<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 12, 1998 (May 28, 1998)
RECYCLING INDUSTRIES, INC.
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Colorado 0-20179 84-1103445
- ---------------- --------------- ------------------
(State or other (Commission (I.R.S. Employer
jurisdiction File Number) Identification No.)
of incorporation)
9780 South Meridian Boulevard, Suite 180
Englewood, Colorado 80112
- -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (303) 790-7372
- -------------------------------------------------------------------------------
(Former name or former address, if changed since last report.)
<PAGE>
Item 2. ACQUISITION OR DISPOSITION OF ASSETS
ACQUISITION OF FEREX CORPORATION
On May 28, 1998, Recycling Industries, Inc. acquired all of the capital
stock of Ferex Corporation ("FEREX"), headquartered in Tyler, Texas.
Ferex is a metals recycler and auto crusher with operations in Arkansas,
Oklahoma and Texas. Ferex operated 16 facilities, a scrap brokering business,
six mobile auto crushing units that operate in a six state geographic region,
one non-ferrous shredder and one non-ferrous wire chopper operation.
The total aggregate purchase price for Ferex was $46,347,000, comprised
of $28,936,000 in cash, 556,944 shares of the Registrant's Common Stock,
$.001 par value per share having a value of $6.125 per share or $3,411,000 on
May 28, 1998 and $14,000,000 of assumed liabilities. The purchase price is
subject to post-closing adjustments pursuant to the Agreement and Plan of
Share Exchange.
The cash portion of the purchase price was financed, in part, from the
proceeds of the Registrant's credit facility and the issuance of $50 million
of subordinated debt on May 29, 1998 (the "New Subordinated Notes"). The
purchase price was determined through arm's length negotiations and based
upon an independent appraisal.
The Registrant will continue the operations of Ferex.
ACQUISITION OF MCKINNEY SMELTING, INC.
On May 29, 1998, Ferex Metals Recycling of McKinney, Inc., a wholly
owned subsidiary of Recycling Industries, Inc., completed the acquisition of
substantially all of the assets of McKinney Smelting, Inc., with operations
in the McKinney, Texas area.
The assets acquired from McKinney consist of heavy equipment, tools and
rolling stock used in the business of recycling ferrous and non-ferrous metals.
The total purchase price for McKinney was $2,940,000 and was funded,
in part, from the proceeds of the Registrant's credit facility and the New
Subordinated Notes. The purchase price was determined through arm's length
negotiations and based upon an independent appraisal.
The Registrant will continue the operations of McKinney.
<PAGE>
Item 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) FINANCIAL STATEMENTS OF BUSINESS 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
------- -----------
<S> <C>
2.1 Agreement and Plan of Share Exchange dated May 27, 1998, by
and among Recycling Industries, Inc., a Colorado
corporation, Ferex Corporation, a Texas Corporation, and its
Control Shareholders.*
2.2 Asset Purchase Agreement dated April 15, 1998, by and among
McKinney Smelting, Inc., a Texas corporation, Benjamin L.
Smith and Ferex Metals Recycling of McKinney, Inc., a Texas
corporation.*
</TABLE>
* These exhibits have been filed without exhibits, schedules or attachments.
Upon request, the Registrant will furnish supplementary 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.
Dated: June 12, 1998 By /s/ Thomas J. Wiens
-------------------------------
Thomas J. Wiens, Chairman & CEO
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AGREEMENT AND PLAN OF SHARE EXCHANGE
BY AND AMONG
RECYCLING INDUSTRIES, INC.,
FEREX CORPORATION,
AND
CERTAIN SHAREHOLDERS OF
FEREX CORPORATION
DATED MAY 27, 1998
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C> <C>
ARTICLE 1 DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE 2 THE SHARE EXCHANGE . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.1 The Share Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.2 Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.3 Effects of the Share Exchange. . . . . . . . . . . . . . . . . . . . . 8
2.4 Aggregate Consideration to be Received by Ferex Shareholders . . . . . 8
2.5 Manner of Share Exchange; Surrender of Certificates; Stock
Transfer Books . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.6 Payment of Purchase Consideration. . . . . . . . . . . . . . . . . . . 9
2.7 Post-Closing Adjustment. . . . . . . . . . . . . . . . . . . . . . . . 10
2.8 Dissenting Holders . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.9 Indemnity Consideration. . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE 3 THE CLOSING. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.1 The Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.2 Deliveries at Closing. . . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF FEREX AND
THE CONTROL SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . 15
4.1 Making of Representations and Warranties . . . . . . . . . . . . . . . 15
4.2 Organization and Qualifications of Ferex . . . . . . . . . . . . . . . 15
4.3 Capital Stock; Ownership . . . . . . . . . . . . . . . . . . . . . . . 16
4.4 Subsidiaries; Acquisitions . . . . . . . . . . . . . . . . . . . . . . 16
4.5 Required Action; Authority . . . . . . . . . . . . . . . . . . . . . . 17
4.6 No Conflicts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.7 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
4.8 Real and Personal Property . . . . . . . . . . . . . . . . . . . . . . 19
4.9 No Litigation; Compliance. . . . . . . . . . . . . . . . . . . . . . . 22
4.10 Employee Benefit Programs. . . . . . . . . . . . . . . . . . . . . . . 24
4.11 Interest of Ferex in Customers, etc. . . . . . . . . . . . . . . . . . 24
4.12 Financial Statements; Liabilities and Projections. . . . . . . . . . . 24
4.13 Ordinary Course. . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
4.14 Accounts Receivable. . . . . . . . . . . . . . . . . . . . . . . . . . 25
4.15 Inventories. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
4.16 Absence of Certain Changes . . . . . . . . . . . . . . . . . . . . . . 25
4.17 Material Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . 26
4.18 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
4.19 Approvals; Consents. . . . . . . . . . . . . . . . . . . . . . . . . . 28
4.20 Banking Relationships. . . . . . . . . . . . . . . . . . . . . . . . . 28
4.21 Licenses and Permits . . . . . . . . . . . . . . . . . . . . . . . . . 28
<PAGE>
4.22 Environmental Matters. . . . . . . . . . . . . . . . . . . . . . . . . 29
