<PAGE>
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):
June 5, 1998 (May 21, 1998)
RECYCLING INDUSTRIES, INC.
- --------------------------------------------------------------------------------
(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
of incorporation) Number)
9780 South Meridian Blvd., Suite 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
Not Applicable
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(Former name or former address, if changed since last report.)
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On May 21, May 22, May 27 and May 28, the Registrant completed the
acquisitions listed below. The purchase price for each acquisition is
subject to post-closing adjustments pursuant to the Asset Purchase Agreements.
ACQUISITION OF THE ASSETS OF C&J CRUSHING, INC.
On May 21, 1998, Recycling Industries, of Greensboro Inc., a wholly-owned
subsidiary of the Registrant, acquired substantially all of the scrap metals
recycling assets and business of C&J Crushing, Inc. ("C&J Crushing"), a
privately held North Carolina corporation with operations in the Landis, North
Carolina area.
The assets owned by C&J Crushing consist primarily of heavy equipment,
tools and rolling stock used in the business of recycling ferrous and
non-ferrous metals. The Registrant also purchased from C&J Crushing
approximately 3.5 acres of real property, buildings and improvements used in
the metals recycling business.
The total purchase price for C&J Crushing was $1,450,000, comprised of
$1,160,000 of cash and 580 shares of the Registrant's Series L Redeemable
Convertible Preferred Stock valued at $290,000, or $500 per share. The
purchase price was financed, in part, from the Registrant's credit facility
and proceeds from the New Subordinated Notes 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 C&J
Crushing.
ACQUISITION OF THE ASSETS OF PRO RECYCLING, LLC
On May 22, 1998, Recycling Industries of Wisconsin, Inc., a wholly-owned
subsidiary of the Registrant, acquired substantially all of the scrap metals
recycling assets and business of Pro Recycling, L.L.C. ("Pro Recycling"), a
privately-held Wisconsin limited liability company with operations in the
Milwaukee, Wisconsin area.
The assets of Pro Recycling consist primarily of heavy equipment, tools
and rolling stock used in the business of recycling ferrous and non-ferrous
metals. Also as part of the transaction the Registrant also purchased from
Lewinsky Iron and Metal and AA Investment three separate parcels of real
property, buildings and improvements used in the metals recycling business.
The total purchase price for Pro Recycling was $3,000,000, comprised of
$2,485,000 of cash and 1,030 shares of the Registrant's Series M Redeemable
Convertible Preferred Stock valued at $515,000, or $500 per share. The cash
portion of the purchase price was financed, in part, from the Registrant's
credit facility and proceeds from the New Subordinated
<PAGE>
Notes 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 Pro
Recycling.
ACQUISITION OF THE ASSETS OF REPUBLIC ALLOYS, INC.
On May 22, 1998, Recycling Industries of Charlotte, Inc., a wholly-owned
subsidiary of the Registrant, acquired substantially all of the scrap metals
recycling assets and business of Republic Alloys, Inc. ("Republic"), a privately
held metals recycler and crane operator with operations in the Charlotte, North
Carolina area.
The assets acquired from Republic consist of heavy equipment, tools and
rolling stock used in the business of recycling ferrous and non-ferrous metals.
The Registrant also purchased approximately 13.5 acres of real property,
buildings and improvements used in the metals recycling business.
The total purchase price for Republic was $12,868,600, comprised of
$10,160,000 in cash, 5,080 shares of the Registrant's Series K Redeemable
Convertible Preferred Stock having a stated value of $2,540,000, or $500 per
share and 30,000 shares of the Registrant's Common Stock, $.001 par value per
share, having a stated value of $168,600, or $5.62 per share.
The cash portion of the purchase price was financed, in part, from the
Registrant's credit facility and proceeds from the New Subordinated Notes
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 Republic.
The crane business will be retained by Republic.
ACQUISITION OF PEANUT CITY IRON & METAL CO., INC.
On May 28, 1998, Recycling Industries of Suffolk, Inc., a wholly-owned
subsidiary of the Registrant, acquired substantially all of the scrap metals
recycling assets and business of Peanut City Iron & Metal Co., Inc. ("Peanut
City"), a privately held metals recycler with operations in the Suffolk,
Virginia area.
The assets acquired from Peanut City consist of heavy equipment, tools and
rolling stock used in the business of recycling ferrous and non-ferrous metals.
The Registrant also purchased from Peanut City approximately 3 acres of real
property, buildings and improvements used in the metals recycling business.
<PAGE>
The total purchase price for Peanut City was $3,400,000, comprised of
$2,897,500 in cash and 1,005 shares of the Registrant's Series J Redeemable
Convertible Preferred Stock having a stated value of $502,500, or $500 per
share.
The cash portion of the purchase price was financed, in part, from the
Registrant's credit facility and proceeds from the New Subordinated Notes
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 Peanut
City.
<PAGE>
NEW SUBORDINATED NOTES
On May 29, 1998, the Registrant issued an additional $50 million of 13%
Subordinated Notes, due in 2005, placed to a group of investors that includes
Sun America Life Insurance Company (the "New Subordinated Notes"). The terms of
the New Subordinated Notes are substantially similar to the $60 million of
Subordinated Notes issued by the Registrant on December 4, 1997.
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.
(c) EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description
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<S> <C>
2.1 Asset Purchase Agreement dated May 21, 1998, by and among
Recycling Industries of Greensboro, Inc., a Colorado corporation,
Recycling Industries, Inc., a Colorado corporation, C&J Crushing,
Inc., a North Carolina corporation, Carl Drye and the Seller
Owners.*
2.2 Asset Purchase Agreement dated May 22, 1998, by and among
Recycling Industries of Wisconsin, Inc., a Colorado corporation,
Recycling Industries, Inc., a Colorado corporation, Pro
Recycling, L.L.C., a Wisconsin limited liability company,
Lewinsky Iron & Metal, Inc., a Wisconsin corporation, Steven
Lewinsky and Arthur Arnstein.*
2.3 Asset Purchase Agreement dated May 21, 1998, by and among
Recycling Industries of Charlotte, Inc., a Colorado corporation,
Recycling Industries, Inc., a Colorado corporation, Republic
Alloys, Inc., a North Carolina corporation, William B. Allen and
Mark W. Russo.*
<PAGE>
2.4 Asset Purchase Agreement dated May 27, 1998, by and among
Recycling Industries of Suffolk, Inc., a Colorado corporation,
Recycling Industries, Inc., a Colorado corporation, Peanut City
Iron & Metal Co., Inc., a Virginia corporation, George Ginsburg,
Fred Jacobson, Edwin Jacobson, Kenny Weinstein and Samuel Blum.
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 J
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 K
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 L
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 M
Secured Redeemable Convertible Preferred Stock of Recycling
Industries, Inc.
</TABLE>
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* These Exhibits have 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.
<PAGE>
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: June 5, 1998
By /s/ Thomas J. Wiens
------------------------
Thomas J. Wiens, Chairman and CEO
<PAGE>
EXHIBIT 2.1
<TABLE>
<CAPTION>
TABLE OF CONTENTS
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<S> <C>
ARTICLE 1
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE 2
ACQUISITION OF SELLER ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . 5
2.1 PURCHASE AND SALE OF THE SELLER ASSETS . . . . . . . . . . . . . . . . 5
2.2 EXCLUDED ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.3 COLLECTION OF ACCOUNTS RECEIVABLE. . . . . . . . . . . . . . . . . . . 7
ARTICLE 3
PURCHASE PRICE AND CLOSING. . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.1 PURCHASE PRICE FOR SELLER ASSETS . . . . . . . . . . . . . . . . . . . 7
3.2 ADJUSTMENT OF THE PURCHASE PRICE . . . . . . . . . . . . . . . . . . . 8
3.3 ALLOCATION OF THE PURCHASE PRICE . . . . . . . . . . . . . . . . . . . 9
3.4 ASSUMED CONTRACTS. . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.5 NO ASSUMPTION; DISCHARGE OF LIABILITIES. . . . . . . . . . . . . . . . 9
3.6 CLOSING OF THE PURCHASE. . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE 4
REPRESENTATIONS OF SELLER AND OFFICER . . . . . . . . . . . . . . . . . . . . 9
4.1 DUE ORGANIZATION AND QUALIFICATION . . . . . . . . . . . . . . . . . . 9
4.2 TITLE TO PROPERTY. . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.3 AUTHORITY OF SELLER; CONSENTS. . . . . . . . . . . . . . . . . . . . . 10
4.4 FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.5 OWNERSHIP. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.6 NO TAX LIENS; NO WAIVER. . . . . . . . . . . . . . . . . . . . . . . . 12
4.7 COMPLIANCE WITH LAWS . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.8 PERMITS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.9 LITIGATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.10 PRODUCT LIABILITY. . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.11 CONTRACT AND OTHER AGREEMENTS. . . . . . . . . . . . . . . . . . . . . 13
4.12 NOTES AND ACCOUNTS RECEIVABLE. . . . . . . . . . . . . . . . . . . . . 14
4.13 TANGIBLE PROPERTY. . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.14 INVENTORY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.15 INTELLECTUAL PROPERTY. . . . . . . . . . . . . . . . . . . . . . . . . 14
4.16 REAL PROPERTY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
(i)
<PAGE>
4.17 LIABILITIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.18 SUPPLIERS AND CUSTOMERS. . . . . . . . . . . . . . . . . . . . . . . . 15
4.19 EMPLOYEE BENEFIT PLANS . . . . . . . . . . . . . . . . . . . . . . . . 15
4.20 CURTAILMENT OF OPERATIONS. . . . . . . . . . . . . . . . . . . . . . . 17
4.21 EMPLOYEE RELATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 18
4.22 INSURANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
4.23 POWERS OF ATTORNEY . . . . . . . . . . . . . . . . . . . . . . . . . . 18
4.24 RELATIONSHIPS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
4.25 BROKERS' OR FINDER'S FEES. . . . . . . . . . . . . . . . . . . . . . . 18
4.26 EMPLOYEE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . 18
4.27 ENVIRONMENTAL MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . 18
4.28 COMPLIANCE WITH ADA. . . . . . . . . . . . . . . . . . . . . . . . . . 19
4.29 GUARANTEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
4.30 DISCLOSURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
4.31 EMPLOYMENT AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . 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. . . . . . . . . . . . . . . . . . . . . . . 20
5.4 AUTHORITY OF RII SUB AND THE PARENT. . . . . . . . . . . . . . . . . . 20
5.5 STOCK CONSIDERATION. . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.6 1934 ACT REGISTRATION. . . . . . . . . . . . . . . . . . . . . . . . . 21
5.7 BROKERS' OR FINDERS' FEES. . . . . . . . . . . . . . . . . . . . . . . 21
5.8 DISCLOSURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.9 BEST EFFORTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.10 EMPLOYMENT AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE 6
REGULATORY COMPLIANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.1 BULK SALES COMPLIANCE. . . . . . . . . . . . . . . . . . . . . . . . . 22
6.2 THE WARN ACT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.3 COBRA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.4 OTHER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE 7
ENVIRONMENTAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
7.1 ENVIRONMENTAL STUDIES. . . . . . . . . . . . . . . . . . . . . . . . . 23
7.2 ENVIRONMENTAL LIABILITIES. . . . . . . . . . . . . . . . . . . . . . . 23
(ii)
<PAGE>
7.3 OFF-SITE ENVIRONMENTAL CLAIMS. . . . . . . . . . . . . . . . . . . . . 23
ARTICLE 8
COVENANTS TO BE PERFORMED PRIOR TO THE CLOSING. . . . . . . . . . . . . . . . 24
8.1 TITLE INSURANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
8.2 SURVEY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
8.3 ZONING CERTIFICATE . . . . . . . . . . . . . . . . . . . . . . . . . . 24
8.4 MATERIAL ASSUMED CONTRACTS . . . . . . . . . . . . . . . . . . . . . . 24
8.5 POWER OF ATTORNEY. . . . . . . . . . . . . . . . . . . . . . . . . . . 25
8.6 CONDUCT OF BUSINESS. . . . . . . . . . . . . . . . . . . . . . . . . . 25
8.7 PRESERVATION OF BUSINESS . . . . . . . . . . . . . . . . . . . . . . . 25
8.8 NOTICE OF EVENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
8.9 EXAMINATIONS AND INVESTIGATIONS. . . . . . . . . . . . . . . . . . . . 25
8.10 NO NEGOTIATION BY SELLER OR OFFICER. . . . . . . . . . . . . . . . . . 26
8.11 SAFETY AUDITS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
8.12 REMOVAL OF WASTE MATERIALS . . . . . . . . . . . . . . . . . . . . . . 26
ARTICLE 9
CONDITIONS PRECEDENT TO THE OBLIGATIONOF RECYCLING TO CLOSE . . . . . . . . . 26
9.1 REPRESENTATIONS, WARRANTIES AND OTHER AGREEMENTS . . . . . . . . . . . 27
9.2 GOVERNMENTAL PERMITS AND APPROVALS . . . . . . . . . . . . . . . . . . 27
9.3 THIRD PARTY CONSENTS . . . . . . . . . . . . . . . . . . . . . . . . . 27
9.4 LITIGATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
9.5 REAL PROPERTY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
9.6 NO MATERIAL ADVERSE CHANGE . . . . . . . . . . . . . . . . . . . . . . 28
9.7 TRANSFER DOCUMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . 28
9.8 ENVIRONMENTAL ESCROW AGREEMENT . . . . . . . . . . . . . . . . . . . . 28
9.9 ASSIGNMENT OF CONTRACTS. . . . . . . . . . . . . . . . . . . . . . . . 28
9.10 POWER OF ATTORNEY. . . . . . . . . . . . . . . . . . . . . . . . . . . 28
9.11 SATISFACTION WITH DUE DILIGENCE, FINANCIAL PERFORMANCE
AND APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
9.12 SATISFACTION WITH ENVIRONMENTAL STUDIES AND SAFETY AUDITS. . . . . . . 29
9.13 SUBSCRIPTION AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . 29
9.14 BOOKS AND RECORDS. . . . . . . . . . . . . . . . . . . . . . . . . . . 29
9.15 RESOLUTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
9.16 CERTIFICATES, ETC. OF OFFICER AND SELLER . . . . . . . . . . . . . . . 29
9.17 PAYMENT OF SALES OR USE TAXES BY SELLER. . . . . . . . . . . . . . . . 29
9.18 PAYMENT OF ACCOUNTS PAYABLE; DISCHARGE OF LIABILITIES. . . . . . . . . 29
9.19 APPROVAL OF COUNSEL TO RECYCLING . . . . . . . . . . . . . . . . . . . 29
(iii)
<PAGE>
ARTICLE 10
CONDITIONS PRECEDENT TO THE OBLIGATION OF SELLER AND OFFICER TO CLOSE . . . . 29
10.1 REPRESENTATIONS, WARRANTIES AND OTHER AGREEMENTS . . . . . . . . . . . 30
10.2 GOVERNMENTAL PERMITS AND APPROVALS . . . . . . . . . . . . . . . . . . 30
10.3 LITIGATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
10.4 RESOLUTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
10.5 DESIGNATIONS OF STOCK CONSIDERATION. . . . . . . . . . . . . . . . . . 30
10.6 THE PURCHASE PRICE . . . . . . . . . . . . . . . . . . . . . . . . . . 30
10.7 ENVIRONMENTAL ESCROW AGREEMENT . . . . . . . . . . . . . . . . . . . . 30
ARTICLE 11
ACTIONS TO BE TAKEN AT THE CLOSING. . . . . . . . . . . . . . . . . . . . . . 30
11.1 TRANSFER DOCUMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . 31
11.2 THE PURCHASE PRICE . . . . . . . . . . . . . . . . . . . . . . . . . . 31
11.3 SUBSCRIPTION AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . 31
11.4 ENVIRONMENTAL ESCROW AGREEMENT . . . . . . . . . . . . . . . . . . . . 31
11.5 GENERAL WARRANTY DEED. . . . . . . . . . . . . . . . . . . . . . . . . 31
11.6 CONSENTS TO ASSIGNMENT . . . . . . . . . . . . . . . . . . . . . . . . 31
11.7 CLOSING CERTIFICATE OF SELLER. . . . . . . . . . . . . . . . . . . . . 31
11.8 CLOSING CERTIFICATE OF OFFICER . . . . . . . . . . . . . . . . . . . . 31
11.9 CLOSING CERTIFICATE OF PARENT AND RII SUB. . . . . . . . . . . . . . . 31
11.10 CERTIFICATE REGARDING RESOLUTIONS OF SELLER. . . . . . . . . . . . . . 31
11.11 CERTIFICATE REGARDING RESOLUTIONS OF RII SUB AND PARENT. . . . . . . . 31
11.12 FUNDS FLOW STATEMENT; REAL PROPERTY CLOSING. . . . . . . . . . . . . . 31
11.13 TITLES TO VEHICLES, MACHINERY AND EQUIPMENT. . . . . . . . . . . . . . 32
ARTICLE 12
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION . . . . . . . . . 32
12.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . 32
12.2 INDEMNITY AGREEMENTS OF SELLER AND THE SELLER OWNERS . . . . . . . . . 33
12.3 INDEMNITY AGREEMENT OF RII SUB AND THE PARENT. . . . . . . . . . . . . 34
12.4 INDEMNIFICATION PROCEDURE FOR THIRD PARTY CLAIMS . . . . . . . . . . . 34
12.5 LIMIT ON OBLIGATIONS . . . . . . . . . . . . . . . . . . . . . . . . . 35
12.6 GOOD FAITH EFFORTS TO SETTLE DISPUTES. . . . . . . . . . . . . . . . . 35
12.7 FEES AND EXPENSES. . . . . . . . . . . . . . . . . . . . . . . . . . . 35
12.8 LITIGATION SUPPORT . . . . . . . . . . . . . . . . . . . . . . . . . . 35
(iv)
<PAGE>
ARTICLE 13
TERMINATION OF AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . 36
13.1 TERMINATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
13.2 SURVIVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
ARTICLE 14
CERTAIN ADDITIONAL AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . 37
14.1 PUBLIC STATEMENTS; CONFIDENTIALITY OF INFORMATION. . . . . . . . . . . 37
14.2 REASSIGNMENT OF SELLER RECEIVABLES . . . . . . . . . . . . . . . . . . 37
14.3 EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
14.4 WAIVERS AND CONSENTS . . . . . . . . . . . . . . . . . . . . . . . . . 38
14.5 NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
14.6 FURTHER ASSURANCES . . . . . . . . . . . . . . . . . . . . . . . . . . 39
14.7 RETENTION OF/ACCESS TO BUSINESS RECORDS. . . . . . . . . . . . . . . . 39
14.8 ENTIRE AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
14.9 CONSTRUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
14.10 RIGHTS OF THIRD PARTIES. . . . . . . . . . . . . . . . . . . . . . . . 40
14.11 HEADINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
14.12 GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
14.13 SUBMISSION TO JURISDICTION; WAIVERS. . . . . . . . . . . . . . . . . . 40
14.14 PARTIES IN INTEREST. . . . . . . . . . . . . . . . . . . . . . . . . . 41
14.15 COUNTERPARTS AND FACSIMILE SIGNATURES. . . . . . . . . . . . . . . . . 41
14.16 SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
14.17 CORPORATE AUTHORITY. . . . . . . . . . . . . . . . . . . . . . . . . . 41
14.18 REAL PROPERTY TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . 42
LIST OF EXHIBITS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
LIST OF SCHEDULES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
</TABLE>
<PAGE>
ASSET PURCHASE AGREEMENT
THIS AGREEMENT is made as of the 21st day of May, 1998, by and among
Recycling Industries of Greensboro, a Colorado corporation ("RII Sub"),
Recycling Industries, Inc., a Colorado corporation ("Parent"), C&J Crushing,
Inc., a North Carolina corporation ("Seller"), Carl Drye, an individual
shareholder and officer of Seller ("Officer"), and each of the individual
owners of voting securities of Seller listed on Schedule 4.5 hereto (the
"Seller Owners"). Throughout this Agreement, RII Sub and the Parent may be
collectively referred to as "Recycling." 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 nonferrous scrap metal recycling business conducted by Seller at
its facility located in Landis, 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 to RII Sub;
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, Officer and the Seller Owners 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.
1.1 "Acquisition" means the acquisition of the Seller Assets by RII
Sub from Seller.
<PAGE>
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 scrap metal recycling business and
operations as conducted by Seller on March 27, 1998, and subsequent thereto,
as a going concern.
1.4 "Closing" means the consummation of the Transaction.
1.5 "Closing Date" means the date on which the Closing occurs.
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.
1.7 "Closing Notification" means the notification of the Closing Date
given by RII Sub pursuant to Section 3.6.
1.8 "Current Assets" means current assets as defined by GAAP, net of
any reserves, excluding cash and cash equivalents and marketable securities.
1.9 "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.
1.10 "Environmental Liabilities" has the meaning set forth in Section
7.2.
1.11 "ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
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1.12 "GAAP" means generally accepted accounting principles
consistently applied in the United States.
1.13 "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.
1.14 "Intellectual Property" has the meaning set forth in Section
2.1(e).
1.15 "Inventory" means Unprocessed Inventory, Processed Inventory and
Supply Inventory, collectively.
1.16 "Inventory Date" means a date not more than 5 business days
preceding the Closing on which a physical inventory is taken pursuant to
Section 3.2(a).
1.17 "IRC" means the Internal Revenue Code of 1986, as amended.
1.18 "Knowledge" with respect to individuals means actual or
constructive knowledge after reasonable investigation and with respect to
corporations means Knowledge of the executive officers and directors of the
corporation.
1.19 "Lender" means Merrill Lynch & Co., Jefferies and Company, Inc.,
BT/Alex. Brown, Imperial Capital LLC and Piper Jaffray Inc., collectively.
1.20 "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.
1.21 "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.
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1.22 "Material Assumed Contracts" means all Assumed Contracts other
than (a) contracts which do not require payment by Seller of $10,000 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 $10,000 or more per year, and (c) contracts terminable upon notice
of 60 days or less and which do not require expenditures by Seller of $10,000
or more per year. The Material Assumed Contracts are listed on Schedule
1.22.
1.23 "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).
1.24 "Owned Facility" means the real property and associated fixtures
owned by Seller located at 3775 Mt. Hope Church Road, Salisbury, North
Carolina and employed in the Business, as specifically described on Schedule
2.1(a).
1.25 "Parent Common Stock" means the common stock, $.001 par value per
share, of Parent.
1.26 "Parent Series L Preferred" means the Redeemable Convertible
Preferred Stock of Parent described in the Designation of Series L Redeemable
Convertible Preferred Stock attached hereto as EXHIBIT A.
1.27 "Permits" means all licenses, permits, orders and approvals of
any federal, state or local governmental or regulatory bodies that are
material to or required for the conduct of the Business.
1.28 "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.
1.29 "Processed Inventory" means all ferrous and nonferrous 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.
1.30 "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.
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1.31 "Seller Financial Statements" has the meaning set forth in Section
4.4(b).
1.32 "Seller Payables" means all of Seller's accounts payable, other
than amounts which are the subject of a bona fide dispute.
1.33 "Seller Receivables" means all of Seller's receivables of any
nature, including without limitation accounts and notes receivable;
1.34 "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.
1.35 "Tangible Property" shall include the property described in
Sections 2.1(a), 2.1(c), 2.1(d), and 2.1(j).
1.36 "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.
1.37 "Transaction" means the transactions contemplated by this
Agreement and the Closing Documents.
1.38 "Unprocessed 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
nonferrous metal comprised of various nonmagnetic alloys or co-mingled
ferrous and nonferrous which traditionally would be processed by Seller
before shipment. Unprocessed Inventory does not include any nonsaleable
ferrous or nonferrous materials resulting from Seller's operations or
contained within dirt or other nonprocessable medium within the Owned
Facility.
1.39 "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
5
<PAGE>
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). The
Seller Assets shall include, without limitation, all of the items enumerated
in subparagraphs (a) through (m) below (with the exception of the Excluded
Assets):
(a) The Owned Facility, including all buildings situated
thereon and all real property leasehold improvements and all rights in
easements, driveways and signs, all as legally described on Schedule 2.1(a).
(b) All Seller Receivables;
(c) All Unprocessed 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 Facility and/or used in the conduct of the Business as of the
date of this Agreement, whether or not at the Owned Facility, all as
described 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 "C&J Crushing, Inc." 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 trade names;
(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 Facility or used in connection with the
operation of the Business.
6
<PAGE>
(i) All accounting and other computer software relating to the
Business owned or licensed by Seller, including information interfaced with
those systems, as maintained by Seller at the Owned Facility, all of which are
listed on Schedule 2.1(i).
(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 Facility whether owned or leased by
Seller, unless specifically identified on Schedule 2.2 as an Excluded Asset.
2.2 EXCLUDED ASSETS. RII Sub shall not purchase those assets of Seller
set forth on Schedule 2.2, and such assets are specifically not included in the
Seller Assets (the "Excluded Assets").
2.3 COLLECTION OF ACCOUNTS RECEIVABLE.
(a) If, after the Closing Date, 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 2.3(a).
(b) The provisions of this Section 2.3 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
$1,450,000, subject to adjustments 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) $1,160,000, as adjusted in accordance with Section 3.2
below, in immediately available funds (the "Cash Consideration");
7
<PAGE>
(2) $290,000 of Parent Series L Preferred (the "Stock
Consideration") delivered at Closing pursuant to the terms of a
subscription agreement (the "Subscription Agreement") substantially in the
form attached hereto as EXHIBIT A.
3.2 ADJUSTMENT OF THE PURCHASE PRICE.
(a) At Closing, if the aggregate value of the Current Assets
included in the Seller Assets is less than $90,000 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 on Schedule 3.2
and various accruals are to be estimated), the Purchase Price shall be adjusted
by decreasing the cash portion of the Purchase Price on a dollar-for-dollar
basis to reflect the Current Assets delivered at Closing. For purposes of this
adjustment, Inventory shall be valued based upon a physical inventory taken
jointly by Seller and Recycling and its representatives on the Inventory Date.
(b) Within 60 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 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 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.
(c) In addition to any adjustment pursuant to Section 3.2(b),
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 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(c) shall be paid within five days
of the determination of the adjustment amount.
(d) In addition to the foregoing, the Purchase Price may be
further adjusted in accordance with the last sentence of Section 7.1(b).
8
<PAGE>
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 60
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 ASSUMED CONTRACTS. In addition to the foregoing, RII Sub shall
assume the obligations of Seller under the Assumed Contracts.
3.5 NO ASSUMPTION; DISCHARGE OF LIABILITIES. Other than as provided in
Section 3.4 in respect of the Assumed Contracts, RII Sub shall not assume any
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 prorated 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. Prior to
the Closing Date, Seller shall discharge or otherwise satisfy any and all of its
Liabilities associated with the Seller Assets, and, within 14 days after the
Closing Date, Seller shall discharge any and all of its Seller Payables and
other Liabilities.
3.6 CLOSING. The Closing shall take place at the offices of Womble
Carlyle Sandridge & Rice, PLLC, 200 West Second Street, Winston-Salem, North
Carolina, or at such other place as selected by the Lender, in its sole and
absolute discretion, on the Closing Date and at the time set forth in the
Closing Notification given by RII Sub pursuant to this section.
ARTICLE 4
REPRESENTATIONS OF SELLER AND OFFICER
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 Officer, 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.
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(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 in which the nature of the business
conducted or the character or location of the properties owned makes such
qualification necessary, and all such jurisdictions are listed on Schedule
4.1(b).
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 liability or 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, shareholder and 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 as provided on 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 each of Seller, Officer and the
Seller Owners 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) Violate its 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;
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(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; NO ADVERSE CHANGE.
(a) Seller has furnished, or will furnish where applicable, to
Recycling the following financial information, Schedules, and other disclosures:
(1) Audited financial statements for Seller for the year
ended December 31, 1997 prepared in accordance with GAAP (the "Audited
Financial Statements"), the cost of the preparation of which shall be
borne 50% by Recycling and 50% by Seller. RII Sub and Parent acknowledge
receipt of the Audited Financial Statements prior to the execution of
this Agreement or, alternatively, Seller acknowledges that RII Sub and
Parent have not received the Audited Financial Statements and shall
provide same to RII Sub and Parent as soon as is practicable after the
Closing Date.
(2) Unaudited financial statements (collectively, the
"Unaudited Financial Statements") for (i) the Crushing Scrap Division,
a division of Seller, for each of the years the two-year period ended
December 31, 1996 prepared substantially in accordance with GAAP and
(ii) for Seller for the monthly periods included in the period from
January 1, 1998 until the Closing Date, the latter to be furnished
within 10 days after the end of each month and to show monthly and
year-to-date financial information.
(3) Copies of Seller's tax returns for its tax years
ended in 1994, 1995, 1996 and 1997.
(4) Any other financial information or data relating
to Seller or the Business as Recycling may reasonably request.
(b) The Audited Financial Statements will be or have been
prepared in accordance with GAAP and the Unaudited Financial Statements will be
or have been prepared substantially in accordance with GAAP 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" and are attached hereto as Schedule 4.4.
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(c) Since December 31, 1997, there has been (1) no material
adverse change in the assets or liabilities, the business or financial
condition or 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 Seller Owners. 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.
(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 Officer, contemplated.
4.7 COMPLIANCE WITH LAWS. Except as set forth on Schedule 4.7:
(a) Neither Seller nor Officer 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 Officer, except as
disclosed on Schedule 4.27 or otherwise disclosed in the Environmental
Studies (as defined in Section 7.1), neither Seller nor Officer 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 Facility do not encroach on the property of
others, (2) except as otherwise disclosed on Schedule 4.27 or in the
Environmental Studies or other documents provided to the environmental
auditing firm engaged by Recycling, Dames & Moore (the "EAF"), 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
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laws and regulations, or Environmental Laws, and neither Seller nor Officer
has Knowledge of any basis therefor, and (3) except as disclosed on Schedule
4.27, neither Seller nor 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 required Permits 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
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 arbitration tribunal against or involving the
Seller Assets or the Business. There are no actions, suits or claims against
Seller or Officer, or, to the Knowledge of Seller or 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 Officer,
threatened against or involving the Seller Assets or the Business, nor to the
Knowledge of Seller or Officer, is there any basis therefor. 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 Officer.
