance contracts, and other funding agreements which implement each
Employee Benefit Plan.
4.18 CURTAILMENT OF OPERATIONS. 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. To the Knowledge of
Seller and the Owners, 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.
4.19 EMPLOYEE RELATIONS. Seller is not a party to a collective
bargaining agreement and, to its and the Owners' Knowledge, Seller 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 Seller has not and is not engaged in any
unfair labor practice. There have been no organization efforts by any trade
unions within the last five years.
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4.20 INSURANCE. Schedule 4.20 lists all insurance policies maintained by
Seller relating to the Business or the Owned Facilities, copies of which have
been provided to RII Sub, which cover the Seller Assets or the Business, the
nature of such policies, the amount and types of coverage, and the name of the
insurers and expiration dates. Seller 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.
4.21 POWERS OF ATTORNEY. There are no outstanding powers of attorney
executed on behalf of Seller, except in connection with Employee Benefit Plans.
4.22 RELATIONSHIPS. Except as described on Schedule 4.22, no Owner of
Seller possesses, directly or indirectly, any financial interest in, or is a
director, officer, stockholder or employee of, any corporation, firm,
association or business organization which is a manufacturer for, or client,
supplier, customer, lessor, lessee, or competitor of the Business. The Business
is not indebted to any officer, director, owner or employee of Seller or to any
entity in which any such Person has a financial interest.
4.23 BROKER'S OR FINDER'S FEES. No agent, broker, Person or firm acting
on behalf of Seller or the Owners 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.
4.24 EMPLOYEE TRANSITION. Schedule 4.24 lists all employees of Seller who
work or are customarily stationed at the Owned Facilities, their current
employment compensation (excluding bonus), and other amounts if any payable to
each employee. RII Sub will hire all employees of the Business upon
consummation of the Closing but is not obligated to employ such persons for any
specified length of time (except to the extent RII Sub shall agree contractually
to do so). RII Sub will not be responsible for any salaried or hourly health
and life insurance obligations incurred prior to the Closing for any Seller
employees, nor for payment of claims to insureds, or payment of any premiums for
coverage prior to the Closing Date. All employees of Seller hired by RII Sub
will receive credit for their employment period with Seller for purposes of
determining vesting and eligibility under the terms of RII Sub's or the Parent's
Employee Benefit Plans, to the extent allowable under applicable law, and will
be entitled to take vacation time in accordance with the policies of Seller
(including credit for time employed by Seller).
4.25 ENVIRONMENTAL MATTERS. Except as may be provided in the
Environmental Studies to be performed as contemplated by Section 7.2 of this
Agreement, or in documents provided to Baumgartner, copies of which have been
delivered to RII Sub, or disclosed on Schedules 4.8 or 4.25, to the Knowledge of
Seller and the Owners:
(1) No Hazardous Material has been disposed of on, released
to or from, threatened to be released to or from or is presently at, on,
beneath, in or upon any of the Owned Facilities or upon adjacent parcels of
real estate in amounts or concentrations
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which constitute or constituted a violation of, or which could reasonably
be expected to give rise to liability under, any Environmental Law.
(2) There has been no generation, production, refining,
processing, manufacturing, use, storage, disposal, treatment, shipment or
receipt of a Hazardous Material at or from the Owned Facilities or relating
to the operation of Seller in violation of or in a manner that could give
rise to liability under Environmental Laws.
(3) The operations of Seller are in compliance and have
been in compliance with all applicable Environmental Laws, and there is no
violation of any Environmental Law with respect to the Owned Facilities
which could interfere with continued operation Seller's business or impair
its fair saleable value.
(4) Neither Seller nor the Owners have received any notice
of violation, alleged violation, non-compliance, liability or potential
liability regarding environmental matters or compliance with Environmental
Laws with regard to the Owned Facilities from any Person, nor does Seller
or any of the Owners have Knowledge or reason to believe that any such
notice will be received from or is being threatened by any Person.
(5) No judicial proceedings, governmental administrative
actions, investigations or internal or non-public agency proceedings are
pending or threatened, under any Environmental Law, to which Seller is or
will be named as a party, nor are there any consent decrees, or other
decrees, consent orders, agreements, administrative orders or other orders,
judicial or administrative requirements outstanding under any Environmental
Law with respect to Seller.
4.26 COMPLIANCE WITH ADA. Seller has substantially complied with the
Americans with Disabilities Act of 1991, 42 U.S.C. Sections 12111, 12112 and
12209, as amended, and any similar applicable state regulations.
4.27 GUARANTEES. Seller is not a guarantor or otherwise liable for any
liability or obligation of any other person, except as described in Section
4.25.
4.28 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 has been supplied by or on behalf of Seller or the
Owners 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.
4.29 BEST EFFORTS. Seller and the Owners 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. Seller and the Owners will
execute and deliver such instruments and take such other
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action as may be reasonable or appropriate to carry out the Acquisition and the
intentions of this Agreement.
ARTICLE 5
REPRESENTATIONS OF RECYCLING
As an inducement to Seller and the Owners to enter into this Agreement and
to complete the Transaction and with the knowledge that Seller and the Owners
will rely thereon, RII Sub and the Parent jointly and severally represent and
warrant to Seller and the Owners the following both as of the date hereof and as
of the Closing Date:
5.1 DUE INCORPORATION AND QUALIFICATION OF RII SUB. RII Sub 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,
RII Sub will be duly qualified or otherwise authorized as a foreign corporation
to transact business and will be in good standing in the State of North
Carolina.
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. On or before the Closing
Date, RII Sub and the Parent will deliver to Seller 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 RII SUB AND THE PARENT. RII Sub 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 RII Sub 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 RII Sub or the Parent to enter into and perform its obligations under the
Closing Documents, and neither the execution and delivery of the Closing
Documents nor the completion of the Transaction will, with respect to RII Sub
and the Parent, individually:
(a) Be in violation of its Articles 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;
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(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 STOCK CONSIDERATION. The Stock Consideration when issued, and the
Parent Common Stock issuable upon conversion of the Stock Consideration, will be
duly authorized, fully paid and non-assessable and not subject to any preemptive
rights, and free and clear of any Security Interests or other encumbrances,
except for transfer restrictions required under federal and state securities
laws.
5.6 1934 ACT REGISTRATION. The common stock of the Parent is registered
under Section 12(g) of the 1934 Act, and in accordance therewith, the Parent
files periodic reports, proxy statements, and other informational reports
required under the 1934 Act. The Parent has made all filings with the
Securities and Exchange Commission that it has been required to make under the
1934 Act (collectively, the "Public Reports"). The Public Reports were complete
and accurate when filed and no material events have occurred subsequent to the
filing of the Public Reports which would require additional filings or other
disclosure other than a press release or similar announcement which has been
made when required.
5.7 BROKER'S OR FINDER'S FEES. No agent, broker, Person or firm acting
on behalf of RII Sub 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.
5.8 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 has been supplied by or on behalf of RII Sub 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.
5.9 BEST EFFORTS. RII Sub 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
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by RII Sub and the Parent in order to complete the Transaction by the Closing
Date. RII Sub 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. RII Sub and Parent hereby waive compliance
by Seller with the provisions of the bulk sales or bulk transfer law of the
State of North Carolina, and Seller and the Owners agree to indemnify and hold
RII Sub and Parent harmless from any liability incurred as a result of the
failure to so comply.
6.2 HART-SCOTT-RODINO ACT. As soon as practicable, but in no event
later than five days after the date hereof, each party shall make any and all
filings required to be made under the HSR Act. Each of the parties will assist
the other as may be reasonably requested in connection with the preparation of
the Notification and Report Forms and related materials that it may be required
to file pursuant to the HSR Act and will use its best efforts to obtain an early
termination of the applicable waiting period and will make any further filings
that may be necessary, proper or advisable in connection therewith. Recycling
will pay all costs of preparing and making each initial filing and any
additional filings under the HSR Act, other than the costs and expenses of
Seller and its personnel and legal fees incurred by Seller in connection with
such filings.
6.3 THE WARN ACT. Seller 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. Seller has complied 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 terminated prior to the Closing.
Recycling shall offer COBRA benefits to all persons who became eligible for
COBRA due to a qualifying event that occurred under Seller's medical benefit
plans prior to the Closing Date, and who elected to receive COBRA benefits prior
to the Closing Date (and are eligible to continue to receive such benefits
following the Closing Date), or who were notified in timely manner of their
COBRA rights (or were not so notified but the notice period has not expired
prior to the Closing Date) and did not so elect but remain eligible to elect to
receive such benefits following the Closing Date. Other than as provided in the
immediately preceding sentence, any liabilities for any COBRA claims arising out
of transactions occurring prior to the Closing Date shall be the sole
responsibility of Seller.
6.5 OTHER. The parties shall prepare and promptly file all reports,
documents or notices with appropriate regulatory or other governmental
authorities, as may be required of them.
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ARTICLE 7
ENVIRONMENTAL MATTERS
With respect to matters governed by Environmental Laws, the Parties hereby
agree as follows:
7.1 ENVIRONMENTAL STUDIES. Baumgartner has commenced preparation of
ASTM Phase I and Phase II Environmental Site Assessments and Transaction Screen
Process (the "Environmental Studies"). Upon completion, the Environmental
Studies shall be delivered to Recycling and attached as Schedule 7.1. Recycling
shall pay for the costs of the Environmental Studies, except that Recycling
shall be reimbursed by Seller, out of assets other than Seller Assets, for the
cost of the initial visual reconnaissance performed by Baumgartner.
7.2 ON-SITE LIABILITIES AT THE OWNED FACILITIES.
(a) The Parties will work together in good faith and will seek
to achieve consensus regarding how to respond to any "Environmental Claims" (as
defined below) at the Owned Facilities, and will mutually agree on the timing of
any cleanup. Recycling will have the right to incur response costs up to $5,000
per occurrence, limited to no more than three occurrences per year, without
approval by Seller. Any other response costs must be approved by Seller or will
be resolved by arbitration, with each party paying one-half of the arbitration
costs (neither party's share of the arbitration costs will be from the "Seller
Environmental Escrow Account," as defined below).
(b) Subject to Section 7.5, Seller will indemnify, defend, and
hold harmless RII Sub and Parent, and their officers, directors, successors and
assigns, from and against any and all claims, demands, suits, judgments,
settlements, penalties, liabilities, cleanup costs and expenses, including
reasonable fees of counsel and environmental consultants ("Environmental
Claims"), arising out of or resulting from on-site events or occurrences at the
Owned Facilities on or before the Closing Date or any migration of contamination
onto or under the Owned Facilities prior to the Closing Date (collectively,
"On-Site Liabilities"). Seller will have no liability or indemnification
obligations, however, if it does not receive notice of an Environmental Claim
within four years after the Closing Date. Notwithstanding the foregoing,
Seller's liability for all On-Site Liabilities shall not exceed [CONFIDENTIAL
TREATMENT REQUESTED BY REGISTRANT] in the aggregate. At Closing, the parties
will create an escrow account, funded by [CONFIDENTIAL TREATMENT REQUESTED BY
REGISTRANT] (the "Seller Environmental Escrow Account") (all of which amounts
will be contributed to the Environmental Escrow Account by Seller at the
Closing). The Environmental Escrow Account will be administered as provided in
the Seller Environmental Escrow Agreement in the form attached hereto as
EXHIBIT C. Recycling will look solely to the Seller Environmental Escrow Account
to satisfy Seller's obligations for On-Site Liabilities as provided in this
Section 7.2.
(c) RII Sub and Recycling will indemnify, defend, and hold
harmless Seller and the Owners, and their officers, directors, successors and
assigns, from and against any and all Environmental Claims arising out of or
resulting from: (i) on-site events or occurrences at the Owned
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Facilities after the Closing Date, and (ii) On-Site Liabilities before the
Closing Date if Seller's indemnification obligations pursuant to Section 7.2(b)
above, have expired.
7.3 ON-SITE LIABILITIES AT THE GRIFFIN FACILITY.
(a) The Parties will work together in good faith and will seek
to achieve consensus regarding how to respond to any Environmental Claims, and
will mutually agree on the timing of any cleanup, at the real property owned by
UMR-D.H. Griffin Recyclers, LLC in Smithfield, North Carolina (the "Griffin
Facility"). Recycling will have the right to incur response costs up to $5,000
per occurrence, limited to no more than three occurrences per year, without
approval by Seller. Any other response costs must be approved by Seller or will
be resolved by arbitration, with each party paying one-half of the arbitration
costs (neither party's share of the arbitration costs will be from the "Griffin
Environmental Escrow Account").
(b) Seller will indemnify, defend, and hold harmless RII Sub and
Parent and their officers, directors, successors and assigns, from and against
any and all Environmental Claims, arising out of or resulting from on-site
events or occurrences at the Griffin Facility on or before the Closing Date.
Seller will have no liability or indemnification obligations, however, if it
does not receive notice of an Environmental Claim within four years after the
Closing Date. Notwithstanding the foregoing, Seller's liability and indemnity
obligation for all On-Site Liabilities shall not exceed [CONFIDENTIAL TREATMENT
REQUESTED BY REGISTRANT] in the aggregate. At Closing, the parties will create
an escrow account, [CONFIDENTIAL TREATMENT REQUESTED BY REGISTRANT] (the
"Griffin Environmental Escrow Account") (all of which amounts will be
contributed to the Environmental Escrow Account by Seller at the Closing). The
Griffin Environmental Escrow Account will be administered as provided in the
Griffin Environmental Escrow Agreement in the form attached hereto as EXHIBIT D.
Recycling will look solely to the Griffin Environmental Escrow Account to
satisfy Seller's obligations for On-Site Liabilities as provided in this Section
7.3.
(c) RII Sub and Recycling will indemnify, defend, and hold
harmless Seller and the Owners, and their officers, directors, successors and
assigns, from and against any and all Environmental Claims at the Griffin
Facility arising out of or resulting from: (i) on-site events or occurrences
after the Closing Date, and (ii) On-Site Liabilities before the Closing Date if
Seller's indemnification obligations pursuant to Section 7.3(b) above, have
expired.
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7.4 OFF-SITE LIABILITIES.
(a) Subject to the following conditions, RII Sub and Parent will
indemnify, defend and hold harmless Seller and the Owners, and their officers,
directors, successors and assigns, from and against any and all Environmental
Claims pertaining to any non-owned disposal sites (I.E., waste disposal sites
that neither Seller nor any controlled party of Seller had any ownership
interest in or control over; referred to herein as "NODS"). The aggregate
indemnification obligation of RII Sub and Parent shall be limited to
[CONFIDENTIAL TREATMENT REQUESTED BY REGISTRANT] for all NODS, subject to a
maximum liability for any individual NODS of [CONFIDENTIAL TREATMENT REQUESTED
BY REGISTRANT], up to a maximum of five NODS which must be identified by Seller
to Recycling on or before the Closing. For the foregoing indemnification to be
available for a NODS, that NODS must meet the following conditions on the
Closing Date, to the Knowledge of Seller and the Owners:
(1) The NODS are not included on the National Priorities List or
subject to any ongoing investigation by the United States Environmental
Protection Agency (the "EPA") or equivalent state agencies;
(2) the NODS are in material compliance with currently
applicable EPA regulations; and
(3) The NODS has any Pollution Legal Liability Insurance if
currently required by law.
(b) RII Sub and Parent will have 45 days after the Closing to
investigate each facility identified in subsection (a) above by Seller. If RII
Sub and Parent conclude that any listed facility fails to meet any of the three
conditions listed in subsection (a) (irrespective of whether or not Seller or
the Owners had knowledge of such failure), it may notify Seller within the
45-day period of its intention to remove that facility from the list. Within 45
days after receipt of such notice, Seller will take either of the following
actions:
(1) It may identify a replacement facility for each facility
removed by RII Sub and Parent. In that event, RII Sub and Parent will have
an additional 45 days to investigate each replacement facility in the same
manner as if each such facility had been designated at the Closing.
(2) If more than one facility has already been removed from the
list, and if Seller disagrees with RII Sub's and Parent's conclusion that a
particular facility does not meet one or more of the three conditions in
subsection (a) above, Seller may notify RII Sub and Parent of its
disagreement. In that event, the parties will submit the issue to
expedited, binding arbitration before a single arbitrator, in accordance
with the commercial arbitration rules and procedures of the American
Arbitration Association. If the arbitrator concludes that the proposed
facility does not meet any of the three conditions listed in subsection (a)
above, Seller will have 45 days after receipt of the arbitrator's decision
to
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identify a replacement facility. The parties will follow the same
procedure set forth in this subsection (b) for review of the replacement
facility.
By using the procedure outlined in this subsection (b), the parties will reach
agreement as to the five facilities to which RII Sub's and Parent's
indemnification and defense obligations under this Section will apply.
(c) Subject to subsection (a) of this Section 7.4, Seller will
indemnify, defend, and hold harmless RII Sub and Parent and their officers,
directors, successors and assigns, from and against any and all off-site
Environmental Claims arising out of the operations of Seller on or before the
Closing Date.
(d) RII Sub and Parent, jointly and severally, will indemnify,
defend, and hold harmless Seller and the Owners and their officers, directors,
successors and assigns, from and against any and all off-site Environmental
Claims arising out of the operations of RII Sub or Parent after the Closing
Date. Except as provided in this Section 7.4, with respect to NODS RII Sub and
Parent do not assume any liability for off-site Environmental Claims, whether
known or unknown, arising from Seller's operations on or before the Closing
Date.
7.5 LANDFILL CLOSURE. The Purchase Price will be reduced by the present
value of the estimated costs of closing the landfill owned and operated by
Seller, not to exceed $750,000 (the "Closure Reduction"), and Recycling will
assume the responsibility for closing the landfill. Recycling's consultant,
Baumgartner, will estimate the costs of closure. Seller will deliver free and
clear title to the land to be used as a buffer on the east side of the property,
and will receive a credit against the Closure Reduction, not to exceed $439,000,
with the actual credit amount to be determined by actual purchase and
transactional costs associated with the acquisition of the buffer property, not
to exceed $439,000). The Closure Reduction as reduced by such credit will
reduce the Stock Consideration deliverable at Closing.
ARTICLE 8
COVENANTS TO BE PERFORMED PRIOR TO THE CLOSING
The parties hereto covenant and agree that between the date hereof and the
Closing Date:
8.1 TITLE INSURANCE. Prior to the Closing, Seller will obtain a title
insurance commitment, including obligations to issue endorsements as may be
required by RII Sub, with respect to the Owned Facilities, using a current North
Carolina standard form of American Land Title Association Owner's Title
Insurance Commitment issued by a title insurer satisfactory to RII Sub in the
amount specifically allocated by the parties on Schedule 3.4 to the Owned
Facilities, insuring title to the Owned Facilities to be in RII Sub as of the
Closing Date, subject only to such exceptions and exclusions as provided in this
Agreement or set forth on Schedule 8.1, or are acceptable to RII Sub and
insuring against all possible contractors', suppliers' and mechanics' lien
claims. Such title commitment is to contain a complete copy of each easement,
restriction, limitation, or condition of
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title which is referred to therein that burdens or benefits said real property.
At the Closing, the costs and premium for the owner's policy of title insurance
shall be paid by Seller. RII Sub shall pay the cost of any endorsements to the
owner's policy of title insurance which may be requested by it and the cost of
the mortgagee's policy of title insurance. When delivered, the title commitment
shall be attached as Schedule 8.1.
8.2 SURVEY. Seller, at its expense, will deliver to RII Sub an updated
survey of the Owned Facilities, certified to RII Sub, any mortgagee of RII Sub,
and the title insurer issuing title insurance in the Transaction as provided in
Section 8.1, prepared by a licensed surveyor and conforming to Minimum Technical
Standards adopted by the North Carolina Society of Professional Surveyors, or
equivalent professional body or licensing agency, disclosing the location of all
improvements, easements, party walls, sidewalks, roadways, utility lines,
setback requirements, and other matters customarily shown on such surveys, and
showing access affirmatively to public streets and roads.
8.3 MATERIAL ASSUMED CONTRACTS. Seller will use its best efforts obtain
the written consent to the assumption by RII Sub of each of the Material Assumed
Contracts listed on Schedule 1.26 which require such consent.
8.4 CONDUCT OF BUSINESS. Seller will not engage in any practice, take
any action, incur any Liabilities, dispose of any assets or enter into any
transaction outside the Ordinary Course of Business and 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, correct and complete
on and as of the Closing Date.
8.5 PRESERVATION OF BUSINESS. Seller will keep the Business and the
Seller Assets substantially intact, including its present operations, physical
facilities, and working conditions, and will use its best efforts to maintain
relationships with lessors, licensors, suppliers, customers, and employees.
Seller will provide to RII Sub a mailing list of all customers and a listing of
their accounts within ten business days (or the earliest possible date) prior to
the Closing Date to permit RII Sub to send announcements to the customers on or
after the Closing Date.
8.6 NOTICE OF EVENTS. Seller and the Owners shall promptly notify RII
Sub 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 Seller or the Owners
misleading.
8.7 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, Recycling shall be entitled, through its employees
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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 Recycling deems necessary. No review,
examination or investigation by Recycling shall diminish or obviate any of the
representations, warranties, covenants or agreements of Seller and the Owners
under this Agreement.
(b) If this Agreement terminates: (1) RII Sub shall keep
confidential and shall not use in any manner any information or documents
obtained from Seller concerning the Business or the Seller Assets, unless
readily ascertainable from public or published information, or trade sources, or
subsequently developed by RII Sub independent of any investigation of the
Business, or received from a third party not under an obligation to Seller to
keep such information confidential, and (2) any documents obtained from Seller
shall be promptly returned to it.
8.8 NO NEGOTIATION BY SELLER OR THE OWNERS. Between the date hereof and
the earlier of (1) the Closing Date; and (2) the date of termination of this
Agreement, neither the Owners nor Seller shall, directly or indirectly:
(a) Solicit, initiate or encourage the submission of inquiries,
proposals or offers from any Person (other than Recycling) relating to any
acquisition or purchase of assets (other than Prepared Inventory) of, or any
equity interest in, the Seller Assets or any exchange offer, merger,
consolidation, purchase of assets, liquidation, dissolution or similar
transaction involving the Seller 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 Recycling
and its representatives) any information with respect to the Seller 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 Recycling) to do or seek any of the foregoing.
Seller and the Owners will notify Recycling 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.
8.9 SAFETY AUDITS. If requested by Recycling, Seller shall have safety
audits at each of its facility sites performed by a consulting firm mutually
acceptable to the parties to ensure compliance with OSHA and any other
applicable safety standards. All costs related to these audits shall be borne
by Recycling.
8.10 REMOVAL OF WASTE MATERIALS. Seller shall remove, at its cost, all
waste materials from the Seller Facilities and real property prior to the
Closing excluding those materials which are consigned to the on-site landfill in
the normal course of operations as of the date of the closing and
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other minimal amounts of waste materials mutually agreed to by the parties
(e.g., waste oil in limited quantities typically consigned to a third party for
disposal in the normal course of operations).
8.11 EMPLOYMENT AGREEMENTS. Parent and RII Sub shall use their
reasonable best efforts to enter into Employment Agreements with certain
employees of Seller substantially in the form of Exhibit H.
ARTICLE 9
CONDITIONS PRECEDENT TO THE OBLIGATION
OF RECYCLING TO CLOSE
The obligation of Recycling 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 Recycling only in writing:
9.1 REPRESENTATIONS, WARRANTIES AND OTHER AGREEMENTS. The
representations, warranties and other agreements of Seller and the Owners
contained in this Agreement shall be true, correct and complete in all material
respects on and as of the Closing Date, with the same force and effect as though
made on and as of the Closing Date. Seller and the Owners shall have performed
and complied in all material respects with all covenants and agreements required
by this Agreement to be performed or complied with by them on or prior to the
Closing Date. Seller and the Owners shall have delivered to Recycling
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, including early termination of the waiting period under the HSR
Act, shall have been obtained and all shall have been transferred to the name of
RII Sub to the extent such permits are transferable.
9.3 THIRD PARTY CONSENTS. All consents, permits and approvals from
parties to any Material Assumed Contracts that may be required in connection
with the performance by Seller 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.
9.4 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 RII Sub or the Parent a materially adverse
effect on the Seller Assets or the Business.
9.5 REAL PROPERTY. Except as set forth on Schedules 2.1(a) and 8.1,
with respect to the Owned Facilities:
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(a) RII Sub shall receive good and marketable title by general
warranty deed for the Owned Facilities in proper form for recording in the State
of North Carolina;
(b) The Owned Facilities shall be free and clear of any Security
Interest, easement, covenant, or other restriction, except for installments of
special assessments not yet delinquent and recorded easements, covenants,
matters shown by the Survey attached as Schedule 8.2 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 therefor 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 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 Facilities.
9.6 NO MATERIAL ADVERSE CHANGE. There shall be no material adverse
change in the Business or the Seller Assets taken as a whole, financial or
otherwise, or, to either Seller's or the Owners' Knowledge, Seller'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 Seller, fire, explosion, accident, casualty, labor trouble,
flood, riot, storm, condemnation or act of God or otherwise, and Seller shall
have delivered to Recycling a certificate, dated the Closing Date, to such
effect.
9.7 TRANSFER DOCUMENTS. RII Sub shall have received assignments and
such other instruments of sale, transfer, conveyance and assignment transferring
all of the Seller Assets from Seller to RII Sub, each in proper legal form to
transfer the Seller assets under applicable law.
9.8 ACQUISITION OF THE BRENNER COMPANIES, INC. Parent or an entity
controlled by Parent shall have acquired or be simultaneously acquiring the
assets and business of The Brenner Companies, Inc., a North Carolina
corporation.
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9.9 ENVIRONMENTAL ESCROW AGREEMENTS. RII Sub shall have received from
Seller the Seller Environmental Escrow Agreement in the form attached hereto as
EXHIBIT C and the Griffin Environmental Escrow Agreement in the form attached
hereto as EXHIBIT D.
9.10 ASSIGNMENT OF CONTRACTS. Seller shall have delivered to RII Sub
written consents to the assignment or assumption of each of the Material Assumed
Contracts as provided by Section 8.3.
9.11 SATISFACTION WITH DUE DILIGENCE, FINANCIAL PERFORMANCE AND APPROVAL.
Recycling shall be satisfied, in its sole discretion, with (a) the results of
its legal, accounting and financial due diligence investigation of Seller and
its operations, including, without limitation, the results of the Environmental
Studies and any Safety Audits, and (b) Seller's financial performance up to the
Closing Date. Further, the terms and conditions of this Agreement shall have
been approved by Recycling's senior management, its Board of Directors, and the
Lender, each in their sole discretion.
9.12 SUBSCRIPTION AGREEMENT. The Parent shall have received from Seller
the Subscription Agreement for the Stock Consideration in the form attached
hereto as EXHIBIT E.
9.13 NON-COMPETITION AGREEMENT. Recycling shall have received from
Seller and the Owners and Frank Brenner, executed Non-Competition Agreements in
the form attached hereto as EXHIBIT F.
9.14 LEGAL OPINION. Recycling shall receive an opinion from counsel to
the Seller and the Owners in the Form attached hereto as EXHIBIT G.
9.15 BOOKS AND RECORDS. RII Sub shall have received the books, books of
account, papers, records, correspondence and instruments of, or relating to, the
Seller Assets and/or Business including, but not limited to, the information set
forth in Section 4.4(a) above.
9.16 CERTIFICATES, ETC. OF OWNERS AND SELLER. The Owners and Seller
shall have delivered all certified resolutions, certificates, documents or
instruments with respect to Seller's authority and such other matters as RII
Sub's and the Parent's counsel may have reasonably requested prior to the
Closing Date.
9.17 PAYMENT OF SALES OR USE TAXES BY SELLER. Seller shall have paid all
sales, use or personal property taxes or other similar taxes payable as a result
of the completion of the Transaction.
9.18 PAYMENT OF ACCOUNTS PAYABLE. Within 60 days of the Closing Date,
Seller 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 "Seller Payables").
9.19 APPROVAL OF COUNSEL TO RECYCLING. All actions and proceedings
hereunder and all documents or other papers required to be delivered by Seller
hereunder or in connection with the completion of the Transaction, and all other
related matters shall have been approved by Friedlob
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Sanderson Raskin Paulson & Tourtillott, LLC, counsel to Recycling, as to their
form, which approval shall not be unreasonably withheld or delayed.
ARTICLE 10
CONDITIONS PRECEDENT TO THE OBLIGATION OF SELLER
AND THE OWNERS TO CLOSE
The obligations of Seller and the Owners 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 Seller and the Owners only in writing:
10.1 REPRESENTATIONS, WARRANTIES AND OTHER AGREEMENTS. The
representations, warranties and other agreements of Recycling 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. Recycling 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. Recycling shall have delivered to Seller certificates, dated the Closing
Date, to such effect.
10.2 ACQUISITION OF THE BRENNER COMPANIES, INC. Parent or an entity
controlled by Parent shall have acquired or be simultaneously acquiring the
assets and business of The Brenner Companies, Inc., a North Carolina
corporation.
10.3 GOVERNMENTAL PERMITS AND APPROVALS. All permits and approvals from
any governmental or regulatory body required for the lawful completion of the
Transaction, including early termination of the waiting period under the HSR
Act, shall have been obtained.
10.4 THIRD PARTY CONSENTS. All consents, permits and approvals from
parties to any Material Assumed Contract that may be required in connection with
the performance by Seller 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.
10.5 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 Seller, a materially adverse effect on the
assets, properties, businesses, operations or financial condition of RII Sub or
the Parent.
10.6 NO MATERIAL ADVERSE CHANGE. There shall be no material adverse
change in the business or operations of RII Sub or Parent taken as a whole,
financial or otherwise, regardless of reason, including those changes that are
as a result of any legislative or regulatory change, and RII Sub and Parent
shall have delivered to Seller a certificate, dated the Closing Date, to such
effect.
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10.7 RESOLUTIONS. There shall have been delivered to Seller and the
Owners a copy of the resolutions duly adopted by the respective boards of
directors of RII Sub and Parent, authorizing and approving the execution and
delivery by RII Sub and Parent of this Agreement, and the completion by RII Sub
and Parent of the Transaction, certified by the secretary of RII Sub and Parent,
dated as of the Closing Date.
10.8 DESIGNATION OF STOCK CONSIDERATION. There shall have been delivered
to Seller and the Owners a certified copy of the Certificates of Designations,
Rights and Preferences of the Parent Series H Preferred.
10.9 LEGAL OPINION. Seller shall receive an opinion from counsel to
Parent and RII Sub in the form attached hereto as EXHIBIT I.
10.10 THE PURCHASE PRICE. RII Sub and the Parent shall have paid to
Seller (or directly to the Owners with the consent of both RII Sub and Seller)
the full Purchase Price for the Seller Assets and executed and delivered all
documents related thereto.
10.11 ENVIRONMENTAL ESCROW AGREEMENTS. Seller and the Owners shall have
received from RII Sub the Seller Environmental Escrow Agreement in the form
attached hereto as EXHIBIT C and the Griffin Environmental Escrow Agreement in
the form attached hereto as EXHIBIT D.
10.12 APPROVAL OF COUNSEL TO SELLER AND THE OWNERS. All actions and
proceedings hereunder and all documents or other papers required to be delivered
by RII Sub and the Parent hereunder or in connection with the completion of the
Transaction, and all other related matters shall have been approved by Womble
Carlyle Sandridge & Rice, PLLC, counsel to Seller and the Owners as to their
form, which approval shall not be unreasonably withheld or delayed.
ARTICLE 11
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:
11.1 TRANSFER DOCUMENTS. Seller shall deliver duly executed transfer
documents and/or instruments of assignment.
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11.2 THE PURCHASE PRICE. RII Sub shall deliver to Seller:
(a) the Cash Consideration; and
(b) the Stock Consideration.
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11.3 SUBSCRIPTION AGREEMENT. Seller shall deliver to the Parent the
Subscription Agreement.
11.4 NON-COMPETITION AGREEMENTS. Seller and the Owners and Frank Brenner
shall deliver to RII Sub and the Parent their duly executed Non-Competition
Agreement.
11.5 ENVIRONMENTAL ESCROW AGREEMENTS. Seller and the Owners shall
deliver to RII Sub and RII Sub shall deliver to Seller and the Owners the Seller
Environmental Escrow Agreement and the Griffin Environmental Escrow Agreement,
duly executed by the parties thereto.
11.6 GENERAL WARRANTY DEED. Seller shall deliver a general warranty deed
for the Owned Facilities in proper form for recording in the State of North
Carolina.
11.7 CONTRACT ASSUMPTIONS. Seller shall deliver the written consents to
the assumption by RII Sub of the Material Assumed Contracts.
11.8 CLOSING CERTIFICATE OF SELLER. Seller shall deliver to RII Sub a
closing certificate dated the Closing Date, in a form satisfactory to RII Sub.
Such certificate shall be signed on behalf of Seller by an executive officer of
Seller.
11.9 CLOSING CERTIFICATE OF THE OWNERS. The Owners shall deliver to RII
Sub a closing certificate dated the Closing Date, in a form satisfactory to RII
Sub.
11.10 CLOSING CERTIFICATE OF RII SUB. RII Sub shall deliver to Seller a
closing certificate dated the Closing Date, in a form satisfactory to Seller.
Said certificate shall be signed on behalf of RII Sub by an executive officer of
RII Sub.
11.11 CERTIFICATE REGARDING RESOLUTIONS OF SELLER. Seller shall deliver
to Recycling copies of resolutions certified as required by Section 9.16.
11.12 LEGAL OPINIONS. Counsel to the Parent and to Seller and the Owners
shall deliver their respective legal opinions as required by Sections 9.14 and
10.9.
11.13 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
Seller at least one business day prior to the Closing. Normal closing
adjustments shall be charged to the parties as follows:
(a) ADJUSTMENTS CHARGED TO SELLER. Seller 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:
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(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 Seller to RII Sub and the closing costs associated for the
Owned Facilities which shall be paid by the RII Sub and Seller in
accordance with local custom for commercial real estate transactions.
11.14 TITLES TO VEHICLES, MACHINERY AND EQUIPMENT. Seller shall deliver
to RII Sub duly executed titles to all vehicles, machinery and equipment
included in the Seller Assets free and clear of any Security Interests.
ARTICLE 12
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
12.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All of the
representations and warranties of the parties contained in this Agreement shall
survive the Closing and continue until Recycling's independent public
accountants shall have completed their first audit of the RII Sub subsequent to
the Closing, except as follows:
(a) 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;
and
(b) the representations and warranties with respect to on-site
liabilities contained in Section 4.25 and Sections 7.2 and 7.3, which shall
survive for a period of four years after the Closing Date.
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12.2 INDEMNITY AGREEMENTS OF SELLER AND THE OWNERS.
(a) Seller and the Owners, jointly and severally, shall indemnify,
defend, reimburse and hold harmless RII Sub 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 or
warranty or nonfulfillment of any covenant on the part of Seller or the
Owners contained in this Agreement;
(2) any misrepresentation in or omission from or nonfulfillment
of any covenant on the part of Seller or the Owners contained in any other
agreement, certificate or other instrument furnished or to be furnished to
RII Sub or the Parent by Seller or the Owners 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
Seller or the Owners relating to the Business through the Closing Date
which are not paid by either Seller or the Owners and which RII Sub or the
Parent pays;
(4) any and all negligence claims arising out of occurrences and
events prior to the Closing Date except for environmental matters as
provided in Sections 7.2, 7.3 and 7.4;
(5) for Environmental Claims limited to the extent provided in
Sections 7.2, 7.3 and 7.4;
(6) the failure of Seller or the Owners to comply with the bulk
sales or bulk transfer law of the State of North Carolina;
(7) any liability of Seller not assumed by RII Sub;
(8) 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
Date unless subsequently modified by RII Sub in a manner which renders the
product to be infringing to the extent that RII Sub and Parent are not
otherwise entitled to indemnification from another party;
(9) any liabilities to employees of the Business terminated in
accordance herewith and any future related actions; and
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(10) reasonable fees and disbursements of counsel incident to any
of the foregoing.
(b) Notwithstanding the foregoing, Seller and the Owners shall not be
required to indemnify RII Sub and the Parent until the amount of indemnification
for any individual matter equals or exceeds $15,000 and the aggregate amount of
indemnification for all matters equals or exceeds $100,000, at which time Seller
and the Owners shall indemnify and reimburse RII Sub and the Parent for all such
amounts incurred for each matter in excess of $15,000, up to an aggregate
liability for all such claims of $3,500,000; PROVIDED, HOWEVER, that the
foregoing limitations shall not apply to any Environmental Claims pursuant to
Sections 7.2, 7.3 and 7.4, any obligation of Seller and Seller Owners under
Section 14.19, the reassignment of any Seller Receivables as provided in Section
14.2, or the failure of Seller to comply with the bulk sales or bulk transfer
laws of the State of North Carolina.
12.3 INDEMNITY AGREEMENT OF RII SUB AND THE PARENT. RII Sub and the Parent
shall jointly and severally indemnify, defend, reimburse and hold harmless
Seller and the Owners from and against:
(a) any and all claims, demands, penalties, fines, liabilities,
obligations, losses, settlements, damages, costs and expenses pertaining to the
Seller 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 RII Sub or the
Parent contained in this Agreement;
(2) any misrepresentation in or omission from or nonfulfillment
of any covenant on the part of RII Sub or the Parent contained in any other
agreement, certificate or other instrument furnished or to be furnished to
Seller by RII Sub or the Parent pursuant to this Agreement;
(3) any liability of Seller arising out of the Assumed
Contracts, unless such liability is due to the actions of Seller, or other
action, events and occurrences prior to the Closing Date;
(4) for Environmental Claims limited to the extent provided in
Sections 7.2, 7.3 and 7.4;
(5) any liability for tort claims which are the result of
actions, events, occurrences or the operation of the business by RII Sub on
or after the Closing Date; and
(6) reasonable fees and disbursement of counsel incident to any
of the foregoing.
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(b) Notwithstanding the foregoing, RII Sub and Parent shall not be
required to indemnify Seller and the Owners until the amount of indemnification
for any individual matter equals or exceeds $15,000 and the aggregate amount of
indemnification for all matters equals or exceeds $100,000, at which time RII
Sub and Parent shall indemnify and reimburse Seller and the Owners for all such
amounts incurred for each matter in excess of $15,000, up to an aggregate
liability for all such claims of $3,500,000; PROVIDED, HOWEVER, that the
foregoing limitations shall not apply to any Environmental Claims pursuant to
Sections 7.4, 7.3 and 7.5, or to any claims for breach of the Assumed Contracts,
or to failure of RII Sub or Parent to deliver the consideration as required
under Section 11.2.
12.4 INDEMNIFICATION PROCEDURE FOR THIRD PARTY CLAIMS.
(a) NOTICE OF CLAIM AND DEFENSE.
(1) The party seeking indemnification under this Article 12
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
12.2 or Section 12.3, 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.
(2) 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.
(3) If the claim for which indemnification is being sought is
the result of a breach of this Agreement by the party obligated to
indemnify, such party shall have a period of 45 days to cure such breach.
If the obligated party does not cure the breach within 45 days, the party
seeking indemnification may proceed with all remedies available under this
Agreement.
(b) 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 after such 30 day
period, ten days prior to the date each such sums are due.
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12.5 LIMIT ON OBLIGATIONS. In no event shall either party have any
indemnification obligation under this Section 12 unless the party from whom
indemnification is sought receives a notice of a claim for indemnification
within the survival period described in Section 12.1.
12.6 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.
12.7 FEES AND EXPENSES. Notwithstanding any other provision in this
Article 12, in the event of any dispute or controversy between any of the
parties to this Agreement, each party shall pay its own legal fees and
out-of-pocket costs incurred by such party in enforcing or defending its rights
hereunder.
12.8 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 12.8, exclusive
of per diem or hourly rates of any personnel of the other party.
ARTICLE 13
TERMINATION OF AGREEMENT
13.1 TERMINATION. This Agreement may be terminated prior to or on the
Closing Date as follows:
(a) At the election of RII Sub 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 Recycling to close has not been fulfilled as of the
Closing Date, or if Seller or the Owners has breached any material
representation or warranty, or failed to perform any covenant or agreement
contained in this Agreement PROVIDED, HOWEVER, Seller and the Owners shall
have, at the election of Seller and the Owners, at least 15 days' notice to
cure any such breach and the Closing Date shall be extended by each day of
such cure period;
(2) within 15 days after the receipt of the Environmental
Studies as provided in as provided in Section 7.1;
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(3) RII Sub 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
(4) Prior to the Closing, RII Sub 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 Seller or any other matters unacceptable to them, in
their sole discretion.
(b) At the election of Seller or the Owners at any time prior to
Closing if:
(1) any one or more of the material conditions precedent
to the obligation of Seller and the Owners to close has not been
fulfilled as of the Closing Date;
(2) Seller is unable to obtain any required consent to the
assignment of any of the Material Assumed Contracts and such failure would
constitute a breach of the Material Assumed Contract;
(3) RII Sub or the Parent has breached any material
representation or warranty, or failed to perform any covenant or agreement
contained in this Agreement; provided, however, RII Sub and the Parent
shall have at least 15 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.
(e) At any time after January 1, 1998, unless extended pursuant
to Section 3.5, at the election of any party so long as such party is not in
default under the terms of this Agreement.
13.2 SURVIVAL. If this Agreement is terminated pursuant to Section 13.1,
this Agreement shall become void and of no further force and effect, except for
the provisions of Sections 8.7(b) and 14.3, 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.
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<PAGE>
ARTICLE 14
CERTAIN ADDITIONAL AGREEMENTS
14.1 PUBLIC STATEMENTS; CONFIDENTIALITY OF INFORMATION. (a) No party
will make any public disclosure (including, without limitation, disclosure to
Seller's employees or customers) of this Agreement, the Acquisition, the
Purchase Price or the other terms and conditions of the Transaction without the
prior written 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.
(b) Subject to the Parent's obligation as a public company to
issue appropriate public announcements of material events, and subject to this
Section 14.1 hereof, each party will maintain the confidentiality of all
non-public information obtained from any other party.
(c) Notwithstanding anything in this Agreement to the contrary,
the Environmental Studies described in this Agreement under Section 7.2 above,
shall remain confidential and Recycling shall not make any disclosures of these
studies or estimates to any Person (other than its legal counsel, independent
accountants and lenders) without the prior written approval of Seller.
14.2 REASSIGNMENT OF SELLER RECEIVABLES. For 180 days following the
Closing Date, RII Sub shall have the right to reassign to Seller any or all of
the Seller Receivables which have not been collected within 90 days of the
Closing, as provided in Section 4.13. Prior to the reassignment of any Seller
Receivable, RII Sub agrees to use commercially reasonable efforts to collect any
past due amount, but shall not be required to engage a collection agency or
commence arbitration or litigation to collect. Within 15 days after any
reassignment of any Seller Receivables, to the extent not paid, Seller and/or
the Owners shall reimburse RII Sub dollar-for-dollar for the Seller Receivables
so reassigned with such payment being made in immediately available funds.
14.3 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 completion
of the Transaction whether or not the Transaction is completed.
14.4 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.
14.5 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
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<PAGE>
overnight delivery service; or (4) when delivered by facsimile transmission for
which automatic confirmation has been received, addressed in each case as
follows:
IF TO RII SUB OR THE PARENT:
Thomas J. Wiens, Chairman and CEO
Recycling Industries, Inc.
Recycling Industries of Greensboro, Inc.
384 Inverness Drive South, Suite 211
Englewood, Colorado 80112
telephone: (303) 790-7372
facsimile: (303) 790-4252
WITH A COPY TO:
Mary M. Maikoetter, 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
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<PAGE>
IF TO SELLER OR THE OWNERS:
Jack L. Levin
222 Swing Road
Suite 3
Greensboro, North Carolina 27409
telephone: (910) 299-0900
facsimile: (910) 299-7030
Frank Brenner
1426 West Mountain Street
Kernersville, North Carolina 27284
telephone: (910) 996-2241
facsimile: (910) 933-3064
WITH A COPY TO:
William A. Davis II
Womble, Carlyle, Sandridge & Rice
200 West Second Street, 17th Floor
Winston-Salem, North Carolina 27101
telephone: (910) 721-3624
facsimile: (910) 733-8364
Any party may change its address by giving notice to every other party.
14.6 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.
Seller and the Owners, at any time and from time to time on and after the
Closing, upon request by RII Sub 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 RII
Sub or the Parent for the better conveying, transferring, assigning, delivering,
assuring and confirming the Seller Assets to RII Sub.
14.7 RETENTION OF/ACCESS TO BUSINESS RECORDS. For at least three years
following the Closing Date, RII Sub shall retain all business records related to
the Seller Assets or the Business. Following such three-year retention period,
and until six years following the Closing Date, records shall be destroyed in
accordance with the policies mutually agreed upon by Seller or the Owners and
RII Sub. Following such six-year period, such records shall be destroyed in
accordance with the policies of RII Sub. During the six year period following
the Closing Date, upon reasonable request by Seller or the Owners from time to
time, and without further consideration, RII Sub shall provide Seller or the
Owners access to or copies of said business records which have not been
previously destroyed.
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<PAGE>
14.8 AUDIT BY RII SUB AND PARENT. For a period of five years after the
Closing, Seller and the Owners shall give Parent and RII Sub'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.
14.9 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.
14.10 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. The parties intend that
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.
14.11 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.
14.12 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.
14.13 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 North Carolina, without regard to principles of conflicts
or choice of law.
14.14 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
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<PAGE>
in, and hereby submits itself and its property to the jurisdiction of, the
courts of the State of North Carolina located in Winston-Salem, North Carolina,
the courts of the United States of America for the District of North Carolina,
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 14.5.
14.15 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.
14.16 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.
14.17 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.
14.18 CORPORATE OR PARTNERSHIP AUTHORITY. The undersigned have executed
this Agreement with all requisite corporate or partnership authority, as
applicable.
14.19 ADOPTION OF SELLER'S 401(k) PLAN. RII Sub agrees to adopt and
continue to maintain Seller's 401(k) Plan until the earlier of (i) the adoption
of a new plan by RII Sub or Parent, or (ii) December 31, 1998. Seller and
Seller Owners agree to indemnify Parent and RII Sub for any costs, taxes,
liabilities or penalties Parent and RII Sub incur as a result of RII Sub
adopting Seller's 401(k) retirement plan, to the extent that such costs, taxes,
liabilities or penalties are attributable to the operation or documentation of
Seller's 401(k) retirement plan prior to the Closing Date. Seller or the Seller
Owners will reimburse RII Sub for the amount of any "top-heavy minimum
contribution" RII Sub may be required to make to Seller's 401(k) retirement plan
for the 1997 plan year, including any resulting penalties.
[THE BALANCE OF THIS PAGE INTENTIONALLY LEFT BLANK]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused their names to be
hereunto subscribed, all as of the day and year first above written.
"RII SUB"
RECYCLING INDUSTRIES OF GREENSBORO, INC.
Dated December 4, 1997 BY: /S/ THOMAS J. WIENS
-----------------------------------------
Thomas J. Wiens, Chairman and
Chief Executive Officer
"PARENT"
RECYCLING INDUSTRIES, INC.
Dated December 4, 1997 BY: /S/ THOMAS J. WIENS
-----------------------------------------
Thomas J. Wiens, Chairman and Chief
Executive Officer
"SELLER"
UNITED METAL RECYCLERS, A GENERAL PARTNERSHIP
By its duly authorized partner
Brenner Companies, Inc.
Dated December 4, 1997 BY: /S/ FRANK BRENNER
-----------------------------------------
Frank Brenner, Its Duly Authorized
Representative
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<PAGE>
"LBI"
LEVIN BROTHERS, INC.
Dated December 4, 1997 By: /S/ SEYMOUR M. LEVIN
-----------------------------------------
Seymour M. Levin, Its Duly Authorized
Representative
Dated December 4, 1997 BY: /S/ JACK L. LEVIN
------------------------------------------
Jack L. Levin, Its Duly Authorized
Representative
"BCI"
BRENNER COMPANIES, INC.
Dated December 4, 1997 BY: /S/ FRANK BRENNER
-----------------------------------------
Frank Brenner, Its Duly Authorized
Representative
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<PAGE>
LIST OF EXHIBITS
Exhibit A Certificate of Designations, Rights and
Preferences of the Series "H" 6%
Redeemable Convertible Preferred Stock
of Recycling Industries, Inc.
Exhibit B Form of Subscription Agreement
Exhibit C Seller Environmental Escrow Agreement
Exhibit D Griffin Environmental Escrow Agreement
Exhibit E Subscription Agreement for the Stock
Consideration
Exhibit F Form of Non-Competition Agreement
Exhibit G Form of Legal Opinion from Counsel for
Seller and the Owners
Exhibit H Form of Employment Agreement
Exhibit I Form of Legal Opinion from Counsel for
RII Sub and Parent
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<PAGE>
LIST OF SCHEDULES
Schedule 1.8 Retained Receivables
Schedule 1.16 Griffin Note
Schedule 1.26 Material Assumed Contracts
Schedule 2.1(a) Owned Facilities - Legal Description
Schedule 2.1(e) Equipment
Schedule 2.1(f) Intellectual Property
Schedule 2.1(k) Computer Software
Schedule 2.2 Excluded Assets
Schedule 3.4 Allocation of Purchase Price
Schedule 4.1(b) Jurisdictions of Seller
Schedule 4.5(c) Tax Matters
Schedule 4.6 Legal Compliance
Schedule 4.7 Permits
Schedule 4.8 Litigation
Schedule 4.9(a) Contracts and Other Agreements
Schedule 4.16 Suppliers and Customers
Schedule 4.17 Employee Benefit Plans
Schedule 4.20 Insurance Policies
Schedule 4.22 Certain Relationships
Schedule 4.24 Employee Information
Schedule 4.25 Environmental Matters
Schedule 7.1 Environmental Studies
Schedule 8.1 Title Commitment
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<PAGE>
December 1, 1997
ARTICLES OF AMENDMENT
TO THE
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
RECYCLING INDUSTRIES, INC.
-------------------
DESIGNATION OF PREFERENCES, LIMITATIONS AND RELATIVE RIGHTS
OF THE
SERIES E REDEEMABLE CONVERTIBLE PREFERRED STOCK
PURSUANT TO SECTION 7-106-102
OF THE
COLORADO BUSINESS CORPORATION ACT
-------------------
Recycling Industries, Inc., a corporation organized and existing under the
laws of the State of Colorado (the "Company"), DOES HEREBY CERTIFY that the
following resolution was duly adopted by the Board of Directors of the Company
on November 17, 1997:
RESOLVED, that the Board of Directors, pursuant to the authority
vested in it by the provisions of the Company's Amended and Restated
Articles of Incorporation, hereby (a) revokes its previous designation
of a series of preferred stock consisting of 10,000 shares called the
"Convertible Preferred Stock, Series E" because no shares of that
series were ever issued; and (b) establishes a series of preferred
stock, consisting of 10,000 shares, which shall be designated as the
"Series E Redeemable Convertible Preferred Stock," and shall have the
powers, preferences, rights, qualifications, limitations and
restrictions as set forth in Attachment A attached hereto.
IN WITNESS WHEREOF, the undersigned hereby acknowledges under penalty of
perjury that the execution of this instrument is the Company's act and deed.
RECYCLING INDUSTRIES, INC.
December 4, 1997 By /s/ Brian L. Klemsz
-------------------------
Brian L. Klemsz, Chief
Financial Officer
<PAGE>
ATTACHMENT A
DESIGNATION OF PREFERENCES, LIMITATIONS AND RELATIVE RIGHTS
OF THE
SERIES E REDEEMABLE CONVERTIBLE PREFERRED STOCK
OF
RECYCLING INDUSTRIES, INC.
1. DESIGNATION AND AMOUNT. The distinctive designation of such series is
"Series E Redeemable Convertible Preferred Stock, without par value" (the
"Series E Preferred Stock") of Recycling Industries, Inc., a Colorado
corporation (the "Company"), the number of shares constituting this series shall
be 10,000, and the aggregate stated value of such shares shall be $3,000,000, or
$300 per share.
2. DIVIDEND RIGHTS. The holders of the Series E Preferred Stock shall
not be entitled to dividends.
3. LIQUIDATION PREFERENCE. The Series E Preferred Stock shall have no
liquidation preferences with respect to any other class or series of the
Company's common stock, $.001 par value per share (the "Common Stock") or
preferred stock.
4. VOTING RIGHTS. The holders of outstanding shares of Series E
Preferred Stock shall not be entitled to vote on any matters submitted to the
shareholders of the Company except as otherwise required by law, in which case
every holder of Series E Preferred Stock shall be entitled to one vote for each
such share.
5. CONVERSION OF THE SERIES E PREFERRED STOCK.
(a) AUTOMATIC CONVERSION. The outstanding shares of Series E
Preferred Stock shall automatically and without any further action on the part
of the owner and holder thereof, convert on the third anniversary of the date of
original issuance thereof (the "Automatic Conversion Date") at the office of the
Company or any transfer agent for the Series E Preferred Stock. On the
Automatic Conversion Date, each outstanding share of Series E Preferred Stock
will be converted into that number of shares of Common Stock whose average
Market Price for the ten trading days preceding the Automatic Conversion Date is
equivalent to the stated value per share of Series E Preferred Stock of $300.
(b) VOLUNTARY CONVERSION. The Company and the holder(s) of the Series
E Preferred Stock may mutually agree to partial or full conversion at any time
prior to the Automatic Conversion Date, with each outstanding share of Series E
Convertible Preferred Stock being converted early being converted into that
number of shares of Common Stock whose
A-1
<PAGE>
average Market Price for the ten trading days preceding the date of conversion
is equivalent to the stated value per share of Series E Preferred Shares of
$300.
(c) DEFINITION OF MARKET PRICE. 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 the Common Stock as reported on the
Nasdaq SmallCap Market System or on the electronic bulletin board or, if none,
the National Quotation Bureau, Inc.'s "Pink Sheets."
(d) MECHANICS OF CONVERSION. Upon surrender of the certificates
representing the Series E Preferred Stock being converted, the Company shall
within three business days of receipt of the original certificates or
certificates representing the shares of Series E Preferred Stock to be
converted, issue and deliver or cause to be issued and delivered to such holder
of Series E 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.
(e) AUTOMATIC CONVERSION UPON MERGER/CONSOLIDATION/SALE OF ASSETS.
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, or if the Company sells
substantially all of its assets not in the ordinary course of business, the
Series E 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, merger or asset sale is equivalent to
$3,000,000.
(f) FRACTIONAL SHARES. Any fractional shares resulting from a
conversion shall be rounded to the next highest whole share of Common Stock.
(g) 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 E 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 E Preferred Stock.
6. REDEMPTION RIGHTS. At any time prior to the conversion set forth in
Section 5, the Company shall have the right to redeem the outstanding shares of
Series E Preferred Stock, in whole or in part, at a cash redemption price of
$300 per share of Series E Preferred Stock outstanding (the "Cash Redemption
Price"); PROVIDED, HOWEVER, that the Company shall not be entitled to redeem any
shares of Series E 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 E Preferred Stock being
redeemed.
A-2
<PAGE>
7. NOTICES. Any notice required by the provisions of this Certificate to
be given to the holder of shares of the Series E 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 holder's 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 E 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
E Preferred Stock.
A-3
<PAGE>
EXHIBIT 3(i)-2
ARTICLES OF AMENDMENT
TO THE
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
RECYCLING INDUSTRIES, INC.
--------------------
DESIGNATION OF PREFERENCES, LIMITATIONS AND RELATIVE RIGHTS
OF THE
SERIES F 6 1/2% REDEEMABLE CONVERTIBLE PREFERRED STOCK
PURSUANT TO SECTION 7-106-102
OF THE
COLORADO BUSINESS CORPORATION ACT
--------------------
Recycling Industries, Inc., a corporation organized and existing under the
laws of the State of Colorado (the "Company"), DOES HEREBY CERTIFY that the
following resolution was duly adopted by the Board of Directors of the Company
on November 17, 1997:
RESOLVED, that the Board of Directors, pursuant to the authority
vested in it by the provisions of the Company's Amended and Restated
Articles of Incorporation, hereby establishes a series of preferred
stock, consisting of 14,000 shares, which shall be designated as the
"Series F 6 1/2% Redeemable Convertible Preferred Stock," and shall
have the powers, preferences, rights, qualifications, limitations and
restrictions as set forth in Exhibit A attached hereto.
IN WITNESS WHEREOF, the undersigned hereby acknowledges under penalty of
perjury that the execution of this instrument is the Company's act and deed.
RECYCLING INDUSTRIES, INC.
December 4, 1997 By /s/ Brian L. Klemsz
------------------------------
Brian L. Klemsz, Chief
Financial Officer
<PAGE>
EXHIBIT A
DESIGNATION OF PREFERENCES, LIMITATIONS AND RELATIVE RIGHTS
OF THE
SERIES F 6 1/2 % REDEEMABLE CONVERTIBLE PREFERRED STOCK
OF
RECYCLING INDUSTRIES, INC.
1. DESIGNATION AND AMOUNT. The distinctive designation of such series is
"Series F 6 1/2% Redeemable Convertible Preferred Stock, without par value" (the
"Series F Preferred Stock") of Recycling Industries, Inc., a Colorado
corporation (the "Company") and the number of shares constituting this series
shall be 14,000.
2. DIVIDEND RIGHTS. The holders of the Series F Preferred Stock shall be
entitled to a 6 1/2% per annum dividend, which shall accrue for three years and
be paid in cash upon the conversion of the Series F Preferred Stock as provided
in Section 6(b) below, to the extent not previously paid.
3. RANKING. The Series F Preferred Stock shall rank PARI PASSU with all
other series or classes of the Company's preferred stock issued as part of the
consideration paid by the Company to acquire the assets or voting securities of
another entity, either now existing or established by the Company while any
shares of Series F Preferred Stock are outstanding, (collectively "Parity
Securities"), and senior to the Company's outstanding Series D 8% Convertible
Preferred Stock.
4. LIQUIDATION PREFERENCE. Upon any voluntary or involuntary
liquidation, dissolution or winding-up of the Company, holders of the Series F
Preferred Stock shall be entitled to be paid, out of assets available for
distribution, $250 per share, being the liquidation preference per share, plus
an amount in cash equal to all accumulated and unpaid dividends thereon to the
date fixed for liquidation, dissolution or winding-up (including an amount equal
to a prorated dividend for the period from the last dividend payment date to the
date fixed for liquidation, dissolution or winding-up) before any distribution
is made on the Company's common stock, $.001 par value per share (the "Common
Stock") or any series or class of preferred stock ranking junior to the Series F
Preferred Stock. If, upon any voluntary or involuntary liquidation, dissolution
or winding-up of the Company, the amounts payable to with respect to the Series
F Preferred Stock and all other Parity Securities are not paid in full, the
holders of the Series F Preferred Stock and the Parity Securities will share
equally and ratably in any distribution of assets of the Company in proportion
to the full liquidation preference and accumulated and unpaid dividends to which
each is entitled. After payment of the full amount of the liquidation
preferences and accumulated and unpaid dividends to which they are entitled, the
holders
<PAGE>
of shares of Series F Preferred Stock will not be entitled to any further
participation in any distribution of assets of the Company. However, neither
the sale, conveyance, exchange or transfer (for cash, shares of stock,
securities or other consideration) of all or substantially all of the property
or assets of the Company nor the consolidation or merger of the Company with or
into one or more corporations will be deemed to be a liquidation, dissolution or
winding-up of the Company.
5. VOTING RIGHTS. The holders of outstanding shares of Series F
Preferred Stock shall not be entitled to vote on any matters submitted to the
shareholders of the Company except as otherwise required by law, in which case
every holder of Series F Preferred Stock shall be entitled to one vote for each
such share.
6. CONVERSION OF THE SERIES F PREFERRED STOCK. All outstanding shares of
Series F Preferred Stock shall be convertible into Common Stock under the
following terms:
(a) MANDATORY CONVERSION. If not earlier redeemed by the Company, all
outstanding shares of Series F Preferred Stock, valued at $3,500,000, shall
automatically and without any further action on the part of the owner and holder
thereof, convert, at the office of the Company or any transfer agent for the
Series F Preferred Stock, on the third anniversary of the date of original
issuance thereof into that number of shares of the Company's Common Stock whose
average Market Price for the ten trading days immediately preceding the date of
conversion is equivalent to $3,500,000, plus accumulated and unpaid dividends to
the date of conversion. For purposes of this Section 6, "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 the Common Stock as reported on the Nasdaq
SmallCap Market System or on the electronic bulletin board or, if none, the
National Quotation Bureau, Inc.'s "Pink Sheets."
The Company shall within five business days of receipt of the original
certificates or certificates representing the shares of Series F Preferred Stock
to be converted, issue and deliver or cause to be issued and delivered to such
holder of Series F 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.
(b) OPTIONAL CONVERSION. Pursuant to Section 5(a)(ii) of the
Environmental Escrow Agreements by and among Recycling Industries of Greensboro,
Inc., the Company, United Metals Recyclers, Brenner Companies, Inc. and Levin
Brothers, Inc., upon written notice to the holders of the Series F Preferred
Stock as provided in the following paragraph, the Company shall have the option
at any time and from time to time to convert, at the office of the Company or
any transfer agent for the Series F Preferred Stock, any share of Series F
Preferred Stock into that number of shares of the Company's Common Stock whose
average Market Price for the ten trading days immediately preceding the date of
conversion is equivalent to $250 plus accumulated and unpaid dividends to the
date of conversion, up
-2-
<PAGE>
to an aggregate amount for all shares converted pursuant to this Section 6(b) of
$750,000 exclusive of any accumulated and unpaid dividends to the date of
conversion. The Company shall not convert any fractional shares of Series F
Preferred Stock.
To exercise its right of optional conversion, not less than ten business
days prior to the date of conversion (the "Optional Conversion Date"), the
Company shall give written notice to the holders of the Series F Preferred Stock
setting forth the number of shares to be converted (the "Conversion Amount") and
the Optional Conversion Date. Upon receipt of such notice, the holders of the
Series F Preferred Stock who desire to convert their shares shall tender such
shares to the Company on or before the Optional Conversion Date. If the Company
does not receive that number of shares of Series F Preferred Stock that equals
or exceed the Conversion Amount, the Company shall convert all shares received
on or prior to the Conversion Date and with respect to the shortfall, shall have
the right, exercisable in its sole discretion, to convert a sufficient number of
shares of Series F Preferred Stock held by one or more of the holders thereof
and without any action on the part of such holder, to cover any shortfall in the
Conversion Amount. If the Company receives shares of Series F Preferred Stock
in excess of the Conversion Amount, the Company shall convert the shares
received on a pro-rata basis among the holders submitting their shares of Series
F Preferred Stock based upon the number of Shares of Series F Preferred Stock
held in the aggregated by each holder, PROVIDED any fractional shares of Series
F Preferred Stock arising from such allocation shall be converted as a whole
share of Series F Preferred Stock.
(c) AUTOMATIC CONVERSION UPON MERGER, CONSOLIDATION OR SHARE EXCHANGE.
Notwithstanding any other provisions found in this designation, if a
consolidation, merger of the Company with or into another company or entity
occurs and the Company is not the surviving entity or the Company exchanges all
of its outstanding voting securities for voting or other securities of another
entity, the Series F Preferred Shares will immediately and automatically convert
upon such event into that number of shares of Common Stock whose average Market
Price for the ten trading days immediately preceding the date of consolidation,
merger or share exchange is equivalent to $3,500,000, plus accumulated and
unpaid dividends to the date of conversion.
(d) FRACTIONAL SHARES. Any fractional shares resulting from a
conversion shall be rounded to the next highest whole share of Common Stock.
(e) 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 F 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 F Preferred Stock.
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<PAGE>
7. REDEMPTION RIGHTS. At any time prior to the mandatory conversion set
forth in Paragraph 6(a), the Company shall have the right to redeem the
outstanding shares of Series F Preferred Stock, in whole or in part, at a cash
redemption price of $250 per share, plus accumulated and unpaid dividends to the
date of redemption (the "Cash Redemption Price"); provided, however, that the
Company shall not be entitled to redeem any shares of Series F 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 F Preferred Stock being redeemed.
8. NOTICES. Any notice required by the provisions of this Certificate to
be given to the holder of shares of the Series F 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.
9. PAYMENT OF TAXES. The holder of the Series F 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
F Preferred Stock.
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<PAGE>
ARTICLES OF AMENDMENT
TO THE
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
RECYCLING INDUSTRIES, INC.
--------------------
DESIGNATION OF PREFERENCES, LIMITATIONS AND RELATIVE RIGHTS
OF THE
SERIES G 6 1/2% REDEEMABLE CONVERTIBLE PREFERRED STOCK
PURSUANT TO SECTION 7-106-102
OF THE
COLORADO BUSINESS CORPORATION ACT
--------------------
Recycling Industries, Inc., a corporation organized and existing under the
laws of the State of Colorado (the "Company"), DOES HEREBY CERTIFY that the
following resolution was duly adopted by the Board of Directors of the Company
on November 17, 1997:
RESOLVED, that the Board of Directors, pursuant to the authority
vested in it by the provisions of the Company's Amended and Restated
Articles of Incorporation, hereby establishes a series of preferred
stock, consisting of 14,000 shares, which shall be designated as the
"Series G 6 1/2% Redeemable Convertible Preferred Stock", and shall
have the powers, preferences, rights, qualifications, limitations and
restrictions as set forth in Exhibit A attached hereto.
IN WITNESS WHEREOF, the undersigned hereby acknowledges under penalty of
perjury that the execution of this instrument is the Company's act and deed.
RECYCLING INDUSTRIES, INC.
December 4, 1997 By: /s/ Brian L. Klemsz
-----------------------
Brian L. Klemsz, Chief
Financial Officer
<PAGE>
EXHIBIT A
DESIGNATION OF PREFERENCES, LIMITATIONS AND RELATIVE RIGHTS
OF THE
SERIES G 6 1/2% REDEEMABLE CONVERTIBLE PREFERRED STOCK
OF
RECYCLING INDUSTRIES, INC.
1. DESIGNATION AND AMOUNT. The distinctive designation of such series is
"Series G 6 1/2% Redeemable Convertible Preferred Stock, without par value" (the
"Series G Preferred Stock") of Recycling Industries, Inc., a Colorado
corporation (the "Company") and the number of shares constituting this series
shall be 14,000.
2. DIVIDEND RIGHTS. The holders of the Series G Preferred Stock shall be
entitled to a 6 1/2% dividend per annum payable as follows:
(a) Dividends that accrue on the Series G Preferred in the first
twelve months will be paid in cash on the earlier of the conversion of the
Series G Preferred as provided in Section 6(b), below or the second anniversary
of the date of the original issuance of the Series G Preferred to the extent not
previously paid by the Company.
(b) Dividends that accrue on the Series G Preferred in the thirteenth
through thirty-sixth months subsequent to the date of the original issuance of
the Series G Preferred will be paid in cash on the earlier of the conversion
of the Series G Preferred as provided by Section 6(b), below, or the third
anniversary of the date of the original issuance of the Series G Preferred to
the extent not previously paid by the Company.
3. RANKING. The Series G Preferred Stock shall rank PARI PASSU with all
other series or classes of the Company's preferred stock issued as part of the
consideration paid by the Company to acquire the assets or voting securities of
another entity, either now existing or established by the Company while any
shares of Series G Preferred Stock are outstanding, (collectively "Parity
Securities"), and senior to the Company's outstanding Series D 8% Convertible
Preferred Stock.
4. LIQUIDATION PREFERENCE. Upon any voluntary or involuntary
liquidation, dissolution or winding-up of the Company, holders of the Series G
Preferred Stock shall be entitled to be paid, out of assets available for
distribution, $250 per share, being the liquidation preference per share, plus
an amount in cash equal to all accumulated and unpaid dividends thereon to the
date fixed for liquidation, dissolution or winding-up (including an amount equal
to a prorated dividend for the period from the last dividend payment date to the
date fixed for liquidation, dissolution or winding-up) before any
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<PAGE>
distribution is made on the Company's common stock, $.001 par value per share
(the "Common Stock") or any series or class of preferred stock ranking junior to
the Series G Preferred Stock. If, upon any voluntary or involuntary
liquidation, dissolution or winding-up of the Company, the amounts payable to
with respect to the Series G Preferred Stock and all other Parity Securities are
not paid in full, the holders of the Series G Preferred Stock and the Parity
Securities will share equally and ratably in any distribution of assets of the
Company in proportion to the full liquidation preference and accumulated and
unpaid dividends to which each is entitled. After payment of the full amount of
the liquidation preferences and accumulated and unpaid dividends to which they
are entitled, the holders of shares of Series G Preferred Stock will not be
entitled to any further participation in any distribution of assets of the
Company. However, neither the sale, conveyance, exchange or transfer (for cash,
shares of stock, securities or other consideration) of all or substantially all
of the property or assets of the Company nor the consolidation or merger of the
Company with or into one or more corporations will be deemed to be a
liquidation, dissolution or winding-up of the Company.
5. VOTING RIGHTS. The holders of outstanding shares of Series G
Preferred Stock shall not be entitled to vote on any matters submitted to the
shareholders of the Company except as otherwise required by law, in which case
every holder of Series G Preferred stock shall be entitled to one vote for each
such share.
6. CONVERSION OF THE SERIES G PREFERRED STOCK. All outstanding shares
of Series G Preferred Stock shall automatically and without any further action
on the part of the owner and holder thereof, convert on the third anniversary of
the date of original issuance thereof upon the following terms:
(a) MANDATORY CONVERSION. If not earlier redeemed by the Company, all
outstanding shares of Series G Preferred Stock, valued at $3,500,000, shall be
convertible at the office of the Company or any transfer agent for the Series G
Preferred Stock into the greater of: (i) that number of shares of common stock,
$.001 par value per share ("Common Stock") whose average Market Price for the
ten trading days immediately preceding the date of conversion is equivalent to
$3,500,000, plus accumulated and unpaid dividends to the date of conversion; or
(ii) that number of shares of Common Stock equivalent to $3,500,000, plus
accumulated and unpaid dividends to the date of conversion, divided by 2.5 times
the average of the closing asked price for the Common Stock as reported in the
Nasdaq National Market quotation system for the ten trading days immediately
preceding issuance of the Series G Preferred Stock (the "Primary Conversion
Price"). For purposes of this Section 6, "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 on the Nasdaq SmallCap Market or on the
electronic bulletin board or, if none, the National Quotation Bureau, Inc.'s
"Pink Sheets."
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<PAGE>
The Company shall, as soon as practicable thereafter, but in any event
within five business days of receipt of the original certificate or certificates
representing the shares of Series G Preferred Stock to be converted, issue and
deliver or cause to be issued and delivered to such holder of Series G 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.
(b) AUTOMATIC CONVERSION UPON MERGER, CONSOLIDATION OR SHARE EXCHANGE.
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 or the Company exchanges all
of its outstanding voting securities for voting or other securities of another
entity, the Series G Preferred Shares will immediately and automatically convert
upon such event into the number of shares provided for in Section 6(a)(i) or
6(a)(ii), whichever is greater.
(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 G 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 G Preferred Stock.
7. REDEMPTION RIGHTS. At any time prior to the mandatory conversion set
forth in Paragraph 6(a), the Company shall have the right to redeem the
outstanding shares of Series G Preferred Stock, in whole or in part, at a cash
redemption price per share equal to $250 plus accumulated and unpaid dividends
to the date of redemption (the "Cash Redemption Price"); provided, however, that
the Company shall not be entitled to redeem any shares of Series G Preferred
Stock unless it has given the holder of such shares written notice of such
redemption (the "Redemption Notice") and, as of the date such Redemption Notice
is given, the closing asked price for the Common Stock as reported in the Nasdaq
National Market quotation system for the ten trading days immediately preceding
the Company's Redemption Notice is less than the Primary Conversion Price. 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 G Preferred Stock
being redeemed.
8. ADJUSTMENT OF THE PRIMARY CONVERSION PRICE. In case the Company shall
at any time issue Common Stock or securities convertible into Common Stock by
way of dividend or other dividend or other distribution on any stock of the
Company or effect a stock split or reverse stock split of the outstanding shares
of Common Stock, the Primary Conversion Price then in effect shall be
proportionately decreased in the case of such
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<PAGE>
issuance (on the day following the date for determining shareholders entitled to
receive such dividend or other distribution) or decreased in the case of such
stock split or increased in the case of such reverse stock split (on the date
that such stock split or reverse stock split shall become effective), by
multiplying the Primary Conversion Price in effect immediately prior to the
stock dividend, stock split or reverse stock split by a fraction, the numerator
of which is the number of shares of Common Stock outstanding immediately prior
to such stock dividend, stock split or reverse stock split, and the denominator
of which is the number of shares of Common Stock outstanding immediately after
such stock dividend, stock split or reverse stock split.
9. NOTICES. Any notice required by the provisions of this Certificate
to be given to the holder of shares of the Series G 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 holder's address appearing on the books of the
Company. All notices shall state the date of conversion or redemption, as the
case may be.
10. PAYMENT OF TAXES. The holder of the Series G 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 G Preferred Stock.
-4-
<PAGE>
EXHIBIT 3(i).4
ARTICLES OF AMENDMENT
TO THE
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
RECYCLING INDUSTRIES, INC.
---------------------
DESIGNATION OF PREFERENCES, LIMITATIONS AND RELATIVE RIGHTS
OF THE
SERIES H 6% SECURED REDEEMABLE CONVERTIBLE PREFERRED STOCK
PURSUANT TO SECTION 7-106-102
OF THE
COLORADO BUSINESS CORPORATION ACT
---------------------
Recycling Industries, Inc., a corporation organized and existing under the
laws of the State of Colorado (the "Company"), DOES HEREBY CERTIFY that the
following resolution was duly adopted by the Board of Directors of the Company
on November 17, 1997:
RESOLVED, that the Board of Directors, pursuant to the authority
vested in it by the provisions of the Company's Amended and Restated
Articles of Incorporation, hereby establishes a series of preferred
stock, consisting of 12,000 shares, which shall be designated as the
"Series H 6% Secured Redeemable Convertible Preferred Stock," and
shall have the powers, preferences, rights, qualifications,
limitations and restrictions as set forth in Exhibit A attached
hereto.
IN WITNESS WHEREOF, the undersigned hereby acknowledges under penalty of
perjury that the execution of this instrument is the Company's act and deed.
RECYCLING INDUSTRIES, INC.
December 4, 1997 By /s/ BRIAN L. KLEMSZ
----------------------------
Brian L. Klemsz, Chief
Financial Officer
<PAGE>
EXHIBIT A
DESIGNATION OF PREFERENCES, LIMITATIONS AND RELATIVE RIGHTS
OF THE
SERIES H 6% SECURED REDEEMABLE CONVERTIBLE PREFERRED STOCK
OF
RECYCLING INDUSTRIES, INC.
1. DESIGNATION AND AMOUNT. The distinctive designation of such series is
"Secured Redeemable Convertible Preferred Stock, Series H, without par value"
(the "Series H Preferred Stock") of Recycling Industries, Inc., a Colorado
corporation (the "Company") and the number of shares constituting this series
shall be 12,000.
2. DIVIDEND RIGHTS. The holders of the Series H Preferred Stock shall be
entitled to a 6% per annum dividend which shall be paid in cash on each
anniversary of the series issue, to the extent not previously paid.
3. RANKING. Except to the extent of the security interest provided in
Section 8, below (the "Series H Security Interest"), the Series H Preferred
Stock shall rank PARI PASSU to all other series or classes of the Company's
preferred stock issued as part of the consideration paid by the Company to
acquire the assets or voting securities of another entity, either now existing
or established by the Company while any shares of Series H Preferred Stock are
outstanding (collectively "Parity Securities"), and senior to the Company's
outstanding Series D 8% Convertible Preferred Stock.
4. LIQUIDATION PREFERENCE. Upon any voluntary or involuntary
liquidation, dissolution or winding-up of the Company, holders of the Series H
Preferred Stock shall be entitled to be paid, first to the extent of the Series
H Security Interest and then out of assets the other assets of the Company
available for distribution, $500 per share, being the liquidation preference per
share, plus an amount in cash equal to all accumulated and unpaid dividends
thereon to the date fixed for liquidation, dissolution or winding-up (including
an amount equal to a prorated dividend for the period from the last dividend
payment date to the date fixed for liquidation, dissolution or winding-up)
before any distribution is made on the Company's common stock, $.001 par value
per share (the "Common Stock") or any series or class of preferred stock ranking
junior to the Series H Preferred Stock. If, upon any voluntary or involuntary
liquidation, dissolution or winding-up of the Company, the amounts payable to
with respect to the Series H Preferred Stock, after all amounts have been paid
with respect to the Series H Security Interest, and all other Parity Securities
are not paid in full, the holders of the Series H Preferred Stock and the Parity
Securities will share equally and ratably in any distribution of assets of the
Company in proportion to the full liquidation preference of all Parity
Securities and the remaining liquidation preference with respect to the Series H
Preferred
-2-
<PAGE>
Stock after all amounts have been paid with respect to the Series H Security
Interest, and accumulated and unpaid dividends to which each is entitled. After
payment of the full amount of the liquidation preferences and accumulated and
unpaid dividends, including the amount of the Series H Security Interest, to
which they are entitled, the holders of shares of Series H Preferred Stock will
not be entitled to any further participation in any distribution of assets of
the Company. However, neither the sale, conveyance, exchange or transfer (for
cash, shares of stock, securities or other consideration) of all or
substantially all of the property or assets of the Company nor the consolidation
or merger of the Company with or into one or more corporations will be deemed to
be a liquidation, dissolution or winding-up of the Company
5. VOTING RIGHTS. The holders of outstanding shares of Series H
Preferred Stock shall not be entitled to vote on any matters submitted to the
shareholders of the Company except as otherwise required by law, in which case
every holder of Series H Preferred stock shall be entitled to one vote for each
such share.
6. CONVERSION OF THE SERIES H PREFERRED STOCK. All outstanding shares
of Series H Preferred Stock shall be convertible into Common Stock under the
following terms:
(i) MANDATORY CONVERSION. If not earlier redeemed by the Company, all
outstanding shares of Series H Preferred Stock, valued at $6,000,000, shall
automatically and without any further action on the part of the owner and holder
thereof, convert, at the office of the Company or any transfer agent for the
Series H Preferred Stock, on the third anniversary of the date of original
issuance thereof into that number of shares of the Company's Common Stock whose
average Market Price for the ten trading days immediately preceding the date of
conversion is equivalent to $6,000,000, plus accumulated and unpaid dividends to
the date of conversion. For purposes of this Section 6, "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 the Common Stock as reported on the Nasdaq
SmallCap Market System or on the electronic bulletin board or, if none, the
National Quotation Bureau, Inc.'s "Pink Sheets."
The Company shall within five business days of receipt of the original
certificates or certificates representing the shares of Series H Preferred
Stock to be converted, issue and deliver or cause to be issued and delivered to
such holder of Series H 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.
(ii) OPTIONAL CONVERSION. Pursuant to Section 5(a)(ii) of the
Environmental Escrow Agreements by and among Recycling Industries of Greensboro,
Inc., the Company, Inc., United Metals Recyclers, Brenner Companies, Inc. and
Levin Brothers, Inc., upon written notice to the holders of the Series H
Preferred Stock as provided in the following paragraph, the Company shall have
the option at any time and from time to time to convert, at the office of the
Company or any transfer agent for the Series H Preferred Stock, any share of
Series H
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<PAGE>
Preferred Stock into that number of shares of the Company's Common Stock whose
average Market Price for the ten trading days immediately preceding the date of
conversion is equivalent to $500 plus accumulated and unpaid dividends to the
date of conversion up to an aggregate amount for all shares converted pursuant
to this Section 6(b) of $500,000 exclusive of any accumulated and unpaid
dividends to the date of conversion. The Company shall not convert any
fractional shares of Series H Preferred Stock.
To exercise its right of optional conversion, not less than ten business
days prior to the date of conversion (the "Optional Conversion Date"), the
Company shall give written notice to the holders of the Series H Preferred
Stock setting forth the number of shares to be converted (the "Conversion
Amount") and the Optional Conversion Date. Upon receipt of such notice, the
holders of the Series H Preferred Stock who desire to convert their shares
shall tender such shares to the Company on or before the Optional Conversion
Date. If the Company does not receive that number of shares of Series H
Preferred Stock that equals or exceed the Conversion Amount, the Company shall
convert all shares received on or prior to the Conversion Date and with respect
to the shortfall, shall have the right, exercisable in its sole discretion, to
convert a sufficient number of shares of Series H Preferred Stock held by one
or more of the holders thereof and without any action on the part of such
holder, to cover any shortfall in the Conversion Amount. If the Company
receives shares of Series H Preferred Stock in excess of the Conversion Amount,
the Company shall convert the shares received on a pro-rata basis among the
holders submitting their shares of Series H Preferred Stock based upon the
number of Shares of Series H Preferred Stock held in the aggregated by each
holder, PROVIDED any fractional shares of Series H Preferred Stock arising from
such allocation shall be converted as a whole share of Series H Preferred
Stock.
(iii) AUTOMATIC CONVERSION UPON MERGER, CONSOLIDATION OR SHARE
EXCHANGE. Notwithstanding any other provisions found in this designation, if a
consolidation, merger of the Company with or into another company or entity
occurs and the Company is not the surviving entity or the Company exchanges all
of its outstanding voting securities for voting or other securities of another
entity, the Series H Preferred Shares will immediately and automatically
convert upon such event into that number of shares of Common Stock whose average
Market Price for the ten trading days immediately preceding the date of
consolidation, merger or share exchange is equivalent to $3,500,000, plus
accumulated and unpaid dividends to the date of conversion.
7. FRACTIONAL SHARES. Any fractional shares resulting from a conversion
shall be rounded to the next highest whole share of Common Stock.
8. 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 H 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 H Preferred Stock.
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<PAGE>
9. REDEMPTION RIGHTS. At any time prior to and including the two year
anniversary date of the issuance of the Series H Preferred Stock, the Company
shall have the right to redeem the outstanding shares of Series H Preferred
Stock, in whole or in part, at a cash redemption price of $500 per share, plus
accumulated and unpaid dividends to the date of redemption (the "Cash Redemption
Price"); provided, however, that the Company shall not be entitled to redeem any
shares of Series H 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 H Preferred Stock being
redeemed.
10. SECURITY. The holders of the Series H Preferred Stock shall be
granted a security interest in the Company's one-half equity interest in United
Metals-D.H. Griffin Recyclers, L.L.C. to secure the liquidation preference of
the Series H Preferred and payment of the dividends payable upon the Series H
Preferred.
11. NOTICES. Any notice required by the provisions of this Certificate to
be given to the holder of shares of the Series H 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.
12. PAYMENT OF TAXES. The holder of the Series H 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
H Preferred Stock.
-5-
<PAGE>
EXHIBIT A
ARTICLES OF AMENDMENT
TO THE
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
RECYCLING INDUSTRIES, INC.
--------------------
Designation of Preferences, Limitations and Relative Rights
of the
Series I Redeemable Convertible Preferred Stock
Pursuant to Section 7-106-102
of the
Colorado Business Corporation Act
--------------------
Recycling Industries, Inc., a corporation organized and existing under the
laws of the State of Colorado (the "Company"), DOES HEREBY CERTIFY that the
following resolution was duly adopted by the Board of Directors of the Company
on December 8, 1997:
RESOLVED, that the Board of Directors, pursuant to the authority vested in
it by the provisions of the Company's Amended and Restated Articles of
Incorporation, hereby establishes a series of preferred stock, consisting of
10,000 shares, which shall be designated as the "Series I Redeemable Convertible
Preferred Stock," and shall have the powers, preferences, rights,
qualifications, limitations and restrictions as set forth in Attachment A
attached hereto.
IN WITNESS WHEREOF, the undersigned hereby acknowledges under penalty of
perjury that the execution of this instrument is the Company's act and deed.
RECYCLING INDUSTRIES, INC.
December 8, 1997
By /s/ THOMAS J. WIENS
---------------------------
Thomas J. Wiens, Chairman
and Chief Executive Officer
<PAGE>
EXHIBIT B
DESIGNATION OF PREFERENCES, LIMITATIONS AND RELATIVE RIGHTS
OF THE
SERIES I REDEEMABLE CONVERTIBLE PREFERRED STOCK
OF
RECYCLING INDUSTRIES, INC.
1. DESIGNATION AND AMOUNT. The distinctive designation of such series is
"Series I Redeemable Convertible Preferred Stock, without par value" (the
"Series I 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. From the date of initial issuance thereof and until
such shares are converted or redeemed as provided herein, the holders of the
Series I Preferred Stock shall be entitled (whether or not declared) to an
annual cumulative dividend equal to 8% of the "Share Liquidation Value" (as
hereinafter defined) of each share of Series I Preferred Stock outstanding,
which shall be paid in cash upon the conversion or redemption of the Series I
Preferred Stock as provided in Section 5(b) or Section 6 below, respectively, to
the extent not previously paid. Unless and until all dividends accruing on the
Series I Preferred Stock have been paid in full when due, the Company shall not
declare or pay any dividends on (i) its presently authorized class of common
stock, $.001 par value per share ("Common Stock") or on any other now or
hereafter authorized class or series of capital stock not limited to a fixed sum
or a percentage of a fixed sum in respect to the right of the holders thereof to
participate in dividends or in the distribution of assets upon the liquidation,
winding up or dissolution of the Company ("Other Common Stock"). The Series I
Preferred Stock shall rank PARI PASSU with all other series or classes of the
Company's preferred stock issued as part of the consideration paid by the
Company to acquire assets or voting securities of another person or entity,
either now existing or hereafter established by the Company while any shares of
Series I Preferred Stock are outstanding (collectively, "Parity Securities").
The Series I Preferred Stock shall rank senior to all other series of preferred
stock authorized or outstanding on the date of this Certificate of Designation,
including without limitation the Series D 8% Convertible Preferred Stock.
3. LIQUIDATION PREFERENCE. Upon the liquidation, winding up or
dissolution of the Company at any time while shares of Series I Preferred Stock
are outstanding, the holders of Series I Preferred Stock will be entitled to
receive per share of Series I Preferred Stock outstanding the sum of (i) $350
and (ii) all accrued but unpaid dividends thereon (the "Share Liquidation
Value") in preference to and in priority over all classes of the Company's
Common Stock, Other Common Stock or any series or class of preferred stock
ranking junior to the Series I Preferred Stock. In the event of the
liquidation, winding up or dissolution of the Company at any time while shares
of Series I Preferred Stock are outstanding, the Company shall pay, in cash, the
Share Liquidation Value to the holders of Series I Preferred Stock before
2
<PAGE>
any payment or distribution of assets of the Company are paid or distributed to
the holders of any Common Stock, Other Common Stock or any series or class of
preferred stock ranking junior to the Series I Preferred Stock. If, upon any
liquidation, dissolution or winding up of the Company, the amounts payable with
respect to the Series I Preferred Stock and all other Parity Securities are not
paid in full, the holders of the Series I Preferred Stock and the Parity
Securities will share equally and ratably in any distribution of assets of the
Company in proportion to the full liquidation preference and accumulated and
unpaid dividends to which each is entitled. After payment of the full amount of
the liquidation preferences and accumulated and unpaid dividends to which they
are entitled, the holders of shares of Series I Preferred Stock will not be
entitled to any further participation in any distribution of assets of the
Company.
4. VOTING RIGHTS. The holders of outstanding shares of Series I
Preferred Stock shall not be entitled to vote on any matters submitted to the
shareholders of the Company except as otherwise required by law, in which case
every holder of Series I Preferred stock shall be entitled to one vote for each
such share.
5. CONVERSION OF THE SERIES I PREFERRED STOCK. All outstanding shares of
Series I 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. If not earlier converted pursuant to
Section 5(b) or (c) or redeemed by the Company pursuant to Section 6 below, each
outstanding share of Series I Preferred Stock shall be converted at the office
of the Company or any transfer agent for the Series I Preferred Stock into that
number of shares of Common Stock as is determined by dividing (a) the Share
Liquidation Value by (b) the lesser of (i) the average Market Price for the ten
trading days immediately preceding the date of conversion or (ii) $15.00 (such
amount to be proportionately reduced in the event that at any time after this
Certificate of Designation the number of outstanding shares of Common Stock or
Other Common Stock is increased as a result of any stock dividend payable in
shares of Common Stock or Other Common Stock, or options to purchase, rights to
subscribe for, or securities convertible into or exchangeable for, Common Stock
or Other Common Stock, or options to purchase or rights to subscribe for such
convertible or exchangeable securities, or by a subdivision or split up of
shares of Common Stock or Other Common Stock (a "Security Dividend Dilution")).
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 the Common Stock as reported on the NASDAQ SmallCap Market System or on the
electronic bulletin board or, if none, the National Quotation Bureau, Inc.'s
"Pink Sheets."
3
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Upon surrender of the certificates representing the Series I Preferred
Stock being converted, the Company shall within five business days of receipt of
the original certificates or certificates representing the shares of Series I
Preferred Stock to be converted, issue and deliver or cause to be issued and
delivered to such holder of Series I 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.
(b) ACCELERATED MANDATORY CONVERSION. Notwithstanding any other
provisions found in this Certificate of Designation, if (i) pursuant to the
Environmental Escrow Agreement dated December 4, 1997 by and among the Company
and Bertram Lans, Bruce Lans and Scott Lans (a copy of which is attached hereto
as Exhibit A), the Escrow Funds are insufficient to cover the Remediation Costs
as such terms are defined therein (such deficit an "Escrow Deficit"), or
(ii) pursuant to that certain Stock Purchase Agreement dated December 4, 1997 by
and among the Company, Wm. Lans Sons' Co. Inc., and Bertram Lans, Bruce Lans and
Scott Lans, there exists a Liquidated Indemnification Liability, as defined
therein, then an amount of shares of the Series I Preferred Stock will
immediately and automatically convert into shares of the Company's Common Stock
pursuant to the formula set forth in 5(a) above so that the number of shares of
Common Stock issued upon such conversion have an aggregate Market Price equal to
the Escrow Deficit or the Liquidated Indemnification Liability, as the case may
be. The Company shall convert the shares to be converted pursuant to this
section(b) on a pro-rata basis among all of the holders based upon the number of
Shares of Series I Preferred Stock held in the aggregated by each holder,
PROVIDED any fractional shares of Series I Preferred Stock arising from such
allocation shall be converted as a whole share of Series I Preferred Stock.
Notwithstanding the above, in the event that (i) the Market Price of the Common
Stock is not ascertainable, or (ii) there is no public or private market for the
sale of the Common Stock, the automatic conversion provided for herein shall not
occur.
(c) AUTOMATIC CONVERSION UPON MERGER AND CONSOLIDATION.
Notwithstanding any other provisions found in this Certificate of 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, each share of the
Series I Preferred Stock will immediately and automatically convert into that
number of shares of Common Stock as is determined by dividing (a) the Share
Liquidation Value by (b) the lesser of (i) the average Market Price for the ten
trading days immediately preceding the initial public announcement of such
consolidation or merger or (ii) $15.00 (such amount to be proportionately
reduced in the event that at any time after this Certificate of Designation the
number of outstanding shares of Common Stock or Other Common Stock is increased
as a result of a Security Dividend Dilution).
(d) FRACTIONAL SHARES. Any fractional shares resulting from a
conversion shall be rounded to the next highest whole share of Common Stock.
(e) RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The Company shall
reserve and keep available out of its authorized but unissued shares of Common
4
<PAGE>
Stock, solely for the purpose of effecting the conversion of the shares of the
Series I 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 I Preferred Stock. All shares of Common Stock issued upon conversion
shall be fully paid and nonassessable.
6. REDEMPTION RIGHTS. At any time during the period commencing on the
day 30 days prior to the second anniversary of the issuance of the Preferred
Stock and ending on the day five days prior to the second anniversary (the
"Redemption Period"), the Company shall have the right to redeem the outstanding
shares of Series I Preferred Stock, in whole, at a cash redemption price per
share equal to the Share Liquidation Value; provided, however, that the Company
shall not be entitled to redeem any shares of Series I Preferred Stock unless
the then Market Price is equal to or less than $15.00 (such amount to be
proportionately reduced in the event that at any time after this Certificate of
Designation the number of outstanding shares of Common Stock or Other Common
Stock is increased as a result of a Security Dividend Dilution) and the Company
has given the holder of such shares written notice of such redemption (the
"Redemption Notice"). If the Company delivers a timely Redemption Notice during
the Redemption Period, the 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 I Preferred Stock being redeemed.
7. NOTICES. Any notice required by the provisions of this Certificate to
be given to the holder of shares of the Series I 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 holder's 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 Company will pay all taxes and other
governmental charges that may become imposed in respect of the issue or delivery
of shares of Common Stock upon conversion of shares of Series I Preferred Stock.
9. RESTRICTIONS ON TRANSFER. No Holder of Series I Preferred Stock may
transfer, sell, exchange, encumber, hypothecate, assign, pledge or otherwise
dispose of any shares of Series I Preferred Stock, unless the transferee of such
shares agrees in writing to be bound by the provisions of the Escrow Agreement
and the Stock Purchase Agreement with respect to the obligations to convert such
shares and sell the Common Stock issuable thereupon for purposes of funding
Remediation Costs and Liquidated Indemnification Liabilities.
10. LIQUIDATING DIVIDENDS AND OTHER PRO RATA DISTRIBUTIONS. If the
Company declares or pays any non-cash dividend upon its Common Stock or Other
Common Stock other than a Security Dividend Dilution, the holders of Series I
5
<PAGE>
Preferred Stock shall be entitled to receive a like distribution based upon the
number of shares of Common Stock into which the Series I Preferred Stock could
then be convertible applying the conversion formula described in Section 5(a)
hereof. In applying the foregoing provision, the Series I Preferred Stock shall
be deemed (for this purpose) to be convertible at the time the Company proposes
to take any action described in this Section 10, and in applying the conversion
formula, the Market Price shall be the market price for the 10 trading days
immediately prior to the Company's taking of such action.