4.23 Proprietary Rights . . . . . . . . . . . . . . . . . . . . . . . . . . 30
4.24 No Illegal Payments. . . . . . . . . . . . . . . . . . . . . . . . . . 30
4.25 Books and Records. . . . . . . . . . . . . . . . . . . . . . . . . . . 30
4.26 Transactions with Related Persons. . . . . . . . . . . . . . . . . . . 30
4.27 No Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
4.28 Employees: Labor Matters . . . . . . . . . . . . . . . . . . . . . . . 31
4.29 Directors, Officers and Key Employees. . . . . . . . . . . . . . . . . 31
4.30 Suppliers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
4.31 Customers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
4.32 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF RECYCLING. . . . . . . . . . . . . . 32
5.1 Making of Representations and Warranties . . . . . . . . . . . . . . . 32
5.2 Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
5.3 Authorization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
5.4 Transaction Not a Breach.. . . . . . . . . . . . . . . . . . . . . . . 33
5.5 Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
5.6 No Misrepresentation . . . . . . . . . . . . . . . . . . . . . . . . . 33
ARTICLE 6 COVENANTS OF FEREX AND THE CONTROL SHAREHOLDERS. . . . . . . . . . . . 34
6.1 Making of Covenants and Agreements . . . . . . . . . . . . . . . . . . 34
6.2 Cooperation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
6.3 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
6.4 Notice of Default. . . . . . . . . . . . . . . . . . . . . . . . . . . 35
6.5 Conduct of Business. . . . . . . . . . . . . . . . . . . . . . . . . . 35
6.6 Acquisition Proposals. . . . . . . . . . . . . . . . . . . . . . . . . 36
6.7 Transfers of Shares; Voting. . . . . . . . . . . . . . . . . . . . . . 36
6.8 Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
6.9 Hart-Scott-Rodino Filings. . . . . . . . . . . . . . . . . . . . . . . 37
6.10 Tax Returns. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
6.11 Options and Other Rights . . . . . . . . . . . . . . . . . . . . . . . 37
6.12 Shareholder Consent. . . . . . . . . . . . . . . . . . . . . . . . . . 37
6.13 Consummation of Agreement. . . . . . . . . . . . . . . . . . . . . . . 37
6.14 McKinney Smelting. . . . . . . . . . . . . . . . . . . . . . . . . . . 37
6.15 Liabilities and Obligations. . . . . . . . . . . . . . . . . . . . . . 37
6.16 Shareholder Loans. . . . . . . . . . . . . . . . . . . . . . . . . . 37
6.17 Environmental Remediation. . . . . . . . . . . . . . . . . . . . . . . 37
6.18 List of Assets and Liabilities . . . . . . . . . . . . . . . . . . . . 38
ARTICLE 7 COVENANTS OF RECYCLING . . . . . . . . . . . . . . . . . . . . . . . . 38
7.1 Making of Covenants and Agreements . . . . . . . . . . . . . . . . . . 38
7.2 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
7.3 Consummation of Agreement. . . . . . . . . . . . . . . . . . . . . . . 38
7.4 Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
ii
<PAGE>
ARTICLE 8 CONDITIONS PRECEDENT TO THE SHARE EXCHANGE . . . . . . . . . . . . . . 39
8.1 Conditions to Each Party's Obligation. . . . . . . . . . . . . . . . . 39
8.2 Conditions to Obligations of Recycling . . . . . . . . . . . . . . . . 39
8.3 Conditions of Obligations of Ferex and the Control Shareholders. . . . 40
ARTICLE 9 TERMINATION AND AMENDMENT. . . . . . . . . . . . . . . . . . . . . . . 41
9.1 Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
9.2 Effect of Termination. . . . . . . . . . . . . . . . . . . . . . . . . 42
9.3 Right to Proceed . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
ARTICLE 10 INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
10.1 Indemnification by the Control Shareholders. . . . . . . . . . . . . . 42
10.2 Indemnification by the Control Shareholders - Environmental
Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
10.3 Indemnification by Recycling . . . . . . . . . . . . . . . . . . . . . 44
10.4 Indemnification Procedure for Third Party Claims . . . . . . . . . . . 44
10.5 Direct Claims. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
10.6 Failure to Give Timely Notice. . . . . . . . . . . . . . . . . . . . . 46
10.7 Limitations on Indemnities . . . . . . . . . . . . . . . . . . . . . . 46
10.8 Survival of Representations, Warranties and Covenants. . . . . . . . . 47
10.9 Time Limitation. . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
10.10 Cumulative Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . 47
10.11 Accounts Receivable. . . . . . . . . . . . . . . . . . . . . . . . . . 48
10.12 Characterization of Indemnification. . . . . . . . . . . . . . . . . . 48
ARTICLE 11 THE SHAREHOLDERS REPRESENTATIVES . . . . . . . . . . . . . . . . . . . 48
11.1 Authorization of the Representative. . . . . . . . . . . . . . . . . . 48
11.2 Replacement of a Shareholders Representative; Successor
Representative; Action by Shareholders Representative. . . . . . . . . 49
ARTICLE 12 MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
12.1 Notices, Consents, etc.. . . . . . . . . . . . . . . . . . . . . . . . 49
12.2 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
12.3 Amendment and Waiver . . . . . . . . . . . . . . . . . . . . . . . . . 51
12.4 Documents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
12.5 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
12.6 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
12.7 Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
12.8 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
12.9 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
12.10 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
12.11 Third Parties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
12.12 Interpretative Matters . . . . . . . . . . . . . . . . . . . . . . . . 52
12.13 No Strict Construction . . . . . . . . . . . . . . . . . . . . . . . . 52
12.14 Consent to Jurisdiction. . . . . . . . . . . . . . . . . . . . . . . . 52
12.15 Publicity and Disclosures. . . . . . . . . . . . . . . . . . . . . . . 52
12.16 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . 53
iii
<PAGE>
12.17 Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
</TABLE>
iv
<PAGE>
AGREEMENT AND PLAN OF SHARE EXCHANGE
THIS AGREEMENT is made as of the 27th day of May 1998, by and among
RECYCLING INDUSTRIES, INC., a Colorado corporation ("Recycling"), FEREX
CORPORATION, a Texas corporation ("Ferex"), and the individuals or entities
listed on EXHIBIT A attached hereto. Throughout this Agreement, the
individuals and entities listed on EXHIBIT A may be individually referred to
as a "Control Shareholder" or collectively as the "Control Shareholders."