4.10 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
produced or sold by Seller.
4.11 CONTRACTS AND OTHER AGREEMENTS.
(a) Except for the contracts and agreements listed on Schedule
4.11(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.
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(c) No approval or consent of any Person is needed in order for
the contracts, leases, and other agreements which are listed on Schedule 1.22 to
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 4.11.
4.12 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 60 days old, and are collectible
and will be collected within 60 days after the Closing, subject only to the
reserve for bad debts set forth on the face of the Seller Financial Statements;
provided, however, that those Seller Receivables listed on Schedule 4.12 are
collectable within twelve months after the Closing Date. Seller Receivables not
timely collected as provided herein shall be subject to reassignment to Seller
in accordance with Section 14.2.
4.13 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 Officer 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.
4.14 INVENTORY. The piles of Unprocessed and Processed 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.
4.15 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 Officer 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 Officer know of any basis for any such charge or claim.
4.16 REAL PROPERTY. The Owned Facility includes all real property
included in the Seller Assets. With respect to each parcel of owned real
property included within the Owned Facility:
(a) Except as otherwise disclosed herein or in the Environmental
Studies or documents provided to the EAF, the Owned Facility has received all
approvals of governmental authorities (including Permits) required in connection
with the ownership or operation thereof and has been operated and maintained in
accordance with applicable laws, rules and regulations.
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(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 Facility,
other than those which would not materially affect RII Sub's right to full
enjoyment of the Owned Facility, 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 Facility or any portion thereof or interest therein.
(d) There are no parties other than Seller in possession of the
Owned Facility or any portion thereof.
(e) The Owned Facility is 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 is provided ingress and
egress via public roads or via permanent, irrevocable, appurtenant easements
benefitting the Owned Facility.
4.17 LIABILITIES. Except as otherwise set forth in this Agreement or any
Schedule hereto, to the Knowledge of Seller and Officer, 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, 1997, in the Ordinary Course of Business.
4.18 SUPPLIERS AND CUSTOMERS. Schedule 4.18 lists the 20 largest
suppliers and 20 largest customers of the Business for each of the years ended
December 31, 1997, 1996 and 1995. 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.
4.19 EMPLOYEE BENEFIT PLANS.
(a) Schedule 4.19 contains an accurate and complete list of all
Plans, as defined below, contributed to, maintained or sponsored by Seller, to
which Seller is obligated to contribute or with respect to which Seller has any
liability or potential liability, whether direct or indirect. For purposes of
this Agreement, the term "Plan" shall mean a plan, arrangement, agreement or
program which is: (A) an employee benefit plan as defined in Section 3(3) of
the ERISA, whether or not funded and whether or not terminated, (B) an
employment agreement, or (C) a personnel policy or fringe benefit plan, policy,
program or arrangement, whether or not subject to ERISA, whether or not funded,
and whether or not terminated, including without limitation, any stock bonus,
deferred compensation, pension, severance, bonus, vacation, travel, incentive,
health, disability or other pension or welfare plan.
(b) Except as disclosed in Schedule 4.19, Seller does not
contribute to, have an obligation to contribute to or otherwise have any
liability or potential liability with respect to (A) any
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Multiemployer Plan (as such term is defined in Section 3(37) of ERISA), (B)
any Plan of the type described in Sections 4063 and 4064 of ERISA or in
Section 413 of the IRC (and regulations promulgated thereunder), or (C) any
plan which provides health, life insurance, accident or other "welfare-type"
benefits to current or future retirees or current or former employees, their
spouses or dependents, other than in accordance with Section 4980B of the IRC
or applicable state continuation coverage law.
(c) Except as disclosed in Schedule 4.19, none of the Plans
obligates Seller to pay separation, severance, termination or similar-type
benefits solely as a result of any transaction contemplated by this Agreement or
solely as a result of a "change in control," as such term is used in Section
280G of the IRC (and regulations promulgated thereunder).
(d) Each Plan and all related trusts, insurance contracts, and
funds have been maintained, funded and administered in compliance in all
respects with all applicable laws and regulations, including but not limited to
ERISA and the IRC. None of Seller, any trustee or administrator of any Plan, or
any other Person has engaged in any transaction with respect to any Plan which
could subject Seller, or any trustee or administrator of any Plan, or any party
dealing with any Plan, or Recycling to any tax or penalty imposed by ERISA or
the IRC. No actions, suits, claims, complaints, charges, proceedings, hearings,
investigations, or demands with respect to the Plans (other than routine claims
for benefits) are pending or, to the Knowledge of Seller, threatened, and Seller
has no Knowledge of any facts which could reasonably be expected to give rise to
any actions, suits, claims, complaints, charges, proceedings, hearings,
investigations, or demands. No Plan that is subject to the funding requirements
of Section 412 of the IRC or Section 302 of ERISA has incurred any "accumulated
funding deficiency" as such term is defined in such Sections of ERISA and the
IRC, whether or not waived. No liability to the Pension Benefit Guaranty
Corporation ("PBGC") (except for routine payment of premiums) has been or is
expected to be incurred with respect to any Plan that is subject to Title IV of
ERISA, no reportable event (as such term is defined in Section 4043 of ERISA)
has occurred with respect to any such Plan, and the PBGC has not commenced or,
to Seller's Knowledge, threatened the termination of any Plan. None of the
Seller Assets are the subject of any Lien arising under Section 302(f) of ERISA
or Section 412(n) of the IRC, Seller has not been required to post any security
pursuant to Section 307 of ERISA or Section 401(a)(29) of the IRC, and neither
Seller, nor any officers or directors of Seller, has Knowledge of any facts
which could reasonably be expected to give rise to such lien or such posting of
security.
(e) Each Plan that is intended to be qualified under Section
401(a) of the IRC, and each trust (if any) forming a part thereof, has received
a favorable determination letter from the Internal Revenue Service as to the
qualification under the IRC of such Plan and the tax exempt status of such
related trust, and nothing has occurred since the date of such determination
letter that could adversely affect the qualification of such Plan or the tax
exempt status of such related trust.
(f) No underfunded "defined benefit plan" (as such term is
defined in Section 3(35) of ERISA) has been, during the five years preceding the
Closing Date, transferred out of the controlled group of companies (within the
meaning of Sections 414(b), (c), (m) and (o) of the IRC) of which Seller is a
member or was a member during such five-year period.
(g) As of the Closing Date, the fair market value of the assets
of each Plan that is a defined benefit pension plan equals or exceeds the
present value of all vested and non-vested liabilities
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thereunder determined in accordance with applicable PBGC methods, factors and
assumptions applicable to a defined benefit pension plan terminating on such
date. With respect to each Plan that is subject to the funding requirements
of Section 412 of the IRC and Section 302 of ERISA, all required or
recommended contributions for all periods ending prior to or as of the
Closing Date (including periods from the first day of the then-current plan
year to the Closing Date and including all quarterly contributions required
in accordance with Section 412(m) of the IRC) shall have been made. With
respect to each other Plan, all required or recommended payments, premiums,
contributions, reimbursements or accruals for all periods ending prior to or
as of the Closing Date shall have been made. No Plan has any unfunded
liabilities.
(h) The Board of Directors of Seller (or committees or officers
authorized by such Board) has authority to amend or terminate the Plans at any
time without limitation (subject to the requirements of ERISA), and neither the
consideration or implementation of the transactions contemplated under this
Agreement nor the amendment or termination of any or all of the Plans on or
after the date of this Agreement will increase (A) the obligation of Seller to
make contributions or any other payments to fund benefits accrued under the
Plans as of the date of this Agreement or (B) the benefits accrued or payable
with respect to any participant under the Plans.
(i) With respect to each Plan, Seller has provided Recycling
with true, complete and correct copies, to the extent applicable, of (A) all
documents pursuant to which the Plans are maintained, funded and administered,
(B) the two most recent annual reports (Form 5500 series) filed with the
Internal Revenue Service (with attachments), (C) the two most recent actuarial
reports, (D) the two most recent financial statements, and (E) all governmental
rulings, determinations, and opinions (and pending requests for governmental
rulings, determinations, and opinions)
(j) Except as provided on Schedule 4.19(j), Seller does not
provide any post-retirement or post-employment health, life insurance, accident
or other "welfare-type" benefits. Schedule 4.19(j) includes the most recent
valuation (but in any case at least one that has been completed within the last
calendar year) of the present and future obligations with respect to Plans and
benefits listed thereon, if any.
4.20 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 Officer, no material customer of or supplier to the Business is
involved in, or affected by, any dispute, arbitration, lawsuit, or
administrative proceeding which might materially adversely affect the Business,
operations, properties, assets or condition, financial or otherwise, of the
Business.
4.21 EMPLOYEE RELATIONS. 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.
4.22 INSURANCE. Schedule 4.22 lists all insurance policies maintained by
Seller relating to the Business or any of the Seller Assets, copies of which
have been provided to RII Sub, the nature
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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.
4.23 POWERS OF ATTORNEY. There are no outstanding powers of attorney
executed on behalf of Seller, except in connection with Employee Benefit Plans.
4.24 RELATIONSHIPS. Except as described on Schedule 4.24, no officer or
director of Seller possesses, directly or indirectly, any financial interest in,
or is a director, officer, shareholder 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.
4.25 BROKERS' 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 brokers' 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.
4.26 EMPLOYEE INFORMATION. Schedule 4.26 lists all employees of Seller
who work or are customarily stationed at the Owned Facility, their current
employment compensation (including 1997 bonus, if any), accrued vacation and
sick leave and other benefits and amounts, if any, payable to each employee.
RII Sub will have the right to hire all employees of the Business upon
consummation of the Closing but will not be obligated to hire or 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 employees terminated by Seller, 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 will be retained 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 Recycling.
4.27 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 the EAF, copies of which have been
delivered to RII Sub, or disclosed on Schedules 4.7 or 4.27, to the knowledge of
Seller and Officer:
(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 the Owned Facility 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 Facility 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 Facility which
could interfere with continued operation Seller's business or impair its
fair saleable value.
(4) Neither Seller nor Officer have received any notice of
violation, alleged violation, noncompliance, liability or potential
liability regarding environmental matters or compliance with Environmental
Laws with regard to the Owned Facility from any Person, nor does Seller or
Officer 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 nonpublic 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.
4.28 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.
4.29 GUARANTEES. Seller is not a guarantor or otherwise is liable for
any liability or obligation of any other Person.
4.30 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
Officer 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.
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4.31 EMPLOYMENT AGREEMENTS. Seller shall use its reasonable best efforts
to cause Christopher J. Drye to enter into an Employment Agreement with Parent
and RII Sub, as applicable, substantially in the form attached as EXHIBIT C, and
to cause Christopher J. Drye and Officer to enter into Noncompetition Agreements
with Parent and RII Sub, as applicable, substantially in the form attached as
EXHIBIT D.
ARTICLE 5
REPRESENTATIONS OF RECYCLING
As an inducement to Seller and Officer to enter into this Agreement and to
complete the Transaction and with the knowledge that Seller and Officer will
rely thereon, RII Sub and the Parent jointly and severally represent and warrant
to Seller and Officer 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. 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) 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 each of RII Sub and 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) Violate its Articles of Incorporation or Bylaws or
constitute a breach of any evidence of indebtedness or agreement to which it is
a party;
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(b) 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;
(c) Conflict with or result in the breach of any writ,
injunction or decree of any court or governmental instrumentality; or
(d) Violate any statute, law or regulation of any jurisdiction
as such statute, law or regulation relates to it.
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 nonassessable, 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 in all material respects 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 BROKERS' OR FINDERS' 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
brokers' or finders' 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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5.10 EMPLOYMENT AGREEMENTS. Parent and RII Sub, as applicable, shall use
their reasonable best efforts to enter into an Employment Agreement with
Christopher J. Drye, substantially in the form attached as EXHIBIT C, and
Noncompetition Agreements with Christopher J. Drye and Officer, substantially in
the form attached as EXHIBIT D.
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 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.
6.3 COBRA. Seller 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.
Seller has complied with all COBRA requirements for all persons who were
participants in Seller's medical benefit plans prior to the Closing Date or who
became eligible for COBRA due to qualifying events that occurred under Seller's
medical benefit plans prior to the Closing Date. Any liabilities for any COBRA
claims or COBRA administration that relate to Seller's medical benefit plans as
in existence on or prior to the Closing Date shall be the sole responsibility of
Seller and the Seller Owners. The Seller and the Seller Owners, jointly and
severally, will reimburse RII Sub or Parent the full amount of any COBRA benefit
claims that the medical plan of either RII Sub or Parent pays to persons who
become eligible for COBRA due to a qualifying event that occurred under Seller's
medical benefit plan on or prior to the Closing Date.
6.4 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:
7.1 ENVIRONMENTAL STUDIES.
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(a) The EAF will update and bring current the ASTM Phase I E
1527-97 Environmental Site Assessment and Transaction Screen Process of the
Business and Owned Facility of Seller (the "Environmental Studies"). Recycling
will use reasonable efforts to cause the EAF to complete the Environmental
Studies on or before April 30, 1998. If the Environmental Studies indicate that
a Phase II review is necessary or advisable, Recycling will use reasonable
efforts to cause same to be completed on or before May 15, 1998 (any such Phase
II review hereinafter included in "Environmental Studies"). Upon completion,
the Environmental Studies shall be delivered to Recycling and attached hereto as
Schedule 7.1. [CONFIDENTIAL TREATMENT REQUESTED]
(b) If the Environmental Studies indicate that remediation is
required to ensure that the Business and Owned Facility of Seller comply with
all Environmental Laws, Recycling shall notify Seller and will provide an
estimate of the costs of such remediation (the "Remediation Estimate").
[CONFIDENTIAL TREATMENT REQUESTED]
7.2 ENVIRONMENTAL LIABILITIES. 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") in respect of
Environmental Laws, (i) arising out of or resulting from on-site events or
occurrences at the Owned Facility on or before the Closing Date or (ii) any
migration of contamination onto or under the Owned Facility prior to the Closing
Date ((i) and (ii) collectively, "Environmental 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 three years after
the Closing Date. [CONFIDENTIAL TREATMENT REQUESTED]
7.3 OFF-SITE ENVIRONMENTAL CLAIMS. Notwithstanding anything in Section
7.2 to the contrary, neither RII Sub, Parent, nor their respective officers,
directors, successors and assigns shall have any liability or obligation
whatsoever in respect of any off-site Environmental Claim, whether known or
unknown, arising out of the operations of Seller on or before the Closing Date.
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 such off-site Environmental
Claims arising out of the operations of Seller on or before the Closing Date,
and
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such indemnification obligation under this Section 7.3 shall be outside and
without regard to the Environmental Escrow Account or the three-year notice
requirement set forth in Section 7.2.
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 Facility, using a current North
Carolina standard form of American Land Title Association Owner's Title
Insurance Commitment issued by Lawyers Title Insurance Corporation in the amount
specifically allocated by the parties on Schedule 3.3 to the Owned Facility,
insuring title to the Owned Facility to be in RII Sub and any other named
parties therein 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 RII Sub. 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 will deliver to RII Sub an updated survey of the
Owned Facility, 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 (the "Survey"). RII
Sub will pay the cost of the Survey.
8.3 ZONING CERTIFICATE. Seller, at its expense, will deliver to RII Sub
a zoning certificate issued by the appropriate zoning authority or other
regulatory body to the effect that the conduct of the Business at the Owned
Facility does not violate any zoning laws or restrictions and that there are no
known zoning laws or restrictions in respect of the Owned Facility.
8.4 MATERIAL ASSUMED CONTRACTS. Seller will obtain the written consent
to the assumption by RII Sub of each of the Material Assumed Contracts listed on
Schedule 1.22 which require such consent.
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8.5 POWER OF ATTORNEY. Officer shall obtain a power of attorney from
each of the Seller Owners authorizing Officer to execute this Agreement on
behalf of each of the Seller Owners.
8.6 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 or that would
diminish the value of the 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.
8.7 PRESERVATION OF BUSINESS. Seller will preserve the Business and
the Seller Assets substantially in the condition as exists on the date hereof
(ordinary wear and tear excepted), including its present operations, physical
facilities and working conditions, will perform all necessary and advisable
repairs and maintenance on the Seller Assets 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.
8.8 NOTICE OF EVENTS. Seller and Officer 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
Officer misleading.
8.9 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
representations, warranties, covenants or agreements of Seller and Officer
under this Agreement, or Recycling's rights hereunder in respect of the
breach or failure thereof.
(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
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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.
8.10 NO NEGOTIATION BY SELLER OR OFFICER. Neither Officer 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 Processed
Inventory in the Ordinary Course of Business) 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.
If any such Acquisition Proposal is received or if any such discussions,
negotiations or other events occur or are sought to be initiated, Seller and
Officer will notify Recycling within 24 hours of receipt thereof, and such
notice will set forth in detail the terms or other particulars thereof.
8.11 SAFETY AUDITS. If requested by Recycling, Seller shall have
safety audits (the "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
the Safety Audits shall be borne by Recycling.
8.12 REMOVAL OF WASTE MATERIALS. Seller shall remove, at its cost,
all waste materials from the Owned Facility and from any other location
relating to the Business (E.G. trash, shredder fluff, waste oil, tires,
Hazardous Materials) 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 of
the following conditions, any one or more of which may be waived by Recycling
only in writing:
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9.1 REPRESENTATIONS, WARRANTIES AND OTHER AGREEMENTS. The
representations, warranties and other agreements of Seller and Officer
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 Officer
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 Officer 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 Permits shall have been
transferred to the name of RII Sub to the extent such permits are
transferrable on or prior to the Closing Date.
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 Facility:
(a) RII Sub shall receive good and marketable title by
general warranty deed for the Owned Facility in proper form for recording in
the State of North Carolina;
(b) The Owned Facility 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 Facility, or other matters affecting adversely the current use, or
occupancy thereof, including unpaid tap fees, contemplated special
assessments or zoning changes;
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(d) The legal description for the Owned Facility contained in
the deed therefor shall describe the real property forming a part of the
Owned Facility 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 Facility shall abut and have direct vehicular
access to a public road, direct access to an operational railroad spur, or
have vehicular access to a public road via a permanent, irrevocable,
appurtenant easement benefitting the Owned Facility.
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 Officer's Knowledge, the business and
operations of 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 ENVIRONMENTAL ESCROW AGREEMENT. RII Sub shall have received from
Seller the Environmental Escrow Agreement in the form attached hereto as
EXHIBIT E.
9.9 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.
9.10 POWER OF ATTORNEY. Officer shall have delivered to RII Sub the
power of attorney executed by each of the Seller Owners as provided by
Section 8.5.
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 the Business and (b) Seller's financial performance for the
twelve-month period ending December 31, 1997 and thereafter through 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 its sole discretion.
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9.12 SATISFACTION WITH ENVIRONMENTAL STUDIES AND SAFETY AUDITS. Each
of Recycling and the Lender shall be satisfied, in their sole discretion,
with the results of the Environmental Studies and the Safety Audits.
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 B.
9.14 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.
9.15 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
Seller Owners, 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.
9.16 CERTIFICATES, ETC. OF OFFICER AND SELLER. Officer 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; DISCHARGE OF LIABILITIES. Seller
shall have complied in full with the provisions of Section 3.5 to the extent
required prior to the Closing Date.
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 Womble Carlyle
Sandridge & Rice, PLLC, 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 OFFICER TO CLOSE
The obligations of Seller and Officer 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 Officer only in writing:
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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 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 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.
10.4 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 Secretaries of RII Sub and Parent, dated as of
the Closing Date.
10.5 DESIGNATIONS OF STOCK CONSIDERATION. There shall have been
delivered to Seller and Officer a certified copy of the Certificates of
Designations, Rights and Preferences of the Parent Series L Preferred.
10.6 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.
10.7 ENVIRONMENTAL ESCROW AGREEMENT. Seller and Officer shall have
received from RII Sub the Environmental Escrow Agreement in the form attached
hereto as EXHIBIT E.
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 ENVIRONMENTAL ESCROW AGREEMENT. Seller and Officer shall deliver
to RII Sub and RII Sub shall deliver to Seller and Officer the Environmental
Escrow Agreement, duly executed by the parties thereto.
11.5 GENERAL WARRANTY DEED. Seller shall deliver a general warranty
deed for the Owned Facility in proper form for recording in the State of
North Carolina.
11.6 CONSENTS TO ASSIGNMENTS. Seller shall deliver the written
consents to the assignment to RII Sub of the Material Assumed Contracts.
11.7 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.
11.8 CLOSING CERTIFICATE OF OFFICER. Officer shall deliver to RII Sub
a closing certificate dated the Closing Date, in a form satisfactory to RII
Sub.
11.9 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.
11.10 CERTIFICATE REGARDING RESOLUTIONS OF SELLER. Seller shall
deliver to Recycling copies of resolutions certified as required by Section
9.15.
11.11 CERTIFICATE REGARDING RESOLUTIONS OF RII SUB AND PARENT. RII Sub
and Parent shall deliver to Seller copies of resolutions certified as
required by Section 10.4.
11.12 FUNDS FLOW STATEMENT; REAL PROPERTY CLOSING. As part of the
Closing it is acknowledged that (i) a funds flow statement shall be prepared
and (ii) a settlement statement shall be separately prepared relating to the
Owned Facility, which funds flow statement and settlement statement shall be
prepared by the attorney for Seller, approved by the attorney for Recycling
and
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executed by both Seller and Recycling 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, including the cost of recording or filing any
necessary release or termination document;
(2) Any and all utility charges through the expiration of the
day immediately preceding Closing Date; and
(3) Fees for documentary stamps due upon the recordation of the
deeds from Seller to RII Sub and the closing costs associated for the Owned
Facility which shall be paid by the RII Sub and Seller in accordance with
local custom for commercial real estate transactions.
11.13 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 the fifth anniversary of the
Closing Date, 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
Environmental Liabilities contained in Section 4.27 and Section 7.2, which
shall survive for a period of three years after the Closing Date.
12.2 INDEMNITY AGREEMENTS OF SELLER AND THE SELLER OWNERS. 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,
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settlements, damages, costs and expenses resulting from, including reasonable
fees and disbursements of counsel incident to:
(1) any inaccuracy in, or breach of, any representation or
warranty or nonfulfillment of any covenant on the part of Seller or Officer
contained in this Agreement, including without limitation Seller's failure
to provide to RII Sub and Parent the Audited Financial Statements pursuant
to Section 4.4(a);
(2) any misrepresentation in or omission from or nonfulfillment
of any covenant on the part of Seller or Officer contained in any other
agreement, certificate or other instrument furnished or to be furnished to
RII Sub or the Parent by Seller or Officer 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 Section 7.2;
(5) any and all product liability and warranty claims for
products manufactured or sold prior to the Closing Date;
(6) Environmental Claims l [CONFIDENTIAL TREATMENT REQUESTED]
(7) the failure of Seller to comply with the bulk sales or bulk
transfer law of the State of North Carolina;
(8) all claims and liabilities of Seller not discharged in
accordance with Section 3.5;
(9) any liability of Seller not expressly assumed by RII Sub;
(10) 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;
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(11) any liabilities to employees of the Business terminated
prior to the Closing Date; and
(12) an assertion of a third party of wrongful interference by
Recycling of such third party's right to acquire Seller, the Seller Assets
or the Business.
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 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, including
reasonable fees and disbursements of counsel incident to:
(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 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; and
(4) 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.
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
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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.
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. Except as provided in Sections 12.2 and 12.3
with respect to legal fees, 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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<PAGE>
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 Officer has breached any material
representation or warranty, or failed to perform any covenant or agreement
contained in this Agreement PROVIDED, HOWEVER, Seller and Officer shall
have, at the election of Seller and Officer, 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 not satisfied in their sole
discretion with the results of their due diligence investigation of Seller
and the Business or with Seller's financial performance between the date
hereof and the Closing Date;
(4) RII Sub, Parent and the Lender are not satisfied in their
sole discretion with the results of the Environmental Studies or the Safety
Audits; or
(5) Prior to the Closing, RII Sub and the Parent are unable to
complete due diligence in a manner satisfactory to permit Parent to
adequately comply with its disclosure requirements 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 Officer 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) 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
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<PAGE>
(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 June 15, 1998, unless extended pursuant to
Section 3.6, 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 8.9(b), 14.1 and 14.3.
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 by Seller, Officer or any of the Seller Owners without
giving Recycling an opportunity to comment on the proposed disclosure, and in
no event shall any disclosure be made by Recycling without giving Seller 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
nonpublic 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.
14.2 REASSIGNMENT OF SELLER RECEIVABLES. For 120 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
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<PAGE>
collected within 60 days of the Closing, as provided in Section 4.12, except
that RII Sub's right to reassign each of the Seller Receivables listed on
Schedule 4.12 shall arise immediately upon expiration of twelve months
following the Closing Date. 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
Officer 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
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.
9780 S. Meridian Boulevard, Suite 180
Englewood, Colorado 80112
telephone: (303) 790-7372
facsimile: (303) 790-4252
38
<PAGE>
WITH A COPY TO:
William A. Davis, II, Esq.
Womble Carlyle Sandridge & Rice, PLLC
200 West Second Street
Winston-Salem, North Carolina 27101
telephone: (336) 721-3624
facsimile: (336) 733-8364
and
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 OFFICER:
Carl Drye, President
C&J Crushing, Inc.
3775 Mt. Hope Church Road
Salisbury, North Carolina 28416
telephone: 704-279-0592
facsimile: 704-855-1308
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 Officer, 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, including without
limitation any Permits not transferred or transferrable to RII Sub on or
prior to the Closing Date, 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 Officer and RII
39
<PAGE>
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 Officer from
time to time, and without further consideration, RII Sub shall provide Seller
or Officer access to or copies of said business records which have not been
previously destroyed.
14.8 ENTIRE AGREEMENT. This Agreement, including all Schedules and
Exhibits hereto, and the other Closing Documents constitute the entire
agreement of the parties with respect to the subject matter hereof and may
not be modified, amended or terminated except by a written instrument
specifically referring to this Agreement signed by each of the parties hereto
or as otherwise provided in this Agreement.
14.9 CONSTRUCTION. In the event of an ambiguity or a question of
intent or interpretation arises, this Agreement shall be construed as if
drafted jointly by the parties and no presumption or burden of proof shall
arise favoring or disfavoring any party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local
or foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise.
The word "including" means including without limitation. 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.
14.10 RIGHTS OF THIRD PARTIES. All conditions of the obligations of
the parties hereto, and all undertakings herein, except as otherwise provided
by a written consent, are solely and exclusively for the benefit of the
parties hereto and their successors and assigns, and no other Person or
entity shall have standing to require satisfaction of such conditions or to
enforce such undertakings in accordance with their terms or be entitled to
assume that any party hereto will refuse to complete the Transaction
contemplated hereby in the absence of strict compliance with any or all
thereof, and no other Person or entity shall, under any circumstances, be
deemed a beneficiary of such conditions or undertakings, any or all of which
may be freely waived in whole or in part, by mutual consent of the parties
hereto at any time, if in their sole discretion they deem it desirable to do
so.
14.11 HEADINGS. The Table of Contents and Article and Section headings
contained in this Agreement are for reference purposes only and shall not
affect in any way the meaning or interpretation of this Agreement.
14.12 GOVERNING LAW. The interpretation and construction of this
Agreement, and all matters relating hereto, shall be governed by the internal
laws of the State of North Carolina, without regard to principles of
conflicts or choice of law.
14.13 SUBMISSION TO JURISDICTION; WAIVERS. The parties each hereby
irrevocably and unconditionally: (1) agree that any action or proceeding
related to this Agreement shall be brought
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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 Charlotte, North Carolina,
the courts of the United States of America for the Western 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.
14.14 PARTIES IN INTEREST. This Agreement may not be transferred,
assigned, pledged or hypothecated by any party hereto, other than by
operation of law, by assignment to the Lender, or with the consent of the
other parties. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and permitted
assigns.
14.15 COUNTERPARTS AND FACSIMILE SIGNATURES. This Agreement may be
executed in two or more counterparts, all of which taken together shall
constitute one instrument. Execution and delivery of this Agreement by
exchange of facsimile copies bearing the facsimile signature of a Party shall
constitute a valid and binding execution and delivery of this Agreement by
such Party. Such facsimile copies shall constitute enforceable original
documents.
14.16 SEVERABILITY. In case any provision in this Agreement shall be
held invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions hereof will not in any way be
affected or impaired thereby.
14.17 CORPORATE AUTHORITY. The undersigned have executed this
Agreement with all requisite corporate authority.
14.18 REAL PROPERTY TAXES. The parties hereto expressly agree that
upon receipt by Seller of the bill for any and all real property taxes for
the tax year 1998, Seller shall notify Recycling, and Recycling shall pay to
Seller 50% of the amount of said real property taxes; provided that Seller
shall remain responsible for remitting payment of 100% of such amount to the
appropriate governmental authorities.
[REMAINDER OF 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.
RECYCLING INDUSTRIES OF GREENSBORO,
INC. ("RII SUB")
Dated: May 21, 1998 By: /s/ Thomas J. Wiens
-------------------------------------------------
Thomas J. Wiens
RECYCLING INDUSTRIES, INC. ("Parent")
Dated: May 21, 1998 By: /s/ Thomas J. Wiens
-------------------------------------------------
Thomas J. Wiens
C&J CRUSHING, INC. ("Seller")
Dated: May 21, 1998 By: /s/ Carl Drye
-------------------------------------------------
Carl Drye, President
"Officer"
Dated: May 21, 1998 /s/ Carl Drye
----------------------------------------------------
Carl Drye
"Seller Owners"
Dated: May 21, 1998 By: /s/ Carl Drye
-------------------------------------------------
Carl Drye, as Attorney-in-Fact
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<PAGE>
<TABLE>
<CAPTION>
LIST OF EXHIBITS
----------------
<S> <C>
Exhibit A Certificate of Designations, Rights and Preferences of the Series
L Redeemable Convertible Preferred Stock of Recycling Industries,
Inc.