11. PROTECTIVE PROVISIONS. So long as any of the Series I Preferred Stock
is outstanding, the Company shall not, without obtaining the written approval of
the holders of more than two-thirds of the outstanding shares of Series I
Preferred Stock:
(a) CHANGE OF RIGHTS. Alter, amend or change the relative
preferences, limitations or rights of the Series I Preferred Stock.
(b) RESTRICTIONS ON CREATION A NEW CLASS. Create any new class or
series of capital stock in connection with an acquisition by the Company of
assets or voting securities of another person or entity having preferences or
priorities superior to the Series I Preferred Stock as to participation in
dividends or distribution of assets upon liquidation, winding up or dissolution
of the Company.
(c) RECLASSIFICATION. Reclassify any existing class or series of
capital stock of the Company into shares having preferences or priorities
superior to the Series I Preferred Stock as to participation in dividends or
distribution of assets upon liquidation, winding up or dissolution of the
Company.
6
<PAGE>
RECYCLING INDUSTRIES, INC., AS ISSUER;
NR HOLDINGS, INC.; RECYCLING INDUSTRIES OF TEXAS, INC.;
RECYCLING INDUSTRIES OF SOUTH CAROLINA, INC.;
RECYCLING INDUSTRIES OF IOWA, INC.;
NEVADA RECYCLING, INC.; WEISSMAN INDUSTRIES, INC.;
RECYCLING INDUSTRIES OF MISSOURI, INC.;
RECYCLING INDUSTRIES OF GEORGIA, INC.;
RECYCLING INDUSTRIES OF WISCONSIN, INC.;
RECYCLING INDUSTRIES OF WINSTON-SALEM, INC.;
RECYCLING INDUSTRIES OF GREENSBORO, INC.;
RECYCLING INDUSTRIES OF CHESAPEAKE, INC.;
WM. LANS SONS' CO. INC.; AND
RECYCLING INDUSTRIES OF ATLANTA, INC.;
AS GUARANTORS
--------------------------------
INDENTURE
Dated as of December 4, 1997
$60,000,000
13% SENIOR SUBORDINATED NOTES DUE 2005
--------------------------------
State Street Bank and Trust Company, as Trustee
<PAGE>
TABLE OF CONTENTS
Page
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ARTICLE 1 - DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01 DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 1.02 OTHER DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . 19
SECTION 1.03 INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT. . . . . . 19
SECTION 1.04 RULES OF CONSTRUCTION. . . . . . . . . . . . . . . . . . . . 20
ARTICLE 2 - THE NOTES
SECTION 2.01 FORM AND DATING. . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 2.02 EXECUTION AND AUTHENTICATION . . . . . . . . . . . . . . . . 22
SECTION 2.03 REGISTRAR AND PAYING AGENT . . . . . . . . . . . . . . . . . 23
SECTION 2.04 PAYING AGENT TO HOLD MONEY IN TRUST. . . . . . . . . . . . . 23
SECTION 2.05 HOLDER LISTS . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 2.06 TRANSFER AND EXCHANGE. . . . . . . . . . . . . . . . . . . . 24
SECTION 2.07 REPLACEMENT NOTES. . . . . . . . . . . . . . . . . . . . . . 35
SECTION 2.08 OUTSTANDING NOTES. . . . . . . . . . . . . . . . . . . . . . 36
SECTION 2.09 TREASURY NOTES . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 2.10 TEMPORARY NOTES. . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 2.11 CANCELLATION . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 2.12 DEFAULTED INTEREST . . . . . . . . . . . . . . . . . . . . . 37
ARTICLE 3 - REDEMPTION AND PREPAYMENT
SECTION 3.01 NOTICES TO TRUSTEE . . . . . . . . . . . . . . . . . . . . . 37
SECTION 3.02 SELECTION OF NOTES TO BE REDEEMED. . . . . . . . . . . . . . 37
SECTION 3.03 NOTICE OF REDEMPTION . . . . . . . . . . . . . . . . . . . . 38
SECTION 3.04 EFFECT OF NOTICE OF REDEMPTION . . . . . . . . . . . . . . . 39
SECTION 3.05 DEPOSIT OF REDEMPTION PRICE. . . . . . . . . . . . . . . . . 39
SECTION 3.06 NOTES REDEEMED IN PART . . . . . . . . . . . . . . . . . . . 39
SECTION 3.07 OPTIONAL REDEMPTION. . . . . . . . . . . . . . . . . . . . . 39
SECTION 3.08 MANDATORY REDEMPTION . . . . . . . . . . . . . . . . . . . . 40
ARTICLE 4 - COVENANTS
SECTION 4.01 PAYMENT OF NOTES . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 4.02 MAINTENANCE OF OFFICE OR AGENCY. . . . . . . . . . . . . . . 41
SECTION 4.03 REPORTS. . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 4.04 COMPLIANCE CERTIFICATE.. . . . . . . . . . . . . . . . . . . 42
SECTION 4.05 TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
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SECTION 4.06 STAY, EXTENSION AND USURY LAWS . . . . . . . . . . . . . . . 43
SECTION 4.07 RESTRICTED PAYMENTS. . . . . . . . . . . . . . . . . . . . . 43
SECTION 4.08 DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING
RESTRICTED SUBSIDIARIES OF THE COMPANY . . . . . . . . . . . 46
SECTION 4.09 INCURRENCE OF INDEBTEDNESS . . . . . . . . . . . . . . . . . 46
SECTION 4.10 ASSET SALES. . . . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 4.11 TRANSACTIONS WITH AFFILIATES . . . . . . . . . . . . . . . . 49
SECTION 4.12 LIENS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
SECTION 4.13 LINE OF BUSINESS . . . . . . . . . . . . . . . . . . . . . . 50
SECTION 4.14 CORPORATE EXISTENCE. . . . . . . . . . . . . . . . . . . . . 50
SECTION 4.15 OFFER TO REPURCHASE UPON CHANGE OF CONTROL . . . . . . . . . 50
SECTION 4.16 NO SENIOR SUBORDINATED DEBT. . . . . . . . . . . . . . . . . 52
SECTION 4.17 PREFERRED STOCK. . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 4.18 CONSOLIDATED NET WORTH.. . . . . . . . . . . . . . . . . . . 52
SECTION 4.19 INSPECTION RIGHTS. . . . . . . . . . . . . . . . . . . . . . 53
SECTION 4.20 COMPLIANCE WITH LAW. . . . . . . . . . . . . . . . . . . . . 54
SECTION 4.21 ACCOUNTING CHANGES . . . . . . . . . . . . . . . . . . . . . 54
SECTION 4.22 ACCOUNTING FIRMS . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 4.23 INVESTMENT COMPANY ACT . . . . . . . . . . . . . . . . . . . 54
SECTION 4.24 MAINTENANCE OF PROPERTIES. . . . . . . . . . . . . . . . . . 55
SECTION 4.25 BOOKS AND RECORDS. . . . . . . . . . . . . . . . . . . . . . 55
SECTION 4.26 MAINTENANCE OF INSURANCE . . . . . . . . . . . . . . . . . . 55
SECTION 4.27 COMPLIANCE WITH ERISA. . . . . . . . . . . . . . . . . . . . 55
SECTION 4.29 MAINTENANCE FIXED CHARGE COVERAGE RATIO. . . . . . . . . . . 56
ARTICLE 5 - SUCCESSORS
SECTION 5.01 MERGER, CONSOLIDATION, OR SALE OF ASSETS . . . . . . . . . . 57
SECTION 5.02 SUCCESSOR CORPORATION SUBSTITUTED. . . . . . . . . . . . . . 58
ARTICLE 6 - DEFAULTS AND REMEDIES
SECTION 6.01 EVENTS OF DEFAULT. . . . . . . . . . . . . . . . . . . . . . 58
SECTION 6.02 ACCELERATION . . . . . . . . . . . . . . . . . . . . . . . . 61
SECTION 6.03 OTHER REMEDIES . . . . . . . . . . . . . . . . . . . . . . . 61
SECTION 6.04 WAIVER OF PAST DEFAULTS. . . . . . . . . . . . . . . . . . . 61
SECTION 6.05 CONTROL BY MAJORITY. . . . . . . . . . . . . . . . . . . . . 62
SECTION 6.06 LlMlTATlON ON SUITS. . . . . . . . . . . . . . . . . . . . . 62
SECTION 6.07 RIGHTS OF HOLDERS OF NOTES TO RECEIVE PAYMENT. . . . . . . . 63
SECTION 6.08 COLLECTION SUIT BY TRUSTEE . . . . . . . . . . . . . . . . . 63
SECTION 6.09 TRUSTEE MAY FILE PROOFS OF CLAIM . . . . . . . . . . . . . . 63
SECTION 6.10 PRIORITIES . . . . . . . . . . . . . . . . . . . . . . . . . 64
SECTION 6.11 UNDERTAKING FOR COSTS. . . . . . . . . . . . . . . . . . . . 64
ii
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ARTICLE 7 - TRUSTEE
SECTION 7.01 DUTIES OF TRUSTEE. . . . . . . . . . . . . . . . . . . . . . 64
SECTION 7.02 RIGHTS OF TRUSTEE. . . . . . . . . . . . . . . . . . . . . . 66
SECTION 7.03 INDIVIDUAL RIGHTS OF TRUSTEE . . . . . . . . . . . . . . . . 66
SECTION 7.04 TRUSTEE DISCLAIMER . . . . . . . . . . . . . . . . . . . . . 67
SECTION 7.05 NOTICE OF DEFAULTS . . . . . . . . . . . . . . . . . . . . . 67
SECTION 7.06 REPORTS BY TRUSTEE TO HOLDERS OF THE NOTES . . . . . . . . . 67
SECTION 7.07 COMPENSATION AND INDEMNITY . . . . . . . . . . . . . . . . . 67
SECTION 7.08 REPLACEMENT OF TRUSTEE . . . . . . . . . . . . . . . . . . . 68
SECTION 7.09 SUCCESSOR TRUSTEE BY MERGER, ETC . . . . . . . . . . . . . . 70
SECTION 7.10 ELIGIBILITY; DISQUALIFICATION. . . . . . . . . . . . . . . . 70
SECTION 7.11 PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY. . . . . . 70
ARTICLE 8 - [Reserved]
ARTICLE 9 - AMENDMENT, SUPPLEMENT AND WAIVER
SECTION 9.01 WITHOUT CONSENT OF HOLDERS OF NOTES. . . . . . . . . . . . . 70
SECTION 9.02 WITH CONSENT OF HOLDERS OF NOTES . . . . . . . . . . . . . . 71
SECTION 9.03 COMPLIANCE WITH TRUST INDENTURE ACT. . . . . . . . . . . . . 72
SECTION 9.04 REVOCATION AND EFFECT OF CONSENTS. . . . . . . . . . . . . . 73
SECTION 9.05 NOTATION ON OR EXCHANGE OF NOTES . . . . . . . . . . . . . . 73
SECTION 9.06 TRUSTEE TO SIGN AMENDMENTS, ETC. . . . . . . . . . . . . . . 73
ARTICLE 10 - SUBORDINATION
SECTION 10.01 AGREEMENT TO SUBORDINATE . . . . . . . . . . . . . . . . . . 73
SECTION 10.02 LIQUIDATION; DISSOLUTION; BANKRUPTCY . . . . . . . . . . . . 74
SECTION 10.03 ACCELERATION OF NOTES. . . . . . . . . . . . . . . . . . . . 74
SECTION 10.04 WHEN DISTRIBUTION MUST BE PAID OVER. . . . . . . . . . . . . 74
SECTION 10.05 NOTICE BY COMPANY. . . . . . . . . . . . . . . . . . . . . . 75
SECTION 10.06 SUBROGATION. . . . . . . . . . . . . . . . . . . . . . . . . 75
SECTION 10.07 RELATIVE RIGHTS. . . . . . . . . . . . . . . . . . . . . . . 75
SECTION 10.08 SUBORDINATION MAY NOT BE IMPAIRED BY COMPANY . . . . . . . . 76
SECTION 10.09 DISTRIBUTION OR NOTICE TO REPRESENTATIVE . . . . . . . . . . 76
SECTION 10.10 RIGHTS OF TRUSTEE AND PAYING AGENT . . . . . . . . . . . . . 76
SECTION 10.11 AUTHORIZATION TO EFFECT SUBORDINATION. . . . . . . . . . . . 77
SECTION 10.12 AMENDMENTS . . . . . . . . . . . . . . . . . . . . . . . . . 77
ARTICLE 11 - GUARANTEE
iii
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SECTION 11.01 GUARANTORS' GUARANTEE. . . . . . . . . . . . . . . . . . . . 77
SECTION 11.02 CONTINUING GUARANTEE; NO RIGHT OF SET-OFF; INDEPENDENT
OBLIGATION . . . . . . . . . . . . . . . . . . . . . . . . . 77
SECTION 11.03 GUARANTEE ABSOLUTE . . . . . . . . . . . . . . . . . . . . . 78
SECTION 11.04 RIGHT TO DEMAND FULL PERFORMANCE . . . . . . . . . . . . . . 81
SECTION 11.05 WAIVERS. . . . . . . . . . . . . . . . . . . . . . . . . . . 81
SECTION 11.06 THE GUARANTORS REMAIN OBLIGATED IN EVENT THE COMPANY IS
NO LONGER OBLIGATED TO DISCHARGE INDENTURE OBLIGATIONS . . . 82
SECTION 11.07 FRAUDULENT CONVEYANCE; SUBROGATION . . . . . . . . . . . . . 82
SECTION 11.08 GUARANTEE IS IN ADDITION TO OTHER SECURITY . . . . . . . . . 83
SECTION 11.09 RELEASE OF SECURITY INTERESTS. . . . . . . . . . . . . . . . 83
SECTION 11.10 NO BAR TO FURTHER ACTIONS. . . . . . . . . . . . . . . . . . 83
SECTION 11.11 FAILURE TO EXERCISE RIGHTS SHALL NOT OPERATE AS A WAIVER; NO
SUSPENSION OF REMEDIES . . . . . . . . . . . . . . . . . . . 83
SECTION 11.12 TRUSTEE'S DUTIES; NOTICE TO TRUSTEE. . . . . . . . . . . . . 84
SECTION 11.13 SUCCESSORS AND ASSIGNS . . . . . . . . . . . . . . . . . . . 84
SECTION 11.14 RELEASE OF GUARANTEE . . . . . . . . . . . . . . . . . . . . 84
SECTION 11.15 EXECUTION OF GUARANTEE . . . . . . . . . . . . . . . . . . . 84
SECTION 11.16 GUARANTEE SUBORDINATE TO SENIOR DEBT . . . . . . . . . . . . 85
SECTION 11.17 LIQUIDATION; DISSOLUTION; BANKRUPTCY . . . . . . . . . . . . 85
SECTION 11.18 SUBROGATION TO RIGHTS OF HOLDERS OF SENIOR DEBT. . . . . . . 86
SECTION 11.19 RELATIVE RIGHTS. . . . . . . . . . . . . . . . . . . . . . . 86
SECTION 11.20 SUBORDINATION MAY NOT BE IMPAIRED BY ANY GUARANTOR . . . . . 86
SECTION 11.21 DISTRIBUTION OR NOTICE TO REPRESENTATIVE . . . . . . . . . . 86
SECTION 11.22 AUTHORIZATION TO EFFECT SUBORDINATION. . . . . . . . . . . . 87
SECTION 11.23 AMENDMENTS . . . . . . . . . . . . . . . . . . . . . . . . . 87
SECTION 11.24 CONTRIBUTION WITH RESPECT TO GUARANTEES. . . . . . . . . . . 87
SECTION 11.25 LIABILITY CUMULATIVE . . . . . . . . . . . . . . . . . . . . 88
ARTICLE 12 - MISCELLANEOUS
SECTION 12.01 TRUST INDENTURE ACT CONTROLS . . . . . . . . . . . . . . . . 88
SECTION 12.02 NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . 88
SECTION 12.03 COMMUNICATION BY HOLDERS OF NOTES WITH OTHER HOLDERS
OF NOTES . . . . . . . . . . . . . . . . . . . . . . . . . . 90
SECTION 12.04 CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT. . . . . 90
SECTION 12.05 STATEMENTS REQUIRED IN CERTIFICATE OR OPINION. . . . . . . . 90
SECTION 12.06 RULES BY TRUSTEE AND AGENTS. . . . . . . . . . . . . . . . . 91
SECTION 12.07 NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND
STOCKHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . 91
SECTION 12.08 GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . . . 91
SECTION 12.09 NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS. . . . . . . . 91
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SECTION 12.10 SUCCESSORS . . . . . . . . . . . . . . . . . . . . . . . . . 91
SECTION 12.11 SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . 91
SECTION 12.12 COUNTERPART ORIGINALS. . . . . . . . . . . . . . . . . . . . 92
SECTION 12.13 TABLE OF CONTENTS, HEADINGS, ETC . . . . . . . . . . . . . . 92
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EXHIBITS
Exhibit A-1 FORM OF NOTE
Exhibit B-1 FORM OF CERTIFICATE FOR EXCHANGE OR REGISTRATION OF TRANSFER FROM
U.S. GLOBAL NOTE TO REGULATION S GLOBAL NOTE
Exhibit B-2 FORM OF CERTIFICATE FOR EXCHANGE OR REGISTRATION OF TRANSFER FROM
REGULATION S GLOBAL NOTE TO RULE 144A GLOBAL NOTE OR ACCREDITED
INSTITUTIONAL INVESTOR GLOBAL NOTE
Exhibit B-3 FORM OF CERTIFICATE FOR EXCHANGE OR REGISTRATION OF TRANSFER FROM
RULE 144A GLOBAL NOTE OR ACCREDITED INSTITUTIONAL INVESTOR GLOBAL
NOTE TO ACCREDITED INSTITUTIONAL INVESTOR GLOBAL NOTE OR RULE
144A GLOBAL NOTE, RESPECTIVELY
Exhibit B-4 FORM OF CERTIFICATE FOR EXCHANGE OR REGISTRATION OF TRANSFER OF
DEFINITIVE NOTES
Exhibit B-5 FORM OF CERTIFICATE FOR EXCHANGE OR REGISTRATION OF TRANSFER FROM
RULE 144A GLOBAL NOTE OR ACCREDITED INSTITUTIONAL INVESTOR GLOBAL
NOTE OR REGULATION S PERMANENT GLOBAL NOTE TO DEFINITIVE NOTE
Exhibit B-6 FORM OF CERTIFICATE FOR EXCHANGE OR REGISTRATION OF TRANSFER FROM
DEFINITIVE NOTE TO RULE 144A GLOBAL NOTE OR ACCREDITED
INSTITUTIONAL INVESTOR GLOBAL NOTE OR REGULATION S PERMANENT
GLOBAL NOTE
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INDENTURE, dated as of December 4, 1997, among Recycling Industries,
Inc., a Colorado corporation (the "COMPANY"); NR Holdings, Inc. , a Nevada
corporation; Recycling Industries of Texas, Inc., a Colorado corporation;
Recycling Industries of South Carolina, Inc., a Colorado corporation; Recycling
Industries of Iowa, Inc., a Colorado corporation; Nevada Recycling, Inc., a
Nevada corporation; Weissman Industries, Inc., an Iowa corporation; Recycling
Industries of Missouri, Inc., a Colorado corporation; Recycling Industries of
Georgia, Inc., a Colorado corporation; Recycling Industries of Wisconsin, Inc.,
a Colorado corporation; Recycling Industries of Winston-Salem, Inc., a Colorado
corporation, Recycling Industries of Greensboro, Inc., a Colorado corporation;
Recycling Industries of Chesapeake, Inc., a Colorado corporation; Wm. Lans Sons'
Co. Inc., an Illinois corporation; Recycling Industries of Atlanta, Inc., a
Colorado corporation (collectively, the "GUARANTORS"); and State Street Bank and
Trust Company, a Massachusetts trust company, as trustee (the "TRUSTEE").
The Company, the Guarantors and the Trustee agree as follows for the
benefit of each other and for the equal and ratable benefit of the Holders of
the 13% Series A Senior Subordinated Notes due 2005 (the "SERIES A NOTES") and
the 13% Series B Senior Subordinated Notes due 2005 (the "Series B Notes" and,
together with the Series A Notes, the "Notes"):
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
SECTION 1.01 DEFINITIONS.
"ACCREDITED INSTITUTIONAL INVESTOR GLOBAL NOTE" means a global note that
contains the paragraph referred to in footnote 1 and the additional schedule
referred to in footnote 2 to the form of the Note attached hereto as Exhibit
A-1, and that is deposited with and registered in the name of the Depositary,
representing a series of Notes sold to institutional accredited investors in
transactions exempt from registration under the Securities Act not made in
reliance on Rule 144A or Regulation S.
"ACQUIRED DEBT" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Restricted Subsidiary of such specified Person,
including, without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Restricted Subsidiary of such specified Person, and (ii) Indebtedness secured by
a Lien encumbering any asset acquired by such specified Person.
"AFFILIATE" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"CONTROL" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "CONTROLLING" and "CONTROLLED" have meanings correlative to the
foregoing.
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"AGENT" means any Registrar, Paying Agent or co-registrar.
"AGENT MEMBERS" means members of, or participants in, the Depositary.
"ANNUALIZED FIXED CHARGES" shall have the meaning ascribed thereto in the
Initial Credit Agreement.
"APPLICABLE PROCEDURES" means applicable procedures of the Depositary,
Euroclear or Cedel Bank, as the case may be.
"BANKRUPTCY LAW" means Title 11, U.S. Code or any similar federal or state
law for the relief of debtors.
"BOARD OF DIRECTORS" means the Board of Directors of the Company, or any
authorized committee of the Board of Directors.
"BUSINESS DAY" means any day other than a Legal Holiday.
"CAPITAL LEASE" means, at the time any determination thereof is to be made,
any lease of property, real or personal or mixed in respect of which the present
value of the minimum rental commitment would be required to be capitalized on a
balance sheet of the lessee in accordance with GAAP.
"CAPITAL STOCK" means (i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (iii) in the case of a partnership, partnership interests
(whether general or limited) and (iv) any other interest or participation that
confers on a Person the right to receive a share of the profits and losses of,
or distributions of assets of, the issuing Person.
"CASH EQUIVALENTS" means (i) United States dollars, (ii) securities issued
or directly and fully guaranteed or insured by the United States government or
any agency or instrumentality thereof, (iii) certificates of deposit and
eurodollar time deposits with maturities of six months or less from the date of
acquisition, bankers' acceptances with maturities not exceeding six months and
overnight bank deposits, in each case with any domestic commercial bank having
capital and surplus in excess of $500 million and a Keefe Bank Watch Rating of
"B" or better, (iv) repurchase obligations with a term of not more than seven
days for underlying securities of the types described in clauses (ii) and (iii)
entered into with any financial institution meeting the qualifications specified
in clause (iii) above, (v) commercial paper having one of the two highest rating
categories obtainable from Moody's or S&P and in each case maturing within six
months after the date of acquisition and (vi) readily marketable direct
obligations issued by any state of the United States of America or any political
subdivision thereof having one of the two highest rating categories obtainable
from Moody's or S&P.
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"CHANGE OF CONTROL" means the occurrence of any of the following: (i) the
sale, lease, transfer, conveyance or other disposition, in one or a series of
related transactions, of all or substantially all of the assets of the Company
and its Subsidiaries taken as a whole to any person (as such term is used in
Section 13(d)(3) of the Exchange Act) (each an "ACQUIRING PERSON"), (ii) the
adoption of a plan relating to the liquidation or dissolution of the Company,
(iii) the consummation of any transaction (including, without limitation, any
merger or consolidation) the result of which is that any "person" other than
Thomas J. Wiens becomes the "beneficial owner" (as each such term is defined in
Rule 13d-3 and Rule 13d-5 under the Exchange Act), directly or indirectly, of
more than 30.0% of the voting stock of the Company, and (iv) the first day on
which the majority of the Company's Board of Directors are not Continuing
Directors. For purposes of this definition, any transfer of an equity interest
of an entity that was formed for the purpose of acquiring voting stock of the
Company will be deemed to be a transfer of such voting stock as corresponds to
the portion of the equity that has been so transferred.
"COMPANY" has the meaning set forth in the preamble hereto.
"CONSOLIDATED CASH FLOW" means, with respect to any Person for any period,
the Consolidated Net Income of such Person and its Restricted Subsidiaries for
such period plus (i) an amount equal to any extraordinary loss in accordance
with GAAP plus any net loss realized in connection with a sale, lease,
conveyance, transfer or other disposition of property or other assets (other
than in the ordinary course of business), to the extent such losses were
deducted in computing such Consolidated Net Income, plus (ii) special or
non-recurring charges not incurred in the ordinary course of business to the
extent such charges were deducted in computing such Consolidated Net Income,
plus (iii) provision for taxes based on income or profits of such Person and its
Restricted Subsidiaries for such period, to the extent that such provision for
taxes was included in computing such Consolidated Net Income, plus (iv)
consolidated interest expense of such Person and its Restricted Subsidiaries for
such period, whether paid or accrued and whether or not capitalized (including,
without limitation, amortization of original issue discount, noncash interest
payments, the interest component of any deferred payment obligations, the
interest component of all payments associated with Capital Lease Obligations,
commissions, discounts and other fees and charges incurred in respect of letter
of credit or bankers' acceptance financings, and net payments (if any) pursuant
to Hedging Obligations), to the extent that any such expense was deducted in
computing such Consolidated Net Income, plus (v) depreciation, amortization
(including amortization of goodwill and other intangibles) and other non-cash
charges (excluding any such non-cash charge to the extent that it represents an
accrual of or reserve for cash charges in any future period or amortization of a
prepaid cash expense that was paid in a prior period) of such Person and its
Restricted Subsidiaries for such period to the extent that such depreciation,
amortization and other non-cash charges were deducted in computing such
Consolidated Net Income, minus (vi) payments in connection with contractual
obligations either existing at the date hereof, or entered into after the date
hereof, in connection with the payment of deferred purchase price (other than
the principal amount of any installment debt constituting deferred purchase
price), or any other payments treated as purchase price adjustments in
accordance with GAAP, with respect to assets or properties acquired by such
Person and its Restricted Subsidiaries. Notwithstanding the foregoing, the
provision for taxes on the income or profits of, and the depreciation and
amortization and other non-cash charges of, a Restricted Subsidiary of the
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referent Person shall be added to Consolidated Net Income to compute
Consolidated Cash Flow only to the extent (and in same proportion) that the Net
Income of such Restricted Subsidiary was included in calculating the
Consolidated Net Income of such Person and only if a corresponding amount would
be permitted at the date of determination to be dividended to the Company by
such Restricted Subsidiary without prior governmental approval (that has not
been obtained), and without direct or indirect restriction pursuant to the terms
of its charter and all agreements, instruments, judgments, decrees, orders,
statutes, rules and governmental regulations applicable to that Restricted
Subsidiary or its stockholders.
"CONSOLIDATED NET INCOME" means, when used with reference to any Person,
for any period, the aggregate of the Net Income of such Person and its
Subsidiaries for such period, on a consolidated basis, determined in accordance
with GAAP, provided that (i) the Net Income of any Person which is not a
Restricted Subsidiary of such Person or is accounted for by the equity method of
accounting shall be included only to the extent of the amount of dividends or
distributions paid to such Person or its Restricted Subsidiaries, (ii) the Net
Income of any Person acquired in a pooling of interests transaction for any
period prior to the date of such acquisition shall be excluded, except to the
extent included pursuant to clause (i) above, (iii) extraordinary gains and
losses and gains and losses from the sale of assets outside the ordinary course
of such Person's business shall be excluded, and (iv) the cumulative effect of
changes in accounting principles shall be excluded.
"CONSOLIDATED NET WORTH" means, with respect to any Person as of any date,
the sum of (i) the consolidated equity of the common stockholders of such Person
and its consolidated Restricted Subsidiaries reported on such Person's balance
sheet as of such date plus (ii) without duplication, the respective amounts
reported on such Person's balance sheet as of such date with respect to any
series of preferred stock (other than Disqualified Stock) that by its terms is
not entitled to the payment of dividends in cash (or Disqualified Stock) unless
such dividends may be declared and paid only out of net earnings in respect of
the year of such declaration and payment, but only to the extent of any cash
received by such Person upon issuance of such preferred stock, less (x) all
write-ups (other than write-ups resulting from foreign currency translations and
write-ups of tangible assets of a going concern business made within 12 months
after the acquisition of such business) subsequent to the date hereof in the
book value of any asset owned by such Person or a consolidated Subsidiary of
such Person, (y) all investments as of such date in unconsolidated Subsidiaries
and in Persons that are not Restricted Subsidiaries (except, in each case,
Permitted Investments), and (z) all unamortized debt discount and expense and
unamortized deferred charges as of such date, all of the foregoing determined in
accordance with GAAP.
"CONTINUING DIRECTORS" means, as of any date of determination, any member
of the Board of Directors of the Company who (i) was a member of such Board of
Directors on the date hereof or (ii) was nominated for election or elected to
such Board of Directors with the approval of a majority of the Continuing
Directors who were members of such Board at the time of such nomination or
election.
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"CORPORATE TRUST OFFICE OF THE TRUSTEE" means the corporate trust office of
the Trustee at which the trust created by this Indenture is administered, which
office is initially located at the address of the Trustee specified in Section
12.02 hereof.
"DEFAULT" means any event that is, or after notice or the passage of time
or both, would be an Event of Default.
"DEFINITIVE NOTES" means Notes that are in the form of the Notes attached
hereto as Exhibit A-1, that do not include the information called for by
footnotes 1 and 2 thereof.
"DEPOSITARY" means, with respect to the Notes issuable or issued in whole
or in part in global form, the Person specified in Section 2.03 hereof as the
Depositary with respect to the Notes, until a successor shall have been
appointed and become such pursuant to the applicable provision of this
Indenture, and, thereafter, "Depositary" shall mean or include such successor.
"DISQUALIFIED STOCK" means Capital Stock of the Company that, either by its
terms or by the terms of any security into which it is convertible or
exchangeable, is, or upon the happening of any event or passage of time, matures
or would be required to be redeemed or purchased, including at the option of the
holder, in whole or in part, or has, or upon the happening of an event or
passage of time would have, a redemption, sinking fund or similar payment due,
on or prior to the Stated Maturity of the Notes for consideration other than
Capital Stock that does not itself so mature and is not itself so redeemable.
The term "Disqualified Stock" shall not include convertible preferred stock
redeemable solely at the option of the Company provided that any such redemption
and any dividends payable on such convertible preferred stock shall be subject
to the provisions of Section 4.07 hereof.
"EBITDA" shall mean, with respect to any Person for any fiscal period, an
amount equal to (a) consolidated net income of such Person for such period,
MINUS (b) the sum of (i) income tax credits, (ii) interest income, (iii) gain
from extraordinary items for such period, (iv) any aggregate net gain (but not
any aggregate net loss) during such period arising from the sale, exchange or
other disposition of capital assets by such Person (including any fixed assets,
whether tangible or intangible, all inventory sold in conjunction with the
disposition of fixed assets and all securities), and (v) any other non-cash
gains which have been added in determining consolidated net income, in each case
to the extent included in the calculation of consolidated net income of such
Person for such period in accordance with GAAP, but without duplication, PLUS
(c) the sum of (i) any provision for income taxes, (ii) Interest Expense, (iii)
loss from extraordinary items for such period, (iv) the amount of non-cash
charges (including depreciation and amortization) for such period, (v) amortized
debt discount for such period, and (vi) the amount of any deduction to
consolidated net income as the result of any grant to any members of the
management of such Person of any Equity Interests, in each case to the extent
included in the calculation of consolidated net income of such Person for such
period in accordance with GAAP, but without duplication. For purposes of this
definition, the following items shall be excluded in determining consolidated
net income of a Person: (1) the income (or loss) of any other Person accrued
prior to the date it became a Subsidiary of, or was merged or consolidated into,
such Person or any of such Person's Subsidiaries; (2) the income (or loss) of
any other Person (other than a Subsidiary)
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in which such Person has an ownership interest, except to the extent any such
income has actually been received by such Person in the form of cash dividends
or distributions; (3) the undistributed earnings of any Subsidiary of such
Person to the extent that the declaration or payment of dividends or similar
distributions by such Subsidiary is not at the time permitted by the terms of
any contractual obligation or requirement of law applicable to such Subsidiary;
(4) any restoration to income of any contingency reserve, except to the extent
that provision for such reserve was made out of income accrued during such
period; (5) any write-up of any asset; (6) any net gain from the collection of
the proceeds of life insurance policies; (7) any net gain arising from the
acquisition of any securities, or the extinguishment, under GAAP, of any
Indebtedness, of such Person, (8) in the case of a successor to such Person by
consolidation or merger or as a transferee of its assets, any earnings of such
successor prior to such consolidation, merger or transfer of assets, and (9) any
deferred credit representing the excess of equity in any Subsidiary of such
Person at the date of acquisition of such Subsidiary over the cost to such
Person of the investment in such Subsidiary. In addition, for purposes of this
definition, EBITDA of the Company and its Subsidiaries on a consolidated basis
shall not include the EBITDA of any Subsidiary derived from any facility which
is subject to an Adverse Shredder Order (which for purposes of this definition
shall have the meaning given such term in the Initial Credit Agreement) while
such Adverse Shredder Order shall remain in effect unless the Agent under the
Senior Credit Agreement shall otherwise consent in writing.
"EQUITY INTERESTS" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"EXCHANGE OFFER" means the offer that may be made by the Company pursuant
to the Registration Rights Agreement to issue and exchange Series B Notes for
Series A Notes.
"EXISTING INDEBTEDNESS" means any outstanding Indebtedness of the Company
and its Restricted Subsidiaries (other than under the Senior Credit Agreement)
as of the date hereof.
"FISCAL QUARTER" shall mean any of the quarterly accounting periods of the
Company and its Subsidiaries, ending on March 31, June 30, September 30 and
December 31 of each year.
"FIXED CHARGE COVERAGE RATIO" means, with respect to any Person for any
period, the ratio of the Consolidated Cash Flow of such Person for such period
to the Fixed Charges of such Person for such period. In the event that the
Company or any of its Restricted Subsidiaries incurs, assumes, guarantees or
redeems any Indebtedness or issues preferred stock subsequent to the
commencement of the period for which the Fixed Charge Coverage Ratio is being
calculated but prior to the date of the event for which the calculation of the
Fixed Charge Coverage Ratio is made (the "CALCULATION DATE"), then the Fixed
Charge Coverage Ratio shall be calculated giving pro forma effect to such
incurrence, assumption, guarantee or redemption of such Indebtedness, or such
issuance or redemption of preferred stock, as if the same had occurred at the
beginning of the applicable four-quarter reference period. In addition, for
purposes of making the computation
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referred to above, (i) the Consolidated Cash Flow attributable to discontinued
operations, as determined in accordance with GAAP, and operations or businesses
disposed of prior to the Calculation Date, shall be excluded, (ii) the Fixed
Charges attributable to discontinued operations, as determined in accordance
with GAAP, and operations or businesses disposed of prior to the Calculation
Date, shall be excluded, but only to the extent that the obligations giving rise
to such Fixed Charges will not be obligations of the referent Person or any of
its Restricted Subsidiaries following the Calculation Date, (iii) the Fixed
Charges attributable to interest on any indebtedness bearing a floating interest
rate shall be computed on a PRO FORMA basis as if the rate in effect on the
Calculation Date had been the applicable rate for the entire period; (iv) the
Fixed Charges attributable to interest on any indebtedness under a revolving
credit facility shall be computed on a PRO FORMA basis based upon the average
daily balance of such indebtedness outstanding during the applicable period;
(v) in the event that the Company or any Restricted Subsidiary consummates
either (A) a Material Acquisition or (B) a sale, lease, conveyance, transfer or
other disposition of property or other assets (other than the disposition of
inventory in the ordinary course of business) with a fair market value of more
than $5.0 million in any one year, in either case subsequent to the commencement
of the period for which the Fixed Charge Coverage Ratio is being calculated, the
Fixed Charge Coverage Ratio shall be calculated giving PRO FORMA effect to such
Material Acquisition or disposition (including the incurrence of any
indebtedness in connection therewith), as if the same had occurred at the
beginning of the applicable period; and (vi) in the event that the Company or
any Restricted Subsidiary purchases any assets or property which was previously
leased by the Company or any Restricted Subsidiary subsequent to the
commencement of the period for which the calculation of the Fixed Charge
Coverage Ratio is being calculated but prior to the Calculation Date, the Fixed
Charge Coverage Ratio shall be calculated giving PRO FORMA effect to such
purchase as if the same had occurred at the beginning of the applicable period.
For purposes of the foregoing calculations, the PRO FORMA effect shall be
calculated in accordance with the rules and regulations promulgated by the
Securities and Exchange Commission for preparing pro forma financial
information.
"FIXED CHARGES" means, with respect to any Person for any period, the sum
(without duplication) of (i) the consolidated interest expense of such Person
and its Restricted Subsidiaries for such period, whether paid or accrued
(including, without limitation, amortization of original issue discount,
non-cash interest payments, the interest component of any deferred payment
obligations, the interest component of all payments associated with Capital
Lease Obligations, commissions, discounts and other fees and charges incurred in
respect of letter of credit or bankers' acceptance financings, and net payments
(if any) pursuant to Hedging Obligations, but excluding amortization of debt
issuance costs in respect of Indebtedness of such Person outstanding on the date
hereof including, with respect to the Company, the Notes) and (ii) the
consolidated interest expense of such Person and its Subsidiaries that was
capitalized during such period, and (iii) any interest expense on Indebtedness
of another Person that is guaranteed by such Person or one of its Restricted
Subsidiaries or secured by a Lien on assets of such Person or one of its
Restricted Subsidiaries (whether or not such guarantee or Lien is called upon)
and (iv) the product of (A) all cash dividend payments on any series of
preferred stock of the Company, and (B) a fraction, the numerator of which is
one and the denominator of which is one minus the then current combined federal,
state and local statutory tax rate of the Company, expressed as a decimal, in
each case, on a consolidated basis, in accordance with GAAP.
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"FUNDED DEBT" shall mean, with respect to any Person, all Indebtedness
(which for purposes of this definition shall have the meaning given such term in
the Initial Credit Agreement) for borrowed money evidenced by notes, bonds,
debentures, or similar evidences of Indebtedness and which by its terms matures
more than one year from, or is directly or indirectly renewable or extendible at
such Person's option under a revolving credit or similar agreement obligating
the lender or lenders to extend credit over a period of more than one year from
the date of creation thereof, and specifically including Capital Leases, current
maturities of long-term debt, revolving credit and short-term debt extendible
beyond one year at the option of the debtor, and also including the Obligations
(which for purposes of this definition shall have the meaning given such term in
the Initial Credit Agreement) and, without duplication, Indebtedness consisting
of guaranties of Funded Debt of other Persons.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which (i) for the purpose of determining compliance with the
covenants contained in this Indenture, are in effect as of the date of this
Indenture, and (ii) for purposes of compliance with the reporting requirements
contained in this Indenture, are in effect from time to time.
"GLOBAL NOTES" means, individually and collectively, the Regulation S
Global Note, the Accredited Institutional Investor Global Note and the Rule 144A
Global Note.
"GOVERNMENT SECURITIES" means direct obligations of, or obligations
guaranteed by, the United States of America for the payment of which guarantee
or obligations the full faith and credit of the United States is pledged.
"GUARANTEE" means the guarantee by any Guarantor of the Company's
Obligations under this Indenture and the Notes pursuant to a guarantee given in
accordance with this Indenture.
"GUARANTEE" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.
"GUARANTOR" means the Subsidiaries listed as guarantors in this Indenture
and any other Subsidiary which is a guarantor of the Securities, including any
Person that is required after the date of this Indenture to execute a guarantee
of the Securities pursuant to the terms hereof until a successor replaces such
party pursuant to the applicable provisions of this Indenture and, thereafter,
shall mean such successor; provided, that for purposes hereof the term
"Guarantor" shall not include any Unrestricted Subsidiary unless specifically
provided otherwise.
"HEDGING OBLIGATIONS" means, with respect to any Person, the net
obligations of such Person under (i) currency exchange or interest rate swap,
cap or collar agreements and (ii) other
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agreements or arrangements designed to protect such Person against fluctuations
in currency exchange or interest rates.
"HOLDER" means a Person in whose name a Definitive Note is registered on
the books of the Registrar, or in whose name a beneficial interest in a Global
Note is recorded by the Trustee or the Note Custodian.
"INDEBTEDNESS" means, with respect to any Person, (i) any indebtedness of
such Person, without duplication, whether or not contingent, in respect of
borrowed money (whether or not the recourse of the lender is to the whole of the
assets of such Person or only to a portion thereof) or for the deferred purchase
price of property or services (other than accounts payable or other obligations
to trade creditors) or evidenced by bonds, notes, debentures or similar
instruments or letters of credit (or reimbursement agreements in respect
thereof) or bankers' acceptances or similar instruments issued or accepted by
banks or representing Capital Lease Obligations or representing any Hedging
Obligations, if and to the extent any of the foregoing Indebtedness (other than
letters of credit and Hedging Obligations) would appear as a liability upon a
balance sheet of such Person prepared in accordance with GAAP, as well as all
indebtedness of others secured by a Lien on any asset of such Person (whether or
not such indebtedness is assumed by such Person), (ii) to the extent not
included in clause (i), the guarantee by such Person of any indebtedness of any
other Person, (iii) Securitized Financing Indebtedness, and (iv) accounts
payable or other obligations of such Person to trade creditors which have
remained unpaid for greater than 90 days past their original due date, unless
the non-payment of such accounts payable or other obligations is being contested
in good faith and appropriate reserves with respect thereto have been
established in accordance with GAAP.
"INDENTURE" means this Indenture, as amended or supplemented from time to
time.
"INDENTURE OBLIGATIONS" means all Obligations under this Indenture or under
the Notes.
"INITIAL CREDIT AGREEMENT" means the Credit Agreement among the Company,
the Guarantors, General Electric Capital Corporation, a New York corporation,
for itself, as lender, and as agent for the lenders, BankBoston, N.A., as
documentation agent, and the other lenders signatory thereto, as in effect on
the date thereof.
"INTEREST EXPENSE" shall mean, with respect to any Person for any fiscal
period, interest expense (whether cash or non-cash) of such Person determined in
accordance with GAAP for the relevant period ended on such date, including, in
any event, interest expense with respect to any Funded Debt of such Person and
interest expense for the relevant period that has been capitalized on the
balance sheet of such Person.
"INVESTMENT" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations) or
other items that would constitute Indebtedness of such other Persons to the
first such Person, advances or capital contributions (excluding commission,
travel and similar advances to officers and employees made in the ordinary
course of business),
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purchases or other acquisitions for consideration of Indebtedness, Equity
Interests or other securities, together with all items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP;
PROVIDED that an acquisition of assets, Equity Interests or other securities by
the Company for consideration consisting of Equity Interests (other than
Disqualified Stock) of the Company shall not be deemed to be an Investment. If
the Company or any Subsidiary of the Company sells or otherwise disposes of any
Equity Interests of any direct or indirect Subsidiary of the Company such that,
after giving effect to any such sale or disposition, such Person is no longer a
Subsidiary of the Company, the Company shall be deemed to have made an
Investment on the date of any such sale or disposition equal to the fair market
value of the Equity Interests of such Subsidiary not sold or disposed of.
"LEGAL HOLIDAY" means a Saturday, a Sunday or a day on which banking
institutions in the City of New York, New York, Denver, Colorado or at a place
of payment are authorized by law, regulation or executive order to remain
closed. If a payment date is a Legal Holiday at a place of payment, payment may
be made at that place on the next succeeding day that is not a Legal Holiday,
and no interest shall accrue for the intervening period.
"LIEN" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind (except for taxes not yet
owing) in respect of such asset, whether or not filed, recorded or otherwise
perfected, under applicable law (including any conditional sale or other title
retention agreement, any lease in the nature thereof, and any filing of or
agreement to give any financing statement under the Uniform Commercial Code (or
equivalent statutes) of any jurisdiction).
"MAINTENANCE FIXED CHARGE COVERAGE RATIO" shall mean, with respect to any
Person for any fiscal period, the ratio of Pro Forma EBITDA LESS Capital
Expenditures (which for purposes of this definition shall have the meaning given
such term in the Initial Credit Agreement) during such period, LESS income taxes
paid or payable in cash with respect to such period to Fixed Charges (which for
purposes of this definition shall have the meaning given such term in the
Initial Credit Agreement). In computing Fixed Charges for any fiscal period,
interest and principal payments that are due within one week after the end of
that fiscal period, without duplication, shall be deemed to have been paid on
the last day of that fiscal period.
"MATERIAL ACQUISITION" means any acquisition of a business or assets,
including the acquisition of operating commercial real estate, by the Company or
a Restricted Subsidiary that has a fair market value in excess of $5.0 million
and which the Company or a Restricted Subsidiary intends to operate as part of
its Principal Business.
"MATURITY" means, with respect to any Note, the date on which the principal
of such Note becomes due and payable as provided in such Note or this Indenture,
whether at the Stated Maturity or by declaration of acceleration, call for
redemption or otherwise.
"MOODY'S" means Moody's Investor Service, Inc. and its successors.
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"NET INCOME" of any Person for any period means the net income (loss) from
continuing operations of such Person for such period, determined in accordance
with GAAP.
"NON-RECOURSE DEBT" means Indebtedness (i) as to which neither the Company
nor any of its Restricted Subsidiaries (a) provides credit support of any kind
(including any undertaking, agreement or instrument that would constitute
Indebtedness), (b) is directly or indirectly liable (as a guarantor or
otherwise), or (c) constitutes the lender; and (ii) no default with respect to
which (including any rights that the holders thereof may have to take
enforcement action against an Unrestricted Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other Indebtedness of the
Company or any of its Restricted Subsidiaries to declare a default on such other
Indebtedness or cause the payment thereof to be accelerated or payable prior to
its stated maturity; and (iii) as to which the lenders have been notified in
writing that they will not have any recourse to the stock or assets of the
Company or any of its Restricted Subsidiaries.
"OBLIGATIONS" with respect to any Indebtedness means the obligations of the
Company and any of its Restricted Subsidiaries to pay principal (including
reimbursement obligations and guarantees), premium, if any, interest (including
interest accruing on or after the filing of any petition in bankruptcy or for
reorganization relating to the Company whether or not a claim for post-filing
interest is allowed in such proceedings), penalties, fees, indemnifications,
reimbursements, damages and other liabilities payable under the documentation
governing such Indebtedness.
"OFFICER" means, with respect to any Person, the Chairman of the Board, the
Vice Chairman, the Chief Executive Officer, the President, the Chief Operating
Officer, the Chief Financial Officer, the Treasurer, any Assistant Treasurer,
the Controller, the Secretary or any Vice-President of such Person.
"OFFICERS' CERTIFICATE" means a certificate signed on behalf of the Company
by two Officers of the Company, one of whom must be the principal executive
officer, the principal financial officer, the treasurer or the principal
accounting officer of the Company, that meets the requirements of Section 12.05
hereof.
"OPINION OF COUNSEL" means an opinion from legal counsel who is reasonably
acceptable to the Trustee, that meets the requirements of Section 12.05 hereof.
The counsel may be an employee of or counsel to the Company, any Subsidiary of
the Company or the Trustee.
"PERMITTED INVESTMENTS" means (a) any Investment in the Company or in a
Restricted Subsidiary of the Company that is engaged in the Principal Business,
PROVIDED that, (i) in the case of an Investment in an Equity Interest in a
corporation, such Investment increases PRO RATA such Person's ownership of the
outstanding voting capital stock of such corporation and, (ii) in the case of an
Investment in any other Subsidiary, such Investment increases PRO RATA such
Person's ownership and control of such entity; (b) capital contributions to any
Wholly Owned Restricted Subsidiary; (c) any Investment in Cash Equivalents; (d)
any Investment by the Company or any Restricted Subsidiary of the Company in a
Person if as a result of such Investment (i) such Person becomes a Restricted
Subsidiary of the Company that is engaged in the Principal Business or (ii)
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such Person is merged, consolidated or amalgamated with or into, or transfers or
conveys substantially all of its assets to, or is liquidated into, the Company
or a Restricted Subsidiary of the Company that is engaged in the Principal
Business; (e) loans and advances to the Company's officers, directors and
employees made in the ordinary course of business and consistent with the
Company's past practice in an aggregate amount at any one time outstanding
(whether made prior to or after the date of this Indenture) that does not exceed
$2,100,000; (f) the amount of the Investment of the Company as of the date
hereof in UMR-Griffin Recyclers, LLC ("UMR-Griffin"), but not any future
Investments in UMR-Griffin unless clause (d) of this definition would be
satisfied in connection with such future Investment; and (g) Investments
consisting of Indebtedness permitted by Section 4.09 (ix) hereof.
"PERMITTED LIENS" means: (i) Liens granted by Restricted Subsidiaries in
favor of the Company; (ii) Liens granted by the Company or a Restricted
Subsidiary in favor of a Restricted Subsidiary, so long as such Restricted
Subsidiary remains a Restricted Subsidiary; (iii) Liens on property of a Person
existing at the time such Person is merged into or consolidated with the Company
or any Restricted Subsidiary; PROVIDED, that such liens were in existence prior
to the contemplation of such merger or consolidation; (iv) Liens on property
existing at the time of acquisition thereof by the Company or any Restricted
Subsidiary; PROVIDED, that such liens were in existence prior to the
contemplation of such acquisition; (v) Liens to secure the performance of
statutory obligations, surety or appeal bonds, performance bonds or other
obligations of a like nature incurred in the ordinary course of business;
(vi) Liens for taxes, assessments or governmental charges or claims that are not
yet delinquent or that are being contested in good faith by appropriate
proceedings promptly instituted and diligently conducted; PROVIDED, that any
reserve or other appropriate provision as shall be required in conformity with
GAAP shall have been made therefor; (vii) ground leases in respect of the real
property on which the facilities owned or leased by the Company or any
Restricted Subsidiary are located; (viii) Liens arising from UCC financing
statements regarding property leased by the Company or any Restricted
Subsidiary; (ix) easements, rights-of-way, navigational servitudes,
restrictions, minor defects or irregularities in title and other similar charges
or encumbrances which do not interfere in any material respect with the ordinary
conduct of business of the Company or any Restricted Subsidiary; (x) Liens
securing purchase money obligations incurred or assumed in connection with the
purchase of real or personal property to be used in the business of the Company
or any Restricted Subsidiary within 180 days of such incurrence or assumption;
PROVIDED, that (A) such purchase money obligations are permitted under Section
4.09(iv), (B) the principal amount of Indebtedness secured by such Lien does not
exceed 100% of the purchase price of such property and (C) such Lien does not
extend to or cover any other property, (xi) materialmen's and similar liens,
(xii) a mortgage and security interest, as in effect on the date hereof, on
certain equipment and real estate of Weissman Industries, Inc. located in
Waterloo, Iowa securing obligations of the Company under that certain Share
Price Guaranty Agreement, dated as of August 5, 1996, in an amount not to exceed
$3.5 million, (xiii) Liens securing the Obligations under the Senior Credit
Agreement; (xiv) Capital Leases to the extent permitted under Section 4.09(v)
and (xv) Liens to secure obligations of the Trustee under Section 7.07.
"PERMITTED REFINANCING INDEBTEDNESS" means any Indebtedness of the Company
or any of its Restricted Subsidiaries issued in exchange for, or the net
proceeds of which are used to extend,
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refinance, renew, replace, defease or refund other Indebtedness of the Company
or any of its Restricted Subsidiaries; PROVIDED that: (i) the principal amount
(or accreted value, if applicable) of such Permitted Refinancing Indebtedness
does not exceed the principal amount (or accreted value, if applicable) of, plus
the interest accrued and unpaid prior to the occurrence of an event of default
with respect to such other Indebtedness, if any, on, the Indebtedness so
extended, refinanced, renewed, replaced, defeased or refunded (plus the amount
of any premium required to be paid, and the amount of reasonable expenses
incurred, in connection therewith); (ii) such Permitted Refinancing Indebtedness
has a final maturity date equal to or later than the final maturity date of, and
has a Weighted Average Life to Maturity equal to or greater than the Weighted
Average Life to Maturity of, the Indebtedness being extended, refinanced,
renewed, replaced, defeased or refunded; (iii) if the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded is subordinated in
right of payment to the Notes, such Permitted Refinancing Indebtedness has a
final maturity date later than the final maturity date of, and is subordinated
in right of payment to, the Notes on terms at least as favorable to the Holders
of Notes as those contained in the documentation governing the Indebtedness
being extended, refinanced, renewed, replaced, defeased or refunded; and (iv)
such Indebtedness is incurred either by the Company or by the Restricted
Subsidiary who is the obligor on the Indebtedness being extended, refinanced,
renewed, replaced, defeased or refunded.
"PERSON" means any individual, corporation, partnership, limited liability
company, joint venture, association, joint stock company, trust, estate,
unincorporated organization or government or any agency or political subdivision
thereof.
"PRINCIPAL BUSINESS" means, with respect to the Company and its Restricted
Subsidiaries, purchasing and processing unprepared metal scrap and selling
processed metal scrap.
"PRO FORMA EBITDA" shall mean EBITDA as defined herein, except that Pro
Forma EBITDA shall include in any applicable twelve-month measurement period the
EBITDA of any Acquired Subsidiary (which for purposes of this definition shall
have the meaning given such term in the Initial Credit Agreement) for the period
prior to the date of such acquisition or formation computed in accordance with
Regulation S-X under the Exchange Act.
"PURCHASE AGREEMENTS" means the Purchase Agreements, each dated as of
December 4, 1997, between the Company, the Guarantors and the Purchasers named
in Schedule A thereto, providing, among other things, for the sale to and
purchase by the Purchasers of the Notes.
"REGULATION S" means Regulation S promulgated under the Securities Act.
"REGULATION S GLOBAL NOTE" means a global note that contains the paragraph
referred to in footnote 1 and the additional schedule referred to in footnote 2
to the form of the Note attached hereto as Exhibit A-1, and that is deposited
with and registered in the name of the Depositary, representing a series of
Notes sold in reliance on Regulation S.
"REPRESENTATIVE" means the indenture trustee or other trustee, agent or
representative for any Senior Debt.
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"RESPONSIBLE OFFICER" when used with respect to the Trustee, means any
officer in the Corporate Trust Office of the Trustee (or any successor group of
the Trustee) or any other officer of the Trustee assigned to perform the duties
of Trustee hereunder and also means, with respect to a particular corporate
trust matter, any other officer to whom such matter is referred because of his
knowledge of and familiarity with the particular subject.
"RESTRICTED INVESTMENT" means an Investment other than a Permitted
Investment.
"RESTRICTED SUBSIDIARY" of a Person means any Subsidiary of the referent
Person that is not (i) an Unrestricted Subsidiary or (ii) a direct or indirect
Subsidiary of an Unrestricted Subsidiary.
"RULE 144A" means Rule 144A promulgated under the Securities Act, as
amended from time to time.
"RULE 144A GLOBAL NOTE" means a permanent global note that contains the
paragraph referred to in footnote 1 and the additional schedule referred to in
footnote 2 to the form of the Note attached hereto as Exhibit A-1, and that is
deposited with and registered in the name of the Depositary, representing a
series of Notes sold in reliance on Rule 144A.
"S&P" means Standard & Poor's Rating Group, a division of McGraw Hill,
Inc., a New York corporation and its successors.
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SECURITIZED FINANCING INDEBTEDNESS" means, with respect to any Person, the
unreturned portion of the amount funded by the investors under an asset
securitization facility with such Person.
"SECURITIZED FINANCING TRANSACTION" means, with respect to any Person, a
securitized financing of receivables of such Person.
"SENIOR CREDIT AGREEMENT" means (i) the Initial Credit Agreement, (ii) each
instrument pursuant to which Obligations under the agreement described in clause
(i) are amended, deferred, extended, renewed, replaced, refunded or refinanced,
in whole or in part, PROVIDED, HOWEVER, that in the event the Obligations to pay
principal at final maturity under any such agreement as so amended, deferred,
extended, renewed, replaced, refunded or refinanced (for purposes of this
definition, the "Amended Senior Credit Agreement") become due and payable after
the Stated Maturity of the principal of the Notes, then such Amended Senior
Credit Agreement shall not by its terms prohibit payment of principal of the
Notes at or after the Stated Maturity of the principal of the Notes, except
under the circumstances contemplated by Sections 1.2, 1.3 and 2.2 of the
Subordination and Intercreditor Agreement, dated as of December 3, 1997, among
the initial Holders of Notes, the Company, the Guarantors, General Electric
Capital Corporation and the
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Trustee, and the aggregate principal amount at any one time outstanding
thereunder shall not exceed (the "Senior Debt Cap") (a) $150.0 million, plus (b)
(I) the additional amount, if any, of the increased commitments under the
Initial Credit Agreement pursuant to clause (viii) of Section 4.09 or (II) 50%
of the amount of the net proceeds received by the Company from the sale after
the date hereof of Equity Interests (other than Disqualified Stock) which net
proceeds are used for purposes other than Restricted Payments, up to but not in
excess of $15.0 million in the aggregate under clauses (I) and (II), minus (c)
(I) all amortization of principal of term loans (including without limitation
the Acquisition Loans) under the Senior Credit Agreement actually made by the
Company and its Subsidiaries through such time and (II) all permanent reductions
of the commitments under the revolving credit facility portion of the Senior
Credit Agreement; and PROVIDED FURTHER, HOWEVER, that the Amended Senior Credit
Agreement shall not change the amounts or times for scheduled payments of
principal specified in the Initial Credit Agreement except that principal
payments (in an amount not to exceed $16,000,000) specified in the Initial
Credit Agreement to be due during the final year prior to the maturity date of
the last loan to mature thereunder may be deferred for up to one year and (iii)
each instrument now or hereafter evidencing, governing, guarantying or securing
any Indebtedness under any agreements described in clause (i) or (ii) above.
"SENIOR DEBT" means (i) with respect to the Company and any of its
Restricted Subsidiaries, (A) all Obligations under the Senior Credit Agreement
and (B) all Obligations with respect to any other Indebtedness permitted to be
incurred by the Company or any of its Restricted Subsidiaries under the terms of
this Indenture, unless the instrument under which such Indebtedness is incurred
expressly provides that it is on a parity with or subordinated in right of
payment to the Notes. Notwithstanding anything to the contrary in the
foregoing, Senior Debt will not include (x) Indebtedness that is expressly
subordinate or junior in right of payment to any Indebtedness of the Company,
(y) any Indebtedness of the Company to any of its Subsidiaries or other
Affiliates, or (z) any Indebtedness that is incurred in violation of this
Indenture.
"SIGNIFICANT SUBSIDIARY" means any Subsidiary that would be a "significant
subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated
pursuant to the Securities Act, as such Regulation is in effect on the date
hereof.
"STATED MATURITY," when used with respect to any Note or any installment of
interest thereof, means the date specified in such Note as the fixed date on
which the principal of such Note or such installment of interest is due and
payable.
"SUBSIDIARY" of any Person means (i) a corporation, association or other
business entity of which more than 50% of the total voting power of all classes
of the outstanding voting stock is owned, directly or indirectly, by such Person
or by one or more other Subsidiaries of such Person or by such Person and one or
more Subsidiaries thereof, (ii) any partnership (a) the sole general partner or
the managing general partner of which is such Person or a Subsidiary of such
Person or (b) the only general partners of which are such Person or one or more
Subsidiaries of such Person (or any combination thereof) and (iii) any other
Person not described in clauses (i) and (ii) above and designated by the Board
of Directors of such Person as a Subsidiary in which such Person, or one or more
other Subsidiaries of such Person or such Person and one or more other
Subsidiaries
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thereof, directly or indirectly, owns 50% ownership and the power, pursuant to a
written contract or agreement, to direct the policies and management or the
financial and other affairs thereof.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. Sections
77aaa-77bbbb) as in effect on the date on which this Indenture is qualified
under the TIA.
"TRANSFER RESTRICTED SECURITIES" means securities that bear or are required
to bear the legend set forth in Section 2.06(g) hereof.
"TRUSTEE" means the party named as such above until a successor replaces it
in accordance with the applicable provisions of this Indenture and thereafter
means the successor serving hereunder.
"UNRESTRICTED SUBSIDIARY" means any Subsidiary that is designated by the
Board of Directors of the Company as an Unrestricted Subsidiary pursuant to a
resolution of its Board of Directors; but only to the extent that such
Subsidiary: (a) has no Indebtedness other than Non-Recourse Debt; (b) is not
party to any agreement, contract, arrangement or understanding with the Company
or any Restricted Subsidiary of the Company unless the terms of any such
agreement, contract, arrangement or understanding are no less favorable to the
Company or such Restricted Subsidiary than those that might be obtained at the
time from Persons who are not Affiliates of the Company; (c) is a Person with
respect to which neither the Company nor any of its Restricted Subsidiaries has
any direct or indirect obligation (x) to subscribe for additional Capital Stock
(including options, warrants or other rights to acquire Capital Stock) or (y) to
maintain or preserve such Person's financial condition or to cause such Person
to achieve any specified levels of operating results; (d) has not guaranteed or
otherwise directly or indirectly provided credit support for any Indebtedness of
the Company or any of its Restricted Subsidiaries; and (e) has at least one
director on its board of directors that is not a director or executive officer
of the Company or any of its Restricted Subsidiaries and has at least one
executive officer that is not a director or executive officer of the Company or
any of its Restricted Subsidiaries. Any such designation by the Board of
Directors shall be evidenced to the Trustee by filing with the Trustee a
certified copy of the Board Resolution giving effect to such designation and an
Officers' Certificate certifying that such designation complied with the
foregoing conditions and was permitted pursuant to and in accordance with the
provisions set forth in Section 4.07 hereof. If, at any time, any Unrestricted
Subsidiary would fail to meet the foregoing requirements as an Unrestricted
Subsidiary, it shall thereafter cease to be an Unrestricted Subsidiary for
purposes of this Indenture and any Indebtedness of such Subsidiary shall be
deemed to be incurred by a Restricted Subsidiary of the Company as of such date
(and, if such Indebtedness is not permitted to be incurred as of such date
pursuant to and in accordance with the provisions set forth in Section 4.09
hereof, the Company shall be in default of such covenant). The Board of
Directors of the Company may at any time designate any Unrestricted Subsidiary
to be a Restricted Subsidiary; PROVIDED that such designation shall be deemed to
be an incurrence of Indebtedness by a Restricted Subsidiary of the Company of
any outstanding Indebtedness of such Unrestricted Subsidiary and such
designation shall only be permitted if (i) such Indebtedness is permitted
pursuant to and in accordance with the provisions set forth in Section 4.09
hereof, and (ii) no Default or Event of Default would be in existence following
such designation.
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"WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (i) the sum of the
products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (ii) the then outstanding principal
amount of such Indebtedness; PROVIDED, HOWEVER, that with respect to any
revolving indebtedness, the foregoing calculation of Weighted Average Life to
Maturity will be determined based upon the total available commitments and the
required reductions of commitments in lieu of the outstanding principal amount
and the required payments of principal, respectively.
"WHOLLY OWNED RESTRICTED SUBSIDIARY" of any Person means a Restricted
Subsidiary of such Person all of the outstanding Capital Stock or other
ownership interests of which shall at the time be owned by such Person or by one
or more Wholly Owned Restricted Subsidiaries of such Person or by such Person
and one or more Wholly Owned Restricted Subsidiaries of such Person.
SECTION 1.02 OTHER DEFINITIONS.
Term Defined in
Section
"ACCREDITED INVESTOR". . . . . . . . . . . . . . . . . . . . . . . . . . 2.01
"AFFILIATE TRANSACTION". . . . . . . . . . . . . . . . . . . . . . . . . 4.11
"CEDEL BANK" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.01
"CHANGE OF CONTROL OFFER". . . . . . . . . . . . . . . . . . . . . . . . 4.15
"CHANGE OF CONTROL PAYMENT". . . . . . . . . . . . . . . . . . . . . . . 4.15
"CHANGE OF CONTROL PAYMENT DATE" . . . . . . . . . . . . . . . . . . . . 4.15
"DTC". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.03
"EUROCLEAR". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.01
"EVENT OF DEFAULT" . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.01
"INCUR". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.09
"NOTE CUSTODIAN" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.03
"PAYING AGENT" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.03
"QIB". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.01
"REGISTRAR". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.03
"RESTRICTED PAYMENTS". . . . . . . . . . . . . . . . . . . . . . . . . . 4.07
"SHAREHOLDER/AFFILIATE TRANSACTION". . . . . . . . . . . . . . . . . . . 4.11
"U.S. GLOBAL NOTES" . . . . . . . . . . . . . . . . . . . . . . . . . . 2.01
SECTION 1.03 INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT.
Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following meanings:
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"INDENTURE SECURITIES" means the Notes;
"INDENTURE SECURITY HOLDER" means a Holder of a Note;
"INDENTURE TO BE QUALIFIED" means this Indenture;
"INDENTURE TRUSTEE" or "INSTITUTIONAL TRUSTEE" means the Trustee;
"OBLIGOR" on the Notes means the Company and any successor obligor upon the
Notes.
All other terms used in this Indenture that are defined by the TIA, defined
by TIA reference to another statute or defined by SEC rule under the TIA have
the meanings so assigned to them.
SECTION 1.04 RULES OF CONSTRUCTION.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning assigned to
it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and in the plural include
the singular;
(5) provisions apply to successive events and transactions; and
(6) references to sections of or rules under the Securities Act shall be
deemed to include substitute, replacement of successor sections or rules
adopted by the SEC from time to time.
ARTICLE 2
THE NOTES
SECTION 2.01 FORM AND DATING.
The Notes, the Guarantees and the Trustee's certificate of authentication
shall be substantially in the form of Exhibit A-1 attached hereto. The Notes
and Guarantees may have notations, legends or endorsements required by law,
stock exchange rule or usage. Each Note and Guarantee shall be dated the date
of its authentication. The Notes shall be issued in minimum denominations of
$1,000 and integral multiples of $1,000 in excess thereof. The terms and
provisions contained in the Notes and Guarantees shall constitute, and are
hereby expressly made,
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a part of this Indenture and the Company, the Guarantors and the Trustee, by
their execution and delivery of this Indenture, expressly agree to such terms
and provisions and to be bound thereby.
(a) GLOBAL NOTES. Notes offered and sold to (i) qualified
institutional buyers as defined in Rule 144A ("QIBS") in reliance on Rule 144A
and (ii) institutional accredited investors as defined in Rule 501(a)(1), (2),
(3) or (7) under the Securities Act ("ACCREDITED INVESTORS") who are not QIBs,
shall be issued initially in the form of Rule 144A Global Notes and Accredited
Institutional Investor Global Notes (collectively, the "U.S. GLOBAL NOTES"),
respectively, which shall be deposited on behalf of the purchasers of the Notes
represented thereby with the Depositary, and registered in the name of the
Depositary or a nominee of the Depositary, duly executed by the Company and
authenticated by the Trustee as hereinafter provided. The aggregate principal
amount of the U.S. Global Notes may from time to time be increased or decreased
by adjustments made on the records of the Trustee and the Depositary or its
nominee as hereinafter provided.
Notes offered and sold in reliance on Regulation S, if any, shall be
issued initially in the form of the Regulation S Global Notes, which shall be
deposited on behalf of the purchasers of the Notes represented thereby with the
Trustee, as custodian for the Depositary, and registered in the name of the
Depositary or the nominee of the Depositary for the accounts of designated
agents holding on behalf of the Euroclear System ("EUROCLEAR") or Cedel Bank,
S.A. ("Cedel Bank"), duly executed by the Company and authenticated by the
Trustee as hereinafter provided. The aggregate principal amount of the
Regulation S Global Notes may from time to time be increased or decreased by
adjustments made on the records of the Trustee and the Depositary or its
nominee, as the case may be, in connection with transfers of interest as
hereinafter provided.
Each Global Note shall represent such of the outstanding Notes as
shall be specified therein and each shall provide that it shall represent the
aggregate amount of outstanding Notes from time to time endorsed thereon and
that the aggregate amount of outstanding Notes represented thereby may from time
to time be reduced or increased, as appropriate, to reflect exchanges and
redemptions. Any endorsement of a Global Note to reflect the amount of any
increase or decrease in the amount of outstanding Notes represented thereby
shall be made by the Trustee or the Note Custodian (as hereinafter defined), at
the direction of the Trustee, in accordance with instructions given by the
Holder thereof as required by Section 2.06 hereof.
The provisions of the "Operating Procedures of the Euroclear System"
and "Terms and Conditions Governing Use of Euroclear" and the "Management
Regulations" and "Instructions to Participants" of Cedel Bank shall be
applicable to interests in the Regulation S Global Notes that are held by the
Agent Members through Euroclear or Cedel Bank.
Except as set forth in Section 2.06 hereof, the Global Notes may be
transferred, in whole and not in part, only to another nominee of the Depositary
or to a successor of the Depositary or its nominee.
(b) BOOK-ENTRY PROVISIONS.
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The Company shall execute and the Trustee shall, in accordance with
this Section 2.01(b), authenticate and deliver the Global Notes that (i) shall
be registered in the name of the Depositary or the nominee of the Depositary and
(ii) shall be delivered by the Trustee to the Depositary or pursuant to the
Depositary's instructions or held by the Trustee as custodian for the
Depositary.
Agent Members shall have no rights either under this Indenture with
respect to any Global Note held on their behalf by the Depositary or by the
Trustee as custodian for the Depositary or under such Global Note, and the
Depositary may be treated by the Company, the Trustee and any agent of the
Company or the Trustee as the absolute owner of such Global Note for all
purposes whatsoever. Notwithstanding the foregoing, nothing herein shall
prevent the Company, the Trustee or any agent of the Company or the Trustee from
giving effect to any written certification, proxy or other authorization
furnished by the Depositary or impair, as between the Depositary and its Agent
Members, the operation of customary practices of such Depositary governing the
exercise of the rights of an owner of a beneficial interest in any Global Note.
(c) DEFINITIVE NOTES. Notes issued in certificated form shall be
substantially in the form of Exhibit A-1 attached hereto (but without including
the text referred to in footnotes 1 and 2 thereto).
SECTION 2.02 EXECUTION AND AUTHENTICATION.
One Officer shall sign the Notes for the Company by manual or facsimile
signature. The Company's seal shall be reproduced on the Notes and may be in
facsimile form.
If an Officer whose signature is on a Note no longer holds that office at
the time a Note is authenticated, the Note shall nevertheless be valid.
A Note shall not be valid until authenticated by the manual signature of
the Trustee. The signature shall be conclusive evidence that the Note has been
authenticated under this Indenture.
The Trustee shall, upon a written order of the Company signed by an
Officer, authenticate Notes for original issue up to the aggregate principal
amount stated in paragraph 4 of the Notes. The aggregate principal amount of
Notes outstanding at any time may not exceed such amount except as provided in
Section 2.07 hereof.
The Trustee may appoint an authenticating agent acceptable to the Company
to authenticate Notes. An authenticating agent may authenticate Notes whenever
the Trustee may do so. Each reference in this Indenture to authentication by
the Trustee includes authentication by such agent. An authenticating agent has
the same rights as an Agent to deal with the Company or an Affiliate of the
Company.
SECTION 2.03 REGISTRAR AND PAYING AGENT.
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The Company shall maintain an office or agency where Notes may be presented
for registration of transfer or for exchange ("Registrar") and an office or
agency where Notes may be presented for payment ("Paying Agent"). The Registrar
shall keep a register of the Notes and of their transfer and exchange. The
Company may appoint one or more co-registrars and one or more additional paying
agents. The term "REGISTRAR" includes any co-registrar and the term "PAYING
AGENT" includes any additional paying agent. The Company may change any Paying
Agent or Registrar without notice to any Holder. The Company shall notify the
Trustee in writing of the name and address of any Agent not a party to this
Indenture. If the Company fails to appoint or maintain another entity as
Registrar or Paying Agent, the Trustee shall act as such. The Company or any of
its Restricted Subsidiaries may act as Paying Agent or Registrar.
The Company initially appoints The Depository Trust Company ("DTC") to act
as Depositary with respect to the Global Notes.
The Company initially appoints the Trustee to act as the Registrar and
Paying Agent and to act as custodian with respect to the Global Notes (the "NOTE
CUSTODIAN").
SECTION 2.04 PAYING AGENT TO HOLD MONEY IN TRUST.
The Company shall require each Paying Agent other than the Trustee to agree
in writing that the Paying Agent will hold in trust for the benefit of Holders
or the Trustee all money held by the Paying Agent for the payment of principal
of and premium and interest on the Notes, and will notify the Trustee of any
default by the Company in making any such payment. While any such default
continues, the Trustee may require a Paying Agent to pay all money held by it to
the Trustee. The Company at any time may require a Paying Agent to pay all
money held by it to the Trustee. Upon payment over to the Trustee, the Paying
Agent (if other than the Company or a Subsidiary) shall have no further
liability for the money delivered to the Trustee. If the Company or a
Restricted Subsidiary acts as Paying Agent, it shall segregate and hold in a
separate trust fund for the benefit of the Holders all money held by it as
Paying Agent. Upon any bankruptcy or reorganization proceedings relating to the
Company, the Trustee shall serve as Paying Agent for the Notes.
SECTION 2.05 HOLDER LISTS.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
all Holders and shall otherwise comply with TIA Section 312(a). If the Trustee
is not the Registrar, the Company shall furnish to the Trustee at least seven
Business Days before each interest payment date and at such other times as the
Trustee may request in writing, a list in such form and as of such date as the
Trustee may reasonably require of the names and addresses of the Holders of
Notes and the Company shall otherwise comply with TIA Section 312(a).
SECTION 2.06 TRANSFER AND EXCHANGE.
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(a) TRANSFER AND EXCHANGE OF GLOBAL NOTES. The transfer and exchange
of Global Notes or beneficial interests therein shall be effected through the
Depositary, in accordance with this Indenture and the procedures of the
Depositary therefor, which shall include restrictions on transfer comparable to
those set forth herein to the extent required by the Securities Act. Beneficial
interests in a Global Note may be transferred to Persons who take delivery
thereof in the form of a beneficial interest in the same Global Note in
accordance with the transfer restrictions set forth in the legend in subsection
(g) of this Section 2.06. Transfers of beneficial interests in the Global Notes
to Persons required to take delivery thereof in the form of an interest in
another Global Note shall be permitted as follows:
(i) U.S. GLOBAL NOTE TO REGULATION S GLOBAL NOTE. If, at any
time, an owner of a beneficial interest in a U.S. Global
Note deposited with the Depositary (or the Trustee as
custodian for the Depositary) wishes to transfer its
interest in such U.S. Global Note to a Person who is
required or permitted to take delivery thereof in the form
of an interest in a Regulation S Global Note, such owner
shall, subject to the Applicable Procedures, exchange or
cause the exchange of such interest for an equivalent
beneficial interest in a Regulation S Global Note as
provided in this Section 2.06(a)(i). Upon receipt by the
Trustee of (1) instructions given in accordance with the
Applicable Procedures from an Agent Member directing the
Trustee to credit or cause to be credited a beneficial
interest in the Regulation S Global Note in an amount equal
to the beneficial interest in the applicable U.S. Global
Note (E.G., the Rule 144A Global Note or the Accredited
Institutional Investor Global Note) to be exchanged, (2) a
written order given in accordance with the Applicable
Procedures containing information regarding the participant
account of the Depositary and the Euroclear or Cedel Bank
account to be credited with such increase, and (3) a
certificate in the form of Exhibit B-1 hereto given by the
owner of such beneficial interest stating that the transfer
of such interest has been made in compliance with the
transfer restrictions applicable to the Global Notes and
pursuant to and in accordance with Rule 903 or Rule 904 of
Regulation S, then the Trustee, as Registrar, shall instruct
the Depositary to reduce or cause to be reduced the
aggregate principal amount at maturity of the applicable
U.S. Global Note and to increase or cause to be increased
the aggregate principal amount at maturity of the applicable
Regulation S Global Note by the principal amount at maturity
of the beneficial interest in the U.S. Global Note to be
exchanged, to credit or cause to be credited to the account
of the Person specified in such instructions a beneficial
interest in the Regulation S Global Note equal to the
reduction in the aggregate principal amount at maturity of
the applicable U.S. Global Note, and to debit, or cause to
be debited, from the account of the Person making such
exchange or transfer
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the beneficial interest in the U.S. Global Note that is
being exchanged or transferred.
(ii) REGULATION S GLOBAL NOTE TO U.S. GLOBAL NOTE. If, at any
time, an owner of a beneficial interest in a Regulation S
Global Note deposited with the Depositary or with the
Trustee as custodian for the Depositary wishes to transfer
its interest in such Regulation S Global Note to (1) a
Person who is required or permitted to take delivery thereof
in the form of an interest in a Rule 144A Global Note or (2)
a Person who is required or permitted to take delivery
thereof in the form of an interest in an Accredited
Institutional Investor Global Note, such owner shall,
subject to the Applicable Procedures, exchange or cause the
exchange of such interest for an equivalent beneficial
interest in a Rule 144A Global Note or an Accredited
Institutional Investor Global Note, as applicable, as
provided in this Section 2.06(a)(ii). Upon receipt by the
Trustee of (1) instructions from Euroclear or Cedel Bank, if
applicable, and the Depositary, directing the Trustee, as
Registrar, to credit or cause to be credited a beneficial
interest in the Rule 144A Global Note or the Accredited
Institutional Investor Global Note, as applicable, equal to
the beneficial interest in the Regulation S Global Note to
be exchanged, such instructions to contain information
regarding the participant account with the Depositary to be
credited with such increase, (2) a written order given in
accordance with the Applicable Procedures containing
information regarding the participant account of the
Depositary and (3) a certificate in the form of Exhibit B-2
attached hereto given by the owner of such beneficial
interest stating (A) if the transfer is pursuant to Rule
144A, that the Person transferring such interest in a
Regulation S Global Note reasonably believes that the Person
acquiring such interest in a Rule 144A Global Note is a QIB
and is obtaining such beneficial interest in a transaction
meeting the requirements of Rule 144A and any applicable
blue sky or securities laws of any state of the United
States, (B) that the transfer complies with the requirements
of Rule 144A under the Securities Act and any applicable
blue sky or securities laws of any state of the United
States or (C) if the transfer is pursuant to any other
exemption from the registration requirements of the
Securities Act, that the transfer of such interest has been
made in compliance with the transfer restrictions applicable
to the Global Notes and pursuant to and in accordance with
the requirements of the exemption claimed, such statement to
be supported by an Opinion of Counsel from the transferee or
the transferor in form reasonably acceptable to the Company
and to the Registrar, then the Trustee, as Registrar, shall
instruct the Depositary to reduce or cause to be reduced the
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aggregate principal amount at maturity of such Regulation S
Global Note and to increase or cause to be increased the
aggregate principal amount at maturity of the applicable
Rule 144A Global Note or the Accredited Institutional
Investor Global Note, as applicable, by the principal amount
at maturity of the beneficial interest in the Regulation S
Global Note to be exchanged, and the Trustee, as Registrar,
shall instruct the Depositary, concurrently with such
reduction, to credit or cause to be credited to the account
of the Person specified in such instructions a beneficial
interest in the applicable Rule 144A Global Note or the
Accredited Institutional Investor Global Note, as
applicable, equal to the reduction in the aggregate
principal amount at maturity of such Regulation S Global
Note and to debit or cause to be debited from the account of
the Person making such transfer the beneficial interest in
the Regulation S Global Note that is being transferred.
(iii) RULE 144A GLOBAL NOTE TO ACCREDITED INSTITUTIONAL INVESTOR
GLOBAL NOTE; ACCREDITED INSTITUTIONAL INVESTOR GLOBAL NOTE
TO RULE 144A GLOBAL NOTE. If, at any time, an owner of a
beneficial interest in a Rule 144A Global Note deposited
with the Depositary or with the Trustee as custodian for the
Depositary wishes to transfer its interest in such Rule 144A
Global Note to a Person who is required or permitted to take
delivery thereof in the form of an interest in an Accredited
Institutional Investor Global Note or an owner of an
Accredited Institutional Investor Global Note wishes to
transfer its interest in such Accredited Institutional
Investor Global Note to a Person who is required or
permitted to take delivery thereof in the form of an
interest in a Rule 144A Global Note, such owner shall,
subject to the Applicable Procedures, exchange or cause the
exchange of such interest for an equivalent beneficial
interest in a Rule 144A Global Note or an Accredited
Institutional Investor Global Note, as applicable, as
provided in this Section 2.06(a)(iii). Upon receipt by the
Trustee of (1) instructions from the Depositary, directing
the Trustee, as Registrar, to credit or cause to be credited
a beneficial interest in the Rule 144A Global Note or the
Accredited Institutional Investor Global Note, as
applicable, equal to the beneficial interest in the Rule
144A Global Note or Accredited Institutional Investor Global
Note to be exchanged, such instructions to contain
information regarding the participant account with the
Depositary to be credited with such increase, (2) a written
order given in accordance with the Applicable Procedures
containing information regarding the participant account of
the Depositary and (3) a certificate in the form of Exhibit
B-3 attached hereto given by the owner of such beneficial
interest stating (A) if the transfer is pursuant to Rule
144A, that the Person transferring
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such interest in an Accredited Institutional Investor Global
Note reasonably believes that the Person acquiring such
interest in a Rule 144A Global Note is a QIB and is
obtaining such beneficial interest in a transaction meeting
the requirements of Rule 144A and any applicable blue sky or
securities laws of any state of the United States, (B) that
the transfer complies with the requirements of Rule 144A
under the Securities Act and any applicable blue sky or
securities laws of any state of the United States or (C) if
the transfer is pursuant to any other exemption from the
registration requirements of the Securities Act, that the
transfer of such interest has been made in compliance with
the transfer restrictions applicable to the Global Notes and
pursuant to and in accordance with the requirements of the
exemption claimed, such statement to be supported by an
Opinion of Counsel from the transferee or the transferor in
form reasonably acceptable to the Company and to the
Registrar, then the Trustee, as Registrar, shall instruct
the Depositary to reduce or cause to be reduced the
aggregate principal amount at maturity of such Rule 144A
Global Note or Accredited Institutional Investor Global Note
and to increase or cause to be increased the aggregate
principal amount at maturity of the applicable Rule 144A
Global Note or the Accredited Institutional Investor Global
Note, as applicable, by the principal amount at maturity of
the beneficial interest in the Rule 144A Global Note or
Accredited Institutional Investor Global Note to be
exchanged, and the Trustee, as Registrar, shall instruct the
Depositary, concurrently with such reduction, to credit or
cause to be credited to the account of the Person specified
in such instructions a beneficial interest in the applicable
Rule 144A Global Note or the Accredited Institutional
Investor Global Note, as applicable, equal to the reduction
in the aggregate principal amount at maturity of such Rule
144A Global Note or the Accredited Institutional Investor
Global Note and to debit or cause to be debited from the
account of the Person making such transfer the beneficial
interest in the Rule 144A Global Note or the Accredited
Institutional Investor Global Note that is being
transferred.
(b) TRANSFER AND EXCHANGE OF DEFINITIVE NOTES. When Definitive Notes
are presented by a Holder to the Registrar with a request:
(x) to register the transfer of the Definitive Notes; or
(y) to exchange such Definitive Notes for an equal principal amount
of Definitive Notes of other authorized denominations, the
Registrar shall register the transfer or make the exchange as
requested; PROVIDED, HOWEVER, that the Definitive Notes presented
or surrendered for register of transfer or exchange:
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(i) shall be duly endorsed or accompanied by a written
instruction of transfer in form satisfactory to the
Registrar duly executed by such Holder or by his attorney,
duly authorized in writing; and
(ii) in the case of a Definitive Note that is a Transfer
Restricted Security, such request shall be accompanied by
the following additional information and documents, as
applicable:
(A) if such Transfer Restricted Security is being delivered
to the Registrar by a Holder for registration in the
name of such Holder, without transfer, or such Transfer
Restricted Security is being transferred to the
Company, a certification to that effect from such
Holder (in substantially the form of Exhibit B-4
hereto);
(B) if such Transfer Restricted Security is being
transferred to a QIB in accordance with Rule 144A under
the Securities Act or pursuant to an exemption from
registration in accordance with Rule 144 under the
Securities Act or pursuant to an effective registration
statement under the Securities Act, a certification to
that effect from such Holder (in substantially the form
of Exhibit B-4 hereto); or
(C) if such Transfer Restricted Security is being
transferred in reliance on any other exemption from the
registration requirements of the Securities Act, a
certification to that effect from such Holder (in
substantially the form of Exhibit B-4 hereto) and an
Opinion of Counsel from such Holder or the transferee
reasonably acceptable to the Company and to the
Registrar to the effect that such transfer is in
compliance with the Securities Act.
(c) TRANSFER OF A BENEFICIAL INTEREST IN A GLOBAL NOTE FOR A
DEFINITIVE NOTE.
(i) Any Person having a beneficial interest in a Global Note may
upon request, subject to the Applicable Procedures, exchange
such beneficial interest for a Definitive Note. Upon
receipt by the Trustee of written instructions or such other
form of instructions as is customary for the Depositary (or
Euroclear or Cedel Bank, if applicable), from the Depositary
or its nominee on behalf of any Person having a beneficial
interest in such Global Note, and, in the case of a Transfer
Restricted Security, the following additional information
and documents (all of which may be submitted by facsimile):
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(A) if such beneficial interest is being transferred to the
Person designated by the Depositary as being the
beneficial owner, a certification to that effect from
such Person (in substantially the form of Exhibit B-5
hereto);
(B) if such beneficial interest is being transferred to a
QIB in accordance with Rule 144A under the Securities
Act or pursuant to an exemption from registration in
accordance with Rule 144 under the Securities Act or
pursuant to an effective registration statement under
the Securities Act, a certification to that effect from
the transferor (in substantially the form of Exhibit
B-5 hereto); or
(C) if such beneficial interest is being transferred in
reliance on any other exemption from the registration
requirements of the Securities Act, a certification to
that effect from the transferor (in substantially the
form of Exhibit B-5 hereto) and an Opinion of Counsel
from the transferee or the transferor reasonably
acceptable to the Company and to the Registrar to the
effect that such transfer is in compliance with the
Securities Act,
the Trustee or the Note Custodian, at the direction of the
Trustee, shall, in accordance with the standing instructions
and procedures existing between the Depositary and the Note
Custodian, cause the aggregate principal amount of the
applicable Global Note (e.g., the Rule 144A Global Note, the
Accredited Institutional Investor Global Note or the
Regulation S Global Note) to be reduced accordingly and,
following such reduction, the Company shall execute and, the
Trustee shall authenticate and deliver to the transferee a
Definitive Note in the appropriate principal amount.
(ii) Definitive Notes issued in exchange for a beneficial
interest in a Global Note, as applicable, pursuant to this
Section 2.06(c) shall be registered in such names and in
such authorized denominations as the Depositary, pursuant to
instructions from its direct or indirect participants or
otherwise, shall instruct the Trustee. The Trustee shall
deliver such Definitive Notes to the Persons in whose names
such Notes are so registered. Following any such issuance
of Definitive Notes, the Trustee, as Registrar, shall
instruct the Depositary to reduce or cause to be reduced the
aggregate principal amount at maturity of the applicable
Global Note to reflect the transfer.
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(d) RESTRICTIONS ON TRANSFER AND EXCHANGE OF GLOBAL NOTES.
Notwithstanding any other provision of this Indenture (other than the provisions
set forth in subsection (f) of this Section 2.06), a Global Note may not be
transferred as a whole except by the Depositary to a nominee of the Depositary
or by a nominee of the Depositary to the Depositary or another nominee of the
Depositary or by the Depositary or any such nominee to a successor Depositary or
a nominee of such successor Depositary.
(e) TRANSFER AND EXCHANGE OF A DEFINITIVE NOTE FOR A BENEFICIAL
INTEREST IN A GLOBAL NOTE. A Definitive Note may not be exchanged for a
beneficial interest in a Global Note except, subject to the Applicable
Procedures, upon satisfaction of the requirements set forth below. Upon receipt
by the Trustee of a Definitive Note, duly endorsed or accompanied by appropriate
instruments of transfer, in form satisfactory to the Trustee, and, in the case
of a Transfer Restricted Security, the following additional information and
documents (all of which may be submitted by facsimile):
(i) if such beneficial interest is being transferred to the
Person designated by the Depositary as being the
beneficial owner, a certification to that effect from
such Person (in substantially the form of Exhibit B-6
hereto);
(ii) if such beneficial interest is being transferred to a QIB
in accordance with Rule 144A under the Securities Act or
pursuant to an exemption from registration in accordance
with Rule 144 under the Securities Act or pursuant to an
effective registration statement under the Securities
Act, a certification to that effect from the transferor
(in substantially the form of Exhibit B-6 hereto); or
(iii) if such beneficial interest is being transferred in
reliance on any other exemption from the registration
requirements of the Securities Act, a certification to
that effect from the transferor (in substantially the
form of Exhibit B-6 hereto) and an Opinion of Counsel
from the transferee or the transferor reasonably
acceptable to the Company and to the Registrar to the
effect that such transfer is in compliance with the
Securities Act,
the Trustee shall cancel such Definitive Note in accordance with Section 2.11
hereof and cause, or direct the Note Custodian to cause, in accordance with the
standing instructions and procedures existing between the Depositary and the
Note Custodian, the aggregate principal amount of Notes represented by the
applicable Global Note (e.g., the Rule 144A Global Note, the Accredited
Institutional Investor Global Note or the Regulation S Global Note, as the case
may be) to be increased accordingly. If none of the applicable Global Notes are
then outstanding, the Company shall issue and, upon receipt of an authentication
order in accordance with Section 2.02 hereof, the Trustee shall authenticate a
new applicable Global Note in the appropriate principal amount.
(f) AUTHENTICATION OF DEFINITIVE NOTES IN ABSENCE OF DEPOSITARY. If
at any time:
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(i) the Depositary for the Notes notifies the Company that
the Depositary is unwilling or unable to continue as
Depositary for the Global Notes and a successor
Depositary for the Global Notes is not appointed by the
Company within 90 days after delivery of such notice; or
(ii) the Company, at its sole discretion, notifies the Trustee
in writing that it elects to cause the issuance of
Definitive Notes under this Indenture,
then the Company shall execute, and the Trustee shall, upon receipt of an
authentication order in accordance with Section 2.02 hereof, authenticate and
deliver, Definitive Notes in an aggregate principal amount equal to the
principal amount of the Global Notes in exchange for such Global Notes.
(g) LEGENDS.
(i) Except as permitted by the following paragraphs (ii) and
(iii), each Note certificate evidencing Global Notes and
Definitive Notes (and all Notes issued in exchange
therefor or substitution thereof) shall bear legends in
substantially the following form:
THE NOTES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT") AND MAY NOT BE OFFERED, SOLD, PLEDGED
OR OTHERWISE TRANSFERRED EXCEPT (1) TO A PERSON WHOM SUCH
INVESTOR REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL
BUYER WITHIN THE MEANING OF RULE 144A UNDER THE
SECURITIES ACT PURCHASING FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (2) IN
AN OFFSHORE TRANSACTION COMPLYING WITH RULE 903 OR RULE
904 OF REGULATION S UNDER THE SECURITIES ACT, (3)
PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF
AVAILABLE), (4) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT, OR (5) TO
INSTITUTIONAL ACCREDITED INVESTORS IN A TRANSACTION
EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT, IN EACH CASE IN ACCORDANCE WITH ALL
APPLICABLE
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SECURITIES LAWS OF THE STATES OF THE UNITED STATES AND
OTHER JURISDICTIONS.
(ii) Upon any sale or transfer of a Transfer Restricted
Security (including any Transfer Restricted Security
represented by a Global Note) pursuant to Rule 144 under
the Securities Act or pursuant to an effective
registration statement under the Securities Act:
(A) in the case of any Transfer Restricted Security
that is a Definitive Note, the Registrar shall
permit the Holder thereof to exchange such
Transfer Restricted Security for a Definitive Note
that does not bear the legend set forth in (i)
above and rescind any restriction on the transfer
of such Transfer Restricted Security upon receipt
of a certification from the transferring holder
substantially in the form of Exhibit B-4 hereto;
and
(B) in the case of any Transfer Restricted Security
represented by a Global Note, such Transfer
Restricted Security shall not be required to bear
the legend as set forth in (i) above, but shall
continue to be subject to the provisions of
Section 2.06(a) and (b) hereof; PROVIDED, HOWEVER,
that with respect to any request for an exchange
of a Transfer Restricted Security that is
represented by a Global Note for a Definitive Note
that does not bear the legend as set forth in (i)
above, which request is made in reliance upon Rule
144, the Holder thereof shall certify in writing
to the Registrar that such request is being made
pursuant to Rule 144 (such certification to be
substantially in the form of Exhibit B-4 hereto).
(iii) Upon any sale or transfer of a Transfer Restricted
Security (including any Transfer Restricted Security
represented by a Global Note) in reliance on any
exemption from the registration requirements of the
Securities Act (other than exemptions pursuant to Rule
144A or Rule 144 under the Securities Act) in which the
Holder or the transferee provides an Opinion of Counsel
to the Company and the Registrar in form and substance
reasonably acceptable to the Company and the Registrar
(which Opinion of Counsel shall also state that the
transfer restrictions contained in the legend are no
longer applicable):
(A) in the case of any Transfer Restricted Security
that is a Definitive Note, the Registrar shall
permit the Holder thereof to exchange such
Transfer Restricted Security for a
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Definitive Note that does not bear the legend set
forth in (i) above and rescind any restriction on
the transfer of such Transfer Restricted Security;
and
(B) in the case of any Transfer Restricted Security
represented by a Global Note, such Transfer
Restricted Security shall not be required to bear
the legend set forth in (i) above, but shall
continue to be subject to the provisions of
Section 2.06(a) and (b) hereof.