Recycling, Ferex and the Control Shareholders are referred to collectively
herein as the "Parties." 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.
WHEREAS, the respective Boards of Directors of Recycling and Ferex have
each determined that it is in their best interest for Recycling to acquire
Ferex upon the terms and subject to the conditions set forth herein:
WHEREAS, Recycling has, or upon the execution of this Agreement shall
take such action as is appropriate to form a subsidiary (the "Exchange Sub")
to be organized under the Texas Business Corporation Act and to cause
Exchange Sub to become a party to this Agreement, pursuant to which Exchange
Sub shall acquire all of the capital stock Ferex (the "Exchange") upon the
terms and subject to the conditions set forth herein;
WHEREAS, pursuant to the Exchange and as set forth in Article 2, the
issued and outstanding shares of Ferex Common Stock (other than any shares of
Ferex Common Stock held by Ferex in its treasury or by any of its
subsidiaries) shall be exchanged for the right to receive the Purchase
Consideration in accordance with the terms hereof.
NOW, THEREFORE, in consideration of the premises and the mutual promises
herein made, and in consideration of the representations, warranties and
covenants herein contained, the Parties agree as follows:
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.
(a) "Accountants" has the meaning set forth in Section 2.7(d).
(b) "Acquisition" has the meaning set forth in Section 4.4(b).
(c) "Acquisition Proposal" has the meaning set forth in Section 6.6.
(d) "Acquisition Rights" has the meaning set forth in Section 4.4(b).
1
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(e) "Acquisition Transaction" has the meaning set forth in Section 6.6.
(f) "Affiliate" means an affiliate as defined in Rule 405 under the
Securities Act of 1933, as amended and includes any past and present Affiliate
of a Person.
(g) "Agreement" means the Agreement and Plan of Share Exchange entered
into by the Parties hereto.
(h) "Business" means the metals recycling business and business
operations as historically conducted by Ferex and the Ferex Subsidiaries as a
going concern.
(i) "Closing" has the meaning set forth in Section 3.1.
(j) "Closing Date" has the meaning set forth in Section 3.1.
(k) "Closing Per Share Amount" means $1.9128505 per share, being the
amount of monies equal to the quotient of the Purchase Consideration less the
expenses to be paid by Ferex to Hoak Breedlove, those described in Section
12.6 to be paid by the holders of Ferex Common Stock and the amount by which
the liabilities and obligations of Ferex as of the Closing Date exceed
$14,000,000, in the aggregate, divided by the number of shares of Ferex
Common Stock issued and outstanding as of the Closing Date (other than shares
held in treasury or by a Ferex Subsidiary).
(l) "Control Shareholder" or "Control Shareholders" has the meaning set
forth in the first paragraph of this Agreement.
(m) "Defense Counsel" has the meaning set forth in Section 10.4.
(n) "Defense Notice" has the meaning set forth in Section 10.4.
(o) "Direct Claims" has the meaning set forth in Section 10.5.
(p) "Dissenting Holder" has the meaning set forth in Section 2.8.
(q) "Effective Time" has the meaning set forth in Section 2.2.
(r) "Employee Program" has the meaning set forth in Section 4.10.
(s) "Employment Agreements" refers to the agreements described in
Section 3.2(a)(xi).
(t) "Environmental Escrow Account" has the meaning set forth in Section
2.6(c).
(u) "Environmental Escrow Agreement" has the meaning set forth in
Section 2.6(c).
(v) "Environmental Escrow Amount" has the meaning set forth in Section
2.6(b).
2
<PAGE>
(w) "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, the Toxic Substance Control Act, the
Resource Conservation and Recovery Act, as Amended, the Clean Air Act, the
Clean Water Act, the Endangered Species Act, the Federal Insecticide,
Fungicide, Rodenticide Act and the Occupational Safety and Health Act of
1970, all as may have been amended.
(x) "Environmental, Health and Safety Liabilities" means any and all
liabilities for the violation of, or required remediation under, any
Environmental Laws.
(y) "ERISA" means Employee Retirement Income Security Act of 1974, as
amended from time to time.
(z) "Escrow Agreements" means the Environmental Escrow Agreement and
Indemnity Consideration Escrow Agreement.
(aa) "Estimated Shareholders' Equity" has the meaning set forth in
Section 2.7(a).
(bb) "Exchange Act" has the meaning set forth in Section 4.3(c).
(cc) "Exchange Agent" has the meaning set forth in Section 2.5(a).
(dd) "Exchange Sub" has the meaning set forth in the Preamble.
(ee) "Expiration Date" has the meaning set forth in Section 10.9.
(ff) "Ferex Board" has the meaning set forth in Section 4.5.
(gg) "Ferex Common Stock" means the common stock, $.01 par value, of
Ferex.
(hh) "Ferex Indemnified Party" has the meaning set forth in Section 10.3.
(ii) "Ferex Leased Real Property" has the meaning set forth in Section
4.8(b).
(jj) "Ferex Material Contract" or "Ferex Material Contracts" have the
meaning set forth in Section 4.17.
(kk) "Ferex Owned Real Property" has the meaning set forth in Section
4.8(a).
3
<PAGE>
(ll) "Ferex Permits" has the meaning set forth in Section 4.21.
(mm) "Ferex Shareholders" means the holders of Ferex Common Stock
entitled to vote on the Share Exchange.
(nn) "Ferex Subsidiary" or "Ferex Subsidiaries" has the meaning set forth
in Section 4.4.
(oo) "Financial Statements" has the meaning set forth in Section 4.12.
(pp) "GAAP" means generally accepted accounting principles consistently
applied in the United States.
(qq) "Hazardous Activity" means any activity, circumstance or occurrence,
whether intentional or otherwise (a) involving the generation, treatment,
storage, disposal, transportation, release, discharge, handling or use of any
Hazardous Material, (b) involving the direct or indirect contact or exposure of
a Person or property to any Hazardous Material, or (c) controlled, restricted or
otherwise regulated under any Environmental Law, whether or not in compliance
with such Environmental Law.