Exhibit B Form of Subscription Agreement
Exhibit C Form of Employment Agreement for Christopher J. Drye
Exhibit D Form of Noncompetition Agreement for Christopher J. Drye and
Officer
Exhibit E Environmental Escrow Agreement
</TABLE>
43
<PAGE>
<TABLE>
<CAPTION>
LIST OF SCHEDULES
-----------------
<S> <C>
Schedule 1.22 Material Assumed Contracts
Schedule 2.1(a) Owned Facility - 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 3.2 Inventory Valuation
Schedule 3.3 Allocation of Purchase Price
Schedule 4.1(b) Jurisdictions of Seller
Schedule 4.3(c) Required Consents
Schedule 4.4 Seller Financial Statements
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 4.11(a) Other Contracts and Agreements
Schedule 4.12 Seller Receivables
Schedule 4.18 Suppliers and Customers
Schedule 4.19 Employee Benefit Plans
Schedule 4.19(j) Post-Retirement Benefits
Schedule 4.22 Insurance Policies
Schedule 4.24 Relationships
Schedule 4.26 Employee Information
Schedule 4.27 Environmental Matters
Schedule 7.1 Environmental Studies
Schedule 8.1 Title Commitment
</TABLE>
44
<PAGE>
EXHIBIT 2.2
ASSET PURCHASE AGREEMENT
THIS AGREEMENT is made as of the 22nd day of May 1998, by and among
Recycling Industries of Wisconsin, Inc., a Colorado corporation ("RII Sub"),
RECYCLING INDUSTRIES, INC., a Colorado corporation ("Parent"), PRO RECYCLING,
L.L.C., a Wisconsin limited liability company (the "Company"), LEWINSKY IRON &
METAL, INC., a Wisconsin corporation ("LIM"), RECYCLING WORLD, LTD, a Wisconsin
corporation ("World"), STEVEN LEWINSKY, President of the Company ("Lewinsky"),
ARTHUR ARNSTEIN, Secretary of the Company ("Arnstein"). Throughout this
Agreement, RII Sub and the Parent may be collectively referred to as
"Recycling;" the Company, LIM and World may be collectively referred to as the
"Sellers," and Lewinsky and Arnstein may be collectively referred to as the
"Members." 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 the Sellers
consisting of substantially all of the tangible and intangible assets used in
the ferrous and non-ferrous metals recycling business conducted by the
Company at its three facilities located in Milwaukee, Wisconsin, and those
certain administrative offices and other assets, as hereinafter identified,
used in connection with the operation of the Company's facilities
(collectively the "Company Assets");
WHEREAS, the Company, LIM and World desire to sell the Company 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 Members have a vested interest in the transactions referred
to herein insofar as they are the principals and owners of LIM and World,
respectively, the sole members of the Company, and therefore, 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 Company Assets from
the Company by RII Sub.
1.2 "Assumed Contracts" means those contracts, operating leases and
other agreements to which the Company, LIM or World is a party or beneficiary
or which otherwise affect the Business, including, but not limited to, open
orders to purchase raw materials or services placed in the Ordinary Course of
Business of the Company, operating 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 the Company. Schedule 1.2 lists all Assumed Contracts other than
(a) contracts which do not require payment by the Company 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 the
Company 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 the Company of
$20,000 or more per year (collectively the "Material Assumed Contracts").
1.3 "Assumed Liabilities" means the Liabilities of the Company under
the Assumed Contracts.
1.4 "Business" means the purchase, sale, processing, preparing,
marketing, distribution, promotion, brokering and recycling of prepared and
non-prepared ferrous and non-ferrous scrap metal and pig iron as historically
conducted by the Company as a going concern.
1.5 "Closing" has the meaning set forth in Section 3.5.
1.6 "Closing Date" has the meaning set forth in Section 3.5.
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.
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).
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<PAGE>
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, 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 "Identified Environmental Claims" means all claims, demands,
suits, judgments,
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<PAGE>
settlements, penalties, liabilities, cleanup costs and expenses, including
reasonable fees of counsel and environmental consultants and engineers,
arising out of or resulting from the presence, removal or migration of
Hazardous Materials or the violation of any Environmental Law which is known
and identified by any of the parties prior to the date of this Agreement and
identified on Schedule 1.17 attached hereto, including the costs of any
further studies to identify the scope and nature of any item identified on
Schedule 1.17.
1.17 "Inventory Date" shall have the meaning set forth in Section 3.2.
1.18 "IRC" means the Internal Revenue Code of 1986, as amended.
1.20 "Knowledge" means actual knowledge without independent
investigation with respect to the Members, and with respect to Recycling,the
Company, LIM and World, actual knowledge without independent investigation of
their respective officers and directors.
1.19 "Lender" means Recycling's primary lender or equity participant
relating to the Transaction.
1.20 "Liability or Liabilities" means any 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 Company
Assets or the Business, including any liability for Taxes.
1.21 "Material Adverse Effect" or "Material Adverse Change" means a
material adverse effect on or change in the business, assets or financial
condition of the Company or Recycling, as applicable.
1.22 "Company Offices" means the administrative offices of the Company
located at 504 W. Cherry Street, Milwaukee, Wisconsin 53212.
1.23 "Company Receivables" has the meaning set forth in Section 2.5(a).
1.24 "Ordinary Course of Business" or "Ordinary Course" means the
ordinary course of business consistent with past custom and practice of the
Company (including with respect to quantity and frequency).
1.25 "Owned Facilities" means the real property and associated
fixtures owned by the Company, the Members, and/or A&A Investment
Acquisitions, LLC and used in connection with the Business, as specifically
described on Schedule 2.1(a).
1.26 "Parent Common Stock" means the common stock, $.001 par value per
share, of Recycling Industries, Inc., a Colorado corporation.
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<PAGE>
1.27 "Parent Series M Preferred Stock" means the Convertible Preferred
Stock of Parent described in the Designation of Series M Redeemable
Convertible Preferred Stock attached hereto as EXHIBIT A.
1.30 "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.
1.28 "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.
1.29 "Prepared Inventory" means all ferrous and non-ferrous Inventory
that has been processed by the Company as of the Closing Date and is ready
for shipment to the Company's customers.
1.30 "Real Estate Purchase Agreements" means, collectively, the
Commercial Contract to Buy and Sell Real Estate to be entered into at
closing, subject to the provision of Section 8.1(c) by and between Lewinsky
and RII Sub and the Commercial Contract to Buy and Sell Real Estate to be
entered into at closing by and between RII Sub and A&A Investment
Acquisitions, LLC, an affiliate of the Company.
1.31 "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.
1.32 "Tangible Property" shall include the property described in
Sections 2.1(b), (f), and (m).
1.33 "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.
1.34 "Transaction" means the transactions contemplated by this
Agreement and the other
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<PAGE>
Transaction Documents.
1.35 "Transaction Documents" means, collectively, (i) this Agreement,
(ii) the Real Estate Purchase Agreements, (iii) any Schedule or Exhibit to
this Agreement, and (iii) any certificate or other document delivered at
Closing.
1.36 "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 the Company 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 the Company for resale.
1.37 "1933 Act" means the Securities Act of 1933, as amended.
1.38 "1934 Act" means the Securities Exchange Act of 1934, as amended.
ARTICLE
ACQUISITION OF ASSETS
2.1 PURCHASE AND SALE OF THE COMPANY ASSETS. At the Closing and
subject to the terms and conditions stated herein, the Company agrees to
sell, assign, convey and transfer to RII Sub, and RII Sub agrees to purchase
from the Sellers, the Company 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 Company Assets shall include all of the items
enumerated in subparagraphs (a) through (o) below:
(a) Pursuant to the Real Estate Purchase Agreements, the
Owned Facilities, including all buildings situated thereon and all leasehold
improvements and all rights in easements, driveways and signs.
(b) All vehicles, machinery and equipment, tools, furniture,
leasehold improvements, fixtures, vehicles, dies, jigs, scales, and supplies,
or any related capitalized items and other tangible property owned or leased
by the Sellers or the Members 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
Company Assets whether or not listed on Schedule 2.1(b).
(c) All of the Sellers' right, title and interest in and to
the names "Pro Recycling," "Recycling World," "Lewinsky Iron and Metal" and
any variations thereof.
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(d) All of the Sellers' right, title and interest in and to the
telephone numbers (414) 263-2626 and (414) 645-6040 and the facsimile numbers
(414) 263-2664 and (414) 645-6969, and any other telephone or facsimile numbers
used in the Business.
(e) 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 the Company 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 the Company located at the Company Offices and listed on Schedule
2.1(f).
(g) 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 Company Offices in connection with
the operation of the Business.
(h) All of the Company'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 the
Company, including information interfaced with those systems, as maintained by
the Company at the Owned Facilities or the Company Offices, all of which are
listed on Schedule 2.1(h); PROVIDED, HOWEVER, that the Company 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 customer and supplier lists, signs, advertising,
catalogues and brochures relating to the Business.
(j) All rights of the Company under the Assumed Contracts.
(k) All goodwill and other general intangibles related to the
Company 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 Company Assets or the Business.
(m) All Prepared and Unprepared Inventory.
(n) All accounts receivable of the Sellers.
(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 the
Company, unless specifically described
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in Section 2.2 or on Schedule 2.2 as an Excluded Asset.
The Seller's sale, conveyance, assignment and transfer of the Company
Assets shall be free and clear of any Security Interest or Liabilities.
2.2 EXCLUDED ASSETS. On the Closing Date, RII Sub shall not purchase
the following assets owned by the Company, each to the extent described in
more detail on Schedule 2.2 (the "Excluded Assets"):
(a) The corporate charter, qualifications to conduct business
as a foreign limited liability company, 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
the Company as a limited liability company; PROVIDED, HOWEVER, that the
Company will not have the right to continue using its current name and
tradenames following the Closing;
(b) Any of the rights of the Company under this Agreement and
any other Transaction Document entered into on or after the date of this
Agreement;
(c) Certain personal assets and other items owned by the
Members as identified on Schedule 2.2(c);
(d) Tax refunds of any nature whatsoever; and
(e) Any other assets of the Sellers set forth on Schedule 2.2.
2.3 ASSUMED CONTRACTS. RII Sub shall assume the obligations of the
Company under the Assumed Contracts.
2.4 ASSUMPTION OF LIABILITIES. Except with respect to the indemnity
obligations of Recycling under Section 12.3, the obligations of Recycling
under the Environmental Escrow Agreement, and the obligations of the Company
under Assumed Contracts, RII Sub shall not assume any Liabilities or
Environmental Liabilities of the Company, the Members or A&A Investment
Acquisitions, LLC arising on or before the Closing or with respect to any
action, event or occurrence of any party on or prior to the Closing. To the
extent that any Company Assets are encumbered prior to closing, such
encumbrances shall be released prior to, or at the Closing and such assets
shall be transferred to RII Sub free and clear of any Security Interest. Any
Company Assets that are the subject of capitalized or financing leases shall
be transferred by the Company to RII Sub, and the Company shall pay the
lessor thereunder any amounts payable pursuant to the terms of such lease to
acquire marketable title to such equipment.
2.5 COLLECTION OF ACCOUNTS RECEIVABLE
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(a) If, after Closing, the Company receives payment on any of
the accounts receivable included in the Company Assets ("the Company
Receivables"), the Company 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 the Company, to
review records of the Company solely to determine compliance with the
provisions of this Section 2.5.
(c) The provisions of this Section 2.5 shall survive the
Closing.
ARTICLE 3
PURCHASE PRICE AND CLOSING
3.1 PURCHASE PRICE FOR THE COMPANY ASSETS
(a) RII Sub shall pay the total amount of $3,000,000, subject to
the adjustments as determined in accordance with Section 3.3 below (the
"Purchase Price") to the Company for the purchase of the Company Assets. The
Purchase Price shall be payable as follows:
(1) $2,485,000, as adjusted in accordance with Section 3.3
below, in immediately available funds at Closing (the "Cash Consideration"); and
(2) $515,000 stated value of Parent Series M 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.
3.2 VALUATION OF INVENTORY AND ACCOUNTS RECEIVABLE. The aggregate
value of the inventory and accounts receivable has been determined jointly by
representatives of the Company and Recycling as of May 18, 1998 (the
"Inventory Date"), and such value is set forth on Schedule 3.2, initialed by
the Company 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 the Company 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 the Company and Recycling to determine such value. The value determination
by such third party shall be binding on the Company and Recycling. The Closing
shall occur as soon as practicable after third party value determination, if
such is required,
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provided all other conditions to Closing are satisfied or waived.
3.3 ADJUSTMENT OF THE PURCHASE PRICE.
(a) PRE-CLOSING ADJUSTMENT. The parties hereby acknowledge that
the Purchase Price was determined based upon the an aggregate value of the
inventory and accounts receivable included in the Company Assets, as
determined in accordance with Section 3.2, of $950,000 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 Section 3.3(a) immediately prior to
the Closing, within 45 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 60th day after the Closing.
3.4 ALLOCATION OF THE PURCHASE PRICE.
(a) The Purchase Price shall be allocated among the Company
Assets and among the Sellers, the Members, and A&A Investment Acquisitions,
LLC as set forth on Schedule 3.4.
(c) 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.
(d) RII Sub and the Company 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 on May 22, 1998, at the offices of Reinhart,
Boerner, Van Deuren, Norris & Rieselbach, s.c., or at such other place as
selected by Recycling, in its sole and absolute discretion, on the date
mutually agreed to by the parties (the "Closing Date"). The Closing Date
shall be no later than May , 1998, unless mutually extended by the parties.
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ARTICLE 4
REPRESENTATIONS OF THE COMPANY AND MEMBERS
As an inducement to Recycling to enter into this Agreement and to
complete the Transaction, and with the knowledge that Recycling will rely
thereon, the Company, LIM, World and the Members, 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, and as of the closing. For purposes of the representations
and warranties contained herein, the term the "Company" shall include LIM,
World, and any other predecessor entities to the Company and any other
entities which have been merged into the Company and whose separate existence
has ceased to exist as a result of such merger since November 1, 1995.
4.1 DUE ORGANIZATION AND QUALIFICATION.
(a) The Company is a limited liability company duly organized,
validly existing and in "current" status under the laws of Wisconsin, and has
the limited liability company power and lawful authority to carry on its
business as now being conducted. LIM is a corporation duly organized,
validly existing and in "current" status under the laws of Wisconsin, and has
the corporate power and lawful authority to carry on its business as now
being conducted. World is a corporation duly organized, validly existing and
in "current" status under the laws of Wisconsin, and has the limited
liability company power and lawful authority to carry on its business as now
being conducted.
(b) Each Seller is duly qualified or otherwise authorized to
transact business in each jurisdiction, listed in Schedule 4.1, 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 PERSONAL PROPERTY. Each Seller has good, valid and
marketable title to its personal property included in the Company 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.
4.3 Authority of the Company; Consents.
(a) Each Seller has full power and authority to execute and
deliver this Agreement and the other Transaction Documents to which it is a
party and to carry out the Transaction and the Company has taken all
requisite action to authorize the execution, delivery and performance of this
Agreement and the other Transaction Documents to which it is a party.
(b) This Agreement and the other Transaction Documents to which
each Seller is a party are valid and binding agreements of such Seller,
enforceable in accordance with their terms.
(c) Except as described in Schedule 4.3, no consent,
authorization or approval of, or declaration, filing or registration with,
any governmental or regulatory authority or any consent,
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authorization or approval of any other third party is required to enable each
Seller to enter into and perform its obligations under this Agreement and the
other Transaction Documents to which it is a party, and neither the execution
and delivery of this Agreement and the other Transaction Documents nor the
consummation of the Transaction by the Sellers will:
(1) Be in violation of its Articles of Organization,
Operating Agreement 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 Company Assets;
(2) Cause a default under any mortgage or deed of trust or
other lien, charge or encumbrance to which any of the Company 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 Company Assets;
(3) Result in the creation or imposition of any Security
Interest upon any of the Company Assets under any agreement or commitment to
which it or the Company Assets are bound;
(4) To the Knowledge of the Sellers, conflict with or result
in the breach of any writ, injunction or decree of any court or governmental
instrumentality; or
(5) To the Knowledge of the Sellers, violate any statute, law
or regulation of any jurisdiction as such statute, law or regulation related
to the Company Assets.
4.4 FINANCIAL STATEMENTS.
(a) The following financial statements of each of the Sellers
(to the extent such Seller was in existence during such periods) are attached
hereto as Schedule 4.4:
(1) A copy of its unaudited financial statements prepared
substantially in accordance with GAAP for its fiscal years ended December 31,
1995, December 31, 1996, and December 31, 1997 (the "Financial Statements").
(2) A copy of its unaudited financial statements prepared
substantially in accordance with GAAP for the period from January 1, 1998
through the Closing (the "Unaudited Financial Statements").
The Financial Statements and the Unaudited Financial Statements
collectively are referred to herein as the "the Company Financial
Statements." The Financial Statements and Unaudited Financial Statements have
been prepared substantially in accordance with GAAP and present fairly the
financial condition of the Company as of such dates and the results of
operations of the Company for such periods; PROVIDED, HOWEVER, that the
Unaudited Financial Statements are subject to normal year-end
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adjustments and lack footnotes and other presentation items.
(b) Since December 31, 1997, 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 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) change in the assets or liabilities, or in the Business,
financial condition, or in the results of operations, or, any loss of
customers of the Company, except in the Ordinary Course which have not, in
the aggregate or individually, had a Material Adverse Effect on the Business.
(c) Within 30 days of the Closing, the Company shall deliver
to Parent audited financial statements for the year ended December 31, 1997
prepared in accordance with GAAP. The cost of such audited fincial
statements shall be borne equally by the Sellers, on the one hand, and
Recycling, on the other hand; provided, however, that the amount payable by
the Sellers hereunder shall in no event exceed $3,000.
4.5 NO TAX LIENS; NO WAIVER.
(a) None of the Company 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) None of the Sellers has waived any statute of limitations
with respect to the assertion of any liability under any federal, state, or
local tax law.
(c) None of the Sellers is 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 the Sellers and the Members, contemplated.
(d) Copies of the Sellers' federal and state income tax
returns (to the extent such documents exist and are reasonably available) for
the tax years ended December 31, 1994, 1995, 1996 and 1997 are attached
hereto as Schedule 4.5.
4.6 COMPLIANCE WITH LAWS. Except as set forth on Schedule 4.6,
(a) None of the Sellers nor any of the Members is in violation of
or has violated any applicable order, judgment, injunction, award or decree
relating to the Company Assets, except where such violation would not have a
Material Adverse Effect. To the Knowledge of the Sellers and the Members,
except as otherwise set forth in the Environmental Studies (which have not been
delivered to the Sellers), none of the Sellers nor the Members is in violation
of or has violated any federal, state,
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local or foreign law, ordinance or regulation or any other requirement of any
governmental or regulatory body, court or arbitrator applicable to the
Company 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, the buildings included in the Owned Facilities do
not encroach on the property of others, and (2) except as otherwise set forth
in the Environmental Studies (which have not been delivered to the Sellers),
there is not pending or threatened any notification of any governmental
authority that the Sellers are not in material compliance with applicable
laws and regulations respecting employment and employment practices,
occupational safety and health laws and regulations, and Environmental Laws.
4.7 PERMITS. Schedule 4.7 lists all Permits required by any
governmental entity related to the Business or operations of the Company that
are material to the operation of the Business. Except as described on
Schedule 4.7, the Company 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 the Company or any Member,
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 Company Assets or the Business. Except as set forth on Schedule 4.8,
there are no actions, suits or claims against the Sellers or any Member, or,
to the Knowledge of the Company or any Member, investigations (whether or not
the defense thereof or liabilities in respect thereof are covered by
insurance) pending or, to the Knowledge of the Company or any Member,
threatened against or involving the Company 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 canceled at or prior to the
Closing, and except as otherwise disclosed on Schedule 4.9, the Sellers are
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 Assumed Contracts are valid and binding upon the
Company in accordance with their terms, and the Company 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.
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(c) Except as otherwise disclosed on Schedule 4.9, 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. The Company 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 Company Receivables are
reflected properly in the books and records of the Company, and were incurred
in the Ordinary Course, are current (not over 60 days delinquent) 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 the Company. The
Company Receivables not collected within 90 days after the Closing shall be
subject to reassignment to the Company 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. Neither the Company nor any
of the Members 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.
(a) The piles of Unprepared Inventory observed and measured
on the Inventory Date" are located on level ground and are comprised solely,
throughout the pile, of the quality and grade of material visible on the
outer surface of the pile.
(b) The Company does not have any non-saleable residual
material resulting from the operations of the Business or contained within
dirt or other non-processable medium within the Owned Facilities.
4.13 INTELLECTUAL PROPERTY.
(a) The Company 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 "Pro Recycling," "Lewinsky Iron and Metal" and "Recycling
World." Other than as required under shrink wrap software licenses for
computers and/or the scales, the Company 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 the Company nor any of the Members has Knowledge
of any patent, invention, trade secret, trademark, service mark, trade name
or copyright of any other Person that is infringed by the Company, 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 the
Company.
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4.14 REAL PROPERTY. The Owned Facilities include all real property
included in the Company Assets or used in connection with the Business. To
the Knowledge of the Company and the Members, with respect to each parcel of
owned real property included within the Owned Facilities:
(a) Except as otherwise disclosed on Schedule 4.14 or in the
Environmental Studies, the Company 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
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, there are no
leases, subleases, licenses, easements, concessions, or other agreements,
written or oral, granting to any third 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 the Company 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, 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, 1997 in the Ordinary
Course, and (d) Liabilities which do not, individually or in the aggregate,
have a Material Adverse Effect on the Business. Except for the Liabilities
under Assumed Contracts, all Liabilities will be extinguished prior to, or at
the Closing.
4.16 SUPPLIERS AND CUSTOMERS. Schedule 4.16 sets forth a list of (1)
all suppliers from whom the Company has purchased $25,000 or more in the 12
month period ending May 31, 1998, and (2) all customers whose annual
purchases from the Business exceeded $25,000 in the 12 month period ending
May 31, 1998. There are no agreements or understandings, either written or
oral, with any customers of the vendors to the Company 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
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(a) Schedule 4.17 contains an accurate and complete list of
all Employee Benefit Plans (also referred to as "Plan"), as defined below,
contributed to, maintained or sponsored by any Seller, to which a Seller is
obligated to contribute or with respect to which a Seller has any liability
or potential liability, whether direct or indirect. For purposes of this
Agreement, the term "Employee Benefit Plan" shall mean a plan, arrangement,
agreement or program which is: (A) an employee benefit plan as described in
Section 3(3) of ERISA, whether or not funded and whether or not terminated,
(B) an employment agreement, or (C) a personnel policy or fringe benefit
plan, policy, program or arrangement, whether or not subject to ERISA,
whether or not funded, and whether or not terminated, including without
limitation, any stock bonus, deferred compensation, pension, severance,
bonus, vacation, travel, incentive, health, disability or other pension or
welfare plan.
(b) Except as disclosed in Schedule 4.17, Seller do not
contribute to, have an obligation to contribute to or otherwise have any
liability or potential liability with respect to (A) any Multiemployer Plan
(as such term is defined in Section 3(37) of ERISA), (B) any Plan of the type
described in Sections 4063 and 4064 of ERISA or in Section 413 of the IRC
(and regulations promulgated thereunder), or (C) any plan which provides
health, life insurance, accident or other "welfare-type" benefits to current
or future retirees or current former employees, their spouses or dependents,
other than in accordance with Section 4980B of the IRC or applicable state
continuation coverage law.
(c) Except as disclosed in Schedule 4.17 none of the Employee
Benefit Plans obligates any Seller to pay separation, severance, termination
or similar-type benefits solely as a result of any transaction contemplated
by this Agreement or solely as a result of a "change in control," as such
term is used in Section 280G of the IRC (and regulations promulgated
thereunder).
(d) Each Plan and all related trusts, insurance contracts,
and funds have been maintained, funded and administered in compliance in all
respects with all applicable laws and regulations, including but not limited
to ERISA and the IRC. None of Sellers, any trustee or administrator of any
Plan, or any other Person has engaged in any transaction with respect to any
Plan which could subject Sellers, or any trustee or administrator of any
Plan, or any party dealing with any Plan, or Recycling to any tax or penalty
imposed by ERISA or the IRC. No actions, suits, claims, complaints, charges,
proceedings, hearings, investigations, or demands with respect to the
Employee Benefit Plans (other than routine claims for benefits) are pending
or, to the Knowledge of Sellers, threatened, and Sellers have no Knowledge of
any facts which could reasonably be expected to give rise to any actions,
suits, complaints, charges, proceedings, hearings, investigations, or
demands. No Plan that is subject to the funding requirements of Section 412
of the IRC or Section 302 of ERISA has incurred any accumulated funding
deficiency as such term is defined in such Sections of ERISA and the IRC,
whether or not waived. No liability to the Pension Benefit Guaranty
Corporation (PBGC) (except for routine payment of premiums) has been or is
expected to be incurred with respect to any Plan that is subject to Title
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IV of ERISA, no reportable event (as such term is defined in Section 4043 of
ERISA) has occurred with respect to any such Plan, and the PBGC has not
commenced or, to Sellers' Knowledge, threatened the termination of any Plan.
None of the Company Assets are the subject of any Lien arising under Section
302(f) of ERISA or Section 412(n) of the IRC, Sellers have not been required
to post any security pursuant to Section 307 of ERISA or Section 401(a)(29)
of the IRC, and neither Sellers, nor any officers or directors of Sellers,
has Knowledge of any facts which could reasonably be expected to give rise to
such lien or such posting of security.
(e) Each Plan that is intended to be qualified under Section
401(a) of the IRC, and each trust (if any) forming a part thereof, has
received a favorable determination letter from the Internal Revenue Service
as to the qualification under the IRC of such Plan and the tax exempt status
of such related trust, and nothing has occurred since the date of such
determination letter that could adversely affect the qualification of such
Plan or the tax exempt status of such related trust.
(f) No underfunded defined benefit plan (as such term is
defined in Section 3(35) of ERISA) has been, during the five years preceding
the Closing Date, transferred out of the controlled group of companies
(within the meaning of Sections 414(b), (c),(m) and (o) of the IRC) of which
Sellers are a member or were members during such five-year period.
(g) As of the Closing Date, the fair market value of the
assets of each Plan that is a defined benefit pension plan equals or exceeds
the present value of all vested and non-vested liabilities thereunder
determined in accordance with applicable PBGC methods, factors and
assumptions applicable to a defined benefit pension plan terminating on such
date. With respect to each Plan that is subject to the funding requirements
of Section 412 of the IRC and Section 302 of ERISA, all required or
recommended contributions for all periods ending prior to or as of the
Closing Date (including periods from the first day of the then-current plan
year to the Closing Date, and including all quarterly contributions required
in accordance with Section 412(m) of the IRC) shall have been made. With
respect to each other Plan, all required or recommended payments, premiums,
contributions, reimbursements or accruals for all periods ending prior to or
as of the Closing Date shall have been made. No Plan has any unfunded
liabilities.
(h) The Managers and Board of Directors of Sellers, as the
case may be, (or committees or officers authorized by such Board) has
authority to amend or terminate the Employee Benefit Plans at any time
without limitation (subject to the requirements of ERISA), and neither the
consideration or implementation of the transactions contemplated under this
Agreement nor the amendment or termination of any or all of the Employee
Benefit Plans on or after the date of this Agreement will increase (A) the
obligation of Sellers to make contributions or any other payments to fund
benefits accrued under the Employee Benefit Plans as of the date of this
Agreement or (B) the benefits accrued or payable with respect to any
participant under the Employee Benefit Plans.
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(i) With respect to each Plan, Sellers have provided Recycling
with true, complete and correct copies, to the extent applicable, or (A) all
documents pursuant to which the Employee Benefit Plans are maintained, funded
and administered, (B) the two most recent annual reports (Form 5500 series)
filed with the Internal Revenue Service (with attachments), (C) the two most
recent actuarial reports, (D) the two most recent financial statements, and (E)
all governmental rulings, determinations, and opinions (and pending requests for
governmental rulings, determinations, and opinions).
(j) Except as provided on Schedule 4.17(j), Sellers do not
provide any post-retirement or post-employment health, life insurance, accident
or other welfare-type benefits. Schedule 4.17 (j) includes the recent valuation
(but in any case at least one that has been completed within the last calendar
year) of the present and future obligations with respect to Employee Benefit
Plans and benefits listed thereon, if any.
4.18 CURTAILMENT OF OPERATIONS. No labor disputes or work stoppages
involving the Business are pending or, to the Knowledge of the Company and
the Members, threatened which, either singly or in the aggregate, might have
a Material Adverse Effect on the Business. To the Knowledge of the Company
and the Members, 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. The Company is not a party to a collective
bargaining agreement and the Company 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 the Company
has not and is not engaged in any unfair labor practice. To the Knowledge of
the Company and the Members, 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 the Company relating to the Business or the Owned Facilities, copies of which
have been provided to RII Sub, which cover the Company Assets or the Business,
the nature of such policies, the amount and types of coverage, and the name of
the insurers and expiration dates. The Company 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 the Company 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 the Company 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.
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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 the Company or the Members 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 the
Sellers 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 amounts payable to each employee. On or before the
first day subsequent to the Closing Date, the Sellers will terminate all
employees of the Business 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, nor for payment of
claims to insureds, or payment of any premiums for coverage prior to the Closing
Date; RII Sub will not assume any liabilities either to former employees or the
employees of the Sellers who are hired by RII Sub after the Closing. The
Sellers agree that all liabilities of the Business to employees will be retained
by the Sellers, including those accruing by reason of termination by the
Sellers. RII Sub shall have the right, in its sole discretion, to determine
which of the Sellers' 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, the Company and the
Members 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. To the Knowledge of the Company and the
Members, the Company has not received any notice, order, summons or other
document alleging or asserting noncompliance with the Americans with
Disabilities Act of 1991, 42 U.S.C. Sections 12111, 12112 and 12209, as amended,
or any similar applicable state regulations.