(iv) Notwithstanding the foregoing, upon consummation of the
Exchange Offer in accordance with the Registration Rights
Agreement, the Company shall issue and, upon receipt of
an authentication order in accordance with Section 2.02
hereof, the Trustee shall authenticate Series B Notes in
exchange for Series A Notes accepted for exchange in the
Exchange Offer, which Series B Notes shall not bear the
legend set forth in (i) above, and the Registrar shall
rescind any restriction on the transfer of such Series B
Notes, in each case unless the Holder of such Series A
Notes is either (A) a broker-dealer, (B) a Person
participating in the distribution of the Series A Notes
or (C) a Person who is an affiliate (as defined in Rule
144A) of the Company;
(h) CANCELLATION AND/OR ADJUSTMENT OF GLOBAL NOTES. At such time as
all beneficial interests in Global Notes have been exchanged for Definitive
Notes, redeemed, repurchased or canceled, all Global Notes shall be returned to
or retained and canceled by the Trustee in accordance with Section 2.11 hereof.
At any time prior to such cancellation, if any beneficial interest in a Global
Note is exchanged for Definitive Notes, redeemed, repurchased or canceled, the
principal amount of Notes represented by such Global Note shall be reduced
accordingly and an endorsement shall be made on such Global Note, by the Trustee
or the Note Custodian, at the direction of the Trustee, to reflect such
reduction.
(i) GENERAL PROVISIONS RELATING TO TRANSFERS AND EXCHANGES.
(i) To permit registrations of transfers and exchanges, the
Company shall execute and the Trustee shall authenticate
Definitive Notes and Global Notes at the Registrar's
request.
(ii) No service charge shall be made to a Holder for any
registration of transfer or exchange, but the Company may
require payment of a sum sufficient to cover any transfer
tax or similar governmental charge payable in connection
therewith (other than any such transfer taxes or similar
governmental charge payable upon exchange or transfer
pursuant to Sections 3.07, 4.15 and 9.05 hereto).
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(iii) The Registrar shall not be required to register the
transfer of or exchange any Note selected for redemption
in whole or in part, except the unredeemed portion of any
Note being redeemed in part.
(iv) All Definitive Notes and Global Notes issued upon any
registration of transfer or exchange of Definitive Notes
or Global Notes shall be the valid obligations of the
Company, evidencing the same debt, and entitled to the
same benefits under this Indenture, as the Definitive
Notes or Global Notes surrendered upon such registration
of transfer or exchange.
(v) The Company shall not be required:
(A) to issue, to register the transfer of or to
exchange Notes during a period beginning at the
opening of business 15 days before the day of any
selection of Notes for redemption under Section
3.02 hereof and ending at the close of business on
the day of selection; or
(B) to register the transfer of or to exchange any
Note so selected for redemption in whole or in
part, except the unredeemed portion of any Note
being redeemed in part; or
(C) to register the transfer of or to exchange a Note
between a record date and the next succeeding
interest payment date.
(vi) Prior to due presentment for the registration of a
transfer of any Note, the Trustee, any Agent and the
Company may deem and treat the Person in whose name any
Note is registered as the absolute owner of such Note for
the purpose of receiving payment of principal of and
interest on such Notes, and neither the Trustee, any
Agent nor the Company shall be affected by notice to the
contrary.
(vii) The Trustee shall authenticate Definitive Notes and
Global Notes in accordance with the provisions of Section
2.02 hereof.
SECTION 2.07 REPLACEMENT NOTES.
If any mutilated Note is surrendered to the Trustee, or the Company and the
Trustee receives evidence to its satisfaction of the destruction, loss or theft
of any Note, the Company shall issue and the Trustee, upon the written order of
the Company signed by two Officers of the Company, shall authenticate a
replacement Note if the Trustee's requirements are met. If required by the
Trustee or the Company, an indemnity bond must be supplied by the Holder that is
sufficient in the reasonable judgment of the Trustee and the Company to protect
the Company,
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the Trustee, any Agent and any authenticating agent from any loss that any of
them may suffer if a Note is replaced. The Company may charge for its expenses
in replacing a Note.
Every replacement Note is an additional obligation of the Company and shall
be entitled to all of the benefits of this Indenture equally and proportionately
with all other Notes duly issued hereunder.
SECTION 2.08 OUTSTANDING NOTES.
The Notes outstanding at any time are all the Notes authenticated by the
Trustee except for those canceled by it, those delivered to it for cancellation,
those reductions in the interest in a Global Note effected by the Trustee in
accordance with the provisions hereof, and those described in this Section as
not outstanding. Except as set forth in Section 2.09 hereof, a Note does not
cease to be outstanding because the Company or an Affiliate of the Company holds
the Note.
If a Note is replaced pursuant to Section 2.07 hereof, it ceases to be
outstanding unless the Trustee receives proof satisfactory to it that the
replaced Note is held by a bona fide purchaser.
If the principal amount of any Note is considered paid under Section 4.01
hereof, it ceases to be outstanding and interest on it ceases to accrue.
If the Paying Agent (other than the Company or a Restricted Subsidiary)
holds, on a redemption date or maturity date, money sufficient to pay Notes
payable on that date, then on and after that date such Notes shall be deemed to
be no longer outstanding and shall cease to accrue interest.
SECTION 2.09 TREASURY NOTES.
In determining whether the Holders of the required principal amount of
Notes have concurred in any direction, waiver or consent, Notes owned by the
Company, or by any Person directly or indirectly controlling or controlled by or
under direct or indirect common control with the Company, shall be considered as
though not outstanding, except that for the purposes of determining whether the
Trustee shall be protected in relying on any such direction, waiver or consent,
only Notes that a Trustee knows are so owned shall be so disregarded.
SECTION 2.10 TEMPORARY NOTES.
Until definitive Notes are ready for delivery, the Company may prepare and
the Trustee shall authenticate temporary Notes upon a written order of the
Company signed by two Officers of the Company. Temporary Notes shall be
substantially in the form of definitive Notes but may have variations that the
Company considers appropriate for temporary Notes and as shall be reasonably
acceptable to the Trustee. Without unreasonable delay, the Company shall
prepare and the Trustee shall authenticate definitive Notes in exchange for
temporary Notes.
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Holders of temporary Notes shall be entitled to all of the benefits of this
Indenture.
SECTION 2.11 CANCELLATION.
The Company and any Guarantor at any time may deliver Notes to the Trustee
for cancellation. The Registrar and Paying Agent shall forward to the Trustee
any Notes surrendered to them for registration of transfer, exchange. or
payment. The Trustee and no one else shall cancel all Notes surrendered for
registration of transfer, exchange, payment, replacement or cancellation and
shall destroy canceled Notes (subject to the record retention requirement of the
Exchange Act). Certification of the destruction of all canceled Notes shall be
delivered to the Company. The Company may not issue new Notes to replace Notes
that it has paid or that have been delivered to the Trustee for cancellation.
SECTION 2.12 DEFAULTED INTEREST.
If the Company defaults in a payment of interest on the Notes, it shall pay
the defaulted interest in any lawful manner plus, to the extent lawful, interest
payable on the defaulted interest, to the Persons who are Holders on a
subsequent special record date, in each case at the rate provided in the Notes
and in Section 4.01 hereof. The Company shall notify the Trustee in writing of
the amount of defaulted interest proposed to be paid on each Note and the date
of the proposed payment. The Company shall fix or cause to be fixed each such
special record date and payment date, PROVIDED that no such special record date
shall be less than 10 days prior to the related payment date for such defaulted
interest. At least 15 days before the special record date, the Company (or,
upon the written request of the Company, the Trustee in the name and at the
expense of the Company) shall mail or cause to be mailed to Holders a notice
that states the special record date, the related payment date and the amount of
such interest to be paid.
ARTICLE 3
REDEMPTION AND PREPAYMENT
SECTION 3.01 NOTICES TO TRUSTEE.
If the Company elects to redeem Notes pursuant to the optional redemption
provisions of Section 3.07 hereof, it shall furnish to the Trustee, at least 45
days but not more than 60 days before a redemption date, an Officers'
Certificate setting forth (i) the clause of this Indenture pursuant to which the
redemption shall occur, (ii) the redemption date, (iii) the principal amount of
Notes to be redeemed and (iv) the applicable redemption price.
SECTION 3.02 SELECTION OF NOTES TO BE REDEEMED.
If less than all of the Notes are to be redeemed at any time, the Trustee
shall select the Notes to be redeemed among the Holders of the Notes on a PRO
RATA basis or by lot, as directed by the Company in writing. In the event of
partial redemption by lot, the particular Notes to be redeemed shall be
selected, unless otherwise provided herein, not less than 30 nor more than 60
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days prior to the redemption date by the Trustee from the outstanding Notes not
previously called for redemption.
The Trustee shall promptly notify the Company in writing of the Notes
selected for redemption and, in the case of any Note selected for partial
redemption, the principal amount thereof to be redeemed. Notes and portions of
Notes selected shall be in amounts of $1,000 or whole multiples of $1,000;
except that if all of the Notes of a Holder are to be redeemed, the entire
outstanding amount of Notes held by such Holder, even if not a multiple of
$1,000, shall be redeemed. Except as provided in the preceding sentence,
provisions of this Indenture that apply to Notes called for redemption also
apply to portions of Notes called for redemption.
SECTION 3.03 NOTICE OF REDEMPTION.
At least 30 days but not more than 60 days before a redemption date, the
Company shall mail or cause to be mailed, by first class mail, a notice of
redemption to each Holder whose Notes are to be redeemed at its registered
address.
The notice shall identify the Notes to be redeemed and shall state:
(a) the redemption date;
(b) the redemption price;
(c) if any Note is being redeemed in part, the portion of the principal
amount of such Note to be redeemed and that, after the redemption date upon
surrender of such Note, a new Note or Notes in principal amount equal to
the unredeemed portion shall be issued upon cancellation of the original
Note;
(d) the name and address of the Paying Agent;
(e) that Notes called for redemption must be surrendered to the Paying
Agent to collect the redemption price;
(f) that, unless the Company defaults in making such redemption payment,
interest on Notes called for redemption ceases to accrue on and after the
redemption date;
(g) the paragraph of the Notes and/or Section of this Indenture pursuant
to which the Notes called for redemption are being redeemed; and
(h) that no representation is made as to the correctness or accuracy of
the CUSIP number, if any, listed in such notice or printed on the Notes.
At the Company's request, the Trustee shall give the notice of redemption
in the Company's name and at its expense; PROVIDED, HOWEVER, that the Company
shall have delivered to the Trustee, at least 45 days prior to the redemption
date, an Officers' Certificate requesting that
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the Trustee give such notice and setting forth the information to be stated in
such notice as provided in the preceding paragraph.
SECTION 3.04 EFFECT OF NOTICE OF REDEMPTION.
Once notice of redemption is mailed in accordance with Section 3.03 hereof,
Notes called for redemption become irrevocably due and payable on the redemption
date at the redemption price. A notice of redemption may not be conditional.
SECTION 3.05 DEPOSIT OF REDEMPTION PRICE.
One Business Day prior to the redemption date, the Company shall deposit
with the Trustee or with the Paying Agent money sufficient to pay the redemption
price of and accrued interest on all Notes to be redeemed on that date. The
Trustee or the Paying Agent shall promptly return to the Company any money
deposited with the Trustee or the Paying Agent by the Company in excess of the
amounts necessary to pay the redemption price of, and accrued interest on, all
Notes to be redeemed.
If the Company complies with the provisions of the preceding paragraph, on
and after the redemption date, interest shall cease to accrue on the Notes or
the portions of Notes called for redemption. If a Note is redeemed on or after
an interest record date but on or prior to the related interest payment date,
then any accrued and unpaid interest shall be paid to the Person in whose name
such Note was registered at the close of business on such record date. If any
Note called for redemption shall not be so paid upon surrender for redemption
because of the failure of the Company to comply with the preceding paragraph,
interest shall be paid on the unpaid principal, from the redemption date until
such principal is paid, and to the extent lawful on any interest not paid on
such unpaid principal, in each case at the rate provided in the Notes and in
Section 4.01 hereof.
SECTION 3.06 NOTES REDEEMED IN PART.
Upon surrender of a Note that is redeemed in part, the Company shall issue
and, upon the Company's written request, the Trustee shall authenticate for the
Holder at the expense of the Company a new Note equal in principal amount to the
unredeemed portion of the Note surrendered.
SECTION 3.07 OPTIONAL REDEMPTION.
(a) The Notes are not redeemable by the Company prior to December 5, 1998.
Thereafter, the Notes will be subject to redemption at the option of the
Company, in whole or in part, at the redemption prices (expressed as percentages
of the principal amount) set forth below plus accrued and unpaid interest
thereon to the date fixed for redemption, if redeemed during the twelve month
period beginning on December 4 of the years indicated below:
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Year Percentage
---- ----------
1998 . . . . . . . . 106.00%
1999 . . . . . . . . 105.14%
2000 . . . . . . . . 104.29%
2001 . . . . . . . . 103.43%
2002 . . . . . . . . 102.57%
2003 . . . . . . . . 101.71%
2004 . . . . . . . . 100.86%
2005 . . . . . . . . 100.00%
(b) Any redemption pursuant to this Section 3.07 shall be made pursuant to
the provisions of Section 3.01 through 3.06 hereof.
SECTION 3.08 MANDATORY REDEMPTION.
Except as set forth under Section 4.15 hereof, the Company shall not be
required to make mandatory or sinking fund redemption payments with respect to
the Notes.
ARTICLE 4
COVENANTS
SECTION 4.01 PAYMENT OF NOTES.
The Company shall pay or cause to be paid the principal of, premium, if
any, and interest on the Notes on the dates and in the manner provided in the
Notes. Principal, premium, if any, and interest shall be considered paid on the
date due if the Paying Agent, if other than the Company or a Subsidiary thereof,
holds as of 10:00 a.m. Eastern Time on the due date money deposited by the
Company in immediately available funds and designated for and sufficient to pay
all principal, premium, if any, and interest then due.
The Company shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue principal at the applicable rate
set forth in the Notes to the extent lawful; it shall pay interest (including
post-petition interest in any proceeding under any Bankruptcy Law) on overdue
installments of interest (without regard to any applicable grace period) at the
same rate to the extent lawful.
SECTION 4.02 MAINTENANCE OF OFFICE OR AGENCY.
The Company shall maintain in the Borough of Manhattan, the City of New
York, an office or agency (which may be an office of the Trustee or an Affiliate
of the Trustee, Registrar or co-registrar) where Notes may be surrendered for
registration of transfer or for exchange and where notices and demands to or
upon the Company in respect of the Notes and this Indenture may be served. The
Company shall give prompt written notice to the Trustee of the location, and any
change in the location, of such office or agency. If at any time the Company
shall fail to maintain any such required office or agency or shall fail to
furnish the Trustee with the address
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thereof, such presentations, surrenders, notices and demands may be made or
served at the Corporate Trust Office of the Trustee.
The Company may also from time to time designate one or more other offices
or agencies where the Notes may be presented or surrendered for any or all such
purposes and may from time to time rescind such designations; PROVIDED, HOWEVER,
that no such designation or rescission shall in any manner relieve the Company
of its obligation to maintain an office or agency in the Borough of Manhattan,
the City of New York for such purposes. The Company shall give prompt written
notice to the Trustee of any such designation or rescission and of any change in
the location of any such other office or agency.
The Company hereby designates the Corporate Trust Office of the Trustee as
one such office or agency of the Company in accordance with Section 2.03.
SECTION 4.03 REPORTS.
(a) Whether or not required by the rules and regulations of the SEC, so
long as any Notes are outstanding, the Company shall furnish to the Holders of
Notes within five (5) Business Days of being required to file, or the date it
would have been required to file if it were subject to such filing requirements,
the same (i) all quarterly and annual financial information that would be
required to be contained in a filing with the SEC on Forms l0-Q and 10-K if the
Company were required to file such Forms, including a "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and, with respect
to the annual information only, a report thereon by the Company's certified
independent accountants and (ii) all current reports that would be required to
be filed with the SEC on Form 8-K (as such requirement is in effect as of the
date hereof or as amended from time to time) as if the Company were required to
file such reports. In addition, whether or not required by the rules and
regulations of the SEC, the Company shall file a copy of all such information
and reports with the SEC for public availability (unless the SEC will not accept
such a filing) and make such information available to securities analysts and
prospective investors who request it in writing. The Company shall at all times
comply with TIA Section 314(a).
(b) The Company shall furnish to the Holders of Notes within five (5)
Business Days of being required to file the same copies of all annual reports
and other documents which the Company is required to file with the SEC pursuant
to the Exchange Act.
(c) For so long as any Transfer Restricted Securities remain outstanding,
the Company shall furnish to all Holders and prospective purchasers of the Notes
designated by the Holders of Transfer Restricted Securities, promptly upon their
request, the information required to be delivered pursuant to Rule 144A(d)(4)
under the Securities Act.
SECTION 4.04 COMPLIANCE CERTIFICATE.
(a) The Company shall deliver to the Trustee, within 50 days after the end
of each of the first three fiscal quarters of the Company's fiscal year, and
within 105 days after the end of
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each fiscal year of the Company, an Officers' Certificate (i) setting forth
computations in reasonable detail showing, as at the end of such quarter or
fiscal year, the Company's compliance with the financial covenants contained in
this Indenture, and (ii) stating that a review of the activities of the Company
and its Subsidiaries during the preceding fiscal year has been made under the
supervision of the signing Officers with a view to determining whether the
Company has kept, observed, performed and fulfilled its obligations under this
Indenture, and further stating, as to each such Officer signing such
certificate, that to the best of his or her knowledge the Company has kept,
observed, performed and fulfilled each and every covenant contained in this
Indenture and is not in default in the performance or observance of any of the
terms, provisions and conditions of this Indenture (or, if a Default or Event of
Default shall have occurred, describing all such Defaults or Events of Default
of which he or she may have knowledge and what action the Company is taking or
proposes to take with respect thereto) and that to the best of his or her
knowledge no event has occurred and remains in existence by reason of which
payments on account of the principal of or interest, if any, on the Notes is
prohibited or if such event has occurred, a description of the event and what
action the Company is taking or proposes to take with respect thereto.
(b) The year-end financial statements delivered pursuant to Section
4.03(a) above shall be accompanied by a written statement of the Company's
independent public accountants (who shall be a firm of established national
reputation) that in making the examination necessary for certification of such
financial statements, nothing has come to their attention that would lead them
to believe that the Company has violated any provisions of Article 4 or Article
5 hereof or, if any such violation has occurred, specifying the nature and
period of existence thereof, it being understood that such accountants shall not
be liable directly or indirectly to any Person for any failure to obtain
knowledge of any such violation.
(c) The Company shall, so long as any of the Notes are outstanding,
deliver to the Trustee, forthwith upon any Officer becoming aware of any Default
or Event of Default, an Officers' Certificate specifying such Default or Event
of Default and what action the Company is taking or proposes to take with
respect thereto.
SECTION 4.05 TAXES.
The Company shall pay, and shall cause each of its Subsidiaries to pay,
prior to delinquency, all material taxes, assessments, and governmental levies
except such as are contested in good faith and by appropriate proceedings and
where adequate reserves with respect to such contest are maintained on the books
of the Company and its Subsidiaries, as applicable.
SECTION 4.06 STAY, EXTENSION AND USURY LAWS.
The Company covenants (to the extent that it may lawfully do so) that it
shall not at any time insist upon, plead, or in any manner whatsoever claim or
take the benefit or advantage of, any stay, extension or usury law wherever
enacted, now or at any time hereafter in force, that may affect the covenants or
the performance of this Indenture; and the Company (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such
law, and
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covenants that it shall not, by resort to any such law, hinder, delay or impede
the execution of any power herein granted to the Trustee, but shall suffer and
permit the execution of every such power as though no such law has been enacted.
SECTION 4.07 RESTRICTED PAYMENTS.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, (i) declare or pay any dividend or make
any other payment or distribution on account of the Company's or any of its
Restricted Subsidiaries' Equity Interests (including, without limitation, any
payment by the Company or its Restricted Subsidiaries in connection with any
merger or consolidation involving the Company or a Restricted Subsidiary) or to
the direct or indirect holders of the Company's Equity Interests in their
capacity as such (other than dividends or distributions payable in Equity
Interests (other than Disqualified Stock) of the Company or dividends or
distributions in respect of Equity Interests of a Restricted Subsidiary which
are payable only to the Company or a Wholly Owned Restricted Subsidiary); (ii)
purchase, redeem or otherwise acquire or retire for value any Equity Interests
of the Company or any direct or indirect parent of the Company or other
Affiliate of the Company that is not (or does not, as a result of such purchase,
redemption or acquisition, become) a Restricted Subsidiary of the Company (other
than any such Equity Interest owned by the Company or any Wholly Owned
Restricted Subsidiary); (iii) voluntarily purchase, redeem, defease or otherwise
acquire or retire for value any indebtedness that is subordinated to the Notes
or any indebtedness that is PARI PASSU with the Notes; or (iv) make any
Restricted Investment (all such payments and other actions set forth in clauses
(i) through (iv) above being collectively referred to as "RESTRICTED PAYMENTS"),
unless, at the time of and after giving effect to such Restricted Payment on a
pro forma basis:
(a) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof;
(b) the Fixed Charge Coverage Ratio of the Company for the Company's
most recently ended four full fiscal quarters (taken as one accounting
period) for which internal financial statements are available immediately
preceding the date on which such Restricted Payment is made, calculated on
a pro forma basis as if such Restricted Payment had been made at the
beginning of such four-quarter period, would have been equal to or greater
than the applicable ratio set forth in the first paragraph of Section 4.09
hereof; and
(c) such Restricted Payment, together with the aggregate of all other
Restricted Payments made by the Company and its Restricted Subsidiaries
after the date hereof (including Restricted Payments pursuant to clauses
(w), (x), (y) and (z) of the next succeeding paragraph, but excluding all
other Restricted Payments permitted by the next succeeding paragraph), does
not exceed the sum of (i) 50% of the Consolidated Net Income of the Company
for the period (taken as one accounting period) from December 5, 1997 to
the end of the Company's most recently ended fiscal quarter for which
internal financial statements are available at the time of such Restricted
Payment (or, if such Consolidated Net Income for such period is a deficit,
less 100% of such deficit), plus (ii) 100% of the aggregate net cash
proceeds received by the Company from the issue or sale
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since the date hereof of Equity Interests of the Company (other than (i)
Equity Interests sold to a Subsidiary of the Company, (ii) Disqualified
Stock and (iii) $10 million of Equity Interests to be issued on the date
hereof or in connection with the transactions contemplated hereby to the
lenders under the Initial Credit Agreement and other institutional
investors), plus (iii) solely with respect to Restricted Investments, $5.0
million.
The foregoing provisions shall not prohibit (v) the redemption, repurchase,
retirement or other acquisition of any Equity Interests of the Company in
exchange for, or out of the proceeds of, the substantially concurrent sale
(other than to a Subsidiary of the Company) of other Equity Interests of the
Company (other than any Disqualified Stock); PROVIDED that the amount of any
such net cash proceeds that are utilized for any such redemption, repurchase,
retirement or other acquisition shall be excluded (to the extent otherwise
included) from clause (c)(ii) of the preceding paragraph; (w) the repurchase,
redemption or other acquisition or retirement for value of any Equity Interests
of the Company or any Restricted Subsidiary of the Company held by any employee,
officer or director of the Company (or any of is Subsidiaries), or such person's
estate or estate beneficiary, pursuant to any equity subscription agreement or
stock option agreement in effect as of the date hereof, and as may be entered
into by the Company from time to time in the ordinary course of business and
consistent with the Company's past practice, at such time as any such employee,
officer or director terminates his or her affiliation with the Company; PROVIDED
that the aggregate price paid on or after the date hereof for all such
repurchased, redeemed or acquired or retired Equity Interests shall not exceed
$100,000 in the aggregate and no Default or Event of Default shall have occurred
and be continuing immediately after such transaction; (x) redemption of and
dividend payments on the Company's Series D Convertible Preferred Stock in an
aggregate amount not to exceed $100,000 as provided in the Designation of
Preferences, Limitations and Relative Rights of the Series D Convertible
Preferred Stock as in effect on the date hereof; (y) any repurchase of the
Company's common stock pursuant to that certain Share Price Guaranty Agreement
entered into between the Company and Weissman Financial, as in effect on the
date hereof; provided that the aggregate price paid to repurchase such stock
shall not exceed $1.7 million; (z) the purchase (and retirement) by the Company
of shares of its common stock for a maximum purchase price of $7,250,000 in
complete settlement of, with full releases, or an enforceable injunction
against, all litigation related to the Caside Associates Litigation (as defined
in the Purchase Agreements) and (xx) dividends consisting of Equity Interests
(other than Disqualified Stock) of the Company which are paid on any convertible
preferred stock of the Company issued as part of the consideration paid for the
acquisition of a business, including commercial real estate, by the Company or a
Restricted Subsidiary of the Company and which the Company or a Restricted
Subsidiary of the Company intends to operate as part of its Principal Business.
The amount of all Restricted Payments (other than cash) shall be the fair
market value (evidenced by a resolution of the Board of Directors set forth in
an Officers' Certificate delivered to the Trustee) on the date of the Restricted
Payment of the asset(s) proposed to be transferred by the Company or such
Subsidiary, as the case may be, pursuant to the Restricted Payment. Not later
than the date of making any Restricted Payment (other than Restricted Payments
permitted pursuant to the immediately preceding paragraph), the Company shall
deliver to the Trustee an
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Officers' Certificate stating that such Restricted Payment is permitted and
setting forth the basis upon which the calculations required by the first
paragraph of this Section 4.07 were computed, which calculations may be based
upon the Company's latest available internal financial statements.
The Board of Directors of the Company may designate any Restricted
Subsidiary to be an Unrestricted Subsidiary if (i) such Subsidiary has total
assets of $1,000 or less at the time of such designation, (ii) such designation
would not cause a Default and (iii) the Company's Fixed Charge Coverage Ratio
after giving effect to such designation is at least 95% of the Company's Fixed
Charge Coverage Ratio before giving effect to such designation. For purposes of
making such determination, all outstanding Investments by the Company and its
Restricted Subsidiaries (except to the extent repaid in cash) in the Subsidiary
so designated will be deemed to be Restricted Payments at the time of such
designation and will reduce the amount available for Restricted Payments under
the first paragraph of this Section 4.07. All such outstanding Investments will
be deemed to constitute Investments in an amount equal to the greatest of (x)
the net book value of such Investments at the time of such designation and (y)
the fair market value of such Investments at the time of such designation. Such
designation will only be permitted if such Restricted Payment would be permitted
at such time and if such Restricted Subsidiary otherwise meets the definition of
an Unrestricted Subsidiary.
SECTION 4.08 DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING
RESTRICTED SUBSIDIARIES OF THE COMPANY.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any encumbrance or restriction on the ability of any
Restricted Subsidiary to (i)(a) pay dividends or make any other distributions to
the Company or any of its Restricted Subsidiaries (1) on its Capital Stock or
(2) with respect to any other interest or participation in, or measured by, its
profits, or (b) pay any indebtedness owed to the Company or any of its
Restricted Subsidiaries, (ii) make loans or advances to the Company or any of
its Restricted Subsidiaries or (iii) transfer any of its properties or assets to
the Company or any of its Restricted Subsidiaries, except for such encumbrances
or restrictions existing under or by reason of (a) the Initial Credit Agreement
as in effect as of the date hereof, and any amendments, modifications,
restatements, renewals, increases, supplements, refundings, replacements or
refinancings thereof, PROVIDED that such amendments, modifications,
restatements, renewals, increases, supplements, refundings, replacements or
refinancings are not materially more restrictive taken as a whole with respect
to such dividend and other payment restrictions than those contained in the
Initial Credit Agreement as in effect on the date hereof, (b) this Indenture and
the Notes, (c) applicable law, (d) any instrument governing Indebtedness or
Capital Stock of a Person acquired by the Company or any of its Restricted
Subsidiaries as in effect at the time of such acquisition (except to the extent
such Indebtedness was incurred in connection with or in contemplation of such
acquisition), which encumbrance or restriction is not applicable to any Person,
or the properties or assets of any Person, other than the Person, or the
property or assets of such Person, so acquired, PROVIDED that the Consolidated
Cash Flow of such Person may be taken into account in determining whether such
acquisition was permitted by the terms of this Indenture only to the extent that
the definition of "Consolidated Cash Flow" would have permitted such inclusion
for a Restricted Subsidiary, (e) by reason of customary
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non-assignment provisions in leases entered into in the ordinary course of
business and consistent with past practices, (f) purchase money obligations for
property acquired in the ordinary course of business that impose restrictions of
the nature described in clause (iii) above on the property so acquired, or (g)
Permitted Refinancing Indebtedness, PROVIDED that the restrictions contained in
the agreements governing such Permitted Refinancing Indebtedness are not
materially more restrictive taken as a whole than those contained in the
agreements governing the Indebtedness being refinanced.
SECTION 4.09 INCURRENCE OF INDEBTEDNESS.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, issue, assume, guaranty,
or otherwise become directly or indirectly liable, contingently or otherwise,
with respect to (collectively, "INCUR") any Indebtedness (including Acquired
Debt) and the Company shall not issue any Disqualified Stock and shall not
permit any of its Restricted Subsidiaries to issue any shares of Disqualified
Stock; PROVIDED, HOWEVER, that the Company may incur Indebtedness (including
Acquired Debt) or issue shares of Disqualified Stock, and any of the Company's
Restricted Subsidiaries may incur Senior Debt and Acquired Debt, if the
Company's Fixed Charge Coverage Ratio for the Company's most recently ended four
full fiscal quarters for which internal financial statements are available
immediately preceding the date on which such additional Indebtedness is incurred
or such Disqualified Stock is issued (taken as one accounting period) would have
been greater than (i) 2.0 to 1.0, in the case of any such four full fiscal
quarters ending at any time during the period from the date hereof to and
including September 30, 1998; (ii) 2.25 to 1.0, in the case of any such four
full fiscal quarters ending at any time during the period from but not including
September 30, 1998 to and including September 30, 1999; and (iii) 2.50 to 1.0,
in the case of any such four fiscal quarters ending at any time thereafter,
determined on a pro forma basis (including a pro forma application of the net
proceeds therefrom), as if the additional Indebtedness had been incurred (or
Disqualified Stock issued) at the beginning of such four-quarter period. Any
determination that is to be made on a pro forma basis under this Section 4.09
shall (i) utilize the principles that would apply to pro forma financial
statements meeting the requirements of Regulation S-X, (ii) not take into
account any cost savings attributable to the synergies between the Company or
any of its Subsidiaries and any Person that is, or whose assets are, acquired,
and (iii) utilize audited financial statements of any such Person if audited
financial statements of such Person exist (or are then required to be filed with
the SEC) at the time of calculation, or otherwise may be unaudited (but
reviewed) financial statements of such Person (in which case any determination
that was made on a pro forma basis under this Section 4.09 shall be recalculated
utilizing such audited financial statements at the time they exist (or are
required to be filed with the SEC)).
The foregoing provisions shall not apply to:
(i) (a) the incurrence by the Company or its Restricted Subsidiaries
of Indebtedness under the Senior Credit Agreement, in an aggregate principal
amount at any one time outstanding not to exceed the Senior Debt Cap and (b) the
guarantee of such Indebtedness by the Company and any of its Restricted
Subsidiaries;
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(ii) the incurrence by the Company of Indebtedness represented by
the Notes;
(iii) the incurrence by the Company or any of its Subsidiaries of
Permitted Refinancing Indebtedness (provided that Indebtedness under the Senior
Credit Agreement shall be subject to the limitations set forth herein in the
definition of Senior Credit Agreement) in exchange for, or the net proceeds of
which are used to extend, refinance, renew, replace, defease or refund
Indebtedness that was permitted by this Indenture to be incurred;
(iv) the incurrence by the Company or any of its Restricted
Subsidiaries of Indebtedness represented by purchase money obligations incurred
for the purpose of financing all or any part of the purchase price or cost of
construction or improvement of personal property used in the business of the
Company or such Restricted Subsidiary, in an aggregate principal amount not to
exceed, together with all amounts of Indebtedness incurred under clauses (v),
(vi), (vii) and (viii) of this Section 4.09, $15.0 million at any time
outstanding;
(v) the incurrence by the Company or any of its Restricted
Subsidiaries of Indebtedness with respect to Capital Leases in an aggregate
principal amount not to exceed, together with all amounts of Indebtedness
incurred under clauses (iv), (vi), (vii) and (viii) of this Section 4.09,
$15.0 million at any time outstanding;
(vi) Indebtedness existing on the date hereof in an aggregate
principal amount not to exceed, together with all amounts of Indebtedness
incurred under clauses (iv), (v), (vii) and (viii) of this Section 4.09,
$15.0 million at any time outstanding;
(vii) Acquired Debt in an aggregate principal amount not to exceed,
together with all amounts of Indebtedness incurred under clauses (iv), (v), (vi)
and (viii) of this Section 4.09, $15.0 million at any time outstanding;
(viii) any increase after the date hereof in the aggregate principal
amount committed by the holders of Senior Debt pursuant to an amendment of the
Senior Credit Agreement in an aggregate principal amount not to exceed together
with all amounts of Indebtedness incurred under clauses (iv), (v), (vi) and
(vii) of this Section 4.09, $15.0 million at any time outstanding; provided that
the maximum aggregate increase in such principal amount under this clause (viii)
and clause (xi) of this Section 4.09 shall not exceed $15.0 million.
(ix) any indebtedness of the Company to any of its Wholly-Owned
Restricted Subsidiaries or any indebtedness of any Restricted Subsidiary to the
Company or any Wholly-Owned Restricted Subsidiary;
(x) indebtedness for accounts payable or other obligations to
trade creditors incurred in the ordinary course of business and consistent with
past practice (other than accounts payable or other obligations to trade
creditors which have remained unpaid for greater than 90 days past their
original due date, unless the non-payment of such accounts payable or other
obligations is being contested in good faith and appropriate reserves with
respect thereto have been established in accordance with GAAP); and
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(xi) any increase after the date hereof in the aggregate principal
amount committed by the holders of Senior Debt pursuant to the Senior Credit
Agreement in an aggregate principal amount not to exceed the lesser of (A) 50%
of the amount of the net proceeds received by the Company from the sale after
the date hereof of Equity Interests (other than Disqualified Stock) which net
proceeds are used for purposes other than Restricted Payments and (B) $15.0
million; provided that the maximum aggregate increase in such principal amount
under this clause (xi) and clause (viii) of this Section 4.09 shall not exceed
$15.0 million; and provided further, that any such increase would not otherwise
result in a Default or Event of Default under this Section 4.09.
SECTION 4.10 ASSET SALES.
The Company shall not, and shall not permit any Restricted Subsidiary of
the Company to, sell, lease, transfer or dispose of any of its interest in its
respective material properties or assets, whether real, personal or mixed or
intangible, other than in the ordinary course of business consistent with past
practice (which includes the disposition in a commercially reasonable manner of
equipment and inventory that is obsolete) and other than any such properties or
assets acquired in connection with an acquisition which are not essential or
useful in the conduct of the Principal Business and are sold within 180 days
following the consummation of such acquisition. The Company shall use the net
proceeds of any such asset sales to either retire Senior Debt or reinvest in
assets related to the Principal Business or for working capital to be used in
the Principal Business (provided that no more than $2,500,000 of such net
proceeds in any Fiscal Year may be used for such working capital), or to
repurchase Notes.
SECTION 4.11 TRANSACTIONS WITH AFFILIATES.
The Company shall not, and shall not permit any Subsidiary of the Company
to, directly or indirectly, conduct any business or enter into any transaction
or series of similar transactions (including, without limitation, the purchase,
sale, transfer, lease or exchange of any property or the rendering of any
service or the payment or loan of money by, to or with the Company or any
Subsidiary) with (i) any direct or indirect holder of more than 5% of any class
of Capital Stock of the Company or of any Subsidiary of the Company, (ii) any
Affiliate of the Company or (iii) any officer or director of the Company or any
Subsidiary of the Company not otherwise included in clause (i) or (ii) (each of
the foregoing, a "SHAREHOLDER/AFFILIATE TRANSACTION") or (iv) any Unrestricted
Subsidiary of the Company unless the terms of such business, transaction or
series of transactions (a) are set forth in writing and (b) are as favorable to
the Company or such Subsidiary in all material respects as terms that would be
obtainable at the time for a comparable transaction or series of similar
transactions in arm's-length dealings with a Person which is not such a
stockholder or Affiliate and, if such transaction or series of transactions
involves aggregate consideration greater than $1,000,000, then a majority of the
disinterested members of the Board of Directors shall in good faith determine
that the terms of such transaction comply with clauses (a) and (b) above
(evidenced by a Board Resolution set forth in an Officer's Certificate delivered
to the Trustee), and if such transaction or series of transactions involves
aggregate consideration greater than $3,000,000, then in addition, the Company
must obtain from an accounting, appraisal or investment banking firm of national
standing an opinion as to the fairness, from a financial
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point of view and taking into account the standard in clauses (a) and (b) above,
of the transaction to the Company or Subsidiary.
Notwithstanding the foregoing limitations, the following shall not be
deemed to be Shareholder/Affiliate Transactions: any payment or loan of money by
the Company or any Subsidiary pursuant to employment agreements and arrangements
and employee benefit plans in the ordinary course of business, consistent with
past practices and approved by the Board of Directors of the Company or such
Subsidiary, or the compensation committee of such Board of Directors provided
that the aggregate amount of all such payments or loans made after the date
hereof (including any loans and advances under clause (e) of the definition of
"Permitted Investments" and any repurchase, redemption, acquisition or
retirement under clause (w) of the second paragraph of Section 4.07) shall not
exceed $2,100,000.
SECTION 4.12 LIENS.
The Company shall not and shall not permit any of its Restricted
Subsidiaries to, create, incur, assume or otherwise cause or suffer to exist or
become effective any Lien upon any of their property or assets (including,
without limitation, shares of stock of any subsidiaries), now owned or hereafter
acquired, other than Permitted Liens.
SECTION 4.13 LINE OF BUSINESS.
The Company shall not, and shall not permit any Restricted Subsidiary to,
engage in any material respect in any business other than the Principal
Business.
SECTION 4.14 CORPORATE EXISTENCE.
Subject to Article 5 hereof, the Company shall do or cause to be done all
things necessary to preserve and keep in full force and effect (i) its corporate
existence, and the corporate, partnership or other existence of each of its
Subsidiaries, in accordance with the respective organizational documents (as the
same may be amended from time to time) of the Company or any such Subsidiary and
(ii) the rights (charter and statutory), licenses and franchises of the Company
and its Subsidiaries; PROVIDED, HOWEVER, that the Company shall not be required
to preserve any such right, license or franchise, or the corporate, partnership
or other existence of any of its Subsidiaries, if the Board of Directors shall
determine that the preservation thereof is no longer desirable in the conduct of
the business of the Company and its Subsidiaries, taken as a whole, and that the
loss thereof is not adverse in any material respect to the Holders of the Notes.
SECTION 4.15 OFFER TO REPURCHASE UPON CHANGE OF CONTROL.
(a) Upon the occurrence of a Change of Control, each Holder shall have the
right, at such Holder's option, subject to the terms and conditions set forth in
this Indenture, to require the Company to repurchase, and upon the exercise of
such right the Company shall repurchase, all or any part (equal to $1,000 or an
integral multiple thereof) of such Holder's Notes pursuant to an Offer (as
provided below), at a purchase price equal to 101.0% of the aggregate principal
amount
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thereof, plus accrued and unpaid interest to the date of purchase, which date
shall be no fewer than 30 nor more than 60 days from the date such notice is
mailed. Within 30 days following a Change of Control, the Company shall mail to
each Holder of Notes at such Holder's registered address a notice stating: (i)
that offer (an "OFFER") is being made pursuant to this Section 4.15 as a result
of a Change of Control, the length of time the Offer shall remain open, and the
maximum aggregate principal amount of Notes that will be accepted for payment
pursuant to such Offer, (ii) the purchase price, the amount of accrued and
unpaid interest as of the purchase date, and the purchase date (which will be no
earlier than 30 days or later than 60 days from the date such notice is mailed
(the "CHANGE OF CONTROL PAYMENT DATE")), (iii) the circumstances and material
facts regarding such Change of Control to the extent known to the Company
(including, but not limited to, information with respect to pro forma and
historical financial information after giving effect to such Change of Control
and information regarding the Person or Persons acquiring control), (iv) that
any Note not tendered will continue to accrue interest; (v) that, unless the
Company defaults in the payment of the Change of Control Payment, all Notes
accepted for payment pursuant to the Offer shall cease to accrue interest after
the Change of Control Payment Date; (vii) that Holders electing to have any
Notes purchased pursuant to an Offer will be required to surrender the Notes,
with the form entitled "Option of Holder to Elect Purchase" on the reverse of
the Notes completed, to the Paying Agent at the address specified in the notice
prior to the close of business on the third Business Day preceding the Change of
Control Payment Date; (viii) that Holders will be entitled to withdraw their
election if the Paying Agent receives, not later than the close of business on
the second Business Day preceding the Change of Control Payment Date, a
telegram, telex, facsimile transmission or letter setting forth the name of the
Holder, the principal amount of Notes delivered for purchase, and a statement
that such Holder is withdrawing his election to have the Notes purchased; and
(ix) that Holders whose Notes are being purchased only in part will be issued
new Notes equal in principal amount to the unpurchased portion of the Notes
surrendered, which unpurchased portion must be equal to $1,000 in principal
amount or an integral multiple thereof. The Company shall comply with the
requirements of Rule 14e-1 under the Exchange Act and any other securities laws
and regulations thereunder to the extent such laws and regulations are
applicable in connection with the repurchase of Notes in connection with a
Change of Control.
(b) On the Change of Control Payment Date, the Company shall, to the
extent lawful (i) accept for payment all Notes tendered pursuant to such Offer,
(ii) deposit with the Paying Agent the aggregate purchase price of all Notes
accepted for payment and any accrued and unpaid interest on such Notes as of the
Change of Control Payment Date, and (iii) deliver or cause to be delivered to
the Trustee all Notes tendered pursuant to the Offer together with an Officer's
Certificate stating the aggregate principal amount of Notes or portions thereof
being purchased by the Company. If less than all Notes tendered pursuant to any
Offer are accepted for payment by the Company for any reason, selection of the
Notes to be purchased by the Trustee will be by lot or by such method as the
Trustee shall deem fair and appropriate; PROVIDED that Notes accepted for
payment in part shall only be purchased in integral multiples of $1,000. The
Paying Agent shall promptly mail to each Holder of Notes accepted for payment an
amount equal to the purchase price for such Notes plus any accrued and unpaid
interest and the Trustee shall promptly authenticate and mail to such Holder of
Notes accepted for payment in part a new Note equal in principal amount to any
unpurchased portion of the Notes, and any Note not accepted for
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payment in whole or in part shall be promptly returned to the Holder of such
Note. On and after a Change of Control Payment Date, interest will cease to
accrue on the Notes accepted for payment. The Company shall announce the
results of the Offer to Holders of the Notes on or as soon as practicable after
the Change of Control Payment Date.
SECTION 4.16 NO SENIOR SUBORDINATED DEBT.
Notwithstanding the provisions of Section 4.09 hereof, the Company and its
Restricted Subsidiaries shall not incur, create, issue, assume, guarantee,
suffer to exist or otherwise become liable for any Indebtedness that is
subordinate or junior in right of payment to any of its Senior Debt and senior
in any respect in right of payment to the Notes.
SECTION 4.17 PREFERRED STOCK.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, issue any preferred stock, or permit any Person to own or hold
an interest in any preferred stock of any such Restricted Subsidiary, except for
(i) preferred stock outstanding as of the date hereof; (ii) stock issued to the
Company or a Wholly Owned Restricted Subsidiary of the Company; (iii) preferred
stock existing at the time such company becomes a Restricted Subsidiary; and
(iv) preferred stock (other than Disqualified Stock) issued by the Company as
part of the consideration paid for the acquisition of a business by the Company
or a Restricted Subsidiary which the Company or such Restricted Subsidiary
intends to operate as part of its Principal Business; provided, however, that
such preferred stock shall not bear dividends other than dividends payable in
Equity Interests (other than Disqualified Stock) or in cash at the Company's
option (the exercise of which shall be subject to compliance with Section 4.07
hereof). The Company shall not make any cash dividend or distribution on or
redeem any such preferred stock (other than for Equity Interests (other than
Disqualified Stock)) if a Default or Event of Default exists or such dividend,
distribution or redemption would cause a Default or Event of Default.
SECTION 4.18 CONSOLIDATED NET WORTH.
The Company and its Subsidiaries shall maintain at all times Consolidated
Net Worth equal to or greater than the following amounts measured as of the last
day of the following respective Fiscal Quarters:
Fiscal Quarter Ending Minimum Consolidated Net Worth
--------------------- ------------------------------
03/31/98 $39,246,000
06/30/98 39,246,000
09/30/98 39,246,000
12/31/98 39,246,000
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Fiscal Quarter Ending Minimum Consolidated Net Worth
--------------------- ------------------------------
03/31/99 $45,344,000
06/30/99 45,344,000
09/30/99 45,344,000
12/31/99 45,344,000
03/31/00 $52,806,000
06/30/00 52,806,000
09/30/00 52,806,000
12/31/00 52,806,000
03/31/01 $61,758,000
06/30/01 61,758,000
09/30/01 61,758,000
12/31/01 61,758,000
03/31/02 $72,128,000
06/30/02 72,128,000
09/30/02 72,128,000
12/31/02 72,128,000
03/31/03 $84,767,000
06/30/03 84,767,000
09/30/03 84,767,000
12/31/03 84,767,000
03/31/04 $99,022,000
06/30/04 99,022,000
09/30/04 99,022,000
12/31/04 99,022,000
03/31/05 and each $115,070,000
Fiscal Quarter
ending thereafter
SECTION 4.19 INSPECTION RIGHTS.
Holders of at least $10,000,000 in aggregate principal amount of the Notes,
at such Noteholder(s)' expense, shall have the right to visit and inspect any of
the properties of the Company and its Subsidiaries and to discuss the affairs,
finances and accounts of the Company with its senior management. Upon the
occurrence and during the continuation of a Default or an Event of Default, at
the Company's expense, in addition to the foregoing right, Holders of at least
$15,000,000 in aggregate principal amount of the Notes shall have the right to
examine the books of account and records of Company and its Subsidiaries, to be
provided with copies and extracts
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therefrom, to discuss the affairs, finances and accounts of the Company and its
Subsidiaries with, and to be advised as to the same by, its and their officers
and employees, and their independent public accountants (and the Company
authorizes such independent public accountants to discuss the Company's or its
Subsidiaries' financial matters which such holder or its representatives,
regardless of whether any representative of the Company is present, but provided
that an officer of the Company will be afforded a reasonable opportunity to be
present at any such discussion), all at such reasonable times and intervals as
such Noteholder(s) may desire. The Company will likewise afford such
Noteholder(s) the opportunity to obtain any information, to the extent the
Company processes such information or can acquire it without unreasonable effort
or expense, necessary to verify the accuracy of any of the representations and
warranties made by the Company under the Purchase Agreements.
SECTION 4.20 COMPLIANCE WITH LAW.
The Company will and will cause each of its Subsidiaries to comply with all
laws, ordinances or governmental rules or regulations to which each of them is
subject, and will obtain and maintain in effect all licenses, certificates,
permits, franchises and other governmental authorizations necessary to the
ownership of their respective properties or to the conduct of their respective
businesses, in each case to the extent necessary to ensure that non-compliance
with such laws, ordinances or governmental rules or regulations or failures to
obtain or maintain in effect such licenses, certificates, permits, franchises
and other governmental authorizations could not, individually or in the
aggregate, reasonably be expected to have a material adverse effect on (i) the
business, operations, affairs, financial condition, assets or properties of the
Company and its Subsidiaries, taken as a whole, (ii) the abilities of the
Company and the Guarantors to perform their obligations under this Indenture,
the Notes or the Guarantees or (iii) the validity or enforceability of this
Indenture, the Notes or the Guarantees.
SECTION 4.21 ACCOUNTING CHANGES.
Neither the Company nor any of its Restricted Subsidiaries shall make or
permit any change in the accounting principles or reporting practices used by it
on the date hereof except as permitted by GAAP.
SECTION 4.22 ACCOUNTING FIRMS.
The Company and each of its Restricted Subsidiaries will use one of the
following accounting firms, or their respective successors: BDO Seidman, Arthur
Andersen, Coopers & Lybrand, Deloitte & Touche, Ernst & Young, KPMG Peat Marwick
or Price Waterhouse.
SECTION 4.23 INVESTMENT COMPANY ACT.
The Company shall not become, and shall not permit any of its Subsidiaries
to become, an investment company subject to registration under the Investment
Company Act of 1940, as amended.
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SECTION 4.24 MAINTENANCE OF PROPERTIES.
The Company shall, and shall cause each of its Subsidiaries to, maintain,
preserve, protect and keep its properties in good repair, working order and
condition (ordinary wear and tear excepted), and make necessary and proper
repairs, renewals and replacements so that its business carried on in connection
therewith may be properly conducted at all times consistent with past practices
of the Company.
SECTION 4.25 BOOKS AND RECORDS.
The Company shall, and shall cause each of its Subsidiaries to, keep books
and records which accurately reflect all of their respective material business
affairs and transactions.
SECTION 4.26 MAINTENANCE OF INSURANCE.
The Company shall, and shall cause each of its Subsidiaries to, maintain
insurance with responsible and reputable insurance companies, or associations or
maintain appropriate risk management practices consistent with past practice in
such amounts and covering such risks as is usually carried by companies engaged
in similar businesses and owning similar properties in the same general areas in
which the Company and its Subsidiaries operate.
SECTION 4.27 COMPLIANCE WITH ERISA.
Neither the Company nor any Subsidiary shall, or shall permit any ERISA
Affiliate to, (i) terminate any Pension Plan so as to result in any liability of
the Company, any Subsidiary or any ERISA Affiliate to the PBGC; (ii) permit to
exist any other event or condition that presents a material risk of such
termination by the PBGC of any Pension Plan, including, but not limited to, the
occurrence of any Reportable Event; (iii) withdraw or otherwise incur any
withdrawal liability with respect to any Multiemployer Plan; (iv) permit a
Reportable Event to occur with respect to any Pension Plan which would present a
material risk to the Company, any Subsidiary or any ERISA Affiliate of incurring
a liability on account of such Pension Plan; (v) fail to make a contribution
when required to any Pension Plan or Multiemployer Plan; or (vi) permit any
event or transaction to occur, or any condition to exist, that could result in
the incurrence of any liability by the Company, any Subsidiary or any ERISA
Affiliate pursuant to Title I or IV of ERISA, the penalty or excise tax
provisions of the Code relating to employee benefit plans, or Section 401(a)
(29) or 412 of the Code, or in the imposition of any Lien on any of the rights,
properties or assets of the Company, any Subsidiary or any ERISA Affiliate
pursuant to Title I or IV of ERISA, such penalty or excise tax Code provisions,
or Section 401(a) (29) or 412 of the Code. For purposes of this Section 4.27,
the following terms shall have the meanings given such terms below.
"CODE" shall mean the Internal Revenue Code of 1986, as amended from time to
time.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended from time to time. "ERISA AFFILIATE" shall mean each trade or business
(whether or not incorporated)
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which together with the Company or any Subsidiary is treated as a "single
employer" under sections (b), (c), (m), (n) or (o) of Section 414 of the Code.
"MULTIEMPLOYER PLAN" shall mean any "multiemployer plan" (as such term is
defined in Section 3(37) of ERISA and Section 414(f) of the Code) to which
contributions are or have been made by the Company, any of its Subsidiaries or
any ERISA Affiliate.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any corporation or
governmental body or agency succeeding to the functions thereof.
"PENSION PLAN" shall mean an employee pension benefit plan within the meaning of
Section 3(2) of ERISA, maintained or contributed to by the Company or an ERISA
Affiliate, and subject to Section 412 of the Code.
"REPORTABLE EVENT" shall mean any of the events set forth in Section 4043(c) of
ERISA, other than those events as to which the thirty day notice period has been
waived by the PBGC.
SECTION 4.28 GUARANTEES OF INDENTURE OBLIGATIONS.
Each Person that becomes a Restricted Subsidiary after the date hereof
shall simultaneously execute and deliver a supplemental indenture to this
Indenture providing for a guarantee of payment of the Notes by such Restricted
Subsidiary, which guarantee shall be subordinated to the claims against such
Restricted Subsidiary in respect of Senior Debt to the same extent as the Notes
are subordinated to Senior Debt under this Indenture.
SECTION 4.29 MAINTENANCE FIXED CHARGE COVERAGE RATIO.
The Company and its Subsidiaries shall have on a consolidated basis at the
end of each Fiscal Quarter, beginning with the Fiscal Quarter ending March 31,
1998, a Maintenance Fixed Charge Coverage Ratio for the 12-month period then
ended of not less than 1.1 to 1.0 (provided that for the Fiscal Quarters ending
on or before September 30, 1998, the Maintenance Fixed Charge Coverage Ratio
shall be calculated on the basis of the ratio of Annualized Pro Forma EBITDA (as
such term is defined in the Initial Credit Agreement) to Annualized Fixed
Charges instead of Pro Forma EBITDA and Fixed Charges for the 12 month periods
then ended).
ARTICLE 5
SUCCESSORS
SECTION 5.01 MERGER, CONSOLIDATION, OR SALE OF ASSETS.
(a) The Company shall not consolidate or merge with or into (whether or
not the Company is the surviving corporation), or sell, assign, transfer, lease,
convey or otherwise dispose
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of all or substantially all of its properties or assets in one or more related
transactions, to another corporation, Person or entity unless (i) the Company is
the surviving corporation or the entity or the Person formed by or surviving any
such consolidation or merger (if other than the Company) or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made is a corporation organized or existing under the laws of the United States,
any state thereof or the District of Columbia; (ii) the entity or Person formed
by or surviving any such consolidation or merger (if other than the Company) or
the entity or Person to which such sale, assignment, transfer, lease, conveyance
or other disposition shall have been made assumes all the obligations of the
Company under the Notes and this Indenture pursuant to a supplemental indenture
in a form reasonably satisfactory to the Trustee; (iii) each Guarantor, unless
it is the other party to the transaction described above, will have by
supplemental indenture confirmed that its Guarantee shall apply to such Person's
obligations hereunder and under the Notes; (iv) immediately after such
transaction no Default or Event of Default exists; and (v) except in the case of
a merger of the Company with or into a Wholly Owned Restricted Subsidiary of the
Company, the Company or the entity or Person formed by or surviving any such
consolidation or merger (if other than the Company), or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made (A) will have a Consolidated Net Worth immediately after the transaction
equal to or greater than the Consolidated Net Worth of the Company immediately
preceding the transaction and (B) will, at the time of such transaction and
after giving pro forma effect thereto as if such transaction had occurred at the
beginning of the applicable four-quarter period (taken as one accounting
period), be permitted to incur at least $1.00 of additional Indebtedness
pursuant to the Fixed Charge Coverage Ratio test set forth in the first
paragraph of Section 4.09 hereof.
(b) Each Guarantor shall not, and the Company will not permit any
Guarantor to, consolidate or merge with or into (whether or not the Guarantor is
the surviving corporation), or sell, assign, transfer, lease, convey or
otherwise dispose of all or substantially all of its properties or assets in one
or more related transactions, to another corporation, Person or entity (other
than the Company or any other Guarantor) unless (i) the Guarantor is the
surviving corporation or the entity or the Person formed by or surviving any
such consolidation or merger (if other than the Guarantor) or to which such
sale, assignment, transfer, lease, conveyance or other disposition shall have
been made is a corporation organized or existing under the laws of the United
States, any state thereof or the District of Columbia; (ii) the entity or Person
formed by or surviving any such consolidation or merger (if other than the
Guarantor) or the entity or Person to which such sale, assignment, transfer,
lease, conveyance or other disposition shall have been made assumes all the
obligations of the Guarantor under its Guarantee of the Notes and this Indenture
pursuant to a supplemental indenture in a form reasonably satisfactory to the
Trustee; and (iii) immediately after such transaction no Default or Event of
Default exists.
SECTION 5.02 SUCCESSOR CORPORATION SUBSTITUTED.
Upon any consolidation or merger, or any sale, assignment, transfer, lease,
conveyance or other disposition of all or substantially all of the assets of the
Company or any Guarantor in accordance with Section 5.01 hereof, the successor
corporation formed by such consolidation or into or with which the Company or
such Guarantor is merged or to which such sale, assignment,
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transfer, lease, conveyance or other disposition is made shall succeed to, and
be substituted for (so that from and after the date of such consolidation,
merger, sale, lease, conveyance or other disposition, the provisions of this
Indenture referring to the "Company" or such "Guarantor" shall refer instead to
the successor corporation and not to the Company or such Guarantor), and may
exercise every right and power of the Company or such Guarantor under this
Indenture with the same effect as if such successor Person had been named as the
Company or such Guarantor herein; PROVIDED, HOWEVER, that the predecessor
Company or such Guarantor shall not be relieved from the obligation to pay the
principal of and interest on the Notes except in the case of a sale of all of
the Company's or such Guarantor's assets that meets the requirements of Section
5.01 hereof.
ARTICLE 6
DEFAULTS AND REMEDIES
SECTION 6.01 EVENTS OF DEFAULT.
An "EVENT OF DEFAULT" occurs if:
(a) there shall be a default in the payment of any interest upon any
Note when it becomes due and payable, and such default continues for a
period of 30 days (whether or not the payment thereof is prohibited by
Articles 10 or 11 hereof);
(b) there shall be a default in the payment of the principal of (or
premium, if any, on) any Note at its Maturity (whether or not the payment
thereof is prohibited by Articles 10 or 11 hereof);
(c) there shall be a default in the payment of principal and
interest (whether or not the payment thereof is prohibited by Articles 10
or 11 hereof) on Notes required to be purchased pursuant to an Offer to
Purchase under Section 4.15 hereof when due and payable;
(d) the Company or any Subsidiary fails to observe or perform any
covenant or condition on the part of the Company or such Subsidiary to be
performed or observed pursuant to Sections 4.07, 4.08, 4.09, 4.10, 4.11,
4.12, 4.16, 4.17, 4.18, 4.29, or 5.01 hereof; and,in the case of Sections
4.09 and 4.12, such failure continues for 30 days after the Company has
knowledge of such failure;
(e) the Company, any Subsidiary or any Guarantor defaults in the
performance of, or breaches, any other covenant or warranty of the Company,
such Subsidiary or Guarantor in this Indenture or the Guarantee, and such
default or breach continues for 60 days after there has been given, by
registered or certified mail, to the Company by the Trustee or to the
Company and the Trustee by the Holders of at least 25 % in principal
amount of the outstanding Notes a written notice specifying such default or
breach and requiring it to be remedied and stating that such notice is a
"Notice of Default";
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(f) any representation or warranty made in writing by or on behalf of
the Company or any Guarantor or by any officer of the Company or any
Guarantor in the Purchase Agreements or in any writing furnished in
connection with the transactions contemplated hereby proves to have been
false or incorrect in any material respect on the date as of which made;
(g) (i) the Company or any Subsidiary is in default (as principal or
as guarantor or other surety) in the payment of scheduled principal
payments under the Senior Credit Agreement beyond any grace period with
respect thereto or (ii) the Company or any Subsidary is in default in the
payment or performance of or compliance with any other term of the Senior
Credit Agreement or any other condition exists, and as a consequence of
such default or condition any of the Obligations under the Senior Credit
Agreement have become, or have been declared, due and payable before their
stated maturity or before their regularly scheduled date of payment;
(h) (i) the Company or any Subsidiary is in default (as principal or
as guarantor or other surety) in the payment of any principal of or premium
or make-whole amount or interest on any Indebtedness (other than
Indebtedness under the Senior Credit Agreement) that is outstanding in an
aggregate principal amount of at least $1,500,000 beyond any period of
grace provided with respect thereto, or (ii) the Company or any Subsidiary
is in default in the performance of or compliance with any term of any
evidence of any Indebtedness (other than Indebtedness under the Senior
Credit Agreement) in an aggregate outstanding principal amount of at least
$1,500,000 or of any mortgage, indenture or other agreement relating
thereto or any other condition exists, and as a consequence of such default
or condition such Indebtedness has become, or has been declared (or one or
more Persons are entitled to declare such Indebtedness to be), due and
payable before its stated maturity or before its regularly scheduled dates
of payment, or (iii) as a consequence of the occurrence or continuation of
any event or condition (other than the passage of time or the right of the
holder of Indebtedness to convert such Indebtedness into Equity Interests),
(x) the Company or any Subsidiary has become obligated to purchase or repay
Indebtedness (other than Indebtedness under the Senior Credit Agreement)
before its regular maturity or before its regularly scheduled dates of
payment in an aggregate outstanding principal amount of at least $1,500,000
or (y) one or more Persons have the right to require the Company or any
Subsidiary so to purchase or repay such Indebtedness;
(i) a final judgment or final judgments for the payment of money are
entered by a court or courts of competent jurisdiction against the Company
or any Subsidiary and such judgment or judgments remain undischarged for a
period (during which execution shall not be effectively stayed, bonded, or
discharged) of 60 days, PROVIDED that the aggregate of all such judgments
(to the extent not paid or to be paid by insurance) exceeds $1,500,000;
(j) the Company, any Guarantor or any of its Significant Subsidiaries
or any group of Subsidiaries that, taken as a whole, would constitute a
Significant Subsidiary pursuant to or within the meaning of Bankruptcy Law;
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(i) commences a voluntary case,
(ii) consents to the entry of an order for relief against it in
an involuntary case,
(iii) consents to the appointment of a custodian of it or for
all or substantially all of its property,
(iv) makes a general assignment for the benefit of its
creditors, or
(v) generally is not paying its debts as they become due;
(k) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that:
(i) is for relief against the Company, any Guarantor or any of
its Significant Subsidiaries or any group of Subsidiaries that, taken
as a whole, would constitute a Significant Subsidiary in an
involuntary case;
(ii) appoints a custodian of the Company, any Guarantor or any
of its Significant Subsidiaries or any group of Subsidiaries that,
taken as whole, would constitute a Significant Subsidiary or for all
or substantially all of the Company or any of its Significant
Subsidiaries or any group of Subsidiaries that, taken as a whole,
would constitute a Significant Subsidiary; or
(iii) orders the liquidation of the Company, any Guarantor or
any of its Significant Subsidiaries or any group of Subsidiaries that,
taken as a whole, would constitute a Significant Subsidiary;
and the order or decree remains unstayed and in effect for 60 consecutive
days; or
(l) any Guarantee shall for any reason cease to be, or shall for any
reason be asserted in writing by any Guarantor not to be, in full force and
effect and enforceable in accordance with its terms.
SECTION 6.02 ACCELERATION.
If any Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25 % in aggregate principal amount of the then outstanding
Notes may declare all unpaid principal of, premium, if any, at the redemption
prices set forth in Section 3.07, and accrued interest on all the Notes to be
due and payable immediately. Notwithstanding the foregoing, in the case an
Event of Default specified in clauses (j) or (k) of Section 6.01 hereof occurs
with respect to the Company, any Guarantor or any Significant Subsidiary or any
group of Subsidiaries that, taken together, would constitute a Significant
Subsidiary, all unpaid principal of, premium, if any, at the redemption prices
set forth in Section 3.07, and accrued interest on all outstanding
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Notes will become due and payable without further action or notice. Holders of
the Notes may not enforce this Indenture or the Notes except as provided in this
Indenture. Subject to certain limitations, Holders of a majority in principal
aggregate amount of the then outstanding Notes may direct the Trustee in its
exercise of any trust or power.
SECTION 6.03 OTHER REMEDIES.
If an Event of Default occurs and is continuing, the Trustee may pursue any
available remedy to collect the payment of principal, premium, if any, and
interest on the Notes or to enforce the performance of any provision of the
Notes, this Indenture or the Guarantees.
The Trustee may maintain a proceeding even if it does not possess any of
the Notes or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Holder of a Note in exercising any right or
remedy accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. All remedies
are cumulative to the extent permitted by law.
SECTION 6.04 WAIVER OF PAST DEFAULTS.
The Holders of a majority in aggregate principal amount of the Notes then
outstanding by notice to the Trustee may on behalf of the Holders of all of the
Notes waive any existing Default or Event of Default and its consequences under
this Indenture, except a continuing Default or Event of Default in the payment
of interest or premium, if any, on, or the principal of, the Notes or a default
with respect to any covenant or provision which cannot be modified or amended
without the consent of the Holder of each outstanding Note affected. Upon any
such waiver, such Default shall cease to exist, and any Event of Default arising
therefrom shall be deemed to have been cured for every purpose of this
Indenture; but no such waiver shall extend to any subsequent or other Default or
impair any right consequent thereon.
SECTION 6.05 CONTROL BY MAJORITY.
Holders of a majority in aggregate principal amount of the then outstanding
Notes may direct the time, method and place of conducting any proceeding for
exercising any remedy available to the Trustee or exercising any trust or power
conferred on it. However, the Trustee may refuse to follow any direction that
conflicts with law or this Indenture that the Trustee determines may be unduly
prejudicial to the rights of other Holders of Notes or that may involve the
Trustee in personal liability.
SECTION 6.06 LIMITATION ON SUITS.
A Holder of a Note may pursue a remedy with respect to this Indenture, the
Notes or the Guarantees only if:
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(a) the Holder of a Note gives to the Trustee written notice of a
continuing Event of Default;
(b) the Holders of at least 25% in aggregate principal amount of the
then outstanding Notes make a written request to the Trustee to pursue the
remedy;
(c) such Holder of a Note or Holders of Notes offer and, if
requested, provide to the Trustee indemnity satisfactory to the Trustee
against any loss, liability or expense;
(d) the Trustee does not comply with the request within 60 days after
receipt of the request and the offer and, if requested, the provision of
indemnity; and
(e) during such 60 day period the Holders of a majority in aggregate
principal amount of the then outstanding Notes do not give the Trustee a
direction inconsistent with the request.
A Holder of a Note may not use this Indenture to prejudice the rights
of another Holder of a Note or to obtain a preference or priority over another
Holder of a Note.
SECTION 6.07 RIGHTS OF HOLDERS OF NOTES TO RECEIVE PAYMENT.
Notwithstanding any other provision of this Indenture, the right of any
Holder of a Note to receive payment of principal, premium and interest on the
Note, on or after the respective due dates expressed in the Note (including in
connection with an offer to purchase), or to bring suit for the enforcement of
any such payment on or after such respective dates, shall not be impaired or
affected without the consent of such Holder.
SECTION 6.08 COLLECTION SUIT BY TRUSTEE.
If an Event of Default specified in Section 6.01(a) or (b) occurs and is
continuing, the Trustee is authorized to recover judgment in its own name and as
trustee of an express trust against the Company or any Guarantor for the whole
amount of principal of, premium and interest remaining unpaid on the Notes and
interest on overdue principal and, to the extent lawful, interest and such
further amount as shall be sufficient to cover the costs and expenses of
collection, including the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel.
SECTION 6.09 TRUSTEE MAY FILE PROOFS OF CLAIM.
The Trustee is authorized to file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and the
Holders of the Notes allowed in any judicial proceedings relative to the Company
(or any other obligor, including any Guarantor, upon the Notes), its creditors
or its property and shall be entitled and empowered to collect, receive and
distribute any money or other property
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payable or deliverable on any such claims and any custodian in any such judicial
proceeding is hereby authorized by each Holder to make such payments to the
Trustee, and in the event that the Trustee shall consent to the making of such
payments directly to the Holders, to pay to the Trustee any amount due to it for
the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the Trustee under
Section 7.07 hereof. To the extent that the payment of any such compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel, and
any other amounts due the Trustee under Section 7.07 hereof out of the estate in
any such proceeding, shall be denied for any reason, payment of the same shall
be secured by a Lien on, and shall be paid out of, any and all distributions,
dividends, money, securities and other properties that the Holders may be
entitled to receive in such proceeding whether in liquidation or under any plan
of reorganization or arrangement or otherwise. Nothing herein contained shall
be deemed to authorize the Trustee to authorize or consent to or accept or adopt
on behalf of any Holder any plan of reorganization, arrangement, adjustment or
composition affecting the Notes or the rights of any Holder, or to authorize the
Trustee to vote in respect of the claim of any Holder in any such proceeding.
SECTION 6.10 PRIORITIES.
If the Trustee collects any money pursuant to this Article, it shall pay
out the money in the following order:
FIRST: to the Trustee, its agents and attorneys for amounts due under
Section 7.07 hereof, including payment of all compensation, expense and
liabilities incurred, and all advances made, by the Trustee and the costs and
expenses of collection;
SECOND: to Holders of Notes for amounts due and unpaid on the Notes for
principal, premium and interest ratably, without preference or priority of any
kind, according to the amounts due and payable on the Notes for principal,
premium and interest respectively; and
THIRD: to the Company or to such party as a court of competent
jurisdiction shall direct.
The Trustee may fix a record date and payment date for any payment to
Holders of Notes pursuant to this Section 6.10.
SECTION 6.11 UNDERTAKING FOR COSTS.
In any suit for the enforcement of any right or remedy under this Indenture
or in any suit against the Trustee for any action taken or omitted by it as a
Trustee, a court in its discretion may require the filing by any party litigant
in the suit of an undertaking to pay the costs of the suit, and the court in its
discretion may assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in the suit, having due regard to the merits and good
faith of the claims or defenses made by the party litigant. This Section does
not apply to a suit by the Trustee, a suit by a Holder of a Note pursuant to
Section 6.07 hereof, or a suit by Holders of more than 10% in principal amount
of the then outstanding Notes.
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ARTICLE 7
TRUSTEE
SECTION 7.01 DUTIES OF TRUSTEE.
(a) If an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the duties, rights and powers vested in it by
this Indenture, and use the same degree of care and skill in its exercise, as a
prudent man would exercise or use under the circumstances in the conduct of his
own affairs.
(b) Except during the continuance of an Event of Default:
(i) the Trustee shall not be liable hereunder except for such
duties of the Trustee which shall be determined solely by
the express provisions of this Indenture and the Trustee
need perform only those duties that are specifically set
forth in this Indenture and no others, and no implied
covenants or obligations shall be read into this Indenture
against the Trustee; and
(ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and
the correctness of the opinions expressed therein, upon
certificates or opinions furnished to the Trustee and
conforming to the requirements of this Indenture.
However, the Trustee shall examine the certificates and
opinions to determine whether or not they conform to the
requirements of this Indenture.
(c) The Trustee may not be relieved from liabilities for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(i) this paragraph does not limit the effect of paragraph (b)
of this Section;
(ii) the Trustee shall not be liable for any error of judgment
made in good faith by a Responsible Officer, unless it is
proved that the Trustee was negligent in ascertaining the
pertinent facts; and
(iii) the Trustee shall not be liable with respect to any action
it takes or omits to take in good faith in accordance with
a direction received by it pursuant to Section 6.05
hereof.
(d) Whether or not therein expressly so provided, every provision of
this Indenture that in any way relates to the Trustee is subject to paragraphs
(a), (b), and (c) of this Section.
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(e) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or incur any liability whatsoever in the
performance of any of its duties hereunder or in the exercise of any of its
rights or powers hereunder. The Trustee shall be under no obligation to
exercise any of its duties under this Indenture at the request of any Holders,
unless such Holder shall have offered to the Trustee security or indemnity
satisfactory to it in its reasonable judgment against any loss, liability or
expense that might be incurred by it in compliance with such request or
direction.
(f) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the Company.
Money held in trust by the Trustee need not be segregated from other funds
except to the extent required by law.
SECTION 7.02 RIGHTS OF TRUSTEE.
(a) The Trustee may conclusively rely upon any document believed by
it to be genuine and to have been signed or presented by the proper Person. The
Trustee need not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may require
an Officers' Certificate or an Opinion of Counsel or both. The Trustee shall
not be liable for any action it takes or omits to take in good faith in reliance
on such Officers' Certificate or Opinion of Counsel. The Trustee may consult
with counsel and the written advice of such counsel or any Opinion of Counsel
shall be full and complete authorization and protection from liability in
respect of any action taken, suffered or omitted by it hereunder in good faith
and in reliance thereon.
(c) The Trustee may act through its attorneys and agents and shall
not be responsible for the misconduct or negligence of any agent appointed with
due care.
(d) The Trustee shall not be liable for any action it takes or omits
to take in good faith that it believes to be authorized or within the rights or
powers conferred upon it by this Indenture.
(e) Unless otherwise specifically provided in this Indenture, any
demand, request, direction or notice from the Company shall be sufficient if
signed by an Officer of the Company.
(f) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction of
any of the Holders unless such Holders shall have offered to the Trustee
security or indemnity satisfactory to it in its reasonable judgment against any
loss, liability or expense that might be incurred by it in compliance with such
request or direction.
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SECTION 7.03 INDIVIDUAL RIGHTS OF TRUSTEE.
The Trustee in its individual or any other capacity may become the owner or
pledgee of Notes and may otherwise deal with the Company or any Affiliate of the
Company with the same rights it would have if it were not Trustee. However, in
accordance with the requirements of the TIA, in the event that the Trustee
acquires any conflicting interest it must eliminate such conflict within 90
days, apply to the SEC for permission to continue as trustee or resign. Any
Agent may do the same with like rights and duties. The Trustee is also subject
to Sections 7.10 and 7.11 hereof.
SECTION 7.04 TRUSTEE DISCLAIMER.
The Trustee shall not be responsible for and makes no representation as to
the validity or adequacy of this Indenture or the Notes, it shall not be
accountable for the Company's use of the proceeds from the Notes or any money
paid to the Company or upon the Company's direction under any provision of this
Indenture, it shall not be responsible for the use or application of any money
received by any Paying Agent other than the Trustee, and it shall not be
responsible for any statement or recital herein or any statement in the Notes or
any other document in connection with the sale of the Notes or pursuant to this
Indenture other than its certificate of authentication.
The Trustee in its capacity as Registrar hereunder, shall not be charged
with knowledge of the Applicable Procedures and may conclusively rely that
instructions and certificates presented to it are in accordance with such
Applicable Procedures in effecting transfers pursuant to Section 2.06 hereof.
SECTION 7.05 NOTICE OF DEFAULTS.
If a Default or Event of Default occurs and is continuing and if it is
known to the Trustee, the Trustee shall mail to Holders of Notes (with a copy to
the Representative under the Senior Credit Agreement, if known to the Trustee) a
notice of the Default or Event of Default within 15 days after it occurs.
Except in the case of a Default or Event of Default in payment of principal of,
premium, if any, or interest on any Note, the Trustee may withhold the notice if
and so long as a committee of its Responsible Officers in good faith determines
that withholding the notice is in the interests of the Holders of the Notes.
SECTION 7.06 REPORTS BY TRUSTEE TO HOLDERS OF THE NOTES.
Within 60 days after each May 15 beginning with the May 15 following the
date hereof, and for so long as Notes remain outstanding, the Trustee shall mail
to the Holders of the Notes a brief report dated as of such reporting date that
complies with TIA Section 313(a) (but if no event described in TIA Section
313(a) has occurred within the twelve months preceding the reporting date, no
report need be transmitted). The Trustee also shall comply with TIA Section
313(b)(2). The Trustee shall also transmit by mail all reports as required by
TIA Section 313(c). A copy of each report at the time of its mailing to the
Holders of Notes shall be mailed to the Company.
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SECTION 7.07 COMPENSATION AND INDEMNITY.
The Company shall pay to the Trustee upon demand from time to time
reasonable compensation for its acceptance of this Indenture and services
hereunder. The Trustee's compensation shall not be limited by any law on
compensation of a trustee of an express trust. The Company shall reimburse the
Trustee promptly upon request for all reasonable disbursements, advances and
expenses incurred or made by it in addition to the compensation for its
services. Such expenses shall include the reasonable compensation,
disbursements and expenses of the Trustee's agents and counsel.
The Company shall indemnify the Trustee against any and all losses,
liabilities or expenses incurred by it arising out of or in connection with the
acceptance or administration of its duties under this Indenture, including the
costs and expenses of enforcing this Indenture against the Company (including
this Section 7.07) and defending itself against any claim (whether asserted by
the Company or any Holder or any other person) or liability in connection with
the exercise or performance of any of its powers or duties hereunder, except to
the extent any such loss, liability or expense may be attributable to its
negligence or bad faith. The Trustee shall notify the Company promptly of any
claim for which it may seek indemnity. Failure by the Trustee to so notify the
Company shall not relieve the Company of its obligations hereunder. The Company
shall defend the claim and the Trustee shall cooperate in the defense. The
Trustee may have separate counsel and the Company shall pay the reasonable fees
and expenses of such counsel. The Company need not pay for any settlement made
without its consent, which consent shall not be unreasonably withheld.
The obligations of the Company under this Section 7.07 shall survive the
satisfaction and discharge of this Indenture.
To secure the Company's payment obligations in this Section, the Trustee
shall have a Lien prior to the Notes on all money or property held or collected
by the Trustee, except that held in trust to pay principal and interest on
particular Notes. Such Lien shall survive the satisfaction and discharge of
this Indenture. Furthermore, the Guarantors, jointly and severally, guarantee
the payment of all amounts payable to the Trustee pursuant to this Section 7.07.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.01(i) or (j) hereof occurs, the expenses and the
compensation for the services (including the fees and expenses of its agents and
counsel) are intended to constitute expenses of administration under any
Bankruptcy Law.
The Trustee shall comply with the provisions of TIA Section 313(b)(2) to
the extent applicable.
SECTION 7.08 REPLACEMENT OF TRUSTEE.
A resignation or removal of the Trustee and appointment of a successor
Trustee shall become effective only upon the successor Trustee's acceptance of
appointment as provided in this Section.
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The Trustee may resign in writing at any time and be discharged from the
trust hereby created by so notifying the Company (with a copy to the
Representative under the Senior Credit Agreement, if known to the Trustee). The
Holders of Notes of a majority in aggregate principal amount of the then
outstanding Notes may remove the Trustee by so notifying the Trustee and the
Company in writing (with a copy to the Representative under the Senior Credit
Agreement, if known to the Trustee). The Company may remove the Trustee if:
(a) the Trustee fails to comply with Section 7.10 hereof;
(b) the Trustee is adjudged a bankrupt or an insolvent or an order
for relief is entered with respect to the Trustee under any Bankruptcy Law;
(c) a custodian or public officer takes charge of the Trustee or its
properly; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the office
of Trustee for any reason, the Company shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the Holders
of a majority in principal amount of the then outstanding Notes may appoint a
successor Trustee to replace the successor Trustee appointed by the Company.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company, or
the Holders of Notes of at least 10.0% in aggregate principal amount of the
then outstanding Notes may petition any court of competent jurisdiction for the
appointment of a successor Trustee.
If the Trustee, after written request by any Holder of a Note who has been
a Holder of a Note for at least six months, fails to comply with Section 7.10,
such Holder of a Note may petition any court of competent jurisdiction for the
removal of the Trustee and the appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its appointment
to the retiring Trustee and to the Company (with a copy to the Representative
under the Senior Credit Agreement, if known to the Trustee). Thereupon, the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
succession to Holders of the Notes (with a copy to the Representative under the
Senior Credit Agreement, if known to the Trustee). The retiring Trustee shall
promptly transfer all property held by it as Trustee to the successor Trustee,
PROVIDED all sums owing to the Trustee hereunder have been paid and subject to
the Lien provided for in Section 7.07 hereof. Notwithstanding replacement of
the Trustee pursuant to this Section 7.08, the Company's obligations under
Section 7.07 hereof shall continue for the benefit of the retiring Trustee.
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SECTION 7.09 SUCCESSOR TRUSTEE BY MERGER, ETC.
If the Trustee consolidates, merges or converts into, or transfers all or
substantially all of its corporate trust business (including the trust created
by this Indenture) to, another corporation, the successor corporation without
any further act shall be the successor Trustee.
SECTION 7.10 ELIGIBILITY; DISQUALIFICATION.
There shall at all times be a Trustee hereunder that is a corporation
organized and doing business under the laws of the United States of America or
of any state thereof that is authorized under such laws to exercise corporate
trustee power, that is subject to supervision or examination by federal or state
authorities and that has or has a corporate parent that has a combined capital
and surplus of at least $100.0 million as set forth in its most recent published
annual report of condition.
This Indenture shall always have a Trustee who satisfies the requirements
of TIA Section 310(a)(1), (2) and (5). The Trustee is subject to TIA
Section 310(b).
SECTION 7.11 PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.
The Trustee is subject to TIA Section 311(a), excluding any creditor
relationship listed in TIA Section 311(b). A Trustee who has resigned or been
removed shall be subject to TIA Section 311(a) to the extent indicated therein.
ARTICLE 8
[Reserved]
ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER
SECTION 9.01 WITHOUT CONSENT OF HOLDERS OF NOTES.
Notwithstanding Section 9.02 of this Indenture, the Company, the Guarantors
and the Trustee may amend or supplement this Indenture or the Notes without the
consent of any Holder of a Note:
(a) to cure any ambiguity, defect or inconsistency;
(b) to provide for uncertificated Notes in addition to or in place of
certificated Notes;
(c) to provide for the assumption of the Company's or any Guarantor's
obligations to the Holders of the Notes in the case of a merger or
consolidation pursuant to Article 5 hereof;
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(d) to make any change that would provide any additional rights or
benefits to the Holders of the Notes and that does not adversely affect the
legal rights hereunder of any Holder of the Note; or
(e) to comply with requirements of the SEC in order to effect or
maintain the qualification of this Indenture under the TIA.
Upon the request of the Company accompanied by a resolution of its Board of
Directors authorizing the execution of any such amended or supplemental
Indenture, and upon receipt by the Trustee of the documents described in Section
7.02 hereof, the Trustee shall join with the Company and the Guarantors in the
execution of any amended or supplemental Indenture authorized or permitted by
the terms of this Indenture and to make any further appropriate agreements and
stipulations that may be therein contained, but the Trustee shall not be
obligated to enter into such amended or supplemental Indenture that affects its
own rights, duties or immunities under this Indenture or otherwise.
SECTION 9.02 WITH CONSENT OF HOLDERS OF NOTES.
Except as provided below in this Section 9.02, this Indenture or the Notes
may be amended or supplemented with the consent of the Holders of at least a
majority in aggregate principal amount of the Notes then outstanding (including,
without limitation, consents obtained in connection with a purchase of, or
tender offer or exchange offer for, Notes), and any existing default or
compliance with any provision of this Indenture or the Notes may be waived with
the consent of the Holders of a majority in aggregate principal amount of the
then outstanding Notes (including consents obtained in connection with a tender
offer or exchange offer for Notes).
Upon the request of the Company accompanied by a resolution of its Board of
Directors authorizing the execution of any such amended or supplemental
Indenture, and upon the filing with the Trustee of evidence satisfactory to the
Trustee of the consent of the Holders of Notes as aforesaid, and upon receipt by
the Trustee of the documents described in Section 7.02 hereof, the Trustee shall
join with the Company and the Guarantors in the execution of such amended or
supplemental Indenture unless such amended or supplemental Indenture affects the
Trustee's own rights, duties or immunities under this Indenture or otherwise, in
which case the Trustee may in its discretion, but shall not be obligated to,
enter into such amended or supplemental Indenture.
Neither the Company, the Guarantors nor any of its Restricted Subsidiaries
shall, directly or indirectly, pay or cause to be paid any consideration,
whether by way of interest, fee or otherwise, to any Holder of any Notes for or
as an inducement to any consent, waiver or amendment of any of the terms or
provisions of this Indenture or the Notes unless such consideration is offered
to be paid or is paid to all Holders of the Notes that consent, waive or agree
to amend in the time frame set forth in the solicitation documents relating to
such consent, waiver or agreement.
After an amendment, supplement or waiver under this Section becomes
effective, the Company shall mail to the Holders of Notes affected thereby a
notice briefly describing the
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amendment, supplement or waiver. Any failure of the Company to mail such
notice, or any defect therein, shall not, however, in any way impair or affect
the validity of any such amended or supplemental Indenture or waiver. Subject
to Sections 6.04 and 6.07 hereof, the Holders of a majority in aggregate
principal amount of the Notes then outstanding may waive compliance in a
particular instance by the Company with any provision of this Indenture or the
Notes. However, without the consent of each Holder affected, an amendment or
waiver may not (with respect to any Notes held by a non-consenting Holder):
(a) reduce the principal amount of Notes whose Holders must consent
to an amendment, supplement or waiver;
(b) reduce the principal of or change the fixed maturity of any Note,
or alter the provisions with respect to the redemption of the Notes in
a manner adverse to the Holders;
(c) reduce the rate of or change the time for payment of interest on
any Note;
(d) waive a Default or Event of Default in the payment of principal
of or premium, if any, or interest on the Notes (except a rescission
of acceleration of the Notes by the Holders of at least a majority in
aggregate principal amount of the Notes and a waiver of the payment
default that resulted from such acceleration);
(e) make any Note payable in money other than that stated in the
Notes;
(f) make any change in the provisions of this Indenture relating to
waivers of past Defaults or the rights of Holders of Notes to receive
payments of principal of or premium, if any, or interest on the Notes;
(g) waive a redemption payment with respect to any Note; or
(h) make any change in the foregoing amendment and waiver provisions.
SECTION 9.03 COMPLIANCE WITH TRUST INDENTURE ACT.
Every amendment or supplement to this Indenture or the Notes shall be set
forth in a amended or supplemental Indenture that complies with the TIA as then
in effect.
SECTION 9.04 REVOCATION AND EFFECT OF CONSENTS.
Until an amendment, supplement or waiver becomes effective, a consent to it
by a Holder of a Note is a continuing consent by the Holder of a Note and every
subsequent Holder of a Note or portion of a Note that evidences the same debt as
the consenting Holder's Note, even if notation of the consent is not made on any
Note. However, any such Holder of a Note or subsequent Holder of a Note may
revoke the consent as to its Note if the Trustee receives written notice of
revocation before the date the waiver, supplement or amendment becomes
effective. An
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amendment, supplement or waiver becomes effective in accordance with its terms
and thereafter binds every Holder.
SECTION 9.05 NOTATION ON OR EXCHANGE OF NOTES.
The Trustee may place an appropriate notation about an amendment,
supplement or waiver on any Note thereafter authenticated. The Company in
exchange for all Notes may issue and the Trustee shall authenticate new Notes
that reflect the amendment, supplement or waiver.
Failure to make the appropriate notation or issue a new Note shall not
affect the validity and effect of such amendment, supplement or waiver.
SECTION 9.06 TRUSTEE TO SIGN AMENDMENTS, ETC.
The Trustee shall sign any amended or supplemental Indenture authorized
pursuant to this Article Nine if the amendment or supplement does not adversely
affect the rights, duties, labilities or immunities of the Trustee. The Company
may not sign an amendment or supplemental Indenture until the Board of Directors
approves it. In executing any amended or supplemental indenture, the Trustee
shall be entitled to receive and (subject to Section 7.01) shall be fully
protected in relying upon, an Officer's Certificate and an Opinion of Counsel
stating that the execution of such amended or supplemental indenture is
authorized or permitted by this Indenture.
ARTICLE 10
SUBORDINATION
SECTION 10.01 AGREEMENT TO SUBORDINATE.
The Company agrees, and each Holder of Notes by accepting a Note agrees,
that the payment of the Indenture Obligations (including, without limitation, by
redemption or purchase of any Notes as provided by Section 4.15 hereof) will be
subordinated in right of payment, as set forth in this Article, to the prior
payment in full in cash, cash equivalents or any other manner acceptable to the
Holders of Senior Debt of all Obligations with respect to the Senior Debt,
whether outstanding on the date hereof or thereafter incurred.
SECTION 10.02 LIQUIDATION; DISSOLUTION; BANKRUPTCY.
Upon any distribution to creditors of the Company in a liquidation or
dissolution of the Company or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to the Company or its property, an
assignment for the benefit of creditors or any marshaling of the Company's
assets and liabilities:
(a) the holders of Senior Debt shall be entitled to receive payment
in full in cash of all Obligations due in respect of such Senior Debt (including
interest after the commencement of any such proceeding at the rate specified in
the applicable Senior Debt) before
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the Holders of Notes shall be entitled to receive any payment with respect to
the Indenture Obligations (except that all Holders of Notes may receive
securities that are subordinated to at least the same extent as the Notes to (i)
Senior Debt and (ii) any securities issued in exchange for Senior Debt); and
(b) until all Obligations with respect to Senior Debt (as provided in
subsection (a) above) are paid in full, any distribution to which Holders of
Notes would be entitled but for this Article shall be made to Holders of Senior
Debt (except that all Holders of Notes may receive securities that are
subordinated to at least the same extent as the Notes to (i) Senior Debt and
(ii) any securities issued in exchange for Senior Debt), as their interests may
appear. A distribution may consist of cash, securities or other property, by
set-off or otherwise.
The consolidation of the Company with, or the merger of the Company with or
into, another Person or the liquidation or dissolution of the Company following
the sale, assignment, conveyance, transfer, lease or other disposal of its
properties and assets substantially as an entirety to another Person upon the
terms and conditions set forth in Article 5 shall not be deemed a dissolution,
winding up, liquidation, reorganization, assignment for the benefit of creditors
or marshalling of assets and liabilities of the Company for the purposes of this
Section if the Person formed by such consolidation or the surviving entity of
such merger or the Person which acquires by sale, assignment, conveyance,
transfer, lease or other disposal of such properties and assets substantially as
an entirety, as the case may be, shall, as a part of such consolidation, merger,
sale, assignment, conveyance, transfer, lease or other disposal, comply with the
conditions set forth in Article 5.
SECTION 10.03 ACCELERATION OF NOTES.
If payment of the Notes is accelerated because of an Event of Default, the
Trustee shall promptly notify the applicable Representative(s) for the Senior
Debt of the acceleration.
SECTION 10.04 WHEN DISTRIBUTION MUST BE PAID OVER.
In the event that the Trustee or any Holder receives any payment of any
Obligations with respect to the Notes at a time when such payment is prohibited
under the terms of this Indenture, such payment shall be held by the Trustee or
such Holder, in trust for the benefit of, and shall be paid forthwith over and
delivered to the holders of Senior Debt as their interests may appear or their
Representative under the Senior Credit Agreement, indenture or other agreement
(if any) pursuant to which Senior Debt may have been issued, as their respective
interests may appear, for application to the payment of all Obligations with
respect to Senior Debt remaining unpaid to the extent necessary to pay such
Obligations in full in accordance with their terms, after giving effect to any
payment or distribution to or for the holders of Senior Debt made concurrently
with such payment received by the Trustee or such Holder.
With respect to the holders of Senior Debt, the Trustee undertakes to
perform only such obligations on the part of the Trustee as are specifically set
forth in this Article 10, and no implied covenants or obligations with respect
to the holders of Senior Debt shall be read into this
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Indenture against the Trustee. The Trustee shall not be deemed to owe any
fiduciary duty to the holders of Senior Debt, and shall not be liable to any
such holders if the Trustee shall pay over or distribute to or on behalf of
Holders of Notes or the Company or any other Person money or assets to which any
holders of Senior Debt shall be entitled by virtue of this Article 10, except if
such payment is made as a result of the willful misconduct or gross negligence
of the Trustee.
SECTION 10.05 NOTICE BY COMPANY.
The Company shall promptly notify the Trustee and the Paying Agent of any
facts known to the Company that would cause a payment of any Indenture
Obligations to violate this Article, but failure to give such notice shall not
affect the subordination of the Notes to the Senior Debt as provided in this
Article.
SECTION 10.06 SUBROGATION.
After all Senior Debt is paid in full and until the Notes are paid in full,
Holders shall be subrogated (equally and ratably with all other Indebtedness
PARI PASSU with the Notes) to the rights of holders of Senior Debt to receive
distributions applicable to Senior Debt to the extent that distributions
otherwise payable to the Holders have been applied to the payment of Senior
Debt. A distribution made under this Article to holders of Senior Debt that
otherwise would have been made to Holders is not, as between the Company and
Holders, a payment by the Company on the Notes.
SECTION 10.07 RELATIVE RIGHTS.
This Article defines the relative rights of Holders of Notes and holders of
Senior Debt. Nothing in this Indenture shall:
(a) impair, as between the Company and Holders, the obligation of the
Company, which is absolute and unconditional, to pay the Indenture
Obligations in accordance with their terms;
(b) affect the relative rights of Holders and creditors of the
Company other than their rights in relation to holders of Senior Debt; or
(c) prevent the Trustee or any Holder from exercising its available
remedies upon a Default or Event of Default, subject to the rights of
holders of Senior Debt to receive distributions and payments otherwise
payable to Holders.
If the Company fails because of this Article to pay the Indenture
Obligations on the due date, the failure is still a Default or Event of Default.
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SECTION 10.08 SUBORDINATION MAY NOT BE IMPAIRED BY COMPANY.
No right of any holder of Senior Debt to enforce the subordination of the
Indebtedness evidenced by the Notes shall be impaired by any act or failure to
act by the Company or any Holder or by the failure of the Company or any Holder
to comply with this Indenture.
SECTION 10.09 DISTRIBUTION OR NOTICE TO REPRESENTATIVE.
Whenever a distribution is to be made or a notice given to holders of
Senior Debt, the distribution may be made and the notice given to their
Representative.
With respect to any payment or distribution of assets of the Company
referred to in this Article 10, the Trustee and the Holders shall be entitled to
rely upon any order or decree made by any court of competent jurisdiction or
upon any certificate of such Representative or of the liquidating trustee or
agent or other Person making any distribution to the Trustee or to the Holders
for the purpose of ascertaining the Persons entitled to participate in such
distribution, the holders of the Senior Debt and other Indebtedness of the
Company, the amount thereof or payable thereon, the amount or amounts paid or
distributed thereon and all other facts pertinent thereto or to this Article 10.
SECTION 10.10 RIGHTS OF TRUSTEE AND PAYING AGENT.