(rr) "Hazardous Materials" means any substance (a) which is present
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.
(ss) "Hoak Breedlove" means Hoak Breedlove Wesneski & Co.
(tt) "HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, or any successor law, and the regulations and rules issued pursuant to
that Act or any successor law.
(uu) "HSR Filings" has the meaning set forth in Section 6.9.
(vv) "Indemnity Consideration Escrow Account" has the meaning set forth
in Section 2.9.
(ww) "Indemnity Consideration Escrow Agreement" has the meaning set forth
in Section 2.9.
(xx) "Indemnified Party" has the meaning set forth in Section 10.4.
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(yy) "Indemnifying Party" has the meaning set forth in Section 10.4.
(zz) "IRC" means the Internal Revenue Code of 1986, as amended.
(aaa) "IRS" has the meaning set forth in Section 4.7(c).
(bbb) "To the Knowledge of Ferex" means the actual knowledge, after
reasonable investigation, of Lloyd B. Fletcher, Donnye M. Storey and Robert
Wollard. An individual will be deemed to have "Knowledge" of a particular fact
or other matter if such individual, after reasonable investigation, is actually
aware of such fact or other matter.
(ccc) "Latest Balance Sheet" has the meaning set forth in Section
4.12(a)(ii).
(ddd) "Latest Balance Sheet Date" with respect to Ferex and the Ferex
Subsidiaries shall be February 28, 1998.
(eee) "Latest Financial Statements" has the meaning set forth in Section
4.12(a)(ii).
(fff) "Leases" has the meaning set forth in Section 4.8(b).
(ggg) "Lien" has the meaning set forth in Section 4.3(b).
(hhh) "Losses" has the meaning set forth in Section 10.1.
(iii) "Material Adverse Effect" means a material adverse effect on the
business, assets, prospects or financial condition of Ferex or Recycling, as
applicable.
(jjj) "Multiemployer Plan" has the meaning set forth in Section 4.10(i).
(kkk) "Ordinary Course of Business" or "Ordinary Course" means the
ordinary course of business consistent with past custom and practice of Ferex
(including with respect to quantity and frequency).
(lll) "Permitted Liens" has the meaning set forth in Section 4.8(b)(v).
(mmm) "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.
(nnn) "Per Share Escrow Amount" [CONFIDENTIAL TREATMENT REQUESTED]
being the amounts deposited in the Environmental Escrow Account, divided by
the number of shares of Ferex Common Stock issued and outstanding as of the
Closing Date (other than shares held in treasury or by a Ferex Subsidiary).
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(ooo) "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.
(ppp) "Program Affiliate" has the meaning set forth in Section 4.10(i).
(qqq) "Projections" has the meaning set forth in Section 4.12(c).
(rrr) "Proprietary Rights" means all patents, patent applications,
patent disclosures and inventions (whether or not patentable and whether or
not reduced to practice); all trademarks, service marks, trade dress, trade
names and corporate names; all registered and unregistered statutory and
common law copyrights; all registrations, applications and renewals for any
of the foregoing; all trade secrets, confidential information, ideas,
formulae, compositions, know-how, manufacturing and production processes and
techniques, research and development information, drawings, specifications,
designs, plans, improvements, proposals, technical and computer data,
documentation and software, financial, business and marketing plans, and
franchisee, customer and supplier lists and related information and all other
proprietary rights.
(sss) "Protest Notice" has the meaning set forth in Section 2.7(c).
(ttt) "Purchase Consideration" has the meaning set forth in Section 2.4.
(uuu) "Recycling Common Stock" means the common stock, $.001 par value per
share, of Recycling.
(vvv) "Recycling Indemnified Party" has the meaning set forth in Section
10.1(a).
(www) "Reduction Amount" has the meaning set forth in Section 2.7.
(xxx) "Related Person" means with respect to a particular individual:
(i) each other member of such individual's Family;
(ii) any Person that is directly or indirectly controlled by such
individual or one or more members of such individual's Family;
(iii) any Person in which such individual or members of such
individual's Family hold (individually or in the aggregate) a Material
Interest; and
(iv) any Person with respect to which such individual or one or
members of such individual's Family serves as a director, officer, partner,
executor, or trustee (or in a similar capacity).
With respect to specified Person other than an individual:
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(i) any Person that directly or indirectly controls, is directly
or indirectly controlled by, or is directly or indirectly under common control
with such specified Person;
(ii) any Person that holds a Material Interest in such specified
Person;
(iii) each Person that serves as a director, officer, partner,
executor, or trustee of such specified Person (or in a similar capacity);
(iv) any Person in which such specified Person holds a Material
Interest;
(v) any Person with respect to which such specified Person
serves as a general partner or a trustee (or in a similar capacity); and
(vi) any Related Person of any individual described in clause
(ii) or (iii).
For purposes of this definition, (a) the "Family" of an individual includes (i)
the individual, (ii) the individual's spouse, (iii) any other natural person who
is related to the individual or the individual's spouse within the second
degree, and (iv) any other natural person who resides with such individual, and
(b) "Material Interest" means direct or indirect beneficial ownership (as
defined in Rule 13d-3 under the Securities Exchange Act of 1934) of voting
securities or other voting interests representing at least 51% of the
outstanding voting power of a Person or equity securities or other equity
interests representing at least 51% of the outstanding equity securities or
equity interests in a Person.
(yyy) "Share Exchange" means the exchange of the shares of Ferex Common
Stock for the Purchase Consideration, pursuant to the Texas BCA.
(zzz) "Share Exchange Articles" has the meaning set forth in Section 2.2.
(aaaa) "Shareholders" means the holders of the capital stock of Ferex.
(bbbb) "Shareholders Agreement" means the Agreement described in Section
2.9.
(cccc) "Shareholders' Equity" has the meaning set forth in Section 2.7.
(dddd) "Shareholders' Equity Schedule" has the meaning set forth in Section
2.7(b).
(eeee) "Shareholders Representatives" has the meaning set forth in Section
11.1.
(ffff) "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.