4.27 DISCLOSURE. None of the Transaction Documents issued by the
Company or the Members and furnished or to be furnished to Recycling 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. The Company and the Members will use their best
efforts to timely apply for and obtain all permits, consents and approvals, to
complete any due diligence deemed necessary by the Company and the Members and
take such other actions in order to complete the Transaction by the Closing
Date. The Company and the Members will execute and deliver such instruments and
take such
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other 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 the Company and the Members to enter into this
Agreement and to complete the Transaction and with the knowledge that the
Company and the Members will rely thereon, RII Sub and the Parent jointly and
severally represent and warrant to the Company and the Members that all of the
representations and warranties in this Article 5 are true, correct and complete
as of the date of this Agreement, and as of the Closing.
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. RII Sub is duly qualified as a
foreign corporation to transact business in Wisconsin.
5.2 ARTICLES OF INCORPORATION AND BYLAWS. On or before the Closing
Date, RII Sub and the Parent will deliver to the Company 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.
5.3 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 each 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 required 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:
(a) Violate 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) Conflict with or result in the breach of any writ, injunction or
decree of any court or governmental instrumentality; or
(c) Violate any statute, law or regulation of any jurisdiction as
such statute, law or regulation relates to it.
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5.4 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.
5.5 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 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
REPRESENTATIONS OF THE PARENT RELATED TO THE
STOCK CONSIDERATION
As an inducement to the Sellers and the Members to enter into this
Agreement and to complete the Transaction and with the knowledge that the
Sellers and the Members will rely thereon, the Parent represents and warrants to
the Sellers and the Members that all of the representations and warranties in
this Article 6 are true, correct and complete as of the date of this Agreement,
and as of the Closing.
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 M 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 M 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 REPORTING. 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."
ARTICLE 7
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REGULATORY COMPLIANCE
7.1 BULK SALES COMPLIANCE. Recycling hereby waives compliance by the
Company of the provisions of the bulk sales or bulk transfer law of the State of
Wisconsin, subject to the indemnification provided in Section 12.2.
7.2 COBRA. The Company has complied with the provisions of COBRA, Pub.
L. No. 99-272, 99th Cong., 2d Sess. (1987), and any similar statute, relating to
continuation of health benefits to employees as they apply to the transaction
contemplated hereby. The Company has complied with all COBRA requirements for
all persons who were participants in the Company's medical benefit plans prior
to the Closing Date or who became eligible for COBRA due to qualifying events
that occurred under the Company's medical benefit plans prior to the Closing
Date. Any liabilities for COBRA claims or COBRA administration that relate to
the Company's medical benefit plans as in existence on or prior to the Closing
Date shall be the responsibility of the Company, the Sellers and Members. The
Sellers and the Members will reimburse Recycling for the amount of any COBRA
benefit claims that Recycling's medical plan pays to persons who become eligible
for COBRA due to a qualifying event that occurred under the Company's medical
benefit plan 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) The Company has delivered to Parent the most recent ASTM E
1527-97 Phase I Environmental Site Assessments and a completed ASTM Transaction
Screen Process for the Owned Facilities and RII Sub has engaged an environmental
auditing firm ("EAF") to update the Environmental Studies and to take soil
samples for each parcel of real property (the Phase I and the studies and
reports prepared by the EAF are collectively referred to as the Environmental
Studies"). [CONFIDENTIAL TREATMENT REQUESTED]
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8.2 TITLE INSURANCE. The Company will deliver to Recycling its most
recent title policy with respect to the Owned Facilities. The Company will
cooperate with Recycling as necessary to allow it to obtain a title insurance
commitment for an owner's and lender's title policy, at Recycling's expense,
including obligations to issue endorsements as may be required by RII Sub, with
respect to the Owned Facilities, using a current State of Wisconsin 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 3.4 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 reasonably 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 Recycling.
8.3 SURVEY. The Company will cooperate with Recycling to the extent
necessary to allow Recycling to obtain a survey of each of the Owned Facilities,
at Recycling's expense, 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 Wisconsin 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. The Company will use its best efforts to obtain
the written consent to the assumption by RII Sub of each of the Assumed
Contracts which require such consent.
8.5 CONDUCT OF BUSINESS. After execution of this Agreement and
continuing up to the Closing, the Company 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
the Company; and
(c) provide Recycling with such additional financing and other
information as may be reasonably requested by Recycling and available to the
Company without undue expense.
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8.6 PRESERVATION OF BUSINESS. The Company 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. The Company will provide to
RII Sub a mailing list of all customers whose annual purchases from the Business
were $25,000 or more in the 12 month period ended May 1, 1998, 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. The Company and the Members 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 the
Company or the Members 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., Central Daylight 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 the Company, 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; provided,
however, that such investigation and examination shall not
interfere with the operation of the Business. No review,
examination or investigation by Recycling shall diminish
or obviate any of the representations, warranties,
covenants or agreements of the Company and the Members
under this Agreement.
(b) Recycling will treat and hold any information or documents
obtained from the Company concerning the Business or the
Company 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 the Company
all tangible embodiments (and all copies) of such
confidential information which are in its possession and
Recycling agrees that it shall not use any Confidential
Information to its own advantage for any purpose
whatsoever. 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
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notify the Company promptly of the request so that the
Company may seek an appropriate protective order or waive
compliance with the provisions of this Section 8.8. 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 the Company, an order
or other assurance that confidential treatment will be
accorded to such portion of such information required to
be disclosed as the Company shall designate. For purposes
of this Section 8.8(b), the term "Confidential
Information" shall mean information which is used in the
business of the Company, whether or not designated by the
Company as confidential, and (a) is proprietary to, about
or created by the Company, or (b) gives the Company a
competitive business advantage or the opportunity of
obtaining such advantage or the disclosure of which would
be detrimental to the interests of the Company.
Confidential Information does not include information used
in the business of the Company that (a) becomes generally
available to the public other than as a result of the
disclosure by Recycling, or (b) was available or becomes
available to Recycling on a non-confidential basis prior
to its disclosure to Recycling by the Company. Such
Confidential Information includes, without limitation, the
following types of information and other information of a
similar nature (whether or not reduced to writing or
designated as confidential): (c) Internal personnel and
financial information of the Company, purchasing and
internal cost information, internal service and
operational manuals and the manner and methods of
conducting the business of the Company (d) Marketing and
development plans, price and cost data, price and fee
amounts, pricing and billing policies, quoting procedures,
marketing techniques, forecasts and forecast assumptions
and volumes, and future plans and potential strategies
(including, without limitation, all information relating
to any acquisition prospect and the identity of any key
contact within the organization of any acquisition
prospect) of the Company or its subsidiaries which have
been or are being discussed; (e) Customer services and the
type, quantity, specifications and content of products and
services purchased, leased, licensed or received by
customers of the Company; and (f) Confidential and
proprietary information provided to the Company by any
past, present or potential customer (an individual or
entity that is being actively solicited by the Company for
business), government agency or other third party
(including businesses, consultants and other entities and
individuals).
8.9 NO NEGOTIATION BY THE COMPANY OR THE MEMBERS. Between the date
hereof and the earlier of (1) the Closing Date; and (2) the date of termination
of this Agreement, neither the Members
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nor the Company 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 Company Assets or any exchange offer,
merger, consolidation, purchase of assets, liquidation, dissolution or similar
transaction involving the Company 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 Company 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.
The Company and the Members 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. Except as specifically set forth in the
Environmental Studies, the Company shall remove, at its cost, all trash, waste
oil, tires and any other similar waste materials, hazardous materials, or other
materials or substances which are currently regulated by or currently form the
basis of liability under any environmental laws 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 the Company and the
Members 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. The Company and the
Members 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. The Company and the
Members shall have delivered to Recycling certificates, dated the Closing
Date, to such effect.
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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.
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 Company 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 State of Wisconsin and the Owned Facilities shall be free and clear of any
Security Interest (other than those to be discharged at Closing), but subject to
(i) installments of special assessments not yet delinquent, (ii) covenants,
conditions, restrictions, reservations, encroachments, and easements filed of
record, (iii) matters shown by the survey and title policy contemplated by
Sections 8.2 and 8.3, 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 the
Company.
9.7 SUBSCRIPTION AGREEMENT. The Parent shall have received from the
Company, the Sellers and/or the Members 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 Company Assets from the Company to RII Sub, each in proper legal form
to transfer the Company assets under applicable law.
9.9 LEGAL OPINION. Recycling shall have received from legal counsel to
the Company in the form attached hereto as EXHIBIT D.
9.10 Environmental Escrow Agreement. RII Sub shall have received from
the Company the Environmental Escrow Agreement in the form attached hereto as
EXHIBIT C.
9.11 Intentionally Omitted
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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 the Company and its operations, including, without
limitation, the results of the Environmental Studies, and (b) the Company'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 AND CONSULTING 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 the individuals listed on Schedule
9.13 in the forms attached as EXHIBIT E.
9.14 NON-COMPETITION AGREEMENTS. Recycling shall have received from the
Members, executed Non-Competition Agreements in the forms attached as EXHIBIT F.
9.15 CERTIFICATES, ETC. OF MEMBERS AND THE COMPANY. The Members and the
Company shall have delivered all certified resolutions, certificates, documents
or instruments with respect to the Company'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 THE COMPANY. The Company shall
have paid all sales or use taxes, payable under the laws of the State of
Wisconsin, 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 the
Company hereunder or in connection with the completion of the Transaction, and
all other related matters shall have been approved by legal counsel to
Recycling, as to their form, which approval shall not be unreasonably withheld
or delayed.
ARTICLE 10
CONDITIONS PRECEDENT TO THE OBLIGATION OF THE COMPANY
AND MEMBERS TO CLOSE
The obligations of the Company and the Members 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 the Company and the
Members 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
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and as of the Closing Date. Recycling 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 it on or prior to the Closing
Date. Recycling shall have delivered to the Company 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. The Company 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 the Company and the Members a certified copy of the Certificate
of Designations, Rights and Preferences of the Parent Series M Preferred
Stock.
10.8 LEGAL OPINION. The Company 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
the Company the full Purchase Price for the Company Assets (less any amounts
to be placed in the Environmental Escrow Account) and executed and delivered
all documents related thereto.
10.10 ASSUMPTION OF ASSUMED CONTRACTS. The Company shall have received
RII Sub's signed Assignment and Assumption Agreement related to the Assumed
Contracts.
10.11 ENVIRONMENTAL ESCROW AGREEMENT. The Company and the Members
shall have received from RII Sub and Parent the Environmental Escrow
Agreement in the form attached hereto as
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EXHIBIT C.
10.12 EMPLOYMENT AGREEMENTS. RII Sub or Parent shall have entered into
employment agreements with the Members in the forms attached as EXHIBIT E.
10.13 APPROVAL OF COUNSEL TO THE COMPANY AND THE MEMBERS. 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 legal counsel to the Company and the Members 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. The Company shall deliver duly executed
transfer documents and/or instruments of assignment, including without
limitation a Bill of Sale.
11.2 ASSIGNMENT AND ASSUMPTION AGREEMENT. The Company shall deliver
any required written consents to the assumption by RII Sub of the Assumed
Contracts and the Company 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 the Company the
Purchase Price.
11.4 SUBSCRIPTION AGREEMENT. The Company shall deliver to the Parent
the Subscription Agreement.
11.5 NON-COMPETITION AGREEMENTS. The Members shall deliver to RII Sub
and the Parent their duly executed Non-Competition Agreements.
11.6 EMPLOYMENT AND CONSULTING AGREEMENTS. RII Sub and the
individuals listed on Schedule 9.13 shall enter into employment agreements.
11.7 ENVIRONMENTAL ESCROW AGREEMENT. RII Sub, Parent, the Sellers and
the Members shall enter into the Environmental Escrow Agreement with a third
party escrow agent and $585,000 shall be delivered into the Environmental
Escrow Account 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
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(title company) 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 1.38.
(a) The special warranty deed for the Owned Facilities in proper
form for recording in the State of Wisconsin, conveying the Owned Facilities
from Lewinsky to RII Sub.
(b) The special warranty deed for the Owned Facilities in proper
form for recording in the State of Wisconsin, conveying the Owned Facilities
from A&A Investment Acquisitions, LLC 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 the Company (and the Sellers) 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 THE COMPANY. The Company 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 the Company by Steven Lewinsky as President of
the Company.
11.10 CERTIFICATE OF THE MEMBERS. The Members 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 the Company
certificates dated the Closing Date, in a form reasonably satisfactory to the
Company, as contemplated by Section 10.1. Said certificate shall be signed
on behalf of Recycling by an executive officer of Recycling.
11.12 LEGAL OPINION DELIVERED TO RECYCLING. Recycling shall have
received from legal counsel to the Company and the Members, the legal opinion
required by Section 9.9, which shall be addressed to Recycling and the Lender.
11.13 LEGAL OPINION DELIVERED TO THE COMPANY AND THE MEMBERS. The
Company and the Members shall have received from legal counsel to RII Sub and
the Parent, the legal opinion required by Section 10.8.
11.14 TITLES TO VEHICLES. The Company shall deliver to RII Sub duly
executed assignments of titles to all vehicles included in the Company Assets
free and clear of any Security Interests, other than vehicles leased pursuant
to Assumed Contracts.
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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 five years after the Closing Date
with the exception of the representations and warranties contained in
Sections 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 or
liability under the Hart-Scott-Rodino Act or similar state law being asserted.
12.2 INDEMNITY AGREEMENTS OF THE COMPANY AND THE MEMBERS.
(a) The Company, the Sellers and the Members, jointly and
severally, shall indemnify, defend, reimburse and hold harmless RII Sub and
the Parent, and their respective directors, officers and agents, from and
against any and all Liabilities 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 the Sellers or the
Members contained in this Agreement;
(2) any misrepresentation in or omission from or
nonfulfillment of any covenant on the part of the Sellers or the Members
contained in any Transaction Document furnished to RII Sub or the Parent by
the Company or the Members;
(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 the
Company or the Members relating to the Business through the Closing Date
which are not paid by either the Company or the Members and which RII Sub or
the Parent pays other than those being contested in good faith as set forth
in the Disclosure Schedules or as otherwise permitted under this Agreement;
(4) any and all negligence claims relating to the Business or
the Company Assets arising out of occurrences and events prior to the Closing
Date;
(5) any liability of the Company not expressly assumed by RII
Sub;
(6) 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 the Company prior to
the Closing Date unless subsequently modified by RII Sub in a manner which
renders the product to be infringing;
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(7) any liabilities to employees of the Business that arise
as a result of actions of the Company prior to the Closing Date;
(8) the failure of the Company or the Sellers to comply with
the bulk sales or bulk transfer laws of the State of Wisconsin;
(9) reasonable fees and disbursements of counsel incident to
any of the foregoing.
(b) ENVIRONMENTAL INDEMNITY. The Sellers and the Members,
jointly and severally, shall indemnify, defend, reimburse and hold harmless
Recycling from and 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
the Company or the Members 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 the Company, the Business, the Company Assets, the
Members or other parties from whom the Company or the Members assumed or are
otherwise responsible for their liabilities occurring on or before the
Closing Date (collectively, "Environmental Claims"), provided, however, that
such indemnification obligation shall only exist if the Environmental Claims
result from an inaccuracy in or breach by the Sellers or the Members of any
representation or warranty contained in this Agreement, or from a breach by
the Sellers or the Members of any covenant contained in this Agreement if
such inaccuracy or breach relates to Environmental Laws or Environmental
Liabilities.
(c) [CONFIDENTIAL TREATMENT REQUESTED]
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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 the Company and the Members from and against:
(a) any and all claims, demands, penalties, fines, liabilities,
obligations, losses, settlements, damages, costs and expenses pertaining to
the Company 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 the Company by
RII Sub or the Parent pursuant to this Agreement;
(3) any Liability of the Company arising out of the Assumed
Contracts;
(4) 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;
(5) any liabilities to employees of the Business that
arise as a result of actions of RII Sub or the Parent after the Closing Date;
(6) any and all Liabilities relating to the Business or the
Company Assets arising out of occurrences and events after the Closing Date;
(7) 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 the Company or the Members pay;
(8) any and all negligence claims relating to the Business
or the Company Assets arising out of occurrences and events after the Closing
Date; and
(9) reasonable fees and disbursement of counsel incident to
any of the foregoing.
(b) Notwithstanding the foregoing, Recycling's liability
pursuant to this
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section 12.3 will be subject to the following limitations:
(i) Recycling shall not be liable for any Losses described above
unless and until the aggregate amount of all such Losses (exclusive of any
liabilities for Environmental Remedial Activities) described in such section
exceeds $25,000, after which point the indemnifying party will be obligated,
to the extent required by this section, to indemnify the indemnified parties
for all such amounts incurred in excess of such amount.
(ii) The maximum amount of indemnification payable by Recycling in no
event shall exceed $3,000,000.
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 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.
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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, 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.
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 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 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.
12.9 EXCLUSIVE REMEDY. Except with respect to Environmental Claims, 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
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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 the
Company or the Members has breached any material representation or warranty, or
failed to perform any material covenant or agreement contained in this
Agreement, provided, however, the defaulting party 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.
(b) At the election of the Company or the Members at any time
prior to Closing if:
(1) any one or more of the material conditions precedent to the
obligation of the Company and the Members to close has not been fulfilled as of
the Closing Date; or
(2) 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 May 31, 1998, time being of the essence,
unless extended pursuant to Section 3.5, by the election of the Company 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 (i) 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 and (ii) the provisions of Section 14.1 and
Section 8.8 relating to Confidential Information shall survive the termination
of this Agreement for a period of one year.
ARTICLE 14
CERTAIN ADDITIONAL AGREEMENTS
14.1 PUBLIC STATEMENTS; CONFIDENTIALITY OF INFORMATION.
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(a) No party will make any public disclosure (including,
without limitation, disclosure to the Company'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. Notwithstanding the above, Recycling may issue a
press release announcing the transactions contemplated hereby at any time
prior to or after the execution hereof without such action constituting a
breach of this agreement.
(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 the Company.
14.2 REASSIGNMENT OF THE COMPANY RECEIVABLES. On the 95th day after
the Closing Date, RII Sub shall have the right to reassign to the Company any
or all of the Company Receivables which have not been collected within 90
days of the Closing as provided in Section 2.5. Such reassignment shall only
occur upon delivery of documentation reasonably acceptable to the Company
which transfers all right, title and interest in the Company Receivables to
the Company. RII Sub agrees not to compromise any Company Receivable and to
use commercially reasonable efforts to collect the Company Receivables during
the 90 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 the Company Receivables under this provision, the
Company shall reimburse RII Sub dollar-for-dollar for the Company 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. the Company shall pay all sales or use taxes, payable under the
laws of the State of Wisconsin.
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 Wisconsin, Inc.
9780 S. Meridian Blvd., Suite 180
Englewood, Colorado 80112
telephone: 303-790-7372
facsimile: 303-790-4252
WITH A COPY TO:
Chester P. Schwartz.
Reinhart, Boerner, Van Deuren, Norris & Rieselbach, P.C.
1700 Lincoln, Suite 3725
Denver, Colorado 80203
telephone: 303-831-0909
facsimile: 303-831-4805
IF TO THE COMPANY OR THE MEMBERS:
Steven Lewinsky,
Arthur Arnstein
Pro Recycling, L.L.C.
504 W. Cherry Street
Milwaukee, WI 53212
telephone: 414-263-2626
facsimile: 414-263-2664
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WITH A COPY TO:
Benjamin Stern, Esq.
Chernov, Stern & Burbach, S.C.
Two Plaza East, Suite 1275
330 E. Kilbourn Avenue
Milwaukee, WI 53202
telephone: 414-276-4080
facsimile: 414-276-4152
Any party may change its address by giving notice to every other party.
14.6 THE COMPANY 401(K) PLAN. RII Sub or Parent hereby agrees and
covenants as follows.
(a) 401(K) PLAN. Subject to the indemnification provided in
Section 12.2, RII Sub or Parent shall assume sponsorship of the Company'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 the Company 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 the Company's
or its agent's establishment or maintenance of the Company 401(k) Plan prior
to the Closing Date. The Company 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 the Company's 401(k) Plan
for the 1998 Plan year, with reimbursement being made within ten business
days after RII Sub or Parent provides the Company with documentation of the
amount it was required to pay as a "top-heavy minimum contribution," if any.
14.7 COVENANT TO PAY ALL UNASSUMED DEBTS. To the extent the Company
owes debts to any third parties after the Closing other than the Assumed
Liabilities, which could affect the Company Assets, the Company and the
Members hereby covenant to pay any such Liabilities and debts immediately
after Closing; provided, however, that with respect to trade payables
incurred in the Ordinary Course of Business, the Company may pay such
Liabilities as they become due.
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 their
best efforts without undue cost to obtain all necessary waivers and consents
from third parties, transfer permits and licenses, make any filings,
including without limitation any environmental filings required by the
Department of Natural Resources or similar agency, and to implement the
transactions contemplated under this Agreement and the other Transaction
Documents. The Company and the Members, 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,
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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 Company
Assets to RII Sub.
14.9 RETENTION OF/ACCESS TO BUSINESS RECORDS. For at least six years
following the Closing Date, Recycling shall retain all business records,
including tax records, related to the Company Assets or the Business which
are delivered to RII Sub. During this period, from time to time on and after
the Closing, upon reasonable prior written request by the Company or the
Members and without further consideration, Recycling shall provide the
Company or the Members access to or copies of said business records.
Likewise, for at least six years following the Closing Date, the Sellers and
the Members shall retain all business records related to the Company Assets
or the Business retained by them, and, during this period, from time to time
on and after the Closing, upon reasonable prior written request by Recycling
and without further consideration, such party shall provide Recycling access
to or copies of said business records.
14.10 AUDIT BY RII SUB AND PARENT. For a period of five years after
the Closing, the Company and the Members 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 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.
14.12 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. 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.
-42-
<PAGE>
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 Wisconsin, without regard to principles of conflicts or
choice of law, except that Colorado law shall govern the terms of the Stock
Consideration.
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 Wisconsin
located in Milwaukee, Wisconsin, the courts of the United States of America
for the Eastern District of Wisconsin, and the appellate courts from any
thereof; (2) consent to the venue of any such action or proceeding in any of
said courts and waive 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.
14.17 PARTIES IN INTEREST. This Agreement may not be transferred,
assigned, pledged or hypothecated by any party hereto without the prior
consent of the other parties, except that Recycling may assign its rights
hereunder to the Lender without notice to the Company or the Members. 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.
-43-
<PAGE>
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.
[THE BALANCE OF THIS PAGE INTENTIONALLY LEFT BLANK]
-44-
<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 WISCONSIN, INC.
Dated: May 21, 1998
By /s/ Michael J. McClosney
-------------------------------------------
Michael J. McClosney, Vice President
"PARENT"
RECYCLING INDUSTRIES, INC.
Dated: May 21, 1998 By /s/ Michael J. McClosney
-------------------------------------------
Michael J. McClosney, Senior Vice
President of Acquisitions
"THE COMPANY"
PRO RECYCLING, L.L.C.
Dated: May 22, 1998 By /s/ Steven Lewinsky
-------------------------------------------
Steven Lewinsky, President
LEWINSKY IRON & METAL, INC.
Dated: May 22, 1998 By /s/ Steven Lewinsky
-------------------------------------------
Steven Lewinsky, President
RECYCLING WORLD, LTD.
Dated: May 22, 1998 By /s/ Arthur Arnstein
-------------------------------------------
Arthur Arnstein, President
Dated: May 22, 1998 /s/ Steven Lewinsky
----------------------------------------------
Steven Lewinsky
Dated: May 22, 1998 /s/ Arthur Arnstein
----------------------------------------------
Arthur Arnstein
-xiv-
<PAGE>
Exhibit 2.3
ASSET PURCHASE AGREEMENT
BY AND AMONG
RECYCLING INDUSTRIES OF CHARLOTTE, INC.
RECYCLING INDUSTRIES, INC.
REPUBLIC ALLOYS, INC.