Notwithstanding the provisions of this Article 10 or any other provision of
this Indenture, the Trustee shall not be charged with knowledge of the existence
of any facts that would prohibit the making of any payment or distribution by
the Trustee, and the Trustee and the Paying Agent may continue to make payments
on the Notes, unless a Responsible Officer of the Trustee shall have received at
the Corporate Trust Office of the Trustee at least two Business Days prior to
the date of such payment written notice of facts that would cause the payment of
any Indenture Obligations to violate this Article. Only a Representative may
give the notice. Nothing in this Article 10 shall impair the claims of, or
payments to, the Trustee under or pursuant to Section 7.07 hereof.
The Trustee in its individual or any other capacity may hold Senior Debt
with the same rights it would have if it were not Trustee. Any Agent may do the
same with like rights.
SECTION 10.11 AUTHORIZATION TO EFFECT SUBORDINATION.
Each Holder of a Note by the Holder's acceptance thereof authorizes and
directs the Trustee on the Holder's behalf to take such action as may be
necessary or appropriate to effectuate the subordination as provided in this
Article 10, and appoints the Trustee to act as the Holder's attorney-in-fact for
any and all such purposes. If the Trustee does not file a proper proof of claim
or proof of debt in the form required in any proceeding referred to in Section
6.09 hereof at least 30 days before the expiration of the time to file such
claim, the Representatives are hereby authorized to file an appropriate claim
for and on behalf of the Holders of the Notes.
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SECTION 10.12 AMENDMENTS.
The provisions of this Article 10 shall not be amended or modified without
the written consent of a majority of holders of all Senior Debt (to the extent
required pursuant to the terms of such Senior Debt).
ARTICLE 11
GUARANTEE
SECTION 11.01 GUARANTORS' GUARANTEE.
For value received, each of the Guarantors, in accordance with this
Article 11, hereby absolutely, unconditionally and irrevocably guarantees,
jointly and severally, to the Trustee and the Holders, as if the Guarantors
were the principal debtor, the punctual payment and performance when due of
all Indenture Obligations (which for purposes of this Guarantee shall also be
deemed to include all commissions, fees, charges, costs and other expenses
(including reasonable legal fees and disbursements of one counsel and other
amounts payable to the Trustee pursuant to Section 7.07) arising out of or
incurred by the Trustee or the Holders in connection with the enforcement of
this Guarantee).
SECTION 11.02 CONTINUING GUARANTEE; NO RIGHT OF SET-OFF; INDEPENDENT
OBLIGATION.
(a) This Guarantee shall be a continuing guarantee of the payment and
performance of all Indenture Obligations and shall remain in full force and
effect until the payment in full of all the Indenture Obligations and shall
apply to and secure any ultimate balance due or remaining unpaid to the Trustee
or the Holders; and this Guarantee shall not be considered as wholly or
partially satisfied by the payment or liquidation at any time or from time to
time of any sum of money for the time being due or remaining unpaid to the
Trustee or the Holders. Each Guarantor, jointly and severally, covenants and
agrees to comply with all obligations, covenants, agreements and provisions
applicable to it in this Indenture. Without limiting the generality of the
foregoing, each Guarantor's liability shall extend to all amounts which
constitute part of the Indenture Obligations and would be owed by the Company
under this Indenture and the Notes but for the fact that they are unenforceable,
reduced, limited, impaired, suspended or not allowable due to the existence of a
bankruptcy, reorganization or similar proceeding involving the Company.
(b) Each Guarantor, jointly and severally, hereby guarantees that the
Indenture Obligations will be paid to the Trustee without set-off or
counterclaim or other reduction whatsoever (whether for taxes, withholding or
otherwise) in lawful currency of the United States of America.
(c) Each Guarantor, jointly and severally, guarantees that the Indenture
Obligations shall be paid strictly in accordance with their terms regardless of
any law, regulation or order now or hereafter in effect in any jurisdiction
affecting any of such terms or the rights of the holders of the Securities.
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(d) Each Guarantor's liability to pay or perform or cause the performance
of the Indenture Obligations under this Guarantee shall arise forthwith after
demand for payment or performance by the Trustee has been given to the
Guarantors.
(e) Except as provided herein, the provisions of this Article 11 cover all
agreements between the parties hereto relative to this Guarantee and none of the
parties shall be bound by any representation, warranty or promise made by any
Person relative thereto which is not embodied herein; and it is specifically
acknowledged and agreed that this Guarantee has been delivered by each Guarantor
free of any conditions whatsoever and that no representations, warranties or
promises have been made to any Guarantor affecting its liabilities hereunder,
and that neither the Trustee nor any Holder shall be bound by any
representation, warranties or promises now or at any time hereafter made by the
Company to any Guarantor.
(f) This Guarantee is a guarantee of payment, performance and compliance
and not of collectibility and is in no way conditioned or contingent upon any
attempt to collect from or enforce performance or compliance by the Company or
upon any event or condition whatsoever.
(g) The obligations of the Guarantors set forth herein constitute the full
recourse obligations of the Guarantors enforceable against them to the full
extent of all their assets and properties.
SECTION 11.03 GUARANTEE ABSOLUTE.
The obligations of the Guarantors hereunder are independent of the
obligations of the Company under the Notes and this Indenture and a separate
action or actions may be brought and prosecuted against any Guarantor whether or
not an action or proceeding is brought against the Company and whether or not
the Company is joined in any such action or proceeding. The liability of the
Guarantors hereunder is irrevocable, absolute and unconditional and (to the
extent permitted by law) the liability and obligations of the Guarantors
hereunder shall not be released, discharged, mitigated, waived, impaired or
affected in whole or in part by:
(a) any defect or lack of validity or enforceability in respect of any
Indebtedness or other obligation of the Company or any other Person under this
Indenture or the Securities, or any agreement or instrument relating to any of
the foregoing;
(b) any grants of time, renewals, extensions, indulgences, releases,
discharges or modifications which the Trustee or the Holders may extend to, or
make with, the Company, any Guarantor or any other Person, or any change in the
time, manner or place of payment of, or in any other term of, all or any of the
Indenture Obligations, or any other amendment or waiver of, or any consent to or
departure from, this Indenture or the Notes, including any increase or decrease
in the Indenture Obligations;
(c) the taking of security from the Company, any Guarantor or any other
Person, and the release, discharge or alteration of, or other dealing with, such
security;
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(d) the occurrence of any change in the laws, rules, regulations or
ordinances of any jurisdiction by any present or future action of any
governmental authority or court amending, varying, reducing or otherwise
affecting, or purporting to amend, vary, reduce or otherwise affect, any of the
Indenture Obligations and the obligations of any Guarantor hereunder;
(e) the abstention from taking security from the Company, any Guarantor or
any other Person or from perfecting, continuing to keep perfected or taking
advantage of any security;
(f) any loss, diminution of value or lack of enforceability of any
security received from the Company, any Guarantor or any other Person, and
including any other guarantees received by the Trustee;
(g) any other dealings with the Company, any Guarantor or any other
Person, or with any security;
(h) the Trustee's or the Holders' acceptance of compositions from the
Company or any Guarantor;
(i) the application by the Holders or the Trustee of all monies at any
time and from time to time received from the Company, any Guarantor or any other
Person on account of any indebtedness and liabilities owing by the Company or
any Guarantor to the Trustee or the Holders, in such manner as the Trustee or
the Holders deems best and the changing of such application in whole or in part
and at any time or from time to time, or any manner of application of
collateral, or proceeds thereof, to all or any of the Indenture Obligations, or
the manner of sale of any collateral;
(j) the release or discharge of the Company or any Guarantor of the Notes
or of any Person liable directly as surety or otherwise by operation of law or
otherwise for the Notes, other than an express release in writing given by the
Trustee, on behalf of the Holders, of the liability and obligations of any
Guarantor hereunder;
(k) any change in the name, business, capital structure or governing
instrument of the Company or any Guarantor or any refinancing or restructuring
of any of the Indenture Obligations;
(l) the sale of the Company's or any Guarantor's business or any part
thereof;
(m) any merger or consolidation, arrangement or reorganization of the
Company, any Guarantor, any Person resulting from the merger or consolidation of
the Company or any Guarantor with any other Person or any other successor to
such Person or merged or consolidated Person or any other change in the
corporate existence, structure or ownership of the Company or any Guarantor or
any change in the corporate relationship between the Company and any Guarantor,
or any termination of such relationship;
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(n) the insolvency, bankruptcy, liquidation, winding-up, dissolution,
receivership, arrangement, readjustment, assignment for the benefit of creditors
or distribution of the assets of the Company or its assets or any resulting
discharge of any obligations of the Company (whether voluntary or involuntary)
or of any Guarantor (whether voluntary or involuntary) or the loss of corporate
existence;
(o) any arrangement or plan of reorganization affecting the Company or any
Guarantor;
(p) any failure, omission or delay on the part of the Company to conform
or comply with any term of this Indenture;
(q) any limitation on the liability or obligations of the Company or any
other Person under this Indenture, or any discharge, termination, cancellation,
distribution, irregularity, invalidity or unenforceability in whole or in part
of this Indenture;
(r) any other circumstance (including any statute of limitations that
might otherwise constitute a defense available to, or discharge of, the Company
or any Guarantor); or
(s) any modification, compromise, settlement or release by the Trustee, or
by operation of law or otherwise, of the Indenture Obligations or the liability
of the Company or any other obligor under the Notes, in whole or in part, and
any refusal of payment by the Trustee, in whole or in part, from any other
obligor or other guarantor in connection with any of the Indenture Obligations,
whether or not with notice to, or further assent by, or any reservation of
rights against, each of the Guarantors.
SECTION 11.04 RIGHT TO DEMAND FULL PERFORMANCE.
In the event of any demand for payment or performance by the Trustee from
any Guarantor hereunder, the Trustee or the Holders shall have the right to
demand its full claim and to receive all dividends or other payments in respect
thereof until the Indenture Obligations have been paid in full, and the
Guarantors shall continue to be jointly and severally liable hereunder for any
balance which may be owing to the Trustee or the Holders by the Company under
this Indenture and the Notes. The retention by the Trustee or the Holders of
any security, prior to the realization by the Trustee or the Holders of its
rights to such security upon foreclosure thereon, shall not, as between the
Trustee and any Guarantor, be considered as a purchase of such security, or as
payment, satisfaction or reduction of the Indenture Obligations due to the
Trustee or the Holders by the Company or any part thereof. Each Guarantor,
promptly after demand, will reimburse the Trustee and the Holders for all costs
and expenses of collecting such amount under, or enforcing this Guarantee,
including, without limitation, the reasonable fees and expenses of counsel.
SECTION 11.05 WAIVERS.
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(a) Each Guarantor hereby expressly waives (to the extent permitted by
law) notice of the acceptance of this Guarantee and notice of the existence,
renewal, extension or the non-performance, non-payment, or non-observance on the
part of the Company or any Guarantor of any of the terms, covenants, conditions
and provisions of this Indenture or the Notes or any other notice whatsoever to
or upon the Company or such Guarantor with respect to the Indenture Obligations,
whether by statute, rule of law or otherwise. Each Guarantor hereby
acknowledges communication to it of the terms of this Indenture and the Notes
and all of the provisions therein contained and consents to and approves the
same. Each Guarantor hereby expressly waives (to the extent permitted by law)
diligence, presentment, protest and demand for payment with respect to (i) any
notice of sale, transfer or other disposition of any right, title to or interest
in the Notes by the Holders or in this Indenture, (ii) any release of any
Guarantor from its obligations hereunder resulting from any loss by it of its
rights of subrogation hereunder and (iii) any other circumstances whatsoever
that might otherwise constitute a legal or equitable discharge, release or
defense of a guarantor or surety or that might otherwise limit recourse against
such Guarantor.
(b) without prejudice to any of the rights or recourses which the Trustee
or the Holders may have against the Company, each Guarantor hereby expressly
waives (to the extent permitted by law) any right to require the Trustee or the
Holders to:
(i) enforce, assert, exercise, initiate or exhaust any rights,
remedies or recourse against the Company, any Guarantor or any other Person
under this Indenture or otherwise;
(ii) value, realize upon, or dispose of any security of the Company
or any other Person held by the Trustee or the Holders;
(iii) initiate or exhaust any other remedy which the Trustee or
the Holders may have in law or equity; or
(iv) mitigate the damages resulting from any default under this
Indenture;
before requiring or becoming entitled to demand payment from such Guarantor
under this Guarantee.
SECTION 11.06 THE GUARANTORS REMAIN OBLIGATED IN EVENT THE COMPANY IS NO
LONGER OBLIGATED TO DISCHARGE INDENTURE OBLIGATIONS.
It is the express intention of the Trustee and the Guarantors that if for
any reason the Company has no legal existence, is or becomes under no legal
obligation to discharge the Indenture Obligations owing to the Trustee or the
Holders by the Company or if any of the Indenture Obligations owing by the
Company to the Trustee or the Holders becomes irrecoverable from the Company by
operation of law or for any reason whatsoever, this Guarantee and the covenants,
agreements and obligations of the Guarantors contained in this Article 11 shall
nevertheless be binding upon the Guarantors, as principal debtor, until such
time as all such
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Indenture Obligations have been paid in full to the Trustee and all Indenture
Obligations owing to the Trustee or the Holders by the Company have been
discharged, and the Guarantors shall be responsible for the payment thereof to
the Trustee or the Holders upon demand.
SECTION 11.07 FRAUDULENT CONVEYANCE; SUBROGATION.
Notwithstanding any provision herein contained to the contrary, each
Guarantor's liability under this Article 11 shall be limited to an amount not to
exceed the amount which could be claimed by the Holders from such Guarantor
under this Article 11 without rendering such claim voidable or avoidable under
Section 548 of the Bankruptcy Law or under any applicable state Uniform
Fraudulent Transfer Act, Uniform Fraudulent Conveyance Act or similar statute or
common law after taking into account, among other things, such Guarantor's right
of contribution, subrogation and indemnification under this Indenture or under
applicable law.
SECTION 11.08 GUARANTEE IS IN ADDITION TO OTHER SECURITY.
This Guarantee shall be in addition to and not in substitution for any
other guarantees or other security which the Trustee may now or hereafter hold
in respect of the Indenture Obligations owing to the Trustee or the Holders by
the Company and (except as may be required by law) the Trustee shall be under no
obligation to marshal in favor of each of the Guarantors any other guarantees or
other security or any moneys or other assets which the Trustee may be entitled
to receive or upon which the Trustee or the Holders may have a claim.
SECTION 11.09 RELEASE OF SECURITY INTERESTS.
Without limiting the generality of the foregoing and except as otherwise
provided in this Indenture, each Guarantor hereby consents and agrees, to the
fullest extent permitted by applicable law, that the rights of the Trustee
hereunder, and the liability of the Guarantors hereunder, shall not be affected
by any and all releases for any purpose of any collateral, if any, from the
Liens and security interests created by any collateral document and that this
Guarantee shall continue to be effective or be reinstated, as the case may be,
if at any time any payment of any of the Indenture Obligations is rescinded or
must otherwise be returned by the Trustee upon the insolvency, bankruptcy or
reorganization of the Company or otherwise, all as though such payment had not
been made.
SECTION 11.10 NO BAR TO FURTHER ACTIONS.
Except as provided by law, no action or proceeding brought or instituted
under Article 11 and this Guarantee and no recovery or judgment in pursuance
thereof shall be a bar or defense to any further action or proceeding which may
be brought under Article 11 and this Guarantee by reason of any further default
or defaults under Article 11 and this Guarantee or in the payment of any of the
Indenture Obligations.
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SECTION 11.11 FAILURE TO EXERCISE RIGHTS SHALL NOT OPERATE AS A WAIVER; NO
SUSPENSION OF REMEDIES.
(a) No failure to exercise and no delay in exercising, on the part of the
Trustee or the Holders, any right, power, privilege or remedy under this
Article 11 and this Guarantee shall operate as a waiver thereof, nor shall any
single or partial exercise of any rights, power, privilege or remedy preclude
any other or further exercise thereof, or the exercise of any other rights,
powers, privileges or remedies. The rights and remedies herein provided for are
cumulative and not exclusive of any rights or remedies provided in law or
equity.
(b) Nothing contained in this Article 11 shall limit the right of the
Trustee or the Holders to take any action to accelerate the maturity of the
Notes pursuant to the terms hereof or thereof or to pursue any rights or
remedies hereunder, thereof or under applicable law.
SECTION 11.12 TRUSTEE'S DUTIES; NOTICE TO TRUSTEE.
(a) Any provision in this Article 11 or elsewhere in this Indenture
allowing the Trustee to request any information or to take any action authorized
by, or on behalf of any Guarantor, shall be permissive and shall not be
obligatory on the Trustee except as the Holders may direct in accordance with
the provisions of this Indenture or where the failure of the Trustee to request
any such information or to take any such action arises from the Trustee's
negligence, bad faith or willful misconduct.
(b) The Trustee shall not be required to inquire into the existence,
powers or capacities of the Company, any Guarantor or the officers, directors or
agents acting or purporting to act on their respective behalf.
SECTION 11.13 SUCCESSORS AND ASSIGNS.
All terms, agreements and conditions of this Article 11 shall extend to and
be binding upon each Guarantor and its successors and permitted assigns and
shall enure to the benefit of and may be enforced by the Trustee and its
successors and assigns; provided, however, that the Guarantors may not assign
any of their rights or obligations hereunder.
SECTION 11.14 RELEASE OF GUARANTEE.
Concurrently with the payment in full of all of the Indenture Obligations,
the Guarantors shall be released from and relieved of their obligations under
this Article 11. Upon the delivery by the Company to the Trustee of an
Officers' Certificate and, if requested by the Trustee, an Opinion of Counsel to
the effect that the transaction giving rise to the release of this Guarantee was
made by the Company in accordance with the provisions of this Indenture and the
Notes, the Trustee shall execute any documents reasonably required in order to
evidence the release of the Guarantors from their obligations under this
Guarantee. If any of the Indenture Obligations are revived and reinstated after
the termination of this Guarantee, then all of the obligations of the
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Guarantors under this Guarantee shall be revived and reinstated as if this
Guarantee had not been terminated until such time as the Indenture Obligations
are paid in full, and each Guarantor shall enter into an amendment to this
Guarantee, reasonably satisfactory to the Trustee, evidencing such revival and
reinstatement.
SECTION 11.15 EXECUTION OF GUARANTEE.
To evidence the Guarantee, each Guarantor hereby agrees to execute the
guarantee substantially in the form set forth in Exhibit A-1, to be endorsed on
each Note authenticated and delivered by the Trustee and that this Indenture
shall be executed on behalf of each Guarantor by its Chairman of the Board, Vice
Chairman of the Board, its President, its Chief Executive Officer, Chief
Operating Officer or one of its Vice Presidents, under its corporate seal
reproduced thereon attested by its Secretary or one of its Assistant
Secretaries. The signature of any of these officers on the Notes may be manual
or facsimile.
If an officer whose signature is on this Indenture no longer holds that
office at the time the Trustee authenticates a Note on which this Guarantee is
endorsed, such Guarantee shall be valid nevertheless.
SECTION 11.16 GUARANTEE SUBORDINATE TO SENIOR DEBT.
Each Guarantor agrees, and each Holder of Notes by accepting a Note agrees,
that the Indebtedness represented by the Guarantees is hereby expressly made
subordinate in right of payment, as set forth in this Article, to the prior
payment in full of all Obligations with respect to the Senior Debt, whether
outstanding on the date hereof or thereafter incurred.
SECTION 11.17 LIQUIDATION; DISSOLUTION; BANKRUPTCY.
Upon any distribution to creditors of any Guarantor in a liquidation or
dissolution of the Guarantor or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to the Guarantor or its property, an
assignment for the benefit of creditors or any marshaling of the Guarantor's
assets and liabilities:
(a) the holders of Senior Debt shall be entitled to receive payment
in full in cash of all Obligations due in respect of such Senior Debt (including
interest after the commencement of any such proceeding at the rate specified in
the applicable Senior Debt) before the Holders of Notes shall be entitled to
receive any payment with respect to the Notes (except that all Holders of Notes
may receive securities that are subordinated to at least the same extent as the
Notes to (i) Senior Debt and (ii) and securities issued in exchange for Senior
Debt); and
(b) until all Obligations with respect to Senior Debt (as provided in
subsection (a) above) are paid in full in cash, any distribution to which
Holders of Notes would be entitled but for this Article shall be made to Holders
of Senior Debt (except that all Holders of Notes may receive securities that are
subordinated to at least the same extent as the Guarantees to (i) Senior
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Debt and (ii) any securities issued in exchange for Senior Debt), as their
interests may appear. A distribution may consist of cash, securities or other
property, by set-off or otherwise.
The consolidation of any Guarantor with, or the merger of any Guarantor
with or into, another Person or the liquidation or dissolution of any Guarantor
following the sale, assignment, conveyance, transfer, lease or other disposal of
its properties and assets substantially as an entirety to another Person upon
the terms and conditions set forth in Article 5 hereof shall not be deemed a
dissolution, winding up, liquidation, reorganization, assignment for the benefit
of creditors or marshaling of assets and liabilities of such Guarantor for the
purposes of this Section if the Person formed by such consolidation or the
surviving entity of such merger or the Person which acquires by sale,
assignment, conveyance, transfer, lease or other disposal of such properties and
assets substantially as an entirety, as the case may be, shall, as a part of
such consolidation, merger, sale, assignment, conveyance, transfer, lease or
other disposal, comply with the conditions set forth in Article 5 hereof.
SECTION 11.18 SUBROGATION TO RIGHTS OF HOLDERS OF SENIOR DEBT.
After all Senior Debt is paid in full and until the Notes are paid in
full, Holders shall be subrogated (equally and ratably with all other
Indebtedness pari passu with the Notes) to the rights of holders of such Senior
Debt to receive distributions applicable to the Senior Debt to the extent that
distributions otherwise payable to the Holders have been applied to the payment
of the Senior Debt. A distribution made under this Article to holders of Senior
Debt that otherwise would have been made to Holders is not, as between any
Guarantor and the Holders, a payment by such Guarantor on the Notes.
SECTION 11.19 RELATIVE RIGHTS.
This Article defines the relative rights of Holders of Notes and holders of
Senior Debt. Nothing in this Indenture shall:
(a) impair, as between any Guarantor and the Holders, the obligation
of such Guarantor, which is absolute and unconditional, to pay all Indenture
Obligations in accordance with their terms;
(b) affect the relative rights of Holders and creditors of the
Company other than the rights of Holders in relation to holders of Senior Debt;
or
(c) prevent the Trustee or any Holder from exercising its available
remedies upon a Default or Event of Default, subject to the rights of holders of
Senior Debt to receive distributions and payments otherwise payable to Holders.
If the Company or any Guarantor fails because of this Article to pay any
Indenture Obligation on the due date, the failure is still a Default or Event of
Default.
SECTION 11.20 SUBORDINATION MAY NOT BE IMPAIRED BY ANY GUARANTOR.
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No right of any holder of Senior Debt to enforce the subordination of the
Indebtedness evidenced by the Notes shall be impaired by any act or failure to
act by any Guarantor or any Holder or by the failure of any Guarantor or any
Holder to comply with this Indenture.
SECTION 11.21 DISTRIBUTION OR NOTICE TO REPRESENTATIVE.
Whenever a distribution is to be made or a notice given to holders of
Senior Debt, the distribution may be made and the notice given to their
Representative.
Upon any payment or distribution of assets of any Guarantor referred to in
this Article 11, the Trustee, and the Holders shall be entitled to rely upon any
order or decree made by any court of competent jurisdiction or upon any
certificate of such Representative or of the liquidating trustee or agent or
other Person making any distribution to the Trustee or to the Holders for the
purpose of ascertaining the Persons entitled to participate in such
distribution, the holders of the Senior Debt and other Indebtedness of the
Guarantors, the amount thereof or payable thereon, the amount or amounts paid or
distributed thereon and all other facts pertinent thereto or to this Article 11.
SECTION 11.22 AUTHORIZATION TO EFFECT SUBORDINATION.
Each Holder of a Note by the Holder's acceptance thereof authorizes and
directs the Trustee on the Holder's behalf to take such action as may be
necessary or appropriate to effectuate the subordination as provided in this
Article 11, and appoints the Trustee to act as the Holder's attorney-in-fact for
any and all such purposes.
SECTION 11.23 AMENDMENTS.
The provisions of this Article 11 shall not be amended or modified without
the written consent of a majority of holders of all Senior Debt (to the extent
required pursuant to the terms of such Senior Debt).
SECTION 11.24 CONTRIBUTION WITH RESPECT TO GUARANTEES.
(a) To the extent that any Guarantor shall make a payment under this
Article 11 of all or any of the Indenture Obligations (a "GUARANTOR PAYMENT")
which, taking into account all other Guarantor Payments then previously or
concurrently made by any other Guarantor, exceeds the amount which such
Guarantor would otherwise have paid if each Guarantor had paid the aggregate
Indenture Obligations satisfied by such Guarantor Payment in the same proportion
that such Guarantor's "ALLOCABLE AMOUNT" (as defined below) (as determined
immediately prior to such Guarantor Payment) bore to the aggregate Allocable
Amounts of each of the Guarantors as determined immediately prior to the making
of such Guarantor Payment, THEN, following payment in full in cash of the
Indenture Obligations such Guarantors shall be entitled to receive contribution
and indemnification payments from, and be reimbursed by, each other Guarantor
for the amount of such excess, PRO RATA based upon their respective Allocable
Amounts in effect immediately prior to such Guarantor Payment.
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(b) As of any date of determination, the "ALLOCABLE AMOUNT" of any
Guarantor shall be equal to the maximum amount of the claim which could then be
recovered from such Guarantor under this Article 11 without rendering such claim
voidable or avoidable under Section 548 of the Bankruptcy Law or under any
applicable state Uniform Fraudulent Transfer Act, Uniform Fraudulent Conveyance
Act or similar statute or common law.
(c) This Section 11.24 is intended only to define the relative rights of
Guarantors and nothing set forth in this Section 11.24 is intended to or shall
impair the obligations of Guarantors, jointly and severally, to pay any amounts
as and when the same shall become due and payable in accordance with the terms
of this Agreement, including Section 11.01, or the Notes.
(d) The parties hereto acknowledge that the rights of contribution and
indemnification hereunder shall constitute assets of the Guarantor to which such
contribution and indemnification is owing.
(e) The rights of the indemnifying Guarantor against other Guarantors
Indenture under this Section 11.24 shall be exercisable upon the full and
indefeasible payment of the Obligations.
SECTION 11.25 LIABILITY CUMULATIVE.
The liability of Guarantors under this Article 11 is in addition to and
shall be cumulative with all liabilities of each Guarantor to the Holders under
this Agreement or in respect of any Indenture Obligations or obligation of the
other Guarantors, without any limitation as to amount, unless the instrument or
agreement evidencing or creating such other liability specifically provides to
the contrary.
ARTICLE 12
MISCELLANEOUS
SECTION 12.01 TRUST INDENTURE ACT CONTROLS.
If any provision of this Indenture limits, qualifies or conflicts with the
duties imposed by TIA Section 318(c), the imposed duties shall control.
SECTION 12.02 NOTICES.
Any notice or communication by the Company, the Guarantors or the Trustee
to the others is duly given if in writing and delivered in Person or mailed by
first class mail (registered or certified, return receipt requested), telex,
telecopier or overnight air courier guaranteeing next day delivery, to the
others' address:
If to the Company or any of the Guarantors:
Recycling Industries, Inc.
Suite 211
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384 Inverness Drive South
Englewood, CO 80112
Attention: Chief Financial Officer
Telecopier No.: (303) 790-4252
Telephone No.: (303) 790-7372
If to the Trustee:
State Street Bank and Trust Company
Goodwin Square
225 Asylum Street
Hartford, CT 06103
Attention: Corporate Trust Administration
(Recycling Industries, Inc. 13% Senior
Subordinated Notes due 2005)
Telecopier No.: (860) 244-1889
Notice by the Trustee to the Representative under the Initial Credit
Agreement, if known to the Trustee, provided for herein shall be delivered or
mailed to General Electric Capital Corporation, 10 LaSalle Street, Suite 2700,
Chicago, Illinois 60603, Attention: Recycling Account Manager, Telecopier No.:
(312) 419-5992, Telephone No.: (312) 419-0985 and to any other person who
hereafter becomes an agent under the Initial Credit Agreement, provided the
Trustee has been notified by the Company or the agent of the names and mailing
addresses of such persons.
The Company, the Guarantors or the Trustee by notice to the others may
designate additional or different addresses for subsequent notices or
communications.
All notices and communications (other than those sent to Holders) shall be
deemed to have been duly given: at the time delivered by hand, if personally
delivered; five Business Days after being deposited in the mail, postage
prepaid, if mailed; when answered back, if telexed; when receipt acknowledged,
if telecopied; and the next Business Day after timely delivery to the courier,
if sent by overnight air courier guaranteeing next day delivery.
Notwithstanding the foregoing, notices to the Trustee shall be effective only
upon receipt by a Responsible Officer of the Trustee.
Any notice or communication to a Holder shall be mailed by first class
mail, certified or registered, return receipt requested, or by overnight air
courier guaranteeing next day delivery to its address shown on the register kept
by the Registrar. Any notice or communication shall also be so mailed to any
Person described in TIA Section 313(c), to the extent required by the TIA.
Failure to mail a notice or communication to a Holder or any defect in it shall
not affect its sufficiency with respect to other Holders.
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If a notice or communication is mailed in the manner provided above within
the time prescribed, it is duly given, whether or not the addressee receives it.
If the Company mails a notice or communication to Holders. it shall mail a
copy to the Trustee and each Agent at the same time.
SECTION 12.03 COMMUNICATION BY HOLDERS OF NOTES WITH OTHER HOLDERS OF NOTES.
Holders may communicate pursuant to TIA Section 312(b) with other Holders
with respect to their rights under this Indenture or the Notes. The Company,
the Trustee, the Registrar and anyone else shall have the protection of TIA
Section 312(c).
SECTION 12.04 CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.
Upon any request or application by the Company to the Trustee to take any
action under this Indenture, the Company shall furnish to the Trustee:
(a) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth
in Section 12.05 hereof) stating that, in the opinion of the signers, all
conditions precedent and covenants, if any, provided for in this Indenture
relating to the proposed action have been satisfied; and
(b) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth
in Section 12.05 hereof) stating that, in the opinion of such counsel, all
such conditions precedent and covenants have been satisfied.
SECTION 12.05 STATEMENTS REQUIRED IN CERTIFICATE OR OPINION.
Each certificate or opinion with respect to compliance with a condition or
covenant provided for in this Indenture (other than a certificate provided
pursuant to TIA Section 314(a)(4)) shall comply with the provisions of TIA
Section 314(e) and shall include:
(a) a statement that the Person making such certificate or opinion
has read such covenant or condition;
(b) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(c) a statement that, in the opinion of such Person, he or she has
made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or condition
has been satisfied; and
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(d) a statement as to whether or not, in the opinion of such Person,
such condition or covenant has been satisfied.
SECTION 12.06 RULES BY TRUSTEE AND AGENTS.
The Trustee may make reasonable rules for action by or at a meeting of
Holders. The Registrar or Paying Agent may make reasonable rules and set
reasonable requirements for its functions.
SECTION 12.07 NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND
STOCKHOLDERS.
No director, officer, employee, incorporator or stockholder of the Company,
as such, shall have any liability for any obligations of the Company under the
Notes, this Indenture or for any claim based on, in respect of, or by reason of,
such obligations or their creation. Each Holder of Notes by accepting a Note
waives and releases all such liability. The waiver and release are part of the
consideration for issuance of the Notes. Such waiver may not be effective to
waive liabilities under the federal securities laws and it is the view of the
SEC that such a waiver is against public policy.
SECTION 12.08 GOVERNING LAW.
THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO
CONSTRUE THIS INDENTURE AND THE NOTES.
SECTION 12.09 NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.
This Indenture may not be used to interpret any other indenture, loan or
debt agreement of the Company or its Subsidiaries or of any other Person. Any
such indenture, loan or debt agreement may not be used to interpret this
Indenture.
SECTION 12.10 SUCCESSORS.
All agreements of the Company in this Indenture and the Notes shall bind
its successors. All agreements of the Trustee in this Indenture shall bind its
successors.
SECTION 12.11 SEVERABILITY.
In case any provision in this Indenture or in the Notes shall be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
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SECTION 12.12 COUNTERPART ORIGINALS.
The parties may sign any number of copies of this Indenture. Each signed
copy shall be an original, but all of them together represent the same
agreement.
SECTION 12.13 TABLE OF CONTENTS, HEADINGS, ETC.
The Table of Contents, Cross-Reference Table and Headings of the Articles
and Sections of this Indenture have been inserted for convenience of reference
only, are not to be considered a part of this Indenture and shall in no way
modify or restrict any of the terms or provisions hereof.
[Signatures on following page.]
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SIGNATURES
Dated as of December 4, 1997
Recycling Industries, Inc., NR Holdings, Inc.
Recycling Industries of Texas, Inc.,
Recycling Industries of South Carolina, Inc.,
Recycling Industries of Iowa, Inc., Nevada
Recycling, Inc., Weissman Industries, Inc.,
Recycling Industries of Missouri, Inc.,
Recycling Industries of Georgia, Inc.,
Recycling Industries of Wisconsin, Inc.,
Recycling Industries of Winston-Salem, Inc.,
Recycling Industries of Greensboro, Inc.,
Recycling Industries of Chesapeake, Inc.,
Wm. Lans Sons' Co. Inc.; and Recycling
Industries of Atlanta, Inc.;
By: /s/ LUKE F. BOTICA
------------------------------
Name: LUKE F. BOTICA
Title: VICE CHAIRMAN
(Seal)
Dated as of December 4, 1997 State Street Bank and Trust Company
By: /s/ Mark A. Forgetta
------------------------------
Name: Mark A. Forgetta
Title: Vice President
(Seal)
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Exhibit A-1
(Face of Note)
13% [Series A] [Series B] Senior Subordinated Notes due 2005
No. ___________
CUSIP No. 756285 AA O $___________
RECYCLING INDUSTRIES, INC.
promises to pay to _____________________________________________________________
or registered assigns, the principal sum of_____________________________________
Dollars on December 5, 2005.
Interest Payment Dates: June 30 and December 31
Record Dates: June 15 and December 15
Dated: December 5, 1997
RECYCLING INDUSTRIES, INC.
By:
-----------------------------------------------
Name:
Title:
(SEAL)
This is one of the Notes
referred to in the
within-mentioned Indenture:
State Street Bank and Trust Company,
as Trustee
By:
--------------------------
Name:
Title:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
A-1-1
<PAGE>
(Back of Note)
13% [Series A] [Series B] Senior Subordinated Notes due 2005
[Unless and until it is exchanged in whole or in part for Notes in
definitive form, this Note may not be transferred except as a whole by the
Depositary to a nominee of the Depositary or by a nominee of the Depositary to
the Depositary or another nominee of the Depositary or by the Depositary or any
such nominee to a successor Depositary or a nominee of such successor
Depositary. Unless this certificate is presented by an authorized
representative of The Depository Trust Company (55 Water Street, New York, New
York) ("DTC"), to the issuer or its agent for registration of transfer, exchange
or payment, and any certificate issued is registered in the name of Cede & Co.
or such other name as may be requested by an authorized representative of DTC
(and any payment is made to Cede & Co. or such other entity as may be requested
by an authorized representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the
registered owner hereof, Cede & Co., has an interest herein.](1)
THE NOTES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT") AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE
TRANSFERRED EXCEPT (1) TO A PERSON WHOM SUCH INVESTOR REASONABLY
BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF
RULE 144A UNDER THE SECURITIES ACT PURCHASING FOR ITS OWN ACCOUNT
OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (2) IN AN
OFFSHORE TRANSACTION COMPLYING WITH RULE 903 OR RULE 904 OF
REGULATION S UNDER THE SECURITIES ACT, (3) PURSUANT TO AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY
RULE 144 THEREUNDER, IF AVAILABLE, (4) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT, OR (5) TO
INSTITUTIONAL ACCREDITED INVESTORS IN A TRANSACTION EXEMPT FROM
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, IN EACH CASE
IN ACCORDANCE WITH ALL APPLICABLE
- ------------------
(1) THIS PARAGRAPH SHOULD BE INCLUDED ONLY IF THE NOTE IS ISSUED IN GLOBAL FORM.
A-1-2
<PAGE>
SECURITIES LAWS OF THE STATES OF THE UNITED STATES AND OTHER
JURISDICTIONS.
Capitalized terms used herein shall have the meanings assigned to them in
the Indenture referred to below unless otherwise indicated.
1. INTEREST. Recycling Industries, Inc., a Colorado corporation (the
"COMPANY"), promises to pay interest on the principal amount of this Note at 13%
per annum from December 4, 1997 until December 4, 2005. The Company shall pay
interest semi-annually in arrears on June 30 and December 31 of each year, or if
any such day is not a Business Day, on the next succeeding Business Day (each an
"INTEREST PAYMENT DATE"). Interest on the Notes will accrue from the most
recent date to which interest has been paid or, if no interest has been paid,
from the date of issuance; PROVIDED that if there is no existing Default in the
payment of interest, and if this Note is authenticated between a record date
referred to on the face hereof and the next succeeding Interest Payment Date,
interest shall accrue from such next succeeding Interest Payment Date; PROVIDED,
FURTHER, that the first Interest Payment Date shall be June 30, 1998. The
Company shall pay interest (including post-petition interest in any proceeding
under any Bankruptcy Law) on overdue principal and premium, if any, from time to
time on demand at a rate equal to 15% per annum; it shall pay interest
(including post-petition interest in any proceeding under any Bankruptcy Law) on
overdue installments of interest (without regard to any applicable grace
periods) from time to time on demand at the same rate to the extent lawful.
Interest will be computed on the basis of a 360-day year of twelve 30-day
months.
2. METHOD OF PAYMENT. The Company shall make payments in respect of the
Notes represented by the Global Notes (including principal, premium and
interest) by wire transfer of immediately available funds to the accounts
specified by the Global Note custodian. With respect to Notes issued in
definitive form, the Company shall make all payments of principal, premium and
interest by mailing a check to each such Holder's registered address, PROVIDED
that all payments with respect to Notes having an aggregate principal amount of
$100,000 or more, the Holders of which have given wire transfer instructions to
the Company at least ten business days prior to the applicable payment date,
will be required to be made by wire transfer of immediately available funds to
the accounts specified by the Holders thereof. Except for trades involving
only Euroclear or CEDEL participants, the Notes represented by the Global Notes
are expected to be eligible to trade in DTC's Same-Day Funds Settlement System,
and any permitted secondary market trading activity in such notes will,
therefore, be required by DTC to be settled in immediately available funds. The
Company expects that secondary trading in the Definitive Notes also will be
settled in immediately available funds.
3. PAYING AGENT AND REGISTRAR. Initially, State Street Bank and Trust
Company, the Trustee under the Indenture, will act as Paying Agent and
Registrar. The Notes may be presented for registration of transfer and exchange
at the offices of the Registrar. The Company may change any Paying Agent or
Registrar without notice to any Holder. The Company or any of its Subsidiaries
may act in any such capacity.
A-1-3
<PAGE>
4. INDENTURE. The Company issued the Notes under an Indenture dated as
of December 4, 1997 ("INDENTURE") between the Company, the Guarantors specified
therein and the Trustee. The terms of the Notes include those stated in the
Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939, as amended (15 U.S. Code Sections 77aaa-77bbbb). The
Notes are subject to all such terms, and Holders are referred to the Indenture
and such Act for a statement of such terms. The Notes are obligations of the
Company limited to $60.0 million in aggregate principal amount.
5. OPTIONAL REDEMPTION.
(a) The Notes are not redeemable by the Company prior to December 5,
1998. Thereafter, the Notes will be subject to redemption at the option of the
Company, in whole or in part, at the redemption prices (expressed as percentages
of the principal amount) set forth below plus accrued and unpaid interest
thereon to the date fixed for redemption, if redeemed during the twelve month
period beginning on December 5th of the years indicated below:
YEAR PERCENTAGE
---- ----------
1998. . . . . . . . . .106.00%
1999. . . . . . . . . .105.14%
2000. . . . . . . . . .104.29%
2001. . . . . . . . . .103.43%
2002. . . . . . . . . .102.57%
2003. . . . . . . . . .101.71%
2004. . . . . . . . . .100.86%
2005. . . . . . . . . .100.00%
(b) Any redemption pursuant to this paragraph shall be made
pursuant to the provisions of Section 3.01 through 3.06 of the Indenture.
6. MANDATORY REDEMPTION.
Except as set forth in paragraph 7 below, the Company shall not be required
to make mandatory redemption payments with respect to the Notes.
7. REPURCHASE AT OPTION OF HOLDER.
If there is a Change of Control, the Company shall be required to make
an offer (a "CHANGE OF CONTROL OFFER") to repurchase all or any part (equal to
$1,000 or an integral multiple thereof) of each Holder's Notes at a purchase
price equal to 101.0% of the aggregate principal amount thereof plus accrued and
unpaid interest thereon to the date of purchase, which date shall be no fewer
than 30 and no more than 60 days from the date such notice is mailed (the
"CHANGE OF CONTROL PAYMENT"). Within 30 days following any Change of Control,
the Company shall mail a notice to each Holder setting forth the procedures
governing the Change of Control Offer as required by the Indenture. Such right
to require the repurchase of Notes shall not continue after
A-1-4
<PAGE>
discharge of the Company from its obligations with respect to the Notes. The
Company's board of directors may not waive this provision.
8. NOTICE OF REDEMPTION. Notice of redemption will be mailed at least 30
days but not more than 60 days before the redemption date to each Holder whose
Notes are to be redeemed at its registered address. Notes may be redeemed in
part but only in whole multiples of $1,000. On and after the redemption date
interest ceases to accrue on Notes or portions thereof called for redemption.
9. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in registered form
without coupons in minimum denominations of $1,000 and integral multiples of
$1,000 in excess thereof. The transfer of Notes may be registered and Notes may
be exchanged as provided in the Indenture. The Registrar and the Trustee may
require a Holder, among other things, to furnish appropriate endorsements and
transfer documents and the Company may require a Holder to pay any taxes and
fees required by law or permitted by the Indenture. The Company need not
exchange or register the transfer of any Note or portion of a Note selected for
redemption, except for the unredeemed portion of any Note being redeemed in
part. Also, it need not exchange or register the transfer of any Notes for a
period of 15 days before a selection of Notes to be redeemed or during the
period between a record date and the corresponding Interest Payment Date.
10. PERSONS DEEMED OWNERS. The registered Holder of a Note may be treated
as its owner for all purposes.
11. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain exceptions, the
Indenture, the Guarantees or the Notes may be amended or supplemented with the
consent of the Holders of at least a majority in principal amount of the then
outstanding Notes, and any existing default or compliance with any provision of
the Indenture or the Notes may be waived with the consent of the Holders of a
majority in principal amount of the then outstanding Notes. Without the consent
of any Holder of a Note, the Indenture, the Guarantees or the Notes may be
amended or supplemented to cure any ambiguity, defect or inconsistency, to
provide for Definitive Notes in addition to or in place of uncertificated Notes,
to provide for the assumption of the Company's or any Guarantor's obligations to
Holders of the Notes in case of a merger or consolidation, to make any change
that would provide any additional rights or benefits to the Holders of the Notes
or the Guarantees or that does not adversely affect the legal rights under the
Indenture or the Guarantees of any such Holder, or to comply with the
requirements of the SEC in order to effect or maintain the qualification of the
Indenture under the Trust Indenture Act.
12. DEFAULTS AND REMEDIES. An Event of Default occurs if: (a) there shall
be a default in the payment of any interest upon any Note when it becomes due
and payable, and such default continues for a period of 30 days (whether or not
the payment thereof is prohibited by Articles 10 or 11 of the Indenture);
(b) there shall be a default in the payment of the principal of (or premium, if
any, on) any Note at its Maturity (whether or not the payment thereof is
prohibited by Articles 10 or 11 of the Indenture); (c) there shall be a default
in the payment of principal or interest (whether or not the payment thereof is
prohibited by Articles 10 or 11 of the
A-1-5
<PAGE>
Indenture) on Notes required to be purchased pursuant to an Offer to Purchase
under Section 4.15 of the Indenture when due and payable; (d) the Company or any
Subsidiary fails to observe or perform any covenant or condition on the part of
the Company or such Subsidiary to be performed or observed pursuant to
Sections 4.07, 4.08, 4.09, 4.10, 4.11, 4.12, 4.16, 4.17, 4.18, 4.29, or 5.01 of
the Indenture; and, in the case of Sections 4.09 and 4.12, such failure
continues for 30 days after the Company has knowledge of such failure; (e) the
Company, any Subsidiary or Guarantor defaults in the performance of, or
breaches, any other covenant or warranty of the Company or such Subsidiary or
Guarantor in the Indenture or Guarantee and such default or breach continues for
60 days after there has been given, by registered or certified mail, to the
Company by the Trustee or to the Company and the Trustee by the Holders of at
least 25% in principal amount of the outstanding Notes a written notice
specifying such default or breach and requiring it to be remedied and stating
that such notice is a "NOTICE OF DEFAULT"; (f) any representation or warranty
made in writing by or on behalf of the Company or any Guarantor or by any
officer of the Company or any Guarantor in the Purchase Agreements or in any
writing furnished in connection with the transactions contemplated hereby proves
to have been false or incorrect in any material respect on the date as of which
made; (g) (i) the Company or any Subsidiary is in default (as principal or as
guarantor or other surety) in the payment of scheduled principal payments under
the Senior Credit Agreement beyond any grace period with respect thereto or (ii)
the Company or any Subsidiary is in default in the payment or performance of or
compliance with any other term of the Senior Credit Agreement or any other
condition exists, and as a consequence of such default or condition any of the
Obligations under the Senior Credit Agreement have become, or have been
declared, due and payable before its stated maturity or before its regularly
scheduled date of payment; (h) (i) the Company or any Subsidiary is in default
(as principal or as guarantor or other surety) in the payment of any principal
of or premium or make-whole amount or interest on any Indebtedness (other than
Indebtedness under the Senior Credit Agreement) that is outstanding in an
aggregate principal amount of at least $1,500,000 beyond any period of grace
provided with respect thereto, or (ii) the Company, any Subsidiary or Guarantor
is in default in the performance of or compliance with any term of any evidence
of any Indebtedness (other than Indebtedness under the Senior Credit Agreement)
in an aggregate outstanding principal amount of at least $1,500,000 or of any
mortgage, indenture or other agreement relating thereto or any other condition
exists, and as a consequence of such default or condition such Indebtedness has
become, or has been declared (or one or more Persons are entitled to declare
such Indebtedness to be), due and payable before its stated maturity or before
its regularly scheduled dates of payment, or (iii) as a consequence of the
occurrence or continuation of any event or condition (other than the passage of
time or the right of the holder of Indebtedness to convert such Indebtedness
into Equity Interests), (x) the Company or any Subsidiary has become obligated
to purchase or repay Indebtedness (other than Indebtedness under the Senior
Credit Agreement) before its regular maturity or before its regularly scheduled
dates of payment in an aggregate outstanding principal amount of at least
$1,500,000 or (y) one or more Persons have the right to require the Company or
any Subsidiary so to purchase or repay such Indebtedness; (i) a final judgment
or final judgments for the payment of money are entered by a court or courts of
competent jurisdiction against the Company or any Subsidiary of the Company and
such judgment or judgments remain undischarged for a period (during which
execution shall not be effectively stayed, bonded, or discharged) of 60 days,
provided that the aggregate of all such judgments (to the extent not paid or to
be paid by insurance) exceeds
A-1-6
<PAGE>
$1,500,000; (j) the Company, any Guarantor or any of its Significant
Subsidiaries or any group of Subsidiaries that, taken as a whole, would
constitute a Significant Subsidiary pursuant to or within the meaning of
Bankruptcy Law: (i) commences a voluntary case, (ii) consents to the entry of an
order for relief against it in an involuntary case, (iii) consents to the
appointment of a custodian of it or for all or substantially all of its
property, (iv) makes a general assignment for the benefit of its creditors, or
(v) generally is not paying its debts as they become due; (k) a court of
competent jurisdiction enters an order or decree under any Bankruptcy Law that:
(i) is for relief against the Company, any Guarantor or any of its Significant
Subsidiaries or any group of Subsidiaries that, taken as a whole, would
constitute a Significant Subsidiary in an involuntary case, (ii) appoints a
custodian of the Company, any Guarantor or any of its Significant Subsidiaries
or any group of Subsidiaries that, taken as whole, would constitute a
Significant Subsidiary or for all or substantially all of the Company, any
Guarantor or any of its Significant Subsidiaries or any group of Subsidiaries
that, taken as a whole, would constitute a Significant Subsidiary, or
(iii) orders the liquidation of the Company, any Guarantor or any of its
Significant Subsidiaries or any group of Subsidiaries that, taken as a whole,
would constitute a Significant Subsidiary; and the order or decree remains
unstayed and in effect for 60 consecutive days; or (l) any Guarantee shall for
any reason cease to be, or shall for any reason be asserted in writing by any
Guarantor not to be, in full force and effect and enforceable in accordance with
its terms. If any Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in aggregate principal amount of the then outstanding
Notes may declare all the Notes to be due and payable immediately.
Notwithstanding the foregoing, in the case an Event of Default specified in
clauses (j) or (k) of Section 6.01 of the Indenture occurs with respect to the
Company, any Guarantor or any Significant Subsidiary or any group of
Subsidiaries that, taken together, would constitute a Significant Subsidiary,
all outstanding Notes will become due and payable without further action or
notice. Holders of the Notes may not enforce the Indenture or the Notes except
as provided in the Indenture. Subject to certain limitations, Holders of a
majority in principal amount of the then outstanding Notes may direct the
Trustee in its exercise of any trust or power. The Trustee may withhold from
Holders of the Notes notice of any continuing Default or Event of Default
(except a Default or Event of Default relating to the payment of principal or
interest) if it determines that withholding notice is in their interest. The
Holders of a majority in aggregate principal amount of the Notes then
outstanding by notice to the Trustee may on behalf of the Holders of all of the
Notes waive any existing Default or Event of Default and its consequences under
the Indenture, except a continuing Default or Event of Default in the payment of
interest on, or the principal of, the Notes or a default with respect to any
covenant or provision which cannot be modified or amended without the consent of
the Holder of each outstanding Note affected.
The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and the Company is required, upon
becoming aware of any Default or Event of Default, to deliver to the Trustee a
statement specifying such Default or Event of Default.
13. GUARANTEES. The Notes are entitled to the benefits of Guarantees by
each of the Guarantors of the punctual payment when due of the Indenture
Obligations made in favor of the Trustee for the benefit of the Holders.
Reference is hereby made to Article 11 of the
A-1-7
<PAGE>
Indenture for a statement of the respective rights, limitations of rights,
duties and obligations under the Guarantees of each of the Guarantors.
14. SUBORDINATION. The Notes and the Guarantees are, to the extent and in
the manner provided in Articles 10 and 11 of the Indenture and in the
Subordination and Intercreditor Agreement, dated as of December 4, 1997, among
the initial Holders of the Notes, the Company, the Guarantors, General Electric
Capital Corporation, BankBoston, N.A., and the Trustee.
15. TRUSTEE DEALINGS WITH COMPANY. The Trustee, in its individual or any
other capacity, may make loans to, accept deposits from, and perform services
for the Company or its Affiliates, and may otherwise deal with the Company or
its Affiliates, as if it were not the Trustee.
16. NO RECOURSE AGAINST OTHERS.. A director, officer, employee,
incorporator or stockholder, of the Company, as such, shall not have any
liability for any obligations of the Company under the Notes or the Indenture or
for any claim based on, in respect of, or by reason of, such obligations or
their creation. Each Holder by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for the
issuance of the Notes.
17. AUTHENTICATION. This Note shall not be valid until authenticated by
the manual signature of the Trustee or an authenticating agent.
18. ABBREVIATIONS. Customary abbreviations may be used in the name of a
Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT
(= tenants by the entireties), JT TEN (= joint tenants with right of
survivorship and not as tenants in common), CUST (= Custodian), and WIG/M/A
(= Uniform Gifts to Minors Act).
19. ADDITIONAL RIGHTS OF HOLDERS OF TRANSFER RESTRICTED SECURITIES. In
addition to the rights provided to Holders of Notes under the Indenture, Holders
of Transfer Restricted Securities shall have all the rights set forth in the
Registration Rights Agreement dated as of December 4, 1997, among the Company,
the Guarantors and the parties named on the signature pages thereof.
20. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers
in notices of redemption as a convenience to Holders. No representation is made
as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
The Company shall furnish to any Holder upon written request and without
charge a copy of the Indenture and/or the Registration Rights Agreement.
Requests may be made to:
Recycling Industries, Inc.
A-1-8
<PAGE>
Suite 211
384 Inverness Drive South
Englewood, CO 80112
Attention:
-------------
A-1-9
<PAGE>
ASSIGNMENT FORM
To assign this Note, fill in the form below: (I) or (we) assign and
transfer this Note to
- --------------------------------------------------------------------------------
(Insert assignee's soc. sec. or tax I.D. no.)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint
---------------------------------------------------------
to transfer this Note on the books of the Company. The agent may substitute
another to act for him.
- --------------------------------------------------------------------------------
Date: Your Signature:
-------------------- -----------------------------------
(Sign exactly as your name appears
on the fact of this Note)
Signature Guarantee:
------------------------------
(Signatures(s) must be guaranteed by an eligible
Guarantor Institution (banks, stock brokers,
savings and loan associations and credit unions)
with membership in an approved siganture guarantee
Medallion program pursuant to Securities and
Exchange Commission Rule 17Ad-15 if this Note
is to be delivered other than to and in the name
of the registered Holder)
A-1-10
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Company pursuant to
Section 4.15 of the Indenture, check the box below.
/ / Section 4.15
If you want to elect to have only part of the Note purchased by the Company
pursuant to Section 4.15 of the Indenture, state the amount you elect to have
purchased:
$
------------------------
Date: Your Signature:
------------------------- ------------------------------
(Sign exactly as your name
appears on the Note)
Tax Identification No.:
----------------------
A-1-11
<PAGE>
SCHEDULE OF EXCHANGES OF NOTES(2)
The following exchanges of a part of this Global Note for other Notes have
been made:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Amount of decrease in Amount of increase in Principal Amount of this Signature of authorized
Principal Amount of this Principal Amount of this Global Note following such officer of Trustee or Note
Date of Exchange Global Note Global Note decrease (or increase) Custodian
- ---------------- ----------- ----------- ---------------------- ---------
</TABLE>
- --------------------
(2) THIS SHOULD BE INCLUDED ONLY IF THE NOTE IS ISSUED IN GLOBAL FORM.
A-1-12
<PAGE>
FORM OF GUARANTEE OF EACH OF THE GUARANTORS
The form of Guarantee shall be set forth on the Notes substantially as
follows:
GUARANTEES
For value received, each of the undersigned hereby absolutely,
unconditionally and irrevocably guarantees, jointly and severally, to
the holder of this Note the payment of principal of, premium, if any,
and interest on this Note upon which these Guarantees are endorsed in
the amounts and at the time when due and payable whether by
declaration thereof, or otherwise, and interest on the overdue
principal and interest, if any, of this Note, if lawful, and the
payment or performance of all other obligations of the Company under
the Indenture or the Notes, to the holder of this Note and the
Trustee, all in accordance with and subject to the terms and
limitations of this Note and the Indenture. These Guarantees will not
become effective until the Trustee duly executes the Certificate of
Authentication on this Note. This Guarantee shall be governed by and
construed in accordance with the laws of the State of New York,
without regard to conflict of law principles thereof. The
Indebtedness evidenced by these Guarantees are, to the extent and in
the manner provided in the Indenture, subordinate and subject in right
of payment to the prior payment in full of all Senior Debt (as defined
in the Indenture), whether outstanding on the date of the Indenture or
thereafter, and the Guarantees are issued subject to such provisions.
Dated:
NR Holdings, Inc., Recycling Industries of
Texas, Inc., Recycling Industries of South
Carolina, Inc., Recycling Industries of Iowa,
Inc., Nevada Recycling, Inc., Weissman
Industries, Inc., Recycling Industries of
Missouri, Inc., Recycling Industries of
Georgia, Inc., Recycling Industries of
Wisconsin, Inc., Recycling Industries of
Winston-Salem, Inc., Recycling Industries of
Greensboro, Inc., Recycling Industries of
Chesapeake, Inc., Wm. Lans Sons' Co. Inc.,
and Recycling Industries of Atlanta, Inc.,
By:
-------------------------------------------
Name:
Title:
EXHIBIT B-1
B-1-1
<PAGE>
FORM OF CERTIFICATE FOR EXCHANGE OR REGISTRATION OF TRANSFER
FROM U.S. GLOBAL NOTE TO REGULATION S GLOBAL NOTE
(Pursuant to Section 2.06(a)(i) of the Indenture)
State Street Bank and Trust Company
Goodwin Square
225 Asylum Street
Hartford, CT 06103
Attention: Corporate Trust Administration
Re: 13% [Series A] [Series B] Senior Subordinated
Notes due 2005 of
Recycling Industries, Inc.
Reference is hereby made to the Indenture, dated as of December 4, 1997
(the "INDENTURE") among Recycling Industries, Inc., as issuer (the "COMPANY"),
the guarantors referred to therein and State Street Bank and Trust Company, as
trustee. Capitalized terms used but not defined herein shall have the meanings
given to them in the Indenture.
This letter relates to $ _______ principal amount of Notes which are
evidenced by one or more (check one) / / Rule 144A Global Notes (CUSIP
No.__________) or / / Accredited Institutional Investor Global Notes (CUSIP
No.______) and held with the Depositary in the name of _______________ (the
"TRANSFEROR"). The Transferor has requested a transfer of such beneficial
interest in the Notes to a Person who will take delivery thereof in the form of
an equal principal amount of Notes evidenced by one or more Regulation S Global
Notes (CUSIP No. ________), which amount, immediately after such transfer, is
to be held with the Depositary through Euroclear or Cedel Bank or both (Common
Code ___________).
In connection with such request and in respect of such Notes, the
Transferor hereby certifies that such transfer has been effected in compliance
with the transfer restrictions applicable to the Global Notes and pursuant to
and in accordance with Rule 903 or Rule 904 under the United States Securities
Act of 1933, as amended (the "SECURITIES ACT"), and accordingly the Transferor
hereby further certifies that:
(1) The offer of the Notes was not made to a person in the United States;
(2) either:
(a) at the time the buy order was originated, the transferee was
outside the United States or the Transferor and any person acting
on its behalf reasonably believed and believes that the
transferee was outside the United States; or
B-1-2
<PAGE>
(b) the transaction was executed in, on or through the facilities of
a designated offshore securities market and neither the
Transferor nor any person acting on its behalf knows that the
transaction was prearranged with a buyer in the United States;
(3) no directed selling efforts have been made in contravention of the
requirements of Rule 904(b) of Regulation S;
(4) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act; and
(5) upon completion of the transaction, the beneficial interest being
transferred as described above is to be held with the Depositary
through Euroclear or Cedel Bank or both (Common Code ________).
Upon giving effect to this request to exchange a beneficial interest in
such Rule 144A Global Note or Accredited Institutional Investor Global Note for
a beneficial interest in a Regulation S Global Note, the resulting beneficial
interest shall be subject to the restrictions on transfer applicable to
Regulation S Global Notes pursuant to the Indenture and the Securities Act.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company. Terms used in this certificate and not
otherwise defined in the Indenture have the meanings set forth in Regulation S
under the Securities Act.
----------------------------------------
[Insert Name of Transferor]
By:
-------------------------------------
Name:
Title:
Dated:
--------------------------
cc: Recycling Industries, Inc.
B-1-3
<PAGE>
EXHIBIT B-2
FORM OF CERTIFICATE FOR EXCHANGE OR REGISTRATION OF TRANSFER
FROM REGULATION S GLOBAL NOTE TO RULE 144A GLOBAL NOTE OR
ACCREDITED INSTITUTIONAL INVESTOR GLOBAL NOTE
(Pursuant to Section 2.06(a)(ii) of the Indenture)
State Street Bank and Trust Company
Goodwin Square
225 Asylum Street
Hartford, CT 06103
Attention: Corporate Trust Administration
Re: 13% [Series A] [Series B] Senior Subordinated Notes due 2005 of
American Recycling, Inc.
Reference is hereby made to the Indenture, dated as of December 4, 1997
(the "INDENTURE"), among Recycling Industries, Inc., as issuer (the "COMPANY"),
the guarantors referred to therein and State Street Bank and Trust Company, as
trustee. Capitalized terms used but not defined herein shall have the meanings
given to them in the Indenture.
This letter relates to $___________ principal amount of Notes which are
evidenced by one or more Regulations Global Notes (CUSIP No.___________ ) and
held with the Depositary through Euroclear or Cedel Bank or both (Common Code
_______________) in the name of _________________________ (the "TRANSFEROR").
The Transferor has requested a transfer of such beneficial interest in the Notes
to a Person who will take delivery thereof in the form of an equal principal
amount of Notes evidenced by one or more (check one) / / Rule 144A Global Notes
(CUSIP No.___________), or / / Accredited Institutional Investor Global Note
(CUSIP No. ___________), to be held with the Depositary.
In connection with such request and in respect of such Notes, the
Transferor hereby certifies that:
[CHECK ONE]
/ / such transfer is being effected pursuant to and in accordance with
Rule 144A under the United States Securities Act of 1933, as amended
(the "SECURITIES ACT"), and, accordingly, the Transferor hereby
further certifies that the Notes are being transferred to a Person
that the Transferor reasonably believes is purchasing the Notes for
its own account, or for one or more accounts with respect to which
such Person exercises sole investment discretion, and such Person and
each such account is a "QUALIFIED INSTITUTIONAL BUYER" within the
meaning of Rule 144A in a transaction meeting the requirements of Rule
144A;
B-2-1
<PAGE>
or
/ / such transfer is being effected pursuant to and in accordance with
Rule 144 under the Securities Act;
or
/ / such transfer is being effected pursuant to and in accordance with an
effective registration statement under the Securities Act;
or
/ / such transfer is being effected pursuant to and in accordance with an
exemption from the registration requirements of the Securities Act
other than Rule 144A or Rule 144, and the Transferor hereby further
certifies that the Notes are being transferred in compliance with the
transfer restrictions applicable to the Global Notes and in accordance
with the requirements of the exemption claimed, which certification is
supported by an Opinion of Counsel, provided by the transferor or the
transferee (a copy of which the Transferor has attached to this
certification) in form reasonably acceptable to the Company and to the
Registrar, to the effect that such transfer is in compliance with the
Securities Act;
and such Notes are being transferred in compliance with any applicable
blue sky securities laws of any state of the United States.
Upon giving effect to this request to exchange a beneficial interest
in Regulation S Global Notes for a beneficial interest in Rule 144A Global Notes
or Accredited Institutional Investor Global Notes, as the case may be, the
resulting beneficial interest shall be subject to the restrictions on transfer
applicable to Rule 144A Global Notes or Accredited Institutional Investor Global
Notes, as the case may be, pursuant to the Indenture and the Securities Act.
B-2-2
<PAGE>
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company. Terms used in this certificate and not
otherwise defined in the Indenture have the meanings set forth in Regulation S
under the Securities Act.
----------------------------------------
[Insert Name of Transferor]
By:
-------------------------------------
Name:
Title:
Dated:
----------------------------
cc: Recycling Industries, Inc.
B-2-3
<PAGE>
EXHIBIT B-3
FORM OF CERTIFICATE FOR EXCHANGE OR REGISTRATION OF TRANSFER
FROM RULE 144A GLOBAL NOTE OR ACCREDITED INSTITUTIONAL INVESTOR
GLOBAL NOTE TO ACCREDITED INSTITUTIONAL INVESTOR GLOBAL NOTE
OR RULE 144A GLOBAL NOTE, RESPECTIVELY
(Pursuant to Section 2.06(a)(iii) of the Indenture)
State Street Bank and Trust Company
Goodwin Square
225 Asylum Street
Hartford, CT 06103
Attention: Corporate Trust Administration
Re: 13% [Series A] [Series B] Senior Subordinated Notes due 2005 of
Recycling Industries, Inc.
Reference is hereby made to the Indenture, dated as of December 4, 1997
(the "INDENTURE"), among Recycling Industries, Inc., as issuer (the "COMPANY"),
the guarantors referred to therein and State Street Bank and Trust Company, as
trustee. Capitalized terms used but not defined herein shall have the meanings
given to them in the Indenture.
This letter relates to $_______ principal amount of Notes which are
evidenced by one or more (check one) / / Rule 144A Global Notes (CUSIP
No._______________ ) or / / Accredited Institutional Investor Global Notes
(CUSIP No.___________) and held with the Depositary in the name of
______________________ (the "TRANSFEROR"). The Transferor has requested a
transfer of such beneficial interest in such Notes to a Person who will take
delivery thereof in the form of an equal principal amount of Notes evidenced by
one or more (check one) / / Rule 144A Global Notes (CUSIP No.___________) or
/ / Accredited Institutional Investor Global Notes (CUSlP No.__________), to be
held with the Depositary.
In connection with such request and in respect of such Notes, the
Transferor hereby certifies that:
[CHECK ONE]
/ / such transfer is being effected pursuant to and in accordance with
Rule 144A under the United States Securities Act of 1933, as amended
(the "SECURITIES ACT"), and, accordingly, the Transferor hereby
further certifies that the Notes are being transferred to a Person
that the Transferor reasonably believes is purchasing the Notes for
its own account, or for one or more accounts with respect to which
such Person exercises sole investment discretion, and such Person and
each such
B-3-1
<PAGE>
account is a "QUALIFIED INSTITUTIONAL BUYER" within the meaning of
Rule 144A in a transaction meeting the requirements of Rule 144A;
or
/ / such transfer is being effected pursuant to and in accordance with
Rule 144 under the Securities Act;
or
/ / such transfer is being effected pursuant to and in accordance with an
effective registration statement under the Securities Act;
or
/ / such transfer is being effected pursuant to and in accordance with an
exemption from the registration requirements of the Securities Act
other than Rule 144A or Rule 144, and the Transferor hereby further
certifies that the Notes are being transferred in compliance with the
transfer restrictions applicable to the Global Notes and in accordance
with the requirements of the exemption claimed, which certification is
supported by an Opinion of Counsel, provided by the transferor or the
transferee (a copy of which the Transferor has attached to this
certification) in form reasonably acceptable to the Company and to the
Registrar, to the effect that such transfer is in compliance with the
Securities Act;
and such Notes are being transferred in compliance with any applicable
blue sky securities laws of any state of the United States.
Upon giving effect to this request to exchange a beneficial interest
in Rule 144A Global Notes or Accredited Institutional Investor Global Notes for
a beneficial interest in Accredited Institutional Investor Global Notes or Rule
144A Global Notes, as the case may be, the resulting beneficial interest shall
be subject to the restrictions on transfer applicable to Rule 144A Global Notes
or Accredited Institutional Investor Global Notes, as the case may be, pursuant
to the Indenture and the Securities Act.
B-3-2
<PAGE>
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company. Terms used in this certificate and not
otherwise defined in the Indenture have the meanings set forth in Regulation S
under the Securities Act.
----------------------------------------
[Insert Name of Transferor]
By:
-------------------------------------
Name:
Title:
Dated:
---------------------------
cc: Recycling Industries, Inc.
B-3-3
<PAGE>
EXHIBIT B-4
FORM OF CERTIFICATE FOR EXCHANGE OR REGISTRATION OF TRANSFER
OF DEFINITIVE NOTES
(Pursuant to Section 2.06(b) of the Indenture)
State Street Bank and Trust Company
Goodwin Square
225 Asylum Street
Hartford, CT 06103
Attention: Corporate Trust Administration
Re: 13% [Series A][Series B] Senior Subordinated Notes due 2005 of
Recycling Industries, Inc.
Reference is hereby made to the Indenture, dated as of December 4, 1997
(the"INDENTURE"), among Recycling Industries, Inc., as issuer (the "COMPANY"),
the guarantors referred to therein and State Street Bank and Trust Company, as
trustee. Capitalized terms used but not defined herein shall have the meanings
given to them in the Indenture.
This letter relates to $_______ principal amount of Notes which are
evidenced by one or more Definitive Notes (CUSIP No.________) and registered
with the Registrar in the name of __________________ (the "TRANSFEROR"). The
Transferor has requested an exchange or transfer of such Definitive Note(s) in
the form of an equal principal amount of Notes evidenced by one or more
Definitive Notes (CUSIP No.__________), to be delivered to the Transferor or, in
the case of a transfer of such Notes, to such Person as the Transferor instructs
the Trustee.
In connection with such request and in respect of the Notes surrendered to
the Trustee herewith for exchange (the "SURRENDERED NOTES"), the Holder of such
Surrendered Notes hereby certifies that:
[CHECK ONE]
/ / the Surrendered Notes are being acquired for the Transferor's own
account, without transfer;
or
/ / the Surrendered Notes are being transferred to the Company;
or
/ / the Surrendered Notes are being transferred pursuant to and in
accordance with Rule 144A under the United States Securities Act of
1933, as amended (the
B-4-1
<PAGE>
"SECURITIES ACT"), and, accordingly, the Transferor hereby further
certifies that the Surrendered Notes are being transferred to a Person
that the Transferor reasonably believes is purchasing the Surrendered
Notes for its own account, or for one or more accounts with respect to
which such Person exercises sole investment discretion, and such
Person and each such account is a "QUALIFIED INSTITUTIONAL BUYER"
within the meaning of Rule 144A, in each case in a transaction meeting
the requirements of Rule 144A;
or
/ / the Surrendered Notes are being transferred pursuant to and in
accordance with Rule 144 under the Securities Act;
or
/ / the Surrendered Notes are being transferred pursuant to and in
accordance with an effective registration statement under the
Securities Act;
or
/ / such transfer is being effected pursuant to and in accordance with an
exemption from the registration requirements of the Securities Act
other than Rule 144A or Rule 144, and the Transferor hereby further
certifies that the Notes are being transferred in compliance with the
transfer restrictions applicable to the Global Notes and in accordance
with the requirements of the exemption claimed, which certification is
supported by an Opinion of Counsel, provided by the transferor or the
transferee (a copy of which the Transferor has attached to this
certification) in form reasonably acceptable to the Company and to the
Registrar, to the effect that such transfer is in compliance with the
Securities Act;
and the Surrendered Notes are being transferred in compliance with any
applicable blue sky securities laws of any state of the United States.
B-4-2
<PAGE>
This certificate and the statements contained herein are made for your benefit
and the benefit of the Company. Terms used in this certificate and not
otherwise defined in the Indenture have the meanings set forth in Regulation S
under the Securities Act.
----------------------------------------
[Insert Name of Transferor]
By:
-------------------------------------
Name:
Title:
Dated:
---------------------------
cc: Recycling Industries, Inc.
B-4-3
<PAGE>
EXHIBIT B-5
FORM OF CERTIFICATE FOR EXCHANGE OR REGISTRATION OF TRANSFER FROM
RULE 144A GLOBAL NOTE, ACCREDITED INSTITUTIONAL INVESTOR GLOBAL
NOTE OR REGULATION S GLOBAL NOTE TO DEFINITIVE NOTE
(Pursuant to Section 2.06(c) of the Indenture)
State Street Bank and Trust Company
Goodwin Square
225 Asylum Street
Hartford, CT 06103
Attention: Corporate Trust Administration
Re: 13% [Series A] [Series B] Senior Subordinated Notes due 2005 of
Recycling Industries, Inc.
Reference is hereby made to the Indenture, dated as of December 4, 1997
(the "INDENTURE"), among Recycling Industries, Inc., as issuer (the "COMPANY"),
the guarantors referred to therein and State Street Bank and Trust Company, as
trustee. Capitalized terms used but not defined herein shall have the meanings
given to them in the Indenture.
This letter relates to $_________ principal amount of Notes which are
evidenced by one or more (check one) / / Rule 144A Global Notes (CUSIP No.
_________) or / / Accredited Institutional Investor Global Notes (CUSIP
No._________) or / / Regulation S Global Notes (CUSIP No. _______) and held
with the Depositary through Euroclear or Cedel Bank or both in the name of
(the "TRANSFEROR"). The Transferor has requested a transfer of such
beneficial interest in the Notes to a Person who will take delivery thereof
in the form of an equal principal amount of Notes evidenced by one or more
Definitive Notes (CUSIP No.________), to be registered with the Registrar in
the name of _____________.
In connection with such request and in respect of the Notes surrendered to
the Trustee herewith for exchange (the "SURRENDERED NOTES"), the Holder of such
Surrendered Notes hereby certifies that:
[CHECK ONE]
/ / the Surrendered Notes are being transferred to the beneficial owner of
such Notes;
or
/ / the Surrendered Notes are being transferred pursuant to and in
accordance with Rule 144A under the United States Securities Act of
1933, as amended (the "SECURITIES ACT"), and, accordingly, the
Transferor hereby further certifies that the Surrendered Notes are
being transferred to a Person that the Transferor reasonably
B-5-1
<PAGE>
believes is purchasing the Surrendered Notes for its own account, or
for one or more accounts with respect to which such Person exercises
sole investment discretion, and such Person and each such account is a
"QUALIFIED INSTITUTIONAL BUYER" within the meaning of Rule 144A, in
each case in a transaction meeting the requirements of Rule 144A;
or
/ / the Surrendered Notes are being transferred pursuant to and in
accordance with Rule 144 under the Securities Act;
or
/ / the Surrendered Notes are being transferred pursuant to and in
accordance with an effective registration statement under the
Securities Act;
or
/ / such transfer is being effected pursuant to an exemption from the
registration requirements of the Securities Act other than Rule 144A
or Rule 144, and the Transferor hereby further certifies that the
Notes are being transferred in compliance with the transfer
restrictions applicable to the Global Notes and in accordance with the
requirements of the exemption claimed, which certification is
supported by an Opinion of Counsel, provided by the transferor or the
transferee (a copy of which the Transferor has attached to this
certification) in form reasonably acceptable to the Company and to the
Registrar, to the effect that such transfer is in compliance with the
Securities Act;
and the Surrendered Notes are being transferred in compliance with any
applicable blue sky securities laws of any state of the United States.
B-5-2
<PAGE>
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company. Terms used in this certificate and not
otherwise defined in the Indenture have the meanings set forth in Regulation S
under the Securities Act.
----------------------------------------
[Insert Name of Transferor]
By:
-------------------------------------
Name:
Title:
Dated:
---------------------------
cc: Recycling Industries, Inc.
B-5-3
<PAGE>
EXHIBIT B-6
FORM OF CERTIFICATE FOR EXCHANGE OR REGISTRATION OF TRANSFER
FROM DEFINITIVE NOTE TO RULE 144A GLOBAL
NOTE, ACCREDITED INSTITUTIONAL INVESTOR GLOBAL
NOTE OR REGULATION S PERMANENT GLOBAL NOTE
(Pursuant to Section 2.06(e) of the Indenture)
State Street Bank and Trust Company
Goodwin Square
225 Asylum Street
Hartford, CT 06103
Attention: Corporate Trust Administration
Re: 13% [Series A] [Series B] Senior Subordinated Notes due 2005 of
Recycling Industries, Inc.
Reference is hereby made to the Indenture, dated as of December 4, 1997
(the "INDENTURE"), among Recycling Industries, Inc., as issuer (the "COMPANY"),
the guarantors referred to therein and State Street Bank and Trust Company, as
trustee. Capitalized terms used but not defined herein shall have the meanings
given to them in the Indenture.
This letter relates to $________ principal amount of Notes which are
evidenced by one or more Definitive Notes (CUSIP No._________ ) and
registered with the Registrar in the name of _________________ (the
"TRANSFEROR"). The Transferor has requested a transfer of such Definitive
Notes to a Person who will take delivery thereof in the form of an equal
beneficial interest in Global Notes evidenced by one or more (check one) / /
Rule 144A Global Notes (CUSIP No.________) or / / Accredited Institutional
Investor Global Notes (CUSIP No.________ ) or / / Regulation S Global Notes
(CUSIP No._________), which amount, immediately after such transfer, is to be
held with the Depositary through Euroclear or Cedel Bank or both (Common Code
____________).
In connection with such request and in respect of the Notes surrendered to
the Trustee herewith for exchange (the "SURRENDERED NOTES"), the Holder of such
Surrendered Notes hereby certifies that:
[CHECK ONE]
/ / the Surrendered Notes are being transferred to the beneficial owner of
such Notes;
or
B-6-1
<PAGE>
/ / the Surrendered Notes are being transferred pursuant to and in
accordance with Rule 144A under the United States Securities Act of
1933, as amended (the "SECURITIES ACT"), and, accordingly, the
Transferor hereby further certifies that the Surrendered Notes are
being transferred to a Person that the Transferor reasonably believes
is purchasing the Surrendered Notes for its own account, or for one or
more accounts with respect to which such Person exercises sole
investment discretion, and such Person and each such account is a
"QUALIFIED INSTITUTIONAL BUYER" within the meaning of Rule 144A, in
each case in a transaction meeting the requirements of Rule 144A;
or
/ / the Surrendered Notes are being transferred pursuant to and in
accordance with Rule 144 under the Securities Act;
or
/ / the Surrendered Notes are being transferred pursuant to and in
accordance with an effective registration statement under the
Securities Act;
or
/ / such transfer is being effected pursuant to and in accordance with an
exemption from the registration requirements of the Securities Act
other than Rule 144A or Rule 144, and the Transferor hereby further
certifies that the Notes are being transferred in compliance with the
transfer restrictions applicable to the Global Notes and in accordance
with the requirements of the exemption claimed, which certification is
supported by an Opinion of Counsel, provided by the transferor or the
transferee (a copy of which the Transferor has attached to this
certification) in form reasonably acceptable to the Company and to the
Registrar, to the effect that such transfer is in compliance with the
Securities Act;
or
/ / such transfer is being effected pursuant to and in accordance with
Rule 903 or Rule 904 under the Securities Act, and accordingly the
Transferor hereby further certifies that:
(1) The offer of the Notes was not made to a person in the United
States;
(2) either:
(a) at the time the buy order was originated, the transferee was
outside the United States or the Transferor and any person
acting on its
B-6-2
<PAGE>
behalf reasonably believed and believes that the transferee
was outside the United States; or
(b) the transaction was executed in, on or through the
facilities of a designated offshore securities market and
neither the Transferor nor any person acting on its behalf
knows that the transaction was prearranged with a buyer in
the United States;
(3) no directed selling efforts have been made in contravention of
the requirements of Rule 904(b) of Regulation S;
(4) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act; and
(5) upon completion of the transaction, the beneficial interest being
transferred as described above is to be held with the Depositary
through Euroclear or Cedel Bank or both (Common Code ).
Upon giving effect to this request to exchange a Definitive Note for a
beneficial interest in such Rule 144A Global Note, Accredited Institutional
Investor Global Note or Regulation S Global Note, the resulting beneficial
interest shall be subject to the restrictions on transfer applicable to
Global Notes pursuant to the Indenture and the Securities Act.
and the Surrendered Notes are being transferred in compliance with any
applicable blue sky securities laws of any state of the United States.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company. Terms used in this certificate and not
otherwise defined in the Indenture have the meanings set forth in Regulation S
under the Securities Act.
----------------------------------------
[Insert Name of Transferor]
By:
-------------------------------------
Name:
Title:
Dated:
---------------------------
cc: Recycling Industries, Inc.
B-6-3
<PAGE>
- --------------------------------------------------------------------------------
CREDIT AGREEMENT
Dated as of December 4, 1997
Among
RECYCLING INDUSTRIES, INC.,
as Borrower Representative
NEVADA RECYCLING, INC.,
RECYCLING INDUSTRIES OF TEXAS, INC.,
RECYCLING INDUSTRIES OF MISSOURI, INC.,
RECYCLING INDUSTRIES OF GEORGIA, INC.,
RECYCLING INDUSTRIES OF ATLANTA, INC.,
WEISSMAN INDUSTRIES, INC.,
RECYCLING INDUSTRIES OF SOUTH CAROLINA, INC.,
RECYCLING INDUSTRIES OF CHESAPEAKE, INC.,
RECYCLING INDUSTRIES OF GREENSBORO, INC.,
RECYCLING INDUSTRIES OF WINSTON-SALEM, INC.,
WM. LANS SONS' CO. INC.
and
RECYCLING INDUSTRIES OF WISCONSIN, INC.
as Borrowers,
THE OTHER CREDIT PARTIES SIGNATORY HERETO,
as Credit Parties,
THE LENDERS SIGNATORY HERETO
FROM TIME TO TIME,
as Lenders,
and
GENERAL ELECTRIC CAPITAL CORPORATION,
as Agent and Lender
BankBoston, N.A., as Documentation Agent and Lender
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
1. AMOUNT AND TERMS OF CREDIT. . . . . . . . . . . . . . . . . . . . . . . 2
1.1. CREDIT FACILITIES. . . . . . . . . . . . . . . . . . . . . . 2
1.2. LETTERS OF CREDIT. . . . . . . . . . . . . . . . . . . . . . 9
1.3. PREPAYMENTS. . . . . . . . . . . . . . . . . . . . . . . . . 9
1.4. USE OF PROCEEDS. . . . . . . . . . . . . . . . . . . . . . .13
1.5. INTEREST AND APPLICABLE MARGINS. . . . . . . . . . . . . . .13
1.6. ELIGIBLE ACCOUNTS AND ELIGIBLE MEXICAN ACCOUNTS. . . . . . .17
1.7. ELIGIBLE INVENTORY.. . . . . . . . . . . . . . . . . . . . .21
1.8. CASH MANAGEMENT SYSTEMS. . . . . . . . . . . . . . . . . . .22
1.9. FEES.. . . . . . . . . . . . . . . . . . . . . . . . . . . .23
1.10. RECEIPT OF PAYMENTS.. . . . . . . . . . . . . . . . . . . .23
1.11. APPLICATION AND ALLOCATION OF PAYMENTS. . . . . . . . . . .23
1.12. LOAN ACCOUNT AND ACCOUNTING.. . . . . . . . . . . . . . . .24
1.13. INDEMNITY.. . . . . . . . . . . . . . . . . . . . . . . . .25
1.14. ACCESS. . . . . . . . . . . . . . . . . . . . . . . . . . .26
1.15. TAXES.. . . . . . . . . . . . . . . . . . . . . . . . . . .26
1.16. CAPITAL ADEQUACY; INCREASED COSTS; ILLEGALITY.. . . . . . .27
1.17. SINGLE LOAN.. . . . . . . . . . . . . . . . . . . . . . . .29
2. CONDITIONS PRECEDENT. . . . . . . . . . . . . . . . . . . . . . . . . .29
2.1. CONDITIONS TO THE INITIAL LOANS . . . . . . . . . . . . . .29
2.2. FURTHER CONDITIONS TO EACH LOAN . . . . . . . . . . . . . .32
2.3. CONDITIONS TO EACH ACQUISITION ADVANCE. . . . . . . . . . .33
2.4. ELIGIBILITY OF ACCOUNTS AND INVENTORY OF TARGETS. . . . . .36
3. REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . .36
3.1. CORPORATE EXISTENCE; COMPLIANCE WITH LAW. . . . . . . . . .36
3.2. EXECUTIVE OFFICES; FEIN . . . . . . . . . . . . . . . . . .37
3.3. CORPORATE POWER, AUTHORIZATION, ENFORCEABLE OBLIGATIONS . .37
3.4. FINANCIAL STATEMENTS AND PROJECTIONS. . . . . . . . . . . .37
3.5. MATERIAL ADVERSE EFFECT . . . . . . . . . . . . . . . . . .38
3.6. OWNERSHIP OF PROPERTY; LIENS. . . . . . . . . . . . . . . .39
3.7. LABOR MATTERS . . . . . . . . . . . . . . . . . . . . . . .39
3.8. VENTURES, SUBSIDIARIES AND AFFILIATES; OUTSTANDING
STOCK AND INDEBTEDNESS. . . . . . . . . . . . . . . . . . .40
3.9. GOVERNMENT REGULATION . . . . . . . . . . . . . . . . . . .40
3.10. MARGIN REGULATIONS. . . . . . . . . . . . . . . . . . . . .40
3.11. TAXES.. . . . . . . . . . . . . . . . . . . . . . . . . . .41
3.12. ERISA.. . . . . . . . . . . . . . . . . . . . . . . . . . .41
3.13. NO LITIGATION.. . . . . . . . . . . . . . . . . . . . . . .42
3.14. BROKERS.. . . . . . . . . . . . . . . . . . . . . . . . . .42
3.15. INTELLECTUAL PROPERTY.. . . . . . . . . . . . . . . . . . .42
3.16. FULL DISCLOSURE.. . . . . . . . . . . . . . . . . . . . . .42
3.17. ENVIRONMENTAL MATTERS.. . . . . . . . . . . . . . . . . . .43
<PAGE>
3.18. INSURANCE.. . . . . . . . . . . . . . . . . . . . . . . . .44
3.19. DEPOSIT AND DISBURSEMENT ACCOUNTS.. . . . . . . . . . . . .44
3.20. GOVERNMENT CONTRACTS. . . . . . . . . . . . . . . . . . . .44
3.21. CUSTOMER AND TRADE RELATIONS. . . . . . . . . . . . . . . .44
3.22. AGREEMENTS AND OTHER DOCUMENTS. . . . . . . . . . . . . . .44
3.23. SOLVENCY. . . . . . . . . . . . . . . . . . . . . . . . . .45
3.24. CURRENT ACQUISITION AGREEMENTS. . . . . . . . . . . . . . .45
3.25. SUBORDINATED DEBT.. . . . . . . . . . . . . . . . . . . . .45
4. FINANCIAL STATEMENTS AND INFORMATION. . . . . . . . . . . . . . . . . .46
4.1. REPORTS AND NOTICES . . . . . . . . . . . . . . . . . . . .46
4.2. COMMUNICATION WITH ACCOUNTANTS. . . . . . . . . . . . . . .46
5. AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . .46
5.1. MAINTENANCE OF EXISTENCE AND CONDUCT OF BUSINESS. . . . . .46
5.2. PAYMENT OF OBLIGATIONS. . . . . . . . . . . . . . . . . . .47
5.3. BOOKS AND RECORDS . . . . . . . . . . . . . . . . . . . . .47
5.4. INSURANCE; DAMAGE TO OR DESTRUCTION OF COLLATERAL . . . . .47
5.5. COMPLIANCE WITH LAWS. . . . . . . . . . . . . . . . . . . .49
5.6. SUPPLEMENTAL DISCLOSURE . . . . . . . . . . . . . . . . . .49
5.7. INTELLECTUAL PROPERTY . . . . . . . . . . . . . . . . . . .50
5.8. ENVIRONMENTAL MATTERS . . . . . . . . . . . . . . . . . . .50
5.9. LANDLORDS' AGREEMENTS, MORTGAGEE AGREEMENTS AND
BAILEE LETTERS. . . . . . . . . . . . . . . . . . . . . . .51
5.10. FURTHER ASSURANCES . . . . . . . . . . . . . . . . . . . .52
5.11. EXCLUDED PROPERTY . . . . . . . . . . . . . . . . . . . . .52
5.12. REACTIVATION PLAN . . . . . . . . . . . . . . . . . . . . .52
6. NEGATIVE COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . . .52
6.1. MERGERS, SUBSIDIARIES, ETC. . . . . . . . . . . . . . . . .52
6.2. INVESTMENTS; LOANS AND ADVANCES . . . . . . . . . . . . . .53
6.3. INDEBTEDNESS. . . . . . . . . . . . . . . . . . . . . . . .53
6.4. EMPLOYEE LOANS AND AFFILIATE TRANSACTIONS . . . . . . . . .54
6.5. CAPITAL STRUCTURE AND BUSINESS. . . . . . . . . . . . . . .55
6.6. GUARANTEED INDEBTEDNESS . . . . . . . . . . . . . . . . . .55
6.7. LIENS . . . . . . . . . . . . . . . . . . . . . . . . . . .55
6.8. SALE OF STOCK AND ASSETS. . . . . . . . . . . . . . . . . .56
6.9. ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . .56
6.10. FINANCIAL COVENANTS . . . . . . . . . . . . . . . . . . . .56
6.11. HAZARDOUS MATERIALS.. . . . . . . . . . . . . . . . . . . .56
6.12. SALE-LEASEBACKS.. . . . . . . . . . . . . . . . . . . . . .57
6.13. CANCELLATION OF INDEBTEDNESS. . . . . . . . . . . . . . . .57
6.14. RESTRICTED PAYMENTS.. . . . . . . . . . . . . . . . . . . .57
6.15. CHANGE OF CORPORATE NAME OR LOCATION;
CHANGE OF FISCAL YEAR.. . . . . . . . . . . . . . . . . . .57
6.16. NO IMPAIRMENT OF INTERCOMPANY TRANSFERS . . . . . . . . . .58
6.17. NO SPECULATIVE TRANSACTIONS.. . . . . . . . . . . . . . . .58
6.18. LEASES. . . . . . . . . . . . . . . . . . . . . . . . . . .58
ii
<PAGE>
6.19. CHANGES RELATING TO SUBORDINATED DEBT . . . . . . . . . . .58
6.20. INCONSISTENT AGREEMENTS . . . . . . . . . . . . . . . . . .58
6.21. ACQUISITION DOCUMENTS . . . . . . . . . . . . . . . . . . .59
7. TERM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .59
7.1. TERMINATION. . . . . . . . . . . . . . . . . . . . . . . . .59
7.2. SURVIVAL OF OBLIGATIONS UPON TERMINATION OF FINANCING
ARRANGEMENTS . . . . . . . . . . . . . . . . . . . . . . . .59
8. EVENTS OF DEFAULT: RIGHTS AND REMEDIES. . . . . . . . . . . . . . . . .59
8.1. EVENTS OF DEFAULT. . . . . . . . . . . . . . . . . . . . . .59
8.2. REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . .62
8.3. WAIVERS BY CREDIT PARTIES. . . . . . . . . . . . . . . . . .62
9. ASSIGNMENT AND PARTICIPATIONS; APPOINTMENT OF AGENTS. . . . . . . . . .63
9.1. ASSIGNMENT AND PARTICIPATIONS. . . . . . . . . . . . . . . .63
9.2. APPOINTMENT OF AGENTS. . . . . . . . . . . . . . . . . . . .65
9.3. AGENTS' RELIANCE, ETC. . . . . . . . . . . . . . . . . . . .65
9.4. AGENTS AND AFFILIATES. . . . . . . . . . . . . . . . . . . .66
9.5. LENDER CREDIT DECISION.. . . . . . . . . . . . . . . . . . .66
9.6. INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . .67
9.7. SUCCESSOR AGENT. . . . . . . . . . . . . . . . . . . . . . .67
9.8. SETOFF AND SHARING OF PAYMENTS.. . . . . . . . . . . . . . .68
9.9. ADVANCES; PAYMENTS; NON-FUNDING LENDERS; INFORMATION;
ACTIONS IN CONCERT.. . . . . . . . . . . . . . . . . . . . .68
10. SUCCESSORS AND ASSIGNS . . . . . . . . . . . . . . . . . . . . . . . .71
10.1. SUCCESSORS AND ASSIGNS. . . . . . . . . . . . . . . . . . .71
11. MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . .71
11.1. COMPLETE AGREEMENT; MODIFICATION OF AGREEMENT. . . . . . .71
11.2. AMENDMENTS AND WAIVERS . . . . . . . . . . . . . . . . . .71
11.3. FEES AND EXPENSES. . . . . . . . . . . . . . . . . . . . .73
11.4. NO WAIVER. . . . . . . . . . . . . . . . . . . . . . . . .75
11.5. REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . .75
11.6. SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . .75
11.7. CONFLICT OF TERMS. . . . . . . . . . . . . . . . . . . . .75
11.8. CONFIDENTIALITY. . . . . . . . . . . . . . . . . . . . . .75
11.9. GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . .76
11.10. NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . .77
11.11. SECTION TITLES.. . . . . . . . . . . . . . . . . . . . . .77
11.12. COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . .77
11.13. WAIVER OF JURY TRIAL . . . . . . . . . . . . . . . . . . .78
11.14. PRESS RELEASES . . . . . . . . . . . . . . . . . . . . . .78
11.15. REINSTATEMENT. . . . . . . . . . . . . . . . . . . . . . .78
11.16. ADVICE OF COUNSEL. . . . . . . . . . . . . . . . . . . . .79
11.17. NO STRICT CONSTRUCTION . . . . . . . . . . . . . . . . . .79
iii
<PAGE>
12. CROSS-GUARANTY . . . . . . . . . . . . . . . . . . . . . . . . . . . .79
12.1. CROSS-GUARANTY. . . . . . . . . . . . . . . . . . . . . . .79
12.2. WAIVERS BY CREDIT PARTIES . . . . . . . . . . . . . . . . .80
12.3. BENEFIT OF GUARANTY . . . . . . . . . . . . . . . . . . . .80
12.4. SUBORDINATION OF SUBROGATION, ETC . . . . . . . . . . . . .80
12.5. ELECTION OF REMEDIES. . . . . . . . . . . . . . . . . . . .80
12.6. LIMITATION. . . . . . . . . . . . . . . . . . . . . . . . .81
12.7. CONTRIBUTION WITH RESPECT TO GUARANTY OBLIGATIONS . . . . .81
12.8. LIABILITY CUMULATIVE. . . . . . . . . . . . . . . . . . . .82
iv
<PAGE>
INDEX OF APPENDICES
Exhibit 1.1(a)(i) - Form of Notice of Revolving Credit
Advance
Exhibit 1.1(a)(ii) - Form of Revolving Note
Exhibit 1.1(b)(i) - Form of Term A Note
Exhibit 1.1(b)(ii) - Form of Term B Note
Exhibit 1.1(b)(v) - Borrowers' Ratable Share of Term Loans
Exhibit 1.1(c)(ii) - Form of Swing Line Note
Exhibit 1.1(d)(i) - Form of Notice of Acquisition Advance
Exhibit 1.1(d)(i)(2) - Form of Joinder Agreement
Exhibit 1.1(d)(ii) - Form of Acquisition Loan Note
Exhibit 1.5(e) - Form of Notice of
Conversion/Continuation
Exhibit 4.1(b) - Form of Borrowing Base Certificate
Exhibit 9.1(a) - Form of Assignment Agreement
Schedule 1.1 - Responsible Individual
Disclosure Schedule 1.4 - Sources and Uses; Funds Flow Memorandum
Disclosure Schedule 3.2 - Executive Offices; FEIN
Disclosure Schedule 3.4(A) - Financial Statements
Disclosure Schedule 3.4(B) - Pro Forma
Disclosure Schedule 3.4(C) - Projections
Disclosure Schedule 3.6 - Real Estate and Leases
Disclosure Schedule 3.7 - Labor Matters
Disclosure Schedule 3.8 - Ventures, Subsidiaries and Affiliates;
Outstanding Stock
Disclosure Schedule 3.11 - Tax Matters
Disclosure Schedule 3.12 - ERISA Plans
Disclosure Schedule 3.13 - Litigation
Disclosure Schedule 3.14 - Brokers Advisor's Fees
Disclosure Schedule 3.15 - Intellectual Property
Disclosure Schedule 3.17 - Hazardous Materials
Disclosure Schedule 3.18 - Insurance
Disclosure Schedule 3.19 - Deposit and Disbursement Accounts
Disclosure Schedule 3.20 - Government Contracts
Disclosure Schedule 3.22 - Material Agreements
Disclosure Schedule 5.1 - Trade Names
Disclosure Schedule 6.2 - Existing Investments
Disclosure Schedule 6.3 - Indebtedness
Disclosure Schedule 6.4(a) - Transactions with Affiliates
Disclosure Schedule 6.7 - Existing Liens
Annex A (Recitals) - Definitions
Annex B (SECTION 1.2) - Letters of Credit
Annex C (SECTION 1.8) - Cash Management System
Annex D (SECTION 2.1(a)) - Schedule of Additional Closing Documents
Annex E (SECTION 4.1(a)) - Financial Statements and Projections --
Reporting
Annex F (SECTION 4.1(b)) - Collateral Reports
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Annex G (SECTION 6.10) - Financial Covenants
Annex H (SECTION 9.9(a)) - Lenders' Wire Transfer Information
Annex I (SECTION 11.10) - Notice Addresses
Annex J (Annex A -
Commitments Definition) - Commitments as of Closing Date
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CREDIT AGREEMENT, dated as of December 4, 1997 among RECYCLING
INDUSTRIES, INC., a Colorado corporation ("RII" OR THE "BORROWER
REPRESENTATIVE"), NEVADA RECYCLING, INC., a Nevada corporation ("NV BORROWER"),
RECYCLING INDUSTRIES OF TEXAS, INC., a Colorado corporation ("TX BORROWER"),
RECYCLING INDUSTRIES OF MISSOURI, INC., a Colorado corporation ("MO BORROWER"),
RECYCLING INDUSTRIES OF GEORGIA, INC., a Colorado corporation ("GA BORROWER"),
RECYCLING INDUSTRIES OF ATLANTA, INC., a Colorado corporation ("ATLANTA
BORROWER"), WEISSMAN INDUSTRIES, INC., an Iowa corporation ("WEISSMAN
BORROWER"), RECYCLING INDUSTRIES OF SOUTH CAROLINA, INC., a Colorado corporation
("SC BORROWER"), RECYCLING INDUSTRIES OF CHESAPEAKE, INC., a Colorado
corporation ("CHESAPEAKE BORROWER"), RECYCLING INDUSTRIES OF GREENSBORO, INC., a
Colorado corporation ("GREENSBORO BORROWER"), RECYCLING INDUSTRIES OF
WINSTON-SALEM, INC., a Colorado corporation ("WINSTON BORROWER"), WM. LANS SONS'
CO. INC., an Illinois corporation ("LANS BORROWER") and RECYCLING INDUSTRIES OF
WISCONSIN, INC., a Colorado corporation ("WI BORROWER") (NV Borrower, TX
Borrower, MO Borrower, GA Borrower, Atlanta Borrower, SC Borrower, Chesapeake
Borrower, Greensboro Borrower, Winston Borrower, Lans Borrower and WI Borrower
are sometimes collectively referred to herein as the "BORROWERS" and
individually as a "BORROWER"); the other Credit Parties signatory hereto;
GENERAL ELECTRIC CAPITAL CORPORATION, a New York corporation (in its individual
capacity, "GE CAPITAL"), for itself, as Lender, and as Agent for Lenders,
BankBoston, N.A., a national banking association, as Documentation Agent and a
Lender, and the other Lenders signatory hereto from time to time.