(gggg) "Tax Returns" means returns, declarations, reports, claims for
refund, information returns or other documents (including any related or
supporting schedules, statements or information)
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filed or required to be filed in connection with the determination,
assessment or collection of any Taxes of any party or the administration of
any laws, regulations or administrative requirements relating to any Taxes.
(hhhh) "Texas BCA" means the Texas Business Corporation Act.
(iiii) "Threshold Level" has the meaning set forth in Section 10.7(a).
(jjjj) "Third Party Claim" has the meaning set forth in Section 10.4.
(kkkk) "Transaction" means the transactions contemplated by this Agreement
and the other Transaction Documents.
(llll) "Transaction Documents" means, collectively, (i) this Agreement,
(ii) the Escrow Agreements, (iii) the Employment Agreements, (iv) the
Shareholders Agreement, (v) the Non-Competition Agreements, (vi) the Stock
Option Agreement, (vii) any Schedule or Exhibit to this Agreement, (viii) any
certificate or other document delivered at Closing, and (ix) the General
Release.
ARTICLE 2
THE SHARE EXCHANGE
2.1 THE SHARE EXCHANGE. Upon the terms and subject to the conditions
set forth in this Agreement and as a share exchange effected in accordance
with Article 5.02 of the Texas BCA at the Effective Time, all of the
outstanding shares of Ferex Common Stock shall be exchanged for the Purchase
Consideration, and Exchange Sub shall acquire all of the issued and
outstanding shares of Ferex Common Stock (the "Share Exchange").
2.2 EFFECTIVE TIME. As soon as practicable on or after the Closing
Date, the Parties shall file articles of exchange with respect to the Share
Exchange (the "Share Exchange Articles") in the form attached hereto as EXHIBIT
B with the Secretary of State of the State of Texas. The Share Exchange shall
become effective upon the issuance of the certificates of exchange by the
Secretary of State of the State of Texas (the "Effective Time").
2.3 EFFECTS OF THE SHARE EXCHANGE. In accordance with Article 5.06 of
the Texas BCA (or any successor provisions thereof) at the Effective Time, all
of the outstanding shares of Ferex Common Stock shall be deemed to have been
exchanged to Exchange Sub for the consideration provided in this Agreement and
the former holders of Ferex Common Stock shall be entitled solely to the
consideration therefor provided in this Agreement or to their rights referenced
in Section 2.8.
2.4 AGGREGATE CONSIDERATION TO BE RECEIVED BY FEREX SHAREHOLDERS.
Subject to adjustments and other reductions set forth in this Agreement, the
holders of Ferex Common Stock will receive the cash amount equal to $31,500,000,
in the aggregate (the aggregate amount of the consideration shall herein be
referred to as the "Purchase Consideration"). The portion of the
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Purchase Consideration to be received for each share of Ferex Common Stock by
holders of record of Ferex Common Stock as of the Closing Date shall be an
amount equal to the Closing Per Share Amount less the Per Share Escrow Amount
and will be paid in accordance with Section 2.5 hereof.
2.5 MANNER OF SHARE EXCHANGE; SURRENDER OF CERTIFICATES; STOCK TRANSFER
BOOKS.
(a) On or after the Closing Date, upon surrender to Interwest
Transfer Company, Inc. (the "Exchange Agent") by each holder of Ferex Common
Stock, of a certificate or certificates representing such holder's shares of
Ferex Common Stock together with a duly executed letter of transmittal in form
reasonably acceptable to Exchange Sub, except as provided in Section 2.5(c), the
Exchange Agent shall deliver to each holder of Ferex Common Stock the Closing
Per Share Amount LESS the Per Share Escrow Amount for each share of Ferex Common
Stock represented by the certificate or certificates surrendered.
(b) Until so surrendered and exchanged as provided in Section
2.5(a) above, each certificate representing shares of Ferex Common Stock (other
than shares to be cancelled as provided in Section 2.5(c)) shall, from and after
the Closing Date, be deemed to represent only the right to receive the portion
of the Purchase Consideration to which the holder of Ferex Common Stock
represented by that certificate is entitled pursuant to Section 2.5(a) or such
holder's rights under Article 5.11 of the Texas BCA. Upon surrender of each
certificate representing shares of Ferex Common Stock, such certificate shall
forthwith be cancelled and a new certificate representing such shares shall be
issued and delivered to Exchange Sub.
(c) At the Effective Time, the stock transfer books of Ferex
shall be closed and there shall be no further registration of transfers of
shares of Ferex Common Stock thereafter on the records of Ferex. From and after
the Closing Date, each holder of Ferex Common Stock shall cease to have any
rights as a holder of Ferex Common Stock or otherwise with respect to such
shares, except as otherwise provided herein or by applicable law. Shares of
Ferex Common Stock owned in treasury, or otherwise, by Ferex or any Ferex
Subsidiary shall automatically be cancelled and retired and shall cease to
exist, and such shares will not be entitled to any portion of the Purchase
Consideration.
(d) Notwithstanding anything to the contrary in this Section
2.5, neither Recycling nor Exchange Sub nor any party hereto shall be liable to
any holder of Ferex Common Stock for any amount properly paid to a public
official pursuant to any applicable property, escheat or similar laws.
2.6 PAYMENT OF PURCHASE CONSIDERATION. The payment of the Purchase
Consideration shall be as follows:
(a) subject to the provisions of Section 2.5(a), to the holders
of Ferex Common Stock, $1.7381017 per share of Ferex Common Stock, being the
Closing Per Share Amount LESS the Per Share Escrow Amount for each share of
Ferex Common Stock issued and outstanding on the Closing Date (other than shares
held in treasury or by a Ferex Subsidiary); (the "Environmental Escrow Amount")
to be deposited into the Environmental Escrow Account pursuant to Section
2.6(b); and
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(b) on the Closing Date, the Environmental Escrow Amount, by
wire transfer of immediately available funds to an interest-bearing escrow
account (the "Environmental Escrow Account"), which Account shall be established
under an escrow agreement (the "Environmental Escrow Agreement") in the form of
EXHIBIT D;
2.7 POST-CLOSING ADJUSTMENT. Notwithstanding anything to the contrary
contained herein, the portion of Purchase Consideration payable to the Control
Shareholders shall be reduced to the extent, if any, that the total consolidated
shareholders' equity of Ferex and the Ferex Subsidiaries ("Shareholders'
Equity") as of the Closing Date determined in accordance with GAAP is less than
$3,657,922 (such deficiency, the "Reduction Amount").