WILLIAM B. ALLEN
AND
MARK W. RUSSO
MAY 21, 1998
(vi)
<PAGE>
TABLE OF CONTENTS
ARTICLE 1
<TABLE>
<S> <C>
DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1-
<CAPTION>
ARTICLE 2
<S> <C>
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 COLLECTION OF ACCOUNTS RECEIVABLE. . . . . . . . . . . . . . . . . . -8-
2.6 LEASE TO SELLER. . . . . . . . . . . . . . . . . . . . . . . . . . . -8-
<CAPTION>
ARTICLE 3
<S> <C>
PURCHASE PRICE AND CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . -9-
3.1 PURCHASE PRICE FOR SELLER ASSETS . . . . . . . . . . . . . . . . . . -9-
3.2 INVENTORY VALUATION. . . . . . . . . . . . . . . . . . . . . . . . . -9-
3.3 ADJUSTMENT OF THE PURCHASE PRICE . . . . . . . . . . . . . . . . . . -10-
3.4 ALLOCATION OF THE PURCHASE PRICE . . . . . . . . . . . . . . . . . . -10-
3.5 CLOSING OF THE PURCHASE. . . . . . . . . . . . . . . . . . . . . . . -11-
<CAPTION>
ARTICLE 4
<S> <C>
REPRESENTATIONS OF SELLER AND THE SHAREHOLDERS . . . . . . . . . . . . . . . . . -11-
4.1 DUE ORGANIZATION AND QUALIFICATION . . . . . . . . . . . . . . . . . -11-
4.2 TITLE TO PROPERTY. . . . . . . . . . . . . . . . . . . . . . . . . . -11-
4.3 AUTHORITY OF SELLER; CONSENTS. . . . . . . . . . . . . . . . . . . . -12-
4.4 FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . -13-
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-
4.10 NOTES AND ACCOUNTS RECEIVABLE. . . . . . . . . . . . . . . . . . . . -15-
4.11 TANGIBLE PROPERTY. . . . . . . . . . . . . . . . . . . . . . . . . . -15-
4.12 INVENTORY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -15-
4.13 INTELLECTUAL PROPERTY. . . . . . . . . . . . . . . . . . . . . . . . -16-
</TABLE>
(i)
<PAGE>
<TABLE>
<S> <C>
4.14 REAL PROPERTY. . . . . . . . . . . . . . . . . . . . . . . . . . . . -16-
4.15 LIABILITIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . -17-
4.16 SUPPLIERS AND CUSTOMERS. . . . . . . . . . . . . . . . . . . . . . . -17-
4.17 EMPLOYEE BENEFIT PLANS . . . . . . . . . . . . . . . . . . . . . . . -17-
4.18 CURTAILMENT OF OPERATIONS. . . . . . . . . . . . . . . . . . . . . . -19-
4.19 EMPLOYEE RELATIONS . . . . . . . . . . . . . . . . . . . . . . . . . -19-
4.20 INSURANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -19-
4.21 POWERS OF ATTORNEY . . . . . . . . . . . . . . . . . . . . . . . . . -20-
4.22 RELATIONSHIPS. . . . . . . . . . . . . . . . . . . . . . . . . . . . -20-
4.23 BROKER'S OR FINDER'S FEES. . . . . . . . . . . . . . . . . . . . . . -20-
4.24 EMPLOYEE TRANSITION. . . . . . . . . . . . . . . . . . . . . . . . . -20-
4.25 ENVIRONMENTAL MATTERS. . . . . . . . . . . . . . . . . . . . . . . . -20-
4.26 COMPLIANCE WITH ADA. . . . . . . . . . . . . . . . . . . . . . . . . -21-
4.27 GUARANTEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -21-
4.28 DISCLOSURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -21-
4.29 BEST EFFORTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . -21-
<CAPTION>
ARTICLE 5
<S> <C>
REPRESENTATIONS OF RECYCLING . . . . . . . . . . . . . . . . . . . . . . . . . . -22-
5.1 DUE INCORPORATION AND QUALIFICATION OF RII SUB . . . . . . . . . . . -22-
5.2 DUE INCORPORATION AND QUALIFICATION OF THE PARENT. . . . . . . . . . -22-
5.3 ARTICLES OF INCORPORATION AND BYLAWS . . . . . . . . . . . . . . . . -22-
5.4 AUTHORITY OF RII SUB AND THE PARENT. . . . . . . . . . . . . . . . . -22-
5.5 PREFERRED STOCK CONSIDERATION. . . . . . . . . . . . . . . . . . . . -23-
5.6 COMMON STOCK CONSIDERATION . . . . . . . . . . . . . . . . . . . . . -23-
5.7 1934 ACT REGISTRATION. . . . . . . . . . . . . . . . . . . . . . . . -23-
5.8 BROKER'S OR FINDER'S FEES. . . . . . . . . . . . . . . . . . . . . . -23-
5.9 DISCLOSURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -23-
5.10 BEST EFFORTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . -24-
<CAPTION>
ARTICLE 6
<S> <C>
REGULATORY COMPLIANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -24-
6.1 BULK SALES COMPLIANCE. . . . . . . . . . . . . . . . . . . . . . . . -24-
6.2 HART-SCOTT-RODINO ACT. . . . . . . . . . . . . . . . . . . . . . . . -24-
6.3 THE WARN ACT . . . . . . . . . . . . . . . . . . . . . . . . . . . . -24-
6.4 COBRA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -24-
6.5 OTHER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -25-
</TABLE>
(ii)
<PAGE>
<TABLE>
<CAPTION>
ARTICLE 7
<S> <C>
ENVIRONMENTAL MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -25-
7.1 ENVIRONMENTAL STUDIES. . . . . . . . . . . . . . . . . . . . . . . . -25-
7.2 REMEDIATION ESTIMATE . . . . . . . . . . . . . . . . . . . . . . . . -25-
7.3 ON-SITE ENVIRONMENTAL LIABILITIES. . . . . . . . . . . . . . . . . . -25-
<CAPTION>
ARTICLE 8
<S> <C>
COVENANTS TO BE PERFORMED PRIOR TO THE CLOSING . . . . . . . . . . . . . . . . . -25-
8.1 TITLE INSURANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . -26-
8.2 SURVEY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -26-
8.3 MATERIAL ASSUMED CONTRACTS . . . . . . . . . . . . . . . . . . . . . -26-
8.4 CONDUCT OF BUSINESS. . . . . . . . . . . . . . . . . . . . . . . . . -26-
8.5 PRESERVATION OF BUSINESS . . . . . . . . . . . . . . . . . . . . . . -26-
8.6 NOTICE OF EVENTS . . . . . . . . . . . . . . . . . . . . . . . . . . -27-
8.7 EXAMINATIONS AND INVESTIGATIONS. . . . . . . . . . . . . . . . . . . -27-
8.8 NO NEGOTIATION BY SELLER OR THE SHAREHOLDERS . . . . . . . . . . . . -27-
8.9 SAFETY AUDITS. . . . . . . . . . . . . . . . . . . . . . . . . . . . -28-
8.10 REMOVAL OF WASTE MATERIALS . . . . . . . . . . . . . . . . . . . . . -28-
<CAPTION>
ARTICLE 9
<S> <C>
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 . . . . . . . . . . . . . . . . . . . . . . . . -29-
9.4 LITIGATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -29-
9.5 REAL PROPERTY. . . . . . . . . . . . . . . . . . . . . . . . . . . . -29-
9.6 NO MATERIAL ADVERSE CHANGE . . . . . . . . . . . . . . . . . . . . . -30-
9.7 TRANSFER DOCUMENTS . . . . . . . . . . . . . . . . . . . . . . . . . -30-
9.8 ENVIRONMENTAL ESCROW AGREEMENT . . . . . . . . . . . . . . . . . . . -30-
9.9 ASSIGNMENT OF CONTRACTS. . . . . . . . . . . . . . . . . . . . . . . -30-
9.10 SATISFACTION WITH DUE DILIGENCE, FINANCIAL PERFORMANCE AND
APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -30-
9.11 FINANCING. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -30-
9.12 PREFERRED SUBSCRIPTION AGREEMENT . . . . . . . . . . . . . . . . . . -30-
9.13 COMMON SUBSCRIPTION AGREEMENT. . . . . . . . . . . . . . . . . . . . -30-
9.14 NON-COMPETITION AGREEMENT. . . . . . . . . . . . . . . . . . . . . . -30-
9.15 TERMINAL LEASE . . . . . . . . . . . . . . . . . . . . . . . . . . . -31-
9.16 LEGAL OPINION. . . . . . . . . . . . . . . . . . . . . . . . . . . . -31-
9.17 BOOKS AND RECORDS. . . . . . . . . . . . . . . . . . . . . . . . . . -31-
9.18 RESOLUTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . -31-
9.19 CERTIFICATES, ETC. OF SHAREHOLDERS AND SELLER. . . . . . . . . . . . -31-
</TABLE>
(iii)
<PAGE>
<TABLE>
<S> <C>
9.20 PAYMENT OF SALES OR USE TAXES BY SELLER. . . . . . . . . . . . . . . -31-
9.21 APPROVAL OF COUNSEL TO RECYCLING . . . . . . . . . . . . . . . . . . -31-
<CAPTION>
ARTICLE 10
<S> <C>
CONDITIONS PRECEDENT TO THE OBLIGATION OF SELLER AND THE
SELLER OFFICERS TO CLOSE. . . . . . . . . . . . . -31-
10.1 REPRESENTATIONS, WARRANTIES AND OTHER AGREEMENTS . . . . . . . . . . -31-
10.2 GOVERNMENTAL PERMITS AND APPROVALS . . . . . . . . . . . . . . . . . -32-
10.3 THIRD PARTY CONSENTS . . . . . . . . . . . . . . . . . . . . . . . . -32-
10.4 LITIGATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -32-
10.5 NO MATERIAL ADVERSE CHANGE . . . . . . . . . . . . . . . . . . . . . -32-
10.6 RESOLUTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . -32-
10.7 DESIGNATIONS OF PREFERRED STOCK CONSIDERATION. . . . . . . . . . . . -32-
10.8 LEGAL OPINION. . . . . . . . . . . . . . . . . . . . . . . . . . . . -32-
10.9 THE PURCHASE PRICE . . . . . . . . . . . . . . . . . . . . . . . . . -32-
10.10 ENVIRONMENTAL ESCROW AGREEMENT . . . . . . . . . . . . . . . . . . . -33-
10.11 TERMINAL LEASE . . . . . . . . . . . . . . . . . . . . . . . . . . . -33-
10.12 APPROVAL OF COUNSEL TO SELLER AND THE SHAREHOLDERS . . . . . . . . . -33-
<CAPTION>
ARTICLE 11
<S> <C>
ACTIONS TO BE TAKEN AT THE CLOSING . . . . . . . . . . . . . . . . . . . . . . . -33-
11.1 TRANSFER DOCUMENTS . . . . . . . . . . . . . . . . . . . . . . . . . -33-
11.2 THE PURCHASE PRICE . . . . . . . . . . . . . . . . . . . . . . . . . -33-
11.3 PREFERRED SUBSCRIPTION AGREEMENT . . . . . . . . . . . . . . . . . . -33-
11.4 COMMON SUBSCRIPTION AGREEMENT. . . . . . . . . . . . . . . . . . . . -33-
11.5 NON-COMPETITION AGREEMENTS . . . . . . . . . . . . . . . . . . . . . -33-
11.6 ENVIRONMENTAL ESCROW AGREEMENT . . . . . . . . . . . . . . . . . . . -34-
11.7 GENERAL WARRANTY DEED. . . . . . . . . . . . . . . . . . . . . . . . -34-
11.8 CONTRACT ASSUMPTIONS . . . . . . . . . . . . . . . . . . . . . . . . -34-
11.9 CLOSING CERTIFICATE OF SELLER. . . . . . . . . . . . . . . . . . . . -34-
11.10 CLOSING CERTIFICATE OF THE SHAREHOLDERS. . . . . . . . . . . . . . . -34-
11.11 CLOSING CERTIFICATE OF PARENT AND RII SUB. . . . . . . . . . . . . . -34-
11.12 CERTIFICATE REGARDING RESOLUTIONS OF SELLER. . . . . . . . . . . . . -34-
11.13 CERTIFICATE REGARDING RESOLUTIONS OF RII SUB AND PARENT. . . . . . . -34-
11.14 LEGAL OPINIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . -34-
11.15 REAL PROPERTY CLOSING. . . . . . . . . . . . . . . . . . . . . . . . -34-
11.16 TITLES TO VEHICLES, MACHINERY AND EQUIPMENT. . . . . . . . . . . . . -35-
</TABLE>
(iv)
<PAGE>
<TABLE>
<CAPTION>
ARTICLE 12
<S> <C>
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION. . . . . . . . . . . -35-
12.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . -35-
12.2 INDEMNITY AGREEMENTS OF SELLER AND THE SHAREHOLDERS. . . . . . . . . -35-
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 . . . . . . . . . . . . . . . . . . . . . . . . -38-
12.6 GOOD FAITH EFFORTS TO SETTLE DISPUTES. . . . . . . . . . . . . . . . -38-
12.7 FEES AND EXPENSES. . . . . . . . . . . . . . . . . . . . . . . . . . -39-
12.8 LITIGATION SUPPORT . . . . . . . . . . . . . . . . . . . . . . . . . -39-
<CAPTION>
ARTICLE 13
<S> <C>
TERMINATION OF AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . -39-
13.1 TERMINATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . -39-
13.2 SURVIVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -40-
<CAPTION>
ARTICLE 14
<S> <C>
CERTAIN ADDITIONAL AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . -41-
14.1 PUBLIC STATEMENTS; CONFIDENTIALITY OF INFORMATION. . . . . . . . . . -41-
14.2 REASSIGNMENT OF SELLER RECEIVABLES . . . . . . . . . . . . . . . . . -41-
14.3 EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -41-
14.4 WAIVERS AND CONSENTS . . . . . . . . . . . . . . . . . . . . . . . . -41-
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. . . . . . . . . . . . . . . . . . . . . -43-
14.9 ENTIRE AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . -43-
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. . . . . . . . . . . . . . . . . -44-
14.15 PARTIES IN INTEREST. . . . . . . . . . . . . . . . . . . . . . . . . -45-
14.16 COUNTERPARTS AND FACSIMILE SIGNATURES. . . . . . . . . . . . . . . . -45-
14.17 SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . -45-
14.18 CORPORATE AUTHORITY. . . . . . . . . . . . . . . . . . . . . . . . . -45-
14.19 PAYMENT OF ACCOUNTS PAYABLE. . . . . . . . . . . . . . . . . . . . . -45-
LIST OF EXHIBITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -48-
LIST OF SCHEDULES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -49-
</TABLE>
(v)
<PAGE>
ASSET PURCHASE AGREEMENT
THIS AGREEMENT is made as of the 21st day of May, 1998, by and among
RECYCLING INDUSTRIES OF CHARLOTTE, INC., a Colorado corporation ("RII Sub"),
RECYCLING INDUSTRIES, INC., a Colorado corporation ("Parent"), REPUBLIC ALLOYS,
INC., a North Carolina corporation ("Seller"), William B. Allen, President and
an individual shareholder of Seller ("Allen"), Mark W. Russo, an individual
shareholder of Seller ("Russo"). Throughout this Agreement, RII Sub and the
Parent may be collectively referred to as "Recycling;" and Allen, and Russo 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, below.
WITNESSETH:
WHEREAS, RII Sub is a wholly-owned subsidiary of the Parent;
WHEREAS, RII Sub desires to acquire certain assets of Seller and Allen
consisting of substantially all of the tangible and intangible assets and real
property used in the ferrous and non-ferrous metals recycling business conducted
by Seller at its facility located in Charlotte, 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 and Allen desire 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 Preferred and Common Stock Consideration referred to herein; and
WHEREAS, Allen and Russo in their capacity as Shareholders, 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,
software licenses, 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 as conducted by
Seller on February 16, 1998, and subsequent thereto, as a going concern.
1.4 "Closing" means the closing of the Transaction.
1.5 "Closing Date" means the date and time of the Closing as specified
by RII Sub in the Closing Notification delivered pursuant to Section 3.5, 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" the notice of the date and time of Closing
given by RII Sub to Seller in accordance with Section 3.5, below.
1.8 "Employee Benefit Plan" means any: plan, arrangement, agreement or
program which is: (a) an employee benefit plan as defined in Section 3(3) of the
ERISA, whether or not funded and whether or not terminated, (b) an employment
agreement, or (c) a personnel policy or fringe benefit plan, policy, program or
arrangement, whether or not subject to ERISA, whether or not funded, and whether
or not terminated, including without limitation, any stock bonus, deferred
compensation, pension, severance, bonus, vacation, travel, incentive, health,
disability or other pension or welfare plan.
1.9 "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
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("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.
1.10 "Environmental Liabilities" means any and all liabilities for the
violation of, or remediation under, any Environmental Laws.
1.11 "ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
1.12 "GAAP" means generally accepted accounting principles consistently
applied in the United States.
1.13 "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.
1.14 "HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, 15 U.S.C. Sections 18a.
1.15 "Intellectual Property" has the meaning set forth in Section 2.1(e).
1.16 "IRC" means the Internal Revenue Code of 1986, as amended.
1.17 "Knowledge" with respect to individuals means actual knowledge
without independent investigation and 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.
1.18 "Lender" means Recycling's primary lender or equity participant
relating to the Transaction, including, without limitation, those individuals
and entities listed on Schedule 1.18.
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1.19 "Liability or Liabilities" means direct or indirect indebtedness,
liability, claim, loss, damage, deficiency, obligation or responsibility, known
or unknown, asserted or unasserted, fixed or unfixed, liquidated or
unliquidated, secured or unsecured, accrued, absolute, contingent or otherwise
which affects or could affect the Seller Assets or the Business, including any
liability for Taxes.
1.20 "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 or the average of the last
reported bid and asked price for the Parent Common Stock as reported on the
Nasdaq SmallCap Market.
1.21 "Material Assumed Contracts" means all Assumed Contracts other than
(a) contracts which do not require payment by Seller of $10,000 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
$10,000 or more per year, and (c) contracts terminable upon notice of 60 days or
less and which do not require expenditures by Seller of $10,000 or more per
year. The Material Assumed Contracts are listed on Schedule 1.21.
1.22 "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).
1.23 "Owned Facilities" means the real property and associated fixtures
owned by Allen as specifically described on Schedule 2.1(a).
1.24 "Parent Common Stock" means the common stock, $.001 par value per
share, of Recycling Industries, Inc., a Colorado corporation.
1.25 "Parent Series K Preferred" means the Redeemable Convertible
Preferred Stock of Parent described in the Designation of Series K Redeemable
Convertible Preferred Stock attached hereto as EXHIBIT A.
1.26 "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.
1.27 "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.
1.28 "Prepared Inventory" means all ferrous and non-ferrous scrap metal
inventory that has been processed or at the time of purchase was in a form that
historically was deemed
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saleable without processing by Seller and as of the Closing Date is ready for
shipment to Seller's customers.
1.29 "Retained Receivables" means any receivables of any nature arising
out of the Seller's crane and equipment sale, leasing and repair business which
are listed on Schedule 1.29.
1.30 "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.
1.31 "Seller Financial Statements" means the financial statements, other
than tax returns, delivered pursuant to Section 4.4, below.
1.32 "Seller Payables" means all payables of any nature arising out of
the Business, including accounts and notes payable.
1.33 "Seller Receivables" means all receivables of any nature arising out
of the Business, including accounts and notes receivable but excluding any
receivables that have been outstanding for more than 60 days as of the Closing
Date.
1.34 "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 used in the operation of the Business, but does not
include any inventory spare parts or tools for use in the Seller's crane and
equipment sales, leasing and repair business.
1.35 "Tangible Property" shall include the property described in Sections
2.1(a), 2.1(d), 2.1(h), and 2.1(i), below.
1.36 "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.
1.37 "Transaction" means the transactions contemplated by this Agreement
and the Closing Documents.
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1.38 "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.
1.39 "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):
(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 Seller Receivables other than the Retained Receivables,
including those listed on Schedule 2.1(b);
(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 and used
in the Business as of the date of this Agreement located at the Owned Facilities
or 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 used in the Business
are included in the Seller Assets whether or not listed on Schedule 2.1(d).
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(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 "Republic Alloys," 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.
(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, chooses 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.
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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 obtained by RII Sub pursuant to Section 8.1.
2.2 EXCLUDED ASSETS. On the Closing Date, RII Sub shall not purchase
the 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 Section
2.3, 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 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 2.5(a).
(b) If RII Sub receives payment on any Retained Receivables or
any receivables assigned back to the Seller pursuant to Section 14.2, RII Sub
shall forthwith forward same to Seller. Seller shall have the right, during
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.
2.6 LEASE TO SELLER. On the Closing Date, RII Sub will lease to
Seller the office, shop and storage space located on the portion of the Owned
Facilities formerly used as a truck terminal (the "Terminal Lease"). The
Lease shall provide, among other things, for the lessee to be responsible for
its pro-rata share of utilities, taxes and insurance on the leased premises,
for rental at the rate of $1.00/annum, and for a term of five years with two
five year renewals at the option of the Seller and early termination
available to either party on six months prior written notice. Lessee shall
be responsible for any upfitting or improvements to the premises provided
that any such improvements shall become the property of the lessor upon
termination of the Terminal Lease. The Terminal Lease shall not be assigned
or transferred by Seller nor may Seller sublet any portion of the Terminal
Lease without the prior written consent of RII Sub. The form of Terminal
Lease is attached hereto as Exhibit A.
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<PAGE>
ARTICLE 3
PURCHASE PRICE AND CLOSING
3.1 PURCHASE PRICE FOR SELLER ASSETS.
(a) At Closing, RII Sub shall pay the total amount of
$12,700,000, plus the Market Price of the Common Stock Consideration, as
defined below, on the day immediately preceding the Closing Date, subject to
adjustment in accordance with Section 3.3(a) below (the "Purchase Price") to
Seller and Allen for the purchase of the Seller Assets. The Purchase Price
shall be payable as follows:
(1) $10,160,000, as adjusted in accordance with Section 3.3(a)
below, in immediately available funds (the "Cash Consideration");
(2) $2,540,000 of Parent Series K Preferred (the "Preferred
Stock Consideration") delivered at Closing pursuant to the terms of a
customary subscription agreement (the "Preferred Subscription Agreement").
The form of Preferred Subscription Agreement is attached hereto as Exhibit
B; and
(3) 30,000 shares of Parent Common Stock (the "Common Stock
Consideration") delivered at Closing pursuant to the terms of a customary
subscription agreement containing piggyback registration right for the
Common Stock Consideration (the "Common Subscription Agreement"). The form
of Common Subscription Agreement is attached hereto as Exhibit D.
The amount of the Cash Consideration, Preferred Stock Consideration and
Common Stock Consideration to be paid to each of the Seller and Allen at Closing
shall be as set forth on Schedule 3.1.
3.2 INVENTORY VALUATION.
(a) The aggregate value of the Processed and Unprocessed
Inventory shall be determined jointly by representatives of the Seller and
Recycling prior to the Closing Date, and such value will be set forth on
Schedule 3.2, initialed by Seller 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 Seller 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.
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(b) 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 Seller and Recycling to determine such value. The value
determination by such third party shall be binding on Seller and Recycling.
The Closing shall occur as soon as practicable after third party value
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 ADJUSTMENTS.
(i) The aggregate value of Processed and Unprocessed
Inventory and Seller Receivables, net of any reserves, included in the Seller
Assets, as determined in accordance with Section 3.2 shall not be less than
$1,650,000 on the Closing Date. If the value of the Processed and
Unprocessed Inventory and Seller Receivables 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; and
(ii) The Cash Consideration shall be reduced by the amount of
accrued liabilities assumed by RII Sub in connection with the Sellers Assets,
including accrued employee benefits such as vacation and sick leave, on a
pro-rata basis to the Closing Date and increased by (i) the amount of prepaid
assets acquired by RII Sub in connection with the Sellers Assets (e.g.
prepaid postage), (ii) the cost of roll offs and/or lugger pans purchased by
Seller as provided by Section 8.4; (iii) the cost of stationary and other
office supplies purchased by Seller at Recycling's request and not used prior
to closing, and (iv) deposits in accounts opened by Seller at Recycling's
request prior to Closing.
(b) POST-CLOSING ADJUSTMENT. If the parties are not able to
complete the adjustments contemplated by Sections and 3.3(a) immediately
prior to the Closing, within 45 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 50th day after the Closing.
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
within 45 days following the Closing Date.
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(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 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 Closing Date set
forth in the Closing Notification, given by RII Sub in accordance with this
section. The Closing Date shall be no later than May 31, 1998, PROVIDED,
HOWEVER, the Closing Date will be automatically extended to a date that is
not less than 45 days after delivery of the Remediation Estimates as provided
in Section 7.2.
3.6 ADDITIONAL COMPENSATION. As additional compensation, RII Sub
will pay to Seller the net rents received, as and when received, from
independent third parties currently renting space on the Owned Facilities as
listed on Schedule 3.6. Such payments will be net of costs associated with
the relevant parcels of real property, including but not limited to real
estate taxes and assessments, insurance and utilities. RII Sub will make
such payments to Seller for so long as the property is leased to independent
third parties. Seller acknowledges that RII Sub intends to terminate such
leases as soon as practicable and then to utilize such real property in the
operation of its scrap metal recycling business.
ARTICLE 4
REPRESENTATIONS OF SELLER AND THE 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, Seller 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 and
as of the Closing Date.
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.
4.2 TITLE TO PROPERTY. Seller has good, valid and marketable title
to all real and personal property and Allen has good, valid and marketable
title to all real 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
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acceptable to RII Sub in its reasonable discretion and included as an
exception to the title policy to be obtained by RII Sub.
4.3 AUTHORITY OF SELLER; CONSENTS. (a) Seller and the Shareholders
have full power and authority to execute and deliver this Agreement and the
Closing Documents and to carry out the Transaction and Seller and the
Shareholders have 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 and the Shareholders enforceable in accordance
with their terms.
(c) Except for 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 or the Shareholders 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 they are 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 they are 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 they 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) On or before May 15, 1998, Seller will furnish to Recycling
the following financial information, Schedules, and other disclosures:
(1) Audited financial statements for the Business as of and for
its fiscal years ended December 31, 1997 and 1996, prepared in accordance
with GAAP (the "Audited Financial Statements"). RII Sub will reimburse
Seller for the cost of the audit as of and for the year ended December 31,
1996.
(2) Unaudited financial statements for the Business as of and
for the years ended December 31, 1995 and 1996 and monthly and year to date
financial statements for each monthly period commencing January 1, 1998
through the Closing Date 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.
(c) Since December 31, 1997, 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.
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(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 review by any such authority is
pending, or, to the Knowledge of Seller and the Shareholders, contemplated.
4.6 COMPLIANCE WITH LAWS. Except as set forth on Schedule 4.6:
(a) Neither Seller nor any of the Shareholders 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 Shareholders,
except as disclosed on Schedule 4.25 or otherwise disclosed in the Environmental
Studies, neither Seller nor the Shareholders 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, 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 Shareholder has Knowledge of any basis therefor, and (3) except
as disclosed on Schedule 4.25, neither Seller nor any Shareholder 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 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 Shareholder,
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 Shareholder, or, to the Knowledge of Seller 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 Seller or any
Shareholder, threatened against or involving the Seller Assets or the Business,
nor to the Knowledge of Seller or any Shareholder, is there any basis therefor.
Responsibility for any litigation involving the Seller Assets or the Business
pending or arising from acts that occurred prior to the Closing and the
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satisfaction of judgments (including related costs and fees) shall remain with
Seller and the Shareholders.
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 1.21
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 60 days old and are collectible
and will be collected at their recorded amounts within 60 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 or thereafter is in good operating condition and repair,
subject only to normal wear and tear. Neither Seller nor any of the
Shareholders 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.
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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.
(b) Neither Seller nor any of the Shareholders 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 Shareholders 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 Shareholders,
with respect to each parcel of owned real property included within the Owned
Facilities:
(a) Except as otherwise disclosed herein or in the Environmental
Studies the Owned Facilities have received all approvals of governmental
authorities (including licenses and permits) required in connection with the
ownership or operation thereof and have been operated and maintained in
accordance with applicable laws, rules and regulations including zoning.
(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
except such short-term tenancies as are identified on Schedule 3.6 and except
those matters reflected on 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) with the exception of those short-term tenancies identified
on Schedule 3.6, 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.
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4.15 LIABILITIES. Except as otherwise set forth in this Agreement or any
Schedule hereto, to the Knowledge of Seller and the Shareholders, 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, 1997, in the Ordinary Course of Business and (c) liabilities
for tax and accounting and legal services incurred in connection with this
transaction.
4.16 SUPPLIERS AND CUSTOMERS. Schedule 4.16 lists the 19 largest
suppliers and 13 largest customers of the Business and all customers and
suppliers of the Business whose purchases from or sales to the Business during
the preceding 12 months exceeded $25,000. All purchase orders and customer
contracts were issued by Seller in the Ordinary Course of Business. 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.
4.17 EMPLOYEE BENEFIT PLANS.
(a) Schedule 4.17 contains an accurate and complete list of all
Employee Benefit Plans, contributed to, maintained or sponsored by Seller, to
which Seller is obligated to contribute or with respect to which Seller has any
liability or potential liability, whether direct or indirect (collectively the
"Plans" or individually a "Plan").
(b) Except as disclosed in Schedule 4.17, Seller does not
contribute to, have an obligation to contribute to or otherwise have any
liability or potential liability with respect to (a) any Multiemployer Plan (as
such term is defined in Section 3(37) of ERISA), (b) any plan of the type
described in Sections 4063 and 4064 of ERISA or in Section 413 of the IRC (and
regulations promulgated thereunder), or (c) any plan which provides heath, life
insurance, accident or other welfare-type benefits to current or future retirees
or current former employees, their spouses or dependents, other than in
accordance with Section 4980B of the IRC or applicable state continuation
coverage law.
(c) Except as disclosed in Schedule 4.17, none of the Plans
obligates Seller to pay separation, severance, termination or similar-type
benefits solely as a result of any transaction contemplated by this Agreement or
solely as a result of a change in control, as such term is used in Section 280G
of the IRC (and regulations promulgated thereunder).
(d) Each Plan and all related trusts, insurance contracts, and
funds have been maintained, funded and administered in compliance in all
respects with all applicable laws and regulations, including but not limited to
ERISA and the IRC. None of Seller, any trustee or administrator of any Plan, or
any other Person has engaged in any transaction with respect to any Plan which
could subject Seller, or any trustee or administrator of any Plan, or any party
dealing with any Plan, or Recycling to any tax or penalty imposed by ERISA or
the IRC. No actions, suits, claims, complaints, charges, proceedings, hearings,
investigations, or demands
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with respect to the Plans (other than routine claims for benefits) are
pending or, to the Knowledge of Seller, threatened, and Seller has no
Knowledge of any facts which could reasonably be expected to give rise to any
actions, suits, claims, complaints, charges, proceedings, hearings,
investigations, or demands. No Plan that is subject to the funding
requirements of Section 412 of the IRC or Section 302 of ERISA has incurred
any accumulated funding deficiency as such term is defined in such Sections
of ERISA and the IRC, whether or not waived. No liability to the Pension
Benefit Guaranty Corporation (PBGC) (except for routine payment of premiums)
has been or is expected to be incurred with respect to any Plan that is
subject to Title IV of ERISA, no reportable event (as such term is defined in
Section 4043 of ERISA) has occurred with respect to any such Plan, and the
PBGC has not commenced or, to Seller's Knowledge, threatened the termination
of any Plan. None of the Seller Assets are the subject to any lien arising
under Section 302(f) of ERISA or Section 412(n) of the IRC, Seller has not
been required to post any security pursuant to Section 307 of ERISA or
Section 401(a)(29) of the IRC, and neither Seller, nor any officers or
directors of Seller, has Knowledge of any facts which could reasonably be
expected to give rise to such lien or such posting of security.
(e) Each Plan that is intended to be qualified under Section
401(a) of the IRC, and each trust (if any) forming a part thereof, has received
a favorable determination letter from the Internal Revenue Service as tot he
qualifications under the IRC of such Plan and the tax exempt status of such
related trust, and nothing has occurred since the date of such determination
letter that could adversely affect the qualification of such Plan or the tax
exempt status of such related trust.
(f) No underfunded defined benefit plan (as such term is defined
in Section 3(35) of ERISA) has been, during the five years preceding the Closing
Date, transferred out of the controlled group of companies (within the meaning
of Sections 414(b), (c), (m) and (o) of the IRC) of which Seller is a member or
was a member during such five-year period.
(g) As of the Closing Date, the fair market value of the assets
of each Plan that is a defined benefit pension plan equals or exceeds the
present value of all vested and non-vested liabilities thereunder determined in
accordance with applicable PBGC methods, factors and assumptions applicable to a
defined benefit pension plan terminating on such date. With respect to each
Plan that is subject to the funding requirements of Section 412 of the IRC and
Section 302 of ERISA, all required or recommended contributions for all periods
ending prior to or as of the Closing Date (including periods from the first day
of the then-current plan year to the Closing Date and including all quarterly
contributions required in accordance with Section 412(m) of the IRC) shall have
been made. With respect to each other Plan, all required or recommended
payments, premiums, contributions, reimbursements or accruals for all periods
ending prior to or as of the Closing Date shall have been made. No Plan has any
unfunded liabilities.
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(h) The Board of Directors of Seller (or committees or officers
authorized by such Board) has authority to amend or terminate the Plans at any
time without limitation (subject to the requirements of ERISA), and neither the
consideration or implementation of the transactions contemplated under this
Agreement nor the amendment or termination of any or all of the Plans on or
after the date of this Agreement will increase (a) the obligation of Seller to
make contributions or any other payments to fund benefits accrued under any
Employee Benefit Plans as of the date of this Agreement or (b) the benefits
accrued or payable with respect to any participant under any Employee Benefit
Plans.
(i) With respect to each Plan, Seller has provided Recycling
with true, complete and correct copies, to the extent applicable, of (a) all
documents pursuant to which the Plans are maintained, funded and administered,
(b) the two most recent annual reports (Form 5500 Series) filed with the
Internal Revenue Service (with attachments), (c) the two most recent actuarial
reports, (d) the two most recent financial statements, and (e) all governmental
rulings, determinations, and opinions (and pending requests for governmental
rulings, determinations, and opinions).
(j) Except as provided on Schedule 4.17(j), Seller does not
provide any post-retirement or post-employment health, life insurance, accident
or other welfare-type benefits. Schedule 4.17(j) includes the most recent
valuation (but in any case at least one that has been completed within the last
calendar year) of the present and future obligations with respect to Employee
Benefit Plans and benefits listed thereon, if any.
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 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 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 Shareholders' 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.
4.20 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.
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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 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.
4.23 BROKER'S OR FINDER'S FEES. No agent, broker, Person or firm acting
on behalf of Seller 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 Seller
who work or are customarily stationed at the Owned Facilities, their current
employment compensation (including 1997 bonus, if any), and other amounts if any
payable to each employee. Immediately prior to the Closing, Seller will
terminate all of its employees (the "Terminated Employees") and RII Sub will
hire all employees listed on Schedule 4.24 upon consummation of the Closing.
Seller will pay all compensation due the Terminated Employees 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 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).
4.25 ENVIRONMENTAL MATTERS. Except as may be provided in the
Environmental Studies to be performed as contemplated by Section 7.1 of this
Agreement, or disclosed on Schedule 4.25, to the Knowledge of Seller and the
Shareholders:
(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 Shareholders 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 Shareholders 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 is liable for
any liability or obligation of any other person, except as described in Schedule
4.27.
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
Shareholders 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 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 Shareholders to enter into this
Agreement and to complete the Transaction and with the knowledge that Seller and
the Shareholders will rely thereon, RII Sub and the Parent jointly and severally
represent and warrant to Seller and the Shareholders 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 PREFERRED STOCK CONSIDERATION. The Preferred Stock
Consideration when issued, and the Parent Common Stock issuable upon
conversion of the Preferred 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 COMMON STOCK CONSIDERATION. The Common Stock Consideration when
issued 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.
5.7 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.
5.8 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.
5.9 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,
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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.
5.10 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.
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 Shareholders 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 ten business days after the date hereof, each party, including their
respective affiliates, shall make any and all filings required to be made under
the HSR Act if such filings are required to be made in the opinion of
Recycling's legal counsel. 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. Each party will pay
their respective costs of preparing and making each initial filing and any
additional filings under the HSR Act, including 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 will comply with the provisions of COBRA, Pub. L. No.