RECITALS
WHEREAS, Borrowers desire that Lenders extend revolving, term and
acquisition credit facilities to Borrowers of up to One Hundred Fifty Million
Dollars ($150,000,000) in the aggregate for the purpose of funding a portion of
the Current Acquisitions, refinancing certain indebtedness of Borrowers, funding
certain future Permitted Acquisitions, and providing (a) working capital
financing for Borrowers, and (b) funds for other general corporate purposes of
Borrowers; and for these purposes, Lenders are willing to make certain loans and
other extensions of credit to Borrowers of up to such amount upon the terms and
conditions set forth herein; and
WHEREAS, Borrowers desire to secure all of their obligations under the
Loan Documents by granting to Agent, for the benefit of Agent and Lenders, a
security interest in and lien upon all of their existing and after-acquired
personal and real property other than certain Excluded Property as defined in
the Security Agreement; and
WHEREAS, RII is willing to guaranty all of the obligations of
Borrowers to Lenders under the Loan Documents and to grant to Agent, for the
benefit of Agent and Lenders, a security interest in substantially all assets of
RII, including a pledge of all of the capital stock of NR Holdings, Inc., a
Nevada corporation ("NR HOLDINGS"), Recycling Industries of Iowa, Inc., a
Colorado corporation ("Recycling Iowa") and all Borrowers (other than NV
Borrower and Weissman Borrower) to secure such guaranty; and
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WHEREAS, NR Holdings is willing to guaranty all of the obligations of
Borrowers to Lenders under the Loan Documents and to pledge to Agent, for the
benefit of Agent and Lenders, a security interest in substantially all assets of
NR Holdings, including a pledge of all of the capital stock of NV Borrower to
secure such guaranty; and
WHEREAS, Recycling Iowa is willing to guaranty all of the obligations
of Borrowers to Lenders under the Loan Documents and to pledge to Agent, for the
benefit of Agent and Lenders, a security interest in substantially all assets of
Recycling Iowa, including a pledge of all of the capital stock of Weissman
Borrower; and
WHEREAS, capitalized terms used in this Agreement shall have the
meanings ascribed to them in ANNEX A. All Annexes, Disclosure Schedules,
Exhibits and other attachments (collectively, "APPENDICES") hereto, or expressly
identified to this Agreement, are incorporated herein by reference, and taken
together, shall constitute but a single agreement. These Recitals shall be
construed as part of the Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants hereinafter contained, and for other good and valuable consideration,
the parties hereto agree as follows:
1. AMOUNT AND TERMS OF CREDIT
1.1. CREDIT FACILITIES
(a) Revolving Credit Facility.
(i) Subject to the terms and conditions hereof, each Revolving
Lender agrees to make available from time to time until the Commitment
Termination Date its Pro Rata Share of advances (each, a "REVOLVING CREDIT
ADVANCE"). The Pro Rata Share of the Revolving Loan of any Revolving Lender
shall not at any time exceed its separate Revolving Loan Commitment. The
obligations of each Revolving Lender hereunder shall be several and not joint.
The aggregate amount of Revolving Credit Advances outstanding shall not exceed
at any time the lesser of (A) the Maximum Amount and (B) the Aggregate Borrowing
Base, in each case less the sum of the Letter of Credit Obligations and the
Swing Line Loan outstanding at such time ("BORROWING AVAILABILITY"). Moreover,
the sum of the Revolving Loan and Swing Line Loan outstanding to any Borrower
shall not exceed at any time that Borrower's separate Borrowing Base. Until the
Commitment Termination Date, Borrowers may from time to time borrow, repay and
reborrow under this SECTION 1.1(A). Each Revolving Credit Advance shall be made
on notice by Borrower Representative on behalf of the applicable Borrower to the
representative of Agent identified on SCHEDULE 1.1 at the address specified
thereon. Those notices must be given no later than (1) 11:00 a.m. (New York
time) on the Business Day of the proposed Revolving Credit Advance, in the case
of an Index Rate Loan, or (2) 11:00 a.m. (New York time) on the date which is
three (3) Business Days prior to the proposed Revolving Credit Advance, in the
case of a LIBOR Loan. Each such notice (a "NOTICE OF REVOLVING CREDIT ADVANCE")
must be given in writing (by telecopy or overnight courier) substantially in the
form of EXHIBIT 1.1(a)(i), and shall include the information required in such
Exhibit and such other information as may be required by
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Agent. If any Borrower desires to have the Revolving Credit Advances bear
interest by reference to a LIBOR Rate, Borrower Representative must comply with
SECTION 1.5(e).
(ii) The Revolving Loan Commitments of each Revolving Lender
shall be evidenced by a promissory note, dated as of the Closing Date and
substantially in the form of EXHIBIT 1.1(a)(ii) (the "REVOLVING NOTES") and each
Borrower shall execute such Revolving Note and deliver the same to each
Revolving Lender in the amount of its Revolving Loan Commitment. The Revolving
Note shall represent the obligation of each Borrower to pay the amount of each
Revolving Lender's Revolving Loan Commitment or, if less, the applicable
Revolving Lender's Pro Rata Share of the aggregate unpaid principal amount of
all Revolving Credit Advances to such Borrower together with interest thereon as
prescribed in SECTION 1.5. The entire unpaid balance of the aggregate Revolving
Loan and all other non-contingent Obligations shall be immediately due and
payable in full in immediately available funds on the Commitment Termination
Date.
(iii) At the request of Borrower Representative, in its
discretion Agent may (but shall have absolutely no obligation to), make
Revolving Credit Advances to Borrowers on behalf of Revolving Lenders in amounts
which cause the outstanding balance of the aggregate Revolving Loan to exceed
the Aggregate Borrowing Base (less the Swing Line Loan) or which cause the
outstanding balance of the Revolving Loan owing by any Borrower to exceed that
Borrower's separate Borrowing Base (less the Swing Line Loan advanced to that
Borrower) (any such excess Revolving Credit Advances are herein referred to
collectively as "OVERADVANCES"), and no such event or occurrence shall cause or
constitute a waiver by Agent or Lenders of any Default or Event of Default that
may result therefrom or of Agent's, Swing Line Lender's or Revolving Lenders'
right to refuse to make any further Overadvances, Swing Line Advances or
Revolving Credit Advances, or incur any Letter of Credit Obligations, as the
case may be, at any time that an Overadvance exists or would result therefrom.
In addition, Overadvances may be made even if the conditions to lending set
forth in SECTION 2 have not been met. All Overadvances shall constitute Index
Rate Loans, shall bear interest at the Default Rate and shall be payable on
demand. Except as otherwise provided in SECTION 1.11(b), the authority of Agent
to make Overadvances is limited to an aggregate amount not to exceed $500,000 at
any time, shall not cause the aggregate Revolving Loan to exceed the Maximum
Amount, and may be revoked prospectively by a written notice to Agent signed by
Revolving Lenders holding fifty percent (50%) or more of the Revolving Loan
Commitments.
(iv) On the Closing Date a Reserve against Borrowing
Availability will be imposed in the amount of $7,250,000 (the "Caside Reserve")
to assure the availability of sufficient funds to fund the settlement of the
Caside Associates Litigation. Solely for purposes of determining the Leverage
Ratio in accordance with Section 1.5(a), the ratio of Consolidated Senior Debt
to Operating Cash Flow in accordance with Section 2.1(l) and Section 2.3(xi),
Net Borrowing Availability in accordance with Section 2.1(d) and Section
2.3(xi), and compliance with the financial covenants set forth in Annex G, the
Caside Reserve will be deemed to be part of the Obligations outstanding
hereunder. If the settlement of the Caside Associates Litigation requires the
posting of a Letter of Credit prior to payment of the same, the amount of the
Caside Reserve will be reduced dollar for dollar by the face amount of such
Letter of Credit. Furthermore, if the settlement of the Caside Associates
Litigation is to be funded with Pre-
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Settlement Issuances and the net proceeds of those Pre-Settlement Issuances are
deposited in a cash collateral account pledged to Agent, rather than being
applied against the Revolving Loan balances, the Caside Reserve shall be reduced
dollar-for-dollar by the amount of those deposits. If the settlement of the
Caside Associates Litigation is funded in whole or in part by a Revolving Credit
Advance (a "Caside Advance"), the Caside Reserve will be concurrently reduced by
such amount (and if all amounts owing by any Borrowers in respect of the Caside
Associates Litigation shall have been thereupon fully paid, such Caside Reserve
will be concurrently eliminated). RII shall, within, one hundred eighty (180)
days following the date of the Caside Advance issue common stock and/or warrants
for common stock of RII, and/or receive cash proceeds from the exercise of
warrants or options for common stock of RII, the aggregate net proceeds of which
equity issuances and/or exercises shall equal or exceed the Caside Advance
(collectively, "POST-SETTLEMENT ISSUANCES"). RII will contribute to the capital
of Borrowers the net proceeds of the Post-Settlement Issuances, and Borrowers
will use those capital contributions to reduce the Revolving Loan balance by an
amount at least equal to the Caside Advance. Notwithstanding the foregoing, if
RII has completed one or more Pre-Settlement Issuances, the net proceeds of
which equal or exceed the Caside Reserve, no Post-Settlement Issuances are
required.
(b) TERM LOANS.
(i) Subject to the terms and conditions hereof, (A) each
Term A Lender agrees to make a term loan on the Closing Date to each Borrower (a
"TERM A LOAN") in an amount equal to such Borrower's Ratable Share of such Term
A Lender's Term A Loan Commitment; and (B) each Term B Lender agrees to make a
term loan on the Closing Date to each Borrower (a "TERM B LOAN" and together
with the Term A Loans, individually a "TERM LOAN" and collectively, the "TERM
LOANS") in an amount equal to such Borrower's Ratable Share of such Term B
Lender's Term B Loan Commitment. The obligations of each Term A Lender and each
Term B Lender hereunder shall be several and not joint. All Term A Loans shall
be evidenced by promissory notes substantially in the form of EXHIBIT 1.1(b)(i)
(the "TERM A NOTES"). The Borrowers shall execute and deliver a single Term A
Note to each Term A Lender, and each Borrower's primary obligations under that
Term A Note will equal that Borrower's Ratable Share of the Term A Loan. All
Term B Loans shall be evidenced by promissory notes substantially in the form of
EXHIBIT 1.1(b)(ii) (the "TERM B NOTE" and together with the Term A Notes,
individually a "TERM NOTE" and collectively, the "TERM NOTES"). The Borrowers
shall execute and deliver a single Term B Note to each Term B Lender, and each
Borrower's primary obligations under that Term B Note will equal that Borrower's
Ratable Share of the Term B Loan. Each Term Note shall represent the obligation
of the applicable Borrower to pay that Borrower's Ratable Share applicable to
the Term Lender's respective Term Loan Commitment to such Borrower, together
with interest thereon as prescribed in SECTION 1.5.
(ii) (A) Each Borrower shall pay its Ratable Share of the
principal amount of the Term A Loan in twenty-three (23) consecutive quarterly
installments on the last day of March, June, September and December of each
year, commencing March 31, 1998, as follows:
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Payment Installment
Date Amount
---- ------
Installments 1 through 8 $1,000,000 each;
Installments 9 through 12 1,500,000 each;
Installments 13 through 20 2,000,000 each;
Installments 21 through 23 2,500,000 each;
and a final installment due and payable on December 31, 2003 in an amount of
$2,500,000 or the then remaining principal balance of the Term A Loan if
different from such amount.
(B) Each Borrower shall pay its Ratable Share of the principal amount
of the Term B Loan in twenty-nine (29) consecutive quarterly installments on the
last day of March, June, September and December of each year, commencing March
31, 1998, as follows:
Payment Installment
Date Amount
---- ------
Installments 1 through 24 $ 100,000 each;
Installments 25 through 28 4,650,000 each;
Installment 29 4,750,000;
and a final installment due and payable on April 24, 2005 in an amount of
$14,250,000 or the then remaining principal balance of the Term B Loan if
different from such amount.
(iii) Notwithstanding the foregoing CLAUSES (A)-(B), the
aggregate outstanding principal balance of the Term Loans shall each be due and
payable in full in immediately available funds on the Commitment Termination
Date, if not sooner paid in full.
(iv) Each payment of principal with respect to the Term A Loan
and/or the Term B Loan shall be paid to Agent for the ratable benefit of each
Term Lender making a Term A Loan and/or a Term B Loan, ratably in proportion to
each such Term Lender's respective Term A Loan Commitment, and Term B Loan
Commitment, as applicable.
(v) Each Borrower shall pay its Ratable Share of each
Scheduled installment of the Term A Loan and Term B Loan. The Ratable Share of
each Borrower with respect to Term Loan A and Term Loan B is set forth on
Exhibit 1.1(b)(v). Those Ratable Shares may be adjusted from time to time after
the Closing Date to account for each Permitted Acquisition Target that becomes a
Borrower hereunder and assumes liability for a portion of the Term Loans.
Exhibit 1.1(b)(v) may be so amended and replaced from time to time with the
written agreement of Agents and Borrower Representative, and shall become part
of this Agreement unless Requisite Lenders shall object to the allocations set
forth in any amended Schedule in writing thirty (30) days following their
receipt thereof.
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(c) SWING LINE FACILITY.
(i) Agent shall notify the Swing Line Lender upon Agent's
receipt of any Notice of Revolving Credit Advance. Subject to the terms and
conditions hereof, the Swing Line Lender may, in its discretion, make available
from time to time until the Commitment Termination Date advances (each, a "SWING
LINE ADVANCE") in accordance with any such notice. The aggregate amount of
Swing Line Advances outstanding shall not exceed the lesser of (A) the Swing
Line Commitment and (B) (except for Overadvances) the lesser of the Maximum
Amount and the Aggregate Borrowing Base, in each case, less the outstanding
balance of the Revolving Loan at such time ("SWING LINE AVAILABILITY").
Moreover, except for Overadvances, the Swing Line Loan outstanding to any
Borrower shall not exceed at any time that Borrower's separate Borrowing Base
less the Revolving Loan outstanding to such Borrower. Until the Commitment
Termination Date, Borrowers may from time to time borrow, repay and reborrow
under this SECTION 1.1(c). Each Swing Line Advance shall be made pursuant to a
Notice of Revolving Credit Advance delivered to Agent by Borrower Representative
on behalf of the applicable Borrower in accordance with SECTION 1.1(a). Those
notices must be given no later than noon. (New York time) on the Business Day of
the proposed Swing Line Advance. Notwithstanding any other provision of this
Agreement or the other Loan Documents, the Swing Line Loan shall constitute an
Index Rate Loan. Borrowers shall repay the aggregate outstanding principal
amount of the Swing Line Loan upon demand therefor by Agent.
(ii) The Swing Line Commitment of the Swing Line Lender shall
be evidenced by a single master promissory note, in the principal amount of the
Swing Line Commitment of the Swing Line Lender, dated the Closing Date and
substantially in the form of EXHIBIT 1.1(c)(ii) (the "SWING LINE NOTE"). Each
Borrower shall execute such Swing Line Note and deliver the same to the Agent on
behalf of the Swing Line Lender. The Swing Line Note shall represent the
obligation of each Borrower to pay the amount of the Swing Line Commitment or,
if less, the aggregate unpaid principal amount of all Swing Line Advances made
to such Borrower together with interest thereon as prescribed in SECTION 1.5.
The entire unpaid balance of the Swing Line Loan and all other non-contingent
Obligations shall be immediately due and payable in full in immediately
available funds on the Commitment Termination Date if not sooner paid in full.
(iii) REFUNDING OF SWING LINE LOANS. The Swing Line Lender, at
any time and from time to time in its sole and absolute discretion, but not less
frequently than weekly, shall on behalf of any Borrower (and each Borrower
hereby irrevocably authorizes the Swing Line Lender to so act on its behalf)
request each Revolving Lender (including the Swing Line Lender) to make a
Revolving Credit Advance to such Borrower (which shall be an Index Rate Loan) in
an amount equal to such Revolving Lender's Pro Rata Share of the principal
amount of such Borrower's Swing Line Loan (the "REFUNDED SWING LINE LOAN")
outstanding on the date such notice is given. Unless any of the events
described in SECTIONS 8.1(h) OR 8.1(i) shall have occurred (in which event the
procedures of SECTION 1.1(c)(iv) shall apply) and regardless of whether the
conditions precedent set forth in this Agreement to the making of a Revolving
Credit Advance are then satisfied, each Revolving Lender shall disburse directly
to Agent, its Pro Rata Share of a Revolving Credit Advance on behalf of the
Swing Line Lender, prior to 3:00 p.m. (New York time), in immediately available
funds on the Business Day next succeeding the date such notice is
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given. The proceeds of such Revolving Credit Advances shall be immediately paid
to the Swing Line Lender and applied to repay the Refunded Swing Line Loan of
the applicable Borrower.
(iv) PARTICIPATION IN SWING LINE LOANS. If, prior to
refunding a Swing Line Loan with a Revolving Credit Advance pursuant to SECTION
1.1(c)(iii), one of the events described in SECTIONS 8.1(h) OR 8.1(i) shall have
occurred, then, subject to the provisions of SECTION 1.1(c)(v) below, each
Revolving Lender will, on the date such Revolving Credit Advance was to have
been made for the benefit of the applicable Borrower, purchase from the Swing
Line Lender an undivided participation interest in the Swing Line Loan to such
Borrower in an amount equal to its Pro Rata Share of such Swing Line Loan. Upon
request, each Revolving Lender will promptly transfer to the Swing Line Lender,
in immediately available funds, the amount of its participation and upon receipt
thereof the Swing Line Lender will deliver to such Revolving Lender a Swing Line
Loan Participation Certificate, dated the date of receipt of such funds and in
such amount.
(v) REVOLVING LENDERS' OBLIGATIONS UNCONDITIONAL. Each
Revolving Lender's obligation to make Revolving Credit Advances in accordance
with SECTION 1.1(c)(iii) and to purchase participating interests in accordance
with SECTION 1.1(c)(iv) shall be absolute and unconditional and shall not be
affected by any circumstance, including (A) any setoff, counterclaim,
recoupment, defense or other right which such Revolving Lender may have against
the Swing Line Lender, any Borrower or any other Person for any reason
whatsoever; (B) the occurrence or continuance of any Default or Event of
Default; (C) any inability of any Borrower to satisfy the conditions precedent
to borrowing set forth in this Agreement on the date upon which such
participating interest is to be purchased or (D) any other circumstance,
happening or event whatsoever, whether or not similar to any of the foregoing.
If any Revolving Lender does not make available to Agent or the Swing Line
Lender, as applicable, the amount required pursuant to SECTION 1.1(c)(iii) or
1.1(c)(iv), as the case may be, the Swing Line Lender shall be entitled to
recover such amount on demand from such Revolving Lender, together with interest
thereon for each day from the date of non-payment until such amount is paid in
full at the Federal Funds Rate for the first two Business Days and at the Index
Rate thereafter.
(d) ACQUISITION LOANS.
(i) Subject to the terms and conditions hereof, each
Revolving Lender shall make available from time to time during the period from
the Closing Date until the Acquisition Loan Commitment Termination Date, in
connection with the financing of Permitted Acquisitions, its Pro Rata Share of
Advances (each, an "ACQUISITION ADVANCE"). Such Acquisition Advances shall be
made to an existing Borrower or a direct Subsidiary of RII (a "New Shell")
formed for the purpose of acquiring the Target, if the Target is to be merged
into such Borrower or New Shell or such Borrower or New Shell is to purchase all
or substantially all of the assets of the Target, or to the Target, if the
Target is to become a Subsidiary of RII and a Borrower hereunder upon
consummation of said Permitted Acquisition. The aggregate Acquisition Advances
incurred during the term of this Agreement shall not exceed the Maximum
Acquisition Loan Amount. Amounts from time to time borrowed under this SECTION
1.1(d)(i) and repaid may not be reborrowed. Subject to the additional advance
notice requirements set forth in SECTION 2.3(i), each Acquisition Advance shall
be made on notice by Borrower Representative to the
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representative of the Agent identified on SCHEDULE 1.1 at the address specified
thereon. Those notices must be given no later than (1) 11:00 a.m. (New York
time) on the Business Day of the proposed Acquisition Advance, in the case of an
Index Rate Loan, or (2) 11:00 a.m. (New York time) on the date which is three
(3) Business Days prior to the proposed Acquisition Advance, in the case of a
LIBOR Loan. Each such notice (a "Notice of Acquisition Advance") must be
substantially in the form of EXHIBIT 1.1(d)(i), and must specify the applicable
Borrower, the requested date, the amount and type of such Acquisition Advance
and such other information as may be required by Agent. All such notices must
be given in writing (by telecopy or overnight courier) or by telephone confirmed
immediately in writing. If the applicable Borrower desires to have such Loans
bear interest by reference to a LIBOR Rate, Borrower Representative must comply
with SECTION 1.5(e). If the Target is not merged into, or its assets are not
acquired by, an Existing Borrower, the New Shell or Target, as applicable, shall
become a Borrower hereunder, and such Person shall become a co-obligor under
this Agreement and the other Loan Documents through the execution of a Joinder
Agreement in the form of EXHIBIT 1.1(d)(i)(2) hereto and such other documents as
shall be reasonably requested by, and in form and substance reasonably
acceptable to, Agents.
(ii) The Borrower receiving an Acquisition Advance shall
execute and deliver notes to the Agent for the ratable benefit of the
Acquisition Lenders to evidence each Acquisition Advance upon the making of such
Acquisition Advance. Each note shall be dated the date of such Acquisition
Advance and shall be substantially in the form of EXHIBIT 1.1(d)(ii) (each an
"ACQUISITION LOAN NOTE" and, collectively, the "ACQUISITION LOAN NOTES"). Each
Acquisition Loan Note shall represent the obligation of the applicable Borrower
to pay each applicable Acquisition Lender's Pro Rata Share of the Acquisition
Advance made to such Borrower. Each Borrower of an Acquisition Advance shall
pay the principal amount of such Acquisition Advance in quarterly installments
commencing with the last day of the second Fiscal Quarter following the date of
the funding of such Acquisition Advance and continuing on the last day of each
March, June, September and December thereafter. The principal amount of each
such quarterly installment shall be equal to 1/28th of each such Acquisition
Advance to the applicable Borrower. The final scheduled installment of the
Acquisition Loan shall be due and payable not later than the sixth anniversary
of the Closing Date and shall equal the remaining principal balance of the
Acquisition Loan; PROVIDED THAT the principal amount of the Acquisition Loan
shall be payable in full in immediately available funds on the Commitment
Termination Date if not sooner paid in full.
(iii) Each payment of principal with respect to an Acquisition
Advance shall be paid to Agent for the ratable benefit of each Revolving Lender
in an amount equal to such Lender's Pro Rata Share of the Acquisition Loan
Commitment.
(iv) Each of the conditions set forth in SECTION 2.3 shall be
satisfied prior to the making of any Acquisition Advance.
(e) RELIANCE ON NOTICES; APPOINTMENT OF BORROWER REPRESENTATIVE.
Agent shall be entitled to rely upon, and shall be fully protected in relying
upon, any Notice of Revolving Credit Advance, Notice of Acquisition Advance,
Notice of Conversion/Continuation or similar notice believed by Agent to be
genuine. Agent may assume that each Person executing and delivering such a
notice was duly authorized, unless the responsible individual acting thereon for
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Agent has actual knowledge to the contrary. Each Borrower hereby designates RII
as its representative and agent on its behalf for the purposes of issuing
Notices of Revolving Credit Advances, Notices of Acquisition Advances and
Notices of Conversion/Continuation, giving instructions with respect to the
disbursement of the proceeds of the Loans, selecting interest rate options,
requesting Letters of Credit, giving and receiving all other notices and
consents hereunder or under any of the other Loan Documents and taking all other
actions (including in respect of compliance with covenants and with respect to
any agreement for any amendments, modifications, consents and waivers regarding
this Agreement or any other Loan Document) on behalf of any Borrower or
Borrowers under the Loan Documents. RII hereby accepts such appointment. Agent
and each Lender may regard any notice or other communication pursuant to any
Loan Document from Borrower Representative as a notice or communication from all
Borrowers, and may give any notice or communication required or permitted to be
given to any Borrower or Borrowers hereunder to Borrower Representative on
behalf of such Borrower or Borrowers. Each Borrower agrees that each notice,
election, representation and warranty, covenant, agreement and undertaking made
on its behalf by Borrower Representative shall be deemed for all purposes to
have been made by such Borrower and shall be binding upon and enforceable
against such Borrower to the same extent as if the same had been made directly
by such Borrower.
1.2. LETTERS OF CREDIT. Subject to and in accordance with the
terms and conditions contained herein and in ANNEX B, Borrower Representative,
on behalf of the applicable Borrower, shall have the right to request, and
Revolving Lenders agree to incur, or purchase participations in, Letter of
Credit Obligations in respect of each Borrower.
1.3. PREPAYMENTS
(a) VOLUNTARY PREPAYMENTS. Borrowers may at any time on at least
five (5) days' prior written notice by Borrower Representative to Agent
voluntarily prepay all or part of the Term Loans or the Acquisition Loan;
PROVIDED that any such prepayments shall be in a minimum amount of $500,000 and
integral multiples of $250,000 in excess of such amount. In addition, Borrowers
may at any time on at least ten (10) days' prior written notice by Borrower
Representative to Agent terminate the Revolving Loan Commitment; provided that
upon such termination, all Loans and other Obligations shall be immediately due
and payable in full. Any such voluntary prepayment and any such termination of
the Revolving Loan Commitment must be accompanied by the payment of any LIBOR
funding breakage costs in accordance with SECTION 1.13(b). Upon any such
prepayment and termination of the Revolving Loan Commitment, each Borrower's
right to request any Advances, or request that Letter of Credit Obligations be
incurred on its behalf, shall simultaneously be terminated. Any partial
prepayments of the Term Loans or the Acquisition Loan of any Borrower shall be
applied to prepay the scheduled installments of such Borrower's Term Loans or
Acquisition Loan, as applicable, in inverse order of maturity.
(b) MANDATORY PREPAYMENTS. (i) If at any time the outstanding
balance of the aggregate Revolving Loan exceeds the lesser of (A) the Maximum
Amount and (B) the Aggregate Borrowing Base, LESS, in each case, the aggregate
outstanding Swing Line Loan and Reserves against Borrowing Availability at such
time, Borrowers shall immediately repay the aggregate
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<PAGE>
outstanding Revolving Credit Advances to the extent required to eliminate such
excess. If any such excess remains after repayment in full of the aggregate
outstanding Revolving Credit Advances, Borrowers shall provide cash collateral
for the Letter of Credit Obligations in the manner set forth in ANNEX B to the
extent required to eliminate such excess. Furthermore, if the outstanding
balance of the Revolving Loan of any Borrower exceeds that Borrower's separate
Borrowing Base at any time less the outstanding balance of the Swing Line Loan
of such Borrower at such time, the applicable Borrower shall immediately repay
its Revolving Credit Advances in the amount of such excess (and, if necessary,
shall provide cash collateral for its Letter of Credit Obligations as described
above). Notwithstanding the foregoing, any Overadvance made pursuant to Section
1.1(a)(iii) shall be repaid only on demand.
(ii) Immediately upon receipt by any Borrower of proceeds of
any asset disposition (including condemnation proceeds, but excluding proceeds
of asset dispositions permitted by SECTION 6.8 (a)) or any sale of Stock of any
Subsidiary of any Borrower, Borrowers shall prepay the Loans in an amount equal
to all such proceeds, net of (A) commissions and other reasonable and customary
transaction costs, fees and expenses properly attributable to such transaction
and payable by Borrowers in connection therewith (in each case, paid to
non-Affiliates), (B) transfer taxes, (C) amounts payable to holders of senior
Liens (to the extent such Liens constitute Permitted Encumbrances hereunder), if
any, and (D) an appropriate reserve for income taxes in accordance with GAAP in
connection therewith. Any such prepayment shall be applied in accordance with
CLAUSE (c) below. Notwithstanding the foregoing, mandatory prepayments from the
net proceeds of asset dispositions shall only be required to the extent that the
aggregate amount of those net proceeds exceeds $2,500,000 in any Fiscal Year.
(iii) If RII issues Stock, no later than the Business Day
following the date of receipt of the proceeds thereof, all Borrowers shall
prepay the Loans in an amount equal to 100% of such proceeds, net of
underwriting discounts and commissions and other reasonable costs paid to
non-Affiliates in connection therewith, other than (x) issuances of Stock of RII
as consideration for Permitted Acquisitions (y) Equity Proceeds to the extent
used within 180 days of receipt for funding the purchase price of Permitted
Acquisitions as to which (i) RII and/or one of its Subsidiaries have entered
into a letter of intent with the applicable selling party within 90 days of
receipt of such Equity Proceeds and (ii) RII and/or one of its Subsidiaries
consummate such Permitted Acquisition not later than 180 days from the date of
receipt of such Equity Proceeds and (z) proceeds of Settlement Issuances. Any
such prepayment shall be applied in accordance with CLAUSE (c) below and shall
be allocated to each Borrower's Obligations based upon the relative outstanding
balances of each Borrower's Obligations to the aggregate Obligations of all
Borrowers. If any mandatory prepayment is required under this Section
1.3(b)(iii), RII shall make contributions to the capital of each Borrower in an
amount sufficient to enable each Borrower to pay its Ratable Share thereof.
(iv) Until the Termination Date, Borrowers shall prepay the
Obligations on the earlier of the date which is ten (10) days after (A) the
date on which RII's annual audited Financial Statements for the immediately
preceding Fiscal Year are delivered pursuant to ANNEX E or (B) the date on which
such annual audited Financial Statements were required to be delivered pursuant
to ANNEX E, in an amount equal to sixty-five percent (65%) of Excess Cash Flow
for the immediately preceding Fiscal Year. Any prepayments from Excess Cash
Flow paid pursuant to
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<PAGE>
this CLAUSE (iv) shall be allocated to each Borrower's Obligations based upon
such Borrower's relative contribution to Excess Cash Flow and shall be applied
in accordance with CLAUSE (c) below. Each such prepayment shall be accompanied
by a certificate signed by Borrower Representative's chief financial officer
certifying the manner in which Excess Cash Flow, the resulting prepayment, and
the method of allocation to each Borrower's Obligations were calculated, which
certificate shall be in form and substance satisfactory to Agent.
(v) If RII completes one or more Settlement Issuances, no later
than the Business Day following the date of receipt of the proceeds thereof, all
Borrowers shall prepay the Loans in an amount equal to 100% of such proceeds,
net of underwriting discounts and commissions and other reasonable costs paid to
non-Affiliates in connection therewith; provided that, in the case of
Pre-Settlement Issuances, so long as no Event of Default has occurred and is
continuing, Borrower Representative may elect to deposit such net proceeds in a
cash collateral account pledged to Agent on terms reasonably satisfactory to
Agent, which cash collateral shall, following the termination of the Caside
Reserve, be released to Borrowers at the written request of Borrower
Representative for purposes of funding any amounts for settlement of the Caside
Associates Litigation or funding any Permitted Acquisition in the event that (i)
no Revolving Credit Advances are then outstanding to any Borrower and (ii) no
Event of Default shall have occurred and be continuing.
(c) (i) APPLICATION OF CERTAIN MANDATORY PREPAYMENTS. Any
prepayments made by any Borrower pursuant to CLAUSES (b)(ii), (b)(iii), or
(b)(iv) above shall be applied as follows: FIRST, to Fees and reimbursable
expenses of Agent then due and payable pursuant to any of the Loan Documents;
SECOND, to PRO RATA payment of interest then due and payable on such Borrower's
Term Loans and Acquisition Loan, if any; THIRD, to PRO RATA payment of the
scheduled installments of such Borrower's Term Loans and Acquisition Loan, if
any, in inverse order of maturity, until such Loans shall have been prepaid in
full; FOURTH, to payment of interest then due and payable on such Borrower's
Swing Line Loan; FIFTH, to payment of the principal balance of the Swing Line
Loan outstanding to such Borrower until the same shall have been repaid in full;
SIXTH, to payment of interest then due and payable on Revolving Credit Advances
made to such Borrower; SEVENTH, to payment of the principal balance of Revolving
Credit Advances outstanding to such Borrower until the same shall have been paid
in full; EIGHTH, to payment of any Letter of Credit Obligations of such Borrower
to provide cash collateral therefor in the manner set forth in ANNEX B, until
all such Letter of Credit Obligations have been fully cash collateralized in the
manner set forth in ANNEX B; NINTH, to interest then due and payable on the Term
Loans and Acquisition Loan, if any, of each other Borrower, PRO RATA; TENTH, to
prepayment of scheduled installments of the Term Loans and Acquisition Loan, if
any, of each other Borrower, PRO RATA, in inverse order of maturity, until such
Loans shall have been prepaid in full; ELEVENTH, to payment of interest then due
and payable on the Swing Line Loan of each other Borrower, PRO RATA; TWELFTH, to
payment of the principal balance of the Swing Line Loan outstanding to each
other Borrower, PRO RATA, until the same shall have been repaid in full;
THIRTEENTH, to payment of interest then due and payable on the Revolving Credit
Advances outstanding to each other Borrower, PRO RATA; FOURTEENTH, to payment of
the principal balance of the Revolving Credit Advances made to each other
Borrower, PRO RATA, until the same shall have been paid in full, and LAST to any
Letter of Credit Obligations of each other Borrower, PRO RATA, to provide cash
collateral therefor in the manner set forth in ANNEX B, until all such Letter of
Credit Obligations have been fully cash
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<PAGE>
collateralized. Notwithstanding the foregoing, if a portion of the assets
acquired directly or indirectly in connection with a Permitted Acquisition are
sold within 180 days following the consummation of that Permitted Acquisition
(an "ACQUIRED ASSET DISPOSITION"), net proceeds of that asset disposition shall
be applied to permanently prepay all or a portion of the Acquisition Loan used
to fund that Permitted Acquisition. If those net proceeds exceed that
Acquisition Loan, the excess shall be applied as set forth above. Neither the
Revolving Loan Commitment nor the Swing Line Commitment shall be permanently
reduced by the amount of any prepayments in accordance with this Section
1.3(c)(i).
(ii) APPLICATION OF CERTAIN MANDATORY PREPAYMENTS. Any prepayments
made by any Borrower pursuant to clause (v) above shall be applied to the
principal balance of the Swing Line Loan and Revolving Credit Advances
outstanding. Neither the Revolving Loan Commitment nor the Swing Line
Commitment shall be permanently reduced by the amount of such prepayments.
(d) APPLICATION OF PREPAYMENTS FROM INSURANCE PROCEEDS.
Prepayments from insurance proceeds in accordance with SECTION 5.4(c) shall be
applied as follows: insurance proceeds from casualties or losses to cash or
Inventory shall be applied, FIRST, to the Swing Line Loans and, SECOND, to the
Revolving Credit Advances of the Borrower that incurred such casualties or
losses; insurance proceeds from casualties or losses to Equipment, Fixtures and
Real Estate shall be applied, PRO RATA, to scheduled installments of the Term
Loans and Acquisition Loan, if any, of the Borrower that incurred such
casualties or losses in inverse order of maturity. Neither the Revolving Loan
Commitment nor the Swing Line Loan Commitment shall be permanently reduced by
the amount of any such prepayments. If the insurance proceeds received as to a
particular Borrower exceed the outstanding principal balances of the Loans to
that Borrower or if the precise amount of insurance proceeds allocable to
Inventory as compared to Equipment, Fixtures and Real Estate are not otherwise
determined, the allocation and application of those proceeds shall be determined
by Agent, subject to the approval of Requisite Lenders.
(e) Nothing in this SECTION 1.3 shall be construed to constitute
Agent's or any Lender's consent to any transaction referred to in CLAUSES
(b)(ii) and (b)(iii) above which is not permitted by other provisions of this
Agreement or the other Loan Documents.
1.4. USE OF PROCEEDS. Borrowers shall utilize the proceeds of (a)
the Term Loans, solely to finance the Current Acquisitions and the Refinancing
(and to pay any related transaction expenses), (b) the Revolving Loan and Swing
Line Loan for Permitted Acquisitions and for the financing of Borrowers'
ordinary working capital and general corporate needs (but excluding in any event
the making of any Restricted Payment not specifically permitted by SECTION 6.14)
and (c) the Acquisition Loan solely for Permitted Acquisitions. DISCLOSURE
SCHEDULE (1.4) contains a description of Borrowers' sources and uses of funds as
of the Closing Date, including Loans and Letter of Credit Obligations to be made
or incurred on that date, and a funds flow memorandum detailing how funds from
each source are to be transferred to particular uses.
1.5. INTEREST AND APPLICABLE MARGINS. (a) Borrowers shall pay
interest to Agent, for the ratable benefit of Lenders in accordance with the
various Loans being made by each Lender, in arrears on each applicable Interest
Payment Date, at the following rates: (i) with
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<PAGE>
respect to the Revolving Credit Advances, the Index Rate plus the Applicable
Revolver Index Margin per annum or, at the election of Borrower Representative,
the applicable LIBOR Rate plus the Applicable Revolver LIBOR Margin per annum,
calculated with respect to the aggregate principal balance of Revolving Credit
Advances outstanding from time to time; (ii) with respect to the Term A Loan,
the Index Rate plus the Applicable Term A Index Margin per annum or, at the
election of Borrower Representative, the applicable LIBOR Rate plus the
Applicable Term A LIBOR Margin per annum; (iii) with respect to the Term B Loan,
the Index Rate plus the Applicable Term B Index Margin per annum or, at the
election of Borrower Representative, the applicable LIBOR Rate plus the
Applicable Term B LIBOR Margin per annum; (iv) with respect to the Acquisition
Loan, the Index Rate plus the Applicable Acquisition Loan Index Margin per annum
or, at the election of Borrower Representative, the applicable LIBOR Rate plus
the Applicable Acquisition Loan LIBOR Margin per annum and (v) with respect to
the Swing Line Loan, the Index Rate plus the Applicable Revolver Index Margin
per annum.
As of the Closing Date, the Applicable Margins will be as follows:
-------------------------------------------------------
Index
-------------------------------------------------------
Applicable Revolver Index Margin 0.75%
-------------------------------------------------------
Applicable Revolver LIBOR Margin 2.25%
-------------------------------------------------------
Applicable Term A Index Margin 0.75%
-------------------------------------------------------
Applicable Term A LIBOR Margin 2.25%
-------------------------------------------------------
Applicable Term B Index Margin 1.25%
-------------------------------------------------------
Applicable Term B LIBOR Margin 2.75%
-------------------------------------------------------
Applicable Acquisition Loan Index Margin 0.75%
-------------------------------------------------------
Applicable Acquisition Loan LIBOR Margin 2.25%
-------------------------------------------------------
Applicable L/C Margin 2.00%
-------------------------------------------------------
Applicable Unused Line Fee Margin 0.375%
-------------------------------------------------------
The Applicable Margins will be adjusted (up or down) prospectively on a
quarterly basis as determined by RII's Leverage Ratio, commencing with the first
day of the first calendar month that occurs more than five (5) days after
delivery of Borrowers' quarterly Financial Statements to Lenders for the Fiscal
Quarter ending March 31, 1998. Adjustments in Applicable Margins will be
determined by reference to the following grids:
-------------------------------------------------
IF LEVERAGE RATIO IS: LEVEL OF
APPLICABLE MARGINS:
-------------------------------------------------
> 5.5 Level I
-------------------------------------------------
< 5.5, but > 4.5 Level II
-------------------------------------------------
< 4.5, but > 3.5 Level III
-------------------------------------------------
< 3.5 Level IV
-------------------------------------------------
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APPLICABLE MARGINS
- --------------------------------------------------------------------------------
LEVEL I LEVEL II LEVEL III LEVEL IV
- --------------------------------------------------------------------------------
Applicable Revolver 1.00% 0.75% 0.50% 0.25%
Index Margin
- --------------------------------------------------------------------------------
Applicable Revolver LIBOR 2.50% 2.25% 2.00% 1.75%
Margin
- --------------------------------------------------------------------------------
Applicable Term A Index 1.00% 0.75% 0.50% 0.25%
Margin
- --------------------------------------------------------------------------------
Applicable Term A LIBOR 2.50% 2.25% 2.00% 1.75%
Margin
- --------------------------------------------------------------------------------
Applicable Term B Index 1.50% 1.25% 1.25% 1.25%
Margin
- --------------------------------------------------------------------------------
Applicable Term B LIBOR 3.00% 2.75% 2.75% 2.75%
Margin
- --------------------------------------------------------------------------------
Applicable Acquisition Loan 1.00% 0.75% 0.50% 0.25%
Index Margin
- --------------------------------------------------------------------------------
Applicable Acquisition Loan 2.50% 2.25% 2.00% 1.75%
LIBOR Margin
- --------------------------------------------------------------------------------
Applicable L/C Margin 2.00% 2.00% 2.00% 2.00%
- --------------------------------------------------------------------------------
Applicable Unused Line Fee 0.375% 0.375% 0.375% 0.375%
Margin
- --------------------------------------------------------------------------------
All adjustments in the Applicable Margins after March 31, 1998 will be
implemented quarterly on a prospective basis, for each calendar month commencing
at least five (5) days after the date of delivery to Lenders of the quarterly
unaudited or annual audited (as applicable) Financial Statements of RII and
Borrowers evidencing the need for an adjustment. Concurrently with the delivery
of those Financial Statements, Borrower Representative shall deliver to Agent
and Lenders a certificate, signed by its chief financial officer, setting forth
in reasonable detail the basis for the continuance of, or any change in, the
Applicable Margins. Failure to timely deliver such Financial Statements shall,
in addition to any other remedy provided for in this Agreement, result in an
increase in the Applicable Margins to the highest level set forth in the
foregoing grid, until the fifth (5th) day following delivery of those Financial
Statements demonstrating that such an increase is not required. If a Default or
Event of Default shall have occurred or be continuing at the time any reduction
in the Applicable Margins is to be implemented, that reduction shall be deferred
until the first day of the first calendar month following the date on which such
Default or Event of Default is waived or cured.
(b) If any payment on any Loan becomes due and payable on a day
other than a Business Day, the maturity thereof will be extended to the next
succeeding Business Day (except as set forth in the definition of LIBOR Period)
and, with respect to payments of principal, interest thereon shall be payable at
the then applicable rate during such extension.
(c) All computations of Fees calculated on a per annum basis and
interest shall be made by Agent on the basis of a three hundred and sixty (360)
day year, in each case for the actual number of days occurring in the period for
which such interest and Fees are payable. The Index Rate shall be determined
each day based upon the Index Rate as in effect each day. Each
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<PAGE>
determination by Agent of an interest rate and Fees hereunder shall be
conclusive, absent manifest error.
(d) So long as a Default or an Event of Default shall have occurred
and be continuing under Section 8.1(a), (h) or (i) or so long as any other Event
of Default shall have occurred and be continuing and at the election of Agent
(or upon the written request of Requisite Lenders) confirmed by written notice
from Agent to Borrower Representative, the interest rates applicable to the
Loans and the Letter of Credit Fees shall be increased by two percent (2%) per
annum above the rates of interest or the rate of such Fees otherwise applicable
hereunder ("DEFAULT RATE"), and all outstanding Obligations shall bear interest
at the Default Rate applicable to such Obligations. Interest and Letter of
Credit Fees at the Default Rate shall accrue from the initial date of such
Default or Event of Default until that Default or Event of Default is cured or
waived and shall be payable upon demand.
(e) So long as no Default or Event of Default shall have occurred
and be continuing, and subject to the additional conditions precedent set forth
in SECTION 2.2, Borrower Representative shall have the option to (i) request
that any Revolving Credit Advances be made as a LIBOR Loan, (ii) convert at any
time all or any part of outstanding Loans (other than the Swing Line Loan) from
Index Rate Loans to LIBOR Loans, (iii) convert any LIBOR Loan to an Index Rate
Loan, subject to payment of LIBOR breakage costs in accordance with SECTION
1.13(b) if such conversion is made prior to the expiration of the LIBOR Period
applicable thereto, or (iv) continue all or any portion of any Loan (other than
the Swing Line Loan) as a LIBOR Loan upon the expiration of the applicable LIBOR
Period and the succeeding LIBOR Period of that continued Loan shall commence on
the last day of the LIBOR Period of the Loan to be continued. Any Loan to be
made or continued as, or converted into, a LIBOR Loan must be in a minimum
amount of $5,000,000 and integral multiples of $500,000 in excess of such
amount. Any such election must be made by 11:00 a.m. (New York time) on the
third (3rd) Business Day prior to (1) the date of any proposed Advance which is
to bear interest at the LIBOR Rate, (2) the end of each LIBOR Period with
respect to any LIBOR Loans to be continued as such, or (3) the date on which
Borrower Representative wishes to convert any Index Rate Loan to a LIBOR Loan
for a LIBOR Period designated by Borrower Representative in such election. If
no election is received with respect to a LIBOR Loan by 11:00 a.m. (New York
time) on the third (3rd) Business Day prior to the end of the LIBOR Period with
respect thereto (or if a Default or an Event of Default shall have occurred and
be continuing or if the additional conditions precedent set forth in SECTION 2.2
shall not have been satisfied or waived in writing), that LIBOR Loan shall be
converted to an Index Rate Loan at the end of its LIBOR Period. Borrower
Representative must make such election by notice to Agent in writing, by
telecopy or overnight courier. In the case of any conversion or continuation,
such election must be made pursuant to a written notice (a "NOTICE OF
CONVERSION/CONTINUATION") in the form of EXHIBIT 1.5(e). No Loan may be made as
or converted into a LIBOR Loan until the earlier of forty-five (45) days after
the Closing Date or completion of primary syndication of the Commitments.
(f) Notwithstanding anything to the contrary set forth in this
SECTION 1.5, if a court of competent jurisdiction determines in a final order
that the rate of interest payable hereunder exceeds the highest rate of interest
permissible under law (the "MAXIMUM LAWFUL RATE"), then so long as the Maximum
Lawful Rate would be so exceeded, the rate of interest
15
<PAGE>
payable hereunder shall be equal to the Maximum Lawful Rate; PROVIDED, HOWEVER,
that if at any time thereafter the rate of interest payable hereunder is less
than the Maximum Lawful Rate, Borrowers shall continue to pay interest hereunder
at the Maximum Lawful Rate until such time as the total interest received by
Agent, on behalf of Lenders, is equal to the total interest which would have
been received had the interest rate payable hereunder been (but for the
operation of this paragraph) the interest rate payable since the Closing Date as
otherwise provided in this Agreement. Thereafter, interest hereunder shall be
paid at the rate(s) of interest and in the manner provided in SECTIONS 1.5(a)
through (e) above, unless and until the rate of interest again exceeds the
Maximum Lawful Rate, and at that time this paragraph shall again apply. In no
event shall the total interest received by any Lender pursuant to the terms
hereof exceed the amount which such Lender could lawfully have received had the
interest due hereunder been calculated for the full term hereof at the Maximum
Lawful Rate. If the Maximum Lawful Rate is calculated pursuant to this
paragraph, such interest shall be calculated at a daily rate equal to the
Maximum Lawful Rate divided by the number of days in the year in which such
calculation is made. If, notwithstanding the provisions of this SECTION 1.5(f),
a court of competent jurisdiction shall finally determine that a Lender has
received interest hereunder in excess of the Maximum Lawful Rate, Agent shall,
to the extent permitted by applicable law, promptly apply such excess in the
order specified in SECTION 1.11 and thereafter shall refund any excess to
Borrowers or as a court of competent jurisdiction may otherwise order.
1.6. ELIGIBLE ACCOUNTS AND ELIGIBLE MEXICAN ACCOUNTS. (I) ELIGIBLE
ACCOUNTS Based on the most recent Borrowing Base Certificate delivered by each
Borrower to Agent and on other information available to Agent, Agent shall in
its reasonable credit judgment determine which Accounts of each Borrower shall
be "ELIGIBLE ACCOUNTS" for purposes of this Agreement. In determining whether a
particular Account of any Borrower constitutes an Eligible Account, Agent shall
not include any such Account to which any of the exclusionary criteria set forth
below applies. Agent reserves the right, at any time and from time to time
after the Closing Date, to adjust any such criteria or to establish new
criteria, in its reasonable credit judgment, subject to the approval of
Supermajority Revolving Lenders in the case of adjustments, new criteria which
have the effect of making more credit available. Eligible Accounts shall not
include any Account of any Borrower:
(a) which does not arise from the sale of goods or the performance
of services by such Borrower in the ordinary course of its business;
(b) upon which (i) such Borrower's right to receive payment is not
absolute or is contingent upon the fulfillment of any condition whatsoever or
(ii) such Borrower is not able to bring suit or otherwise enforce its remedies
against the Account Debtor through judicial process or (iii) if the Account
represents a progress billing consisting of an invoice for goods sold or used or
services rendered pursuant to a contract under which the Account Debtor's
obligation to pay that invoice is subject to such Borrower's completion of
further performance under such contract or is subject to the equitable lien of a
surety bond issuer;
(c) to the extent of any defense, counterclaim, setoff or dispute
is asserted as to such Account;
16
<PAGE>
(d) that is not a true and correct statement of bona fide
indebtedness incurred in the amount of the Account for goods sold to or services
rendered and accepted by the applicable Account Debtor;
(e) with respect to which an invoice, acceptable to Agent in form
and substance, has not been sent to the applicable Account Debtor;
(f) that (i) is not owned by such Borrower or (ii) is subject to
any right, claim, security interest or other interest of any other Person, other
than Liens in favor of Agent, on behalf of itself and Lenders;
(g) that arises from a sale to any director, officer, other
employee or Affiliate of any Credit Party, or to any entity which has any common
officer or director with any Credit Party;
(h) that is the obligation of an Account Debtor that is the United
States government or a political subdivision thereof, or any state or
municipality or department, agency or instrumentality thereof unless Agent, in
its sole discretion, has agreed to the contrary in writing and such Borrower, if
necessary or desirable, has complied with the Federal Assignment of Claims Act
of 1940, and any amendments thereto, or any applicable state statute or
municipal ordinance of similar purpose and effect, with respect to such
obligation;
(i) that is the obligation of any Mexican Account Debtor or any
other Account Debtor located in a foreign country other than Canada (excluding
the provinces of Quebec, Newfoundland, Nova Scotia and Prince Edward Island)
unless payment thereof is assured by a letter of credit assigned and delivered
to Agent, satisfactory to Agent as to form, amount and issuer;
(j) to the extent such Borrower or any Subsidiary thereof owes
accounts payable for goods sold or services rendered by the applicable Account
Debtor to such Borrower or any Subsidiary thereof ("contra-accounts"), unless
such Borrower has delivered to Agent a satisfactory waiver of set-off agreement
(a "NO SET-OFF AGREEMENT") executed by that Account Debtor with respect to those
contra-accounts; PROVIDED, that prior to the occurrence of an Event of Default,
so long as the affected Borrower has exercised its reasonable best efforts to
obtain No Set-Off Agreements from the relevant Account Debtor to the reasonable
satisfaction of Agent, the net amount, if any, owing to such Borrower after
deducting all such contra-accounts shall not be disqualified as Eligible
Accounts under this clause so long as the applicable Account Debtor has not
asserted or exercised any setoff or recoupment in respect of such
contra-account(s);
(k) that arises with respect to goods which are delivered on a
bill-and-hold, cash-on-delivery basis or placed on consignment, guaranteed sale
or other terms by reason of which the payment by the Account Debtor is or may be
conditional;
(l) that is in default; PROVIDED, THAT, without limiting the
generality of the foregoing, an Account shall be deemed in default upon the
occurrence of any of the following:
17
<PAGE>
(i) it is not paid within the earlier of: sixty (60) days
following its due date or ninety (90) days following its original invoice date;
(ii) if any Account Debtor obligated upon such Account
suspends business, makes a general assignment for the benefit of creditors or
fails to pay its debts generally as they come due; or
(iii) if any petition is filed by or against any Account Debtor
obligated upon such Account under any bankruptcy law or any other federal, state
or foreign (including any provincial) receivership, insolvency relief or other
law or laws for the relief of debtors;
(m) which is the obligation of an Account Debtor if fifty percent
(50%) or more of the dollar amount of all Accounts owing by that Account Debtor
are ineligible under the other criteria set forth in this SECTION 1.6(I);
(n) as to which Agent's Lien thereon, on behalf of itself and
Lenders, is not a first priority perfected Lien;
(o) as to which any of the representations or warranties pertaining
to Accounts set forth in this Agreement or the Security Agreement is untrue in
any material respect;
(p) to the extent such Account is evidenced by a judgment,
Instrument or Chattel Paper;
(q) to the extent such Account exceeds any credit limit established
by Agent, in its reasonable discretion, following prior notice of such limit by
Agent to Borrower Representative;
(r) to the extent that such Account, together with all other
Accounts owing by (i) such Account Debtor and its Affiliates (other than David
Joseph & Co.) as of any date of determination exceed ten percent (10%) of all
Eligible Accounts or (ii) David Joseph & Co. or any Affiliate thereof as of any
date of determination exceed twenty percent (20%) of all Eligible Accounts;
PROVIDED, that so long as any Account Debtor maintains a long term credit rating
of BBB- or better by Moody's or S&P, the Accounts owing by such Account Debtor
will not be disqualified under this clause except to the extent that the same
exceed thirty percent (30%) of all Eligible Accounts;
(s) which is payable in any currency other than Dollars; or
(t) which is unacceptable to Agent in its reasonable credit
judgment.
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(II) ELIGIBLE MEXICAN ACCOUNTS. Based on the most recent Borrowing
Base Certificate delivered by each Borrower to Agent and on other information
available to Agent, Agent shall in its reasonable credit judgment determine
which Accounts of each Borrower owing by a Mexican Account Debtor shall be
"ELIGIBLE MEXICAN ACCOUNTS" for purposes of this Agreement. In determining
whether a particular Account of any Borrower owing by a Mexican Account Debtor
constitutes an Eligible Account, Agent shall not include any such Account to
which any of the exclusionary criteria set forth below applies. Agent reserves
the right, at any time and from time to time after the Closing Date, to adjust
any such criteria or to establish new criteria, in its reasonable credit
judgment, subject to the approval of Supermajority Revolving Lenders in the case
of adjustments or new criteria which have the effect of making more credit
available. Eligible Mexican Accounts shall not include any Account of any
Borrower:
(a) which does not arise from the sale of goods or the performance
of services by such Borrower in the ordinary course of its business;
(b) upon which (i) such Borrower's right to receive payment is not
absolute or is contingent upon the fulfillment of any condition whatsoever or
(ii) such Borrower is not able to bring suit or otherwise enforce its remedies
against the Mexican Account Debtor through judicial process or (iii) if the
Account represents a progress billing consisting of an invoice for goods sold or
used or services rendered pursuant to a contract under which the Mexican Account
Debtor's obligation to pay that invoice is subject to such Borrower's completion
of further performance under such contract or is subject to a the equitable lien
of a surety bond issuer;
(c) to the extent of any defense, counterclaim, setoff or dispute
is asserted as to such Account;
(d) that is not a true and correct statement of bona fide
indebtedness incurred in the amount of the Account for merchandise sold to or
services rendered and accepted by the applicable Mexican Account Debtor;
(e) with respect to which an invoice, acceptable to Agent in form
and substance, has not been sent to the applicable Mexican Account Debtor;
(f) that (i) is not owned by such Borrower or (ii) is subject to
any right, claim, security interest or other interest of any other Person, other
than Liens in favor of Agent, on behalf of itself and Lenders;
(g) that arises from a sale to any director, officer, other
employee or Affiliate of any Credit Party, or to any entity which has any common
officer or director with any Credit Party;
(h) that is the obligation of a Mexican Account Debtor that is the
Mexican government or a political subdivision thereof, or any state, province or
municipality or department, agency or instrumentality thereof unless Agent, in
its sole discretion, has agreed to the contrary in writing;
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(i) to the extent such Borrower or any Subsidiary thereof owes
accounts payable for goods sold or services rendered by the applicable Mexican
Account Debtor to such Borrower or any Subsidiary thereof ("contra-accounts"),
unless such Borrower has delivered to Agent a satisfactory waiver of set-off
agreement executed by that Account Debtor with respect to those contra-accounts;
(j) that arises with respect to goods which are delivered on a
bill-and-hold, cash-on-delivery basis or placed on consignment, guaranteed sale
or other terms by reason of which the payment by the Mexican Account Debtor is
or may be conditional;
(k) that is in default; PROVIDED, THAT, without limiting the
generality of the foregoing, an Account shall be deemed in default upon the
occurrence of any of the following:
(i) it is not paid within the earlier of: thirty (30) days
following its due date or sixty (60) days following its original invoice date;
(ii) if any Mexican Account Debtor obligated upon such Account
suspends business, makes a general assignment for the benefit of creditors or
fails to pay its debts generally as they come due; or
(iii) if any petition is filed by or against any Mexican
Account Debtor obligated upon such Account under any bankruptcy law or any other
federal, state or foreign (including any provincial) receivership, insolvency
relief or other law or laws for the relief of debtors;
(l) which is the obligation of a Mexican Account Debtor if
twenty-five percent (25%) or more of the dollar amount of all Accounts owing by
that Account Debtor are ineligible under the other criteria set forth in this
SECTION 1.6 (II);
(m) as to which Agent's Lien thereon, on behalf of itself and
Lenders, is not a first priority perfected Lien;
(n) as to which any of the representations or warranties pertaining
to Accounts set forth in this Agreement or the Security Agreement is untrue;
(o) to the extent such Account is evidenced by a judgment,
Instrument or Chattel Paper;
(p) to the extent such Account exceeds any credit limit established
by Agent, in its reasonable discretion, following prior notice of such limit by
Agent to Borrower Representative;
(q) to the extent that such Account, together with all other
Eligible Mexican Accounts owing by such Mexican Account Debtor and its
Affiliates as of any date of determination exceed $800,000;
(r) which is invoiced in or payable in any currency other than
Dollars; or
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(s) which is unacceptable to Agent in its reasonable credit
judgment.
1.7. ELIGIBLE INVENTORY. Based on the most recent Borrowing Base
Certificate delivered by each Borrower to Agent and on other information
available to Agent, Agent shall in its reasonable credit judgment determine
which Inventory of each Borrower shall be "ELIGIBLE INVENTORY" for purposes of
this Agreement. In determining whether any particular Inventory of any Borrower
constitutes Eligible Inventory, Agent shall not include any such Inventory to
which any of the exclusionary criteria set forth below applies. Agent reserves
the right, at any time and from time to time after the Closing Date, to adjust
any such criteria or to establish new criteria with respect to Eligible
Inventory, in its reasonable credit judgment, subject to the approval of
Supermajority Revolving Lenders in the case of adjustments or new criteria which
have the effect of making more credit available. Eligible Inventory shall not
include any Inventory of any Borrower that:
(a) is not owned by such Borrower free and clear of all Liens and
rights of any other Person (including the rights of a purchaser that has made
progress payments and the rights of a surety that has issued a bond to assure
such Borrower's performance with respect to that Inventory), except the Liens in
favor of Agent, on behalf of itself and Lenders, and Permitted Encumbrances in
favor of landlords and bailees to the extent permitted in SECTION 5.9 hereof
(subject to Reserves established by Agent in accordance with Section 5.9
hereof);
(b) is (i) not located on premises owned, leased or operated by
such Borrower or (ii) is stored with a bailee, warehouseman or similar Person,
unless Agent has given its prior consent thereto and unless (x) a satisfactory
bailee letter or landlord waiver has been delivered to Agent, or (y) Reserves
satisfactory to Agent have been established with respect thereto, or (iii)
located at any site if the aggregate book value of Inventory at any such
location is less than $100,000;
(c) is placed on consignment or is in transit, provided that
Inventory in transit between one Borrower location and another Borrower location
shall not be disqualified from being Eligible Inventory by this clause to the
extent that the aggregate amount of such in-transit Inventory does not exceed
$500,000;
(d) is covered by a negotiable document of title, unless such
document has been delivered to Agent with all necessary endorsements, free and
clear of all Liens except those in favor of Agent and Lenders;
(e) in Agent's reasonable determination, is excess, unsalable, or
otherwise unfit for sale;
(f) consists of display items or packing or shipping materials,
manufacturing supplies, or replacement parts;
(g) consists of goods which have been returned by the buyer;
(h) is not of a type held for sale in the ordinary course of such
Borrower's business;
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(i) as to which Agent's Lien, on behalf of itself and Lenders,
therein is not a first priority perfected Lien;
(j) as to which any of the representations or warranties pertaining
to Inventory set forth in this Agreement or the Security Agreement is untrue in
any material respect;
(k) consists of any costs associated with "freight-in" charges;
(l) consists of Hazardous Materials or goods that can be
transported or sold only with licenses that are not readily available;
(m) is not covered by casualty insurance required by this
Agreement; or
(n) is otherwise unacceptable to Agent in its reasonable credit
judgment.
1.8. CASH MANAGEMENT SYSTEMS. Within ninety (90) days following the
Closing Date, RII and each of the Borrowers will establish and will maintain
until the Termination Date, the cash management systems described on ANNEX C
(the "CASH MANAGEMENT SYSTEMS").
1.9. FEES. (a) Borrowers shall pay to GE Capital, individually,
the Fees specified in that certain fee letter dated as of November 20, 1997
among RII, Borrowers and GE Capital (the "GE CAPITAL FEE LETTER"), at the times
specified for payment therein.
(b) As additional compensation for the Revolving Lenders, Borrowers
agree, jointly and severally to pay to Agent, for the ratable benefit of such
Lenders, in arrears, (i) on the first Business Day of each month prior to the
Commitment Termination Date and on the Commitment Termination Date, a fee for
Borrowers' non-use of available funds in an amount equal to the Applicable
Unused Line Fee Margin per annum (calculated on the basis of a 360 day year for
actual days elapsed) of the difference between (x) the Maximum Amount and (y)
the average for the period of the daily closing balances of the aggregate
Revolving Loan and the Swing Line Loan outstanding during the period for which
such fee is due and (ii) on the first Business Day of each month prior to the
Acquisition Loan Commitment Termination Date and on the Acquisition Loan
Commitment Termination Date, a fee for Borrowers' non-use of available funds in
an amount equal to the Applicable Unused Line Fee Margin (calculated on the
basis of a 360 day year for actual days elapsed) of the difference between (x)
the Maximum Acquisition Loan Amount and (y) the average for the period of the
daily closing balance of the Acquisition Loan outstanding during the period for
which such fee is due.
1.10. RECEIPT OF PAYMENTS. Borrowers shall make each payment under
this Agreement not later than 2:00 p.m. (New York time) on the day when due in
immediately available funds in Dollars to the Collection Account. For purposes
of computing interest and Fees and determining Borrowing Availability or Net
Borrowing Availability as of any date, all payments shall be deemed received on
the day of receipt of immediately available funds therefor in the Collection
Account at or prior to 2:00 p.m. New York time. Payments received after 2:00
p.m. New York time on any Business Day shall be deemed to have been received on
the following Business Day.
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1.11. APPLICATION AND ALLOCATION OF PAYMENTS. (a) So long as no
Event of Default shall have occurred and be continuing, (i) payments consisting
of proceeds of Accounts received in the ordinary course of business shall be
applied to the Swing Line Loan and the Revolving Loan; (ii) payments matching
specific scheduled payments then due shall be applied to those scheduled
payments; (iii) voluntary prepayments shall be applied as determined by Borrower
Representative, subject to the provisions of SECTION 1.3(a); and (iv) mandatory
prepayments shall be applied as set forth in SECTIONS 1.3(c) AND 1.3(d). All
payments and prepayments applied to a particular Loan shall be applied ratably
to the portion thereof held by each Lender as determined by its Pro Rata Share.
As to each other payment, and as to all payments made when an Event of Default
shall have occurred and be continuing or following the Commitment Termination
Date, each Borrower hereby irrevocably waives the right to direct the
application of any and all payments received from or on behalf of such Borrower,
and each Borrower hereby irrevocably agrees that Agent shall have the continuing
exclusive right to apply any and all such payments against the Obligations of
Borrowers as Agent may deem advisable notwithstanding any previous entry by
Agent in the Loan Account or any other books and records. In the absence of a
specific determination by Agent with respect thereto, payments shall be applied
to amounts then due and payable in the following order: (1) to Fees and Agent's
expenses reimbursable hereunder; (2) to interest on the Swing Line Loan; (3) to
principal payments on the Swing Line Loan; (4) to interest on the other Loans,
ratably in proportion to the interest accrued as to each Loan; (5) to principal
payments on the other Loans and to provide cash collateral for Letter of Credit
Obligations in the manner described in ANNEX B, ratably to the aggregate,
combined principal balance of the other Loans and outstanding Letter of Credit
Obligations; and (6) to all other Obligations including expenses of Lenders to
the extent reimbursable under SECTION 11.3.
(b) Agent is authorized to, and at its sole election may, charge to
the Revolving Loan balance on behalf of each Borrower and cause to be paid all
Fees, expenses, Charges, costs (including insurance premiums in accordance with
SECTION 5.4(a)) and interest and principal, other than principal of the
Revolving Loan, owing by Borrowers under this Agreement or any of the other Loan
Documents if and to the extent Borrowers fail to promptly pay any such amounts
as and when due, even if such charges would cause the balance of the aggregate
Revolving Loan and the Swing Line Loan to exceed Borrowing Availability or would
cause the balance of the Revolving Loan and the Swing Loan of any Borrower to
exceed such Borrower's separate Borrowing Base. At Agent's option and to the
extent permitted by law, any charges so made shall constitute part of the
Revolving Loan hereunder.
1.12. LOAN ACCOUNT AND ACCOUNTING. Agent shall maintain a loan
account (the "LOAN ACCOUNT") on its books to record: all Advances and the Term
Loan, all payments made by Borrowers, and all other debits and credits as
provided in this Agreement with respect to the Loans or any other Obligations.
All entries in the Loan Account shall be made in accordance with Agent's
customary accounting practices as in effect from time to time. The balance in
the Loan Account, as recorded on Agent's most recent printout or other written
statement, shall, absent manifest error, be presumptive evidence of the amounts
due and owing to Agent and Lenders by each Borrower; PROVIDED that any failure
to so record or any error in so recording shall not limit or otherwise affect
any Borrower's duty to pay the Obligations. Agent shall render to Borrower
Representative a monthly accounting of transactions with respect to the Loans
setting forth the balance of the Loan Account as to each Borrower. Unless
Borrower Representative notifies
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Agent in writing of any objection to any such accounting (specifically
describing the basis for such objection), within thirty (30) days after the date
thereof, each and every such accounting shall (absent manifest error) be deemed
final, binding and conclusive upon Borrowers in all respects as to all matters
reflected therein. Only those items expressly objected to in such notice shall
be deemed to be disputed by Borrowers. Notwithstanding any provision herein
contained to the contrary, any Lender may elect not to receive a Note or Notes
issued in accordance herewith and may elect to rely on the Loan Account as
evidence of the amounts from time to time owing to it hereunder.
1.13. INDEMNITY. (a) Each Credit Party that is or becomes a
signatory hereto shall jointly and severally indemnify and hold harmless each of
Agent, Lenders and their respective Affiliates, and each such Person's
respective officers, directors, employees, attorneys, agents and representatives
(each, an "INDEMNIFIED PERSON"), from and against any and all suits, actions,
proceedings, claims, damages, losses, liabilities and expenses (including
reasonable attorneys' fees and disbursements and other costs of investigation or
defense, including those incurred upon any appeal) which may be instituted or
asserted against or incurred by any such Indemnified Person as the result of
credit having been extended, suspended or terminated under this Agreement and
the other Loan Documents and the administration of such credit, and in
connection with or arising out of the transactions contemplated hereunder and
thereunder and any actions or failures to act in connection therewith, including
any and all Environmental Liabilities and legal costs and expenses arising out
of or incurred in connection with disputes between or among ANY PARTIES to any
of the Loan Documents (collectively, "INDEMNIFIED LIABILITIES"); PROVIDED, that
no such Credit Party shall be liable for any indemnification to an Indemnified
Person to the extent that any such suit, action, proceeding, claim, damage,
loss, liability or expense results from that Indemnified Person's gross
negligence or willful misconduct or any dispute among or between any Lenders
and/or any of the Agents arising while no Event of Default has occurred and is
continuing under this Agreement. NO INDEMNIFIED PERSON SHALL BE RESPONSIBLE OR
LIABLE TO ANY OTHER PARTY TO ANY LOAN DOCUMENT, ANY SUCCESSOR, ASSIGNEE OR THIRD
PARTY BENEFICIARY OF SUCH PERSON OR ANY OTHER PERSON ASSERTING CLAIMS
DERIVATIVELY THROUGH SUCH PARTY, FOR INDIRECT, PUNITIVE, EXEMPLARY OR
CONSEQUENTIAL DAMAGES WHICH MAY BE ALLEGED AS A RESULT OF CREDIT HAVING BEEN
EXTENDED, SUSPENDED OR TERMINATED UNDER ANY LOAN DOCUMENT OR AS A RESULT OF ANY
OTHER TRANSACTION CONTEMPLATED HEREUNDER OR THEREUNDER.
(b) To induce Lenders to provide the LIBOR Rate option on the terms
provided herein, if (i) any LIBOR Loans are repaid in whole or in part prior to
the last day of any applicable LIBOR Period (whether that repayment is made
pursuant to any provision of this Agreement or any other Loan Document or is the
result of acceleration, by operation of law or otherwise); (ii) any Borrower
shall default in payment when due of the principal amount of or interest on any
LIBOR Loan; (iii) any Borrower shall default in making any borrowing of,
conversion into or continuation of LIBOR Loans after Borrower Representative has
given notice requesting the same in accordance herewith; or (iv) any Borrower
shall fail to make any prepayment of a LIBOR Loan after Borrower Representative
has given a notice thereof in accordance herewith, Borrowers shall jointly and
severally indemnify and hold harmless each Lender from and against all losses,
costs and expenses resulting from or arising from any of the
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foregoing. Such indemnification shall include any loss (including loss of
margin) or expense arising from the reemployment of funds obtained by it or from
fees payable to terminate deposits from which such funds were obtained. For the
purpose of calculating amounts payable to a Lender under this subsection, each
Lender shall be deemed to have actually funded its relevant LIBOR Loan through
the purchase of a deposit bearing interest at the LIBOR Rate in an amount equal
to the amount of that LIBOR Loan and having a maturity comparable to the
relevant LIBOR Period; PROVIDED, HOWEVER, that each Lender may fund each of its
LIBOR Loans in any manner it sees fit, and the foregoing assumption shall be
utilized only for the calculation of amounts payable under this subsection.
This covenant shall survive the termination of this Agreement and the payment of
the Notes and all other amounts payable hereunder. As promptly as practicable
under the circumstances, each Lender shall provide Borrower Representative with
its written calculation of all amounts payable pursuant to this SECTION 1.13(b),
and such calculation shall be binding on the parties hereto unless Borrower
Representative shall object in writing within ten (10) Business Days of receipt
thereof, specifying the basis for such objection in detail.
1.14. ACCESS. Each Credit Party which is a party hereto shall,
during normal business hours, from time to time upon one (1) Business Day's
prior notice as frequently as either of Agents determine to be appropriate: (a)
provide Agents and any of their respective officers, employees and agents access
to its properties, facilities, advisors and employees (including officers) of
each Credit Party and to the Collateral, (b) permit Agents, and any of their
respective officers, employees and agents, to inspect, audit and make extracts
from any Credit Party's books and records, and (c) permit Agents, and any of
their respective officers, employees and agents, to inspect, review, evaluate
and make test verifications and counts of the Accounts, Inventory and other
Collateral of any Credit Party. If a Default under Section 8.1(h) or an Event
of Default shall have occurred and be continuing or if access is necessary to
preserve or protect the Collateral as determined by any Agents, each such Credit
Party shall provide such access to Agents and to each Lender at all times and
without advance notice. Furthermore, so long as any Event of Default shall have
occurred and be continuing, Borrowers shall provide Agents and each Lender with
access to their suppliers and customers. Each Credit Party shall make available
to Agents and their respective counsel, as quickly as is possible under the
circumstances, originals or copies of all books and records which any of Agents
may request. Each Credit Party shall deliver any document or instrument
necessary for Agents, as they may from time to time request, to obtain records
from any service bureau or other Person which maintains records for such Credit
Party, and shall maintain duplicate records or supporting documentation on
media, including computer tapes and discs owned by such Credit Party. Agent
will give Lenders at least ten (10) days' prior written notice of regularly
scheduled audits. Representatives of other Lenders may accompany Agents'
representatives on regularly scheduled audits at no charge to Borrowers.
1.15. TAXES. (a) Any and all payments by each Borrower hereunder
(including any payments made pursuant to SECTION 12) or under the Notes shall be
made, in accordance with this SECTION 1.15, free and clear of and without
deduction for any and all present or future Taxes. If any Borrower shall be
required by law to deduct any Taxes from or in respect of any sum payable
hereunder (including any sum payable pursuant to SECTION 12) or under the Notes,
(i) the sum payable shall be increased as much as shall be necessary so that
after making all required deductions (including deductions applicable to
additional sums payable under this
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SECTION 1.15) Agent or Lenders, as applicable, receive an amount equal to the
sum they would have received had no such deductions been made, (ii) such
Borrower shall make such deductions, and (iii) such Borrower shall pay the full
amount deducted to the relevant taxing or other authority in accordance with
applicable law. Within thirty (30) days after the date of any payment of Taxes,
Borrower Representative shall furnish to Agent the original or a certified copy
of a receipt evidencing payment thereof.
(b) Each Credit Party that is a signatory hereto shall jointly and
severally indemnify and, within ten (10) days of demand therefor, pay Agent and
each Lender for the full amount of Taxes (including any Taxes imposed by any
jurisdiction on amounts payable under this SECTION 1.15) paid by Agent or such
Lender, as appropriate, and any liability (including penalties, interest and
expenses) arising therefrom or with respect thereto, whether or not such Taxes
were correctly or legally asserted.
(c) Each Lender organized under the laws of a jurisdiction outside
the United States (a "FOREIGN LENDER") as to which payments to be made under
this Agreement or under the Notes are exempt from United States withholding tax
under an applicable statute or tax treaty shall provide to Borrower
Representative and Agent a properly completed and executed IRS Form 4224 or Form
1001 or other applicable form, certificate or document prescribed by the IRS or
the United States certifying as to such Foreign Lender's entitlement to such
exemption (a "CERTIFICATE OF EXEMPTION"). Any foreign Person that seeks to
become a Lender under this Agreement shall provide a Certificate of Exemption to
Borrower Representative and Agent prior to becoming a Lender hereunder. No
foreign Person may become a Lender hereunder if such Person is unable to deliver
a Certificate of Exemption.
1.16. CAPITAL ADEQUACY; INCREASED COSTS; ILLEGALITY. (a) If any
Lender shall have determined that any law, treaty, governmental (or
quasi-governmental) rule, regulation, guideline or order regarding capital
adequacy, reserve requirements or similar requirements or compliance by any
Lender with any request or directive regarding capital adequacy, reserve
requirements or similar requirements (whether or not having the force of law),
in each case, adopted after the Closing Date, from any central bank or other
Governmental Authority increases or would have the effect of increasing the
amount of capital, reserves or other funds required to be maintained by such
Lender and thereby reducing the rate of return on such Lender's capital as a
consequence of its obligations hereunder, then such Lender shall promptly notify
Agent and Borrower Representative thereof and thereafter Borrowers shall from
time to time upon demand by such Lender (with a copy of such demand to Agent)
pay to Agent, for the account of such Lender, additional amounts sufficient to
compensate such Lender for such reduction. A certificate as to the amount of
that reduction and showing the basis of the computation thereof submitted by
such Lender to Borrower Representative and to Agent shall, absent manifest
error, be final, conclusive and binding for all purposes.
(b) If, due to either (i) the introduction of or any change in any
law or regulation (or any change in the interpretation thereof) or (ii) the
compliance with any guideline or request from any central bank or other
Governmental Authority (whether or not having the force of law), in each case
after the Closing Date, there shall be any increase in the cost to any Lender of
agreeing to make or making, funding or maintaining any Loan, then such Lender
shall promptly
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notify Agent and Borrower Representative thereof and thereafter Borrowers shall
from time to time, upon demand by such Lender (with a copy of such demand to
Agent), pay to Agent for the account of such Lender additional amounts
sufficient to compensate such Lender for such increased cost. A certificate as
to the amount of such increased cost, submitted to Borrower Representative and
to Agent by such Lender, shall be conclusive and binding on Borrowers for all
purposes, absent manifest error. Each Lender agrees that, as promptly as
practicable after it becomes aware of any circumstances referred to above which
would result in any such increased cost, the affected Lender shall, to the
extent not inconsistent with such Lender's internal policies of general
application, use reasonable commercial efforts to minimize costs and expenses
incurred by it and payable to it by Borrowers pursuant to this SECTION 1.16(b).
(c) Notwithstanding anything to the contrary contained herein, if
the introduction of or any change in any law or regulation (or any change in the
interpretation thereof) shall make it unlawful, or any central bank or other
Governmental Authority shall assert that it is unlawful, for any Lender to agree
to make or to make or to continue to fund or maintain any LIBOR Loan, then,
unless that Lender is able to make or to continue to fund or to maintain such
LIBOR Loan at another branch or office of that Lender without, in that Lender's
opinion, adversely affecting it or its Loans or the income obtained therefrom,
such Lender shall promptly notify Agent and Borrower Representative thereof and
thereafter upon demand therefor by such Lender to Borrower Representative
through Agent, (i) the obligation of such Lender to agree to make or to make or
to continue to fund or maintain LIBOR Loans shall terminate and (ii) each
Borrower shall forthwith prepay in full, without any prepayment fee or premium,
all outstanding LIBOR Loans owing by such Borrower to such Lender, together with
interest accrued thereon, UNLESS Borrower Representative on behalf of such
Borrower, within five (5) Business Days after the delivery of such notice and
demand or, if permitted by applicable law, on the last day of the applicable
LIBOR Period, converts all such Loans into a Loan bearing interest based on the
Index Rate.
(d) REPLACEMENT OF LENDER IN RESPECT OF INCREASED COSTS. Within
fifteen (15) days after receipt by Borrower Representative of written notice and
demand from any Lender (an "AFFECTED LENDER") for payment of additional amounts
or increased costs as provided in SECTION 1.15(a), 1.16(a) or 1.16(b) or of such
Lender's inability to make LIBOR Loans as provided in SECTION 1.16(c), Borrower
Representative may, at its option, notify Agent and such Affected Lender of its
intention to replace the Affected Lender. So long as no Default or Event of
Default shall have occurred and be continuing, Borrower Representative, with the
consent of Agent, may obtain, at Borrowers' expense, a replacement Lender
("REPLACEMENT LENDER") for the Affected Lender, which Replacement Lender must be
satisfactory to Agent. If Borrowers obtain a Replacement Lender within ninety
(90) days following notice of their intention to do so, the Affected Lender must
sell and assign its Loans and Commitments to such Replacement Lender for an
amount equal to the principal balance of all Loans held by the Affected Lender
and all accrued interest and Fees with respect thereto through the date of such
sale, PROVIDED that Borrowers shall have reimbursed such Affected Lender for the
additional amounts or increased costs that it is entitled to receive under this
Agreement through the date of such sale and assignment.
Notwithstanding the foregoing, Borrowers shall not have the right to obtain a
Replacement Lender if the Affected Lender rescinds its demand for increased
costs or additional amounts
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within fifteen (15) days following its receipt of Borrowers' notice of intention
to replace such Affected Lender. Furthermore, if Borrowers give a notice of
intention to replace and do not so replace such Affected Lender within ninety
(90) days thereafter, Borrowers' rights under this SECTION 1.16(d) shall
terminate and Borrowers shall promptly pay all increased costs or additional
amounts demanded by such Affected Lender pursuant to SECTIONS 1.15(a), 1.16(a)
and 1.16(b).
1.17. SINGLE LOAN. All Loans to each Borrower and all of the other
Obligations of each Borrower arising under this Agreement and the other Loan
Documents shall constitute one general obligation of that Borrower secured,
until the Termination Date, by all of its Collateral.
2. CONDITIONS PRECEDENT
2.1. CONDITIONS TO THE INITIAL LOANS. No Lender shall be obligated
to make any Loan or incur any Letter of Credit Obligations on the Closing Date,
or to take, fulfill, or perform any other action hereunder, until the following
conditions have been satisfied or provided for in a manner satisfactory to
Agents, or waived in writing by Agents and Lenders:
(a) CREDIT AGREEMENT; LOAN DOCUMENTS. This Agreement or
counterparts hereof shall have been duly executed by, and delivered to,
Borrowers, Agents and Lenders; and Agents shall have received such documents,
instruments, agreements and legal opinions as Agents shall reasonably request in
connection with the transactions contemplated by this Agreement and the other
Loan Documents, including all those listed in the Closing Checklist attached
hereto as ANNEX D, each in form and substance satisfactory to Agents.
(b) REPAYMENT OF PRIOR LENDER OBLIGATIONS; SATISFACTION OF
OUTSTANDING L/CS. (i) Agents shall have received a fully executed original of
a pay-off letter satisfactory to Agents confirming that all of the Prior Lender
Obligations will be repaid in full from the proceeds of the Term Loans and the
initial Revolving Credit Advance and all Liens upon any of the property of
Borrowers or any of their Subsidiaries in favor of each Prior Lender shall be
terminated by such Prior Lender immediately upon such payment; and (ii) all
letters of credit issued or guaranteed by each Prior Lender shall have been cash
collateralized, supported by a guaranty of Agent or supported by a Letter of
Credit issued pursuant to ANNEX B, as mutually agreed upon by Agents, Borrowers
and such Prior Lender.
(c) APPROVALS. Agents shall have received (i) satisfactory
evidence that the Credit Parties have obtained all required consents and
approvals of all Persons including all requisite Governmental Authorities, to
the execution, delivery and performance of this Agreement and the other Loan
Documents and the consummation of the Related Transactions or (ii) an officer's
certificate in form and substance satisfactory to Agents affirming that no such
consents or approvals are required.
(d) OPENING AVAILABILITY. The Eligible Accounts, Eligible Mexican
Accounts and Eligible Inventory of each Borrower supporting the initial
Revolving Credit Advance and the initial Letter of Credit Obligations incurred
and the amount of the Reserves to be established on the Closing Date shall be
sufficient in value, as determined by Agent, to provide Borrowers,
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collectively, with Net Borrowing Availability, after giving effect to the
initial Revolving Credit Advance made to each Borrower, the incurrence of any
initial Letter of Credit Obligations and the consummation of the Related
Transactions (on a pro forma basis, with trade payables being paid currently,
and expenses and liabilities being paid in the ordinary course of business and
without acceleration of sales) of at least $7,500,000.
(e) PAYMENT OF FEES. Borrowers shall have paid the Fees required to
be paid on the Closing Date in the respective amounts specified in SECTION 1.9
(including the Fees specified in the GE Capital Fee Letter), and shall have
reimbursed Agents for all fees, costs and expenses of closing presented as of
the Closing Date.
(f) CAPITAL STRUCTURE: OTHER INDEBTEDNESS, DOCUMENTS. The capital
structure of each Credit Party and the terms and conditions of all Indebtedness,
all material contracts and governing documents of each Credit Party and the
legal and tax consequences of the Related Transactions shall be acceptable to
Agents in their sole discretion.
(g) CONSUMMATION OF RELATED TRANSACTIONS. Agents shall have
received fully executed copies of each of the Current Acquisition Agreements and
each of the other Related Transactions Documents, each of which shall be in form
and substance satisfactory to Agents and their respective counsel. Each of the
Current Acquisitions and other Related Transactions shall have been consummated
in accordance with the terms in all material respects of each of the Current
Acquisition Agreements and the other Related Transactions Documents but for the
payment of the cash purchase price payable on the Closing Date pursuant to the
Current Acquisition Agreements. In addition, Agents shall have received an
Officer's Certificate from RII certifying the conditions set forth in this
clause (g) have been satisfied and describing with respect to the consummation
of the Current Acquisitions (i) whether any options have been exercised under
any Current Acquisition Agreement to lease rather than purchase real property to
be occupied by any Subsidiary of RII after consummating such Current Acquisition
and, if so, the terms of such lease and any related purchase option, (ii)
whether any portion of the purchase price to be paid under any Current
Acquisition Agreement is to be escrowed or subject to a deferred payment
arrangement, and if so, the terms and amount of such escrow or deferred payment
arrangement, and (iii) whether compliance with any terms or conditions of any
Current Acquisition Agreement have been waived or modified by RII and/or its
Subsidiaries, and if so, the terms or conditions so waived or modified.
(h) RII EQUITY ISSUANCES. RII shall have consummated the RII
Equity Issuances.
(i) TRANSACTION COSTS AND EXPENSES. The aggregate purchase price
for all of the Current Acquisitions shall not exceed $145.2 million; the
aggregate amount due to consummate the Refinancing shall not exceed $32.1
million; and aggregate fees, expenses and closing costs (including those payable
to Agents and Lenders) incurred by RII and the Borrowers in connection with the
Related Transactions shall not exceed $13 million.
(j) PROCEEDS OF SUBORDINATED DEBT AND EQUITY ISSUANCES. All net
cash proceeds from the issuance of the Subordinated Notes and RII's New Common
Stock not utilized
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on the Closing Date to fund the Refinancing or consummate the Current
Acquisitions shall have been contributed by RII to the common equity of the
Borrowers in a manner and on terms acceptable to Agents.
(k) SUBORDINATED DEBT. RII shall have received at least
$60,000,000 in net cash proceeds from the issuance of the Subordinated Notes
(exclusive of costs and fees incurred in connection with such issuance).
Without limiting any of the foregoing, the terms of all Subordinated Debt
outstanding as of the Closing Date must be acceptable to Agents and shall (x)
not be secured by any lien or security interest in the property of RII or any of
its Subsidiaries, and (y) expressly acknowledge that all Obligations owing or
Liens granted to Agent and/or any Lender under the Loan Documents shall
constitute permitted senior indebtedness and permitted liens (or any similar
terms used in any instrument evidencing any such Subordinated Debt), as
applicable, under terms of such Subordinated Debt. In addition, solely with
respect to the $60 million issuance of Subordinated Notes, any guaranties of
such debt issued by any Subsidiaries of RII shall be unsecured and subordinated
on terms and conditions acceptable to Agents.
(l) FINANCIAL PERFORMANCE. Agents shall have received and deemed
satisfactory a written report by a major accounting firm selected by RII and
deemed acceptable to Agents substantiating that the consolidated pro forma
EBITDA of RII and its Subsidiaries (immediately after giving effect to the
Current Acquisitions) shall not be less than $30 million for the fiscal year
ending September 30, 1997 which report shall be in form and substance acceptable
to Agents. In addition, Agents shall have received evidence satisfactory to
Agents that RII's Consolidated Senior Debt to consolidated Pro Forma Operating
Cash Flow shall not exceed a ratio of 3.75 to 1.0 for the trailing twelve-month
period ending on the last day of the calendar month immediately preceding the
Closing Date.
(m) LITIGATION MATTERS. Agents shall have received evidence
satisfactory to Agents and their respective counsel that each of the following
conditions have been met with regard to the following pending Litigation
matters:
(i) With respect to Anglo Metals, Inc. Litigation (U.S.
Bankruptcy Court S. Dist. Texas, Bankruptcy No. 96-24999-C-11 and related state
court litigation), (1) the costs of required clean-up (and Borrowers' share
thereof) must have been determined with a reasonable degree of certainty with
respect to the Harlingen, Brownsville and San Juan, Texas sites, and Borrowers'
share thereof must not exceed $400,000 in the aggregate and (2) Recycling
Industries of Texas, Inc. must have entered into a letter of intent to directly
lease those sites with the owner(s) thereof (subject to bankruptcy court
approval thereto), all on terms reasonably satisfactory to Agents; and
(ii) With respect to the Caside Associates Litigation, (1) the
final form of settlement agreement must have been entered into between the RII
and EACH OF THE TRUSTEES in the bankruptcy case of John Silvia, Jr. and the
bankruptcy case of Environmental Recovery Systems of Somerset, Inc. and
submitted by such parties for bankruptcy court approval, (2) RII's total
exposure under the settlement agreement shall not exceed $7,250,000 and (3) the
settlement reflected in the settlement agreement shall be binding upon all of
the plaintiffs in BEEBER, ET AL. V. JOHN SILVIA, JR., No. 96-12416-JLT,
MITCHELL, ET AL. V. RECYCLING INDUSTRIES, INC., No. C-97-00845,
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DWIGHT SILVIA, ET AL. V. RECYCLING INDUSTRIES, INC., No. 97-12015-JLT and
FERREIRA, ET AL. V. RECYCLING INDUSTRIES, Bristol County Superior Court No.
B97-01400 (collectively, the "Caside Associates Litigation").