(a) ESTIMATED SHAREHOLDERS' EQUITY. Within 3 business days
prior to the Closing Date, Ferex shall deliver to Exchange Sub a certificate of
the Chief Financial Officer of Ferex which contains Ferex's good faith best
estimate of the Shareholders' Equity expected on the Closing Date ("Estimated
Shareholders' Equity"), which Estimated Shareholders' Equity shall be reasonably
acceptable to Recycling. If the Estimated Shareholders' Equity is less than
$3,657,922, then Recycling shall deposit such deficiency into escrow.
(b) SHAREHOLDERS' EQUITY SCHEDULE. Not later than 30 days after
the Closing Date, Exchange Sub shall prepare and deliver to the Shareholders
Representatives a schedule (the "Shareholders' Equity Schedule"), setting forth
the Shareholders' Equity as of the Closing Date and the Reduction Amount, if
any.
(c) PROTEST NOTICE. Within 30 days of Recycling's delivery of
the Shareholders' Equity Schedule, the Shareholders Representatives may deliver
a written notice (the "Protest Notice") to Exchange Sub of any objections, and
the basis therefor, which the Shareholders Representatives may have to the
Shareholders' Equity Schedule. The failure of the Shareholders Representatives
to deliver such Protest Notice within the prescribed time period will constitute
the Shareholders Representatives' acceptance of the Shareholders' Equity
Schedule as determined by Exchange Sub. Upon receipt of the Shareholders'
Equity Schedule, the Shareholders Representatives and their respective
accountants and other representatives will be given access to Ferex's books and
records which specifically relate to the determination of Shareholders' Equity,
during reasonable business hours for the purpose of verifying such Schedule.
(d) RESOLUTION OF CONTROL SHAREHOLDERS' PROTEST. If the
Shareholders Representatives and Exchange Sub (and their respective accountants
and other representatives) are unable to resolve any disagreement with respect
to the Shareholders' Equity Schedule within 20 days following Exchange Sub's
receipt of the Shareholders Representatives' Protest Notice, then the items in
dispute will be referred to Peat Marwick KPMG (the "Accountants") for final
determination within 45 days, which determination shall be final and binding on
both Exchange Sub and the Shareholders Representatives. The Control
Shareholders and Exchange Sub shall bear the fees and expenses of the
Accountants equally.
(e) PAYMENT. If the final Shareholders' Equity Schedule
reflects a Reduction Amount, within 10 days of the final determination of the
Shareholders' Equity Schedule, such Reduction Amount shall be paid to Exchange
Sub first out of the amount escrowed, then from the
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Indemnity Consideration Escrow Account, and the balance, if any, severally,
by the Control Shareholders in direct proportion to their relative ownership
of the Ferex Common Stock as of the Closing Date.
2.8 DISSENTING HOLDERS. Notwithstanding any of the provisions of this
Agreement, any holder of Ferex Common Stock who shall not have voted in favor of
the Share Exchange and who shall have exercised or perfected rights for
appraisal of shares of Ferex Common Stock in accordance with Article 5.12 of the
Texas BCA or shall otherwise be entitled to exercise or perfect such rights (a
"Dissenting Holder") shall not receive their pro rata share of the Purchase
Consideration but shall from and after the Closing Date have only the right to
receive such consideration as may be determined to be due to such Dissenting
Holder pursuant to the procedures set forth in the Texas BCA; PROVIDED, HOWEVER,
that the shares of Ferex Common Stock held by a Dissenting Holder who shall
effectively withdraw the demand for appraisal or lose the right of appraisal, in
either case pursuant to the Texas BCA, shall be deemed to be converted, as of
the Closing Date, into the right to receive the Closing Per Share Amount,
without interest, for each share of Ferex Common Stock which such Dissenting
Holder owned as of the Closing Date.
2.9 INDEMNITY CONSIDERATION. In order to induce the Control
Shareholders to agree to the indemnification obligations set forth in Article
10, and to agree to the provisions of Section 2.7 hereof, on the Closing Date,
Exchange Sub shall deliver, issue, transfer and assign to an escrow account
("Indemnity Consideration Escrow Account") 556,944 shares of Recycling Common
Stock pursuant to the terms of an escrow agreement in the form of EXHIBIT G-1
(the "Indemnity Consideration Escrow Agreement") which shares shall be
distributed to the Control Shareholders, in direct proportion to their
respective ownership of Ferex Common Stock on the Closing Date, without any
payment by, or other consideration whatsoever from, the Control Shareholders, as
set forth in the Indemnity Consideration Escrow Agreement. The escrowed
Recycling Common Stock shall be distributed to the Control Shareholders in
direct proportion to their respective ownership of Ferex Common Stock on the
Closing Date, subject to the terms and conditions of the Shareholders Agreement
in form of EXHIBIT G-2.
ARTICLE 3
THE CLOSING
3.1 THE CLOSING. The closing of the Share Exchange (the "Closing")
shall occur at the offices of Powell, Sweet & Coleman, L.L.P., 8950 North
Central Expressway, Suite 130, Dallas, Texas 75231 at 12:00 Noon on May 27,
1998, or at such other time and date to which the parties may agree in
writing (the "Closing Date").