99-272, 99th Cong., 2d Sess. (1987), and any similar statute, relating to
continuation of health benefits to employees, as they apply to the transaction
contemplated hereby. Seller has complied with all of its COBRA requirements for
all persons who were participants in the Seller's medical benefit plans prior to
the Closing Date or who became eligible for COBRA due to qualifying events that
occurred under Seller's medical benefit plans prior to the Closing Date. Any
liabilities for COBRA claims or COBRA administration that relate to Seller's
medical benefit plans as in existence on or prior to the Closing Date shall be
the responsibility of the Seller and
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or Shareholders. After the Closing Date, Seller shall remain responsible for
COBRA claims and administration arising out of qualifying events that
occurred prior to or on the Closing Date.
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:
7.1 ENVIRONMENTAL STUDIES. Recycling, at its sole cost and expense, has
engaged an environmental auditing firm (the "EAF") to complete an ASTM E 1527-97
Phase I and Phase II Environmental Site Assessment and Transaction Screen
Process of the Business, facilities and operations of Seller (the "Environmental
Studies"). The Environmental Studies are attached hereto as Schedule 7.1
7.2 REMEDIATION ESTIMATE. The Environmental Studies have indicated that
remediation is required to ensure that the Business, real property, facilities
and operations of Seller meet and comply with all applicable environmental laws
and regulations, and Recycling has directed and the EAF has completed an
estimate of the cost of such remediation (the "Remediation Estimate") which has
been delivered to Seller. [CONFIDENTIAL TREATMENT REQUESTED].
7.3 ON-SITE ENVIRONMENTAL LIABILITIES. Seller and the
Shareholders, 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, arising
out of or resulting from on-site events or occurrences on or before the
Closing Date or any migration of contamination onto or under the Owned
Facilities prior to the Closing Date ("On-Site Environmental Liabilities")
[CONFIDENTIAL TREATMENT REQUESTED].
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:
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8.1 TITLE INSURANCE. Prior to the Closing, RII Sub at its sole cost
and expense will obtain a title insurance commitment or commitments, with
respect to the Owned Facilities, using a current North Carolina standard form
of American Land Title Association Owner's Title Insurance Commitment 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 title which is referred to
therein that burdens or benefits said real property. When delivered, the
title commitment shall be attached as Schedule 8.1.
8.2 SURVEY. RII Sub, at its expense, will obtain 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. When delivered, the Survey shall be attached as Schedule 8.2.
8.3 MATERIAL ASSUMED CONTRACTS. Seller will use its best efforts to
obtain the written consent to the assumption by RII Sub of each of the
Material Assumed Contracts listed on Schedule 1.21 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. Notwithstanding the
foregoing, Seller may spend up to $40,000 to acquire new roll offs and/or
lugger pans to service new accounts and such amounts, if expended, will be
added to the Purchase Price and paid at Closing and a listing of such
equipment will be provided on Schedule 8.4 attached hereto.
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, licensor, 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.
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8.6 NOTICE OF EVENTS. Seller 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 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 Shareholders 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 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
Shareholders 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 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 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
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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.
Seller and the Shareholders will notify Recycling within 24 hours 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. Recycling may perform safety audits at each of the
Seller's facilities through 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 paid by the Seller and, if the
transaction is completed shall be paid out of assets other than the Seller
Assets.
8.10 REMOVAL OF WASTE MATERIALS. Seller shall remove, at its cost, all
waste materials (e.g. shredder fluff, waste oil, Hazardous Materials, other
materials or substances which currently form the basis of liability under any
Environmental Laws) 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 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 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. Seller 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. Seller 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, including, if applicable, 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.
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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 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.
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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 Shareholders' 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 ENVIRONMENTAL ESCROW AGREEMENT. RII Sub shall have received from
Seller the Environmental Escrow Agreement in the form attached hereto as
Exhibit E.
9.9 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.
9.10 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.
9.11 FINANCING. Recycling shall have obtained a commitment for
financing from the Lender to effect the purchase of the Seller Assets as
contemplated hereunder.
9.12 PREFERRED SUBSCRIPTION AGREEMENT. The Parent shall have received
from Seller the Common Subscription Agreement for the Preferred Stock
Consideration in the form attached hereto as Exhibit C.
9.13 COMMON SUBSCRIPTION AGREEMENT. The Parent shall have received
from Seller the Common Subscription Agreement for the Common Stock
Consideration in the form attached hereto as Exhibit D.
9.14 NON-COMPETITION AGREEMENT. Recycling shall have received from
Seller, and William B. Allen, executed Non-Competition Agreements in the form
attached hereto as Exhibit F.
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9.15 TERMINAL LEASE. Recycling shall have received from Seller an
executed Terminal Lease in the form attached hereto as Exhibit A.
9.16 LEGAL OPINION. Recycling and its Lender shall receive an opinion
from counsel to the Seller and the Shareholders in the Form attached hereto
as Exhibit G.
9.17 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.
9.18 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.
9.19 CERTIFICATES, ETC. OF SHAREHOLDERS AND SELLER. The Shareholders
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.
9.20 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.
9.21 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 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 Seller 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 on and as of the Closing Date with the same
force and effect as though made on and as of the Closing
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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 GOVERNMENTAL PERMITS AND APPROVALS. All permits and approvals
from any governmental or regulatory body required for the lawful completion
of the Transaction, including, if applicable, early termination of the
waiting period under the HSR Act, shall have been obtained.
10.3 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.
10.4 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 Seller, a materially
adverse effect on the assets, properties, businesses, operations or financial
condition of RII Sub or the Parent.
10.5 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.
10.6 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.
10.7 DESIGNATIONS OF PREFERRED STOCK CONSIDERATION. There shall have
been delivered to Seller and the Shareholders a certified copy of the
Certificates of Designations, Rights and Preferences of the Parent Series K
Preferred.
10.8 LEGAL OPINION. Seller shall receive an opinion from counsel to
Parent and RII Sub in the Form attached hereto as Exhibit H.
10.9 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.
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10.10 ENVIRONMENTAL ESCROW AGREEMENT. Seller and the Shareholders
shall have received from RII Sub the Environmental Escrow Agreement in the
form attached hereto as Exhibit E.
10.11 TERMINAL LEASE. Seller shall have received from Recycling an
executed Terminal Lease in the form attached hereto as Exhibit A.
10.12 APPROVAL OF COUNSEL TO SELLER 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 Rayburn, Moon & Smith, P.A., counsel to Seller 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. 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 Preferred Stock
Consideration.
(c) Parent shall deliver to Seller the Common Stock
Consideration.
11.3 PREFERRED SUBSCRIPTION AGREEMENT. Seller shall deliver to the
Parent the Preferred Subscription Agreement.
11.4 COMMON SUBSCRIPTION AGREEMENT. Seller shall deliver to the
Parent the Common Subscription Agreement.
11.5 NON-COMPETITION AGREEMENTS. Seller, and Allen shall deliver to
RII Sub and the Parent their duly executed Non-Competition Agreements.
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11.6 ENVIRONMENTAL ESCROW AGREEMENT. Seller and the Shareholders
shall deliver to RII Sub and RII Sub shall deliver to Seller and the
Shareholders the Environmental Escrow Agreement, duly executed by the parties
thereto.
11.7 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.
11.8 CONTRACT ASSUMPTIONS. Seller shall deliver the written consents
to the assumption by RII Sub of the Material Assumed Contracts.
11.9 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.
11.10 CLOSING CERTIFICATE OF THE SHAREHOLDERS. The Shareholders shall
deliver to RII Sub a closing certificate dated the Closing Date, in a form
satisfactory to RII Sub.
11.11 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.
11.12 CERTIFICATE REGARDING RESOLUTIONS OF SELLER. Seller shall
deliver to Recycling copies of resolutions certified as required by Section
9.19.
11.13 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.
11.14 LEGAL OPINIONS. Counsel to the Parent and to Seller and the
Shareholders shall deliver their respective legal opinions as required by
Sections 9.17 and 10.9.
11.15 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;
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(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 and;
(3) Any and all utility charges through the expiration of the
day immediately preceding Closing Date;
(4) 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.
11.16 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.
11.17 TERMINAL LEASE. RII Sub and Seller will execute the Terminal
Lease.
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 for a period of 13 months after
Closing except for 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.
12.2 INDEMNITY AGREEMENTS OF SELLER AND THE SHAREHOLDERS.
(a) Seller 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 Seller or the
Shareholders contained in this Agreement;
(2) any misrepresentation in or omission from or nonfulfillment
of any covenant on the part of Seller or the Shareholders contained in any
other agreement, certificate or other instrument furnished or to be
furnished to RII Sub or the Parent by Seller or the Shareholders pursuant
to Article 11 of this Agreement;
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(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 Shareholders relating to the Business through the Closing
Date which are not paid by either Seller or the Shareholders 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 [CONFIDENTIAL TREATMENT
REQUESTED];
(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) the violation or alleged violation by Seller or the
Shareholders of any Environmental Law or any orders, requirements or
demands of any governmental authorities related thereto, arising out of
events or circumstances occurring on or before the Closing Date PROVIDED,
HOWEVER [CONFIDENTIAL TREATMENT REQUESTED];
(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
Shareholders shall not be required to indemnify RII Sub and Parent until the
aggregate amount of indemnification for all matters equals or exceeds
$50,000, at which time Seller and the Shareholders shall indemnify and
reimburse RII Sub and the Parent for all such amounts incurred (including the
first $50,000) up to an aggregate liability for all such claims of $950,000
PROVIDED, HOWEVER, that the foregoing
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limitations shall not apply to (i) [CONFIDENTIAL TREATMENT REQUESTED]; (ii)
the reassignment of any Seller Receivables as provided in Section 14.2, or
(iii) 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 Shareholders 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 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) the violation or alleged violation by RII Sub or the Parent
of any Environmental Law or any orders, requirements or demands of any
governmental authorities related thereto, arising out of events or
circumstances occurring after the Closing Date;
(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 Shareholders until the aggregate
amount of indemnification for all matters equals or exceeds $50,000, at which
time RII Sub and Parent shall indemnify and reimburse Seller and the
Shareholders for all such amounts incurred (including the first $50,000) up
to an aggregate liability for such claims of $950,000 PROVIDED, HOWEVER, that
the foregoing
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<PAGE>
limitations shall not apply to 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
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
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<PAGE>
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, 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 occurred under Section
12.4(b).
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, 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 Shareholders has breached any material
representation or warranty, or failed to perform any covenant or agreement
contained in this Agreement PROVIDED, HOWEVER, Seller and the Shareholders
shall have, at the election of Seller 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;
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<PAGE>
(2) 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
(3) 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 Shareholders 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) within 15 days after the receipt of the Remediation Estimate
as provided in Section 7.2;
(3) 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;
(4) 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 May 31, 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
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Section 8.7(b), 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.
14.2 REASSIGNMENT OF SELLER RECEIVABLES. For 120 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 60 days of the
Closing, as provided in Section 4.10. 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 Shareholders 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.
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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
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 Charlotte, Inc.
9780 South Meridian Blvd., Suite 180
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 SHAREHOLDERS:
William B. Allen, President
Republic Alloys, Inc.
419 Atando Avenue
Charlotte, North Carolina 28706
telephone: (704)
facsimile: (704)
-42-
<PAGE>
WITH A COPY TO:
C. Richard Rayburn, Jr.
Rayburn, Moon & Smith, P.A.
227 West Trade Street, Suite 1200
Charlotte, North Carolina 28202
telephone: (704) 334-0891
facsimile: (704) 377-1897
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 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 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 Shareholders 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 Shareholders from time to time, and without further
consideration, RII Sub shall provide Seller or the Shareholders access to or
copies of said business records which have not been previously destroyed.
14.8 AUDIT BY RII SUB AND PARENT. For a period of five years after
the Closing, Seller 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.
14.9 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.
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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 Colorado, 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 in, and hereby submits itself and
its property to the jurisdiction of, the courts of the State of Colorado
located in Denver, Colorado, the courts of the United States of America for
the District of Colorado, 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.
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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 AUTHORITY. The undersigned have executed this
Agreement with all requisite corporate authority.
14.19 PAYMENT OF ACCOUNTS PAYABLE. Within 30 days of the Closing Date,
Seller shall have paid in full all of the Seller Payables outstanding as of
the Closing Date other than, amounts which are the subject of a bona fide
dispute.
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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 CHARLOTTE, INC.
Dated: May 21, 1998 By: /s/ Michael J. McCloskey
-------------------------------------
Michael J. McCloskey, Vice
President
"PARENT"
RECYCLING INDUSTRIES, INC.
Dated: May 21, 1998 By: /s/ Michael J. McCloskey
-------------------------------------
Michael J. McCloskey, Vice
President of Acquisitions
"SELLER"
REPUBLIC ALLOYS, INC.
Dated: May 21, 1998 By: /s/ William B. Allen
-------------------------------------
William B. Allen, President
"ALLEN"
Dated: May 21, 1998 By: /s/ William B. Allen
------------------------------------
William B. Allen
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<PAGE>
"RUSSO"
By: /s/ Mark W. Russo
Dated: May 21, 1998 ------------------------------------
Mark W. Russo
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<PAGE>
LIST OF EXHIBITS
----------------
<TABLE>
<CAPTION>
<S> <C>
Exhibit A Form of Terminal Lease Agreement
Exhibit B Certificate of Designations, Rights and Preferences of the Series
K Redeemable Convertible Preferred Stock of Recycling Industries,
Inc.
Exhibit C Form of Preferred Subscription Agreement
Exhibit D Form of Common Subscription Agreement
Exhibit E Environmental Escrow Agreement
Exhibit F Non-Competition Agreement
Exhibit G Form of Legal Opinion from Counsel for Seller and the
Shareholders
Exhibit H Form of Legal Opinion from Counsel for RII Sub and Parent
</TABLE>
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<PAGE>
LIST OF SCHEDULES
-----------------
<TABLE>
<CAPTION>
<S> <C>
Schedule 1.18 Lender
Schedule 1.21 Material Assumed Contracts
Schedule 1.29 Retained Receivables
Schedule 2.1(a) Owned Facilities - Legal Description
Schedule 2.1(b) Seller Receivables
Schedule 2.1(d) Equipment
Schedule 2.1(e) Intellectual Property
Schedule 2.1(j) Computer Software
Schedule 2.2 Excluded Assets
Schedule 3.1 Payment Instructions
Schedule 3.2 Inventory Valuation
Schedule 3.4 Allocation of Purchase Price
Schedule 3.6 Tenants of Owned Facilities
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) Other Contracts and Agreements
Schedule 4.16 Suppliers and Customers
Schedule 4.17 Employee Benefit Plans
Schedule 4.17(j) Post-Retirement Benefits
Schedule 4.20 Insurance Policies
Schedule 4.22 Relationships
Schedule 4.24 Employee Information
Schedule 4.25 Environmental Matters
Schedule 4.27 Guarantees
Schedule 7.1 Environmental Studies
Schedule 8.1 Title Commitment
Schedule 8.2 Survey
Schedule 8.4 Equipment Purchased Prior to Closing
</TABLE>
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Exhibit 2.4
ASSET PURCHASE AGREEMENT
BY AND AMONG
RECYCLING INDUSTRIES OF SUFFOLK, INC.
a Colorado corporation
AND
RECYCLING INDUSTRIES, INC.
a Colorado corporation
AND
PEANUT CITY IRON & METAL COMPANY, INC.
a Virginia corporation
AND
GEORGE B. GINSBURG
AND
FRED JACOBSON
AND
EDWIN JACOBSON
AND
KENNY WEINSTEIN
AND
SAMUEL BLUM
May 27, 1998
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
ARTICLE 1 DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .-2-
ARTICLE 2 ACQUISITION OF PEANUT CITY ASSETS. . . . . . . . . . . . . . . . . . . .-6-
2.1 PURCHASE AND SALE OF THE PEANUT CITY ASSETS . . . . . . . . . . . . . . .-6-
2.2 EXCLUDED ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .-8-
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 PEANUT CITY ASSETS . . . . . . . . . . . . . . . . . .-9-
3.2 VALUATION OF INVENTORY AND ACCOUNTS RECEIVABLE. . . . . . . . . . . . . .-9-
3.3 ADJUSTMENT OF THE PURCHASE PRICE. . . . . . . . . . . . . . . . . . . . -10-
3.4 ALLOCATION OF THE PURCHASE PRICE. . . . . . . . . . . . . . . . . . . . -10-
3.5 CLOSING OF THE PURCHASE . . . . . . . . . . . . . . . . . . . . . . . . -10-
ARTICLE 4 REPRESENTATIONS OF PEANUT CITY AND SHAREHOLDERS. . . . . . . . . . . . -11-
4.1 DUE ORGANIZATION AND QUALIFICATION. . . . . . . . . . . . . . . . . . . -11-
4.2 TITLE TO PROPERTY . . . . . . . . . . . . . . . . . . . . . . . . . . . -11-
4.3 AUTHORITY OF PEANUT CITY; CONSENTS. . . . . . . . . . . . . . . . . . . -11-
4.4 FINANCIAL STATEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . -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. . . . . . . . . . . . . . . . . . . . . -14-
4.10 NOTES AND ACCOUNTS RECEIVABLE. . . . . . . . . . . . . . . . . . . . . -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. . . . . . . . . . . . . . . . . . . . . . . . -17-
4.17 EMPLOYEE BENEFIT PLANS . . . . . . . . . . . . . . . . . . . . . . . . -17-
4.18 CURTAILMENT OF OPERATIONS. . . . . . . . . . . . . . . . . . . . . . . -18-
4.19 EMPLOYEE RELATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . -18-
4.20 INSURANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -18-
4.21 RELATIONSHIPS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . -18-
4.22 NO MATERIAL CHANGES PRIOR TO CLOSING DATE. . . . . . . . . . . . . . . -18-
4.23 BROKER'S OR FINDER'S FEES. . . . . . . . . . . . . . . . . . . . . . . -18-
4.24 EMPLOYEE TRANSITION. . . . . . . . . . . . . . . . . . . . . . . . . . -19-
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4.25 ENVIRONMENTAL MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . -19-
4.26 COMPLIANCE WITH ADA. . . . . . . . . . . . . . . . . . . . . . . . . . -19-
4.27 HART-SCOTT-RODINO ACT. . . . . . . . . . . . . . . . . . . . . . . . . -19-
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-
5.6 BROKER'S OR FINDER'S FEES . . . . . . . . . . . . . . . . . . . . . . . -21-
5.7 DISCLOSURE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -22-
5.8 BEST EFFORTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -22-
ARTICLE 6 REPRESENTATIONS OF THE PARENT RELATED TO THE STOCK CONSIDERATION . . . -22-
6.1 STATUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -22-
6.2 1934 ACT REGISTRATION . . . . . . . . . . . . . . . . . . . . . . . . . -22-
6.3 PUBLIC REPORTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . -22-
ARTICLE 7 REGULATORY COMPLIANCE. . . . . . . . . . . . . . . . . . . . . . . . . -23-
7.1 BULK SALES COMPLIANCE . . . . . . . . . . . . . . . . . . . . . . . . . -23-
7.2 COBRA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -23-
7.3 OTHER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -23-
ARTICLE 8 COVENANTS TO BE PERFORMED PRIOR TO THE CLOSING . . . . . . . . . . . . -23-
8.1 ENVIRONMENTAL STUDIES . . . . . . . . . . . . . . . . . . . . . . . . . -24-
8.2 TITLE INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . -24-
8.3 SURVEY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -24-
8.4 ASSUMED CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . -25-
8.5 CONDUCT OF BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . -25-
8.6 PRESERVATION OF BUSINESS. . . . . . . . . . . . . . . . . . . . . . . . -25-
8.7 NOTICE OF EVENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . -25-
8.8 EXAMINATIONS AND INVESTIGATIONS . . . . . . . . . . . . . . . . . . . . -26-
8.9 NO NEGOTIATION BY PEANUT CITY OR THE SHAREHOLDERS . . . . . . . . . . . -26-
8.10 REMOVAL OF WASTE MATERIALS . . . . . . . . . . . . . . . . . . . . . . -27-
8.11 SAFETY AUDITS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . -27-
ARTICLE 9 CONDITIONS PRECEDENT TO THE OBLIGATION
OF RECYCLING TO CLOSE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -27-
9.1 REPRESENTATIONS, WARRANTIES AND OTHER AGREEMENTS. . . . . . . . . . . . -27-
9.2 GOVERNMENTAL PERMITS AND APPROVALS. . . . . . . . . . . . . . . . . . . -28-
9.3 THIRD PARTY CONSENTS. . . . . . . . . . . . . . . . . . . . . . . . . . -28-
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<PAGE>
9.4 LITIGATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -28-
9.5 REAL PROPERTY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -28-
9.6 NO MATERIAL ADVERSE CHANGE. . . . . . . . . . . . . . . . . . . . . . . -28-
9.7 SUBSCRIPTION AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . . . -28-
9.8 TRANSFER DOCUMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . -28-
9.9 LEGAL OPINION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -28-
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 CERTIFICATES, ETC. OF SHAREHOLDERS AND PEANUT CITY . . . . . . . . . . -29-
9.14 PAYMENT OF SALES OR USE TAXES BY PEANUT CITY . . . . . . . . . . . . . -29-
9.15 APPROVAL OF COUNSEL TO RECYCLING . . . . . . . . . . . . . . . . . . . -29-
ARTICLE 10 CONDITIONS PRECEDENT TO THE OBLIGATION OF PEANUT CITY
AND SHAREHOLDERS TO CLOSE. . . . . . . . . . . . . . . . . . . . . . . . . . . . -29-
10.1 REPRESENTATIONS, WARRANTIES AND OTHER AGREEMENTS . . . . . . . . . . . -30-
10.2 GOVERNMENTAL PERMITS AND APPROVALS . . . . . . . . . . . . . . . . . . -30-
10.3 THIRD PARTY CONSENTS . . . . . . . . . . . . . . . . . . . . . . . . . -30-
10.4 NO MATERIAL ADVERSE CHANGE . . . . . . . . . . . . . . . . . . . . . . -30-
10.5 LITIGATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -30-
10.6 SATISFACTION WITH DUE DILIGENCE. . . . . . . . . . . . . . . . . . . . -30-
10.7 DESIGNATION OF STOCK CONSIDERATION . . . . . . . . . . . . . . . . . . -30-
10.8 LEGAL OPINION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . -30-
10.9 THE PURCHASE PRICE . . . . . . . . . . . . . . . . . . . . . . . . . . -30-
10.10 ASSUMPTION OF ASSUMED CONTRACTS . . . . . . . . . . . . . . . . . . . -31-
10.11 ENVIRONMENTAL ESCROW AGREEMENT. . . . . . . . . . . . . . . . . . . . -31-
10.12 APPROVAL OF COUNSEL TO PEANUT CITY AND THE SHAREHOLDERS . . . . . . . -31-
ARTICLE 11 ACTIONS TO BE TAKEN AT THE CLOSING. . . . . . . . . . . . . . . . . . -31-
11.1 TRANSFER DOCUMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . -31-
11.2 ASSIGNMENT AND ASSUMPTION AGREEMENT. . . . . . . . . . . . . . . . . . -31-
11.3 THE PURCHASE PRICE . . . . . . . . . . . . . . . . . . . . . . . . . . -31-
11.4 SUBSCRIPTION AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . -31-
11.5 NON-COMPETITION AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . -31-
11.6 EMPLOYMENT AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . -31-
11.7 ENVIRONMENTAL ESCROW AGREEMENT . . . . . . . . . . . . . . . . . . . . -32-
11.8 CLOSING ON REAL PROPERTY . . . . . . . . . . . . . . . . . . . . . . . -32-
11.9 CERTIFICATES OF PEANUT CITY. . . . . . . . . . . . . . . . . . . . . . -32-
11.10 CERTIFICATE OF THE SHAREHOLDERS . . . . . . . . . . . . . . . . . . . -32-
11.11 CERTIFICATE OF RECYCLING. . . . . . . . . . . . . . . . . . . . . . . -32-
11.12 LEGAL OPINION DELIVERED TO RECYCLING. . . . . . . . . . . . . . . . . -32-
11.13 LEGAL OPINION DELIVERED TO PEANUT CITY AND THE SHAREHOLDERS . . . . . -32-
11.14 TITLES TO VEHICLES. . . . . . . . . . . . . . . . . . . . . . . . . . -33-
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<PAGE>
ARTICLE 12 SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION . . . . . -33-
12.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . -33-
12.2 INDEMNITY AGREEMENTS OF PEANUT CITY AND THE SHAREHOLDERS . . . . . . . -33-
12.3 INDEMNITY AGREEMENT OF RII SUB AND THE PARENT. . . . . . . . . . . . . -35-
12.4 INDEMNIFICATION PROCEDURE FOR THIRD PARTY CLAIMS . . . . . . . . . . . -37-
12.5 GOOD FAITH EFFORTS TO SETTLE DISPUTES. . . . . . . . . . . . . . . . . -38-
12.6 FEES AND EXPENSES. . . . . . . . . . . . . . . . . . . . . . . . . . . -38-
12.7 LITIGATION SUPPORT . . . . . . . . . . . . . . . . . . . . . . . . . . -38-
12.8 INDEMNIFICATION OBLIGATIONS DEDUCTIBLE . . . . . . . . . . . . . . . . -38-
12.9 ADJUSTMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -38-
12.10 EXCLUSIVE REMEDY. . . . . . . . . . . . . . . . . . . . . . . . . . . -38-
ARTICLE 13 TERMINATION OF AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . -39-
13.1 TERMINATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -39-
13.2 SURVIVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -40-
ARTICLE 14 CERTAIN ADDITIONAL AGREEMENTS . . . . . . . . . . . . . . . . . . . . -40-
14.1 PUBLIC STATEMENTS; CONFIDENTIALITY OF INFORMATION. . . . . . . . . . . -40-
14.2 REASSIGNMENT OF PEANUT CITY RECEIVABLES. . . . . . . . . . . . . . . . -40-
14.3 EXPENSES; SALES TAX. . . . . . . . . . . . . . . . . . . . . . . . . . -41-
14.4 WAIVERS AND CONSENTS . . . . . . . . . . . . . . . . . . . . . . . . . -41-
14.5 NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -41-
14.6 PEANUT CITY 401(K) PLAN; PEANUT CITY HEALTH INSURANCE COVERAGE . . . . -43-
14.7 CONVERSION OF THE PARENT SERIES J PREFERRED STOCK AND ARRANGED
SALE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -44-
14.8 COVENANT TO PAY ALL UNASSUMED DEBTS. . . . . . . . . . . . . . . . . . -44-
14.9 FURTHER ASSURANCES . . . . . . . . . . . . . . . . . . . . . . . . . . -44-
14.10 RETENTION OF/ACCESS TO BUSINESS RECORDS . . . . . . . . . . . . . . . -45-
14.11 AUDIT BY RII SUB AND PARENT . . . . . . . . . . . . . . . . . . . . . -45-
14.12 ENTIRE AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . -45-
14.13 CONSTRUCTION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . -45-
14.14 RIGHTS OF THIRD PARTIES . . . . . . . . . . . . . . . . . . . . . . . -46-
14.15 HEADINGS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -46-
14.16 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . -46-
14.17 SUBMISSION TO JURISDICTION; WAIVERS . . . . . . . . . . . . . . . . . -46-
14.18 PARTIES IN INTEREST . . . . . . . . . . . . . . . . . . . . . . . . . -47-
14.19 COUNTERPARTS AND FACSIMILE SIGNATURES . . . . . . . . . . . . . . . . -47-
14.20 SEVERABILITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . -47-
14.21 CORPORATE AUTHORITY . . . . . . . . . . . . . . . . . . . . . . . . . -47-
LIST OF EXHIBITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -50-
LIST OF SCHEDULES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -51-
</TABLE>
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<PAGE>
ASSET PURCHASE AGREEMENT
THIS AGREEMENT is made as of the 27th day of May, 1998, by and among
RECYCLING INDUSTRIES OF SUFFOLK, INC., a Colorado corporation ("RII Sub"),
RECYCLING INDUSTRIES, INC., a Colorado corporation ("Parent"), PEANUT CITY IRON
& METAL COMPANY, INC., a Virginia corporation ("Peanut City"), GEORGE B.
GINSBURG, President and an individual shareholder of Peanut City ("Ginsburg"),
FRED JACOBSON an individual and shareholder of Peanut City ("FJ"), and EDWIN
JACOBSON, an individual and shareholder of Peanut City ("EJ"), KENNETH
WEINSTEIN, an individual shareholder of Peanut City ("KW"), and SAMUEL BLUM, an
individual and shareholder of Peanut City ("SB"). Throughout this Agreement,
RII Sub and the Parent may be collectively referred to as "Recycling;" and
Ginsburg, the FJ Trust, EJ, KW and SB 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 Peanut City
consisting of substantially all of the tangible and intangible assets used in
the ferrous and non-ferrous metals recycling business conducted by Peanut City
at its facility located in Suffolk, Virginia, and those certain administrative
office and other assets, as hereinafter identified, used in connection with the
operation of Peanut City's facility (collectively the "Peanut City Assets");
WHEREAS, Peanut City desires to sell the Peanut City 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 Peanut City Assets
from Peanut City.
1.2 "Assumed Contracts" means those contracts, leases and other
agreements to which Peanut City 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 Peanut City.
SCHEDULE 1.2 lists all Assumed Contracts other than (a) contracts which do
not require payment by Peanut City 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 Peanut City 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 Peanut City of $20,000 or
more per year (collectively the "Material Assumed Contracts").
1.3 "Assumed Liabilities" means the Liabilities of Peanut City 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 Peanut City as a going concern.
1.5 "Closing" has the meaning set forth in Section 3.5.
1.6 "Closing Date" has the meaning set forth in Section 3.5.
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.
1.8 "Employee Pension Benefit Plan" has the meaning set forth in
ERISA Section 3(2).
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<PAGE>
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, mutagenic, or otherwise hazardous and the presence of which
causes or threatens to cause a nuisance or trespass
-3-
<PAGE>
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 "Inventory Date" shall have the meaning set forth in Section 4.12.