2.2. FURTHER CONDITIONS TO EACH LOAN. Except as otherwise expressly
provided herein, no Lender shall be obligated to fund any Loan, convert or
continue any Loan as a LIBOR Loan or incur any Letter of Credit Obligation, if,
as of the date thereof:
(a) Any representation or warranty by any Credit Party contained
herein or in any of the other Loan Documents shall be untrue or incorrect as of
such date, except to the extent that such representation or warranty expressly
relates to an earlier date and except for changes therein expressly permitted or
expressly contemplated by this Agreement; or
(b) Any event or circumstance having a Material Adverse Effect
shall have occurred since the date hereof as determined by the Requisite
Lenders; or
(c) (i) Any Event of Default shall have occurred and be continuing
or would result after giving effect to any Loan (or the incurrence of any Letter
of Credit Obligations), or (ii) a Default shall have occurred and be continuing
or would result after giving effect to any Loan, and Agent or Requisite
Revolving Lenders shall have determined not to make any Loan or incur any Letter
of Credit Obligation so long as that Default is continuing; or
(d) After giving effect to any Advance (or the incurrence of any
Letter of Credit Obligations), (i) the outstanding principal amount of the
aggregate Revolving Loan would exceed the lesser of the Aggregate Borrowing Base
and the Maximum Amount, LESS, in each case, the then outstanding principal
amount of the Swing Line Loan, or (ii) the outstanding principal amount of the
Revolving Loan of the applicable Borrower would exceed such Borrower's separate
Borrowing Base LESS the outstanding principal amount of the Swing Line Loan to
that Borrower; or
(e) After giving effect to any Swing Line Advance, (i) the
outstanding principal amount of the Swing Line Loan would exceed Swing Line
Availability, or (ii) the outstanding principal amount of the Swing Line Loan of
the applicable Borrower would exceed such Borrower's separate Borrowing Base
LESS the outstanding principal amount of the Revolving Loan to that Borrower.
The request and acceptance by any Borrower of the proceeds of any Loan, the
incurrence of any Letter of Credit Obligations or the conversion or continuation
of any Loan into, or as, a LIBOR Loan, as the case may be, shall be deemed to
constitute, as of the date of such request or acceptance, (i) a representation
and warranty by Borrowers that the conditions in this SECTION 2.2 have been
satisfied and (ii) a reaffirmation by Borrowers of the cross-guaranty provisions
set forth in SECTION 12 and of the granting and continuance of Agent's Liens, on
behalf of itself and Lenders, pursuant to the Collateral Documents.
2.3. CONDITIONS TO EACH ACQUISITION ADVANCE.
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In addition to those conditions applicable to all Loans set forth in
Section 2.2, no Lender shall be obligated to fund any Acquisition Advance,
unless each of the following conditions have been met or satisfied in a manner
satisfactory to Agents:
(i) Agents shall receive at least thirty (30) days' prior
written notice of such proposed Permitted Acquisition and the requested
Acquisition Advance, which notice shall include a reasonably detailed
description of such proposed Permitted Acquisition;
(ii) such Permitted Acquisition shall only involve assets or
businesses located in the United States and comprising a business, or those
assets of a business, substantially of the type engaged in by Borrowers as of
the Closing Date (and to the extent not engaged in the business of metals
recycling such business will not subject any Borrower to materially greater
regulatory burdens);
(iii) such Permitted Acquisition shall be consensual and shall
have been approved by the Target's board of directors (and stockholders to the
extent required by applicable law);
(iv) no additional Indebtedness, Guaranteed Indebtedness, or
other liabilities shall be incurred, assumed or otherwise be reflected on a
consolidated balance sheet of RII and Target after giving effect to such
Permitted Acquisition, except (A) Loans made hereunder and (B) ordinary course
trade payables and accrued expenses, (C) Indebtedness permitted under SECTION
6.3(a)(viii) hereof and (D) Permitted Subordinated Debt;
(v) the Target shall not have incurred an operating loss for
the trailing twelve-month period preceding the date of the Permitted
Acquisition, as determined based upon the Target's Financial Statements for its
most recently completed fiscal year and its most recent interim financial period
completed within sixty (60) days prior to the date of consummation of such
Permitted Acquisition (with such adjustments to pro forma EBITDA as may be
acceptable to the Agents);
(vi) the business and assets acquired in such Permitted
Acquisition shall be free and clear of all Liens (other than Permitted
Encumbrances);
(vii) at or prior to the closing of any Permitted Acquisition,
Agent will be granted first priority perfected Liens (A) by the newly formed
Subsidiary of RII in all assets of such newly formed Subsidiary (including the
capital stock of the Target, if applicable), by Target in all of its assets
and/or by the applicable Borrower in the assets acquired directly by such
Borrower (including the capital stock of the Target, if applicable), subject in
each case only to Permitted Encumbrances and (B) by RII in the capital stock of
any newly formed Subsidiary of RII organized to consummate such Permitted
Acquisition; and RII, Borrowers, such newly formed Subsidiary and the Target, as
applicable, shall have executed such documents and taken such actions as may be
required by Agent in connection therewith;
(viii) Such Target or newly formed Subsidiary shall execute
Joinder Agreement in the form of EXHIBIT 1.1(d)(i)(2) and such other documents
and take such actions as
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may be required by the Agent to establish such Target or Subsidiary as a
Borrower under and a party to this Agreement, the Security Agreement and, the
other Loan Documents, applicable;
(ix) Acquisition Advances shall not exceed 80% of the
consideration to be paid to consummate the Permitted Acquisition, with the
balance to be paid in cash, financed the issuance of RII Stock or the issuance
of Permitted Subordinated Debt;
(x) Agents shall be satisfied that all necessary or
appropriate third party and governmental waivers and consents relating to the
Permitted Acquisition have been received;
(xi) At least fourteen (14) days prior to the date of closing
of the Permitted Acquisition, RII shall have delivered to Agents, in form and
substance satisfactory to Agents:
(A) a pro forma consolidated balance sheet,
income statement and cash flow statement of RII and its
Subsidiaries (the "ACQUISITION PRO FORMA"), based on recent
financial statements, which shall be complete and shall fairly
present in all material respects the assets, liabilities,
financial condition and results of operations of RII and its
Subsidiaries in accordance with GAAP consistently applied, but
taking into account such Permitted Acquisition, the funding of
the Acquisition Loan and the incurrence of Permitted Subordinated
Debt, if any, in connection therewith, and such Acquisition Pro
Forma shall reflect that (x) on a pro forma basis, RII and its
Subsidiaries would have had a ratio of Consolidated Senior Debt
to Operating Cash Flow not in excess of 4.0 to 1.0 for the four
quarter period reflected in the Compliance Certificate most
recently delivered to Agent pursuant to ANNEX E prior to the
consummation of such Permitted Acquisition (giving effect to such
Permitted Acquisition and all Indebtedness incurred or assumed in
connection therewith as if made on the first day of such period),
(y) average daily Net Borrowing Availability of all Borrowers for
the 30-day period preceding the consummation of such Permitted
Acquisition would have exceeded $4,500,000 on a pro forma basis
(giving effect to such Permitted Acquisition and all Indebtedness
incurred in connection therewith as if made on the first day of
such period) and the Acquisition Projections (as hereinafter
defined) shall reflect that such Net Borrowing Availability of
$4,500,000 shall continue for at least 30 days after the
consummation of such Permitted Acquisition, and (z) on a pro
forma basis, no Event of Default shall have occurred and be
continuing or would result after giving effect to such Permitted
Acquisition and RII and Borrowers would have been in compliance
with the financial covenants set forth in ANNEX G for the four
quarter period reflected in the Compliance Certificate most
recently delivered to Agent pursuant to ANNEX E prior to the
consummation of such Permitted Acquisition (giving effect to such
Permitted Acquisition and all Loans funded in connection
therewith as if made on the first day of such period);
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(B) updated versions of the most recently
delivered Projections covering the one (1) year period commencing
on the date of such Permitted Acquisition and otherwise prepared
in accordance with the Projections (the "ACQUISITION
PROJECTIONS") and based upon historical financial data of a
recent date satisfactory to Agents, taking into account such
Permitted Acquisition; and
(C) a certificate of the chief financial officer
of RII and each Borrower to the effect that: (w) each Borrower
(after taking into consideration all rights of contribution and
indemnity such Borrower has against RII and each other Subsidiary
of RII) will be Solvent upon the consummation of the Permitted
Acquisition; (x) the Acquisition Pro Forma fairly presents the
financial condition of RII and its Subsidiaries (on a
consolidated basis) as of the date thereof after giving effect to
the Permitted Acquisition; (y) the Acquisition Projections are
reasonable estimates of the future financial performance of RII
and its Subsidiaries subsequent to the date thereof based upon
the historical performance of RII, its Subsidiaries and the
Target and show that RII and its Subsidiaries shall continue to
be in compliance with the financial covenants set forth in ANNEX
G for the three (3) year period thereafter; and (z) RII and its
Subsidiaries have completed their due diligence investigation
with respect to the Target and such Permitted Acquisition, which
investigation was conducted in a manner similar to that which
would have been conducted by a prudent purchaser of a comparable
business and the results of which investigation were delivered to
Agents and Lenders;
(xii) RII and Agents shall have completed legal and
environmental due diligence with respect to the Target, including a review of
contingent liabilities to be assumed or acquired as part of a Permitted
Acquisition, with results reasonably satisfactory to Agents; provided, that RII
and Agents shall use their best efforts to complete such due diligence within 20
days of receipt of notice of such proposed acquisition.
(xiii) on or prior to the date such Permitted Acquisition is
consummated, Agents shall have received, in form and substance satisfactory to
Agents, copies of the acquisition agreement and related agreements and
instruments, and all opinions, certificates, lien search results, an assignment
of the seller(s)' representations, warranties, covenants and indemnities to
Agents and other documents reasonably requested by Agents; and
(xiv) at the time of such Permitted Acquisition and after
giving effect thereto, no Default or Event of Default shall have occurred and be
continuing.
2.4. ELIGIBILITY OF ACCOUNTS AND INVENTORY OF TARGETS.
Notwithstanding anything in this Agreement to the contrary, the Accounts and
Inventory of the Permitted Acquisition will not be included in Eligible
Accounts, Eligible Mexican Accounts and Eligible Inventory of any Borrower,
until completion of a field audit thereof with results satisfactory to Agent;
PROVIDED, that in the event such field audit is completed with results
satisfactory to Agent
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before consummation of such Permitted Acquisition, the Borrowing Availability to
be ascribed to the Eligible Accounts, Eligible Mexican Accounts and Eligible
Inventory of the Target being acquired shall not, for purposes of any Revolving
Credit Advances made on the date of consummation of such Permitted Acquisition
to the acquiring Borrower or the Target, exceed ninety (90%) percent of the
Borrowing Availability which would otherwise be available on account of the
Borrowing Base attributable to that Permitted Acquisition.
3. REPRESENTATIONS AND WARRANTIES
To induce Lenders to make the Loans and to incur Letter of Credit
Obligations, the Credit Parties, jointly and severally, make the following
representations and warranties to Agents and each Lender with respect to all
Credit Parties, each and all of which shall survive the execution and delivery
of this Agreement.
3.1. CORPORATE EXISTENCE; COMPLIANCE WITH LAW. Each Credit Party
(a) is a corporation duly organized, validly existing and in good standing under
the laws of its jurisdiction of incorporation; (b) is duly qualified to conduct
business and is in good standing in each other jurisdiction where its ownership
or lease of property or the conduct of its business requires such qualification,
except where the failure to be so qualified would not have a Material Adverse
Effect; (c) has the requisite corporate power and authority and the legal right
to own, pledge, mortgage or otherwise encumber and operate its properties, to
lease the property it operates under lease and to conduct its business as now,
heretofore and proposed to be conducted; (d) subject to specific representations
regarding Environmental Laws, has all material licenses, permits, consents or
approvals from or by, and has made all material filings with, and has given all
notices to, all Governmental Authorities having jurisdiction, to the extent
necessary for such ownership, operation and conduct; (e) is in compliance with
its charter and by-laws; and (f) subject to specific representations set forth
herein regarding ERISA, Environmental Laws, tax and other laws, is in compliance
with all applicable provisions of law, except where the failure to comply,
individually or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect.
3.2. EXECUTIVE OFFICES; FEIN. As of the Closing Date, the current
location of each Credit Party's chief executive office and principal place of
business is set forth in Disclosure Schedule (3.2), and none of such locations
have changed within the twelve (12) months preceding the Closing Date. In
addition, DISCLOSURE SCHEDULE (3.2) lists the federal employer identification
number of each Credit Party.
3.3. CORPORATE POWER, AUTHORIZATION, ENFORCEABLE OBLIGATIONS. The
execution, delivery and performance by each Credit Party of the Loan Documents
to which it is a party and the creation of all Liens provided for therein: (a)
are within such Person's corporate power; (b) have been duly authorized by all
necessary or proper corporate and shareholder action; (c) do not contravene any
provision of such Person's charter or bylaws; (d) do not violate any law or
regulation, or any order or decree of any court or Governmental Authority; (e)
do not conflict with or result in the breach or termination of, constitute a
default under or accelerate or permit the acceleration of any performance
required by, any indenture, mortgage, deed of trust, lease, agreement or other
instrument to which such Person is a party or by which such Person or any of
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its property is bound; (f) do not result in the creation or imposition of any
Lien upon any of the property of such Person other than those in favor of Agent,
on behalf of itself and Lenders, pursuant to the Loan Documents; and (g) do not
require the consent or approval of any Governmental Authority or any other
Person, except those referred to in SECTION 2.1(c), all of which will have been
duly obtained, made or complied with prior to the Closing Date. On or prior to
the Closing Date, each of the Loan Documents shall have been duly executed and
delivered by each Credit Party thereto and each such Loan Document shall then
constitute a legal, valid and binding obligation of such Credit Party
enforceable against it in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency, moratorium and other
similar laws affecting creditors' rights generally.
3.4. FINANCIAL STATEMENTS AND PROJECTIONS. Except for the
Projections, all Financial Statements concerning RII and its Subsidiaries which
are referenced below have been prepared in accordance with GAAP consistently
applied throughout the periods covered (except as disclosed therein and except,
with respect to unaudited Financial Statements, for the absence of footnotes and
normal year-end audit adjustments) and present fairly in all material respects
the financial position of the Persons covered thereby as at the dates thereof
and the results of their operations and cash flows for the periods then ended.
(a) The following Financial Statements attached hereto as
DISCLOSURE SCHEDULE (3.4(A)) have been delivered on the date hereof:
(i) The audited consolidated and consolidating balance
sheets at September 30, 1995 and 1996 and the related statements of income and
cash flows of RII and its Subsidiaries for the Fiscal Years then ended,
certified by BDO Seidman, L.L.P.
(ii) The unaudited consolidated and consolidating balance
sheet(s) at September 30, 1997 and the related statement(s) of income and cash
flows of RII and its Subsidiaries and the Current Acquisitions Targets in the
case of RII, for the twelve months then ended and in the case of the Current
Acquisitions Targets for the period since the commencement of their most recent
respective fiscal years.
(b) PRO FORMA. The Pro Forma delivered on the date hereof and
attached hereto as DISCLOSURE SCHEDULE (3.4(B)) was prepared by RII giving PRO
FORMA effect to the Related Transactions, was based on the unaudited
consolidated and consolidating balance sheets of RII and its Subsidiaries dated
September 30, 1997, and of the Current Acquisitions Targets and was prepared in
accordance with GAAP, with only such adjustments thereto as would be required in
accordance with GAAP.
(c) PROJECTIONS. The Projections delivered on the date hereof and
attached hereto as DISCLOSURE SCHEDULE (3.4(C)) have been prepared by RII in
light of the past operations of its and its Subsidiaries' and the Current
Acquisitions Targets' businesses, but including future payments of known
contingent liabilities, and reflect projections for the three (3) year period
beginning on October 1, 1997 on a quarter by quarter basis for the first year
and on a year by year basis thereafter. The Projections are based upon
estimates and assumptions stated therein, all of which RII and Borrowers believe
to be reasonable and fair in light of current conditions and
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current facts known to RII and Borrowers and, as of the Closing Date, reflect
RII's and Borrowers' good faith and reasonable estimates of the future financial
performance of RII and Borrowers and of the other information projected therein
for the period set forth therein.
3.5. MATERIAL ADVERSE EFFECT. Between September 30, 1996 and the
Closing Date, (a) no Credit Party has incurred any obligations, contingent or
non-contingent liabilities, liabilities for Charges, long-term leases or unusual
forward or long-term commitments which are not reflected in the Pro Forma and
which, alone or in the aggregate, could reasonably be expected to have a
Material Adverse Effect, (b) no contract, lease or other agreement or instrument
has been entered into by any Credit Party or has become binding upon any Credit
Party's assets and no law or regulation applicable to any Credit Party has been
adopted which has had or could reasonably be expected to have a Material Adverse
Effect, and (c) no Credit Party is in default and to the best of Borrowers'
knowledge no third party is in default under any material contract, lease or
other agreement or instrument, which alone or in the aggregate could reasonably
be expected to have a Material Adverse Effect. Between September 30, 1996 and
the Closing Date no event has occurred, which alone or together with other
events, could reasonably be expected to have a Material Adverse Effect.
3.6. OWNERSHIP OF PROPERTY; LIENS. As of the Closing Date, the real
estate ("REAL ESTATE") listed on DISCLOSURE SCHEDULE (3.6) constitutes all of
the real property owned, leased, subleased, or used by any Credit Party. Each
Credit Party owns good and marketable fee simple title to all of its owned real
estate, and valid and marketable leasehold interests in all of its leased Real
Estate, all as described on DISCLOSURE SCHEDULE (3.6), and copies of all such
leases or a summary of terms thereof satisfactory to Agents have been delivered
to Agents. DISCLOSURE SCHEDULE (3.6) further describes any Real Estate with
respect to which any Credit Party is a lessor, sublessor or assignor as of the
Closing Date. Each Credit Party also has good and marketable title to, or valid
leasehold interests in, all of its personal properties and assets. As of the
Closing Date, none of the properties and assets of any Credit Party are subject
to any Liens other than Permitted Encumbrances, and there are no facts,
circumstances or conditions known to any Credit Party that may result in any
Liens (including Liens arising under Environmental Laws) other than Permitted
Encumbrances. Each Credit Party has received all deeds, assignments, waivers,
consents, non-disturbance and recognition or similar agreements, bills of sale
and other documents, and has duly effected all recordings, filings and other
actions necessary to establish, protect and perfect such Credit Party's right,
title and interest in and to all such Real Estate and other properties and
assets. DISCLOSURE SCHEDULE (3.6) also describes any purchase options, rights
of first refusal or other similar contractual rights pertaining to any Real
Estate. As of the Closing Date, no portion of any Credit Party's Real Estate
has suffered any material damage by fire or other casualty loss which has not
heretofore been repaired and restored in all material respects to its original
condition or otherwise remedied. As of the Closing Date, all material permits
required to have been issued or appropriate to enable the Real Estate to be
lawfully occupied and used for all of the purposes for which they are currently
occupied and used have been lawfully issued and are in full force and effect.
3.7. LABOR MATTERS. As of the Closing Date (a) no strikes or other
material labor disputes against any Credit Party are pending or, to any Credit
Party's knowledge, threatened; (b) hours worked by and payment made to employees
of each Credit Party comply in
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all material respects with the Fair Labor Standards Act and each other federal,
state, local or foreign law applicable to such matter; (c) all payments due from
any Credit Party for employee health and welfare insurance have been paid or
accrued as a liability on the books of such Credit Party; (d) except as set
forth in DISCLOSURE SCHEDULE (3.7), no Credit Party is a party to or bound by
any collective bargaining agreement, management agreement, consulting agreement
or any employment agreement (and true and complete copies of any agreements
described on DISCLOSURE SCHEDULE (3.7) have been delivered to Agents); (e) there
is no organizing activity involving any Credit Party pending or, to any Credit
Party's knowledge, threatened by any labor union or group of employees; (f)
there are no representation proceedings pending or, to any Credit Party's
knowledge, threatened with the National Labor Relations Board, and no labor
organization or group of employees of any Credit Party has made a pending demand
for recognition; and (g) except as set forth in DISCLOSURE SCHEDULE (3.7), there
are no complaints or charges against any Credit Party pending or, to the
knowledge of any Credit Party, threatened to be filed with any Governmental
Authority or arbitrator based on, arising out of, in connection with, or
otherwise relating to the employment or termination of employment by any Credit
Party of any individual seeking more than $100,000 in damages.
3.8. VENTURES, SUBSIDIARIES AND AFFILIATES; OUTSTANDING STOCK AND
INDEBTEDNESS. Except as set forth in DISCLOSURE SCHEDULE (3.8), as of the
Closing Date, no Credit Party has any Subsidiaries, is engaged in any joint
venture or partnership with any other Person, or is an Affiliate of any other
Person. All of the issued and outstanding Stock of each Credit Party is owned
by each of the stockholders and in the amounts set forth on DISCLOSURE SCHEDULE
(3.8). Except as set forth on DISCLOSURE SCHEDULE (3.8), as of the Closing
Date, there are no outstanding rights to purchase, options, warrants or similar
rights or agreements pursuant to which RII may be required to issue, sell,
repurchase or redeem any of its Stock or other equity securities. There are no
such outstanding rights to purchase, options, warrants or similar rights or
agreements with respect to any Stock or other equity securities of RII's
Subsidiaries. All outstanding Indebtedness of each Credit Party as of the
Closing Date is described in SECTION 6.3 (including DISCLOSURE SCHEDULE (6.3)).
NR Holdings has no assets except the Stock of NV Borrower nor any Indebtedness
or Guaranteed Indebtedness other than in respect of the Obligations. Recycling
Iowa has no assets except the stock of Weissman Borrower nor any Indebtedness or
Guaranteed Indebtedness other than in respect of the Obligations. RII has no
assets other than the Stock of its Subsidiaries. NR Holdings, Recycling Iowa
and RII are not engaged in any trade or business.
3.9. GOVERNMENT REGULATION. No Credit Party is an "investment
company" or an "affiliated person" of, or "promoter" or "principal underwriter"
for, an "investment company," as such terms are defined in the Investment
Company Act of 1940 as amended. No Credit Party is subject to regulation under
the Public Utility Holding Company Act of 1935, the Federal Power Act, or any
other federal or state statute that restricts or limits its ability to incur
Indebtedness or to perform its obligations hereunder. The making of the Loans by
Lenders to Borrowers, the incurrence of the Letter of Credit Obligations on
behalf of Borrowers, the application of the proceeds thereof and repayment
thereof and the consummation of the Related Transactions will not violate any
provision of any such statute or any rule, regulation or order issued by the
Securities and Exchange Commission.
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3.10. MARGIN REGULATIONS. No Credit Party is engaged, nor will it
engage, principally or as one of its important activities, in the business of
extending credit for the purpose of "purchasing" or "carrying" any "margin
security" as such terms are defined in Regulation U or G of the Federal Reserve
Board as now and from time to time hereafter in effect (such securities being
referred to herein as "MARGIN STOCK"). No Credit Party owns any Margin Stock,
and none of the proceeds of the Loans or other extensions of credit under this
Agreement will be used, directly or indirectly, for the purpose of purchasing or
carrying any Margin Stock, for the purpose of reducing or retiring any
Indebtedness which was originally incurred to purchase or carry any Margin Stock
or for any other purpose which might cause any of the Loans or other extensions
of credit under this Agreement to be considered a "purpose credit" within the
meaning of Regulation G, T, U or X of the Federal Reserve Board. No Credit
Party will take or permit to be taken any action which might cause any Loan
Document to violate any regulation of the Federal Reserve Board.
3.11. TAXES. All tax returns, reports and statements, including
information returns, required by any Governmental Authority to be filed by any
Credit Party have been filed with the appropriate Governmental Authority and all
Charges have been paid prior to the date on which any fine, penalty, interest or
late charge may be added thereto for nonpayment thereof (or any such fine,
penalty, interest, late charge or loss has been paid), excluding Charges or
other amounts being contested in accordance with SECTION 5.2(b). Proper and
accurate amounts have been withheld by each Credit Party from its respective
employees for all periods in full and complete compliance with all applicable
federal, state, local and foreign law and such withholdings have been timely
paid to the respective Governmental Authorities. DISCLOSURE SCHEDULE (3.11)
sets forth as of the Closing Date those taxable years for which any Credit
Party's tax returns are currently being audited by the IRS or any other
applicable Governmental Authority and any assessments or threatened assessments
in connection with such audit, or otherwise currently outstanding. Except as
described on DISCLOSURE SCHEDULE (3.11), no Credit Party has executed or filed
with the IRS or any other Governmental Authority any agreement or other document
extending, or having the effect of extending, the period for assessment or
collection of any Charges. None of the Credit Parties and their respective
predecessors are liable for any Charges: (a) under any agreement (including any
tax sharing agreements) or (b) to each Credit Party's knowledge, as a
transferee. As of the Closing Date, no Credit Party has agreed or been
requested to make any adjustment under IRC Section 481(a), by reason of a change
in accounting method or otherwise, which would have a Material Adverse Effect.
3.12. ERISA. (a) DISCLOSURE SCHEDULE (3.12) lists and separately
identifies all Title IV Plans, Multiemployer Plans, ESOPs and Retiree Welfare
Plans. Copies of all such listed Plans, together with a copy of the latest form
5500 for each such Plan, have been delivered to Agents. Except with respect to
Multiemployer Plans, each Qualified Plan has been determined by the IRS to
qualify under Section 401 of the IRC, and the trusts created thereunder have
been determined to be exempt from tax under the provisions of Section 501 of the
IRC, and nothing has occurred which would cause the loss of such qualification
or tax-exempt status. Each Plan is in compliance with the applicable provisions
of ERISA and the IRC, including the filing of reports required under the IRC or
ERISA. No Credit Party or ERISA Affiliate has failed to make any contribution or
pay any amount due as required by either Section 412 of the IRC or Section 302
of ERISA or the terms of any such Plan. No Credit Party or ERISA Affiliate has
engaged in a
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prohibited transaction, as defined in Section 4975 of the IRC, in connection
with any Plan, which would subject any Credit Party to a material tax on
prohibited transactions imposed by Section 4975 of the IRC.
(b) Except as set forth in DISCLOSURE SCHEDULE (3.12): (i) no Title
IV Plan has any Unfunded Pension Liability; (ii) no ERISA Event or event
described in Section 4062(e) of ERISA with respect to any Title IV Plan has
occurred or is reasonably expected to occur; (iii) there are no pending, or to
the knowledge of any Credit Party, threatened claims (other than claims for
benefits in the normal course), sanctions, actions or lawsuits, asserted or
instituted against any Plan or any Person as fiduciary or sponsor of any Plan;
(iv) no Credit Party or ERISA Affiliate has incurred or reasonably expects to
incur any liability as a result of a complete or partial withdrawal from a
Multiemployer Plan; (v) within the last five years no Title IV Plan with
Unfunded Pension Liabilities has been transferred outside of the "controlled
group" (within the meaning of Section 4001(a)(14) of ERISA) of any Credit Party
or ERISA Affiliate; and (vi) no liability under any Title IV Plan has been
satisfied with the purchase of a contract from an insurance company that is not
rated AAA by the Standard & Poor's Corporation or the equivalent by another
nationally recognized rating agency.
3.13. NO LITIGATION. No action, claim, lawsuit, demand,
investigation or proceeding is now pending or, to the knowledge of any Credit
Party, threatened against any Credit Party, before any Governmental Authority or
before any arbitrator or panel of arbitrators (collectively, "LITIGATION"), (a)
which challenges any Credit Party's right or power to enter into or perform any
of its obligations under the Loan Documents to which it is a party, or the
validity or enforceability of any Loan Document or any action taken thereunder,
or (b) which has a reasonable risk of being determined adversely to any Credit
Party and which, if so determined, could have a Material Adverse Effect. Except
as set forth on DISCLOSURE SCHEDULE (3.13), as of the Closing Date there is no
Litigation pending or threatened which seeks damages in excess of $100,000 or
injunctive relief or alleges criminal misconduct of any Credit Party.
3.14. BROKERS. Except as set forth on DISCLOSURE SCHEDULE (3.14), no
broker or finder acting on behalf of any Credit Party brought about the
obtaining, making or closing of the Loans or the Related Transactions, and no
Credit Party has any obligation to any Person in respect of any finder's or
brokerage fees in connection therewith.
3.15. INTELLECTUAL PROPERTY. Each Credit Party owns or has
rights to use all Intellectual Property necessary to continue to conduct its
business as now or heretofore conducted by it or proposed to be conducted by it,
and each Patent, Trademark, Copyright and License owned by any Credit Party is
listed, together with application or registration numbers, as applicable, in
DISCLOSURE SCHEDULE (3.15) hereto. To its knowledge, each Credit Party conducts
its business and affairs without infringement of or interference with any
Intellectual Property of any other Person. As of the Closing Date, RII and its
Subsidiaries do not own any Patents or Trademarks having any material value as
to its existing operations.
3.16. FULL DISCLOSURE. No information contained in this Agreement,
any of the other Loan Documents, any Projections, Financial Statements or
Collateral Reports or other reports from time to time delivered hereunder or any
written statement furnished by or on behalf
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of any Credit Party to Agents or any Lender pursuant to the terms of this
Agreement contains or will contain any untrue statement of a material fact or
omits or will omit to state a material fact necessary to make the statements
contained herein or therein not misleading in light of the circumstances under
which they were made. The Liens granted to Agent, on behalf of itself and
Lenders, pursuant to the Collateral Documents will at all times be fully
perfected first priority Liens in and to the Collateral described therein,
subject, as to priority, only to Permitted Encumbrances with respect to the
Collateral other than Accounts.
3.17. ENVIRONMENTAL MATTERS. (a) Except as set forth in DISCLOSURE
SCHEDULE (3.17), to the best of the Credit Parties' knowledge on the basis of
reasonable inquiry (including, without limitation the reports of W. Z.
Baumgartner & Associates and reports of McLaren Hart and Associates described on
DISCLOSURE SCHEDULE (3.17)), as of the Closing Date: (i) the Real Estate is free
of contamination from any Hazardous Material except for such contamination that
would not adversely impact the value or marketability of such Real Estate and
which would not result in Environmental Liabilities which could reasonably be
expected to exceed $1,000,000; (ii) no Credit Party has caused or suffered to
occur any Release of Hazardous Materials on, at, in, under, above, to, from or
about any of its Real Estate; (iii) the Credit Parties are and have been in
compliance with all Environmental Laws, except for such noncompliance which
would not result in Environmental Liabilities which could reasonably be expected
to exceed $1,000,000; (iv) the Credit Parties have obtained, and are in
compliance with, all Environmental Permits required by Environmental Laws for
the operations of their respective businesses as presently conducted or as
proposed to be conducted, except where the failure to so obtain or comply with
such Environmental Permits would not result in Environmental Liabilities which
could reasonably be expected to exceed $1,000,000, and all such Environmental
Permits are valid, uncontested and in good standing; (v) no Credit Party is
involved in operations or knows of any facts, circumstances or conditions,
including any Releases of Hazardous Materials, that are likely to result in any
Environmental Liabilities of such Credit Party which could reasonably be
expected to exceed $1,000,000, and no Credit Party has permitted any current or
former tenant or occupant of the Real Estate to engage in any such operations;
(vi) there is no Litigation arising under or related to any Environmental Laws,
Environmental Permits or Hazardous Material which seeks damages, penalties,
fines, costs or expenses in excess of $1,000,000 or injunctive relief, or which
alleges criminal misconduct by any Credit Party; (vii) no notice has been
received by any Credit Party identifying it as a "potentially responsible party"
or requesting information under CERCLA or analogous state statutes, and to the
knowledge of the Credit Parties, there are no facts, circumstances or conditions
that may result in any Credit Party being identified as a "potentially
responsible party" under CERCLA or analogous state statutes; and (viii) the
Credit Parties have provided to Agents copies of all existing environmental
reports, reviews and audits and all written information pertaining to actual or
potential Environmental Liabilities, in each case relating to any Credit Party.
(b) Each Credit Party hereby acknowledges and agrees that neither
of the Agents (i) is now, nor has ever been, in control of any of the Real
Estate or any Credit Party's affairs, nor (ii) has the capacity through the
provisions of the Loan Documents or otherwise to influence any Credit Party's
conduct with respect to the ownership, operation or management of any of its
Real Estate or compliance with Environmental Laws or Environmental Permits.
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3.18. INSURANCE. DISCLOSURE SCHEDULE (3.18) lists all insurance
policies of any nature maintained, as of the Closing Date, for current
occurrences by each Credit Party, as well as a summary of the terms of each such
policy.
3.19. DEPOSIT AND DISBURSEMENT ACCOUNTS. DISCLOSURE SCHEDULE (3.19)
lists all banks and other financial institutions at which any Credit Party
maintains deposits and/or other accounts, including any Disbursement Accounts,
and such Schedule correctly identifies the name, address and telephone number of
each depository, the name in which the account is held, a description of the
purpose of the account, and the complete account number.
3.20. GOVERNMENT CONTRACTS. Except as set forth in DISCLOSURE
SCHEDULE (3.20), as of the Closing Date, no Credit Party is a party to any
contract or agreement with any Governmental Authority and no Credit Party's
Accounts are subject to the Federal Assignment of Claims Act, as amended (31
U.S.C. Section 3727) or any similar state or local law.
3.21. CUSTOMER AND TRADE RELATIONS. As of the Closing Date and after
giving effect to the Current Acquisitions, there exists no actual or, to the
knowledge of any Credit Party, threatened termination or cancellation of, or any
material adverse modification or change in: the business relationship of any
Credit Party with any customer or group of customers whose purchases during the
preceding twelve (12) months caused them to be ranked among the ten largest
customers of such Credit Party; or the business relationship of any Credit
Party with any supplier material to its operations.
3.22. AGREEMENTS AND OTHER DOCUMENTS. As of the Closing Date, each
Credit Party has provided to Agent, on behalf of Lenders, accurate and complete
copies (or summaries) of all of the following agreements or documents to which
any it is subject and each of which are listed on DISCLOSURE SCHEDULE (3.22);
supply agreements and purchase agreements not terminable by such Credit Party
within sixty (60) days following written notice issued by such Credit Party and
involving transactions in excess of $1,000,000 per annum; any lease of
Equipment having a remaining term of one year or longer and requiring aggregate
rental and other payments in excess of $500,000 per annum; licenses and permits
held by the Credit Parties, the absence of which could be reasonably likely to
have a Material Adverse Effect; instruments or documents evidencing
Indebtedness of such Credit Party and any security interest granted by such
Credit Party with respect thereto; and instruments and agreements evidencing
the issuance of any equity securities, warrants, rights or options to purchase
equity securities of such Credit Party.
3.23. SOLVENCY. Both before and after giving effect to (a) the Loans
and Letter of Credit Obligations to be made or extended on the Closing Date or
such other date as Loans and Letter of Credit Obligations requested hereunder
are made or extended, (b) the disbursement of the proceeds of such Loans
pursuant to the instructions of Borrower Representative, (c) the Current
Acquisitions, the Refinancing and the consummation of the other Related
Transactions and (d) the payment and accrual of all transaction costs in
connection with the foregoing, each Credit Party is Solvent.
3.24. CURRENT ACQUISITION AGREEMENTS. As of the Closing Date,
Borrowers have delivered to Agents a complete and correct copy of each of the
Current Acquisition Agreements
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(including all schedules, exhibits, amendments, supplements, modifications,
assignments and all other documents delivered pursuant thereto or in connection
therewith). No Credit Party and, to the knowledge of the Credit Parties, no
other Person party thereto is in default in the performance or compliance with
any provisions thereof. Each Current Acquisition Agreement complies with, and
each Current Acquisition has been consummated in accordance with, all applicable
laws. Each Current Acquisition Agreement is in full force and effect as of the
Closing Date and has not been terminated, rescinded or withdrawn. All requisite
approvals by Governmental Authorities having jurisdiction over Sellers, any
Credit Party and other Persons referenced therein, with respect to the
transactions contemplated by such Current Acquisition Agreement, have been
obtained, and no such approvals impose any conditions to the consummation of the
transactions contemplated by such Current Acquisition Agreement or to the
conduct by any Credit Party of its business thereafter. To the best of each
Credit Party's knowledge, none of any Seller's representations or warranties in
any Current Acquisition Agreement contain any untrue statement of a material
fact or omit any fact necessary to make the statements therein not misleading.
Each of the representations and warranties given by each applicable Credit Party
in each Current Acquisition Agreement is true and correct in all material
respects. Notwithstanding anything contained in any Current Acquisition
Agreement to the contrary, such representations and warranties of the Credit
Parties are incorporated into this Agreement by this SECTION 3.24 and shall,
solely for purposes of this Agreement and the benefit of Agents and Lenders,
survive the consummation of each Current Acquisition.
3.25. SUBORDINATED DEBT. As of the Closing Date, RII has delivered
to Agents a complete and correct copy of the Subordinated Notes and other
promissory notes evidencing Subordinated Debt outstanding as of the Closing Date
(including all indentures, schedules, exhibits, amendments, supplements,
modifications, assignments and all other documents delivered pursuant thereto or
in connection therewith collectively, the "Subordinated Debt Documents"). RII
has the corporate power and authority to incur the Indebtedness evidenced by the
Subordinated Debt Documents. The subordination provisions of the Subordinated
Debt Documents are enforceable against the holders of the Subordinated Debt by
Agents and Lenders. All Obligations, including the Obligations to pay principal
of and interest on the Loans and the Letter of Credit Obligations, constitute
senior Indebtedness entitled to the benefits of the subordination provisions
contained in the Subordinated Debt Documents. The principal of and interest on
the Notes, all Letter of Credit Obligations and all other Obligations will
constitute "senior debt" as that or any similar term is or may be used in any
other instrument evidencing or applicable to any other Subordinated Debt issued
after the Closing Date. RII and Borrowers acknowledge that Agents and each
Lender are entering into this Agreement and are extending the Commitments in
reliance upon the subordination provisions of the Subordinated Notes and this
SECTION 3.25.
4. FINANCIAL STATEMENTS AND INFORMATION
4.1. REPORTS AND NOTICES. (a) Each Credit Party executing this
Agreement hereby agrees that from and after the Closing Date and until the
Termination Date, it shall deliver to Agent and/or Lenders, as required, the
Financial Statements, notices, Projections and other information at the times,
to the Persons and in the manner set forth in ANNEX E.
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(b) Each Credit Party executing this Agreement hereby agrees that
from and after the Closing Date and until the Termination Date, it shall deliver
to Agent and/or Lenders, as required, the various Collateral Reports (including
Borrowing Base Certificates in the form of EXHIBIT 4.1(b)) at the times, to the
Persons and in the manner set forth in ANNEX F.
4.2. COMMUNICATION WITH ACCOUNTANTS. Each Credit Party executing
this Agreement authorizes Agents and, so long as an Event of Default shall have
occurred and be continuing, each Lender, to communicate directly with its
independent certified public accountants, including BDO Seidman, LLP, and
authorizes and shall instruct those accountants and advisors to disclose and
make available to Agent and each Lender any and all Financial Statements and
other supporting financial documents, schedules and information relating to any
Credit Party (including copies of any issued management letters) with respect to
the business, financial condition and other affairs of any Credit Party.
5. AFFIRMATIVE COVENANTS
Each Credit Party jointly and severally agrees as to all Credit
Parties that until the Termination Date:
5.1. MAINTENANCE OF EXISTENCE AND CONDUCT OF BUSINESS. Each Credit
Party shall: do or cause to be done all things necessary to preserve and keep
in full force and effect its corporate existence and its rights and franchises;
continue to conduct its business substantially as now conducted or as otherwise
permitted hereunder; at all times maintain, preserve and protect all of its
assets and properties used or useful in the conduct of its business, and keep
the same in good repair, working order and condition in all material respects
(taking into consideration ordinary wear and tear) and from time to time make,
or cause to be made, all necessary or appropriate repairs, replacements and
improvements thereto consistent with industry practices; and transact business
only in such corporate and trade names as are set forth in DISCLOSURE SCHEDULE
(5.1).
5.2. PAYMENT OF OBLIGATIONS. (a) Subject to SECTION 5.2(b), each
Credit Party shall pay and discharge or cause to be paid and discharged promptly
all Charges payable by it, including (A) Charges imposed upon it, its income and
profits, or any of its property (real, personal or mixed) and all Charges with
respect to tax, social security and unemployment withholding with respect to its
employees, and (B) lawful claims for labor, materials, supplies and services or
otherwise, before any thereof shall become past due.
(b) Each Credit Party may in good faith contest, by appropriate
proceedings, the validity or amount of any Charges and claims described in
SECTION 5.2(a); PROVIDED, that (i) adequate reserves with respect to such
contest are maintained on the books of such Credit Party, in accordance with
GAAP, (ii) no Lien shall be imposed to secure payment of such Charges other than
Permitted Encumbrances and such contest is maintained and prosecuted
continuously and with diligence and operates to suspend collection or
enforcement of such Charges, (iii) none of the Collateral becomes subject to
forfeiture or loss as a result of such contest, (iv) such Credit Party shall
promptly pay or discharge such contested Charges or claims and all additional
charges, interest, penalties and expenses, if any, and shall deliver to Agent
evidence acceptable to Agent of
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such compliance, payment or discharge, if such contest is terminated or
discontinued adversely to such Credit Party or the conditions set forth in this
SECTION 5.2(b) are no longer met, and (v) Agent has not advised Borrowers in
writing that Agent reasonably believes that nonpayment or nondischarge thereof
could have or result in a Material Adverse Effect.
5.3. BOOKS AND RECORDS. Each Credit Party shall keep adequate books
and records with respect to its business activities in which proper entries,
reflecting all financial transactions, are made in accordance with GAAP and on a
basis consistent with the Financial Statements attached as DISCLOSURE SCHEDULE
(3.4(A)).
5.4. INSURANCE; DAMAGE TO OR DESTRUCTION OF COLLATERAL. (a) The
Credit Parties shall, at their sole cost and expense, maintain the policies of
insurance described on DISCLOSURE SCHEDULE (3.18) as in effect on the date
hereof or other policies providing substantially equivalent coverage reasonably
acceptable to Agent in form and with insurers acceptable to Agent. If any
Credit Party at any time or times hereafter shall fail to obtain or maintain
any of the policies of insurance required above or to pay all premiums relating
thereto, Agent may at any time or times thereafter obtain and maintain such
policies of insurance and pay such premiums and take any other action with
respect thereto which Agent deems advisable. Agent shall have no obligation to
obtain insurance for any Credit Party or pay any premiums therefor. By doing
so, Agent shall not be deemed to have waived any Default or Event of Default
arising from any Credit Party's failure to maintain such insurance or pay any
premiums therefor. All sums so disbursed, including attorneys' fees, court
costs and other charges related thereto, shall be payable on demand by Borrowers
to Agent and shall be additional Obligations hereunder secured by the
Collateral.
(b) Agent reserves the right at any time upon any material increase
in any Credit Party's risk profile (including any change in the product mix
maintained by any Credit Party or any laws affecting the potential liability of
such Credit Party) to require additional forms and limits of insurance to, in
Agent's opinion, adequately protect both Agent's and Lender's interests in all
or any portion of the Collateral and to ensure that each Credit Party is
protected by insurance in amounts and with coverage customary for its industry.
If requested by Agent, each Credit Party shall deliver to Agent from time to
time a report of a reputable insurance broker, satisfactory to Agent, with
respect to its insurance policies.
(c) Each Credit Party shall deliver to Agent, in form and substance
satisfactory to Agent, endorsements to (i) all "All Risk" and business
interruption insurance naming Agent, on behalf of itself and Lenders, as loss
payee, and (ii) all general liability and other liability policies naming Agent,
on behalf of itself and Lenders, as additional insured. Each Credit Party
irrevocably makes, constitutes and appoints Agent (and all officers, employees
or agents designated by Agent), so long as any Default or Event of Default shall
have occurred and be continuing or the anticipated insurance proceeds exceed
$1,000,000, as such Credit Party's true and lawful agent and attorney-in-fact
for the purpose of making, settling and adjusting claims under such "All Risk"
policies of insurance, endorsing the name of such Credit Party on any check or
other item of payment for the proceeds of such "All Risk" policies of insurance
and for making all determinations and decisions with respect to such "All Risk"
policies of insurance. Agent shall have no duty to exercise any rights or
powers granted to it pursuant to the foregoing power-of-
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attorney. Borrower Representative shall promptly notify Agent of any loss,
damage, or destruction to the Collateral in the amount of $250,000 or more,
whether or not covered by insurance. After deducting from such proceeds the
expenses, if any, incurred by Agent in the collection or handling thereof, Agent
may, at its option, apply such proceeds to the reduction of the Obligations in
accordance with SECTION 1.3(d); provided that in the case of insurance proceeds
pertaining to any Credit Party that is not a Borrower, such insurance proceeds
shall be applied ratably to all of the Loans owing by each Borrower, or permit
or require the applicable Credit Party to use such money, or any part thereof,
to replace, repair, restore or rebuild the Collateral in a diligent and
expeditious manner with materials and workmanship of substantially the same
quality as existed before the loss, damage or destruction. Notwithstanding the
foregoing, if the casualty giving rise to such insurance proceeds would not
reasonably be expected to have a Material Adverse Effect and such insurance
proceeds do not exceed $1,000,000 in the aggregate, Agent shall permit the
applicable Credit Party to replace, restore, repair or rebuild the property;
PROVIDED that if such Credit Party shall not have completed or entered into
binding agreements to complete such replacement, restoration, repair or
rebuilding within 180 days of such casualty, Agent may apply such insurance
proceeds to the Obligations in accordance with SECTION 1.3(d); provided further
that in the case of insurance proceeds pertaining to any Credit Party that is
not a Borrower, such insurance proceeds shall be applied ratably to all of the
Loans owing by each Borrower. All insurance proceeds which are to be made
available to any Borrower to replace, repair, restore or rebuild the Collateral
shall be applied by Agent to reduce the outstanding principal balance of the
Revolving Loan of such Borrower (which application shall not result in a
permanent reduction of the Revolving Loan Commitment) and upon such application,
Agent shall establish a Reserve against the separate Borrowing Base of the
affected Borrower in an amount equal to the amount of such proceeds so applied.
All insurance proceeds made available to any Credit Party not constituting a
Borrower to replace, repair, restore or rebuild Collateral shall be deposited in
a cash collateral account. Thereafter, such funds shall be made available to
that Borrower or Credit Party to provide funds to replace, repair, restore or
rebuild the Collateral as follows: (i) Borrower Representative shall request a
Revolving Credit Advance or a release from the cash collateral account be made
to such Borrower or Credit Party in the amount requested to be released; (ii) so
long as the conditions set forth in SECTION 2.2 have been met, Revolving Lenders
shall make such Revolving Credit Advance or Agent shall release funds from the
cash collateral account; and (iii) in the case of insurance proceeds applied
against the Revolving Loan, the Reserve established with respect to such
insurance proceeds shall be reduced by the amount of such Revolving Credit
Advance. To the extent not used to replace, repair, restore or rebuild the
Collateral, such insurance proceeds shall be applied in accordance with SECTION
1.3(d); provided that in the case of insurance proceeds pertaining to any Credit
Party that is not a Borrower, such insurance proceeds shall be applied ratably
to all of the Loans owing by each Borrower.
5.5. COMPLIANCE WITH LAWS. Each Credit Party shall comply with all
federal, state, local and foreign laws and regulations applicable to it,
including those relating to licensing, ERISA and labor matters and Environmental
Laws and Environmental Permits, except to the extent that the failure to comply,
individually or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect.
5.6. SUPPLEMENTAL DISCLOSURE. From time to time as may be requested
by Agent (which request will not be made more frequently than once each year
absent the occurrence and
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continuance of a Default or an Event of Default), the Credit Parties shall
supplement each Disclosure Schedule hereto, or any representation herein or in
any other Loan Document, with respect to any matter hereafter arising which, if
existing or occurring at the date of this Agreement, would have been required to
be set forth or described in such Disclosure Schedule or as an exception to such
representation or which is necessary to correct any information in such
Disclosure Schedule or representation which has been rendered inaccurate thereby
(and, in the case of any supplements to any Disclosure Schedule, such Disclosure
Schedule shall be appropriately marked to show the changes made therein);
provided that (a) no such supplement to any such Disclosure Schedule or
representation shall be or be deemed a waiver of any Default or Event of Default
resulting from the matters disclosed therein, except as consented to by Agent
and Requisite Lenders in writing; and (b) no supplement shall be required as to
representations and warranties that relate solely to the Closing Date.
5.7. INTELLECTUAL PROPERTY. Each Credit Party will conduct its
business and affairs without infringement of or interference with any
Intellectual Property of any other Person in any material respect.
5.8. ENVIRONMENTAL MATTERS. Recognizing the nature of the business
activity in which the Credit Parties are engaged, each Credit Party shall
conduct its operations in a reasonable and cost-effective manner in order to
minimize the possibility of a Release, or any unplanned sudden or non-sudden
Release of Hazardous Material. If any material Release of Hazardous Materials
requiring reporting to Governmental Authorities shall occur on the Real Estate,
the applicable Credit Party shall cause the prompt containment and Removal of
such Hazardous Materials and remediation of the Real Estate to maintain the Real
Estate in compliance with applicable Environmental Laws and Environmental
Permits. Therefore, each Credit Party shall and shall cause each Person within
its control to: (a) conduct its operations and keep and maintain its Real Estate
in compliance with all Environmental Laws and Environmental Permits other than
noncompliance which could not reasonably be expected to have a Material Adverse
Effect; (b) implement any and all investigation, remediation, removal and
response actions which are appropriate or necessary to maintain the Real Estate
in compliance with Environmental Laws and Environmental Permits pertaining to
the presence, generation, treatment, storage, use, disposal, transportation or
Release of any Hazardous Material on, at, in, under, above, to, from or about
any of its Real Estate except for a time period not exceeding 30 days which
period may be extended at the discretion of the Agent so long as Agent remains
satisfied that the applicable Credit Party is diligently and in good faith
contesting any requirement of a Governmental Authority which has not yet become
the subject of an applicable judicial order or decree; (c) notify Agent within
14 days after such Credit Party becomes aware of any violation of Environmental
Laws or Environmental Permits or any Release of Hazardous Materials required to
be reported to any Governmental Authority concerning any Real Estate which is
reasonably likely to result in Environmental Liabilities in excess of $100,000;
and (d) within 14 days of receipt forward to Agent a copy of any order, notice,
request for information or any communication or report received by such Credit
Party in connection with any such violation or Release or any other
matter relating to any Environmental Laws or Environmental Permits that could
reasonably be expected to result in Environmental Liabilities in excess of
$100,000, in each case whether or not the Environmental Protection Agency or any
Governmental Authority has taken or threatened any action in connection with any
such violation, Release or other matter. If Agent at any time has a
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reasonable basis to believe that there is a violation of any Environmental Laws
or Environmental Permits by any Credit Party or any Environmental Liability
arising thereunder, or a Release of Hazardous Materials on, at, in, under,
above, to, from or about any of its Real Estate, which, in each case, could
reasonably be expected to have a Material Adverse Effect (any such event, an
"ENVIRONMENTAL EVENT"), then each Credit Party shall, upon Agent's written
request (i) cause the performance of such environmental audits including
subsurface sampling of soil and groundwater, and preparation of such
environmental reports, at Borrowers' expense, as Agent may from time to time
reasonably request, which shall be conducted by reputable environmental
consulting firms reasonably acceptable to Agent and shall be in form and
substance acceptable to Agent, and (ii) permit Agent or its representatives to
have access to all Real Estate for the purpose of conducting such environmental
audits and testing as Agent deems appropriate, including subsurface sampling of
soil and groundwater. Without limiting the foregoing, each Credit Party shall,
at Agent's request, cause environmental consultants acceptable to Agent to
prepare for Agent Phase 1 environmental reports in form and substance acceptable
to Agent on each of the Credit Parties' facilities; PROVIDED that unless an
Event of Default shall be outstanding or the Agent has a reasonable basis to
believe that an Environmental Event has occurred, Agent's request for such
Phase 1 environmental reports shall be made no more frequent than an annual
basis. Borrowers shall fund, and/or reimburse Agent for, the costs of such
audits and tests and the same will constitute a part of the Obligations secured
hereunder.
5.9. LANDLORDS' AGREEMENTS, MORTGAGEE AGREEMENTS AND BAILEE LETTERS.
Each Credit Party shall obtain a landlord's agreement, mortgagee agreement or
bailee letter, as applicable, from the lessor of each leased property or
mortgagee of owned property or with respect to any warehouse, processor or
converter facility or other location where Collateral is located, which
agreement or letter shall contain a waiver or subordination of all Liens or
claims that the landlord, mortgagee or bailee may assert against the Inventory
or Collateral at that location, and shall otherwise be satisfactory in form and
substance to Agent. With respect to such locations or warehouse space leased or
owned as of the Closing Date and thereafter, if Agent has not received a
landlord or mortgagee agreement or bailee letter as of the Closing Date (or, if
later, as of the date such location is acquired or leased), any Borrower's
Eligible Inventory at that location shall, in Agent's discretion, be excluded
from the Borrowing Base or be subject to such Reserves as may be established by
Agent in its reasonable credit judgment. After the Closing Date, no real
property or warehouse space shall be leased or acquired by any Credit Party and
no Inventory shall be shipped to a processor or converter under arrangements
established after the Closing Date without the prior written consent of Agent
(which consent, in Agent's discretion, may be conditioned upon the exclusion
from the Borrowing Base of Eligible Inventory at that location or the
establishment of Reserves acceptable to Agent) or, unless and until a
satisfactory landlord or mortgagee agreement or bailee letter, as appropriate,
shall first have been obtained with respect to such location. Each Credit Party
shall timely and fully pay and perform in all material respects its obligations
under all leases and other agreements with respect to each leased location or
public warehouse where any Collateral is or may be located. In addition,
concurrent with the acquisition of any fee interest in any real property, the
applicable Credit Party shall duly execute and deliver, or cause to be duly
executed and delivered, to Agent a Mortgage with respect to such real property
together with (a) a title insurance policy, current as-built survey, zoning
letters and certificates of occupancy, in each case satisfactory in form and
substance to
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Agent; (b) evidence that counterparts of the Mortgage have been recorded in all
places to the extent necessary or desirable, in the judgment of Agent, to create
a valid and enforceable first priority lien (subject to Permitted Encumbrances)
on each such parcel of real property in favor of Agent for the benefit of itself
and Lenders (or in favor of such other trustee as may be required or desired
under local law); and (c) an opinion of counsel in each state in which any such
parcel of real property is located in form and substance and from counsel
reasonably satisfactory to Agent.
5.10. FURTHER ASSURANCES. Each Credit Party executing this Agreement
agrees that it shall and shall cause each other Credit Party to, at such Credit
Party's expense and upon request of Agent, duly execute and deliver, or cause to
be duly executed and delivered, to Agent such further instruments and do and
cause to be done such further acts as may be necessary or proper in the
reasonable opinion of Agent to carry out more effectively the provisions and
purposes of this Agreement or any other Loan Document.
5.11. EXCLUDED PROPERTY. Within ten (10) Business Days after any
property ceases to be Excluded Property, the Credit Party owning such property
shall, at such Credit Party's expense, execute and deliver, or cause to be
executed and/or delivered, to Agent such documents, agreements and mortgages as
may be deemed as necessary or proper by Agent to perfect a first priority Lien
in and upon such property, subject only to Permitted Encumbrances.
5.12. REACTIVATION PLAN. Within 120 days following the issuance of
any injunction, temporary restraining order or other judicial order which
results in the termination or substantial impairment of the operation of any
shredder owned by any Credit Party which is not cured within 30 days of the date
so issued (an "ADVERSE SHREDDER ORDER"), such Credit Party shall provide a
written plan to Agent detailing the proposed actions to be undertaken by such
Credit Party to cause such shredder to become operational, which report shall be
in form and substance acceptable to Agent in all respects.
6. NEGATIVE COVENANTS
Each Credit Party jointly and severally agrees as to all Credit
Parties that, without the prior written consent of Agent and the Requisite
Lenders, until the Termination Date:
6.1. MERGERS, SUBSIDIARIES, ETC. No Credit Party shall directly or
indirectly, by operation of law or otherwise, (a) form or acquire any
Subsidiary, or (b) merge with, consolidate with, acquire all or substantially
all of the assets or capital stock of, or otherwise combine with or acquire, any
Person, except for Permitted Acquisitions and except that any Borrower may merge
with another Borrower or another Subsidiary of RII.
6.2. INVESTMENTS; LOANS AND ADVANCES. Except as otherwise expressly
permitted by this SECTION 6, no Credit Party shall make or permit to exist any
investment in, or make, accrue or permit to exist loans or advances of money
to, any Person, through the direct or indirect lending of money, holding of
securities or otherwise, except that (a) Borrowers may hold investments
comprised of notes payable, or stock or other securities issued by Account
Debtors to any Borrower pursuant to negotiated agreements with respect to
settlement of such Account Debtor's Accounts in the ordinary course of business,
so long as the aggregate amount of such
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Accounts so settled by Borrowers does not exceed $300,000 (b) each Credit Party
may maintain its existing investments in its Subsidiaries as of the Closing
Date; (c) each Credit Party may maintain its other investments existing as of
the Closing Date as set forth on DISCLOSURE SCHEDULE (6.2); (d) RII and/or
Borrowers shall make equity investments in existing or newly formed Subsidiaries
to fund Permitted Acquisitions to the extent not funded by (i) Equity Proceeds,
(ii) Acquisition Advances and/or (iii) Permitted Subordinated Debt; (e) so long
as no Default or Event of Default shall have occurred and be continuing and
there is no outstanding Revolving Loan balance, Borrowers may make investments
subject to Control Letters in favor of Agent for the benefit of Lenders or
otherwise subject to a perfected security interest in favor of Agent for the
benefit of Lenders in (i) marketable direct obligation issued or unconditionally
guaranteed by the United States of America or any agency thereof maturing within
one year from the date of acquisition thereof, (ii) commercial paper maturing no
more than one year from the date of creation thereof and currently having the
highest rating obtainable from either Standard & Poor's Ratings Group or Moody's
Investors Service, Inc., (iii) certificates of deposit, maturing no more than
one year from the date of creation thereof, issued by commercial banks
incorporated under the laws of the United States of America, each having a
senior unsecured rating of "A" or better by a nationally recognized rating
agency (an "A RATED BANK"), (iv) time deposits, maturing no more than 30 days
from the date of creation thereof with A Rated Banks; and (f) so long as no
Default or Event of Default shall have occurred and be continuing, RII and/or
Borrowers may make other investments not exceeding $100,000 in the aggregate at
any time outstanding.
6.3. INDEBTEDNESS. (a) No Credit Party shall create, incur, assume
or permit to exist any Indebtedness, except (without duplication) (i)
Indebtedness secured by purchase money security interests and Capitalized Leases
permitted in clause (c) of Section 6.7; (ii) the Loans and the other
Obligations; (iii) unfunded pension fund and other employee benefit plan
obligations and liabilities to the extent they are permitted to remain unfunded
under applicable law; (iv) existing Indebtedness described in DISCLOSURE
SCHEDULE (6.3) (including Subordinated Debt outstanding on the Closing Date and
refinancings thereof or amendments or modifications thereto which do not have
the effect of increasing the principal amount thereof or changing the
amortization thereof (other than to extend the same), granting Liens to secure
payment thereof and which are otherwise on terms and conditions no less
favorable to any Credit Party, Agent or any Lender, as determined by Agent, than
the terms of the Indebtedness being refinanced, amended or modified; (v) the
Subordinated Notes; (vi) Permitted Subordinated Debt incurred after the Closing
Date; (vii) Indebtedness consisting of intercompany loans and advances made by
any Borrower to RII the proceeds of which RII concurrently loans to another
Borrower, PROVIDED that (A) RII and each Borrower shall have executed and
delivered to each other, a demand note (collectively, the "INTERCOMPANY NOTES")
to evidence any such intercompany Indebtedness owing at any time by RII or such
Borrower to RII or such other Borrowers, as applicable, which Intercompany Notes
shall be in form and substance satisfactory to Agent and shall be pledged and
delivered to Agent pursuant to the applicable Pledge Agreement or Security
Agreement as additional collateral security for the Obligations; (B) RII and/or
each Borrower shall record all intercompany transactions on its books and
records in a manner satisfactory to Agent; (C) the obligations of RII and/or
each Borrower under any such Intercompany Notes shall be subordinated to the
Obligations of RII and/or such Borrower hereunder in a manner satisfactory to
Agent; (D) at the time any such intercompany loan or advance is made by RII
and/or any Borrower to RII and/or
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any other Borrower, as applicable, and after giving effect thereto, RII and each
such Borrower shall be Solvent; (E) no Default or Event of Default would occur
and be continuing after giving effect to any such proposed intercompany loan;
(F) in the case of any intercompany Indebtedness, the Borrower advancing such
funds shall have Net Borrowing Availability under its separate Borrowing Base of
not less than $500,000 after giving effect to such intercompany loan; and (G)
the aggregate amount of such intercompany Indebtedness owing by RII or any
Borrower shall not exceed $1,500,000 at any one time outstanding; and (viii)
unsecured indebtedness of RII and/or any Borrower existing on the Closing Date
or assumed in connection with one or more Permitted Acquisitions hereafter
consummated by RII and/or such Borrower not exceeding $5,000,000 in the
aggregate at any time.
(b) No Credit Party shall, directly or indirectly, voluntarily
purchase, redeem, defease or prepay any principal of, premium, if any, interest
or other amount payable in respect of any Indebtedness, other than (i) the
Obligations and (ii) Indebtedness secured by a Permitted Encumbrance if the
asset securing such Indebtedness has been sold or otherwise disposed of in
accordance with SECTIONS 6.8(b) or (c).
6.4. EMPLOYEE LOANS AND AFFILIATE TRANSACTIONS. (a) Except as
otherwise expressly permitted in this Section 6 with respect to Affiliates, no
Credit Party shall enter into or be a party to any transaction with any other
Credit Party or any Affiliate thereof except in the ordinary course of and
pursuant to the reasonable requirements of such Credit Party's business and upon
fair and reasonable terms that are no less favorable to such Credit Party than
would be obtained in a comparable arm's length transaction with a Person not an
Affiliate of such Credit Party; provided that (i) any Borrower may sell
Inventory to any other Borrower at cost (a "PERMITTED INTERCOMPANY INVENTORY
SALE") and (ii) RII shall be entitled to receive ratable payment from the Credit
Parties for reasonable administrative overhead costs at RII ("PERMITTED
INTERCOMPANY OVERHEAD PAYMENTS"). In addition, if any such transaction or
series of related transactions involves payments in excess of $250,000 in the
aggregate, the terms of these transactions must be disclosed in advance to Agent
and Lenders other than in respect of Permitted Intercompany Inventory Sales or
Permitted Intercompany Overhead Payments. All such transactions existing as of
the date hereof are described on DISCLOSURE SCHEDULE (6.4(a)).
(b) No Credit Party shall enter into any lending or borrowing
transaction with any employees of any Credit Party, except loans to their
respective employees on an arm's-length basis in the ordinary course of business
consistent with past practices for travel expenses, relocation costs and similar
purposes and stock option financing up to a maximum of $2,100,000 in the
aggregate at any one time outstanding.
6.5. CAPITAL STRUCTURE AND BUSINESS. No Credit Party shall (a) make
any changes in any of its business objectives, purposes or operations which
could in any way adversely affect the repayment of the Loans or any of the other
Obligations or could reasonably be expected to have or result in a Material
Adverse Effect, (b) make any change in its capital structure as described on
DISCLOSURE SCHEDULE (3.8), including the issuance of any shares of Stock,
warrants or other securities convertible into Stock or any revision of the terms
of its outstanding Stock, except that RII may make (i) the RII Equity Issuances,
(ii) the Settlement Issuances, (iii) issuances of Stock in connection with
Permitted Acquisitions and (iv) other Public Offerings of its common
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Stock so long as (1) the proceeds thereof are applied in prepayment of the
Obligations to the extent required by SECTION 1.3(b)(iii), and (2) no Change of
Control occurs after giving effect thereto, or (c) amend its charter or bylaws
in a manner which would adversely affect Agent or Lenders or such Credit Party's
duty or ability to repay the Obligations. No Credit Party shall engage in any
business other than the businesses currently engaged in by it or businesses
reasonably related thereto.
6.6. GUARANTEED INDEBTEDNESS. No Credit Party shall create, incur,
assume or permit to exist any Guaranteed Indebtedness except (a) by endorsement
of instruments or items of payment for deposit to the general account of any
Credit Party, (b) for unsecured guaranties by any Credit Party of the
Subordinated Notes and (c) for Guaranteed Indebtedness incurred for the benefit
of any other Credit Party if the primary obligation is expressly permitted by
this Agreement other than Indebtedness, if any, of a Target existing at the time
such Target is acquired and Subordinated Debt as to which RII is the sole
obligor.
6.7. LIENS. No Credit Party shall create, incur, assume or permit
to exist any Lien on or with respect to its Accounts or any of its other
properties or assets (whether now owned or hereafter acquired) except for (a)
Permitted Encumbrances; (b) Liens in existence on the date hereof and
summarized on DISCLOSURE SCHEDULE (6.7) or discharged by the proceeds of a Loan
or otherwise on the Closing Date; (c) Liens created after the date hereof by
conditional sale or other title retention agreements (including Capital Leases)
or in connection with purchase money Indebtedness with respect to Equipment and
Fixtures acquired by any Credit Party in the ordinary course of business,
involving the incurrence of an aggregate amount of purchase money Indebtedness
and Capital Lease Obligations of not more than $5,000,000 outstanding at any one
time for all such Liens (provided that such Liens attach only to the assets
subject to such purchase money debt and such Indebtedness is incurred within
twenty (20) days following such purchase and does not exceed 100% of the
purchase price of the subject assets); and (d) other Liens securing Indebtedness
not exceeding $5,000,000 in the aggregate at any time outstanding, so long as
such Liens do not attach to any Accounts or Inventory. In addition, no Credit
Party shall become a party to any agreement, note, indenture or instrument, or
take any other action, which would prohibit the creation of a Lien on any of its
properties or other assets in favor of Agent, on behalf of itself and Lenders,
as additional collateral for the Obligations, except operating leases, Capital
Leases or Licenses which prohibit Liens upon the assets that are subject
thereto.
6.8. SALE OF STOCK AND ASSETS. No Credit Party shall sell,
transfer, convey, assign or otherwise dispose of any of its properties or other
assets, including the capital Stock of any of its Subsidiaries (whether in a
public or a private offering or otherwise) or any of their Accounts, other than
(a) the sale of Inventory in the ordinary course of business and (b) the sale,
transfer, conveyance or other disposition by a Credit Party of Equipment and
Fixtures (not constituting a shredder or any permit therefor) having a value not
exceeding $2,500,000 in the aggregate in any Fiscal Year. For purposes of
computing the aggregate amount of asset dispositions permitted in any Fiscal
Year under clause (b) above, the value of any Acquired Asset Sale shall not be
included. With respect to any disposition of assets or other properties
permitted pursuant to CLAUSE (B) and CLAUSE (C) above, Agent agrees on
reasonable prior written notice to release its Lien on such assets or other
properties in order to permit the applicable Credit Party to effect such
disposition and shall execute and deliver to Borrowers, at Borrowers' expense,
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appropriate UCC-3 termination statements and other releases as reasonably
requested by Borrowers.
6.9. ERISA. No Credit Party shall, or shall cause or permit any
ERISA Affiliate to, cause or permit to occur an event which could result in the
imposition of a Lien under Section 412 of the IRC or Section 302 or 4068 of
ERISA or cause or permit to occur an ERISA Event to the extent such ERISA Event
could reasonably be expected to have a Material Adverse Effect.
6.10. FINANCIAL COVENANTS. Borrowers shall not breach or fail to
comply with any of the Financial Covenants (the "FINANCIAL COVENANTS") set forth
in ANNEX G.
6.11. HAZARDOUS MATERIALS. Recognizing the nature of the business
activity in which the Credit Parties are engaged and each Credit Party's duty to
conduct its operations in a reasonable and cost-effective manner to minimize the
possibility of a release or any unplanned sudden or non-sudden release of
Hazardous Material, no Credit Party shall cause or permit a Release of any
Hazardous Material on, at, in, under, above, to, from or about any of the Real
Estate where such Release would (a) violate in any respect, or form the basis
for any Environmental Liabilities under, any Environmental Laws or Environmental
Permits or otherwise adversely impact the value or marketability of any of the
Real Estate or any of the Collateral and (b) be reasonably likely to result in a
Material Adverse Effect.
6.12. SALE-LEASEBACKS. No Credit Party shall engage in any
sale-leaseback, synthetic lease or similar transaction involving any of its
assets.
6.13. CANCELLATION OF INDEBTEDNESS. No Credit Party shall cancel any
claim or debt owing to it, except for reasonable consideration negotiated on an
arm's-length basis and in the ordinary course of its business consistent with
past practices.
6.14. RESTRICTED PAYMENTS. No Credit Party shall make any Restricted
Payment, except (a) intercompany loans and advances between Borrowers to the
extent permitted by SECTION 6.3 above, (b) dividends and distributions by
Subsidiaries of any Borrower paid to such Borrower, (c) employee loans permitted
under SECTION 6.4(b) above, (d) distributions from Borrowers to RII in an amount
necessary to enable RII (i) to satisfy its Federal, state and local income tax
obligations to the extent such obligations are the result of the net
consolidated income of Borrowers and their Subsidiaries being attributed to RII
for tax purposes; PROVIDED that each Borrower's contribution shall not be
greater than or paid sooner than its ratable share of such income taxes then due
and payable by RII; PROVIDED FURTHER, that if any Borrower pays more to RII than
its ratable share of income taxes paid in cash by RII for any Fiscal Year, as
finally determined, it shall either demand and obtain reimbursement from RII or
set off the amount of such overpayment against other amounts owing by such
Borrower to RII, (ii) to pay the necessary fees and expenses to maintain its
corporate existence and good standing and to pay the reasonable costs of its
directors' and officers' insurance, (iii) to pay legal and accounting fees to
the extent such fees relate to legal or accounting services provided by entities
which are not Affiliates of Borrowers and which services are directly related to
Borrowers or their Subsidiaries, and (iv) to pay Permitted Intercompany Overhead
Payments, and (e) scheduled payments with respect to the
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Subordinated Notes to the extent not prohibited or blocked by the terms of the
Subordinated Notes Intercreditor Agreement.
6.15. CHANGE OF CORPORATE NAME OR LOCATION; CHANGE OF FISCAL YEAR.
No Credit Party shall (a) change its corporate name, or (b) change its chief
executive office, principal place of business, corporate offices or warehouses
or locations at which Collateral is held or stored, or the location of its
records concerning the Collateral, in any case without at least thirty (30) days
prior written notice to Agent and after Agent's written acknowledgment that any
reasonable action requested by Agent in connection therewith, including to
continue the perfection of any Liens in favor of Agent, on behalf of Lenders, in
any Collateral, has been completed or taken, and PROVIDED that any such new
location shall be in the continental United States. Without limiting the
foregoing, no Credit Party shall change its name, identity or corporate
structure in any manner which might make any financing or continuation statement
filed in connection herewith seriously misleading within the meaning of Section
9-402(7) of the Code or any other then applicable provision of the Code except
upon prior written notice to Agent and Lenders and after Agent's written
acknowledgment that any reasonable action requested by Agent in connection
therewith, including to continue the perfection of any Liens in favor of Agent,
on behalf of Lenders, in any Collateral, has been completed or taken. No Credit
Party shall change its Fiscal Year.
6.16. NO IMPAIRMENT OF INTERCOMPANY TRANSFERS. No Credit Party shall
directly or indirectly enter into or become bound by any agreement, instrument,
indenture or other obligation (other than this Agreement and the other Loan
Documents) which could directly or indirectly restrict, prohibit or require the
consent of any Person with respect to the payment of dividends or distributions
or the making or repayment of intercompany loans by a Subsidiary of any Borrower
to any Borrower or between Borrowers.
6.17. NO SPECULATIVE TRANSACTIONS. No Credit Party shall engage in
any transaction involving commodity options, futures contracts or similar
transactions, except solely to hedge against fluctuations in the prices of
commodities owned or purchased by it and the values of foreign currencies
receivable or payable by it and interest swaps, caps or collars.
6.18. LEASES. No Credit Party shall enter into any operating lease
for Equipment or Real Estate, if the aggregate of all such operating lease
payments payable in any year for Borrowers and their Subsidiaries on a
consolidated basis would exceed $1,000,000.
6.19. CHANGES RELATING TO SUBORDINATED DEBT. No Credit Party shall
change or amend the terms of any Subordinated Debt (or any indenture or
agreement in connection therewith) if the effect of such amendment is to: (a)
increase the interest rate on such Subordinated Debt; (b) change the dates upon
which payments of principal or interest are due on such Subordinated Debt other
than to extend such dates; (c) change any default or event of default other than
to delete or make less restrictive any default provision therein, or add any
covenant with respect to such Subordinated Debt; (d) change the redemption or
prepayment provisions of such Subordinated Debt other than to extend the dates
therefor or to reduce the premiums payable in connection therewith; (e) grant
any security or collateral to secure payment of such Subordinated Debt; or (f)
change or amend any other term if such change or amendment
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would materially increase the obligations of the obligor or confer additional
material rights to the holder of such Subordinated Debt in a manner adverse to
any Credit Party, Agent or any Lender.
6.20. INCONSISTENT AGREEMENTS. No Credit Party shall, or shall cause
or permit any Subsidiary to, become party to any agreement, note, indenture,
instrument or other arrangement, or take any other action, which, directly or
indirectly, (i) requires a sharing of any interest in the Collateral or
prohibits the creation of a Lien on any of its properties or other assets in
favor of Agent, on behalf of the Lenders, as additional collateral for the
Obligations, except operating leases, Capital Leases or intellectual property
licenses which prohibit Liens upon the assets that are subject thereto; (ii)
prohibits or restrains, or has the effect of prohibiting or restraining, or
imposes materially adverse conditions upon, the incurrence of the Obligations,
the granting of Liens to secure the Obligations, amending the Loan Documents, or
(iii) contains any provision which would be violated or breached by the making
of the Revolving Credit Advances or by the performance by Borrowers or RII or
any Subsidiary of any of its obligations under any Loan Document.
6.21. ACQUISITION DOCUMENTS. Neither RII nor any Borrower shall, nor
shall cause or permit any Subsidiary to amend, waive or modify in any manner any
provision of any of the Current Acquisition Documents in any material respect
prior to the closing thereof.
7. TERM
7.1. TERMINATION. The Revolving Loan, Term A Loan, Term B Loan, and
the Acquisition Loan shall be in effect until the Commitment Termination Date,
and such Loans and all Obligations shall be automatically due and payable in
full on such date.
7.2. SURVIVAL OF OBLIGATIONS UPON TERMINATION OF FINANCING
ARRANGEMENTS. Except as otherwise expressly provided for in the Loan Documents,
no termination or cancellation (regardless of cause or procedure) of any
financing arrangement under this Agreement shall in any way affect or impair the
obligations, duties and liabilities of the Credit Parties or the rights of Agent
and Lenders relating to any unpaid portion of the Loans or any other
Obligations, due or not due, liquidated, contingent or unliquidated or any
transaction or event occurring prior to such termination, or any transaction or
event, the performance of which is required after the Commitment Termination
Date. Except as otherwise expressly provided herein or in any other Loan
Document, all undertakings, agreements, covenants, warranties and
representations of or binding upon the Credit Parties, and all rights of Agent
and each Lender, all as contained in the Loan Documents, shall not terminate or
expire, but rather shall survive any such termination or cancellation and shall
continue in full force and effect until the Termination Date; provided however,
that in all events the provisions of SECTION 11, the payment obligations under
SECTIONS 1.15 and 1.16, and the indemnities contained in the Loan Documents
shall survive the Termination Date.
8. EVENTS OF DEFAULT: RIGHTS AND REMEDIES
8.1. EVENTS OF DEFAULT. The occurrence of any one or more of the
following events (regardless of the reason therefor) shall constitute an "EVENT
OF DEFAULT" hereunder:
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(a) Any Borrower (i) fails to make any payment of principal of, or
interest on, or Fees owing in respect of, the Loans or any of the other
Obligations when due and payable, or (ii) fails to pay or reimburse Agents or
Lenders for any expense reimbursable hereunder or under any other Loan Document
within ten (10) days following Agent's demand for such reimbursement or payment
of expenses.
(b) Any Credit Party shall fail or neglect to perform, keep or
observe any of the provisions of SECTIONS 1.4, 1.8, 5.4(a) or 6, or any of the
provisions set forth in ANNEXES C or G, respectively.
(c) Any Borrower shall fail or neglect to perform, keep or observe
any of the provisions of SECTION 4 or any provisions set forth in ANNEXES E or
F, respectively, and the same shall remain unremedied for three (3) days or
more.
(d) Any Credit Party shall fail or neglect to perform, keep or
observe any other provision of this Agreement or of any of the other Loan
Documents (other than any provision embodied in or covered by any other clause
of this SECTION 8.1) and the same shall remain unremedied for thirty (30) days
or more.
(e) A default or breach shall occur under any other agreement,
document or instrument to which any Credit Party is a party which is not cured
within any applicable grace period, and such default or breach (i) involves the
failure to make any payment when due in respect of any Indebtedness (other than
the Obligations) of any Credit Party in excess of $1,000,000 in the aggregate,
or (ii) causes, or permits any holder of such Indebtedness or a trustee to
cause, Indebtedness or a portion thereof in excess of $1,000,000 in the
aggregate to become due prior to its stated maturity or prior to its regularly
scheduled dates of payment, regardless of whether such default is waived, or
such right is exercised, by such holder or trustee.
(f) Any information contained in any Borrowing Base Certificate is
untrue or incorrect in any respect (other than as to immaterial inadvertent
matters), or any representation or warranty herein or in any Loan Document or in
any written statement, report, financial statement or certificate (other than a
Borrowing Base Certificate) made or delivered to Agent or any Lender by any
Credit Party is untrue or incorrect in any material respect as of the date when
made or deemed made.
(g) Assets of any Credit Party with a fair market value of $250,000
or more shall be attached, seized, levied upon or subjected to a writ or
distress warrant, or come within the possession of any receiver, trustee,
custodian or assignee for the benefit of creditors of any Credit Party and such
condition continues for thirty (30) days or more.
(h) A case or proceeding shall have been commenced against any
Credit Party seeking a decree or order in respect of any Credit Party (i) under
Title 11 of the United States Code, as now constituted or hereafter amended or
any other applicable federal, state or foreign bankruptcy or other similar law,
(ii) appointing a custodian, receiver, liquidator, assignee, trustee or
sequestrator (or similar official) for any Credit Party or of any substantial
part of any such Person's assets, or (iii) ordering the winding-up or
liquidation of the affairs of any Credit Party,
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and such case or proceeding shall remain undismissed or unstayed for sixty (60)
days or more or such court shall enter a decree or order granting the relief
sought in such case or proceeding.
(i) Any Credit Party (i) shall file a petition seeking relief under
Title 11 of the United States Code, as now constituted or hereafter amended, or
any other applicable federal, state or foreign bankruptcy or other similar law,
(ii) shall fail to contest in a timely and appropriate manner or shall consent
to the institution of proceedings thereunder or to the filing of any such
petition or to the appointment of or taking possession by a custodian, receiver,
liquidator, assignee, trustee or sequestrator (or similar official) of any
Credit Party or of any substantial part of any such Person's assets, (iii) shall
make an assignment for the benefit of creditors, (iv) shall take any corporate
action in furtherance of any of the foregoing; or (v) shall admit in writing its
inability to, or shall be generally unable to, pay its debts as such debts
become due.
(j) A final judgment or judgments for the payment of money in
excess of $250,000 in the aggregate at any time outstanding shall be rendered
against any Credit Party and the same shall not, within thirty (30) days after
the entry thereof, have been discharged or execution thereof stayed or bonded
pending appeal, or shall not have been discharged prior to the expiration of any
such stay.
(k) Any material provision of any Loan Document shall for any
reason cease to be valid, binding and enforceable in accordance with its terms
(or any Credit Party shall challenge the enforceability of any Loan Document or
shall assert in writing, or engage in any action or inaction based on any such
assertion, that any provision of any of the Loan Documents has ceased to be or
otherwise is not valid, binding and enforceable in accordance with its terms),
or any security interest created under any Loan Document shall cease to be a
valid and perfected first priority security interest or Lien (except as
otherwise permitted herein or therein) in any of the Collateral purported to be
covered thereby.
(l) Any Change of Control shall occur.
(m) Any event shall occur, whether or not insured or insurable, as
a result of which revenue-producing activities cease or are substantially
curtailed at any facility of Borrowers generating more than 15% of Borrowers'
consolidated revenues for the Fiscal Year preceding such event and such
cessation or curtailment continues for more than 45 days other than for
scheduled maintenance.
(n) A criminal or civil action, suit or proceeding is commenced by
any governmental entity against any of RII, any Borrower or any Subsidiary
thereof under the Racketeer Influenced and Corrupt Organizations Act of 1970,
which action, suit or proceeding could reasonably be expected to result in a
Material Adverse Effect.
(o) Any event shall occur that gives any holder of Subordinated
Debt a mandatory right of redemption or other right to prepayment with respect
thereto.
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(p) Any exercise of any rights under the mortgage by the mortgagee
thereunder on the real property owned by Weissman Borrower (as described in the
definition of Excluded Property) shall occur as a result of any breach or
default thereunder.
8.2. REMEDIES. (a) If any Event of Default shall have occurred and
be continuing or if a Default shall have occurred and be continuing and Agent or
Requisite Revolving Lenders shall have determined not to make any Advances or
incur any Letter of Credit Obligations so long as that specific Default is
continuing, Agent may (and at the written request of the Requisite Revolving
Lenders shall), without notice, suspend the Revolving Loan facility and
Acquisition Loan facility with respect to further Advances and/or the incurrence
of further Letter of Credit Obligations whereupon any further Advances and
Letter of Credit Obligations shall be made or extended in Agent's sole
discretion (or in the sole discretion of the Requisite Revolving Lenders, if
such suspension occurred at their direction) so long as such Default or Event of
Default is continuing. Subject to Section 1.5(d), if a Default or Event of
Default shall have occurred and be continuing, Agent may (and at the written
request of Requisite Lenders shall), without notice except as otherwise
expressly provided herein, increase the rate of interest applicable to the Loans
and the Letter of Credit Fees to the Default Rate.
(b) If any Event of Default shall have occurred and be continuing,
Agent may (and at the written request of the Requisite Lenders shall), without
notice, (i) terminate the Revolving Loan facility and Acquisition Loan facility
with respect to further Advances or the incurrence of further Letter of Credit
Obligations; (ii) declare all or any portion of the Obligations, including all
or any portion of any Loan to be forthwith due and payable, and require that the
Letter of Credit Obligations be cash collateralized as provided in ANNEX B, all
without presentment, demand, protest or further notice of any kind, all of which
are expressly waived by Borrowers and each other Credit Party; and (iii)
exercise any rights and remedies provided to Agent under the Loan Documents
and/or at law or equity, including all remedies provided under the Code;
PROVIDED, HOWEVER, that upon the occurrence of an Event of Default specified in
SECTIONS 8.1(g), (h) or (i), the Revolving Loan facility shall be immediately
terminated and all of the Obligations, including the aggregate Revolving Loan,
shall become immediately due and payable without declaration, notice or demand
by any Person.
8.3. WAIVERS BY CREDIT PARTIES. Except as otherwise provided for in
this Agreement or by applicable law, each Credit Party waives (including for
purposes of SECTION 12): (a) presentment, demand and protest and notice of
presentment, dishonor, notice of intent to accelerate, notice of acceleration,
protest, default, nonpayment, maturity, release, compromise, settlement,
extension or renewal of any or all commercial paper, accounts, contract rights,
documents, instruments, chattel paper and guaranties at any time held by Agent
on which any Credit Party may in any way be liable, and hereby ratifies and
confirms whatever Agent may do in this regard, (b) all rights to notice and a
hearing prior to Agent's taking possession or control of, or to Agent's replevy,
attachment or levy upon, the Collateral or any bond or security which might be
required by any court prior to allowing Agent to exercise any of its remedies,
and (c) the benefit of all valuation, appraisal, marshaling and exemption laws.
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9. ASSIGNMENT AND PARTICIPATIONS; APPOINTMENT OF AGENT
9.1. ASSIGNMENT AND PARTICIPATIONS. (a) The Credit Parties
signatory hereto consent to any Lender's assignment of, and/or sale of
participations in, at any time or times, the Loan Documents, Loans, Letter of
Credit Obligations and any Commitment or of any portion thereof or interest
therein, including any Lender's rights, title, interests, remedies, powers or
duties thereunder, whether evidenced by a writing or not. Any assignment by a
Lender shall (i) require the consent of Agent (which shall not be unreasonably
withheld or delayed), and if not to another Lender or any Affiliate of any
Lender, the consent of Borrower Representative (which consent shall not be
unreasonably withheld or delayed, provided that no such consent shall be
required so long as any Event of Default has occurred and is continuing and the
execution of an assignment agreement (an "ASSIGNMENT AGREEMENT") substantially
in the from attached hereto as EXHIBIT 9.1(a) and otherwise in form and
substance satisfactory to, and acknowledged by, Agent; (ii) be conditioned on
such assignee Lender representing to the assigning Lender and Agent that it is
purchasing the applicable Loans to be assigned to it for its own account, for
investment purposes and not with a view to the distribution thereof; (iii) if a
partial assignment, be in an amount at least equal to $5,000,000 and, after
giving effect to any such partial assignment, the assigning Lender shall have
retained Commitments in an amount at least equal to $5,000,000; and (iv) include
a payment to Agent of an assignment fee of $3,500. In the case of an assignment
by a Lender under this SECTION 9.1, the assignee shall have, to the extent of
such assignment, the same rights, benefits and obligations as it would if it
were a Lender hereunder. The assigning Lender shall be relieved of its
obligations hereunder with respect to its Commitments or assigned portion
thereof from and after the date of such assignment. Each Borrower hereby
acknowledges and agrees that any assignment will give rise to a direct
obligation of Borrowers to the assignee and that the assignee shall be
considered to be a "Lender". In all instances, each Lender's liability to make
Loans hereunder shall be several and not joint and shall be limited to such
Lender's Pro Rata Share of the applicable Commitment. In the event Agent or any
Lender assigns or otherwise transfers all or any part of a Note, Agent or any
such Lender shall so notify Borrowers and Borrowers shall, upon the request of
Agent or such Lender, execute new Notes in exchange for the Notes being
assigned. Notwithstanding the foregoing provisions of this SECTION 9.1(a), any
Lender may at any time pledge or assign all or any portion of such Lender's
rights under this Agreement and the other Loan Documents to a Federal Reserve
Bank or, in the case of a Term Lender that is an investment fund, to another
investment fund managed by the same investment advisor as the investment advisor
executing this Agreement or an Assignment Agreement on behalf of that Term
Lender; PROVIDED, HOWEVER, that no such pledge or assignment shall release such
Lender from such Lender's obligations hereunder or under any other Loan
Document.
(b) Any participation by a Lender of all or any part of its
Commitments shall be made with the understanding that all amounts payable by
Borrowers hereunder shall be determined as if that Lender had not sold such
participation, and that the holder of any such participation shall not be
entitled to require such Lender to take or omit to take any action hereunder
except actions directly affecting (i) any reduction in the principal amount of,
or interest rate or Fees payable with respect to, any Loan in which such holder
participates, (ii) any extension of the scheduled amortization of the principal
amount of any Loan in which such holder participates or the final maturity date
thereof, and (iii) any release of all or substantially all of the Collateral
(other than in accordance with the terms of this Agreement, the Collateral
Documents
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or the other Loan Documents). Solely for purposes of SECTIONS 1.13, 1.15,
1.16 and 9.8, each Borrower acknowledges and agrees that a participation
shall give rise to a direct obligation of Borrowers to the participant and
the participant shall be considered to be a "Lender". Except as set forth in
the preceding sentence no Borrower or Credit Party shall have any obligation
or duty to any participant. Neither Agent nor any Lender (other than the
Lender selling a participation) shall have any duty to any participant and
may continue to deal solely with the Lender selling a participation as if no
such sale had occurred.
(c) Except as expressly provided in this SECTION 9.1, no Lender
shall, as between Borrowers and that Lender, or Agent and that Lender, be
relieved of any of its obligations hereunder as a result of any sale,
assignment, transfer or negotiation of, or granting of participation in, all or
any part of the Loans, the Notes or other Obligations owed to such Lender.
(d) Each Credit Party executing this Agreement shall assist any
Lender permitted to sell assignments or participations under this SECTION 9.1 as
reasonably required to enable the assigning or selling Lender to effect any such
assignment or participation, including the execution and delivery of any and all
agreements, notes and other documents and instruments as shall be requested and,
if requested by Agent, the preparation of informational materials for, and the
participation of management in meetings with, potential assignees or
participants. Each Credit Party executing this Agreement shall certify the
correctness, completeness and accuracy of all descriptions of the Credit Parties
and their affairs contained in any selling materials provided by them and all
other information provided by them and included in such materials, except that
any Projections delivered by Borrowers shall only be certified by Borrowers as
having been prepared by Borrowers in compliance with the representations
contained in SECTION 3.4(c).
(e) A Lender may furnish any information concerning Credit Parties
in the possession of such Lender from time to time to assignees and participants
(including prospective assignees and participants). Each Lender shall obtain
from assignees or participants confidentiality covenants substantially
equivalent to those contained in SECTION 11.8.
(f) So long as no Event of Default shall have occurred and be
continuing, no Lender shall assign or sell participations in any portion of its
Loans or Commitments to a potential Lender or participant, if, as of the date of
the proposed assignment or sale, the assignee Lender or participant would be
subject to capital adequacy or similar requirements under SECTION 1.16(a),
increased costs under SECTION 1.16(b), an inability to fund LIBOR Loans under
SECTION 1.16(c), or withholding taxes in accordance with SECTION 1.16(d).
9.2. APPOINTMENT OF AGENTS. GE Capital is hereby appointed to act
on behalf of all Lenders as Agent under this Agreement and the other Loan
Documents. BankBoston, N.A., is hereby appointed to act on behalf of all
Lenders as Documentation Agent under this Agreement in accordance with the terms
hereof. The provisions of this SECTION 9.2 are solely for the benefit of Agents
and Lenders and no Credit Party nor any other Person shall have any rights as a
third party beneficiary of any of the provisions hereof. In performing its
functions and duties under this Agreement and the other Loan Documents, each
Agent shall act solely as an agent of Lenders and does not assume and shall not
be deemed to have assumed any obligation toward or relationship of agency or
trust with or for any Credit Party or any other Person. Each Agent shall have
no
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duties or responsibilities except for those expressly set forth in this
Agreement and the other Loan Documents. The duties of each Agent shall be
mechanical and administrative in nature and each Agent shall not have, or be
deemed to have, by reason of this Agreement, any other Loan Document or
otherwise a fiduciary relationship in respect of any Lender. None of Agents nor
any of their respective Affiliates nor any of their respective officers,
directors, employees, agents or representatives shall be liable to any Lender
for any action taken or omitted to be taken by it hereunder or under any other
Loan Document, or in connection herewith or therewith, except for damages caused
by its or their own gross negligence or willful misconduct.
If Agent shall request instructions from Requisite Lenders, Requisite
Revolving Lenders, Supermajority Revolving Lenders or all affected Lenders with
respect to any act or action (including failure to act) in connection with this
Agreement or any other Loan Document, then Agent shall be entitled to refrain
from such act or taking such action unless and until Agent shall have received
instructions from Requisite Lenders, Requisite Revolving Lenders, Supermajority
Revolving Lenders or all affected Lenders, as the case may be, and Agent shall
not incur liability to any Person by reason of so refraining. Notwithstanding
any provision contained herein or in any other Loan Document to the contrary,
Agent shall be fully justified in failing or refusing to take any action
hereunder or under any other Loan Document (a) if such action would, in the
opinion of Agent, be contrary to law or the terms of this Agreement or any other
Loan Document, (b) if such action would, in the opinion of Agent, expose Agent
to Environmental Liabilities or (c) if Agent shall not first be indemnified to
its satisfaction against any and all liability and expense which may be incurred
by it by reason of taking or continuing to take any such action. Without
limiting the foregoing, no Lender shall have any right of action whatsoever
against Agent as a result of Agent acting or refraining from acting hereunder or
under any other Loan Document in accordance with the instructions of Requisite
Lenders, Requisite Revolving Lenders, Supermajority Revolving Lenders or all
affected Lenders, as applicable.
9.3. AGENTS' RELIANCE, ETC. None of Agents nor any of their
respective Affiliates nor any of their respective directors, officers, agents or
employees shall be liable for any action taken or omitted to be taken by it or
them under or in connection with this Agreement or the other Loan Documents,
except for damages caused by its or their own gross negligence or willful
misconduct. Without limitation of the generality of the foregoing, Agent: (a)
may treat the payee of any Note as the holder thereof until Agent receives
written notice of the assignment or transfer thereof signed by such payee and in
form satisfactory to Agent; (b) may consult with legal counsel, independent
public accountants and other experts selected by it and shall not be liable for
any action taken or omitted to be taken in good faith by it in accordance with
the advice of such counsel, accountants or experts; (c) makes no warranty or
representation to any Lender and shall not be responsible to any Lender for any
statements, warranties or representations made in or in connection with this
Agreement or the other Loan Documents; (d) shall not have any duty to ascertain
or to inquire as to the performance or observance of any of the terms, covenants
or conditions of this Agreement or the other Loan Documents on the part of any
Credit Party or to inspect the Collateral (including the books and records) of
any Credit Party; (e) shall not be responsible to any Lender for the due
execution, legality, validity, enforceability, genuineness, sufficiency or value
of this Agreement or the other Loan Documents or any other instrument or
document furnished pursuant hereto or thereto; and (f) shall incur no liability
under or in respect of this Agreement or the other Loan Documents by acting upon
any notice, consent, certificate or
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other instrument or writing (which may be by telecopy, telegram, cable or telex)
believed by it to be genuine and signed or sent by the proper party or parties.