3.2 DELIVERIES AT CLOSING.
(a) DELIVERIES OF FEREX AND CONTROL SHAREHOLDERS. At the
Closing, Ferex and the Shareholders Representatives, on behalf of the Control
Shareholders, will execute and deliver or cause to be executed and delivered to
Exchange Sub:
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(i) STOCK CERTIFICATES. Stock certificates representing the
shares of Ferex Common Stock owned by the Control Shareholders,
accompanied by duly executed letters of transmittal for such shares;
(ii) RESOLUTIONS. A copy of resolutions of the Ferex Board and
the holders of at least two-thirds of the outstanding shares of
Ferex capital stock entitled to vote on the Share Exchange,
certified by the Secretary of Ferex as having been duly and validly
adopted and being in full force and effect, authorizing execution
and delivery of this Agreement and performance of the transactions
contemplated hereby by Ferex;
(iii) BOOKS AND RECORDS. All of the minute books, stock
ledgers and similar corporate records of Ferex and each Ferex
Subsidiary;
(iv) CORPORATE DOCUMENTS. The Articles of Incorporation of
Ferex and each Ferex Subsidiary, certified by the Secretary of State
of Texas, as of a date not more than 15 days prior to the Closing
Date, and the by-laws of Ferex and each Ferex Subsidiary, certified
in each case by the Secretary of Ferex or each Ferex Subsidiary, as
the case may be, as in effect at the Closing;
(v) CERTIFICATES. A Certificate of Existence and Certificate of
Good Standing dated not more than 15 days prior to the Closing Date,
with respect to Ferex and each Ferex Subsidiary, issued,
respectively, by the Secretary of State and the Comptroller of
Public Accounts of Texas and with respect to Ferex and each Ferex
Subsidiary, a Certificate of Good Standing from the Secretary of
State of each State in which they are qualified to do business as a
foreign corporation;
(vi) CONSENTS. Evidence that all consents, approvals, or
authorizations of or notifications to any third parties (including
governmental agencies), if any, required for the Share Exchange and
to consummate the Transactions, have been obtained by Ferex;
(vii) OPINION OF COUNSEL. An opinion of counsel for Ferex
and the Control Shareholders, dated as of the Closing Date, in the
form of EXHIBIT H;
(viii) FEREX'S CERTIFICATE. A certificate from Ferex and
Shareholders Representatives on behalf of the Control Shareholders,
dated the Closing Date, as provided in Section 8.2(a);
(ix) ENVIRONMENTAL ESCROW AGREEMENT. The Environmental Escrow
Agreement, duly executed by the Control Shareholders on behalf of
the holders of Common Stock of Ferex;
(x) ARTICLES OF EXCHANGE. Articles of Exchange duly executed by
Ferex, for filing in Texas and such other documents and instructions
as required to effectuate the Share Exchange or reasonably
determined by Exchange Sub's counsel.
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(xi) EMPLOYMENT AGREEMENTS. The Employment Agreements in
the form of EXHIBITS I-1 THROUGH 4, duly executed by the
respective Persons listed on Schedule 3.2(a)(xi);
(xii) SHAREHOLDERS AGREEMENT. The Shareholders Agreement,
duly executed by the Shareholders Representatives, on behalf of
the Control Shareholders;
(xiii) GENERAL RELEASE. A General Release of Recycling,
Ferex and the Ferex Subsidiaries and their respective Affiliates
from the Shareholders Representatives on behalf of the Control
Shareholders and the employees participating in the Stock Option
Agreement referred to in Section 3.2(b)(xiii) in the form of
EXHIBIT J;
(xiv) OPTIONS. Termination agreements duly executed by each
holder of an option, warrant or other right or security
exercisable for or convertible into shares of any class of equity
security of Ferex or any Ferex Subsidiary, terminating or
canceling all of such rights or securities in exchange for their
rights under the Stock Option Agreement pursuant to a written
agreement in form and substance reasonably satisfactory to
Recycling and its counsel;
(xv) RESIGNATIONS. Resignations from all of the members of
the Ferex Board and officers of Ferex and each Ferex Subsidiary,
resigning from their positions as directors and/or officers and
from each other office or position held by such person at Ferex
or each Ferex Subsidiary, as the case may be;
(xvi) NON-COMPETITION AGREEMENTS. The Non-Competition
Agreements in the form of EXHIBIT K-1 THROUGH 5, duly executed by
the Control Shareholders and by the Persons listed on Schedule
3.2(a)(xi);
(xvii) INDEMNITY CONSIDERATION ESCROW AGREEMENT. The
Indemnity Consideration Escrow Agreement duly executed by the
Shareholders Representatives on behalf of the Control
Shareholders; and
(xviii) INTENTIONALLY DELETED.
(xix) WELLS FARGO BANK NA. Duly executed termination
statements and other documentation to pay off the Wells Fargo
Bank NA loan to Ferex and the Ferex Subsidiary and terminate the
security interests securing such indebtedness;
(xx) MCKINNEY SMELTING, INC. Such fully executed documents
to effectuate the provisions of Section 6.14 hereof.
(xxi) STOCK OPTION AGREEMENT. The Stock Option Agreement
referred to in Section 3.2(b)(xiv) duly executed by Ferex and
Ferex Subsidiary employees who are to be parties thereto.
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(xxii) OTHER DOCUMENTS. Such other documents and instruments
as Recycling or its counsel reasonably shall deem necessary to
consummate the transactions contemplated hereby.
All documents delivered to Exchange Sub and Recycling shall be in
form and substance reasonably satisfactory to Katten Muchin & Zavis,
counsel for Recycling and Exchange Sub.