1.18 "IRC" means the Internal Revenue Code of 1986, as amended.
1.19 "Knowledge" means actual knowledge without independent
investigation with respect to the Shareholders, and with respect to Recycling
and Peanut City, actual knowledge without independent investigation of their
respective officers and directors.
1.20 "Lender" means Recycling's primary lender or equity participant
relating to the Transaction.
1.21 "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 Peanut
City Assets or the Business, including any liability for Taxes.
1.22 "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.
1.23 "Material Adverse Effect" means a material adverse effect on the
business, assets or financial condition of Peanut City or Recycling, as
applicable.
1.24 "Peanut City Offices" means the administrative offices of Peanut
City located at 425 Saratoga Street, Suffolk, Virginia 23434.
1.25 "Peanut City Receivables" has the meaning set forth in Section
2.5.
1.26 "Ordinary Course of Business" or "Ordinary Course" means the
ordinary course of business consistent with past custom and practice of
Peanut City (including with respect to quantity and frequency).
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<PAGE>
1.27 "Owned Facilities" means the real property and associated
fixtures owned by Peanut City as specifically described on SCHEDULE 2.1(a).
1.28 "Parent Common Stock" means the common stock, $.001 par value per
share, of Recycling Industries, Inc., a Colorado corporation.
1.29 "Parent Series J Preferred Stock" means the Convertible Preferred
Stock of Parent described in the Designation of Series J Redeemable
Convertible Preferred Stock attached hereto as EXHIBIT A.
1.30 "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.
1.31 "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.
1.32 "Prepared Inventory" means all ferrous and non-ferrous Inventory
that has been processed by Peanut City as of the Closing Date and is ready
for shipment to Peanut City's customers.
1.33 "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.
1.34 "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).
1.35 "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.
1.36 "Transaction" means the transactions contemplated by this
Agreement and the other Transaction Documents.
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<PAGE>
1.37 "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.
1.38 "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 Peanut City 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 Peanut City for resale. Unprepared Inventory does not
include any non-saleable ferrous or non-ferrous materials resulting from
Peanut City's operations or contained within dirt or other non-processable
medium within the Owned Facility.
1.39 "1933 Act" means the Securities Act of 1933, as amended.
1.40 "1934 Act" means the Securities Exchange Act of 1934, as amended.
ARTICLE 2
ACQUISITION OF PEANUT CITY ASSETS
2.1 PURCHASE AND SALE OF THE PEANUT CITY ASSETS. At the Closing and
subject to the terms and conditions stated herein, Peanut City agrees to
sell, assign, convey and transfer to RII Sub, and RII Sub agrees to purchase
from Peanut City, the Peanut City 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 Peanut City 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).
(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 Peanut City 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 Peanut City Assets whether or not listed on
SCHEDULE 2.1(b).
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(c) All of Peanut City's right, title and interest in and to
the names "Peanut City Iron & Metal Company," any tradenames or trademarks
used in the Business, and any variations of any of the foregoing.
(d) All of Peanut City's right, title and interest in and to
telephone number (757) 539-7494 and facsimile number (757) 539-2471.
(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 Peanut City 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 Peanut City located at the Peanut City 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 Peanut City
Offices in connection with the operation of the Business.
(h) All of Peanut City'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
Peanut City, including information interfaced with those systems, as
maintained by Peanut City at the Owned Facilities or the Peanut City Offices,
all of which are listed on SCHEDULE 2.1(h); PROVIDED, HOWEVER, that Peanut
City 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 Peanut City under the Assumed Contracts.
(k) All goodwill and other general intangibles related to the
Peanut City 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 Peanut City Assets or the Business, except as may
be set forth in Excluded Assets in Section 2.2 herein.
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(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 Peanut City, unless specifically described in Section 2.2 or on SCHEDULE 2.2
as an Excluded Asset.
Peanut City's sale, conveyance, assignment and transfer of the Peanut
City 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 Peanut City, each to the extent described in more
detail on SCHEDULE 2.2 (the "Excluded Assets"):
(a) Any cash, marketable securities and cash equivalents of
Peanut City;
(b) 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 Peanut City as
corporations; PROVIDED, HOWEVER, that Peanut City will not have the right
to continue using its current corporate names following the Closing;
(c) Any of the rights of Peanut City under this Agreement and
any other Transaction Document entered into on or after the date of this
Agreement;
(d) Rights to refunds of insurance premiums paid by Peanut City
on the insurance policies referenced in Section 4.20 prior to the Closing;
(e) Certain personal assets and other items owned by the
Shareholders as identified on SCHEDULE 2.2;
(f) Tax refunds of any nature whatsoever; and
(g) Any other assets of Peanut City set forth on SCHEDULE 2.2.
2.3 ASSUMED CONTRACTS. RII Sub shall assume the obligations of Peanut
City 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 Peanut City
under Assumed Contracts, RII Sub shall not assume any Liabilities or
Environmental Liabilities of Peanut
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City 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, Peanut City receives payment on any of
the accounts receivable included in the Peanut City assets ("Peanut City
Receivables"), Peanut City 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 Peanut City, to review
records of Peanut City solely to determine compliance with the provisions of
Section 2.5(a).
(c) The provisions of this Section 2.5 shall survive the
Closing.
ARTICLE 3
PURCHASE PRICE AND CLOSING
3.1 PURCHASE PRICE FOR PEANUT CITY ASSETS.
(a) RII Sub shall pay the total amount of $3,400,000, subject to
the adjustments, as determined in accordance with Section 3.3 below (the
"Purchase Price") to Peanut City for the purchase of the Peanut City Assets.
The Purchase Price shall be payable as follows:
(1) $2,897,500, as adjusted in accordance with Section
3.3 below, in immediately available funds at Closing (the "Cash
Consideration");
(2) $502,500 stated value of Parent Series J 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.
3.2 VALUATION OF INVENTORY AND ACCOUNTS RECEIVABLE. The aggregate value
of the inventory and accounts receivable determined jointly by representatives
of Peanut City and Recycling prior to the Closing Date, and such value is set
forth on SCHEDULE 3.2, initialed by Peanut City 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 Peanut City has paid for comparable material received
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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 Peanut City and Recycling to determine such value. The value
determination by such third party shall be binding on Peanut City and
Recycling. The Closing shall occur as soon as practicable after third party
value 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 Peanut City Assets, as determined in
accordance with Section 3.2 shall not be less than $675,000 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 30 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 60th 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 Peanut City by RII Sub, the reimbursement shall be made in
connection with the post-closing adjustment.
3.4 ALLOCATION OF THE PURCHASE PRICE.
(a) The Purchase Price shall be allocated among the Peanut
City 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.
(c) RII Sub and Peanut City 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 on May 27, 1998, via facsimile, or at such place
as selected by the Lender, in its sole and absolute discretion, on the date
mutually agreed to by the parties (the
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"Closing Date"). The Closing Date shall be no later than May 31, 1998,
unless mutually extended by the parties.
ARTICLE 4
REPRESENTATIONS OF PEANUT CITY 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, Peanut City 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) Peanut City 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) Peanut City 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, Peanut City has good, valid and insurable title to all real property,
and except as set forth SCHEDULE 4.2 Peanut City has good, valid and
marketable title to its personal property included in the Peanut City 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 PEANUT CITY; CONSENTS.
(a) Peanut City has full power and authority to execute and
deliver this Agreement and the other Transaction Documents and to carry out
the Transaction and Peanut City 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 Peanut City, 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 Peanut City 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 consummation of the
Transaction by Peanut City will:
(1) Be in violation of its 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 Peanut
City Assets;
(2) Cause a default under any mortgage or deed of trust or
other lien, charge or encumbrance to which any of the Peanut City 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 Peanut City Assets;
(3) Result in the creation or imposition of any Security
Interest upon any of the Peanut City Assets under any agreement or commitment
to which it or the Peanut City 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 Peanut City Assets.
4.4 FINANCIAL STATEMENTS.
(a) The following financial statements of Peanut City are attached
hereto as SCHEDULE 4.4:
(1) A copy of the audited financial statements for Peanut City as
of and for the fiscal year ended December 31, 1997, prepared in accordance with
GAAP (the "Audited Financial Statements").
(2) A copy of the unaudited financial statements for Peanut City
prepared substantially in accordance with GAAP in the same manner which they are
currently prepared as of and for the fiscal years ended December 31, 1995 and
1996 and for the period from January 1, 1998 through the Closing Date (the
"Unaudited Financial Statements").
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The Audited Financial Statements and the Unaudited Financial Statements
collectively are referred to herein as the "Peanut City 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 Peanut City as of such dates and the results of
operations of Peanut City 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, 1997, 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 Peanut City 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 Peanut City and the
Shareholders, any loss of customers of Peanut City, 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 Peanut City 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) Peanut City has not waived any statute of limitations
with respect to the assertion of any liability under any federal, state, or
local tax law.
(c) Peanut City 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 Peanut City and the Shareholders, contemplated.
(d) Copies of Peanut City'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).
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4.6 COMPLIANCE WITH LAWS. Except as set forth on SCHEDULE 4.6,
(a) Neither Peanut City nor any of the Shareholders is in
violation of or has violated any applicable order, judgment, injunction,
award or decree relating to the Peanut City Assets, except where such
violation would not have a Material Adverse Effect. To the Knowledge of
Peanut City and the Shareholders, except as otherwise disclosed in the
Environmental Studies, neither Peanut City nor the Shareholders is in
violation of or has violated 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 Peanut City 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 Peanut City 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 Peanut City and the Shareholders,
there is not pending or threatened any notification of any governmental
authority that Peanut City 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 Peanut City nor any Shareholder has received, since January 1, 1995,
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 Peanut City that
are material to the operation of the Business. Except as described on
SCHEDULE 4.7, Peanut City 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 Peanut City 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 Peanut City Assets or the Business. Except as set forth on SCHEDULE 4.8,
there are no actions, suits or claims against Peanut City or any Shareholder,
or, to the Knowledge of Peanut City 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 Peanut City or any
Shareholder, threatened against or involving the Peanut City 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 canceled at or prior to the Closing,
and except as
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otherwise disclosed on SCHEDULE 4.9(a), Peanut City 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 Assumed Contracts are valid and binding upon
Peanut City in accordance with their terms, and Peanut City 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. Peanut City 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 Peanut City Receivables are
reflected properly in the books and records of Peanut City, 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 Peanut City. The
Peanut City Receivables not collected within 60 days after the Closing shall
be subject to reassignment to Peanut City 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. Since January 1, 1994,
neither Peanut City 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 May 17, 1998 (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) Peanut City 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 "Peanut City Iron & Metal
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Company". Other than as required under shrink wrap software licenses for
computers and/or the scales, Peanut City 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 Peanut City 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 Peanut City,
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 Peanut City.
4.14 REAL PROPERTY. The Owned Facilities include all real property
included in the Peanut City Assets. To the Knowledge of Peanut City 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, Peanut City has possessed all
approvals of governmental authorities (including licenses and permits )
required which are material to the ownership or operation of the Business.
Since January 1, 1994, the Owned Facilities 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 Peanut City 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 Peanut
City 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
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Contracts, (c) Liabilities incurred since December 31, 1997 in the Ordinary
Course, and (d) Liabilities which do not, individually or in the aggregate,
have a Material Adverse Effect on the Business.
4.16 SUPPLIERS AND CUSTOMERS. SCHEDULE 4.16 sets forth a list of (1)
all suppliers from whom Peanut City has purchased $5,000 or more in the
fiscal year ended December 31, 1997 and (2) all customer whose annual
purchases from the Business exceeded $5,000 in the fiscal year ended December
31, 1997. There are no agreements or understandings, either written or oral,
with any customers of the vendors to Peanut City 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 Peanut City or to which it contributes for the benefit of
any of its current or former employees.
(a) To the Knowledge of Peanut City 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 Peanut
City or any ERISA affiliate of Peanut City and there is no material risk that
such liability will be incurred;
(d) To the Knowledge of Peanut City 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) Peanut City does not provide any medical or other similar
benefits to employees beyond retirement, other than group health care
continuation required by COBRA; and
(f) Peanut City 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.
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4.18 CURTAILMENT OF OPERATIONS. No labor disputes or work stoppages
involving the Business are pending or, to the Knowledge of Peanut City and
the Shareholders, threatened which, either singly or in the aggregate, might
have a Material Adverse Effect on the Business. To the Knowledge of Peanut
City 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. Peanut City is not a party to a collective
bargaining agreement and, to its and the Shareholders' Knowledge, Peanut City
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 Peanut City has not and is not
engaged in any unfair labor practice. To the Knowledge of Peanut City 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 Peanut City relating to the Business or the Owned Facilities, copies of
which have been provided to RII Sub, which cover the Peanut City Assets or
the Business, the nature of such policies, the amount and types of coverage,
and the name of the insurers and expiration dates. Peanut City 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 Peanut City 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 Peanut City 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 Peanut City 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.
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4.24 EMPLOYEE TRANSITION. SCHEDULE 4.24 lists all employees of Peanut
City 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 amounts payable to each employee. On or
before the first day subsequent to the Closing Date, Peanut City 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 Peanut City and/or their family members, with the premiums being
covered by such former employees of Peanut City and/or their family members.
Except as provided in the foregoing sentence, RII Sub will not assume any
liabilities either to former Peanut City employees or the employees of Peanut
City who are hired by RII Sub after the Closing. Peanut City agrees that all
liabilities of the Business to terminated employees will be retained by
Peanut City, including those accruing by reason of termination by Peanut
City. RII Sub shall have the right, in its sole discretion, to determine
which of Peanut City'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, Peanut City 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. Peanut City 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 HART-SCOTT-RODINO ACT. Neither the total assets or annual net
sales of Peanut City as and for the year ended December 31, 1997 are greater
than $10,000,000, nor do any interim regularly prepared financial statements
of Peanut City show total assets or annual net sales in excess of $10,000,000.
4.28 DISCLOSURE. None of the Transaction Documents issued by Peanut
City or the Shareholders and furnished or to be furnished to Recycling, to
the Knowledge of Peanut City and the Shareholders, contains or will contain
any untrue statement of a material fact
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or omits any statement of a material fact necessary in order to make the
statements contained therein not misleading.
4.29 BEST EFFORTS. Peanut City 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 Peanut City and
the Peanut City Shareholders and take such other actions in order to complete
the Transaction by the Closing Date. Peanut City and the Shareholders will
execute and deliver such instruments and take such other action as may be
reasonable or appropriate to carry out the Acquisition and the intentions of
this Agreement.
ARTICLE 5
REPRESENTATIONS OF RECYCLING
As an inducement to Peanut City and the Shareholders to enter into this
Agreement and to complete the Transaction and with the knowledge that Peanut
City and the Shareholders will rely thereon, RII Sub and the Parent jointly and
severally represent and warrant to Peanut City 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 Peanut City 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
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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:
(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.
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5.7 DISCLOSURE. None of the Transaction Documents issued by RII Sub or
the Parent and furnished or to be furnished to Peanut City 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 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
REPRESENTATIONS OF THE PARENT RELATED TO THE
STOCK CONSIDERATION
As an inducement to Peanut City and the Shareholders to enter into this
Agreement and to consummate the transactions contemplated hereby, and with the
knowledge that Peanut City and the Shareholders will rely thereon, the Parent
represents and warrants the following to Peanut City 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 J 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 J 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").
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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.
ARTICLE 7
REGULATORY COMPLIANCE
7.1 BULK SALES COMPLIANCE. Recycling hereby waives compliance by
Peanut City 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. Peanut City 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 Peanut City's health insurance plan.
Subject to the indemnification provided in Section 12.2(a)(9), RII Sub or the
Parent will assume Peanut City's obligations related to the provision of
COBRA coverage, in the sole discretion of RII Sub and the Parent either
through coverage under Peanut City'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 Peanut City.
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:
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8.1 ENVIRONMENTAL STUDIES.
(a) Prior to the Closing Date, Peanut City 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 (the "Environmental Studies").
The costs of the Environmental Studies will be paid by Peanut City;
PROVIDED, HOWEVER, that Recycling shall reimburse Peanut City for one-half of
the costs if the Transaction is completed.
(b) If the Environmental Studies indicate that remediation is
required to ensure that the business, real property, facilities and
operations of Peanut City meet and comply with all applicable environmental
laws and regulations, Peanut City shall provide Recycling an estimate of the
cost of such remediation ("Remediation Estimate"). If the estimated cost of
remediation set forth in the Remediation Estimate exceeds
[CONFIDENTIAL TREATMENT REQUESTED], either party may: (i) terminate this
Agreement without liability to any party or (ii) elect to proceed with the
Closing with [CONFIDENTIAL TREATMENT REQUESTED].
8.2 TITLE INSURANCE. Peanut City has delivered to Recycling its most
recent title policy with respect to the Owned Facilities. Peanut City 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 3.4 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. Peanut City has delivered to Recycling its most recent
survey with respect to the Owned Facilities. Peanut City 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
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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. Peanut City 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.
8.5 CONDUCT OF BUSINESS. After execution of this Agreement and
continuing up to the Closing, Peanut City 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 $5,000 or which in total aggregate more than $10,000 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 Peanut City; and
(c) provide Recycling with such additional financing and other
information as may be reasonably requested by Recycling and available to
Peanut City without undue expense.
8.6 PRESERVATION OF BUSINESS. Peanut City 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. Peanut City will
provide to RII Sub a mailing list of all customers whose annual purchases
from the Business were $5,000 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. Peanut City 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 Peanut City or the Shareholders materially
misleading.
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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 Peanut City, 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
representations, warranties, covenants or agreements of Peanut City and the
Shareholders under this Agreement.
(b) Recycling will treat and hold any information or documents
obtained from Peanut City concerning the Business or the Peanut City 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 Peanut City 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 Peanut City promptly of the request so that
Peanut City 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 Peanut City, an order or other assurance that confidential
treatment will be accorded to such portion of such information required to be
disclosed as Peanut City 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 Peanut
City or the Shareholders in any document filed with a government agency or
authority and available for public inspection.
8.9 NO NEGOTIATION BY PEANUT CITY 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 Peanut City 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 Peanut City Assets or any exchange
offer, merger, consolidation, purchase of assets,
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liquidation, dissolution or similar transaction involving the Peanut City
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 Peanut City 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.
Peanut City 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. Peanut City 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.
8.11 SAFETY AUDITS. If requested by Recycling, Peanut City will have
safety audits of its facility performed by a consulting firm mutually accepted
to parties to ensure compliance with OSHA and any other applicable safety
standards. The costs related to these audits will be paid by Peanut City and,
if the transaction is completed, Recycling shall reimburse Peanut City 50% of
these costs.
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 Peanut City 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. Peanut City 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
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complied with by them on or prior to the Closing Date. Peanut City 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.
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 Peanut City 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, 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 Peanut
City.
9.7 SUBSCRIPTION AGREEMENT. The Parent shall have received from Peanut
City 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 Peanut City Assets from Peanut City to RII Sub, each in proper legal
form to transfer the Peanut City assets under applicable law.
9.9 LEGAL OPINION. Recycling shall have received from legal counsel to
Peanut City in the form attached hereto as EXHIBIT D.
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9.10 ENVIRONMENTAL ESCROW AGREEMENT. If required under Section 8.1(b),
RII Sub shall have received from Peanut City the Environmental Escrow Agreement
in the form attached hereto as EXHIBIT C.
9.11 ASSIGNMENT OF CONTRACTS. Peanut City 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 Peanut
City and its operations, including, without limitation, the results of the
Environmental Studies, and (b) Peanut City'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 CERTIFICATES, ETC. OF SHAREHOLDERS AND PEANUT CITY. The
Shareholders and Peanut City shall have delivered all certified resolutions,
certificates, documents or instruments with respect to Peanut City's authority
and such other matters as RII Sub's and the Parent's counsel may have reasonably
requested prior to the Closing Date.
9.14 PAYMENT OF SALES OR USE TAXES BY PEANUT CITY. Peanut City 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.
9.15 APPROVAL OF COUNSEL TO RECYCLING. All actions and proceedings
hereunder and all documents or other papers required to be delivered by Peanut
City 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 PEANUT CITY
AND SHAREHOLDERS TO CLOSE
The obligations of Peanut City 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 Peanut City and the
Shareholders only in writing:
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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 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 Peanut City 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. Peanut City 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 Peanut City and the Shareholders a certified copy of the Certificate of
Designations, Rights and Preferences of the Parent Series J Preferred Stock.
10.8 LEGAL OPINION. Peanut City 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
Peanut City the full Purchase Price for the Peanut City Assets and executed and
delivered all documents related thereto.
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10.10 ASSUMPTION OF ASSUMED CONTRACTS. Peanut City shall have received
RII Sub's signed Assignment and Assumption Agreement related to the Assumed
Contracts.
10.11 ENVIRONMENTAL ESCROW AGREEMENT. If required under Section 8.1(b),
Peanut City and the Shareholders shall have received from RII Sub the
Environmental Escrow Agreement in the form attached hereto as EXHIBIT C.
10.12 APPROVAL OF COUNSEL TO PEANUT CITY 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 Peanut City 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. Peanut City shall deliver duly executed
transfer documents and/or instruments of assignment, including without
limitation a Bill of Sale.
11.2 ASSIGNMENT AND ASSUMPTION AGREEMENT. Peanut City shall deliver any
required written consents to the assumption by RII Sub of the Assumed Contracts
and Peanut City 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 Peanut City the
Purchase Price.
11.4 SUBSCRIPTION AGREEMENT. Peanut City shall deliver to the Parent the
Subscription Agreement.
11.5 NON-COMPETITION AGREEMENTS. KW, RII Sub and the Parent shall enter
into a Non-Competition Agreement in the form attached as Exhibit F.
11.6 EMPLOYMENT AGREEMENTS. RII Sub and KW shall enter into employment
agreements for continuation of employment of KW following the Closing in the
form attached as Exhibit E.
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11.7 ENVIRONMENTAL ESCROW AGREEMENT. If required by Section 8.1(b), RII
Sub, Peanut City and the Shareholders shall enter into the Environmental Escrow
Agreement with a third party escrow agent and [CONFIDENTIAL TREATMENT
REQUESTED].
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 1.37.
(a) 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.
(b) The owner's Title Insurance Policy Commitment provided by
Lawyer's Title, including the list of endorsements to be issued in connection
therewith.
(c) A funds flow statement (the "Funds Flow Statement") prepared
jointly by the attorneys for Recycling and Peanut City 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 PEANUT CITY. Peanut City 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 Peanut City by Ginsburg as President of Peanut City.
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 Peanut City
certificates dated the Closing Date, in a form reasonably satisfactory to Peanut
City, as contemplated by Section 10.1. Said certificate shall be signed on
behalf of Recycling by an executive officer of Recycling.
11.12 LEGAL OPINION DELIVERED TO RECYCLING. Recycling shall have received
from Kaufman & Canoles, P.C., legal counsel to Peanut City and the Shareholders,
the legal opinion required by Section 9.9.
11.13 LEGAL OPINION DELIVERED TO PEANUT CITY AND THE SHAREHOLDERS. Peanut
City and the Shareholders shall have received from Friedlob Sanderson Raskin
Paulson &
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Tourtillott, LLC, counsel to RII Sub and the Parent, the legal opinion
required by Section 10.8.
11.14 TITLES TO VEHICLES. Peanut City shall deliver to RII Sub duly
executed assignments of titles to all vehicles included in the Peanut City
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 4.27, 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 PEANUT CITY AND THE SHAREHOLDERS.
(a) Peanut City 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 Peanut City or the
Shareholders contained in this Agreement;
(2) any misrepresentation in or omission from or
nonfulfillment of any covenant on the part of Peanut City or the Shareholders
contained in any Transaction Document furnished to RII Sub or the Parent by
Peanut City 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 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 Peanut
City or the Shareholders relating to the Business through the Closing Date
which are not paid by either Peanut City or the Shareholders and which RII
Sub or the Parent pays;
(4) any and all negligence claims relating to the Business or
the Peanut City Assets arising out of occurrences and events prior to the
Closing Date;
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(5) the failure of Peanut City or the Shareholders to comply
with the bulk sales or bulk transfer laws of the Commonwealth of Virginia;
(6) any liability of Peanut City 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 Peanut City 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 Peanut City 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 Peanut City's administration of Peanut City'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 Peanut City'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 Peanut City'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. Peanut City and the Shareholders,
jointly and severally, shall indemnify, defend, reimburse and hold harmless
Recycling from and 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
Peanut City 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 Peanut City, the Business, the Peanut City Assets,
the Shareholders or other parties from whom Peanut City or the Shareholders
assumed or are otherwise responsible for their liabilities occurring
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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 Peanut City or the
Shareholders of any representation or warranty contained in this Agreement,
or from a breach by Peanut City or the Shareholders of any covenant contained
in this Agreement if such inaccuracy or breach relates to Environmental Laws
or Environmental Liabilities, Peanut City 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, [CONFIDENTIAL TREATMENT REQUESTED].
(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, Peanut City 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 Peanut City
and the Shareholders had no Knowledge on the Closing Date,
[CONFIDENTIAL TREATMENT REQUESTED].
(5) UNKNOWN/OFF-SITE. For those Environmental Claims
involving matters or conditions off-site from the Owned Facilities of which
Peanut City and the Shareholders had no Knowledge on the Closing Date, Peanut
City and the Shareholders shall indemnify Recycling for such Environmental
Claims; [CONFIDENTIAL TREATMENT REQUESTED].
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 Peanut City and the Shareholders from and against:
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(a) any and all claims, demands, penalties, fines, liabilities,
obligations, losses, settlements, damages, costs and expenses pertaining to
the Peanut City 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 Peanut City by
RII Sub or the Parent pursuant to this Agreement;
(3) any Liability of Peanut City 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);
(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
Peanut City 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 Peanut City or the Shareholders pay;
(9) any and all negligence claims relating to the Business or
the Peanut City Assets arising out of occurrences and events after the
Closing Date; and
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(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 Peanut City 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
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.
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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 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, Peanut City shall not have the
obligation to indemnify Recycling, and Recycling shall not have the
obligation to indemnify Peanut City: (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.
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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 Peanut
City 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, Peanut City and the Shareholders shall have, at the
election of Peanut City 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 Peanut City or the Shareholders at any time
prior to Closing if:
(1) any one or more of the material conditions precedent to the
obligation of Peanut City and the Shareholders to close has not been fulfilled
as of the Closing Date;
(2) Peanut City 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 (1) 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 or (2)
as provided in Section 8.1(b) if the cost of remediation as stated on the
Remediation Estimate exceeds $200,000.
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(d) At any time on or prior to the Closing Date, by mutual written
consent of the parties.
(e) At any time after June 15, 1998, time being of the essence,
unless extended pursuant to Section 3.5, at the election of Peanut City and
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 Peanut City'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 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 Peanut City.
14.2 REASSIGNMENT OF PEANUT CITY RECEIVABLES. On the 65th day after the
Closing Date, RII Sub shall have the right to reassign to Peanut City any or all
of the Peanut City Receivables which have not been collected within 60 days of
the Closing as
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provided in Section 4.10. Such reassignment shall only occur upon delivery
of documentation reasonably acceptable to Peanut City which transfers all
right, title and interest in the Peanut City Receivables to Peanut City. RII
Sub agrees not to compromise any Peanut City Receivable and to use
commercially reasonable efforts to collect the Peanut City 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 Peanut City Receivables under this provision, Peanut
City shall reimburse RII Sub dollar-for-dollar for the Peanut City
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.
Peanut City 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.
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
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WITH A COPY TO:
Gerald Raskin, Esq.
John W. Kellogg, Esq.
Friedlob Sanderson Raskin Paulson & Tourtillott, LLC
1400 Glenarm Place, Suite 300
Denver, Colorado 80202
telephone: 303-571-1400
facsimile: 303-595-3970
IF TO PEANUT CITY OR THE SHAREHOLDERS:
George B. Ginsburg, President
Peanut City Iron & Metal Company, Inc.
4300 Buell Street
Chesapeake, VA 23324
telephone: 757-543-2066
facsimile: 757-543-6632
and
Kenneth Weinstein
425 Saratoga Street
Suffolk, Virginia 23434
telephone:
facsimile:
Edwin Jacobson
207 Park Road
Portsmouth, Virginia 23707
telephone:
facsimile:
Samuel Blum
4740 Pool Side Road
Virginia Beach, Virginia 23455
telephone:
facsimile:
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Fred Jacobson
c/o Dorothy G. Jacobson
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 PEANUT CITY 401(k) PLAN; PEANUT CITY 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 Peanut
City'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, 1999 or the date on which RII Sub or Parent has in place a
401(k) plan in which the former Peanut City 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 Peanut City's
or its agent's establishment or maintenance of the Peanut City 401(k) Plan
prior to the Closing Date. Peanut City 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 Peanut City's
401(k) Plan for the 1997 Plan year, with reimbursement being made within ten
business days after RII Sub or Parent provides Peanut City with documentation
of the amount it was required to pay as a "top-heavy minimum contribution,"
if any.
(b) PEANUT CITY MEDICAL INSURANCE PLAN. Subject to the
Termination Provisions of the Peanut City Medical Insurance Plan, the former
Peanut City 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
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periods or any other requirements and without any exclusion or limitation for
preexisting conditions, other than those permitted under applicable law and
regulation.
14.7 CONVERSION OF THE PARENT SERIES J PREFERRED STOCK AND ARRANGED
SALE. At least 30 days prior to the third year anniversary of the Closing
Date, Peanut City and the Shareholders shall notify the Parent if they elect
to retain the shares of Parent Common Stock issuable upon automatic
conversion of the Parent Series J Preferred Stock (the "Conversion Shares").
If Peanut City 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 Peanut City 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 Peanut City 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 Peanut City 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 $502,500
[CONFIDENTIAL TREATMENT REQUESTED], the Parent shall pay to Peanut City 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 Peanut City owes
debts to any third parties after the Closing other than the Assumed Liabilities,
which could affect the Peanut City Assets, Peanut City and the Shareholders
hereby covenant to pay such debts timely as they become due.
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.
-44-
<PAGE>
Peanut City 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 Peanut City Assets to RII Sub.