9.4. AGENTS AND AFFILIATES. With respect to its Commitments
hereunder, each Agent that is a Lender shall have the same rights and powers
under this Agreement and the other Loan Documents as any other Lender and may
exercise the same as though it were not Agent or Documentation Agent; and the
term "Lender" or "Lenders" shall, unless otherwise expressly indicated, include
each of GE Capital and BankBoston, N.A., in its individual capacity. Each of GE
Capital and its Affiliates and BankBoston, N.A., and its Affiliates may lend
money to, invest in, and generally engage in any kind of business with, any
Credit Party, any of their Affiliates and any Person who may do business with or
own securities of any Credit Party or any such Affiliate, all as if GE Capital
and/or BankBoston were not Agents and without any duty to account therefor to
Lenders. Each of GE Capital and its Affiliates and BankBoston and its
Affiliates may accept fees and other consideration from any Credit Party for
services in connection with this Agreement or otherwise without having to
account for the same to Lenders. GE Capital has also purchased certain equity
interests in RII, which is a corporation which currently owns directly or
indirectly one hundred percent (100%) of the outstanding Stock of Borrowers.
Each Lender acknowledges the potential conflict of interest between GE Capital
as a Lender holding disproportionate interests in the Loans, GE Capital as a
stockholder and GE Capital as Agent.
9.5. LENDER CREDIT DECISION. Each Lender acknowledges that it has,
independently and without reliance upon Agent or any other Lender and based on
the Financial Statements referred to in SECTION 3.4(a) and such other documents
and information as it has deemed appropriate, made its own credit and financial
analysis of the Credit Parties and its own decision to enter into this
Agreement. Each Lender also acknowledges that it will, independently and
without reliance upon Agent or any other Lender and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under this Agreement. Each
Lender acknowledges the potential conflict of interest of each other Lender as a
result of Lenders holding disproportionate interests in the Loans, and expressly
consents to, and waives any claim based upon, such conflict of interest.
9.6. INDEMNIFICATION. Lenders agree to indemnify each of Agents (to
the extent not reimbursed by Credit Parties and without limiting the obligations
of Credit Parties hereunder), ratably according to their respective Pro Rata
Shares, from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind or nature whatsoever which may be imposed on, incurred by, or asserted
against any of Agents in any way relating to or arising out of this Agreement or
any other Loan Document or any action taken or omitted by any of Agents in
connection therewith; PROVIDED, HOWEVER, that no Lender shall be liable for any
portion of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements resulting from such Agent's
gross negligence or willful misconduct. Without limiting the foregoing, each
Lender agrees to reimburse Agents promptly upon demand for its ratable share of
any out-of-pocket expenses (including counsel fees) incurred by Agents in
connection with the preparation, execution, delivery, administration,
modification, amendment or enforcement (whether through negotiations, legal
proceedings or otherwise) of, or legal advice in respect of rights or
responsibilities under, this
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Agreement and each other Loan Document, to the extent that Agents are not
reimbursed for such expenses by Credit Parties.
9.7. SUCCESSOR AGENT. Agent may resign at any time by giving not
less than thirty (30) days' prior written notice thereof to Lenders and Borrower
Representative. Upon any such resignation, the Requisite Lenders shall have the
right to appoint a successor Agent. If no successor Agent shall have been so
appointed by the Requisite Lenders and shall have accepted such appointment
within 30 days after the resigning Agent's giving notice of resignation, then
the resigning Agent may, on behalf of Lenders, appoint a successor Agent, which
shall be a Lender, if a Lender is willing to accept such appointment, or
otherwise shall be a commercial bank or financial institution or a subsidiary of
a commercial bank or financial institution if such commercial bank or financial
institution is organized under the laws of the United States of America or of
any State thereof and has a combined capital and surplus of at least
$300,000,000. If no successor Agent has been appointed pursuant to the
foregoing, by the 30th day after the date such notice of resignation was given
by the resigning Agent, such resignation shall become effective and the
Requisite Lenders shall thereafter perform all the duties of Agent hereunder
until such time, if any, as the Requisite Lenders appoint a successor Agent as
provided above. Any successor Agent appointed by Requisite Lenders hereunder
shall be subject to the approval of Borrower Representative, such approval not
to be unreasonably withheld or delayed; PROVIDED that such approval shall not be
required if a Default or an Event of Default shall have occurred and be
continuing. Upon the acceptance of any appointment as Agent hereunder by a
successor Agent, such successor Agent shall succeed to and become vested with
all the rights, powers, privileges and duties of the resigning Agent. Upon the
earlier of the acceptance of any appointment as Agent hereunder by a successor
Agent or the effective date of the resigning Agent's resignation, the resigning
Agent shall be discharged from its duties and obligations under this Agreement
and the other Loan Documents, except that any indemnity rights or other rights
in favor of such resigning Agent shall continue. After any resigning Agent's
resignation hereunder, the provisions of this SECTION 9 shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was Agent
under this Agreement and the other Loan Documents.
9.8. SETOFF AND SHARING OF PAYMENTS. In addition to any rights now
or hereafter granted under applicable law and not by way of limitation of any
such rights, upon the occurrence and during the continuance of any Event of
Default, each Lender and each holder of any Note is hereby authorized at any
time or from time to time, without notice to any Credit Party or to any other
Person, any such notice being hereby expressly waived, to set off and to
appropriate and to apply any and all balances held by it at any of its offices
for the account of any Borrower or Guarantor (regardless of whether such
balances are then due to such Borrower or Guarantor) and any other properties or
assets any time held or owing by that Lender or that holder to or for the credit
or for the account of any Borrower or Guarantor against and on account of any of
the Obligations which are not paid when due. Any Lender or holder of any Note
exercising a right to set off or otherwise receiving any payment on account of
the Obligations in excess of its Pro Rata Share thereof shall purchase for cash
(and the other Lenders or holders shall sell) such participations in each such
other Lender's or holder's Pro Rata Share of the Obligations as would be
necessary to cause such Lender to share the amount so set off or otherwise
received with each other Lender or holder in accordance with their respective
Pro Rata Shares. Each Lender's obligation under this SECTION 9.8 shall be in
addition to and not limitation of its obligations to
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purchase a participation in an amount equal to its Pro Rata Share of the Swing
Line Loans under SECTION 1.1. Each Credit Party that is a Borrower or Guarantor
agrees, to the fullest extent permitted by law, that (a) any Lender or holder
may exercise its right to set off with respect to amounts in excess of its Pro
Rata Share of the Obligations and may sell participations in such amount so set
off to other Lenders and holders and (b) any Lender or holders so purchasing a
participation in the Loans made or other Obligations held by other Lenders or
holders may exercise all rights of set-off, bankers' lien, counterclaim or
similar rights with respect to such participation as fully as if such Lender or
holder were a direct holder of the Loans and the other Obligations in the amount
of such participation. Notwithstanding the foregoing, if all or any portion of
the set-off amount or payment otherwise received is thereafter recovered from
the Lender that has exercised the right of set-off, the purchase of
participations by that Lender shall be rescinded and the purchase price restored
without interest.
9.9. ADVANCES; PAYMENTS; NON-FUNDING LENDERS; INFORMATION; ACTIONS
IN CONCERT. (a) ADVANCES; PAYMENTS. (i) Revolving Lenders shall refund or
participate in the Swing Line Loan in accordance with CLAUSES (iii) and (iv) of
SECTION 1.1(c). If the Swing Line Lender declines to make a Swing Line Loan or
if Swing Line Availability is zero, Agent shall notify Revolving Lenders,
promptly after receipt of a Notice of Revolving Credit Advance and in any event
prior to 1:00 p.m. (New York time) on the date such Notice of Revolving Advance
is received, by telecopy, telephone or other similar form of transmission. Each
Revolving Lender shall make the amount of such Lender's Pro Rata Share of each
Advance available to Agent in same day funds by wire transfer to Agent's account
as set forth in ANNEX H not later than 3:00 p.m. (New York time) on the
requested funding date, in the case of an Index Rate Loan and not later than
11:00 a.m. (New York time) on the requested funding date in the case of a LIBOR
Loan. After receipt of such wire transfers (or, in the Agent's sole discretion,
before receipt of such wire transfers), subject to the terms hereof, Agent shall
make the requested Advance to the Borrower designated by Borrower Representative
in the Notice of Revolving Credit Advance. All payments by each Revolving
Lender shall be made without setoff, counterclaim or deduction of any kind.
(ii) On the second (2nd) Business Day of each calendar week
or more frequently as aggregate cumulative payments in excess of $2,000,000 are
received with respect to the Loans (other than the Swing Line Loan) (each, a
"SETTLEMENT DATE"), Agent will advise each Lender by telephone, or telecopy of
the amount of such Lender's Pro Rata Share of principal, interest and Fees paid
for the benefit of Lenders with respect to each applicable Loan. Provided that
such Lender has made all payments required to be made by it and has purchased
all participations required to be purchased by it under this Agreement and the
other Loan Documents as of such Settlement Date, Agent will pay to each Lender
such Lender's Pro Rata Share of principal, interest and Fees paid by Borrowers
since the previous Settlement Date for the benefit of that Lender on the Loans
held by it. Such payments shall be made by wire transfer to such Lender's
account (as specified by such Lender in ANNEX H or the applicable Assignment
Agreement) not later than 2:00 p.m. (New York time) on the next Business Day
following each Settlement Date.
(b) AVAILABILITY OF LENDER'S PRO RATA SHARE. Agent may assume that
each Revolving Lender will make its Pro Rata Share of each Advance available to
Agent on each
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funding date. If such Pro Rata Share is not, in fact, paid to Agent by such
Revolving Lender when due, Agent will be entitled to recover such amount on
demand from such Revolving Lender without set-off, counterclaim or deduction of
any kind. If any Revolving Lender fails to pay the amount of its Pro Rata Share
forthwith upon Agent's demand, Agent shall promptly notify Borrower
Representative and Borrowers shall immediately repay such amount to Agent.
Nothing in this SECTION 9.9(b) or elsewhere in this Agreement or the other Loan
Documents shall be deemed to require Agent to advance funds on behalf of any
Revolving Lender or to relieve any Revolving Lender from its obligation to
fulfill its Commitments hereunder or to prejudice any rights that Borrowers may
have against any Revolving Lender as a result of any default by such Revolving
Lender hereunder. To the extent that Agent advances funds to any Borrower on
behalf of any Revolving Lender and is not reimbursed therefor on the same
Business Day as such Advance is made, Agent shall be entitled to retain for its
account all interest accrued on such Advance until reimbursed by the applicable
Revolving Lender and shall be entitled to retain all payments and cash proceeds
allocable to any such Non-Funding Lender in respect of the Obligations and apply
the same to such unfunded Advances until such payments and/or cash proceeds so
retained equal the Pro Rata Share of the Advances not funded by such Non-Funding
Lender.
(c) RETURN OF PAYMENTS. (i) If Agent pays an amount to a Lender
under this Agreement in the belief or expectation that a related payment has
been or will be received by Agent from Borrowers and such related payment is not
received by Agent, then Agent will be entitled to recover such amount from such
Lender on demand without set-off, counterclaim or deduction of any kind.
(ii) If Agent determines at any time that any amount
received by Agent under this Agreement must be returned to any Borrower or paid
to any other Person pursuant to any insolvency law or otherwise, then,
notwithstanding any other term or condition of this Agreement or any other Loan
Document, Agent will not be required to distribute any portion thereof to any
Lender. In addition, each Lender will repay to Agent on demand any portion of
such amount that Agent has distributed to such Lender, together with interest at
such rate, if any, as Agent is required to pay to any Borrower or such other
Person, without set-off, counterclaim or deduction of any kind.
(d) NON-FUNDING LENDERS. The failure of any Revolving Lender (such
Revolving Lender, a "NON-FUNDING LENDER") to make any Advance or to purchase any
participation in any Swing Line Loan to be made or purchased by it on the date
specified therefor shall not relieve any other Revolving Lender (each such other
Revolving Lender, an "OTHER LENDER") of its obligations to make such Advance or
purchase such participation on such date, but neither any Other Lender nor Agent
shall be responsible for the failure of any Non-Funding Lender to make an
Advance or to purchase a participation required hereunder. Notwithstanding
anything set forth herein to the contrary, a Non-Funding Lender shall not have
any voting or consent rights under or with respect to any Loan Document or
constitute a "Lender" or a "Revolving Lender" (or be included in the calculation
of "Requisite Lenders", "Requisite Revolving Lenders" or "Supermajority
Revolving Lenders" hereunder) for any voting or consent rights under or with
respect to any Loan Document. In addition, Agent at its discretion, may
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cause a Non-Funding to be removed as if it were a Non-Consenting Lender in
accordance with Section 11.2(d).
(e) DISSEMINATION OF INFORMATION. Agent will use reasonable
efforts to provide Lenders with any notice of Default or Event of Default
received by Agent from, or delivered by Agent to, any Credit Party, with notice
of any Event of Default of which Agent has actually become aware and with notice
of any action taken by Agent following any Event of Default; provided, however,
that Agent shall not be liable to any Lender for any failure to do so, except to
the extent that such failure is attributable to Agent's gross negligence or
willful misconduct. Lenders acknowledge that Borrowers are required to provide
Financial Statements and Collateral Reports to Lenders in accordance with
ANNEXES E and F hereto and agree that Agent shall have no duty to provide the
same to Lenders.
(f) ACTIONS IN CONCERT. Anything in this Agreement to the contrary
notwithstanding, each Lender hereby agrees with each other Lender that no Lender
shall take any action to protect or enforce its rights arising out of this
Agreement or the Notes (including exercising any rights of set-off) without
first obtaining the prior written consent of Agent and Requisite Lenders, it
being the intent of Lenders that any such action to protect or enforce rights
under this Agreement and the Notes shall be taken in concert and at the
direction or with the consent of Agent.
10. SUCCESSORS AND ASSIGNS
10.1. SUCCESSORS AND ASSIGNS. This Agreement and the other Loan
Documents shall be binding on and shall inure to the benefit of each Credit
Party, Agents, Lenders and their respective successors and assigns (including,
in the case of any Credit Party, a debtor-in-possession on behalf of such Credit
Party), except as otherwise provided herein or therein. No Credit Party may
assign, transfer, hypothecate or otherwise convey its rights, benefits,
obligations or duties hereunder or under any of the other Loan Documents without
the prior express written consent of Agent and Lenders. Any such purported
assignment, transfer, hypothecation or other conveyance by any Credit Party
without the prior express written consent of Agent and Lenders shall be void.
The terms and provisions of this Agreement are for the purpose of defining the
relative rights and obligations of each Credit Party, Agents and Lenders with
respect to the transactions contemplated hereby and no Person shall be a third
party beneficiary of any of the terms and provisions of this Agreement or any of
the other Loan Documents.
11. MISCELLANEOUS
11.1. COMPLETE AGREEMENT; MODIFICATION OF AGREEMENT. The Loan
Documents constitute the complete agreement between the parties with respect to
the subject matter thereof and may not be modified, altered or amended except as
set forth in SECTION 11.2 below. Any letter of interest, commitment letter,
and/or fee letter (other than the GE Capital Fee Letter) and/or confidentiality
agreement between any Credit Party and Agents or any Lender or any of their
respective affiliates, predating this Agreement and relating to a financing of
substantially similar form, purpose or effect shall be superseded by this
Agreement.
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11.2. AMENDMENTS AND WAIVERS. (a) Except for actions expressly
permitted to be taken by Agent, no amendment, modification, termination or
waiver of any provision of this Agreement or any of the Notes, or any consent to
any departure by any Credit Party therefrom, shall in any event be effective
unless the same shall be in writing and signed by Agent and Borrowers, and by
Requisite Lenders, Requisite Revolving Lenders, Supermajority Revolving Lenders
or all affected Lenders, as applicable. Except as set forth in CLAUSES (b) and
(c) below, all such amendments, modifications, terminations or waivers requiring
the consent of any Lenders shall require the written consent of Requisite
Lenders.
(b) No amendment, modification, termination or waiver of or consent
with respect to any provision of this Agreement which increases the percentage
advance rates set forth in the definition of any Borrowing Base of any Borrower,
or which makes less restrictive the nondiscretionary criteria for exclusion from
Eligible Accounts, Eligible Mexican Accounts and Eligible Inventory set forth in
SECTIONS 1.6 and 1.7, shall be effective unless the same shall be in writing and
signed by Agent, Supermajority Revolving Lenders and Borrowers. No amendment,
modification, termination or waiver of or consent with respect to any provision
of this Agreement which waives compliance with the conditions precedent set
forth in SECTION 2.2 to the making of any Loan or the incurrence of any Letter
of Credit Obligations shall be effective unless the same shall be in writing and
signed by Agent, Requisite Revolving Lenders and Borrowers. Notwithstanding
anything contained in this Agreement to the contrary, no waiver or consent with
respect to any Default (if in connection therewith Agent or Requisite Revolving
Lenders, as the case may be, have exercised its or their right to suspend the
making or incurrence of further Advances or Letter of Credit Obligations
pursuant to SECTION 8.2(a)) or any Event of Default shall be effective for
purposes of the conditions precedent to the making of Loans or the incurrence of
Letter of Credit Obligations set forth in SECTION 2.2 unless the same shall be
in writing and signed by Agent, Requisite Revolving Lenders and Borrowers.
(c) No amendment, modification, termination or waiver shall, unless
in writing and signed by Agent and each Lender directly affected thereby, do any
of the following: (i) increase the principal amount of any Lender's Commitment
(which action shall be deemed to directly affect all Lenders); (ii) reduce the
principal of, rate of interest on or Fees payable with respect to any Loan or
Letter of Credit Obligations of any affected Lender; (iii) extend any scheduled
payment date or final maturity date of the principal amount of any Loan of any
affected Lender; (iv) waive, forgive, defer, extend or postpone any payment of
interest or Fees as to any affected Lender; (v) release any Guaranty or, except
as otherwise permitted herein or in the other Loan Documents, release, or permit
any Credit Party to sell or otherwise dispose of, any Collateral with a value
exceeding $5,000,000 in the aggregate (which action shall be deemed to directly
affect all Lenders); (vi) change the percentage of the Commitments or of the
aggregate unpaid principal amount of the Loans which shall be required for
Lenders or any of them to take any action hereunder; and (vii) amend or waive
this SECTION 11.2 or the definitions of the terms "Requisite Lenders",
"Requisite Revolving Lenders" or "Supermajority Revolving Lenders" insofar as
such definitions affect the substance of this SECTION 11.2. Furthermore, no
amendment, modification, termination or waiver affecting the rights or duties of
Agent under this Agreement or any other Loan Document shall be effective unless
in writing and signed by Agent, in addition to Lenders required hereinabove to
take such action. Each amendment, modification, termination or waiver shall be
effective only in the specific instance and for the specific purpose for which
it
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was given. No amendment, modification, termination or waiver shall be required
for Agent to take additional Collateral pursuant to any Loan Document. No
notice to or demand on any Credit Party in any case shall entitle such Credit
Party or any other Credit Party to any other or further notice or demand in
similar or other circumstances. Any amendment, modification, termination,
waiver or consent effected in accordance with this SECTION 11.2 shall be binding
upon each holder of the Notes at the time outstanding and each future holder of
the Notes.
(d) If, in connection with any proposed amendment, modification,
waiver or termination (a "PROPOSED CHANGE"):
(i) requiring the consent of all affected Lenders, the consent
of Requisite Lenders is obtained, but the consent of other Lenders whose consent
is required is not obtained (any such Lender whose consent is not obtained as
described this CLAUSE (i) and in CLAUSES (ii), (iii) and (iv) below being
referred to as a "NON-CONSENTING LENDER"), or
(ii) requiring the consent of Supermajority Revolving Lenders,
the consent of Requisite Revolving Lenders is obtained, but the consent of
Supermajority Revolving Lenders is not obtained, or
(iii) requiring the consent of Requisite Revolving Lenders, the
consent of Revolving Lenders holding 51% or more of the aggregate Revolving Loan
Commitments is obtained, but the consent of Requisite Revolving Lenders is not
obtained, or
(iv) requiring the consent of Requisite Lenders, the consent of
Lenders holding 51% or more of the aggregate Commitments is obtained, but the
consent of Requisite Lenders is not obtained,
then, so long as Agent is not a Non-Consenting Lender, at Borrower
Representative's request, Agent or a Person acceptable to Agent shall have the
right with Agent's consent and in Agent's sole discretion (but shall have no
obligation) to purchase from such Non-Consenting Lenders, and such
Non-Consenting Lenders agree that they shall, upon Agent's request, sell and
assign to Agent or such Person, all of the Commitments of such Non-Consenting
Lender for an amount equal to the principal balance of all Loans held by the
Non-Consenting Lender and all accrued interest and Fees with respect thereto
through the date of sale, such purchase and sale to be consummated pursuant to
an executed Assignment Agreement.
(e) Upon indefeasible payment in full in cash and performance of all
of the Obligations (other than indemnification Obligations under SECTION 1.13),
termination of the Commitments and a release of all claims against Agents and
Lenders, and so long as no suits, actions, proceedings, or claims are pending or
threatened against any Indemnified Person asserting any damages, losses or
liabilities that are Indemnified Liabilities, Agent shall deliver to Borrowers
termination statements, mortgage releases and other documents necessary or
appropriate to evidence the termination of the Liens securing payment of the
Obligations.
11.3. FEES AND EXPENSES. Borrowers shall reimburse Agents for all
out-of-pocket expenses incurred in connection with the preparation of the Loan
Documents
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(including the reasonable fees and expenses of all of its special loan counsel,
advisors, consultants and auditors retained in connection with the Loan
Documents and the Related Transactions and advice in connection therewith).
Borrowers shall reimburse Agents (and, with respect to CLAUSES (c) and (d)
below, all Lenders) for all fees, costs and expenses, including the reasonable
fees, costs and expenses of counsel or other advisors (including environmental
and management consultants and appraisers) for advice, assistance, or other
representation in connection with:
(a) the forwarding to Borrowers or any other Person on behalf of
Borrowers by Agent of the proceeds of the Loans;
(b) any amendment, modification or waiver of, or consent with respect
to, any of the Loan Documents or Related Transactions Documents or advice in
connection with the administration of the Loans made pursuant hereto or its
rights hereunder or thereunder;
(c) any litigation, contest, dispute, suit, proceeding or action
(whether instituted by Agent, any Lender, any Borrower or any other Person) in
any way relating to the Collateral, any of the Loan Documents or any other
agreement to be executed or delivered in connection therewith or herewith,
whether as party, witness, or otherwise, including any litigation, contest,
dispute, suit, case, proceeding or action, and any appeal or review thereof, in
connection with a case commenced by or against any or all of the Borrowers or
any other Person that may be obligated to Agent by virtue of the Loan Documents;
including any such litigation, contest, dispute, suit, proceeding or action
arising in connection with any work-out or restructuring of the Loans during the
pendency of one or more Events of Default; PROVIDED that in the case of
reimbursement of counsel for Lenders other than Agents, such reimbursement shall
be limited to one counsel for all such Lenders;
(d) any attempt to enforce any remedies of any of Agents against any
or all of the Credit Parties or any other Person that may be obligated to any of
Agents or any Lender by virtue of any of the Loan Documents; including any such
attempt to enforce any such remedies in the course of any work-out or
restructuring of the Loans during the pendency of one or more Events of Default;
PROVIDED that in the case of reimbursement of counsel for Lenders other than
Agents, such reimbursement shall be limited to one counsel for all such Lenders;
(e) any work-out or restructuring of the Loans during the pendency of
one or more Events of Default;
(f) efforts to (i) monitor the Loans or any of the other Obligations,
(ii) evaluate, observe or assess any of the Credit Parties or their respective
affairs, and (iii) verify, protect, evaluate, assess, appraise, collect, sell,
liquidate or otherwise dispose of any of the Collateral;
(g) including all attorneys' and other professional and service
providers' fees arising from such services, including those in connection with
any appellate proceedings; and all expenses, costs, charges and other fees
incurred by such counsel and others in any way or respect arising in connection
with or relating to any of the events or actions described in this SECTION 11.3
shall be payable, on demand, by Borrowers to Agents. Without limiting the
generality of the
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foregoing, such expenses, costs, charges and fees may include: fees, costs and
expenses of accountants, environmental advisors, appraisers, investment bankers,
management and other consultants and paralegals; court costs and expenses;
photocopying and duplication expenses; court reporter fees, costs and expenses;
long distance telephone charges; air express charges; telegram or telecopy
charges; secretarial overtime charges; and expenses for travel, lodging and food
paid or incurred in connection with the performance of such legal or other
advisory services.
11.4. NO WAIVER. Agent's or any Lender's failure, at any time or
times, to require strict performance by the Credit Parties of any provision of
this Agreement and any of the other Loan Documents shall not waive, affect or
diminish any right of Agent or such Lender thereafter to demand strict
compliance and performance therewith. Any suspension or waiver of an Event of
Default shall not suspend, waive or affect any other Event of Default whether
the same is prior or subsequent thereto and whether the same or of a different
type. Subject to the provisions of SECTION 11.2, none of the undertakings,
agreements, warranties, covenants and representations of any Credit Party
contained in this Agreement or any of the other Loan Documents and no Default or
Event of Default by any Credit Party shall be deemed to have been suspended or
waived by Agent or any Lender, unless such waiver or suspension is by an
instrument in writing signed by an officer of or other authorized employee of
Agent and the applicable required Lenders, and directed to Borrowers specifying
such suspension or waiver.
11.5. REMEDIES. Agent's and Lenders' rights and remedies under
this Agreement shall be cumulative and nonexclusive of any other rights and
remedies which Agent or any Lender may have under any other agreement, including
the other Loan Documents, by operation of law or otherwise. Recourse to the
Collateral shall not be required.
11.6. SEVERABILITY. Wherever possible, each provision of this
Agreement and the other Loan Documents shall be interpreted in such a manner as
to be effective and valid under applicable law, but if any provision of this
Agreement shall be prohibited by or invalid under applicable law, such provision
shall be ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Agreement.
11.7. CONFLICT OF TERMS. Except as otherwise provided in this
Agreement or any of the other Loan Documents by specific reference to the
applicable provisions of this Agreement, if any provision contained in this
Agreement is in conflict with, or inconsistent with, any provision in any of the
other Loan Documents, the provision contained in this Agreement shall govern and
control.
11.8. CONFIDENTIALITY. Agents and each Lender agree to use
commercially reasonable efforts (equivalent to the efforts Agents or such Lender
applies to maintaining the confidentiality of its own confidential information)
to maintain as confidential all confidential information provided to them by the
Credit Parties and designated as confidential for a period of two (2) years
following receipt thereof, except that Agents and any Lender may disclose such
information (a) to Persons employed or engaged by Agents or such Lender in
evaluating, approving, structuring or administering the Loans and the
Commitments; (b) to any bona fide assignee or participant or potential assignee
or participant that has agreed to comply with the
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covenant contained in this SECTION 11.8 (and any such bona fide assignee or
participant or potential assignee or participant may disclose such information
to Persons employed or engaged by them as described in CLAUSE (a) above); (c) as
required or requested by any Governmental Authority or reasonably believed by
such Agent or such Lender to be compelled by any court decree, subpoena or legal
or administrative order or process; (d) as, on the advice of such Agent's or
such Lender's counsel, required by law; (e) in connection with the exercise of
any right or remedy under the Loan Documents or in connection with any
Litigation to which Agent or such Lender is a party; or (f) which ceases to be
confidential through no fault of such Agent or such Lender.
11.9. GOVERNING LAW. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN
ANY OF THE LOAN DOCUMENTS, IN ALL RESPECTS, INCLUDING ALL MATTERS OF
CONSTRUCTION, VALIDITY AND PERFORMANCE, THE LOAN DOCUMENTS AND THE OBLIGATIONS
SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF ILLINOIS APPLICABLE TO CONTRACTS MADE AND PERFORMED IN THAT STATE
AND ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA. EACH CREDIT PARTY
HEREBY CONSENTS AND AGREES THAT THE STATE OR FEDERAL COURTS LOCATED IN COOK
COUNTY, CITY OF CHICAGO, ILLINOIS SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND
DETERMINE ANY CLAIMS OR DISPUTES BETWEEN THE CREDIT PARTIES, AGENTS AND LENDERS
PERTAINING TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR TO ANY MATTER
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS,
PROVIDED, THAT AGENTS, LENDERS AND THE CREDIT PARTIES ACKNOWLEDGE THAT ANY
APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF
COOK COUNTY, CITY OF CHICAGO, ILLINOIS AND, PROVIDED, FURTHER NOTHING IN THIS
AGREEMENT SHALL BE DEEMED OR OPERATE TO PRECLUDE AGENT FROM BRINGING SUIT OR
TAKING OTHER LEGAL ACTION IN ANY OTHER JURISDICTION TO REALIZE ON THE COLLATERAL
OR ANY OTHER SECURITY FOR THE OBLIGATIONS, OR TO ENFORCE A JUDGMENT OR OTHER
COURT ORDER IN FAVOR OF AGENT. EACH CREDIT PARTY EXPRESSLY SUBMITS AND CONSENTS
IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH
COURT, AND EACH CREDIT PARTY HEREBY WAIVES ANY OBJECTION WHICH SUCH CREDIT PARTY
MAY HAVE BASED UPON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON
CONVENIENS AND HEREBY CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF
AS IS DEEMED APPROPRIATE BY SUCH COURT. EACH CREDIT PARTY HEREBY WAIVES
PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH
ACTION OR SUIT AND AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINTS AND OTHER
PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO SUCH CREDIT
PARTY AT THE ADDRESS SET FORTH IN ANNEX I OF THIS AGREEMENT AND THAT SERVICE SO
MADE SHALL BE DEEMED COMPLETED UPON THE EARLIER OF
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SUCH CREDIT PARTY'S ACTUAL RECEIPT THEREOF OR THREE (3) DAYS AFTER DEPOSIT IN
THE U.S. MAILS, PROPER POSTAGE PREPAID.
11.10. NOTICES. Except as otherwise provided herein, whenever it
is provided herein that any notice, demand, request, consent, approval,
declaration or other communication shall or may be given to or served upon any
of the parties by any other parties, or whenever any of the parties desires to
give or serve upon any other parties any communication with respect to this
Agreement, each such notice, demand, request, consent, approval, declaration or
other communication shall be in writing and shall be deemed to have been validly
served, given or delivered (a) upon the earlier of actual receipt and three (3)
Business Days after deposit in the United States Mail, registered or certified
mail, return receipt requested, with proper postage prepaid, (b) upon
transmission, when sent by telecopy or other similar facsimile transmission
(with such telecopy or facsimile promptly confirmed by delivery of a copy by
personal delivery or United States Mail as otherwise provided in this SECTION
11.10), (c) one (1) Business Day after deposit with a reputable overnight
courier with all charges prepaid or (d) when delivered, if hand-delivered by
messenger, all of which shall be addressed to the party to be notified and sent
to the address or facsimile number indicated on ANNEX I or to such other address
(or facsimile number) as may be substituted by notice given as herein provided.
The giving of any notice required hereunder may be waived in writing by the
party entitled to receive such notice. Failure or delay in delivering copies of
any notice, demand, request, consent, approval, declaration or other
communication to any Person (other than Borrower Representative or Agent)
designated on ANNEX I to receive copies shall in no way adversely affect the
effectiveness of such notice, demand, request, consent, approval, declaration or
other communication.
11.11. SECTION TITLES. The Section titles and Table of Contents
contained in this Agreement are and shall be without substantive meaning or
content of any kind whatsoever and are not a part of the agreement between the
parties hereto.
11.12. COUNTERPARTS. This Agreement may be executed in any number
of separate counterparts, each of which shall collectively and separately
constitute one agreement.
11.13. WAIVER OF JURY TRIAL. BECAUSE DISPUTES ARISING IN
CONNECTION WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY
RESOLVED BY AN EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH APPLICABLE
STATE AND FEDERAL LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE PARTIES
DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS.
THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL
SYSTEM AND OF ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY
IN ANY ACTION, SUIT, OR PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE, WHETHER
SOUNDING IN CONTRACT, TORT OR OTHERWISE, AMONG AGENTS, LENDERS AND ANY CREDIT
PARTY ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE
RELATIONSHIP ESTABLISHED AMONG THEM IN CONNECTION WITH, THIS AGREEMENT OR ANY OF
THE OTHER LOAN DOCUMENTS OR THE TRANSACTIONS RELATED THERETO.
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11.14. PRESS RELEASES. Each Credit Party executing this Agreement
agrees that neither it nor its Affiliates will in the future issue any press
releases or other public disclosure using the name of GE Capital or its
affiliates or referring to this Agreement, the other Loan Documents or the
Related Transactions Documents without at least two (2) Business Days' prior
notice to GE Capital and without the prior written consent of GE Capital unless
(and only to the extent that) such Credit Party or Affiliate is required to do
so under law and then, in any event, such Credit Party or Affiliate will consult
with GE Capital before issuing such press release or other public disclosure.
Each Credit Party consents to the publication by Agents or any Lender of a
tombstone or similar advertising material relating to the financing transactions
contemplated by this Agreement. Such Agent or such Lender shall provide a draft
of any such tombstone or similar advertising material to each Credit Party for
review and comment prior to the publication thereof. Agents reserve the right
to provide to industry trade organizations information necessary and customary
for inclusion in league table measurements with Borrowers' consent which shall
not be unreasonably withheld or delayed.
11.15. REINSTATEMENT. This Agreement shall remain in full force
and effect and continue to be effective should any petition be filed by or
against any Borrower for liquidation or reorganization, should any Borrower
become insolvent or make an assignment for the benefit of any creditor or
creditors or should a receiver or trustee be appointed for all or any
significant part of any Borrower's assets, and shall continue to be effective or
to be reinstated, as the case may be, if at any time payment and performance of
the Obligations, or any part thereof, is, pursuant to applicable law, rescinded
or reduced in amount, or must otherwise be restored or returned by any obligee
of the Obligations, whether as a "voidable preference," "fraudulent conveyance,"
or otherwise, all as though such payment or performance had not been made. In
the event that any payment, or any part thereof, is rescinded, reduced, restored
or returned, the Obligations shall be reinstated and deemed reduced only by such
amount paid and not so rescinded, reduced, restored or returned.
11.16. ADVICE OF COUNSEL. Each of the parties represents to each
other party hereto that it has discussed this Agreement and, specifically, the
provisions of SECTIONS 11.9 and 11.13, with its counsel.
11.17. NO STRICT CONSTRUCTION. The parties hereto have
participated jointly in the negotiation and drafting of this Agreement. In the
event an ambiguity or question of intent or interpretation arises, this
Agreement shall be construed as if drafted jointly by the parties hereto and no
presumption or burden of proof shall arise favoring or disfavoring any party by
virtue of the authorship of any provisions of this Agreement.
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12. CROSS-GUARANTY
12.1. CROSS-GUARANTY. Each Credit Party hereby agrees that such
Credit Party is jointly and severally liable for, and hereby absolutely and
unconditionally guarantees to Agent and Lenders and their respective successors
and assigns, the full and prompt payment (whether at stated maturity, by
acceleration or otherwise) and performance of, all Obligations owed or
hereafter owing to Agent and Lenders by each other Credit Party. Each Credit
Party agrees that its guaranty obligation hereunder is a continuing guaranty of
payment and performance and not of collection, and that its obligations under
this SECTION 12 shall be absolute and unconditional, irrespective of, and
unaffected by,
(a) the genuineness, validity, regularity, enforceability or any
future amendment of, or change in, this Agreement, any other Loan Document or
any other agreement, document or instrument to which any Credit Party is or may
become a party;
(b) the absence of any action to enforce this Agreement (including
this SECTION 12) or any other Loan Document or the waiver or consent by Agent
and Lenders with respect to any of the provisions thereof;
(c) the existence, value or condition of, or failure to perfect its
Lien against, any security for the Obligations or any action, or the absence of
any action, by Agent and Lenders in respect thereof (including the release of
any such security);
(d) the insolvency of any Credit Party; or
(e) any other action or circumstances which might otherwise
constitute a legal or equitable discharge or defense of a surety or guarantor,
(f) it being agreed by each Credit Party that its obligations under
this SECTION 12 shall not be discharged until the payment and performance, in
full, of the Obligations has occurred. Each Credit Party shall be regarded, and
shall be in the same position, as principal debtor with respect to the
Obligations guaranteed hereunder.
12.2. WAIVERS BY CREDIT PARTIES. Each Credit Party expressly
waives all rights it may have now or in the future under any statute, or at
common law, or at law or in equity, or otherwise, to compel Agent or Lenders to
marshall assets or to proceed in respect of the Obligations guaranteed hereunder
against any other Credit Party, any other party or against any security for the
payment and performance of the Obligations before proceeding against, or as a
condition to proceeding against, such Credit Party. It is agreed among each
Credit Party, Agent and Lenders that the foregoing waivers are of the essence of
the transaction contemplated by this Agreement and the other Loan Documents and
that, but for the provisions of this SECTION 12 and such waivers, Agent and
Lenders would decline to enter into this Agreement.
12.3. BENEFIT OF GUARANTY. Each Credit Party agrees that the
provisions of this SECTION 12 are for the benefit of Agent and Lenders and their
respective successors, transferees, endorsees and assigns, and nothing herein
contained shall impair, as between any other Credit
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Party and Agent or Lenders, the obligations of such other Credit Party under the
Loan Documents.
12.4. SUBORDINATION OF SUBROGATION, ETC. Notwithstanding anything
to the contrary in this Agreement or in any other Loan Document, and except as
set forth in SECTION 12.7, each Credit Party hereby expressly and irrevocably
subordinates to payment of the Obligations any and all rights at law or in
equity to subrogation, reimbursement, exoneration, contribution,
indemnification or set off and any and all defenses available to a surety,
guarantor or accommodation co-obligor until the Obligations are indefeasibly
paid in full in cash. Each Credit Party acknowledges and agrees that this
subordination is intended to benefit Agent and Lenders and shall not limit or
otherwise affect such Credit Party's liability hereunder or the enforceability
of this SECTION 12, and that Agent, Lenders and their respective successors and
assigns are intended third party beneficiaries of the waivers and agreements set
forth in this SECTION 12.4.
12.5. ELECTION OF REMEDIES. If Agent or any Lender may, under
applicable law, proceed to realize its benefits under any of the Loan Documents
giving Agent or such Lender a Lien upon any Collateral, whether owned by any
Credit Party or by any other Person, either by judicial foreclosure or by
non-judicial sale or enforcement, Agent or any Lender may, at its sole option,
determine which of its remedies or rights it may pursue without affecting any of
its rights and remedies under this SECTION 12. If, in the exercise of any of
its rights and remedies, Agent or any Lender shall forfeit any of its rights or
remedies, including its right to enter a deficiency judgment against any Credit
Party or any other Person, whether because of any applicable laws pertaining to
"election of remedies" or the like, each Credit Party hereby consents to such
action by Agent or such Lender and waives any claim based upon such action, even
if such action by Agent or such Lender shall result in a full or partial loss of
any rights of subrogation which each Credit Party might otherwise have had but
for such action by Agent or such Lender. Any election of remedies which results
in the denial or impairment of the right of Agent or any Lender to seek a
deficiency judgment against any Credit Party shall not impair any other Credit
Party's obligation to pay the full amount of the Obligations. In the event
Agent or any Lender shall bid at any foreclosure or trustee's sale or at any
private sale permitted by law or the Loan Documents, Agent or such Lender may
bid all or less than the amount of the Obligations and the amount of such bid
need not be paid by Agent or such Lender but shall be credited against the
Obligations. The amount of the successful bid at any such sale, whether Agent,
Lender or any other party is the successful bidder, shall be conclusively deemed
to be the fair market value of the Collateral and the difference between such
bid amount and the remaining balance of the Obligations shall be conclusively
deemed to be the amount of the Obligations guaranteed under this SECTION 12,
notwithstanding that any present or future law or court decision or ruling may
have the effect of reducing the amount of any deficiency claim to which Agent or
any Lender might otherwise be entitled but for such bidding at any such sale.
12.6. LIMITATION. Notwithstanding any provision herein contained
to the contrary, each Credit Party's liability under this SECTION 12 (which
liability is in any event in addition to amounts for which such Credit Party, to
the extent applicable, is primarily liable under SECTION 1) shall be limited to
an amount not to exceed as of any date of determination the greater of:
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(a) the net amount of all Loans advanced to any other Credit Party
under this Agreement and then re-loaned or otherwise transferred to, or for the
benefit of, such Credit Party; and
(b) the amount which could be claimed by Agent and Lenders from such
Credit Party under this SECTION 12 without rendering such claim voidable or
avoidable under Section 548 of Chapter 11 of the Bankruptcy Code or under any
applicable state Uniform Fraudulent Transfer Act, Uniform Fraudulent Conveyance
Act or similar statute or common law after taking into account, among other
things, such Credit Party's right of contribution and indemnification from each
other Credit Party under SECTION 12.7.
12.7. CONTRIBUTION WITH RESPECT TO GUARANTY OBLIGATIONS. (a) To
the extent that any Credit Party shall make a payment under this SECTION 12 of
all or any of the Obligations (other than Loans made to that Credit Party for
which it is primarily liable, to the extent applicable), (a "GUARANTOR PAYMENT")
which, taking into account all other Guarantor Payments then previously or
concurrently made by any other Credit Party, exceeds the amount which such
Credit Party would otherwise have paid if each Credit Party had paid the
aggregate Obligations satisfied by such Guarantor Payment in the same proportion
that such Credit Party's "ALLOCABLE AMOUNT" (as defined below) (as determined
immediately prior to such Guarantor Payment) bore to the aggregate Allocable
Amounts of each of the Credit Parties as determined immediately prior to the
making of such Guarantor Payment, THEN, following indefeasible payment in full
in cash of the Obligations and termination of the Commitments, such Credit Party
shall be entitled to receive contribution and indemnification payments from, and
be reimbursed by, each other Credit Party for the amount of such excess, PRO
RATA based upon their respective Allocable Amounts in effect immediately prior
to such Guarantor Payment.
(b) As of any date of determination, the "ALLOCABLE AMOUNT" of any
Credit Party shall be equal to the maximum amount of the claim which could then
be recovered from such Credit Party under this SECTION 12 without rendering such
claim voidable or avoidable under Section 548 of Chapter 11 of the Bankruptcy
Code or under any applicable state Uniform Fraudulent Transfer Act, Uniform
Fraudulent Conveyance Act or similar statute or common law.
(c) This SECTION 12.7 is intended only to define the relative rights
of Credit Parties and nothing set forth in this SECTION 12.7 is intended to or
shall impair the obligations of Credit Parties, jointly and severally, to pay
any amounts as and when the same shall become due and payable in accordance with
the terms of this Agreement, including SECTION 12.1. Nothing contained in this
SECTION 12.7 shall limit the liability of any Credit Party to pay the Loans made
directly or indirectly to that Credit Party and accrued interest, Fees and
expenses with respect thereto for which such Credit Party shall be primarily
liable.
(d) The parties hereto acknowledge that the rights of contribution
and indemnification hereunder shall constitute assets of the Credit Party to
which such contribution and indemnification is owing.
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(e) The rights of the indemnifying any Credit Party against other
Credit Parties under this SECTION 12.7 shall be exercisable upon the full and
indefeasible payment of the Obligations and the termination of the Commitments.
12.8. LIABILITY CUMULATIVE. The liability of Credit Parties under
this SECTION 12 is in addition to and shall be cumulative with all liabilities
of each Credit Party to Agent and Lenders under this Agreement and the other
Loan Documents to which such Credit Party is a party or in respect of any
Obligations or obligation of the other Credit Parties, without any limitation as
to amount, unless the instrument or agreement evidencing or creating such other
liability specifically provides to the contrary.
[Signature Page Follows]
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IN WITNESS WHEREOF, this Agreement has been duly executed as of the
date first written above.
NEVADA RECYCLING, INC.,
a Nevada corporation
RECYCLING INDUSTRIES OF TEXAS, INC.,
a Colorado corporation
RECYCLING INDUSTRIES OF MISSOURI, INC.,
a Colorado corporation
RECYCLING INDUSTRIES OF GEORGIA, INC.,
a Colorado corporation
WEISSMAN INDUSTRIES, INC.,
an Iowa corporation
RECYCLING INDUSTRIES OF ATLANTA, INC., a
Colorado corporation
RECYCLING INDUSTRIES OF CHESAPEAKE, INC., a
Colorado corporation
RECYCLING INDUSTRIES OF GREENSBORO, INC., a
Colorado corporation
RECYCLING INDUSTRIES OF SOUTH CAROLINA, INC.,
a Colorado corporation
RECYCLING INDUSTRIES OF WINSTON-SALEM, INC.,
a Colorado corporation
RECYCLING INDUSTRIES OF WISCONSIN, INC.,
a Colorado corporation
WM. LANS SONS' CO. INC.,
an Illinois corporation
By: /s/ Luke F. Botica
---------------------------------------
Title: Vice Chairman
------------------------------------
GENERAL ELECTRIC CAPITAL
CORPORATION,
as Agent and Lender
By: /s/ Glenn Bartley
---------------------------------------
Title: Duly Authorized Signatory
------------------------------------
<PAGE>
BANKBOSTON, N.A.,
as Documentation Agent and Lender
By: /s/ Brent E. Shay
---------------------------------------
Title: Director
------------------------------------
<PAGE>
The following Persons are signatories to this Agreement in
their capacity as Credit Parties and not as Borrowers.
RECYCLING INDUSTRIES, INC.,
a Colorado corporation
By: /s/ Luke F. Botica
---------------------------------------
Title: Vice Chairman
------------------------------------
NR HOLDINGS, INC.,
a Nevada corporation
By: /s/ Luke F. Botica
---------------------------------------
Title: Vice Chairman
------------------------------------
RECYCLING INDUSTRIES OF IOWA, INC.,
a Colorado corporation
By: /s/ Luke F. Botica
---------------------------------------
Title: Vice Chairman
------------------------------------
<PAGE>
ANNEX A (RECITALS)
TO
CREDIT AGREEMENT
DEFINITIONS
Capitalized terms used in the Loan Documents shall have (unless
otherwise provided elsewhere in the Loan Documents) the following respective
meanings and all section references in the following definitions shall refer to
Sections of the Agreement:
"ACCOUNT DEBTOR" shall mean any Person who may become obligated to any
Credit Party under, with respect to, or on account of, an Account.
"ACCOUNTS" shall mean all "accounts," as such term is defined in the
Code, now owned or hereafter acquired by any Credit Party and, in any event,
including (a) all accounts receivable, other receivables, book debts and other
forms of obligations (other than forms of obligations evidenced by Chattel
Paper, Documents or Instruments) now owned or hereafter received or acquired by
or belonging or owing to any Credit Party, whether arising out of goods sold or
services rendered by it or from any other transaction (including any such
obligations which may be characterized as an account or contract right under the
Code), (b) all of each Credit Party's rights in, to and under all purchase
orders or receipts now owned or hereafter acquired by it for goods or services,
(c) all of each Credit Party's rights to any goods represented by any of the
foregoing (including unpaid sellers' rights of rescission, replevin, reclamation
and stoppage in transit and rights to returned, reclaimed or repossessed goods),
(d) all monies due or to become due to any Credit Party, under all purchase
orders and contracts for the sale of goods or the performance of services or
both by such Credit Party or in connection with any other transaction (whether
or not yet earned by performance on the part of such Credit Party) now or
hereafter in existence, including the right to receive the proceeds of said
purchase orders and contracts, and (e) all collateral security and guarantees of
any kind, now or hereafter in existence, given by any Person with respect to any
of the foregoing.
"ACQUIRED SUBSIDIARY" means, as of any date of determination, any
wholly owned Subsidiary of RII which has been formed or acquired during the
immediately preceding twelve-month period.
"ACQUISITION ADVANCE" shall have the meaning assigned to it in SECTION
1.1(d)(i).
"ACQUISITION LOAN" shall mean, collectively, all outstanding
Acquisition Advances.
"ACQUISITION LOAN COMMITMENT" shall mean (a) as to any Lender with an
Acquisition Loan Commitment, the commitment of such Lender to make its Pro Rata
Share of the Acquisition Loan as set forth on ANNEX J to the Agreement or in the
most recent Assignment Agreement executed by such Lender, and (b) as to all
Lenders with an Acquisition Loan Commitment, the aggregate commitment of all
Lenders to make the Acquisition Advances, which aggregate commitment shall be
Twenty-Five Million ($25,000,000) as of the Closing Date (as such commitment
shall be reduced, dollar for dollar, by the funding of each Acquisition Advance
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prior to the Acquisition Loan Commitment Termination Date, at which time such
commitment shall be automatically reduced to zero).
"ACQUISITION LOAN COMMITMENT TERMINATION DATE" shall mean the second
anniversary of the Closing Date.
"ACQUISITION LOAN NOTE" shall have the meaning assigned to it in
SECTION 1.1(d)(ii).
"ACQUIRED ASSET SALE" shall have the meaning assigned to it in SECTION
1.3(c)(i) hereof.
"ADVANCE" shall mean any Revolving Credit Advance or Swing Line
Advance, or Acquisition Advance as the context may require.
"ADVERSE SHREDDER ORDER" shall have the meaning assigned to such term
in SECTION 5.12.
"AFFILIATE" shall mean, with respect to RII, (a) each Person that,
directly or indirectly, owns or controls, whether beneficially, or as a trustee,
guardian or other fiduciary, five percent (5%) or more of the Stock having
ordinary voting power in the election of directors of RII, (b) each Person that
controls, is controlled by or is under common control with RII, (c) each of such
Person's officers, directors, joint venturers and partners and (d) in the case
of Borrowers, the immediate family members, spouses and lineal descendants of
individuals who are Affiliates of any Borrower. For the purposes of this
definition, "CONTROL" of a Person shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of its management or
policies, whether through the ownership of voting securities, by contract or
otherwise; PROVIDED, HOWEVER, that the term "AFFILIATE" shall specifically
exclude Agents and each Lender.
"AGENT" shall mean GE Capital or its successor appointed pursuant to
SECTION 9.7.
"AGENTS" shall mean the Agent and the Documentation Agent,
collectively.
"AGGREGATE BORROWING BASE" shall mean, as of any date of
determination, an amount equal to the sum of the Borrowing Bases of all
Borrowers; provided that the total amount of such Aggregate Borrowing Base
attributable to Eligible Mexican Accounts shall not exceed $750,000.
"AGREEMENT" shall mean the Credit Agreement by and among Borrowers,
the other Credit Parties named therein, GE Capital, as Agent and a Lender,
BankBoston, N.A., as Documentation Agent and a Lender and the other Lenders
signatory from time to time to the Agreement.
"ANNUALIZED EBITDA" shall mean for the applicable Fiscal Quarter then
ended prior to December 31, 1998, the EBITDA of RII and its Subsidiaries
computed as follows: (i) for the Fiscal Quarter ended March 31, 1998, EBITDA
multiplied by four (4) to annualize it; (ii) for the two (2) successive Fiscal
Quarters ended June 30, 1998, EBITDA multiplied by two (2) to
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annualize it; and (iii) for the three (3) successive Fiscal Quarters ended
September 30, 1998, EBITDA multiplied by 1.3333 to annualize it.
"ANNUALIZED FIXED CHARGES" shall mean for the applicable Fiscal
Quarter then ended prior to December 31, 1998, the Fixed Charges of RII and its
Subsidiaries computed as follows: (i) for the Fiscal Quarter ended March 31,
1998, Fixed Charges multiplied by four (4) to annualize them; (ii) for the two
(2) successive Fiscal Quarters ended June 30, 1998, Fixed Charges multiplied by
two (2) to annualize them; and (iii) for the three (3) successive Fiscal
Quarters ended September 30, 1998, Fixed Charges multiplied by 1.3333 to
annualize them; PROVIDED THAT the component of Fixed Charges consisting of
scheduled payments of principal paid during each period shall not be annualized,
but shall be calculated for each period set forth above based on scheduled
payments of principal paid with respect to Indebtedness from January 1, 1998
through the last day of each respective Fiscal Quarter.
"ANNUALIZED PRO FORMA EBITDA" shall mean for the applicable Fiscal
Quarter then ended prior to December 31, 1998, the Pro Forma EBITDA of RII and
its Subsidiaries computed as follows: (i) for the Fiscal Quarter ended March 31,
1998, Pro Forma EBITDA multiplied by four (4) to annualize it; (ii) for the two
(2) successive Fiscal Quarters ended June 30, 1998, Pro Forma EBITDA multiplied
by two (2) to annualize it; and (iii) for the three (3) successive Fiscal
Quarters ended September 30, 1998, Pro Forma EBITDA multiplied by 1.3333 to
annualize it.
"APPENDICES" shall have the meaning assigned to it in the recitals to
the Agreement.
"APPLICABLE ACQUISITION LOAN INDEX MARGIN" shall mean the per annum
interest rate margin from time to time in effect and payable in addition to the
Index Rate applicable to the Acquisition Loan, as determined by reference to
SECTION 1.5(a) of the Agreement.
"APPLICABLE ACQUISITION LOAN LIBOR MARGIN" shall mean the per annum
interest rate margin from time to time in effect and payable in addition to the
LIBOR Rate applicable to the Acquisition Loan, as determined by reference to
SECTION 1.5(a) of the Agreement.
"APPLICABLE L/C MARGIN" shall mean the per annum fee, from time to
time in effect, payable with respect to outstanding Letter of Credit Obligations
as determined by reference to SECTION 1.5(a).
"APPLICABLE MARGINS" means collectively the Applicable L/C Margin, the
Applicable Unused Line Fee Margin, the Applicable Revolver Index Margin, the
Applicable Revolver LIBOR Margin, the Applicable Term A Index Margin, the
Applicable Term A LIBOR Margin, the Applicable Term B Index Margin, the
Applicable Term B LIBOR Margin, the Applicable Acquisition Loan Index Margin,
and the Applicable Acquisition Loan LIBOR Margin.
"APPLICABLE REVOLVER INDEX MARGIN" shall mean the per annum interest
rate margin from time to time in effect and payable in addition to the Index
Rate applicable to the Revolving Loan, as determined by reference to SECTION
1.5(a) of the Agreement.
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"APPLICABLE REVOLVER LIBOR MARGIN" shall mean the per annum interest
rate from time to time in effect and payable in addition to the LIBOR Rate
applicable to the Revolving Loan, as determined by reference to SECTION 1.5(a)
of the Agreement.
"APPLICABLE TERM A INDEX MARGIN" shall mean the per annum interest
rate from time to time in effect and payable in addition to the Index Rate
applicable to Term Loan A, as determined by reference to SECTION 1.5(a) of the
Agreement.
"APPLICABLE TERM A LIBOR MARGIN" shall mean the per annum interest
rate from time to time in effect and payable in addition to the LIBOR Rate
applicable to Term Loan A, as determined by reference to SECTION 1.5(a) of the
Agreement.
"APPLICABLE TERM B INDEX MARGIN" shall mean the per annum interest
rate margin from time to time in effect and payable in addition to the Index
Margin applicable to the Term B Loan, as determined by reference to Section
1.5(a) of the Agreement.
"APPLICABLE TERM B LIBOR MARGIN" shall mean the per annum interest
rate margin from time to time in effect and payable in addition to the LIBOR
Margin applicable to the Term B Loan, as determined by reference to Section
1.5(a) of the Agreement.
"APPLICABLE UNUSED LINE FEE MARGIN" shall mean the per annum fee, from
time to time in effect, payable in respect to Borrowers' non-use of committed
funds pursuant to SECTION 1.9(b), which fee is determined by reference to
SECTION 1.5(a).
"ASSIGNMENT AGREEMENT" shall have the meaning assigned to it in
SECTION 9.1(a).
"ATLANTA BORROWER" shall have the meaning assigned to it in the
Recitals hereto.
"BORROWER ACCOUNTS" shall have the meaning assigned to it in ANNEX C.
"BORROWER REPRESENTATIVE" shall mean RII in its capacity as Borrower
Representative pursuant to the provisions of SECTION 1.1(e).
"BORROWERS" and "BORROWER" shall have the respective meanings assigned
thereto in the recitals to the Agreement as of the Closing Date and thereafter
shall be deemed to also include any subsidiary of RII formed or acquired in
connection with a Permitted Acquisition which shall qualify to borrow
Acquisition Advances and/or Revolving Credit Advances under this Agreement and
become a co-obligor under this Agreement and the other Loan Documents in each
case through the execution of a Joinder Agreement substantially in the form
attached to the Agreement as EXHIBIT 1.1(d)(i)(2) and such other documents as
shall be reasonably requested by, and in form and substance reasonably
acceptable to Agents.
"BORROWING AVAILABILITY" shall have the meaning assigned to it in
SECTION 1.1(a)(i).
"BORROWING BASE" shall mean, as to each Borrower, as of any date of
determination, an amount equal to:
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(a) eighty-five percent (85%) of the book value of that Borrower's
Eligible Accounts, LESS any Reserves established as of such date of
determination; PLUS
(b) fifty percent (50%) of the book value of that Borrower's Eligible
Mexican Accounts LESS any Reserves established as of such date of
determination; PLUS
(c) fifty percent (50%) of the book value of that Borrower's Eligible
Inventory, valued on a first-in, first-out basis (at the lower of cost or
market) LESS any Reserves established as of such date of determination.
"BORROWING BASE CERTIFICATE" shall mean a certificate to be executed
and delivered from time to time by each Borrower in the form attached to the
Agreement as EXHIBIT 4.1(b).
"BUSINESS DAY" shall mean any day that is not a Saturday, a Sunday or
a day on which banks are required or permitted to be closed in the States of
Illinois, New York or Colorado and in reference to LIBOR Loans shall mean any
such day that is also a LIBOR Business Day.
"CAPITAL EXPENDITURES" shall mean, with respect to any Person, all
expenditures (by the expenditure of cash or the incurrence of Indebtedness) by
such Person during any measuring period for any fixed assets or improvements or
for replacements, substitutions or additions thereto, that have a useful life of
more than one year and that are required to be capitalized under GAAP; provided
that the purchase price(s) paid for Permitted Acquisitions shall not constitute
Capital Expenditures.
"CAPITAL LEASE" shall mean, with respect to any Person, any lease of
any property (whether real, personal or mixed) by such Person as lessee that, in
accordance with GAAP, would be required to be classified and accounted for as a
capital lease on a balance sheet of such Person.
"CAPITAL LEASE OBLIGATION" shall mean, with respect to any Capital
Lease of any Person, the amount of the obligation of the lessee thereunder that,
in accordance with GAAP, would appear on a balance sheet of such lessee in
respect of such Capital Lease.
"CASH MANAGEMENT SYSTEMS" shall have the meaning assigned to it in
SECTION 1.8.
"CASIDE ADVANCE" shall have the meaning ascribed thereto in Section
1.1(a)(iv).
"CASIDE ASSOCIATES LITIGATION" shall have the meaning ascribed thereto
in Section 2.1(m).
"CASIDE RESERVE" shall have the meaning ascribed thereto in Section
1.1(a)(iv).
"CHANGE OF CONTROL" means any of the following: (i) the sale, lease,
transfer, conveyance or other disposition of, in one or a series of related
transactions, of all or substantially all of the assets of RII and its
Subsidiaries taken as a whole to any Person (as such term is used in Section
13(d)(3) of the Exchange Act) (each an "ACQUIRING PERSON"), (ii) the adoption of
a plan relating to the liquidation or dissolution of RII, (iii) the consummation
of any transaction
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(including, without limitation, any merger or consolidation) the result of which
is that any "person" becomes the "beneficial owner" (as each such term is
defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act), directly or
indirectly, of more than 30.0% of the voting Stock of RII other than Thomas J.
Wiens, (iv) during any period of twelve consecutive calendar months, individuals
who at the beginning of such period constituted the board of directors of RII
(together with any new directors whose election by the board of directors of RII
or whose nomination for election by the stockholders of RII was approved by a
vote of at least two-thirds of the directors then still in office who either
were directors at the beginning of such period or whose elections or nomination
for election was previously so approved) cease for any reason other than death
or disability to constitute a majority of the directors then in office, or (v)
RII shall cease to own and control all of the economic and voting rights
associated with all of the outstanding Stock of the Borrowers.
"CHARGES" shall mean all federal, state, county, city, municipal,
local, foreign or other governmental taxes (including taxes owed to the PBGC at
the time due and payable), levies, assessments, charges, liens, claims or
encumbrances upon or relating to (a) the Collateral, (b) the Obligations, (c)
the employees, payroll, income or gross receipts of any Credit Party, (d) any
Credit Party's ownership or use of any properties or other assets, or (e) any
other aspect of any Credit Party's business.
"CHATTEL PAPER" shall mean any "chattel paper," as such term is
defined in the Code, now owned or hereafter acquired by any Credit Party,
wherever located.
"CHESAPEAKE BORROWER" shall have the meaning assigned to it in the
Recitals hereto.
"CLOSING CHECKLIST" shall mean the schedule, including all appendices,
exhibits or schedules thereto, listing certain documents and information to be
delivered in connection with the Agreement, the other Loan Documents and the
transactions contemplated thereunder, substantially in the form attached hereto
as ANNEX D.
"CLOSING DATE" shall mean December 5, 1997.
"CODE" shall mean the Uniform Commercial Code as the same may, from
time to time, be enacted and in effect in the State of Illinois; PROVIDED,
HOWEVER, in the event that, by reason of mandatory provisions of law, any or all
of the attachment, perfection or priority of Agent's or any Lender's security
interest in any Collateral is governed by the Uniform Commercial Code as enacted
and in effect in a jurisdiction other than the State of Illinois, the term
"CODE" shall mean the Uniform Commercial Code as enacted and in effect in such
other jurisdiction solely for purposes of the provisions hereof relating to such
attachment, perfection or priority and for purposes of definitions related to
such provisions.
"COLLATERAL" shall mean the property covered by the Security
Agreement, the Mortgages and the other Collateral Documents and any other
property, real or personal, tangible or intangible, now existing or hereafter
acquired, that may at any time be or become subject to a
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security interest or Lien in favor of Agent, on behalf of itself and Lenders, to
secure the Obligations.
"COLLATERAL DOCUMENTS" shall mean the Security Agreement, the Pledge
Agreements, the Guaranties, the Mortgages, the Trademark Security Agreements,
and all similar agreements entered into guaranteeing payment of, or granting a
Lien upon property as security for payment of, the Obligations.
"COLLATERAL REPORTS" shall mean the reports with respect to the
Collateral referred to in ANNEX F.
"COLLECTION ACCOUNT" shall mean that certain account of Agent, account
number 502-328-54 in the name of Agent at Bankers Trust Company in New York,
New York or such other account as Agent shall specify.
"COMMITMENT TERMINATION DATE" shall mean the earliest of (a) the sixth
anniversary of the Closing Date, (b) the date of termination of Lenders'
obligations to make Advances and/or incur Letter of Credit Obligations or permit
existing Loans to remain outstanding pursuant to SECTION 8.2(b), and (c) the
date of indefeasible prepayment in full by Borrowers of the Loans and the
cancellation and return (or stand-by guarantee) of all Letters of Credit or the
cash collateralization of all Letter of Credit Obligations pursuant to ANNEX B,
and the permanent reduction of the Revolving Loan Commitment and the Swing Line
Commitment to zero dollars ($0).
"COMMITMENTS" shall mean (a) as to any Lender, the aggregate of such
Lender's Revolving Loan Commitment (including without duplication the Swing
Line Lender's Swing Line Commitment as a subset of its Revolving Loan
Commitment), Term Loan Commitment and Acquisition Loan Commitment as set forth
on ANNEX J to the Agreement or in the most recent Assignment Agreement executed
by such Lender and (b) as to all Lenders, the aggregate of all Lenders'
Revolving Loan Commitments (including without duplication the Swing Line
Lender's Swing Line Commitment as a subset of its Revolving Loan Commitment),
Term Loan Commitments and Acquisition Loan Commitment, which aggregate
commitment shall be One Hundred Fifty Million Dollars ($150,000,000) on the
Closing Date, as such amount may be reduced, amortized or adjusted from time to
time in accordance with the Agreement.
"COMPLIANCE CERTIFICATE" shall have the meaning assigned to it in
ANNEX E.
"CONCENTRATION ACCOUNTS" shall have the meaning assigned to it in
ANNEX C.
"CONSOLIDATED SENIOR DEBT" shall mean, as to RII and its Subsidiaries,
on a consolidated basis, the principal amount of Obligations and other Funded
Debt, except Subordinated Debt.
"CONSOLIDATED NET WORTH" shall have the meaning assigned to such term
in the Subordinated Notes Indenture as in effect on the Closing Date; PROVIDED,
that for purposes of determining the amount of Consolidated Net Worth as of any
date of determination, such amount shall be deemed not to be reduced by any
amounts paid in cash by RII and/or any Subsidiary
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thereof in respect of the settlement of the Caside Associates Litigation (the
"Settlement Payment") so long as Settlement Issuances generating net proceeds in
an amount not less than the Settlement Payment occur prior to or within 180 days
following the date of the Settlement Payment.
"CONTRACTS" shall mean all "contracts," as such term is defined in the
Code, now owned or hereafter acquired by any Credit Party, in any event,
including all contracts, undertakings, or agreements (other than rights
evidenced by Chattel Paper, Documents or Instruments) in or under which any
Credit Party may now or hereafter have any right, title or interest, including
any agreement relating to the terms of payment or the terms of performance of
any Account.
"CREDIT PARTIES" shall mean RII, NR Holdings, Recycling Iowa, each
Borrower, and each Person that becomes a Borrower or Guarantor after the Closing
Date.
"CURRENT ACQUISITION AGREEMENTS" shall mean, collectively that certain
(i) Asset Purchase Agreement dated on or about the date hereof between Current
Target - Money Point, George B. Ginsburg, Fred Jacobson Revocable Trust, Dorothy
G. Jacobson Revocable Trust and Chesapeake Borrower; (ii) Asset Purchase
Agreement dated on or about the date hereof between Current Target - United
Metal, Recyclers and Levin Brothers Inc., Frank Brenner, Michael Brenner, Jack
Lewis Levin and Greensboro Borrower; (iii) Asset Purchase Agreement dated on or
about the date hereof between Current Target - Central Metals by Atlanta
Borrower and RII; (iv) Stock Purchase Agreement dated on or about the date
hereof between Current Target - Wm. Lans Sons' Co. Inc. and Bertram Lans, Bruce
Lans, Scott Lans and RII; (v) Asset Purchase Agreement dated on or about the
date hereof between Current Target - Brenner Companies, Inc., Frank Brenner,
Michael Brenner and Winston-Salem Borrower; and (vi) Asset Purchase Agreement
dated as of October 31, 1997 between Current Target - Grossman Brothers Company
and Milwaukee Metal Briquetting Co., Inc. and WI Borrower.
"CURRENT ACQUISITION TARGET(S)" shall mean, individually, any of the
following and collectively, all of the following: (i) Current Target - Money
Point; (ii) Current Target - United Metal; (iii) Current Target - Central
Metals; (iv) Current Target - Wm. Lans Sons' Co. Inc.; (v) Current Target -
Grossman; and (vi) Current Target - Brenner.
"CURRENT ACQUISITIONS" shall mean the following asset and stock
acquisitions by RII and/or its Subsidiary noted below in accordance with the
applicable Current Acquisition Agreement in all material respects: (1) the
acquisition of Current Target - Money Point, by Chesapeake Borrower; (2) the
acquisition of Current Target - United Metal by Greensboro Borrower; (3) the
acquisition of Current Target - Central Metals by Atlanta Borrower; (4) the
acquisition of Current Target - Lans by Lans Borrower; (5) the acquisition of
Current Target - Brenner by Winston-Salem Borrower; and (6) the acquisition of
Current Target - Grossman by WI Borrower.
"CURRENT ASSETS" shall mean, with respect to any Person, all current
assets of such Person as of any date of determination calculated in accordance
with GAAP, but excluding cash, cash equivalents and debts due from Affiliates.
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"CURRENT LIABILITIES" shall mean, with respect to any Person, all
liabilities which should, in accordance with GAAP, be classified as current
liabilities, and in any event shall include all Indebtedness payable on demand
or within one year from any date of determination without any option on the part
of the obligor to extend or renew beyond such year, all accruals for federal or
other taxes based on or measured by income and payable within such year, and the
current portion of long-term debt required to be paid within one year, but
excluding, in the case of Borrowers, the aggregate outstanding principal
balances of the Revolving Loan and the Swing Line Loan.
"CURRENT TARGET - BRENNER" shall mean certain assets of Brenner
Companies, Inc. and Brenner Iron & Metal Co.
"CURRENT TARGET - CENTRAL METALS" shall mean certain assets of Central
Metals Company.
"CURRENT TARGET - GROSSMAN" shall mean certain assets of Grossman
Bros. Co. and Milwaukee Metal Briquetting Co., Inc.
"CURRENT TARGET - LANS" shall mean all Stock of Wm. Lans Sons' Co.
Inc.
"CURRENT TARGET - MONEY POINT" shall mean certain assets of Money
Point Diamond Corporation and Money Point Land Holding Corporation.
"CURRENT TARGET - UNITED METALS" shall mean certain assets of United
Metal Recyclers.
"DEFAULT" shall mean any event which, with the passage of time or
notice or both, would, unless cured or waived, become an Event of Default.
"DEFAULT RATE" shall have the meaning assigned to it in SECTION
1.5(d).
"DISBURSEMENT ACCOUNTS" shall have the meaning assigned to it on ANNEX
C.
"DISCLOSURE SCHEDULES" shall mean the Schedules prepared by Borrowers
and denominated as Disclosure SCHEDULES 1.4 through 6.7 in the Index to the
Agreement.
"DOCUMENTATION AGENT" shall mean BankBoston, N.A. so long as it is a
Lender.
"DOCUMENTS" shall mean any "documents," as such term is defined in the
Code, now owned or hereafter acquired by any Credit Party, wherever located.
"DOLLARS" or "$" shall mean lawful currency of the United States of
America.
"EBITDA" shall mean, with respect to any Person for any fiscal period,
an amount equal to (a) consolidated net income of such Person for such period,
MINUS (b) the sum of (i) income tax credits, (ii) interest income, (iii) gain
from extraordinary items for such period, (iv) any aggregate net gain (but not
any aggregate net loss) during such period arising from the sale,
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exchange or other disposition of capital assets by such Person (including any
fixed assets, whether tangible or intangible, all inventory sold in conjunction
with the disposition of fixed assets and all securities), and (v) any other
non-cash gains which have been added in determining consolidated net income, in
each case to the extent included in the calculation of consolidated net income
of such Person for such period in accordance with GAAP, but without duplication,
PLUS (c) the sum of (i) any provision for income taxes, (ii) Interest Expense,
(iii) loss from extraordinary items for such period, (iv) the amount of non-cash
charges (including depreciation and amortization) for such period, (v) amortized
debt discount for such period, and (vi) the amount of any deduction to
consolidated net income as the result of any grant to any members of the
management of such Person of any Stock, in each case to the extent included in
the calculation of consolidated net income of such Person for such period in
accordance with GAAP, but without duplication. For purposes of this definition,
the following items shall be excluded in determining consolidated net income of
a Person: (1) the income (or loss) of any other Person accrued prior to the date
it became a Subsidiary of, or was merged or consolidated into, such Person or
any of such Person's Subsidiaries; (2) the income (or loss) of any other Person
(other than a Subsidiary) in which such Person has an ownership interest, except
to the extent any such income has actually been received by such Person in the
form of cash dividends or distributions; (3) the undistributed earnings of any
Subsidiary of such Person to the extent that the declaration or payment of
dividends or similar distributions by such Subsidiary is not at the time
permitted by the terms of any contractual obligation or requirement of law
applicable to such Subsidiary; (4) any restoration to income of any contingency
reserve, except to the extent that provision for such reserve was made out of
income accrued during such period; (5) any write-up of any asset; (6) any net
gain from the collection of the proceeds of life insurance policies; (7) any net
gain arising from the acquisition of any securities, or the extinguishment,
under GAAP, of any Indebtedness, of such Person, (8) in the case of a successor
to such Person by consolidation or merger or as a transferee of its assets, any
earnings of such successor prior to such consolidation, merger or transfer of
assets, and (9) any deferred credit representing the excess of equity in any
Subsidiary of such Person at the date of acquisition of such Subsidiary over the
cost to such Person of the investment in such Subsidiary. In addition, for
purposes of this definition, EBITDA of RII and its Subsidiaries on a
consolidated basis shall not include the EBITDA of any Borrower derived from any
facility, which facility is subject to an Adverse Shredder Order while such
Adverse Shredder Order shall remain in effect unless the Agent shall otherwise
consent in writing.
"ELIGIBLE ACCOUNTS" shall have the meaning assigned to it in SECTION
1.6(I) of the Agreement.
"ELIGIBLE INVENTORY" shall have the meaning assigned to it in SECTION
1.7 of the Agreement.
"ELIGIBLE MEXICAN ACCOUNTS" shall have the meaning assigned to it in
SECTION 1.6(II) of the Agreement.
"ENVIRONMENTAL LAWS" shall mean all applicable federal, state, local
and foreign laws, statutes, ordinances, codes, rules, standards and regulations,
now or hereafter in effect, and in each case as amended or supplemented from
time to time, and any applicable judicial or administrative interpretation
thereof, including any applicable judicial or administrative order,
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consent decree, order or judgment, imposing liability or standards of conduct
for or relating to the regulation and protection of human health, safety, the
environment and natural resources (including ambient air, surface water,
groundwater, wetlands, land surface or subsurface strata, wildlife, aquatic
species and vegetation). Environmental Laws include the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980 (42 U.S.C.
Sections 9601 ET SEQ.) ("CERCLA"); the Hazardous Materials Transportation
Authorization Act of 1994 (49 U.S.C. Sections 5101 ET SEQ.); the Federal
Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. Sections 136 ET SEQ.);
the Solid Waste Disposal Act (42 U.S.C. Sections 6901 ET SEQ.); the Toxic
Substance Control Act (15 U.S.C. Sections 2601 ET SEQ.); the Clean Air Act
(42 U.S.C. Sections 7401 ET SEQ.); the Federal Water Pollution Control Act
(33 U.S.C. Sections 1251 ET SEQ.); the Occupational Safety and Health Act
(29 U.S.C. Sections 651 ET SEQ.); and the Safe Drinking Water Act (42 U.S.C.
Sections 300(f) ET SEQ.), each as from time to time amended, and any and all
regulations promulgated thereunder, and all analogous state, local and foreign
counterparts or equivalents and any transfer of ownership notification or
approval statutes.
"ENVIRONMENTAL LIABILITIES" shall mean, with respect to any Person,
all liabilities, obligations, responsibilities, response, remedial and removal
costs, investigation and feasibility study costs, capital costs, operation and
maintenance costs, losses, damages, punitive damages, property damages, natural
resource damages, consequential damages, treble damages, costs and expenses
(including all fees, disbursements and expenses of counsel, experts and
consultants, but excluding ongoing, routine or periodic expenses related to
environmental compliance of a Credit Party as to matters disclosed on DISCLOSURE
SCHEDULE 3.17), fines, penalties, sanctions and interest incurred as a result of
or related to any claim, suit, action, investigation, proceeding or demand by
any Person, whether based in contract, tort, implied or express warranty, strict
liability, criminal or civil statute or common law, including any arising under
or related to any Environmental Laws, Environmental Permits, or in connection
with any Release or threatened Release or presence of a Hazardous Material
whether on, at, in, under, from or about or in the vicinity of any real or
personal property.
"ENVIRONMENTAL PERMITS" shall mean all permits, licenses,
authorizations, certificates, approvals or registrations required by any
Governmental Authority under any Environmental Laws.
"EQUIPMENT" shall mean all "equipment," as such term is defined in the
Code, now owned or hereafter acquired by any Credit Party, wherever located and,
in any event, including all such Credit Party's machinery and equipment,
including processing equipment, conveyors, machine tools, data processing and
computer equipment with software and peripheral equipment (other than software
constituting part of the Accounts), and all engineering, processing and
manufacturing equipment, office machinery, furniture, materials handling
equipment, tools, attachments, accessories, automotive equipment, trailers,
trucks, forklifts, molds, dies, stamps, motor vehicles, rolling stock and other
equipment of every kind and nature, trade fixtures and fixtures not forming a
part of real property, all whether now owned or hereafter acquired, and wherever
situated, together with all additions and accessions thereto, replacements
therefor, all parts therefor, all substitutes for any of the foregoing, fuel
therefor, and all manuals, drawings, instructions, warranties and rights with
respect thereto, and all products and proceeds thereof and condemnation awards
and insurance proceeds with respect thereto.
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"EQUITY PROCEEDS" shall mean net cash proceeds of issuances of Stock
of RII or from the sale or exercise of warrants or options for common stock of
RII received by or payable to RII.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974
(or any successor legislation thereto), as amended from time to time, and any
regulations promulgated thereunder.
"ERISA AFFILIATE" shall mean, with respect to any Credit Party, any
trade or business (whether or not incorporated) which, together with such Credit
Party, are treated as a single employer within the meaning of Sections 414(b),
(c), (m) or (o) of the IRC.
"ERISA EVENT" shall mean, with respect to any Credit Party or any
ERISA Affiliate, (a) any event described in Section 4043(c) of ERISA with
respect to a Title IV Plan; (b) the withdrawal of any Credit Party or ERISA
Affiliate from a Title IV Plan subject to Section 4063 of ERISA during a plan
year in which it was a substantial employer, as defined in Section 4001(a)(2) of
ERISA; (c) the complete or partial withdrawal of any Credit Party or any ERISA
Affiliate from any Multiemployer Plan; (d) the filing of a notice of intent to
terminate a Title IV Plan or the treatment of a plan amendment as a termination
under Section 4041 of ERISA; (e) the institution of proceedings to terminate a
Title IV Plan or Multiemployer Plan by the PBGC; (f) the failure by any Credit
Party or ERISA Affiliate to make when due required contributions to a
Multiemployer Plan or Title IV Plan unless such failure is cured within 30 days;
(g) any other event or condition which might reasonably be expected to
constitute grounds under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Title IV Plan or Multiemployer Plan
or for the imposition of liability under Section 4069 or 4212(c) of ERISA; (h)
the termination of a Multiemployer Plan under Section 4041A of ERISA or the
reorganization or insolvency of a Multiemployer Plan under Section 4241 of
ERISA; or (i) the loss of a Qualified Plan's qualification or tax exempt status.
"ESOP" shall mean a Plan which is intended to satisfy the requirements
of Section 4975(e)(7) of the IRC.
"EVENT OF DEFAULT" shall have the meaning assigned to it in SECTION
8.1.
"EXCESS CASH FLOW" shall mean, without duplication, with respect to
any Fiscal Year of RII and its Subsidiaries, consolidated net income PLUS (a)
depreciation, amortization and Interest Expense to the extent deducted in
determining consolidated net income, MINUS (c) Capital Expenditures during such
Fiscal Year (excluding the financed portion thereof and excluding any Capital
Expenditures in such Fiscal Year to the extent in excess of the amount permitted
to be made in such Fiscal Year pursuant to CLAUSE (a) of ANNEX G), MINUS (d)
Interest Expense paid or accrued (excluding any original issue discount,
interest paid in kind or amortized debt discount, to the extent included in
determining Interest Expense) and scheduled principal payments paid or payable
in respect of Funded Debt, PLUS or MINUS (as the case may be), (e) extraordinary
gains or losses which are cash items not included in the calculation of net
income, MINUS (f) mandatory prepayments paid in cash pursuant to SECTION 1.3
other than mandatory prepayments made pursuant to SECTIONS 1.3(b)(i), 1.3(b)(iv)
or 1.3(d), PLUS (g) taxes deducted in determining
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consolidated net income to the extent not paid for in cash MINUS (h) the cash
purchase price paid for Permitted Acquisitions during such Fiscal Year less the
portion thereof funded with the proceeds of any Acquisition Advance. For
purposes of this definition, "WORKING CAPITAL" means Current Assets LESS Current
Liabilities.
"EXCLUDED PROPERTY" shall mean certain real property owned by Weissman
Industries, Inc. commonly known as 1500 West Airline Highway, Waterloo, IA 50704
which is subject to a mortgage held by Weissman Financial, a Nevada general
partnership ("First Mortgage Holder") (provided that from and after the date on
which First Mortgage Holder terminates its mortgage lien on the subject property
or consents to the granting of a mortgage lien in favor of Agent, such property
shall cease to be "Excluded Property").
"FEDERAL FUNDS RATE" shall mean, for any day, a floating rate equal to
the weighted average of the rates on overnight Federal funds transactions among
members of the Federal Reserve System, as determined by Agent.
"FEDERAL RESERVE BOARD" means the Board of Governors of the Federal
Reserve System, or any successor thereto.
"FEES" shall mean any and all fees payable to Agent or any Lender
pursuant to the Agreement or any of the other Loan Documents.
"FINANCED ACQUISITION" shall have the meaning assigned to it in
SECTION 1.1(d)(i).
"FINANCED ACQUISITIONS" shall have the meaning assigned to it in
SECTION 1.1(e).
"FINANCIAL STATEMENTS" shall mean the consolidated and consolidating
income statements, statements of cash flows and balance sheets of Borrowers
delivered in accordance with SECTION 3.4 of the Agreement and ANNEX E to the
Agreement.
"FISCAL MONTH" shall mean any of the monthly accounting periods of
Borrowers.
"FISCAL QUARTER" shall mean any of the quarterly accounting periods of
Borrowers, ending on March 31, June 30, September 30 and December 31 of each
year.
"FISCAL YEAR" shall mean any of the annual accounting periods of
Borrowers ending on September 30 of each year.
"FIXED CHARGE COVERAGE RATIO" shall mean, with respect to any Person
for any fiscal period, the ratio of Pro Forma EBITDA LESS Capital Expenditures
during such period, LESS income taxes paid or payable in cash with respect to
such period to Fixed Charges. In computing Fixed Charges for any fiscal period,
interest and principal payments that are due within one week after the end of
that fiscal period, without duplication, shall be deemed to have been paid on
the last day of that fiscal period.
"FIXED CHARGES" shall mean, with respect to any Person for any fiscal
period, (a) the aggregate of all Interest Expense paid or accrued during such
period, plus (b) scheduled
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payments of principal paid with respect to Indebtedness during such period, plus
(c) cash dividends or distributions paid during such period.
"FIXTURES" shall mean any "fixtures" as such term is defined in the
Code, now owned or hereafter acquired by any Credit Party.
"FUNDED DEBT" shall mean, with respect to any Person, all Indebtedness
for borrowed money evidenced by notes, bonds, debentures, or similar evidences
of Indebtedness and which by its terms matures more than one year from, or is
directly or indirectly renewable or extendible at such Person's option under a
revolving credit or similar agreement obligating the lender or lenders to extend
credit over a period of more than one year from the date of creation thereof,
and specifically including Capital Lease Obligations, current maturities of
long-term debt, revolving credit and short-term debt extendible beyond one year
at the option of the debtor, and also including, in the case of Borrowers, the
Obligations and, without duplication, Guaranteed Indebtedness consisting of
guaranties of Funded Debt of other Persons.
"GA BORROWER" shall have the meaning assigned to it in the Recitals
hereto.
"GAAP" shall mean generally accepted accounting principles in the
United States of America consistently applied, as such term is further defined
in ANNEX G to the Agreement.
"GE CAPITAL FEE LETTER" shall mean that certain letter, dated as of
November 20, 1997, between GE Capital, RII and certain of the Borrowers with
respect to certain Fees to be paid from time to time by RII and certain of the
Borrowers to GE Capital.
"GENERAL INTANGIBLES" shall mean any "general intangibles," as such
term is defined in the Code, now owned or hereafter acquired by any Credit
Party, and, in any event, including all right, title and interest which such
Credit Party may now or hereafter have in or under any Contract, all customer
lists, Licenses, Copyrights, Trademarks, Patents, and all applications therefor
and reissues, extensions or renewals thereof, rights in Intellectual Property,
interests in partnerships, joint ventures and other business associations,
licenses, permits, copyrights, trade secrets, proprietary or confidential
information, inventions (whether or not patented or patentable), technical
information, procedures, designs, knowledge, know-how, software, data bases,
data, skill, expertise, experience, processes, models, drawings, materials and
records, goodwill (including the goodwill associated with any Trademark or
Trademark License), all rights and claims in or under insurance policies
(including insurance for fire, damage, loss and casualty, whether covering
personal property, real property, tangible rights or intangible rights, all
liability, life, key man and business interruption insurance, and all unearned
premiums), uncertificated securities, choses in action, deposit, checking and
other bank accounts, rights to receive tax refunds and other payments, rights of
indemnification, all books and records, correspondence, credit files, invoices
and other papers, including without limitation all tapes, cards, computer runs
and other papers and documents in the possession or under the control of such
Credit Party or any computer bureau or service company from time to time acting
for such Credit Party.
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"GOVERNMENTAL AUTHORITY" shall mean any nation or government, any
state or other political subdivision thereof, and any agency, department or
other entity exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.
"GREENSBORO BORROWER" shall have the meaning assigned to it in the
Recitals hereto.
"GUARANTEED INDEBTEDNESS" shall mean, as to any Person, any obligation
of such Person guaranteeing any indebtedness, lease, dividend, or other
obligation ("PRIMARY OBLIGATIONS") of any other Person (the "PRIMARY OBLIGOR")
in any manner, including any obligation or arrangement of such Person (a) to
purchase or repurchase any such primary obligation, (b) to advance or supply
funds (i) for the purchase or payment of any such primary obligation or (ii) to
maintain working capital or equity capital of the primary obligor or otherwise
to maintain the net worth or solvency or any balance sheet condition of the
primary obligor, (c) to purchase property, securities or services primarily for
the purpose of assuring the owner of any such primary obligation of the ability
of the primary obligor to make payment of such primary obligation, or (d) to
indemnify the owner of such primary obligation against loss in respect thereof.
The amount of any Guaranteed Indebtedness at any time shall be deemed to be an
amount equal to the lesser at such time of (x) the stated or determinable amount
of the primary obligation in respect of which such Guaranteed Indebtedness is
made and (y) the maximum amount for which such Person may be liable pursuant to
the terms of the instrument embodying such Guaranteed Indebtedness; or, if not
stated or determinable, the maximum reasonably anticipated liability (assuming
full performance) in respect thereof.
"GUARANTIES" shall mean, any guaranty executed by any Guarantor in
favor of Agent and Lenders in respect of the Obligations.
"GUARANTORS" shall mean RII, NR Holdings, Recycling Iowa and each
other Person, if any, which is obligated as a Credit Party under Section 12 of
the Agreement or otherwise executes a guarantee or other similar agreement in
favor of Agent in connection with the transactions contemplated by the Agreement
and the other Loan Documents.
"HAZARDOUS MATERIAL" shall mean any substance, material or waste which
is regulated by or forms the basis of liability now or hereafter under, any
Environmental Laws, including any material or substance which is (a) defined as
a "solid waste," "hazardous waste," "hazardous material," "hazardous substance,"
"extremely hazardous waste," "restricted hazardous waste," "pollutant,"
"contaminant," "hazardous constituent," "special waste," "toxic substance" or
other similar term or phrase under any Environmental Laws, (b) petroleum or any
fraction or by-product thereof, asbestos, polychlorinated biphenyls (PCB's), or
any radioactive substance.
"INDEBTEDNESS" of any Person shall mean without duplication (a) all
indebtedness of such Person for borrowed money or for the deferred purchase
price of property payment for which is deferred six (6) months or more, but
excluding obligations to trade creditors incurred in the ordinary course of
business that are not overdue by more than six (6) months unless being contested
in good faith, (b) all reimbursement and other obligations with respect to
letters of credit, bankers' acceptances and surety bonds, whether or not
matured, (c) all obligations
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evidenced by notes, bonds, debentures or similar instruments, (d) all
indebtedness created or arising under any conditional sale or other title
retention agreement with respect to property acquired by such Person (even
though the rights and remedies of the seller or lender under such agreement in
the event of default are limited to repossession or sale of such property), (e)
all Capital Lease Obligations and the present value (discounted at the Index
Rate as in effect on the Closing Date) of future rental payments under all
synthetic leases, (f) all obligations of such Person under commodity purchase or
option agreements or other commodity price hedging arrangements, in each case
whether contingent or matured, (g) all obligations of such Person under any
foreign exchange contract, currency swap agreement, interest rate swap, cap or
collar agreement or other similar agreement or arrangement designed to alter the
risks of that Person arising from fluctuations in currency values or interest
rates, in each case whether contingent or matured, (h) all Indebtedness referred
to above secured by (or for which the holder of such Indebtedness has an
existing right, contingent or otherwise, to be secured by) any Lien upon or in
property or other assets (including accounts and contract rights) owned by such
Person, even though such Person has not assumed or become liable for the payment
of such Indebtedness, and (i) the Obligations.
"INDEMNIFIED LIABILITIES" shall have the meaning assigned to it in
SECTION 1.13.
"INDEX RATE" shall mean, for any day, a floating rate equal to the
higher of (i) the rate publicly quoted from time to time by THE WALL STREET
JOURNAL as the "base rate on corporate loans at large U.S. money center
commercial banks" (or, if THE WALL STREET JOURNAL ceases quoting a base rate
of the type described, the highest per annum rate of interest published by
the Federal Reserve Board in Federal Reserve statistical release H.15 (519)
entitled "Selected Interest Rates" as the Bank prime loan rate or its
equivalent), and (ii) the Federal Funds Rate plus fifty (50) basis points per
annum. Each change in any interest rate provided for in the Agreement based
upon the Index Rate shall take effect at the time of such change in the Index
Rate.
"INDEX RATE LOAN" shall mean a Loan or portion thereof bearing
interest by reference to the Index Rate.
"INSTRUMENTS" shall mean any "instrument," as such term is defined in
the Code, now owned or hereafter acquired by any Credit Party, wherever located,
and, in any event, including all certificated securities, all certificates of
deposit, and all notes and other, without limitation, evidences of indebtedness,
other than instruments that constitute, or are a part of a group of writings
that constitute, Chattel Paper.
"INTELLECTUAL PROPERTY" shall mean any and all Licenses, Patents,
Copyrights, Trademarks, trade secrets and customer lists.
"INTERCOMPANY NOTES" shall have the meaning assigned to it in SECTION
6.3.
"INTEREST EXPENSE" shall mean, with respect to any Person for any
fiscal period, interest expense (whether cash or non-cash) of such Person
determined in accordance with GAAP for the relevant period ended on such date,
including, in any event, interest expense with respect
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to any Funded Debt of such Person and interest expense for the relevant period
that has been capitalized on the balance sheet of such Person.
"INTEREST PAYMENT DATE" means (a) as to any Index Rate Loan, the first
Business Day of each month to occur while such Loan is outstanding, (b) as to
any LIBOR Loan, the last day of the applicable LIBOR Period; PROVIDED that in
the case of any LIBOR Period greater than three months in duration, interest
shall be payable at three-month intervals and on the last day of such LIBOR
Period; and PROVIDED FURTHER that, in addition to the foregoing, each of (x) the
date upon which all of the Commitments have been terminated and the Loans have
been paid in full and (y) the Commitment Termination Date shall be deemed to be
an "Interest Payment Date" with respect to any interest which is then accrued
under the Agreement.
"INVENTORY" shall mean any "inventory," as such term is defined in the
Code, now or hereafter owned or acquired by any Credit Party, wherever located,
and in any event including inventory, merchandise, goods and other personal
property which are held by or on behalf of any Credit Party for sale or lease or
are furnished or are to be furnished under a contract of service, or which
constitute raw materials, work in process or materials used or consumed or to be
used or consumed in such Credit Party's business or in the processing,
production, packaging, promotion, delivery or shipping of the same, including
other supplies.
"INVESTMENT PROPERTY" shall have the meaning ascribed thereto in
Section 9-115 of the Code in those jurisdictions in which such definition has
been adopted and shall include (i) all securities, whether certificated or
uncertificated, including stocks, bonds, interests in limited liability
companies, partnership interests, treasuries, certificates of deposit, and
mutual fund shares; (ii) all securities entitlements of any Credit Party,
including the rights of any Credit Party to any securities account and the
financial assets held by a securities intermediary in such securities account
and any free credit balance or other money owing by any securities intermediary
with respect to that account; (iii) all securities accounts held by any Credit
Party; (iv) all commodity contracts held by any Credit Party; and (v) all
commodity accounts held by any Credit Party.
"IRC" shall mean the Internal Revenue Code of 1986, as amended, and
any successor thereto.
"IRS" shall mean the Internal Revenue Service, or any successor
thereto.
"L/C ISSUER" shall have the meaning assigned to such term in ANNEX B.
"LANS BORROWER" shall have the meaning assigned to it in the Recitals
hereto.
"LENDERS" shall mean GE Capital, the other Lenders named on the
signature page of the Agreement, and, if any such Lender shall decide to assign
all or any portion of the Obligations, such term shall include such assignee.
"LETTERS OF CREDIT" shall mean commercial or standby letters of credit
issued for the account of any Borrower by any L/C Issuer, and bankers'
acceptances issued by any Borrower, for which Agent and Lenders have incurred
Letter of Credit Obligations.
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"LETTER OF CREDIT FEE" has the meaning ascribed thereto in ANNEX B.
"LETTER OF CREDIT OBLIGATIONS" shall mean all outstanding obligations
incurred by Agent and Lenders at the request of Borrower Representative, whether
direct or indirect, contingent or otherwise, due or not due, in connection with
the issuance of a reimbursement agreement or guaranty by Agent or purchase of a
participation as set forth in ANNEX B with respect to any Letter of Credit. The
amount of such Letter of Credit Obligations shall equal the maximum amount which
may be payable by Agent or Lenders thereupon or pursuant thereto.
"LEVERAGE RATIO" shall mean with respect to RII on a consolidated
basis, as of the last day of any Fiscal Quarter, the ratio of Funded Debt as of
such date to Pro Forma EBITDA for the four Fiscal Quarters then ended.
"LIBOR BUSINESS DAY" shall mean a Business Day on which banks in the
city of London are generally open for interbank or foreign exchange
transactions.
"LIBOR LOAN" shall mean a Loan or any portion thereof bearing interest
by reference to the LIBOR Rate.