14.10 RETENTION OF/ACCESS TO BUSINESS RECORDS. For at least six years
following the Closing Date, Peanut City shall retain all business records,
including tax records, related to the Peanut City 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, Peanut City 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 Peanut City Assets or the Business and,
during this period, from time to time on and after the Closing, upon
reasonable prior written request by Peanut City or the Shareholders and
without further consideration, RII Sub shall provide Peanut City 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, Peanut City 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 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
-45-
<PAGE>
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 mail), postage prepaid, to the party against whom the action
or proceeding is brought at its address set forth in Section 14.5.
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<PAGE>
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 SUFFOLK, INC.
Dated: May 27, 1998 By /s/ Brian L. Klemsz
-----------------------------------------
Brian L. Klemsz, Chief Financial Officer
"PARENT"
RECYCLING INDUSTRIES, INC.
Dated: May 27, 1998 By /s/ Brian L. Klemsz
-----------------------------------------
Brian L. Klemsz, Chief Financial Officer
"PEANUT CITY"
PEANUT CITY IRON & METAL COMPANY, INC.
Dated: May 27, 1998 By /s/ George B. Ginsburg
-----------------------------------------
George B. Ginsburg, President
"GINSBURG"
Dated: May 27, 1998 /s/ George B. Ginsburg
------------------------------------------
George B. Ginsburg
"FJ"
Dated: May 27, 1998 /s/ Fred Jacobson
------------------------------------------
Fred Jacobson by Dorothy G. Jacobson,
his Attorney-in-Fact
"EJ"
Dated: May 27, 1998 /s/ Edward Jacobson
------------------------------------------
Edward Jacobson
-48-
<PAGE>
"KW"
Dated: May 27, 1998 /s/ Kenny Weinstein
------------------------------------------
Kenny Weinstein
"SB"
Dated: May 27, 1998 /s/ Samuel Blum
------------------------------------------
Samuel Blum
-49-
<PAGE>
LIST OF EXHIBITS
<TABLE>
<C> <S>
Exhibit A Certificate of Designations, Rights and Preferences of the Series J
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 Peanut City and the Shareholders
Exhibit E Employment Agreements
Exhibit F Non-Competition Agreements
Exhibit G Legal Opinion from Counsel for RII Sub and Parent
</TABLE>
-50-
<PAGE>
LIST OF SCHEDULES
<TABLE>
<C> <S>
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 3.2 Accounts Receivable and Inventory Valuations
SCHEDULE 3.4 Allocation of Purchase Price
SCHEDULE 4.1(b) Jurisdictions in which Peanut City is qualified to
transact business
SCHEDULE 4.2 Property Title Exceptions
SCHEDULE 4.3(c) Consents and Approvals
SCHEDULE 4.4 Peanut City Financial Statements
SCHEDULE 4.5(d) Peanut City 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
</TABLE>
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<PAGE>
Exhibit 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 J 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 May 20, 1998:
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 1,005 shares called the
"Convertible Preferred Stock, Series J" because no shares of that
series were ever issued; and (b) establishes a series of preferred
stock, consisting of 1,005 shares, which shall be designated as the
"Series J 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.
May 20, 1998 By /s/ Thomas J. Wiens
-------------------------------------
Thomas J. Wiens, Chairman and
Chief Executive Officer
<PAGE>
ATTACHMENT A
DESIGNATION OF PREFERENCES, LIMITATIONS AND RELATIVE RIGHTS
OF THE
SERIES J REDEEMABLE CONVERTIBLE PREFERRED STOCK
OF
RECYCLING INDUSTRIES, INC.
1. DESIGNATION AND AMOUNT. The distinctive designation of such series
is "Series J Redeemable Convertible Preferred Stock, without par value" (the
"Series J Preferred Stock") of Recycling Industries, Inc., a Colorado
corporation (the "Company"), the number of shares constituting this series
shall be 1,005, and the aggregate stated value of such shares shall be
$502,500, or $500 per share.
2. DIVIDEND RIGHTS. The holders of the Series J Preferred Stock shall
not be entitled to dividends.
3. LIQUIDATION PREFERENCE. The Series J 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 J
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 J Preferred Stock shall be entitled to one vote
for each such share.
5. CONVERSION OF THE SERIES J PREFERRED STOCK.
(a) AUTOMATIC CONVERSION. The outstanding shares of Series J
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 J Preferred Stock.
On the Automatic Conversion Date, each outstanding share of Series J
Preferred Stock will be converted into that number of shares of Common Stock
whose average Market Price for the thirty trading days preceding the
Automatic Conversion Date is equivalent to the stated value per share of
Series J Preferred Stock of $500.
(b) VOLUNTARY CONVERSION. The Company and the holder(s) of the
Series J 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 J Convertible Preferred Stock being converted early being converted
into that number of shares of Common Stock whose
2
<PAGE>
average Market Price for the ten trading days preceding the date of
conversion is equivalent to the stated value per share of Series J Preferred
Shares of $500.
(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 J Preferred Stock being converted, the Company shall
within three business days of receipt of the original certificates or
certificates representing the shares of Series J Preferred Stock to be
converted, issue and deliver or cause to be issued and delivered to such
holder of Series J 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 J 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 $502,500.
(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 J 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 J 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 J Preferred Stock, in whole or in part, at a cash redemption
price of $500 per share of Series J Preferred Stock outstanding (the "Cash
Redemption Price"); PROVIDED, HOWEVER, that the Company shall not be entitled
to redeem any shares of Series J 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 J Preferred Stock being redeemed.
3
<PAGE>
7. NOTICES. Any notice required by the provisions of this Certificate
to be given to the holder of shares of the Series J 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 J 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 J Preferred Stock.
4
<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 K 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 May 20, 1998:
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 12,480 shares, which shall be designated as the
"Series K 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.
May 20, 1998 By /s/ Thomas J. Wiens
----------------------------------
Thomas L. Wiens, Chairman and Chief
Executive Officer
<PAGE>
EXHIBIT A
DESIGNATION OF PREFERENCES, LIMITATIONS AND RELATIVE RIGHTS
OF THE
SERIES K REDEEMABLE CONVERTIBLE PREFERRED STOCK
OF
RECYCLING INDUSTRIES, INC.
1. DESIGNATION AND AMOUNT. The distinctive designation of such series
is "Series K Redeemable Convertible Preferred Stock, without par value" (the
"Series K Preferred Stock") of Recycling Industries, Inc., a Colorado
corporation (the "Company") and the number of shares constituting this series
shall be 12,480.
2. NO DIVIDEND RIGHTS. The holders of the Series K Preferred Stock
shall not be entitled to any dividends.
3. RANKING. The Series K 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 K Preferred Stock are outstanding,
(collectively "Parity Securities").
4. LIQUIDATION PREFERENCE. Upon any voluntary or involuntary
liquidation, dissolution or winding-up of the Company, holders of the Series
K Preferred Stock shall be entitled to be paid, out of assets available for
distribution, $500 per share, being the liquidation preference per share (the
"Share Liquidation Value"), 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 K 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 K Preferred
Stock and all other Parity Securities are not paid in full, the holders of
the Series K 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 K 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 K
Preferred Stock shall not be entitled to vote on any matters submitted to the
shareholders of the Company except
A-1
<PAGE>
as otherwise required by law or the Company's Amended and Restated Articles
of Incorporation, in which case every holder of Series K Preferred stock
shall be entitled to one vote for each such share.
6. CONVERSION OF THE SERIES K PREFERRED STOCK. Each share of Series K
Preferred Stock shall be convertible, at any time and from time to time,
subject to the terms and provisions of this Section 6, into such number of
fully paid and nonassessable shares of Common Stock at the Conversion Price
(as defined in Section 6(a), below) in effect on the date of conversion,
determined in accordance with the following formula:
(Share Liquidation Value) x (Number of Shares of Series K Preferred Being
Converted)
-------------------------------------------------------------------------
Conversion Price
For example, if a holder of the Series K Preferred desires to convert
100 shares at a time when the Conversion Price is $16, the holder will
receive, upon conversion, 3,125 shares of Common Stock, determined as follows:
$500 X 100
----------
$16
= 3,125 shares of Common Stock
(a) CONVERSION PRICE. The Conversion Price shall initially be
$16, subject to adjustment as provided in this Section 6(a).
(i) RESET OF CONVERSION PRICE ON SECOND ANNIVERSARY DATE. The
Conversion Price shall be adjusted on the second anniversary date of the
date of issuance of the Series K Preferred Stock (the "Reset Date") to the
lesser of (i) $16 or (ii) an amount equal to the average closing price for
the Common Stock for the 30 trading days immediately preceding the Reset
Date as reported on the NASDAQ National Market System, or such other stock
exchange or other quotation system upon which the Common Stock is then
traded or quoted (the "Reset Conversion Price").
(ii) ADJUSTMENT OF CONVERSION PRICE IN THE EVENT OF STOCK
DIVIDENDS, STOCK SPLITS AND REVERSE STOCK SPLITS. In case the Company
shall at any time issue Common Stock or securities convertible into Common
Stock by way of 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 Conversion Price then in effect shall be proportionately
decreased in the case of such issuance (on the day following the date fixed
for determining shareholders entitled to receive such dividend or other
distribution) or decreased in the case of such stock split or increased in
the case of such reverse stock split (on the date that such stock split or
reverse stock split shall become effective), by multiplying the Conversion
Price in effect immediately prior to the stock dividend, stock
A-2
<PAGE>
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.
(b) CONVERSION PROCEDURE. To convert any share of Series K
Preferred Stock, the holder shall provide written notice to the Company
stating that the holder elects to convert all or a portion of the shares of
Series K Preferred Stock represented by a certificate or certificates
delivered to the Company (the "Conversion Notice"). The Conversion Notice
will include the following information: (1) The number of shares of Series K
Preferred Stock being converted; (2) The name or names (with address and
taxpayer identification number) in which a certificate or certificates for
shares of Common Stock are to be issued; (3) A written instrument or
instruments of transfer in form reasonably satisfactory to the Company, duly
executed by the holder or its duly authorized legal representative; and (4)
The date on which the holder desires to convert the shares of Series K
Preferred Stock (the "Conversion Date"). The Conversion Notice shall be
accompanied by the certificate or certificates representing the shares of
Series K Preferred Stock being converted. The Conversion Notice shall be
delivered to the Company, in the manner provided in Section 8, below, not
more than ten and not less than five business days prior to the Conversion
Date. If the Conversion Date shall not be a Business Day, then such
conversion right shall be deemed exercised on the next Business Day.
(c) EFFECT OF CONVERSION
(i) Immediately prior to the close of business on the Conversion
Date, each converting holder of Series K Preferred Stock shall be deemed to
be a holder of record of Common Stock issuable upon conversion of such
holder's Series K Preferred Stock, notwithstanding that the share register
of the Company shall then be closed or that certificates representing such
Common Stock shall not then be actually delivered to such person.
(ii) On any Conversion Date, all rights with respect to the
shares of Series K Preferred Stock so converted, including the rights, if
any, to receive notices, will terminate, except the rights of holders
thereof to:(1) receive certificates for the number of shares of Common
Stock into which such shares of Series K Preferred Stock have been
converted; and (2) exercise the rights to which they are entitled as
holders of Common Stock.
(d) DELIVERY OF COMMON STOCK Upon surrender of the certificates
representing the Series K Preferred Stock being converted, the Company,
provided the original certificates or certificates representing the shares of
Series K Preferred Stock to be converted have been delivered to the Company,
shall, within five business days of the Conversion Date, issue and deliver or
cause to be issued and delivered to such holder of Series K Preferred Stock,
or to its
A-3
<PAGE>
nominee or nominees, a certificate or certificates for the number of shares
of Common Stock to which such holder shall be entitled.
(e) MANDATORY CONVERSION. If not earlier redeemed by the Company
or converted by the holder, all outstanding shares of Series K Preferred
Stock, 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 K Preferred Stock, on the second anniversary of
the date of original issuance thereof at the Reset Conversion Price.
(f) 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 K Preferred Stock will immediately and automatically be
converted into shares of Common Stock at the Conversion Price then in effect.
(g) FRACTIONAL SHARES. Any fractional shares resulting from a
conversion shall be rounded to the next highest whole share of Common Stock.
(h) 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 K 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 K Preferred Stock. All shares of Common
Stock issued upon conversion shall be fully paid and nonassessable.
7. REDEMPTION RIGHTS. At any time prior to the conversion of the
Series K Preferred Stock (the "Redemption Period"), the Company shall have
the right to redeem the outstanding shares of Series K Preferred Stock, in
whole, at a cash redemption price per share equal to the Share Liquidation
Value (the "Redemption Price"). The Company shall give the holder of such
shares written notice of such redemption (the "Redemption Notice"), which
notice shall the date fixed for redemption which shall not be less than 30
days after the date of the Redemption Notice (the "Redemption Date"). At any
time prior to the Redemption Date, holders of the shares of Series K
Preferred Stock shall have the right to convert such shares in accordance
with Section 6, above. The aggregate Redemption Price for all shares of
Series K Preferred which remain outstanding on the Redemption Date shall be
paid by the Company to the holder of the shares to be redeemed within five
business days of the surrender of the certificates representing the Series K
Preferred Stock being redeemed. Any shares of Series K Preferred which
remain outstanding on the Redemption Date shall only entitle the holder to
receive the Redemption Price for such shares upon delivery of the
certificates representing the shares of Series K Preferred Stock to the
Company and shall not be considered outstanding for any other purpose or have
any other rights as shares of preferred stock of the Company. The Company
shall not be entitled to deliver a Redemption Notice after it has received a
Conversion Notice in the form required by Section 6(b) above.
A-4
<PAGE>
8. NOTICES. Any notice required by the provisions of this Certificate
to be given to the holder of shares of the Series K 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.
9. PAYMENT OF TAXES. The holder of the Series K 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 K Preferred Stock.
A-5
<PAGE>
Exhibit 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 L 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 May 20, 1998:
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 580 shares, which shall be designated as the
"Series L 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.
May 20, 1998 By /s/ Thomas J. Wiens
-----------------------------------
Thomas L. Wiens, Chairman and Chief
Executive Officer
<PAGE>
EXHIBIT A
DESIGNATION OF PREFERENCES, LIMITATIONS AND RELATIVE RIGHTS
OF THE
SERIES L REDEEMABLE CONVERTIBLE PREFERRED STOCK
OF
RECYCLING INDUSTRIES, INC.
1. DESIGNATION AND AMOUNT. The distinctive designation of such series
is "Series L Redeemable Convertible Preferred Stock, without par value" (the
"Series L Preferred Stock") of Recycling Industries, Inc., a Colorado
corporation (the "Company") and the number of shares constituting this series
shall be 580.
2. NO DIVIDEND RIGHTS. The holders of the Series L Preferred Stock
shall not be entitled to any dividends.
3. RANKING. The Series L 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 L Preferred Stock are outstanding,
(collectively "Parity Securities").
4. LIQUIDATION PREFERENCE. Upon any voluntary or involuntary
liquidation, dissolution or winding-up of the Company, holders of the Series
L Preferred Stock shall be entitled to be paid, out of assets available for
distribution, $500 per share, being the liquidation preference per share (the
"Share Liquidation Value"), 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 L 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 L Preferred
Stock and all other Parity Securities are not paid in full, the holders of
the Series L 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 L 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 L
Preferred Stock shall not be entitled to vote on any matters submitted to the
shareholders of the Company except
A-1
<PAGE>
as otherwise required by law or the Company's Amended and Restated Articles
of Incorporation, in which case every holder of Series L Preferred stock
shall be entitled to one vote for each such share.
6. CONVERSION OF THE SERIES L PREFERRED STOCK. Each share of Series L
Preferred Stock shall be convertible, at any time and from time to time,
subject to the terms and provisions of this Section 6, into such number of
fully paid and nonassessable shares of Common Stock at the Conversion Price
(as defined in Section 6(a), below) in effect on the date of conversion,
determined in accordance with the following formula:
(SHARE LIQUIDATION VALUE) X (NUMBER OF SHARES OF
SERIES L PREFERRED BEING CONVERTED)
Conversion Price
For example, if a holder of the Series L Preferred desires to convert 108
shares at a time when the Conversion Price is $18, the holder will receive, upon
conversion, 3,125 shares of Common Stock, determined as follows:
$500 X 108
----------
$18
= 3,000 shares of Common Stock
(a) CONVERSION PRICE. The Conversion Price shall initially be $18,
subject to adjustment as provided in this Section 6(a).
(i) RESET OF CONVERSION PRICE ON THIRD ANNIVERSARY DATE. The
Conversion Price shall be adjusted on the third anniversary date of the
date of issuance of the Series L Preferred Stock (the "Reset Date") to the
lesser of (i) $18 or (ii) an amount equal to the average closing price for
the Common Stock for the 30 trading days immediately preceding the Reset
Date as reported on the NASDAQ National Market System, or such other stock
exchange or other quotation system upon which the Common Stock is then
traded or quoted (the "Reset Conversion Price").
(ii) ADJUSTMENT OF CONVERSION PRICE IN THE EVENT OF STOCK
DIVIDENDS, STOCK SPLITS AND REVERSE STOCK SPLITS. In case the Company
shall at any time issue Common Stock or securities convertible into Common
Stock by way of 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 Conversion Price then in effect shall be proportionately
decreased in the case of such issuance (on the day following the date fixed
for determining shareholders entitled to receive such dividend or other
distribution) or decreased in the case of such stock split or increased in
the case of such reverse stock split (on the date that such stock split or
reverse stock split shall become effective), by multiplying the Conversion
Price in effect immediately prior to the stock dividend, stock
A-2
<PAGE>
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.
(b) CONVERSION PROCEDURE. To convert any share of Series L
Preferred Stock, the holder shall provide written notice to the Company
stating that the holder elects to convert all or a portion of the shares of
Series L Preferred Stock represented by a certificate or certificates
delivered to the Company (the "Conversion Notice"). The Conversion Notice
will include the following information: (1) The number of shares of Series L
Preferred Stock being converted; (2) The name or names (with address and
taxpayer identification number) in which a certificate or certificates for
shares of Common Stock are to be issued; (3) A written instrument or
instruments of transfer in form reasonably satisfactory to the Company, duly
executed by the holder or its duly authorized legal representative; and (4)
The date on which the holder desires to convert the shares of Series L
Preferred Stock (the "Conversion Date"). The Conversion Notice shall be
accompanied by the certificate or certificates representing the shares of
Series L Preferred Stock being converted. The Conversion Notice shall be
delivered to the Company, in the manner provided in Section 8, below, not
more than ten and not less than five business days prior to the Conversion
Date. If the Conversion Date shall not be a Business Day, then such
conversion right shall be deemed exercised on the next Business Day.
(c) EFFECT OF CONVERSION
(i) Immediately prior to the close of business on the Conversion
Date, each converting holder of Series L Preferred Stock shall be deemed to
be a holder of record of Common Stock issuable upon conversion of such
holder's Series L Preferred Stock, notwithstanding that the share register
of the Company shall then be closed or that certificates representing such
Common Stock shall not then be actually delivered to such person.
(ii) On any Conversion Date, all rights with respect to the
shares of Series L Preferred Stock so converted, including the rights, if
any, to receive notices, will terminate, except the rights of holders
thereof to:(1) receive certificates for the number of shares of Common
Stock into which such shares of Series L Preferred Stock have been
converted; and (2) exercise the rights to which they are entitled as
holders of Common Stock.
(d) DELIVERY OF COMMON STOCK Upon surrender of the certificates
representing the Series L Preferred Stock being converted, the Company, provided
the original certificates or certificates representing the shares of Series L
Preferred Stock to be converted have been delivered to the Company, shall,
within five business days of the Conversion Date, issue and deliver or cause to
be issued and delivered to such holder of Series L Preferred Stock, or to its
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<PAGE>
nominee or nominees, a certificate or certificates for the number of shares
of Common Stock to which such holder shall be entitled.
(e) MANDATORY CONVERSION. If not earlier redeemed by the Company or
converted by the holder, all outstanding shares of Series L Preferred Stock
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 L Preferred Stock, on the third anniversary of the date of original
issuance thereof at the Reset Conversion Price.
(f) 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 L Preferred Stock will immediately and automatically be converted into
shares of Common Stock at the Conversion Price then in effect.
(g) FRACTIONAL SHARES. Any fractional shares resulting from a
conversion shall be rounded to the next highest whole share of Common Stock.
(h) 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 L 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 L Preferred Stock. All shares of Common Stock issued upon conversion
shall be fully paid and nonassessable.
7. REDEMPTION RIGHTS. At any time prior to the conversion of the Series
L Preferred Stock (the "Redemption Period"), the Company shall have the right to
redeem the outstanding shares of Series L Preferred Stock, in whole, at a cash
redemption price per share equal to the Share Liquidation Value (the "Redemption
Price"). The Company shall give the holder of such shares written notice of
such redemption (the "Redemption Notice"), which notice shall the date fixed for
redemption which shall not be less than 30 days after the date of the Redemption
Notice (the "Redemption Date"). At any time prior to the Redemption Date,
holders of the shares of Series L Preferred Stock shall have the right to
convert such shares in accordance with Section 6, above. The aggregate
Redemption Price for all shares of Series L Preferred which remain outstanding
on the Redemption Date shall be paid by the Company to the holder of the shares
to be redeemed within five business days of the surrender of the certificates
representing the Series L Preferred Stock being redeemed. Any shares of Series
L Preferred which remain outstanding on the Redemption Date shall only entitle
the holder to receive the Redemption Price for such shares upon delivery of the
certificates representing the shares of Series L Preferred Stock to the Company
and shall not be considered outstanding for any other purpose or have any other
rights as shares of preferred stock of the Company. The Company shall not be
entitled to deliver a Redemption Notice after it has received a Conversion
Notice in the form required by Section 6(b) above.
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<PAGE>
8. NOTICES. Any notice required by the provisions of this Certificate to
be given to the holder of shares of the Series L 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.
9. PAYMENT OF TAXES. The holder of the Series L 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
L Preferred Stock.
A-5
<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 M 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 May 20, 1998:
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 1,030 shares, which shall be designated as the
"Series M 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.
May 20, 1998 By /s/ Thomas J. Wiens
-------------------------------
Thomas L. Wiens, Chairman and Chief
Executive Officer
<PAGE>
EXHIBIT A
DESIGNATION OF PREFERENCES, LIMITATIONS AND RELATIVE RIGHTS
OF THE
SERIES M REDEEMABLE CONVERTIBLE PREFERRED STOCK
OF
RECYCLING INDUSTRIES, INC.
1. DESIGNATION AND AMOUNT. The distinctive designation of such series
is "Series M Redeemable Convertible Preferred Stock, without par value" (the
"Series M Preferred Stock") of Recycling Industries, Inc., a Colorado
corporation (the "Company") and the number of shares constituting this series
shall be 1,030.
2. NO DIVIDEND RIGHTS. The holders of the Series M Preferred Stock
shall not be entitled to any dividends.
3. RANKING. The Series M 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 M Preferred Stock are outstanding,
(collectively "Parity Securities").
4. LIQUIDATION PREFERENCE. Upon any voluntary or involuntary
liquidation, dissolution or winding-up of the Company, holders of the Series
M Preferred Stock shall be entitled to be paid, out of assets available for
distribution, $500 per share, being the liquidation preference per share (the
"Share Liquidation Value"), 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 M 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 M Preferred
Stock and all other Parity Securities are not paid in full, the holders of
the Series M 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 M 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 M
Preferred Stock shall not be entitled to vote on any matters submitted to the
shareholders of the Company except
A-1
<PAGE>
as otherwise required by law or the Company's Amended and Restated Articles
of Incorporation, in which case every holder of Series M Preferred stock
shall be entitled to one vote for each such share.
6. CONVERSION OF THE SERIES M PREFERRED STOCK. Each share of Series M
Preferred Stock shall be convertible, at any time and from time to time,
subject to the terms and provisions of this Section 6, into such number of
fully paid and nonassessable shares of Common Stock at the Conversion Price
(as defined in Section 6(a), below) in effect on the date of conversion,
determined in accordance with the following formula:
(SHARE LIQUIDATION VALUE) X (NUMBER OF SHARES OF SERIES M PREFERRED BEING
CONVERTED)
-------------------------------------------------------------------------
Conversion Price
For example, if a holder of the Series M Preferred desires to convert
100 shares at a time when the Conversion Price is $16, the holder will
receive, upon conversion, 3,125 shares of Common Stock, determined as follows:
$500 X 100
------------
$16
= 3,125 shares of Common Stock
(a) CONVERSION PRICE. The Conversion Price shall initially be
$16, subject to adjustment as provided in this Section 6(a).
(i) RESET OF CONVERSION PRICE ON THIRD ANNIVERSARY DATE. The
Conversion Price shall be adjusted on the third anniversary date of the
date of issuance of the Series M Preferred Stock (the "Reset Date") to the
lesser of (i) $16 or (ii) an amount equal to the average closing price for
the Common Stock for the 30 trading days immediately preceding the Reset
Date as reported on the NASDAQ National Market System, or such other stock
exchange or other quotation system upon which the Common Stock is then
traded or quoted (the "Reset Conversion Price").
(ii) ADJUSTMENT OF CONVERSION PRICE IN THE EVENT OF STOCK
DIVIDENDS, STOCK SPLITS AND REVERSE STOCK SPLITS. In case the Company
shall at any time issue Common Stock or securities convertible into Common
Stock by way of 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 Conversion Price then in effect shall be proportionately
decreased in the case of such issuance (on the day following the date fixed
for determining shareholders entitled to receive such dividend or other
distribution) or decreased in the case of such stock split or increased in
the case of such reverse stock split (on the date that such stock split or
reverse stock split shall become effective), by multiplying the Conversion
Price in effect immediately prior to the stock dividend, stock
A-2
<PAGE>
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.
(b) CONVERSION PROCEDURE. To convert any share of Series M Preferred
Stock, the holder shall provide written notice to the Company stating that the
holder elects to convert all or a portion of the shares of Series M Preferred
Stock represented by a certificate or certificates delivered to the Company (the
"Conversion Notice"). The Conversion Notice will include the following
information: (1) The number of shares of Series M Preferred Stock being
converted; (2) The name or names (with address and taxpayer identification
number) in which a certificate or certificates for shares of Common Stock are to
be issued; (3) A written instrument or instruments of transfer in form
reasonably satisfactory to the Company, duly executed by the holder or its duly
authorized legal representative; and (4) The date on which the holder desires to
convert the shares of Series M Preferred Stock (the "Conversion Date"). The
Conversion Notice shall be accompanied by the certificate or certificates
representing the shares of Series M Preferred Stock being converted. The
Conversion Notice shall be delivered to the Company, in the manner provided in
Section 8, below, not more than ten and not less than five business days prior
to the Conversion Date. If the Conversion Date shall not be a Business Day,
then such conversion right shall be deemed exercised on the next Business Day.
(c) EFFECT OF CONVERSION
(i) Immediately prior to the close of business on the Conversion
Date, each converting holder of Series M Preferred Stock shall be deemed to
be a holder of record of Common Stock issuable upon conversion of such
holder's Series M Preferred Stock, notwithstanding that the share register
of the Company shall then be closed or that certificates representing such
Common Stock shall not then be actually delivered to such person.
(ii) On any Conversion Date, all rights with respect to the
shares of Series M Preferred Stock so converted, including the rights, if
any, to receive notices, will terminate, except the rights of holders
thereof to:(1) receive certificates for the number of shares of Common
Stock into which such shares of Series M Preferred Stock have been
converted; and (2) exercise the rights to which they are entitled as
holders of Common Stock.
(d) DELIVERY OF COMMON STOCK Upon surrender of the certificates
representing the Series M Preferred Stock being converted, the Company, provided
the original certificates or certificates representing the shares of Series M
Preferred Stock to be converted have been delivered to the Company, shall,
within five business days of the Conversion Date, issue and deliver or cause to
be issued and delivered to such holder of Series M Preferred Stock, or to its
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<PAGE>
nominee or nominees, a certificate or certificates for the number of shares of
Common Stock to which such holder shall be entitled.
(e) MANDATORY CONVERSION. If not earlier redeemed by the Company or
converted by the holder, all outstanding shares of Series M Preferred Stock,
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 M Preferred Stock, on the third anniversary of the date of original
issuance thereof at the Reset Conversion Price.
(f) 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 M Preferred Stock will immediately and automatically be converted into
shares of Common Stock at the Conversion Price then in effect.
(g) FRACTIONAL SHARES. Any fractional shares resulting from a
conversion shall be rounded to the next highest whole share of Common Stock.
(h) 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 M 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 M Preferred Stock. All shares of Common Stock issued upon conversion
shall be fully paid and nonassessable.
7. REDEMPTION RIGHTS. At any time prior to the conversion of the Series
M Preferred Stock (the "Redemption Period"), the Company shall have the right to
redeem the outstanding shares of Series M Preferred Stock, in whole, at a cash
redemption price per share equal to the Share Liquidation Value (the "Redemption
Price"). The Company shall give the holder of such shares written notice of
such redemption (the "Redemption Notice"), which notice shall the date fixed for
redemption which shall not be less than 30 days after the date of the Redemption
Notice (the "Redemption Date"). At any time prior to the Redemption Date,
holders of the shares of Series M Preferred Stock shall have the right to
convert such shares in accordance with Section 6, above. The aggregate
Redemption Price for all shares of Series M Preferred which remain outstanding
on the Redemption Date shall be paid by the Company to the holder of the shares
to be redeemed within five business days of the surrender of the certificates
representing the Series M Preferred Stock being redeemed. Any shares of Series
M Preferred which remain outstanding on the Redemption Date shall only entitle
the holder to receive the Redemption Price for such shares upon delivery of the
certificates representing the shares of Series M Preferred Stock to the Company
and shall not be considered outstanding for any other purpose or have any other
rights as shares of preferred stock of the Company. The Company shall not be
entitled to deliver a Redemption Notice after it has received a Conversion
Notice in the form required by Section 6(b) above.
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<PAGE>
8. NOTICES. Any notice required by the provisions of this Certificate to
be given to the holder of shares of the Series M 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.
9. PAYMENT OF TAXES. The holder of the Series M 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
M Preferred Stock.
A-5