"LIBOR PERIOD" shall mean, with respect to any LIBOR Loan, each period
commencing on a LIBOR Business Day selected by Borrower Representative pursuant
to the Agreement and ending one, two, three or six months thereafter, as
selected by Borrower Representative's irrevocable notice to Agent as set forth
in SECTION 1.5(e); PROVIDED that the foregoing provision relating to LIBOR
Periods is subject to the following:
(a) if any LIBOR Period would otherwise end on a day that is not a
LIBOR Business Day, such LIBOR Period shall be extended to the next
succeeding LIBOR Business Day unless the result of such extension would be
to carry such LIBOR Period into another calendar month in which event such
LIBOR Period shall end on the immediately preceding LIBOR Business Day;
(b) any LIBOR Period that would otherwise extend beyond the
Commitment Termination Date shall end two (2) LIBOR Business Days prior to
such date;
(c) any LIBOR Period pertaining to a LIBOR Loan that begins on the
last LIBOR Business Day of a calendar month (or on a day for which there is
no numerically corresponding day in the calendar month at the end of such
LIBOR Period) shall end on the last LIBOR Business Day of a calendar month;
(d) Borrower Representative shall select LIBOR Periods so as not to
require a payment or prepayment of any LIBOR Loan during a LIBOR Period for
such Loan; and
(e) Borrower Representative shall select LIBOR Periods so that there
shall be no more than five (5) separate LIBOR Loans in existence at any one
time.
"LIBOR RATE" shall mean for each LIBOR Period, a rate of interest
determined by Agent equal to:
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(a) the offered rate for deposits in United States Dollars for the
applicable LIBOR Period which appears on Telerate Page 3750 as of
11:00 a.m., London time, on the second full LIBOR Business Day next
preceding the first day of each LIBOR Period (unless such date is not a
Business Day, in which event the next succeeding Business Day will be
used); divided by
(b) a number equal to 1.0 MINUS the aggregate (but without
duplication) of the rates (expressed as a decimal fraction) of reserve
requirements in effect on the day which is two (2) LIBOR Business Days
prior to the beginning of such LIBOR Period (including basic, supplemental,
marginal and emergency reserves under any regulations of the Board of
Governors of the Federal Reserve system or other governmental authority
having jurisdiction with respect thereto, as now and from time to time in
effect) for Eurocurrency funding (currently referred to as "Eurocurrency
liabilities" in Regulation D of such Board which are required to be
maintained by a member bank of the Federal Reserve System.
If such interest rates shall cease to be available from Telerate News
Service, the LIBOR Rate shall be determined from such financial reporting
service or other information as shall be mutually acceptable to Agent and
Borrower Representative.
"LICENSE" shall mean any Copyright License, Patent License, Trademark
License or other license of rights or interests now held or hereafter acquired
by any Credit Party.
"LIEN" shall mean any mortgage or deed of trust, pledge,
hypothecation, assignment, deposit arrangement, lien, charge, claim, security
interest, easement or encumbrance, or preference, priority or other security
agreement or preferential arrangement of any kind or nature whatsoever
(including any lease or title retention agreement, any lease intended as
security having substantially the same economic effect as any of the foregoing,
and the filing of, or agreement to give, any financing statement perfecting a
security interest under the Code or comparable law of any jurisdiction).
"LITIGATION" shall have the meaning assigned to it in SECTION 3.13.
"LOAN ACCOUNT" shall have the meaning assigned to it in SECTION 1.12.
"LOAN DOCUMENTS" shall mean the Agreement, the Notes, the Collateral
Documents and all other agreements, instruments, documents and certificates
identified in the Closing Checklist executed and delivered to, or in favor of,
Agent and/or Lenders and including all other pledges, powers of attorney,
consents, assignments, contracts, notices, and all other written matter whether
heretofore, now or hereafter executed by or on behalf of any Credit Party, or
any employee of any Credit Party, and delivered to Agent or any Lender in
connection with the Agreement or the transactions contemplated hereby. Any
reference in the Agreement or any other Loan Document to a Loan Document shall
include all appendices, exhibits or schedules thereto, and all amendments,
restatements, supplements or other modifications thereto, and shall refer to
such Agreement as the same may be in effect at any and all times such reference
becomes operative.
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"LOANS" shall mean the Revolving Loan, the Swing Line Loan the
Acquisition Loan and the Term Loans.
"MATERIAL ADVERSE EFFECT" shall mean a material adverse effect on (a)
the business, assets, operations, prospects or financial or other condition of
any Borrower or the Credit Parties considered as a whole, (b) any Borrower's
ability to pay any of the Loans or any of the other Obligations in accordance
with the terms of the Agreement, (c) the Collateral or Agent's Liens, on behalf
of itself and Lenders, on the Collateral or the priority of such Liens, or (d)
Agent's or any Lender's rights and remedies under the Agreement and the other
Loan Documents. Without limiting the foregoing, any event or occurrence
adverse to one or more Credit Parties which results or could reasonably be
expected to result in costs and/or liabilities in excess of the lesser of
$4,500,000 and 10% of Borrowing Availability as of any date of determination
shall be deemed to have had Material Adverse Effect.
"MAXIMUM ACQUISITION LOAN AMOUNT" shall mean, at any particular time,
an amount equal to the Acquisition Loan Commitment of all Lenders.
"MAXIMUM AMOUNT" shall mean, at any particular time, an amount equal
to the Revolving Loan Commitment of all Lenders.
"MEXICAN ACCOUNT DEBTOR" shall mean any Account Debtor located in
Mexico.
"MO BORROWER" shall have the meaning assigned to it in the Recitals
hereto.
"MORTGAGED PROPERTIES" shall have the meaning assigned to it in ANNEX
D.
"MORTGAGES" shall mean each of the mortgages, deeds of trust,
leasehold mortgages, leasehold deeds of trust, collateral assignments of leases
or other real estate security documents delivered by any Credit Party to Agent
with respect to the Mortgaged Properties, all in form and substance satisfactory
to Agent.
"MULTIEMPLOYER PLAN" shall mean a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA, and to which any Credit Party or ERISA Affiliate is
making, is obligated to make, has made or been obligated to make, contributions
on behalf of participants who are or were employed by any of them.
"NET BORROWING AVAILABILITY" shall mean as of any date of
determination (a) as to all Borrowers, the lesser of (i) the Maximum Amount and
(ii) the Aggregate Borrowing Base, in each case LESS the sum of the aggregate
Revolving Loan and Swing Line Loan then outstanding, or (b) as to an individual
Borrower, the lesser of (i) the Maximum Amount LESS the sum of the Revolving
Loan and Swing Line Loan outstanding to all other Borrowers and (ii) that
Borrower's separate Borrowing Base, LESS the sum of the Revolving Loan and Swing
Line Loan outstanding to that Borrower.
"NET WORTH" shall mean, with respect to any Person as of any date of
determination, the book value of the assets of such Person, MINUS (a) reserves
applicable thereto,
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and MINUS (b) all of such Person's liabilities on a consolidated basis
(including accrued and deferred income taxes), all as determined in accordance
with GAAP.
"NEW COMMON STOCK" shall mean Common Stock of RII issued on the
Closing Date for aggregate consideration of at least $17.8 million.
"NO SET-OFF AGREEMENT" shall have the meaning assigned to it in
SECTION 1.6(I)(j).
"NOTES" shall mean the Revolving Notes, the Swing Line Notes, the
Acquisition Loan Note(s) and the Term Notes, collectively.
"NOTICE OF CONVERSION/CONTINUATION" shall have the meaning assigned to
it in SECTION 1.5(e).
"NOTICE OF REVOLVING CREDIT ADVANCE" shall have the meaning assigned
to it in SECTION 1.1(a).
"NR HOLDINGS PLEDGE AGREEMENT" shall mean the Pledge Agreement of even
date herewith executed by NR Holdings in favor of Agent, on behalf of itself and
Lenders, pledging all Stock of its Subsidiaries, if any, and all Intercompany
Notes owing to or held by it.
"NV BORROWER" shall have the meaning assigned to it in the Recitals
hereto.
"OBLIGATIONS" shall mean all loans, advances, debts, liabilities and
obligations, for the performance of covenants, tasks or duties or for payment of
monetary amounts (whether or not such performance is then required or
contingent, or such amounts are liquidated or determinable) owing by any Credit
Party to any Agent or any Lender, and all covenants and duties regarding such
amounts, of any kind or nature, present or future, whether or not evidenced by
any note, agreement or other instrument, arising under the Agreement or any of
the other Loan Documents. This term includes all principal, interest (including
all interest which accrues after the commencement of any case or proceeding in
bankruptcy after the insolvency of, or for the reorganization of any Credit
Party, whether or not allowed in such proceeding), Fees, Charges, expenses,
attorneys' fees and any other sum chargeable to any Credit Party under the
Agreement or any of the other Loan Documents.
"OPERATING CASH FLOW" shall mean, for any period, Pro Forma EBITDA
MINUS Capital Expenditures, excluding that portion of Capital Expenditures that
is funded by purchase money financing other than Revolving Credit Advances.
"OVERADVANCE" shall have the meaning assigned to it in SECTION
1.1(a)(iii).
"PATENT LICENSE" shall mean rights under any written agreement now
owned or hereafter acquired by any Credit Party granting any right with respect
to any invention on which a Patent is in existence.
"PATENTS" shall mean all of the following in which any Credit Party
now holds or hereafter acquires any interest: (a) all letters patent of the
United States or any other country, all
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registrations and recordings thereof, and all applications for letters patent of
the United States or any other country, including registrations, recordings and
applications in the United States Patent and Trademark Office or in any similar
office or agency of the United States, any State or Territory thereof, or any
other country, and (b) all reissues, continuations, continuations-in-part or
extensions thereof.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any
successor thereto.
"PERMITTED ACQUISITION" shall mean the acquisition of a Person (by
merger or stock purchase) or the acquisition of all or substantially all of the
assets and business of a Person, that is funded in part with an Acquisition
Advance in accordance with Section 1.1(d) and meets the conditions set forth in
Section 2.3 of the Agreement.
"PERMITTED ENCUMBRANCES" shall mean the following encumbrances: (a)
Liens for taxes or assessments or other governmental Charges not yet due and
payable or which are being contested in accordance with Section 5.2(b); (b)
pledges or deposits of money securing obligations under workmen's compensation,
unemployment insurance, social security or public liability laws or similar
legislation; (c) pledges or deposits of money securing bids, tenders, contracts
(other than contracts for the payment of money) or leases to which any Credit
Party is a party as lessee made in the ordinary course of business; (d) deposits
of money securing statutory obligations of any Credit Party for workers
compensation, unemployment compensation and similar costs (excluding Liens under
ERISA); (e) inchoate and unperfected workers', mechanics' or similar liens
arising in the ordinary course of business, so long as such Liens attach only to
Equipment, Fixtures and/or Real Estate; (f) carriers', warehousemen's,
suppliers' or other similar possessory liens arising in the ordinary course of
business and securing liabilities in an outstanding aggregate amount so long as
such Liens attach only to Inventory; (g) deposits securing, or in lieu of,
surety, appeal or customs bonds in proceedings to which any Credit Party is a
party; (h) any attachment or judgment lien not constituting an Event of Default
under SECTION 8.1(j); (i) zoning restrictions, easements, licenses, or other
restrictions on the use of any Real Estate or other minor irregularities in
title (including leasehold title) thereto, so long as the same do not materially
impair the use, value, or marketability of such Real Estate; (j) presently
existing or hereinafter created Liens in favor of Agent, on behalf of Lenders;
(k) Liens expressly permitted under CLAUSES (b), (c) and (d) of SECTION 6.7 of
the Agreement and (l) Liens securing payment of trustee's fees set forth in the
Indenture executed in connection with the Subordinated Notes.
"PERMITTED INTERCOMPANY INVENTORY SALES" shall have the meaning
assigned to such term in SECTION 6.4.
"PERMITTED INTERCOMPANY OVERHEAD PAYMENTS" shall have the meaning
assigned to such term in SECTION 6.4.
"PERMITTED SUBORDINATED DEBT" shall mean the Indebtedness incurred by
RII in connection with Permitted Acquisitions that is not the obligation of any
Credit Party other than RII and is subordinated to the Obligations in a manner
and form satisfactory to Agents in their
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sole discretion, and otherwise acceptable to Agents as to right and time of
payment and as to any other rights and remedies thereunder.
"PERSON" shall mean any individual, sole proprietorship, partnership,
joint venture, trust, unincorporated organization, association, corporation,
limited liability company, institution, public benefit corporation, other entity
or government (whether federal, state, county, city, municipal, local, foreign,
or otherwise, including any instrumentality, division, agency, body or
department thereof).
"PLAN" shall mean, at any time, an employee benefit plan, as defined
in Section 3(3) of ERISA, which any Credit Party maintains, contributes to or
has an obligation to contribute to on behalf of participants who are or were
employed by any Credit Party.
"PLEDGE AGREEMENT" shall mean the Pledge Agreement of even date
herewith executed by RII in favor of Agent, on behalf of itself and Lenders,
pledging all Stock of its Subsidiaries, if any, and all Intercompany Notes owing
to or held by it.
"PLEDGE AGREEMENTS" shall mean, collectively, the Pledge Agreement,
the NR Holdings Pledge Agreement, the Recycling Iowa Pledge Agreement and any
pledge agreements entered into after the Closing Date by any Credit Party (as
required by the Agreement or any other Loan Document).
"POST-SETTLEMENT ISSUANCES" shall have the meaning ascribed thereto in
Section 1.1(a)(iv).
"PRE-SETTLEMENT ISSUANCES" shall mean one or more issuances of Stock
by RII prior to settlement of the Caside Associates Litigation, the net proceeds
of which: (i) equal or exceed the Caside Reserve, (ii) are contributed to the
capital of Borrowers, (iii) are applied against the outstanding balance of the
Revolving Loan or deposited in a cash collateral account pledged to Agent on
terms satisfactory to it, (iv) are designated in an irrevocable notice from
Borrower Representative to Agent as "Caside Settlement Proceeds," prior to the
issuance of such Stock, and (v) are used solely to fund the settlement of the
Caside Associates Litigation until such litigation is discharged or dismissed.
"PRIOR LENDER" shall mean each of Ally Capital Corporation, Coast
Business Credit, Siena Capital, Auto Sales and Pawn, Nevada State Bank, The CIT
Group, Bank West of Nevada, Caterpillar Financial Services, Alamo Bank, Ford
Motor Credit, Banker's Leasing, Southwest State Bank of St. Louis, Beloit State
Bank, Orix Credit, Signet Bank, Mutual Savings Bank and GE Capital-Commercial
Equipment Group.
"PRIOR LENDER OBLIGATIONS" shall mean obligations not exceeding an
aggregate amount of $32,100,000 owing to the Prior Lenders.
"PROCEEDS" shall mean "proceeds," as such term is defined in the Code
and, in any event, shall include (a) any and all proceeds of any insurance,
indemnity, warranty or guaranty payable to any Credit Party from time to time
with respect to any of the Collateral, (b) any and all payments (in any form
whatsoever) made or due and payable to any Credit Party from time to
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time in connection with any requisition, confiscation, condemnation, seizure or
forfeiture of all or any part of the Collateral by any Governmental Authority
(or any Person acting under color of governmental authority), (c) any claim of
any Credit Party against third parties (i) for past, present or future
infringement of any Patent or Patent License, or (ii) for past, present or
future infringement or dilution of any Copyright, Copyright License, Trademark
or Trademark License, or for injury to the goodwill associated with any
Trademark or Trademark License, (d) any recoveries by any Credit Party against
third parties with respect to any litigation or dispute concerning any of the
Collateral, and (e) any and all other amounts from time to time paid or payable
under or in connection with any of the Collateral, upon disposition or
otherwise.
"PRO FORMA" means the unaudited consolidated and consolidating balance
sheet of RII and its Subsidiaries as of September 30, 1997 after giving PRO
FORMA effect to the Related Transactions.
"PRO FORMA DEPRECIATION" shall mean for any Fiscal Year, depreciation
expense of RII and its Subsidiaries computed in accordance with GAAP except that
such depreciation expense shall include in any applicable twelve-month
measurement period the depreciation expense of any Acquired Subsidiary for the
period prior to the date of such acquisition or formation computed in accordance
with Regulation S-X of the Securities Exchange Act of 1934, all as verified, in
a manner and with results, reasonably satisfactory to Agents.
"PRO FORMA EBITDA" shall mean EBITDA as defined herein, except that
Pro Forma EBITDA shall include in any applicable twelve-month measurement period
the EBITDA of any Acquired Subsidiary for the period prior to the date of any
such acquisition or formation, adjusted in accordance with Regulation S-X of the
Securities Exchange Act of 1934, all as verified, in a manner and with results,
reasonably satisfactory to Agents. For purposes of this definition, Pro Forma
EBITDA of RII and its Subsidiaries on a consolidated basis shall not include the
EBITDA of any Borrower derived from any facility, which facility is subject to
an Adverse Shredder Order while such Adverse Shredder Order shall remain in
effect unless the Agent shall otherwise consent in writing.
"PROJECTIONS" means RII's forecasted consolidated and consolidating:
(a) balance sheets; (b) profit and loss statements; (c) cash flow statements;
and (d) capitalization statements, all prepared on a Subsidiary by Subsidiary or
division by division basis, if applicable, and otherwise consistent with the
historical Financial Statements of the RII, together with appropriate supporting
details and a statement of underlying assumptions.
"PRO RATA SHARE" shall mean with respect to all matters relating to
any Lender (a) with respect to the Revolving Loan (including the Swing Line Loan
as a subset of the Swing Line Lender's Revolving Loan), the percentage obtained
by dividing (i) the Revolving Loan Commitment (including the Swing Line
Commitment as a subset of the Swing Line Lender's Revolving Loan Commitment) by
(ii) the aggregate Revolving Loan Commitments, (b) with respect to the Term
Loan(s), the percentage obtained by dividing (i) the Term Loan Commitment of
that Lender by (ii) the aggregate Term Loan Commitments of all Lenders, as any
such percentages may be adjusted by assignments permitted pursuant to SECTION
9.1, (c) with respect to the Acquisition Loan, the percentage obtained by
dividing, (i) the Acquisition Loan Commitment
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of that Lender by (ii) the aggregate Acquisition Loan Commitments of all
Lenders, as any such percentages may be adjusted as a result of assignments
permitted pursuant to Section 9.1, (d) with respect to all Loans, the percentage
obtained by dividing (i) the aggregate Commitments of that Lender by (ii) the
aggregate Commitments of all Lenders, and (e) with respect to all Loans on and
after the Commitment Termination Date, the percentage obtained by dividing (i)
the aggregate outstanding principal balance of the Loans held by that Lender, by
(ii) the outstanding principal balance of the Loans held by all Lenders.
"PUBLIC OFFERING" shall mean a firm underwritten public offering of
common stock registered on form S-1, S-2 or S-3 under the Securities Act of
1933, as amended, by a nationally recognized investment banking firm and after
giving effect to which the issuer shall be qualified for listing on the NASDAQ
National Market, the American Stock Exchange or the New York Stock Exchange.
"QUALIFIED PLAN" shall mean a Plan which is intended to be
tax-qualified under Section 401(a) of the IRC.
"RATABLE SHARE" shall mean as to each Borrower that portion of the
Term A Loan and Term B Loan for which that Borrower is primarily liable, as set
forth on Exhibit 1.1(b)(v) as from time to time amended.
"REAL ESTATE" shall have the meaning assigned to it in SECTION 3.6.
"RECYCLING IOWA" shall have the meaning assigned to it in the Recitals
hereto.
"RECYCLING IOWA PLEDGE AGREEMENT" shall mean the Pledge Agreement of
even date herewith executed by Recycling Iowa in favor of Agent, on behalf of
itself and Lenders, pledging all stock of its Subsidiaries, if any, and all
Intercompany Notes owing to or held by it.
"REFINANCING" shall mean the repayment in full by Borrowers of the
Prior Lender Obligations on the Closing Date.
"REFUNDED SWING LINE LOAN" shall have the meaning assigned to it in
SECTION 1.1(c)(iii).
"RELATED TRANSACTIONS" means each borrowing under the Revolving Loan
and the Term Loans on the Closing Date, the Current Acquisitions, the
Refinancing, the issuance of the Subordinated Notes, RII Equity Issuances, the
payment of all fees, costs and expenses associated with all of the foregoing and
the execution and delivery of all of the Related Transactions Documents.
"RELATED TRANSACTIONS DOCUMENTS" shall mean the Loan Documents, the
Current Acquisition Agreements, the Subordinated Debt Documents and the
agreements, instruments and documents evidencing or relating to the RII Equity
Issuances.
"RELEASE" shall mean any release, spill, emission, leaking, pumping,
pouring, emitting, emptying, escape, injection, deposit, disposal, discharge,
dispersal, dumping, leaching or
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migration of Hazardous Material in the indoor or outdoor environment, including
the movement of Hazardous Material through or in the air, soil, surface water,
ground water or property.
"REQUISITE LENDERS" shall mean (a) Lenders having more than sixty-six
and two-thirds percent (66 2/3%) of the Commitments of all Lenders, or (b) if
the Commitments have been terminated, more than sixty-six and two-thirds percent
(66 2/3%) of the aggregate outstanding amount of all Loans.
"REQUISITE REVOLVING LENDERS" shall mean (a) Lenders having more than
sixty-six and two-thirds percent (66 2/3%) of the Revolving Loan Commitments of
all Lenders, or (b) if the Revolving Loan Commitments have been terminated, more
than sixty-six and two-thirds percent (66 2/3%) of the aggregate outstanding
amount of the Revolving Loan.
"RESERVES" shall mean, with respect to the Borrowing Base of any
Borrower (a) reserves established by Agent from time to time against Eligible
Inventory pursuant to SECTION 5.9, (b) reserves established pursuant to SECTION
1.3(c) or SECTION 5.4(c), and (c) such other reserves against Eligible Accounts,
Eligible Mexican Accounts, Eligible Inventory or Borrowing Availability of any
Borrower which Agent may, in its reasonable credit judgment, establish from time
to time. Without limiting the generality of the foregoing, Reserves established
to ensure the payment of accrued Interest Expenses or Indebtedness shall be
deemed to be a reasonable exercise of Agent's credit judgment.
"RESTRICTED PAYMENT" shall mean (a) the declaration or payment of any
dividend or the incurrence of any liability to make any other payment or
distribution of cash or other property or assets in respect of a Person's Stock,
(b) any payment on account of the purchase, redemption, defeasance, sinking fund
or other retirement of a Person's Stock or any other payment or distribution
made in respect thereof, either directly or indirectly, (c) any payment or
prepayment of principal of, premium, if any, or interest, fees or other charges
on or with respect to, and any redemption, purchase, retirement, defeasance,
sinking fund or similar payment and any claim for rescission with respect to,
any Subordinated Debt; (d) any payment made to redeem, purchase, repurchase or
retire, or to obtain the surrender of, any outstanding warrants, options or
other rights to acquire Stock of such Person now or hereafter outstanding; (e)
any payment of a claim for the rescission of the purchase or sale of, or for
material damages arising from the purchase or sale of, any shares of such
Person's Stock or of a claim for reimbursement, indemnification or contribution
arising out of or related to any such claim for damages or rescission; (f) any
payment, loan, contribution, or other transfer of funds or other property to any
Stockholder of such Person other than payment of compensation in the ordinary
course to Stockholders who are employees of such Person; and (g) any payment of
management fees (or other fees of a similar nature) by such Person to any
Stockholder of such Person or their Affiliates.
"RETIREE WELFARE PLAN" shall mean, at any time, a Plan that is a
"welfare plan" as defined in Section 3(2) of ERISA, that provides for continuing
coverage or benefits for any participant or any beneficiary of a participant
after such participant's termination of employment, other than continuation
coverage provided pursuant to Section 4980B of the IRC and at the sole expense
of the participant or the beneficiary of the participant.
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"REVOLVING CREDIT ADVANCE" shall have the meaning assigned to it in
SECTION 1.1(a)(i).
"REVOLVING LENDERS" shall mean, as of any date of determination,
Lenders having a Revolving Loan Commitment.
"REVOLVING LOAN" shall mean, at any time, the sum of (i) the aggregate
amount of Revolving Credit Advances outstanding to any Borrower or to all
Borrowers PLUS (ii) the aggregate Letter of Credit Obligations incurred on
behalf of any Borrower or all Borrowers. Unless the context otherwise requires,
references to the outstanding principal balance of the Revolving Loan shall
include the outstanding balance of Letter of Credit Obligations.
"REVOLVING LOAN COMMITMENT" shall mean (a) as to any Lender, the
aggregate commitment of such Lender to make Revolving Credit Advances (including
without duplication Swing Line Advances as a subset of the Swing Line Lender's
Revolving Loan Commitment) and/or incur Letter of Credit Obligations as set
forth on ANNEX J to the Agreement or in the most recent Assignment Agreement
executed by such Lender and (b) as to all Lenders, the aggregate commitment of
all Lenders to make Revolving Credit Advances (including without duplication
Swing Line Advances as a subset of the Swing Line Lender's Revolving Loan
Commitment) and/or incur Letter of Credit Obligations, which aggregate
commitment shall be Forty-Five Million Dollars ($45,000,000) on the Closing
Date, as such amount may be adjusted, if at all, from time to time in accordance
with the Agreement.
"REVOLVING NOTE" shall have the meaning assigned to it in
SECTION 1.1(a)(ii).
"RII" shall have the meaning assigned thereto in the Recitals to this
Agreement.
"RII EQUITY ISSUANCES" shall mean the issuance by RII on or prior to
the Closing Date of (i) $19.1 million of agreed value of RII's convertible
preferred stock at face value to Sellers of the Current Acquisition Targets on
terms acceptable to Agent and (ii) $10 million of New Common Stock to Sellers of
the Current Acquisition Targets as partial consideration for the Current
Acquisitions, and (iii) New Common Stock for net cash proceeds of $7.8 million.
"SC BORROWER" shall have the meaning assigned to it in the Recitals
hereto.
"SECURITY AGREEMENT" shall mean the Security Agreement of even date
herewith entered into among Agent, on behalf of itself and Lenders, and each
Credit Party that is a signatory thereto.
"SELLERS" shall mean collectively, Brenner Companies, Inc., Central
Metals Company, Inc., Money Point Land Holding Corporation, Money Point Diamond
Corporation, Grossman Brothers Company, Bertram Lans, Bruce Lans, Scott Lans,
Levin Brothers, Inc., Milwaukee Metal Briquetting Co., Inc., United Metals
Recyclers.
"SETTLEMENT ISSUANCES" means, collectively, Pre-Settlement Issuances
and Post-Settlement Issuances.
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"SOLVENT" shall mean, with respect to any Person on a particular date,
that on such date (a) the fair value of the property of such Person is greater
than the total amount of liabilities, including contingent liabilities, of such
Person; (b) the present fair salable value of the assets of such Person is not
less than the amount that will be required to pay the probable liability of such
Person on its debts as they become absolute and matured; (c) such Person does
not intend to, and does not believe that it will, incur debts or liabilities
beyond such Person's ability to pay as such debts and liabilities mature; and
(d) such Person is not engaged in a business or transaction, and is not about to
engage in a business or transaction, for which such Person's property would
constitute an unreasonably small capital. The amount of contingent liabilities
(such as litigation, guarantees and pension plan liabilities) at any time shall
be computed as the amount which, in light of all the facts and circumstances
existing at the time, represents the amount which can be reasonably be expected
to become an actual or matured liability.
"STOCK" shall mean all shares, options, warrants, general or limited
partnership interests or other equivalents (regardless of how designated) of or
in a corporation, partnership or equivalent entity whether voting or nonvoting,
including common stock, preferred stock or any other "equity security" (as such
term is defined in Rule 3a11-1 of the General Rules and Regulations promulgated
by the Securities and Exchange Commission under the Securities Exchange Act of
1934, as amended).
"SUBORDINATED DEBT" shall mean any Indebtedness (a) the payment of
which is subordinated to the payment of the Obligations and (b) which is
incurred pursuant to terms, conditions and documents in form and substance
satisfactory to the Lenders. Subordinated Debt shall include, without
limitation, the Indebtedness of RII in respect of the Subordinated Notes and the
Permitted Subordinated Debt.
"SUBORDINATED DEBT DOCUMENTS" shall have the meaning assigned to it in
SECTION 3.25.
"SUBORDINATED NOTES" shall mean those certain 13% Senior Subordinated
Notes due 2005 issued by RII in an aggregate original principal amount of
$60,000,000, together with the Subordinated Notes Indenture issued by RII in
favor of Sun America and the holders of the Subordinated Notes.
"SUBORDINATED NOTES INDENTURE" shall mean that certain Indenture dated
on or about the Closing Date among State Street Bank and Trust Company as
trustee, RII and the Credit Parties.
"SUBORDINATED NOTES INTERCREDITOR AGREEMENT" shall mean that certain
Subordination and Intercreditor Agreement dated on or about the Closing Date
among the Credit Parties, Agent, the holders of the Subordinated Notes and the
other parties thereto.
"SUBSIDIARY" shall mean, with respect to any Person, (a) any
corporation of which an aggregate of more than fifty percent (50%) of the
outstanding Stock having ordinary voting power to elect a majority of the board
of directors of such corporation (irrespective of whether, at the time, Stock of
any other class or classes of such corporation shall have or might have voting
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power by reason of the happening of any contingency) is at the time, directly or
indirectly, owned legally or beneficially by such Person and/or one or more
Subsidiaries of such Person, or with respect to which any such Person has the
right to vote or designate the vote of fifty percent (50%) or more of such Stock
whether by proxy, agreement, operation of law or otherwise, and (b) any
partnership or limited liability company in which such Person and/or one or more
Subsidiaries of such Person shall have an interest (whether in the form of
voting or participation in profits or capital contribution) of more than fifty
percent (50%) or of which any such Person is a general partner or may exercise
the powers of a general partner.
"SUPERMAJORITY REVOLVING LENDERS" shall mean (a) Lenders having eighty
percent (80%) or more of the Revolving Loan Commitments of all Lenders, or (b)
if the Revolving Loan Commitments have been terminated, eighty percent (80%) or
more of the aggregate outstanding amount of the Revolving Loan (with the Swing
Line Loan being attributed to the Lender making such Loan) and Letter of Credit
Obligations.
"SWING LINE ADVANCE" has the meaning assigned to it in SECTION
1.1(c)(i).
"SWING LINE AVAILABILITY" has the meaning assigned to it in SECTION
1.1(c)(i).
"SWING LINE COMMITMENT" shall mean, as to the Swing Line Lender, the
commitment of the Swing Line Lender to make Swing Line Loans as set forth on
ANNEX J to the Agreement, which commitment constitutes a subfacility of the
Revolving Loan Commitment of the Swing Line Lender.
"SWING LINE LENDER" shall mean GE Capital.
"SWING LINE LOAN" shall mean, as the context may require, at any time,
the aggregate amount of Swing Line Advances outstanding to any Borrower or to
all Borrowers.
"SWING LINE NOTE" has the meaning assigned to it in SECTION
1.1(c)(ii).
"TARGET" shall mean any Person that RII proposes to acquire by merger,
stock purchase or by the purchase of all or substantially all of its assets and
which meets or appears, on a preliminary basis, to meet the conditions set forth
in Agreement to be a Permitted Acquisition.
"TAXES" shall mean taxes, levies, imposts, deductions, Charges or
withholdings, and all liabilities with respect thereto, excluding taxes imposed
by the United States or any political subdivision or taxing authority thereof or
therein, excluding net income and franchise taxes imposed on any Agent or
Lender.
"TERM A LENDERS" shall mean Lenders having a Term A Loan Commitment.
"TERM A LOAN" shall have the meaning ascribed thereto in Section
1.1(b)(i).
"TERM A LOAN COMMITMENT" shall mean (a) as to any Lender with a Term A
Loan Commitment, the commitment of such Lender to make its Pro Rata Share of the
Term A Loan as set forth on ANNEX J to the Agreement or in the most recent
Assignment Agreement executed by
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such Lender, and (b) as to all Lenders with a Term A Loan Commitment, the
aggregate commitment of all Lenders to make the Term A Loan, which aggregate
commitment shall be Forty Million Dollars ($40,000,000) on the Closing Date.
"TERM A NOTES" shall mean shall have the meaning ascribed thereto in
Section 1.1(b)(i).
"TERM B LENDERS" shall mean Lenders having Term B Loan Commitments.
"TERM B LOAN" shall mean shall have the meaning ascribed thereto in
Section 1.1(b)(i).
"TERM B LOAN COMMITMENT" shall mean (a) as to any Lender with a Term B
Loan Commitment, the commitment of such Lender to make its Pro Rata Share of the
Term B Loan as set forth on ANNEX J to the Agreement or in the most recent
Assignment Agreement executed by such Lender, and (b) as to all Lenders with a
Term B Loan Commitment, the aggregate commitment of all Lenders to make the
Term B Loan, which aggregate commitment shall be Forty Million Dollars
($40,000,000) on the Closing Date.
"TERM B NOTES" shall have the meaning ascribed thereto in Section
1.1(b)(i).
"TERM LENDERS" shall mean those Lenders having a Term Loan A
Commitment and/or a Term Loan B Commitment.
"TERM LOAN COMMITMENT" shall mean, collectively, the Term A Loan
Commitment and the Term B Loan Commitment.
"TERM LOAN(S)" shall have the meaning assigned to it in SECTION
1.1(b)(i).
"TERM NOTE(S)" shall have the meaning assigned to it in SECTION
1.1(b)(i).
"TERMINATION DATE" shall mean the date on which the Loans have been
indefeasibly repaid in full and all other Obligations under the Agreement and
the other Loan Documents have been completely discharged and Letter of Credit
Obligations have been cash collateralized, canceled or backed by stand-by
letters of credit in accordance with ANNEX B, and none of Borrowers shall have
any further right to borrow any monies under the Agreement.
"TITLE IV PLAN" shall mean an employee pension benefit plan, as
defined in Section 3 (2) of ERISA (other than a Multiemployer Plan), which is
covered by Title IV of ERISA, and which any Credit Party or ERISA Affiliate
maintains, contributes to or has an obligation to contribute to on behalf of
participants who are or were employed by any of them.
"TRADEMARK LICENSE" shall mean rights under any written agreement now
owned or hereafter acquired by any Credit Party granting any right to use any
Trademark.
"TRADEMARK SECURITY AGREEMENTS" shall mean the Trademark Security
Agreements made in favor of Agent, on behalf of Lenders, by each applicable
Credit Party.
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"TRADEMARKS" shall mean all of the following now owned or hereafter
acquired by any Credit Party: (a) all trademarks, trade names, corporate names,
business names, trade styles, service marks, logos, other source or business
identifiers, prints and labels on which any of the foregoing have appeared or
appear, designs and general intangibles of like nature (whether registered or
unregistered), now owned or existing or hereafter adopted or acquired, all
registrations and recordings thereof, and all applications in connection
therewith, including registrations, recordings and applications in the United
States Patent and Trademark Office or in any similar office or agency of the
United States, any state or territory thereof, or any other country or any
political subdivision thereof; (b) all reissues, extensions or renewals thereof;
and (c) all goodwill associated with or symbolized by any of the foregoing.
"TX BORROWER" shall have the meaning assigned to it in the Recitals
hereto.
"UNFUNDED PENSION LIABILITY" shall mean, at any time, the aggregate
amount, if any, of the sum of (a) the amount by which the present value of all
accrued benefits under each Title IV Plan exceeds the fair market value of all
assets of such Title IV Plan allocable to such benefits in accordance with Title
IV of ERISA, all determined as of the most recent valuation date for each such
Title IV Plan using the actuarial assumptions for funding purposes in effect
under such Title IV Plan, and (b) for a period of five (5) years following a
transaction which might reasonably be expected to be covered by Section 4069 of
ERISA, the liabilities (whether or not accrued) that could be avoided by any
Credit Party or any ERISA Affiliate as a result of such transaction.
"WI BORROWER" shall have the meaning assigned to it in the Recitals
hereto.
"WINSTON-SALEM BORROWER" shall have the meaning assigned to it in the
Recitals hereto.
All other undefined terms contained in any of the Loan Documents
shall, unless the context indicates otherwise, have the meanings provided for by
the Code as in effect in the State of Illinois to the extent the same are used
or defined therein. Unless otherwise specified, references in the Agreement or
any of the Appendices to a Section, subsection or clause refer to such Section,
subsection or clause as contained in the Agreement. The words "herein,"
"hereof" and "hereunder" and other words of similar import refer to the
Agreement as a whole, including all Annexes, Exhibits and Schedules, as the same
may from time to time be amended, restated, modified or supplemented, and not to
any particular section, subsection or clause contained in the Agreement or any
such Annex, Exhibit or Schedule.
Wherever from the context it appears appropriate, each term stated in
either the singular or plural shall include the singular and the plural, and
pronouns stated in the masculine, feminine or neuter gender shall include the
masculine, feminine and neuter genders. The words "including", "includes" and
"include" shall be deemed to be followed by the words "without limitation";
references to Persons include their respective successors and assigns (to the
extent and only to the extent permitted by the Loan Documents) or, in the case
of governmental Persons, Persons succeeding to the relevant functions of such
Persons; and all references to statutes and related regulations shall include
any amendments of the same and any successor statutes and
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regulations. Whenever any provision in any Loan Document refers to the
knowledge (or an analogous phrase) of any Credit Party, such words are intended
to signify that such Credit Party has actual knowledge or awareness of a
particular fact or circumstance or that such Credit Party, if it had exercised
reasonable diligence, would have known or been aware of such fact or
circumstance.
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ANNEX B (SECTION 1.2)
TO
CREDIT AGREEMENT
LETTERS OF CREDIT
(a) ISSUANCE. Subject to the terms and conditions of the Agreement,
Agent and Revolving Lenders agree to incur, from time to time prior to the
Commitment Termination Date, upon the request of Borrower Representative on
behalf of the applicable Borrower and for such Borrower's account, Letter of
Credit Obligations by causing Letters of Credit to be issued by BankBoston, N.A.
or another legally authorized Person selected by or acceptable to Agents in
their sole discretion (each, an "L/C ISSUER")) for such Borrower's account and
guaranteed by Agent; PROVIDED, HOWEVER, that if the L/C Issuer is a Revolving
Lender, then such Letters of Credit shall not be guaranteed by Agent but rather
each Revolving Lender shall, subject to the terms and conditions hereinafter set
forth, purchase (or be deemed to have purchased) risk participations in all such
Letters of Credit issued with the written consent of Agent, as more fully
described in paragraph (b)(ii) below. The aggregate amount of all such Letter
of Credit Obligations shall not at any time exceed the least of (i) Ten Million
Dollars ($10,000,000) (the "L/C SUBLIMIT"), and (ii) the Maximum Amount LESS the
aggregate outstanding principal balance of the Revolving Credit Advances and the
Swing Line Loan, and (iii) the Aggregate Borrowing Base LESS the aggregate
outstanding principal balance of the Revolving Credit Advances and the Swing
Line Loan. Furthermore, the aggregate amount of any Letter of Credit Obligations
incurred on behalf of any Borrower shall not at any time exceed such Borrower's
separate Borrowing Base LESS the aggregate principal balance of the Revolving
Credit Advances and the Swing Line Loan to such Borrower. No such Letter of
Credit shall have an expiry date which is more than one year following the date
of issuance thereof, and neither Agent nor Revolving Lenders shall be under any
obligation to incur Letter of Credit Obligations in respect of, or purchase risk
participations in, any Letter of Credit having an expiry date which is later
than fourteen (14) days prior to the Commitment Termination Date.
(b)(i) ADVANCES AUTOMATIC; PARTICIPATIONS. In the event that Agent
or any Revolving Lender shall make any payment on or pursuant to any Letter of
Credit Obligation, such payment shall then be deemed automatically to constitute
a Revolving Credit Advance to the applicable Borrower under SECTION 1.1(a) of
the Agreement regardless of whether a Default or Event of Default shall have
occurred and be continuing and notwithstanding any Borrower's failure to satisfy
the conditions precedent set forth in SECTION 2, and each Revolving Lender shall
be obligated to pay its Pro Rata Share thereof in accordance with the Agreement.
The failure of any Revolving Lender to make available to Agent for Agent's own
account its Pro Rata Share of any such Revolving Credit Advance or payment by
Agent under or in respect of a Letter of Credit shall not relieve any other
Revolving Lender of its obligation hereunder to make available to Agent its Pro
Rata Share thereof, but no Revolving Lender shall be responsible for the failure
of any other Revolving Lender to make available such other Revolving Lender's
Pro Rata Share of any such payment.
(ii) If it shall be illegal or unlawful for any Borrower to
incur Revolving Credit Advances as contemplated by paragraph (b)(i) above
because of an Event of Default
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described in SECTION 8.1(h) or (i) or otherwise or if it shall be illegal or
unlawful for any Revolving Lender to be deemed to have assumed a ratable
share of the reimbursement obligations owed to an L/C Issuer, or if the L/C
Issuer is a Revolving Lender, then (i) immediately and without further action
whatsoever, each Revolving Lender shall be deemed to have irrevocably and
unconditionally purchased from Agent (or such L/C Issuer, as the case may be)
an undivided interest and participation equal to such Revolving Lender's Pro
Rata Share (based on the Revolving Loan Commitments) of the Letter of Credit
Obligations in respect of all Letters of Credit then outstanding and (ii)
thereafter, immediately upon issuance of any Letter of Credit, each Revolving
Lender shall be deemed to have irrevocably and unconditionally purchased from
Agent (or such L/C Issuer, as the case may be) an undivided interest and
participation in such Revolving Lender's Pro Rata Share (based on the
Revolving Loan Commitments) of the Letter of Credit Obligations with respect
to such Letter of Credit on the date of such issuance. Each Revolving Lender
shall fund its participation in all payments or disbursements made under the
Letters of Credit in the same manner as provided in the Agreement with
respect to Revolving Credit Advances.
(c) CASH COLLATERAL. If Borrowers are required to provide cash
collateral for any Letter of Credit Obligations pursuant to the Agreement
prior to the Commitment Termination Date, each Borrower will pay to Agent for
the benefit of Revolving Lenders cash or cash equivalents acceptable to Agent
("CASH EQUIVALENTS") in an amount equal to 105% of the maximum amount then
available to be drawn under each applicable Letter of Credit outstanding for
the benefit of such Borrower. Such funds or Cash Equivalents shall be held
by Agent in a cash collateral account (the "CASH COLLATERAL ACCOUNT")
maintained at a bank or financial institution acceptable to Agent. The Cash
Collateral Account shall be in the name of the applicable Borrower and shall
be pledged to, and subject to the control of, Agent, for the benefit of Agent
and Lenders, in a manner satisfactory to Agent. Each Borrower hereby pledges
and grants to Agent, on behalf of Lenders, a security interest in all such
funds and Cash Equivalents held in the Cash Collateral Account from time to
time and all proceeds thereof, as security for the payment of all amounts due
in respect of the Letter of Credit Obligations and other Obligations, whether
or not then due. The Agreement, including this ANNEX B, shall constitute a
security agreement under applicable law.
If any Letter of Credit Obligations, whether or not then due and
payable, shall for any reason be outstanding on the fourteenth day prior to
Commitment Termination Date, Borrowers shall either (i) provide cash collateral
therefor in the manner described above, or (ii) cause all such Letters of Credit
and guaranties thereof to be canceled and returned, or (iii) deliver a stand-by
letter (or letters) of credit in guaranty of such Letter of Credit Obligations,
which stand-by letter (or letters) of credit shall be of like tenor and duration
(plus thirty (30) additional days) as, and in an amount equal to 105% of, the
aggregate maximum amount then available to be drawn under, the Letters of Credit
to which such outstanding Letter of Credit Obligations relate and shall be
issued by a Person, and shall be subject to such terms and conditions, as are be
satisfactory to Agent in its sole discretion.
From time to time after funds are deposited in the Cash Collateral
Account by any Borrower, whether before or after the Commitment Termination
Date, Agent may apply such funds or Cash Equivalents then held in the Cash
Collateral Account to the payment of any
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amounts, in such order as Agent may elect, as shall be or shall become due and
payable by such Borrower to Lenders with respect to such Letter of Credit
Obligations of such Borrower and, upon the satisfaction in full of all Letter of
Credit Obligations of such Borrower, to any other Obligations of any Borrower
then due and payable.
No Borrower nor any Person claiming on behalf of or through any
Borrower shall have any right to withdraw any of the funds or Cash Equivalents
held in the Cash Collateral Account, except that upon the termination of all
Letter of Credit Obligations and the payment of all amounts payable by Borrowers
to Lenders in respect thereof, any funds remaining in the Cash Collateral
Account shall be applied to other Obligations when due and owing and upon
payment in full of such Obligations, any remaining amount shall be paid to
Borrowers or as otherwise required by law.
(d) FEES AND EXPENSES. Borrowers agree to pay to Agent for the
benefit of Revolving Lenders, as compensation to such Lenders for Letter of
Credit Obligations incurred hereunder, (x) all costs and expenses incurred by
Agent or any Lender on account of such Letter of Credit Obligations, and (y)
for each month during which any Letter of Credit Obligation shall remain
outstanding, a fee (the "LETTER OF CREDIT FEE") in an amount equal to the
Applicable L/C Margin multiplied by the maximum amount available from time to
time to be drawn under the applicable Letter of Credit. Such fee shall be
paid to Agent for the benefit of the Revolving Lenders in arrears, on the
first day of each month. In addition, Borrowers shall pay to any L/C Issuer,
on demand, such fees (including all per annum fees), charges and expenses of
such L/C Issuer in respect of the issuance, negotiation, acceptance,
amendment, transfer and payment of such Letter of Credit or otherwise payable
pursuant to the application and related documentation under which such Letter
of Credit is issued.
(e) REQUEST FOR INCURRENCE OF LETTER OF CREDIT OBLIGATIONS.
Borrower Representative shall give Agent and the L/C Issuer at least two (2)
Business Days prior written notice requesting the incurrence of any Letter of
Credit Obligation, specifying the date such Letter of Credit Obligation is to
be incurred, identifying the beneficiary and the Borrower to which such
Letter of Credit Obligation relates and describing the nature of the
transactions proposed to be supported thereby. The notice shall be
accompanied by the form of the Letter of Credit (which shall be acceptable to
the L/C Issuer) to be guarantied and, to the extent not previously delivered
to Agent, copies of all agreements between any Borrower and the L/C Issuer
pertaining to the issuance of Letters of Credit. Notwithstanding anything
contained herein to the contrary, Letter of Credit applications by Borrower
Representative and approvals by Agent and the L/C Issuer may be made and
transmitted pursuant to electronic codes and security measures mutually
agreed upon and established by and among Borrower Representative, Agent and
the L/C Issuer.
(f) OBLIGATION ABSOLUTE. The obligation of Borrowers to reimburse
Agent and Revolving Lenders for payments made with respect to any Letter of
Credit Obligation shall be absolute, unconditional and irrevocable, without
necessity of presentment, demand, protest or other formalities, and the
obligations of each Revolving Lender to make payments to Agent with respect to
Letters of Credit shall be unconditional and irrevocable. Such obligations of
Borrowers and Revolving Lenders shall be paid strictly in accordance with the
terms hereof under all circumstances including the following circumstances:
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(i) any lack of validity or enforceability of any Letter of Credit
or the Agreement or the other Loan Documents or any other agreement;
(ii) the existence of any claim, set-off, defense or other right
which any Borrower or any of their respective Affiliates or any Lender
may at any time have against a beneficiary or any transferee of any
Letter of Credit (or any Persons or entities for whom any such transferee
may be acting), Agent, any Lender, or any other Person, whether in
connection with the Agreement, the Letter of Credit, the transactions
contemplated herein or therein or any unrelated transaction (including
any underlying transaction between any Borrower or any of their
respective Affiliates and the beneficiary for which the Letter of Credit
was procured);
(iii) any draft, demand, certificate or any other document presented
under any Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or
inaccurate in any respect;
(iv) payment by Agent (except as otherwise expressly provided in
paragraph (g)(ii)(C) below) or any L/C Issuer under any Letter of Credit
or guaranty thereof against presentation of a demand, draft or
certificate or other document which does not comply with the terms of
such Letter of Credit or such guaranty;
(v) any other circumstance or happening whatsoever, which is
similar to any of the foregoing; or
(vi) the fact that a Default or an Event of Default shall have
occurred and be continuing.
(g) INDEMNIFICATION; NATURE OF LENDERS' DUTIES. (i) In addition to
amounts payable as elsewhere provided in the Agreement, Borrowers hereby agree
to pay and to protect, indemnify, and save harmless Agent, the L/C Issuer and
each Lender from and against any and all claims, demands, liabilities, damages,
losses, costs, charges and expenses (including attorneys' fees and allocated
costs of internal counsel) which Agent, the L/C Issuer or any Lender may incur
or be subject to as a consequence, direct or indirect, of (A) the issuance of
any Letter of Credit or guaranty thereof, or (B) the failure of Agent or any
Lender seeking indemnification or of any L/C Issuer to honor a demand for
payment under any Letter of Credit or guaranty thereof as a result of any act or
omission, whether rightful or wrongful, of any present or future de jure or de
facto government or Governmental Authority, in each case other than to the
extent solely as a result of the gross negligence or willful misconduct of Agent
or such Lender (as finally determined by a court of competent jurisdiction).
(ii) As between Agent and any Lender and Borrowers,
Borrowers assume all risks of the acts and omissions of, or misuse of any Letter
of Credit by beneficiaries of any Letter of Credit. In furtherance and not in
limitation of the foregoing, to the fullest extent permitted by law neither
Agent nor any Lender shall be responsible: (A) for the form, validity,
sufficiency, accuracy, genuineness or legal effect of any document issued by any
party in connection with the application for and issuance of any Letter of
Credit, even if it should in fact
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prove to be in any or all respects invalid, insufficient, inaccurate, fraudulent
or forged; (B) for the validity or sufficiency of any instrument transferring or
assigning or purporting to transfer or assign any Letter of Credit or the rights
or benefits thereunder or proceeds thereof, in whole or in part, which may prove
to be invalid or ineffective for any reason; (C) for failure of the beneficiary
of any Letter of Credit to comply fully with conditions required in order to
demand payment under such Letter of Credit; PROVIDED that, in the case of any
payment by Agent or the L/C Issuer under any Letter of Credit or guaranty
thereof, Agent or the L/C Issuer, as the case may be, shall be liable to the
extent such payment was made solely as a result of its gross negligence or
willful misconduct (as finally determined by a court of competent jurisdiction)
in determining that the demand for payment under such Letter of Credit or
guaranty thereof complies on its face with any applicable requirements for a
demand for payment under such Letter of Credit or guaranty thereof; (D) for
errors, omissions, interruptions or delays in transmission or delivery of any
messages, by mail, cable, telegraph, telex or otherwise, whether or not they be
in cipher; (E) for errors in interpretation of technical terms; (F) for any loss
or delay in the transmission or otherwise of any document required in order to
make a payment under any Letter of Credit or guaranty thereof or of the proceeds
thereof; (G) for the credit of the proceeds of any drawing under any Letter of
Credit or guaranty thereof; and (H) for any consequences arising from causes
beyond the control of Agent, the L/C Issuer or any Lender. None of the above
shall affect, impair, or prevent the vesting of any of Agent's or any Lender's
rights or powers hereunder or under the Agreement.
(iii) Nothing contained herein shall be deemed to limit or to
expand any waivers, covenants or indemnities made by Borrowers in favor of any
L/C Issuer in any letter of credit application, reimbursement agreement or
similar document, instrument or agreement between or among Borrowers and such
L/C Issuer.
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ANNEX C (SECTION 1.8)
TO
CREDIT AGREEMENT
CASH MANAGEMENT SYSTEMS
Each Borrower shall, and shall cause its Subsidiaries to, establish
and maintain the Cash Management Systems described below:
(a) Within 90 days following the Closing Date and until the
Termination Date, each Borrower shall (i) establish lock boxes ("LOCK BOXES")
at one or more of the banks set forth on DISCLOSURE SCHEDULE (3.19), and
shall request in writing and otherwise take such reasonable steps to ensure
that all Account Debtors forward payment directly to such Lock Boxes, and
(ii) deposit and cause its Subsidiaries to deposit or cause to be deposited
promptly, and in any event no later than the first Business Day after the
date of receipt thereof, all cash, checks, drafts or other similar items of
payment relating to or constituting payments made in respect of any and all
Collateral or otherwise paid to or for the benefit of any Borrower (whether
or not otherwise delivered to a Lock Box) into bank accounts in such
Borrower's name or any such Subsidiary's name (collectively, the "BORROWER
ACCOUNTS") at banks set forth on DISCLOSURE SCHEDULE (3.19) (each, a
"RELATIONSHIP BANK"). On or before the Closing Date, each Borrower shall
have established a concentration account in its name (each a "CONCENTRATION
ACCOUNT" and collectively, the "CONCENTRATION ACCOUNTS") at the bank or
banks which shall be designated as the Concentration Account bank for each
such Borrower on DISCLOSURE SCHEDULE (3.19) (each a "CONCENTRATION ACCOUNT
BANK" and collectively, the "CONCENTRATION ACCOUNT BANKS"), which banks shall
be satisfactory to Agent.
(b) Within 90 days following the Closing Date (or such later date
as Agent shall consent to in writing), each Concentration Account Bank, each
bank where a Disbursement Account is located and all other Relationship
Banks, shall have entered into tri-party blocked account agreements with
Agent, for the benefit of itself and Lenders, BankBoston, N.A. (or such other
financial institution selected by Borrower Representative and deemed
acceptable by Agent providing lockbox, blocked account and/or Concentration
Account Services), and the applicable Borrower and Subsidiaries thereof, as
applicable, in form and substance acceptable to Agent, which shall become
operative on or prior to the Closing Date. Each such blocked account
agreement shall provide, among other things, that (i) all items of payment
deposited in such account and proceeds thereof deposited in the applicable
Concentration Account are held by such bank as agent or bailee-in-possession
for Agent, on behalf of Lenders, (ii) the bank executing such agreement has
no rights of setoff or recoupment or any other claim against such account, as
the case may be, other than for payment of its service fees and other charges
directly related to the administration of such account and for returned
checks or other items of payment, and (iii) from and after the Closing Date
(A) with respect to banks at which a Borrower Account is located, such bank
agrees to forward immediately all amounts in each Borrower Account to such
Borrower's Concentration Account Bank and to commence the process of daily
sweeps from such Borrower Account into the applicable Concentration Account
and (B) with respect to each Concentration Account Bank, such bank agrees to
immediately forward all amounts received in the applicable Concentration
Account to the Collection Account through daily sweeps from such
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Concentration Account into the Collection Account. No Borrower shall, or
shall cause or permit any Subsidiary thereof to, accumulate or maintain cash
in disbursement or payroll accounts as of any date of determination in excess
of checks outstanding against such accounts as of that date and amounts
necessary to meet minimum balance requirements.
(c) So long as no Default or Event of Default has occurred and is
continuing, Borrowers may amend DISCLOSURE SCHEDULE (3.19) to add or replace a
Relationship Bank, Lock Box or Borrower Account or to replace any Concentration
Account or any Disbursement Account; PROVIDED, HOWEVER, THAT (i) Agent shall
have consented in writing in advance to the opening of such account or Lock Box
with the relevant bank and (ii) prior to the time of the opening of such account
or Lock Box, the applicable Borrower and/or the Subsidiaries thereof, as
applicable, and such bank shall have executed and delivered to Agent a tri-party
blocked account agreement, in form and substance satisfactory to Agent.
Borrowers shall close any of their accounts (and establish replacement accounts
in accordance with the foregoing sentence) promptly and in any event within
thirty (30) days of notice from Agent that the creditworthiness of any bank
holding an account is no longer acceptable in Agent's reasonable judgment, or as
promptly as practicable and in any event within sixty (60) days of notice from
Agent that the operating performance, funds transfer and/or availability
procedures or performance with respect to accounts or lockboxes of the bank
holding such accounts or Agent's liability under any tri-party blocked account
agreement with such bank is no longer acceptable in Agent's reasonable judgment.
(d) The Lock Boxes, Borrower Accounts, Disbursement Accounts and
the Concentration Accounts shall be cash collateral accounts, with all cash,
checks and other similar items of payment in such accounts securing payment of
the Loans and all other Obligations, and in which each Borrower and each
Subsidiary thereof shall have granted a Lien to Agent, on behalf of itself and
Lenders, pursuant to the Security Agreement.
(e) All amounts deposited in the Collection Account shall be deemed
received by Agent in accordance with SECTION 1.10 of the Agreement and shall be
applied (and allocated) by Agent in accordance with SECTION 1.11 of the
Agreement. In no event shall any amount be so applied unless and until such
amount shall have been credited in immediately available funds to the Collection
Account.
(f) Each Borrower may maintain, in its name, an account (each a
"DISBURSEMENT ACCOUNT" and collectively, the "DISBURSEMENT ACCOUNTS") at a bank
acceptable to Agent into which Agent shall, from time to time, deposit proceeds
of Revolving Credit Advances and Swing Line Advances made to such Borrower
pursuant to SECTION 1.1 for use by such Borrower solely in accordance with the
provisions of SECTION 1.4.
(g) Each Borrower shall and shall cause its Affiliates, officers,
employees, agents, directors or other Persons acting for or in concert with such
Borrower (each a "RELATED PERSON") to (i) hold in trust for Agent, for the
benefit of itself and Lenders, all checks, cash and other items of payment
received by such Borrower or any such Related Person, and (ii) within one (1)
Business Day after receipt by such Borrower or any such Related Person of any
checks, cash or other items or payment, deposit the same into a Borrower Account
of such Borrower. Each
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Borrower and each Related Person thereof acknowledges and agrees that all cash,
checks or items of payment constituting proceeds of Collateral are the property
of Agent and Lenders.
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ANNEX D (SECTION 2.1(a))
TO
CREDIT AGREEMENT
SCHEDULE OF ADDITIONAL CLOSING DOCUMENTS
In addition to, and not in limitation of, the conditions described in SECTION
2.1 of the Agreement, pursuant to SECTION 2.1(a), the following items must be
received by Agent in form and substance satisfactory to Agent on or prior to the
Closing Date (each capitalized term used but not otherwise defined herein shall
have the meaning ascribed thereto in ANNEX A to the Agreement):
A. APPENDICES. All Appendices to the Agreement, in form and
substance satisfactory to Agent.
B. REVOLVING NOTES, SWING LINE NOTES AND TERM NOTES. Duly
executed originals of the Revolving Notes, Swing Line Notes and Term Notes for
the ratable benefit of each applicable Lender, dated the Closing Date.
C. SECURITY AGREEMENT. Duly executed originals of the Security
Agreement, dated the Closing Date, and all instruments, documents and agreements
executed pursuant thereto.
D. INSURANCE. Satisfactory evidence that the insurance policies
required by SECTION 5.4 are in full force and effect, together with appropriate
evidence showing loss payable and/or additional insured clauses or endorsements,
as requested by Agent, in favor of Agent, on behalf of Lenders.
E. SECURITY INTERESTS AND CODE FILINGS.
(a) Evidence satisfactory to Agent that Agent (for the
benefit of itself and Lenders) has a valid and perfected first priority security
interest in the Collateral, including (i) such documents duly executed by each
Credit Party (including financing statements under the Code and other applicable
documents under the laws of any jurisdiction with respect to the perfection of
Liens) as Agent may request in order to perfect its security interests in the
Collateral and (ii) copies of Code search reports listing all effective
financing statements that name any Credit Party as debtor, together with copies
of such financing statements, none of which shall cover the Collateral, except
for those relating to the Prior Lender Obligations (all of which shall be
terminated on the Closing Date).
(b) Evidence satisfactory to Agent, including copies, of
all UCC-1 and other financing statements filed in favor of any Credit Party with
respect to each location, if any, at which Inventory may be consigned.
(c) To the extent applicable and requested by Agent,
Control Letters from (i) all issuers of uncertificated securities and financial
assets held by each Borrower, (ii) all securities intermediaries with respect to
all securities accounts and securities entitlements of each
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Borrower, and (iii) all futures commission agents and clearing houses with
respect to all commodities contracts and commodities accounts held by any
Borrower.
F. PAYOFF LETTER; TERMINATION STATEMENTS. Copies of a duly
executed payoff letter, in form and substance satisfactory to Agent, by and
between all parties to the Prior Lender loan documents evidencing repayment in
full of all Prior Lender Obligations, together with (a) UCC-3 or other
appropriate termination statements, in form and substance satisfactory to Agent,
manually signed by the Prior Lender releasing all liens of Prior Lender upon any
of the personal property of each Credit Party, and (b) termination of all
blocked account agreements, bank agency agreements or other similar agreements
or arrangements or arrangements in favor of Prior Lender or relating to the
Prior Lender Obligations.
G. INTELLECTUAL PROPERTY SECURITY AGREEMENTS. Duly executed
originals of Trademark Security Agreements and Patent Security Agreements, each
dated the Closing Date and signed by each Credit Party which owns Trademarks,
and/or Patents, as applicable, all in form and substance satisfactory to Agent,
together with all instruments, documents and agreements executed pursuant
thereto.
H. INITIAL BORROWING BASE CERTIFICATE. Duly executed originals of
an initial Borrowing Base Certificate from each Borrower, dated the Closing
Date, reflecting information concerning Eligible Accounts, Eligible Mexican
Accounts and Eligible Inventory of such Borrower as of a date not more than
seven (7) days prior to the Closing Date.
I. INITIAL NOTICE OF REVOLVING CREDIT ADVANCE. Duly executed
originals of a Notice of Revolving Credit Advance, dated the Closing Date, with
respect to the initial Revolving Credit Advance to be requested by Borrower
Representative on the Closing Date.
J. LETTER OF DIRECTION. Duly executed originals of a letter of
direction from Borrower Representative addressed to Agent, on behalf of itself
and Lenders, with respect to the disbursement on the Closing Date of the
proceeds of the Term Loan and the initial Revolving Credit Advance.
K. CASH MANAGEMENT SYSTEM; BLOCKED ACCOUNT AGREEMENTS. Executed
tri-party blocked account agreement, satisfactory to Agent, with BankBoston as
required by ANNEX C.
L. CHARTER AND GOOD STANDING. For each Credit Party, such
Person's (a) charter and all amendments thereto, (b) good standing certificates
(including verification of tax status) in its state of incorporation and (c)
good standing certificates (including verification of tax status) and
certificates of qualification to conduct business in each jurisdiction where its
ownership or lease of property or the conduct of its business requires such
qualification, each dated a recent date prior to the Closing Date and certified
by the applicable Secretary of State or other authorized Governmental Authority.
M. BYLAWS AND RESOLUTIONS. For each Credit Party, (a) such
Person's bylaws, together with all amendments thereto and (b) resolutions of
such Person's Board of Directors,
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approving and authorizing the execution, delivery and performance of the Loan
Documents to which such Person is a party and the transactions to be consummated
in connection therewith, each certified as of the Closing Date by such Person's
corporate secretary or an assistant secretary as being in full force and effect
without any modification or amendment.
N. INCUMBENCY CERTIFICATES. For each Credit Party, signature and
incumbency certificates of the officers of each such Person executing any of the
Loan Documents, certified as of the Closing Date by such Person's corporate
secretary or an assistant secretary as being true, accurate, correct and
complete.
O. OPINIONS OF COUNSEL. Duly executed originals of opinions of
Holland & Hart, counsel for the Credit Parties, together with any local counsel
opinions requested by Agent, each in form and substance satisfactory to Agent
and its counsel, dated the Closing Date, and each accompanied by a letter
addressed to such counsel from the Credit Parties, authorizing and directing
such counsel to address its opinion to Agent, on behalf of Lenders, and to
include in such opinion an express statement to the effect that Agent and
Lenders are authorized to rely on such opinion.
P. PLEDGE AGREEMENTS. Duly executed originals of each of the
Pledge Agreements accompanied by (as applicable) (a) share certificates
representing all of the outstanding Stock being pledged pursuant to such Pledge
Agreement and stock powers for such share certificates executed in blank and (b)
the original Intercompany Notes and other instruments evidencing Indebtedness
being pledged pursuant to such Pledge Agreement, duly endorsed in blank.
Q. ACCOUNTANTS' LETTER. A letter from the Credit Parties to their
independent auditors authorizing the independent certified public accountants of
the Credit Parties to communicate with Agent and Lenders in accordance with
SECTION 4.2, and a letter from such auditors acknowledging Lenders' reliance on
the auditor's certification of past and future Financial Statements.
R. APPOINTMENT OF AGENT FOR SERVICE. An appointment of CT
Corporation as each Credit Party's agent for service of process.
S. FEE LETTER. Duly executed originals of the GE Capital Fee
Letter.
T. OFFICER'S CERTIFICATE. Agent shall have received duly executed
originals of a certificate of the Chief Executive Officer and/or Chief Financial
Officer of each Borrower, dated the Closing Date, stating that, since September
30, 1996 (a) no event or condition has occurred or is existing which could
reasonably be expected to have a Material Adverse Effect; (b) there has been no
material adverse change in the industry in which any Borrower operates or in the
prospects or projections of any Borrower or the Borrowers taken as a whole; (c)
no Litigation has been commenced which, if successful, would have a Material
Adverse Effect or could challenge any of the transactions contemplated by the
Agreement and the other Loan Documents; (d) there have been no Restricted
Payments made by any Credit Party; and (e) there has been no material
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increase in liabilities, liquidated or contingent, and no material decrease in
assets of any Borrower or any of its Subsidiaries.
U. WAIVERS. Agent, on behalf of Lenders, shall have received
landlord waivers and consents, bailee letters and mortgagee agreements in form
and substance satisfactory to Agent, in each case as required pursuant to
SECTION 5.9.
V. MORTGAGES. Mortgages covering all of the Real Estate (the
"MORTGAGED PROPERTIES") together with: (a) title insurance policies, current
as-built surveys, zoning letters and certificates of occupancy, in each case
satisfactory in form and substance to Agent, in its sole discretion; (b)
evidence that counterparts of the Mortgages have been recorded in all places to
the extent necessary or desirable, in the judgment of Agent, to create a valid
and enforceable first priority lien (subject to Permitted Encumbrances) on each
Mortgaged Property in favor of Agent for the benefit of itself and Lenders (or
in favor of such other trustee as may be required or desired under local law);
and (c) an opinion of counsel in each state in which any Mortgaged Property is
located in form and substance and from counsel satisfactory to Agent.
W. SUBORDINATION AND INTERCREDITOR AGREEMENTS. Agent and Lenders
shall have received any and all subordination and/or intercreditor agreements,
all in form and substance reasonably satisfactory to Agent, in its sole
discretion, as Agent shall have deemed necessary or appropriate with respect to
any Indebtedness of any Credit Party.
X. ENVIRONMENTAL REPORTS. Agent shall have received Phase I
Environmental Site Assessment Reports, consistent with American Society for
Testing and Materials (ASTM) Standard E 1527-94 and applicable state
requirements, on all of the Real Estate, dated no more than 6 months prior to
the Closing Date, prepared by environmental engineers satisfactory to Agent, all
in form and substance satisfactory to Agent, in its sole discretion; and Agent
shall have further received such environmental review and audit reports,
including Phase II reports, with respect to the Real Estate of any Credit Party
as Agent shall have requested, and Agent shall be satisfied, in its sole
discretion, with the contents of all such environmental reports. Agent shall
have received letters executed by the environmental firms preparing such
environmental reports, in form and substance satisfactory to Agent, authorizing
Agent and Lenders to rely on such reports.
Y. AUDITED FINANCIALS; FINANCIAL CONDITION. Agent shall have
received Borrowers' final Financial Statements for their Fiscal Year ended
September 30, 1996, audited by BDO Seidman, L.L.P. Each Borrower shall have
provided Agent with its current operating statements, a consolidated and
consolidating balance sheet and statement of cash flows, the Pro Forma,
Projections, and a Borrowing Base Certificate with respect to such Borrower
certified by its Chief Financial Officer, in each case in form and substance
satisfactory to Agent, and Agent shall be satisfied, in its sole discretion,
with all of the foregoing. Agent shall have further received a certificate of
the Chief Executive Officer and/or the Chief Financial Officer of each Borrower,
based on such Pro Forma and Projections, to the effect that (a) such Borrower
will be Solvent upon the consummation of the transactions contemplated herein;
(b) the Pro Forma fairly presents the financial condition of such Borrower as
of the date thereof after giving effect to the transactions contemplated by the
Loan Documents; (c) the Projections are based upon estimates
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and assumptions stated therein, all of which such Borrower believes to be
reasonable and fair in light of current conditions and current facts known to
such Borrower and, as of the Closing Date, reflect such Borrower's good faith
and reasonable estimates of its future financial performance and of the other
information projected therein for the period set forth therein.
Z. ASSIGNMENT OF REPRESENTATIONS, WARRANTIES, COVENANTS,
INDEMNITIES AND RIGHTS. Agent shall have received a duly executed copies of
Assignments of Representations, Warranties, Covenants, Indemnities and Rights in
respect of RII's and/or the Applicable Borrower's rights under each of the
Acquisition Agreements, which assignment shall be expressly permitted under the
applicable Acquisition Agreements or shall have been consented to by the
Seller(s) in writing.
AA. OTHER DOCUMENTS. Such other certificates, documents and
agreements respecting any Credit Party as Agent may, in its sole discretion,
request.
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ANNEX E (SECTION 4.1(a))
TO
CREDIT AGREEMENT
FINANCIAL STATEMENTS AND PROJECTIONS -- REPORTING
Borrowers shall deliver or cause to be delivered to Agent or to Agent
and Lenders, as indicated, the following:
(a) MONTHLY FINANCIALS. To Agent and Lenders, within thirty (30)
days after the end of each Fiscal Month, financial information regarding
Borrowers and their Subsidiaries, certified by the Chief Financial Officer of
Borrower Representative, consisting of consolidated and consolidating (i)
unaudited balance sheets as of the close of such Fiscal Month and the related
statements of income and cash flow for that portion of the Fiscal Year ending as
of the close of such Fiscal Month; (ii) unaudited statements of income and cash
flows for such Fiscal Month, setting forth in comparative form the figures for
the corresponding period in the prior year and the figures contained in the
Projections for such Fiscal Year, all prepared in accordance with GAAP (subject
to normal year-end adjustments); and (iii) a summary of the outstanding balance
of all Intercompany Notes as of the last day of that Fiscal Month. Such
financial information shall be accompanied by the certification of the Chief
Financial Officer of Borrower Representative that (i) such financial information
presents fairly in accordance with GAAP (subject to normal year-end adjustments)
the financial position and results of operations of Borrowers and their
Subsidiaries, on a consolidated and consolidating basis, in each case as at the
end of such month and for the period then ended and (ii) any other information
presented is true, correct and complete in all material respects and that there
was no Default or Event of Default in existence as of such time or, if a Default
or Event of Default shall have occurred and be continuing, describing the nature
thereof and all efforts undertaken to cure such Default or Event of Default;
(b) QUARTERLY FINANCIALS. To Agent and Lenders, within forty-five
(45) days after the end of each Fiscal Quarter (or, in the event the Securities
and Exchange Commission ("SEC") shall have provided its written consent
extending the time for filing RII's applicable 10Q, an additional period not to
exceed the lesser of (i) the period provided by the SEC in such written consent
and (ii) fourteen (14) days), consolidated and consolidating financial
information regarding Borrowers and their Subsidiaries, certified by the Chief
Financial Officer of Borrower Representative, including (i) unaudited balance
sheets as of the close of such Fiscal Quarter and the related statements of
income and cash flow for that portion of the Fiscal Year ending as of the close
of such Fiscal Quarter and (ii) unaudited statements of income and cash flows
for such Fiscal Quarter, in each case setting forth in comparative form the
figures for the corresponding period in the prior year and the figures contained
in the Projections for such Fiscal Year, all prepared in accordance with GAAP
(subject to normal year-end adjustments). Such financial information shall be
accompanied by (A) a statement in reasonable detail (each, a "COMPLIANCE
CERTIFICATE" showing the calculations used in determining compliance with each
of the financial covenants set forth on ANNEX G which is tested on a quarterly
basis and (B) the certification of the Chief Financial Officer of Borrower
Representative that (i) such financial information presents fairly in accordance
with GAAP (subject to normal year-end adjustments) the financial position,
results of operations and statements of cash flows of Borrowers and their
Subsidiaries, on both a
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consolidated and consolidating basis, as at the end of such Fiscal Quarter and
for the period then ended, (ii) any other information presented is true, correct
and complete in all material respects and that there was no Default or Event of
Default in existence as of such time or, if a Default or Event of Default shall
have occurred and be continuing, describing the nature thereof and all efforts
undertaken to cure such Default or Event of Default. In addition, Borrowers
shall deliver to Agent and Lenders, at the time when the quarterly financial
information is due with respect to such Fiscal Quarter, a management discussion
and analysis which includes a comparison to budget for that Fiscal Quarter and a
comparison of performance for that Fiscal Quarter to the corresponding period in
the prior year;
(c) OPERATING PLAN. To Agent and Lenders, as soon as available, but
not later than thirty (30) days after the end of each Fiscal Year, an annual
operating plan for each Borrower, approved by the Board of Directors of such
Borrower, for the following year, which will include a statement of all of the
material assumptions on which such plan is based, will include monthly balance
sheets and a monthly budget for the following year and will integrate sales,
gross profits, operating expenses, operating profit, cash flow projections and
Borrowing Availability projections all prepared on the same basis and in similar
detail as that on which operating results are reported (and in the case of cash
flow projections, representing management's good faith estimates of future
financial performance based on historical performance), and including plans for
personnel, Capital Expenditures and facilities;
(d) ANNUAL AUDITED FINANCIALS. To Agent and Lenders, within ninety
(90) days after the end of each Fiscal Year, audited Financial Statements for
Borrowers and their Subsidiaries on a consolidated and (unaudited) consolidating
basis, consisting of balance sheets and statements of income and retained
earnings and cash flows, setting forth in comparative form in each case the
figures for the previous Fiscal Year, which Financial Statements shall be
prepared in accordance with GAAP, certified without qualification, by an
independent certified public accounting firm of national standing or otherwise
acceptable to Agent. Such Financial Statements shall be accompanied by (i) a
statement prepared in reasonable detail showing the calculations used in
determining compliance with each of the financial covenants set forth on ANNEX
G, (ii) a report from such accounting firm to the effect that, in connection
with their audit examination, nothing has come to their attention to cause them
to believe that a Default or Event of Default has occurred (or specifying those
Defaults and Events of Default that they became aware of), it being understood
that such audit examination extended only to accounting matters and that no
special investigation was made with respect to the existence of Defaults or
Events of Default, (iii) a letter addressed to Agent, on behalf of itself and
Lenders, in form and substance reasonably satisfactory to Agent and subject to
standard qualifications taken by nationally recognized accounting firms, signed
by such accounting firm acknowledging that Agent and Lenders are entitled to
rely upon such accounting firm's certification of such audited Financial
Statements, (iv) the annual letters to such accountants in connection with their
audit examination detailing contingent liabilities and material litigation
matters, and (v) the certification of the Chief Executive Officer or Chief
Financial Officer of Borrowers that all such Financial Statements present fairly
in accordance with GAAP the financial position, results of operations and
statements of cash flows of Borrowers and their Subsidiaries on a consolidated
and consolidating basis, as at the end of such year and for the period then
ended, and that there was no Default or Event of Default in existence as of such
time
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or, if a Default or Event of Default shall have occurred and be continuing,
describing the nature thereof and all efforts undertaken to cure such Default or
Event of Default;
(e) MANAGEMENT LETTERS. To Agent and Lenders, within five (5)
Business Days after receipt thereof by any Credit Party, copies of all
management letters, exception reports or similar letters or reports received by
such Credit Party from its independent certified public accountants;
(f) DEFAULT NOTICES. To Agent and Lenders, as soon as practicable,
and in any event within five (5) Business Days after an executive officer of any
Borrower has actual knowledge of the existence of any Default, Event of Default
or other event which has had a Material Adverse Effect, telephonic or telecopied
notice specifying the nature of such Default or Event of Default or other event,
including the anticipated effect thereof, which notice, if given telephonically,
shall be promptly confirmed in writing on the next Business Day;
(g) SEC FILINGS AND PRESS RELEASES. To Agent and Lenders, promptly
upon their becoming available, copies of: (i) all Financial Statements,
reports, notices and proxy statements made publicly available by any Credit
Party to its security holders; (ii) all regular and periodic reports and all
registration statements and prospectuses, if any, filed by any Credit Party with
any securities exchange or with the Securities and Exchange Commission or any
governmental or private regulatory authority; and (iii) all press releases and
other statements made available by any Credit Party to the public concerning
material changes or developments in the business of any such Person;
(h) SUBORDINATED DEBT AND EQUITY NOTICES. To Agent, as soon as
practicable, copies of all material written notices given or received by any
Credit Party with respect to any Subordinated Debt or Stock of such Person, and,
within two (2) Business Days after any Credit Party obtains knowledge of any
matured or unmatured event of default with respect to any Subordinated Debt,
notice of such event of default;
(i) SUPPLEMENTAL SCHEDULES. To Agent, supplemental disclosures, if
any, required by SECTION 5.6 of the Agreement;
(j) LITIGATION. To Agent in writing, promptly upon learning
thereof, notice of any Litigation commenced or threatened against any Credit
Party that (i) seeks damages in excess of $100,000, (ii) seeks injunctive
relief, (iii) is asserted or instituted against any Plan, its fiduciaries or its
assets or against any Credit Party or ERISA Affiliate in connection with any
Plan, (iv) alleges criminal misconduct by any Credit Party, (v) alleges the
violation of any law regarding, or seeks remedies in connection with, any
Environmental Liabilities or (vi) involves any product recall;
(k) INSURANCE NOTICES. To Agent, disclosure of losses or
casualties required by SECTION 5.4 of the Agreement;
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(l) LEASE DEFAULTS. To Agent, copies of (i) any and all default
notices received under or with respect to any leased location or public
warehouse where Collateral is located, and (ii) such other notices or documents
as Agent may request in its reasonable discretion; and
(m) OTHER DOCUMENTS. To Agent and Lenders, such other financial
and other information respecting any Credit Party's business or financial
condition as Agent or any Lender shall, from time to time, request.
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ANNEX F (SECTION 4.1(b))
TO
CREDIT AGREEMENT
COLLATERAL REPORTS
Borrowers shall deliver or cause to be delivered the following:
(a) To Agent, upon its request, and in no event less frequently
than ten (10) days after the end of each Fiscal Month (together with a copy of
all or any part of such delivery requested by any Lender in writing after the
Closing Date), each of the following:
(i) a Borrowing Base Certificate with respect to each
Borrower, in each case accompanied by such supporting detail and
documentation as shall be requested by Agent in its reasonable
discretion;
(ii) with respect to each Borrower, a summary of Inventory
by location and type with a supporting perpetual Inventory report, in
each case accompanied by such supporting detail and documentation as
shall be requested by Agent in its reasonable discretion;
(iii) with respect to each Borrower, a monthly trial balance
showing Accounts outstanding aged from invoice due date as follows: 1
to 30 days, 31 to 60 days, 61 to 90 days and 91 days or more,
accompanied by such supporting detail and documentation as shall be
requested by Agent in its reasonable discretion; and
(iv) with respect to each Borrower, a summary of the
identity of each Account Debtor possessing any contra-account(s) and
a statement of the amount of such contra-accounts together with any
information relating to the assertion or exercise by any such Account
Debtors of any offset or recoupment regarding such contra-account(s).
(b) To Agent, on or before the third Business Day of each week, in
respect of the immediately preceding week, or at such more frequent intervals as
Agent may request from time to time (together with a copy of all or any part of
such delivery requested by any Lender in writing after the Closing Date),
collateral reports with respect to each Borrower, including all additions and
reductions (cash and non-cash) with respect to Accounts of such Borrower, in
each case accompanied by such supporting detail and documentation as shall be
requested by Agent in its reasonable discretion;
(c) To Agent, at the time of delivery of each of the monthly
Financial Statements delivered pursuant to ANNEX E, a reconciliation of the
Accounts trial balance and month-end Inventory reports of each Borrower to such
Borrower's general ledger and monthly Financial Statements delivered pursuant to
such ANNEX E, in each case accompanied by such supporting detail and
documentation as shall be requested by Agent in its reasonable discretion;
(d) To Agent, at the time of delivery of each of the annual
Financial Statements delivered pursuant to ANNEX E, (i) a listing of government
contracts of each Borrower subject to
F-1
<PAGE>
the Federal Assignment of Claims Act of 1940; and (ii) a list of any
applications for the registration of any Patent, Trademark or Copyright with the
United States Patent and Trademark Office, the United States Copyright Office or
any similar office or agency which any Credit Party thereof has filed in the
prior Fiscal Quarter;
(e) Each Borrower, at its own expense, shall deliver to Agent the
results of each physical verification, if any, which such Borrower or any of its
Subsidiaries may in their discretion have made, or caused any other Person to
have made on their behalf, of all or any portion of their Inventory (and, if a
Default or an Event of Default shall have occurred and be continuing, each
Borrower shall, upon the request of Agent, conduct, and deliver the results of,
such physical verifications as Agent may require);
(f) Each Borrower, at its own expense, shall deliver to Agent such
appraisals of its assets as Agent may request at any time after the occurrence
and during the continuance of a Default or an Event of Default, such appraisals
to be conducted by an appraiser, and in form and substance, satisfactory to
Agent; and
(g) Such other reports, statements and reconciliations with respect
to the Borrowing Base or Collateral of any or all Credit Parties as Agent shall
from time to time request in its reasonable discretion.
F-2
<PAGE>
ANNEX G (SECTION 6.10)
TO
CREDIT AGREEMENT
FINANCIAL COVENANTS
Borrowers shall not breach or fail to comply with any of the following
financial covenants, each of which shall be calculated in accordance with GAAP
consistently applied:
(a) MAXIMUM CAPITAL EXPENDITURES. Borrowers and their Subsidiaries
on a consolidated basis shall not make Capital Expenditures during any Fiscal
Year that exceed in the aggregate Pro Forma Depreciation for that Fiscal Year;
PROVIDED, HOWEVER, that the amount of permitted Capital Expenditures referenced
above will be increased in any period by the positive amount equal to the lesser
of (a) 50% of the amount of permitted Capital Expenditures for the immediately
prior period, and (b) the amount (if any), equal to the difference obtained by
taking the Capital Expenditures limit specified above for the immediately
preceding Fiscal Year MINUS the actual amount of any Capital Expenditures
expended during such preceding Fiscal Year (the "CARRY OVER AMOUNT"), and for
purposes of measuring compliance herewith, the Carry Over Amount shall be deemed
to be the last amount spent on Capital Expenditures in that succeeding Fiscal
Year.
(b) MINIMUM FIXED CHARGE COVERAGE RATIO. RII and its Subsidiaries
shall have on a consolidated basis at the end of each Fiscal Quarter set forth
below, a Fixed Charge Coverage Ratio for the 12-month period then ended of not
less than the following (provided that for the Fiscal Quarters ending on or
before September 30, 1998, the Fixed Charge Coverage Ratio shall be calculated
on the basis of the ratio of Annualized Pro Forma EBITDA to Annualized Fixed
Charges instead of Pro Forma EBITDA and Fixed Charges for the 12-month periods
then ended):
QUARTERLY PERIOD ENDING MINIMUM FIXED CHARGE COVERAGE RATIO
----------------------- -----------------------------------
03/31/98 1.50 to 1.0
06/30/98 1.40 to 1.0
09/30/98 1.30 to 1.0
12/31/98 1.28 to 1.0
03/31/99 1.30 to 1.0
06/30/99 1.35 to 1.0
09/30/99 1.38 to 1.0
12/31/99 1.40 to 1.0
03/31/00 1.40 to 1.0
06/30/00 1.40 to 1.0
09/30/00 1.40 to 1.0
12/31/00 1.39 to 1.0
03/31/01 1.38 to 1.0
06/30/01 1.37 to 1.0
09/30/01 1.37 to 1.0
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<PAGE>
QUARTERLY PERIOD ENDING MINIMUM FIXED CHARGE COVERAGE RATIO
----------------------- -----------------------------------
12/31/01 1.36 to 1.0
03/31/02 1.38 to 1.0
06/30/02 1.41 to 1.0
09/30/02 1.43 to 1.0
12/31/02 1.45 to 1.0
03/31/03 1.43 to 1.0
06/30/03 1.41 to 1.0
09/30/03 and each Fiscal Quarter 1.40 to 1.0
ending thereafter
(c) MINIMUM EBITDA. RII and its Subsidiaries on a consolidated basis
shall have, at the end of each Fiscal Quarter set forth below, EBITDA for the
12-month period then ended of not less than the following (provided that for the
Fiscal Quarters ending on or before September 30, 1998, compliance with this
covenant will be calculated on the basis of Annualized EBITDA instead of EBITDA
for the 12-month period then ended):
QUARTERLY PERIOD ENDING MINIMUM EBITDA
----------------------- --------------
03/31/98 $30,000,000
06/30/98 $30,000,000
09/30/98 $31,820,000
12/31/98 $32,870,000
03/31/99 $33,920,000
06/30/99 $34,970,000
09/30/99 $36,010,000
12/31/99 $36,650,000
03/31/00 $37,290,000
06/30/00 $37,930,000
09/30/00 $38,560,000
12/31/00 $39,230,000
03/31/01 $39,900,000
06/30/01 $40,570,000
09/30/01 $41,230,000
12/31/01 $41,850,000
03/31/02 $42,470,000
06/30/02 $43,100,000
09/30/02 $43,720,000
12/31/02 $44,330,000
03/31/03 $44,940,000
06/30/03 $45,560,000
09/30/03 $46,170,000
G-2
<PAGE>
QUARTERLY PERIOD ENDING MINIMUM EBITDA
----------------------- --------------
12/31/03 and
each Fiscal Quarter
ending thereafter $46,850,000
(d) MINIMUM CONSOLIDATED NET WORTH. RII and its Subsidiaries shall
maintain at all times Consolidated Net Worth equal to or greater than the
following amounts measured as of the last day of the following respective Fiscal
Quarters:
FISCAL QUARTER ENDING MINIMUM CONSOLIDATED NET WORTH
--------------------- ------------------------------
03/31/98 $45,284,000
06/30/98 $45,284,000
09/30/98 $45,284,000
12/31/98 $45,284,000
03/31/99 $52,320,000
06/30/99 $52,320,000
09/30/99 $52,320,000
12/31/99 $52,320,000
03/31/00 $60,930,000
06/30/00 $60,930,000
09/30/00 $60,930,000
12/31/00 $60,930,000
03/31/01 $71,260,000
06/30/01 $71,260,000
09/30/01 $71,260,000
12/31/01 $71,260,000
03/31/02 $83,224,000
06/30/02 $83,224,000
09/30/02 $83,224,000
12/31/02 $83,224,000
03/31/03 $97,808,000
06/30/03 $97,808,000
09/30/03 $97,808,000
12/31/03 $97,808,000
G-3
<PAGE>
FISCAL QUARTER ENDING MINIMUM CONSOLIDATED NET WORTH
--------------------- ------------------------------
03/31/04 $114,256,000
06/30/04 $114,256,000
09/30/04 $114,256,000
12/31/04 $114,256,000
03/31/05 $132,773,000
and
each Fiscal Quarter
ending thereafter
(e) FUNDED DEBT TO PRO FORMA EBITDA. RII and its Subsidiaries on a
consolidated basis shall have a ratio of (i) Funded Debt measured as of the last
day of each Fiscal Quarter to (ii) Pro Forma EBITDA for the for the 12-month
period then ended of not more than the following:
QUARTERLY PERIOD ENDING FUNDED DEBT TO
----------------------- PRO FORMA EBITDA
----------------
03/31/98 5.6 to 1.0
06/30/98 5.6 to 1.0
09/30/98 5.6 to 1.0
12/31/98 5.4 to 1.0
03/31/99 5.2 to 1.0
06/30/99 5.0 to 1.0
09/30/99 4.8 to 1.0
12/31/99 4.7 to 1.0
03/31/00 4.6 to 1.0
06/30/00 4.5 to 1.0
09/30/00 4.4 to 1.0
12/31/00 4.4 to 1.0
03/31/01 4.2 to 1.0
06/30/01 4.1 to 1.0
09/30/01 4.0 to 1.0
Unless otherwise specifically provided herein, any accounting term
used in the Agreement shall have the meaning customarily given such term in
accordance with GAAP, and all financial computations hereunder shall be computed
in accordance with GAAP consistently applied. That certain items or
computations are explicitly modified by the phrase "in accordance with GAAP"
shall in no way be construed to limit the foregoing. If any "Accounting
Changes" (as defined below) occur and such changes result in a change in the
calculation of the financial covenants, standards or terms used in the Agreement
or any other Loan Document, then
G-4
<PAGE>
Borrowers, Agent and Lenders agree to enter into negotiations in order to amend
such provisions of the Agreement so as to equitably reflect such Accounting
Changes with the desired result that the criteria for evaluating Borrowers' and
their Subsidiaries' financial condition shall be the same after such Accounting
Changes as if such Accounting Changes had not been made; provided, however, that
the agreement of Requisite Lenders to any required amendments of such provisions
shall be sufficient to bind all Lenders. "ACCOUNTING CHANGES" means (a) changes
in accounting principles required by the promulgation of any rule, regulation,
pronouncement or opinion by the Financial Accounting Standards Board of the
American Institute of Certified Public Accountants (or successor thereto or any
agency with similar functions), (b) changes in accounting principles concurred
in by any Borrower's certified public accountants; (c) purchase accounting
adjustments under A.P.B. 16 and/or 17 and EITF 88-16, and the application of the
accounting principles set forth in FASB 109, including the establishment of
reserves pursuant thereto and any subsequent reversal (in whole or in part) of
such reserves; and (d) the reversal of any reserves established as a result of
purchase accounting adjustments. All such adjustments resulting from
expenditures made subsequent to the Closing Date (including capitalization of
costs and expenses or payment of pre-Closing Date liabilities) shall be treated
as expenses in the period the expenditures are made and deducted as part of the
calculation of EBITDA in such period. If Agent, Borrowers and Requisite Lenders
agree upon the required amendments, then after appropriate amendments have been
executed and the underlying Accounting Change with respect thereto has been
implemented, any reference to GAAP contained in the Agreement or in any other
Loan Document shall, only to the extent of such Accounting Change, refer to
GAAP, consistently applied after giving effect to the implementation of such
Accounting Change. If Agent, Borrowers and Requisite Lenders cannot agree upon
the required amendments within thirty (30) days following the date of
implementation of any Accounting Change, then all Financial Statements delivered
and all calculations of financial covenants and other standards and terms in
accordance with the Agreement and the other Loan Documents shall be prepared,
delivered and made without regard to the underlying Accounting Change.
G-5
<PAGE>
ANNEX H (SECTION 9.9(a))
to
CREDIT AGREEMENT
WIRE TRANSFER INFORMATION
Agent:
- -----
Name: General Electric Capital Corporation
Bank: Bankers Trust Company
New York, New York
ABA No.: 021001033
Account No.: 50-232-854
Account Name: GECC/CFC Depository
Reference: Recycling Ind {CFC-4440}
Responsible
Individuals: Karen Klotz, Fran Krause, or Karen Austin
Lenders:
- -------
Name: BankBoston, N.A., Boston, MA
Bank: BankBoston, N.A., Boston, MA
ABA No.: 011-000-390
Reference: Recycling Industries
Attn: Patricia Gaine
BankBoston, N.A.
Commercial Loan Services
BankBoston
100 Rustcraft Rd.
Dedham, MA
Tel: (617) 467-2060
Fax: (617) 467-2151
ALL LETTER OF CREDIT FEES SHOULD BE
WIRED TO THE FOLLOWING:
BankBoston, N.A.
Boston, MA
ABA: 011-000-390
Reference: Recycling Industries
Attn: Cam Duong
Trade Services
H-1
<PAGE>
ANNEX I (SECTION 11.10)
TO
CREDIT AGREEMENT
NOTICE ADDRESSES
(A) If to Agent or GE Capital, at
General Electric Capital Corporation
10 South LaSalle Street - Suite 2700
Chicago, Illinois 60603
Attention: Recycling Account Manager
Telecopier No.: (312) 419-5992
Telephone No.: (312) 419-0985
with copies to:
Latham & Watkins
Suite 5800, Sears Tower
Chicago, Illinois 60606
Attention: Phil Perzek
Telecopier No.: (312) 876-7700
Telephone No.: (312) 993-9767
AND
General Electric Capital Corporation
201 High Ridge Road
Stamford, Connecticut 06927-5100
Attention: Corporate Counsel - Commercial Finance
Telecopier No.: (203) 316-7889
Telephone No.: (203) 316-7552
(B) If to BankBoston, to BankBoston, N.A. at
100 Federal Street
MABOS 01-09-06
Boston, MA 02110
Attention: Brent E. Shay
Telecopier No.: (617) 434-6241
Telephone No.: (617) 434-3556
I-1
<PAGE>
with copies to Bingham Dana LLP:
150 Federal Street
Boston, MA 02110
Attention: Linda J. Groves
Telecopier No.: (617) 951-8736
Telephone No.: (617) 951-8374
(C) If to any Borrower, to Borrower Representative, at
Recycling Industries, Inc.
Suite 211
384 Inverness Drive South
Englewood, CO 80112
Attention: Chief Financial Officer
Telecopier No.: (303) 790-4252
Telephone No.: (303) 790-7372
I-2
<PAGE>
ANNEX J (ANNEX A - COMMITMENTS)
TO
CREDIT AGREEMENT
Lender(s)
Revolving Loan Commitment ---------
(including a Swing Line Commitment
of $4,500,000)
$22,500,000 GE Capital
Term Loan A Commitment:
$20,000,000
Term Loan B Commitment:
$20,000,000
Acquisition Loan Commitment:
$20,000,000
J-1
<PAGE>
Lender(s)
Revolving Loan Commitment ----------
$22,500,000 BankBoston
Term Loan A Commitment:
$20,000,000
Term Loan B Commitment:
$20,000,000
Acquisition Loan Commitment:
$12,500,000
J-2