(b) DELIVERIES OF RECYCLING AND EXCHANGE SUB. At the Closing,
Recycling and Exchange Sub will deliver to the Control Shareholders
simultaneously with delivery of the items referred to in Section 3.2 above:
(i) PAYMENT OF THE PURCHASE CONSIDERATION. Payment of the
portion of the Purchase Consideration payable to Control
Shareholders, by bank wire transfers to the Control Shareholders
of, the Closing Per Share Amount LESS the Per Share Escrow Amount
for each share of Ferex Common Stock owned by the Control
Shareholders as of the Closing Date;
(ii) RESOLUTIONS. A copy of resolutions of the Board of
Directors of Recycling and Exchange Sub, certified by the
Secretary of Recycling and Exchange Sub as having been duly and
validly adopted and being in full force and effect, authorizing
execution and delivery of this Agreement and performance of the
transactions contemplated hereby by Recycling and Exchange Sub;
(iii) CORPORATE DOCUMENTS. The Articles of Incorporation of
Exchange Sub, certified by the Secretary of State of Texas as of
a date not more than 15 days prior to the Closing Date, and the
by-laws of Exchange Sub, certified by the Secretary of Exchange
Sub as in effect at the Closing;
(iv) GOOD STANDING CERTIFICATE. A Certificate of Good
Standing and a Certificate of Existence dated not more than 15
days prior to the Closing Date, with respect to Exchange Sub,
issued by the Comptroller of Public Accounts and Secretary of
State of Texas, respectively;
(v) OPINION OF COUNSEL. An opinion of counsel for
Recycling and Exchange Sub dated as of the Closing Date, in the
form of EXHIBIT L;
(vi) OFFICER'S CERTIFICATE. A certificate from an officer
of Exchange Sub, dated the Closing Date, containing the
information required pursuant to Section 8.3(a);
(vii) ENVIRONMENTAL ESCROW AGREEMENT. The Environmental
Escrow Agreement, duly executed by Recycling;
(viii) EMPLOYMENT AGREEMENTS. The Employment Agreements, duly
executed by Recycling or Ferex, as the case may be;
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(ix) SHAREHOLDERS AGREEMENT. The Shareholders Agreement,
duly executed by Recycling;
(x) ENVIRONMENTAL ESCROW. [CONFIDENTIAL TREATMENT REQUESTED]
(xi) INDEMNITY CONSIDERATION ESCROW. The deposit of 556,944
shares of Recycling Common Stock into the Indemnity Consideration
Escrow Account;
(xii) NON-COMPETITION AGREEMENTS. The Non-Competition
Agreements duly executed by Recycling;
(xiii) STOCK OPTIONS. The issuance of stock options to
purchase 101,308 shares of Recycling Common Stock pursuant to
Stock Option Agreements in the form of EXHIBIT M;
(xiv) STOCK OPTION AGREEMENT. The Stock Option Agreement
duly executed by Recycling; and
(xv) OTHER DOCUMENTS. Such other documents and instruments
as Ferex or their counsel reasonably shall deem necessary to
consummate the transactions contemplated hereby.
All documents delivered to the Control Shareholders shall be in form
and substance reasonably satisfactory to Powell, Sweet & Coleman, L.L.P.,
counsel for the Control Shareholders.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF FEREX AND
THE CONTROL SHAREHOLDERS
Ferex and the Control Shareholders hereby represent and warrant to
Recycling and Exchange Sub as follows:
4.1 MAKING OF REPRESENTATIONS AND WARRANTIES. As a material inducement
to Recycling and the Exchange Sub to enter into this Agreement and to consummate
the Share Exchange and the other transactions contemplated hereby, Ferex and the
Control Shareholders hereby make to the representations and warranties contained
in this Section 4.
4.2 ORGANIZATION AND QUALIFICATIONS OF FEREX. Ferex is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Texas with full corporate power and authority to own or lease its
properties and to conduct its business in the manner and in the places where
such properties are owned or leased or such business is currently conducted
or proposed to be conducted. The copy of Ferex's Articles of Incorporation
and by-laws, each as amended to date,
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heretofore delivered to Recycling's counsel, is complete and correct, and no
amendments thereto are pending. Ferex is not in violation of any term of its
Articles of Incorporation or by-laws. Ferex is duly qualified to do business
as a foreign corporation under the laws of each jurisdiction in which the
nature of its business or the ownership or leasing of its properties and
assets requires such qualification except where the absence of such
qualification could not reasonably be expected to, individually or in the
aggregate, have a Material Adverse Effect on the condition (financial or
otherwise), properties, assets, liabilities, business, operation or prospects
of Ferex.
4.3 CAPITAL STOCK; OWNERSHIP.
(a) The authorized capital stock of Ferex consists of fifty
million (50,000,000) shares of Common Stock, of which 15,925,111 shares are duly
and validly issued, outstanding, fully-paid and non-assessable. Except as set
forth on SCHEDULE 4.3(a), there are no outstanding shares of any other class of
capital stock of Ferex, nor are there any outstanding options, warrants, rights,
commitments, preemptive rights, subscriptions or agreements of any kind for the
issuance or sale of, or outstanding securities convertible into, exchangeable
for or carrying the right to acquire any additional shares of capital stock of
any class of Ferex. None of Ferex's capital stock has been issued in violation
of any federal or state securities law. Except as set forth on SCHEDULE 4.3(a),
there are no voting trusts, voting agreements, proxies or other agreements,
instruments or undertakings with respect to the voting of any shares of Ferex
Common Stock to which the Control Shareholders or to the Knowledge of Ferex or
the Control Shareholders, any other holder of capital stock of Ferex is a party.
(b) Each Control Shareholder owns beneficially and of record all
of the issued and outstanding shares of capital stock of Ferex set forth
opposite such holder's name on SCHEDULE 4.3(b), free and clear of any liens,
restrictions or encumbrances of any kind or nature (collectively, "Liens"). As
of the date set forth on Schedule 4.3(b), each holder of Ferex capital stock
owns of record all of the issued and outstanding shares of capital stock of
Ferex set forth opposite such holder's name on SCHEDULE 4.3(b), to the Knowledge
of Ferex and the Control Shareholders, free and clear of all Liens except as set
forth on Schedule 4.3(b).
(c) Ferex and its predecessors are not and have never been
subject to the provisions of Sections 12 or 15 of the Securities Exchange Act of
1934, as amended (the "Exchange Act"). Neither the Common Stock nor any other
class or series of Ferex capital stock is registered or required to be
registered under the Exchange Act, and is not subject to any proxy solicitation,
going private or other filing requirements under such Act or similar state
securities laws.
4.4 SUBSIDIARIES; ACQUISITIONS.
(a) Except as set forth on SCHEDULE 4.4(a), Ferex does not
have any subsidiaries or investments in any other corporation or business
organization. Ferex owns all of the issued and outstanding capital stock of
each of its subsidiaries (each, a "Ferex Subsidiary" or collectively, "Ferex
Subsidiaries") and there are no outstanding options, warrants, rights,
commitments, preemptive rights, subscriptions or agreements of any kind for
the issuance or sale of, or outstanding securities convertible into,
exchangeable for or carrying the right to acquire any additional shares of
capital stock of any class of any Ferex Subsidiary. Each Ferex Subsidiary is
a corporation duly organized,
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validly existing and in good standing under the laws of the state of its
incorporation and is duly qualified or registered to do business as a foreign
corporation in each jurisdiction in which it is required to be so qualified
or registered except where failure to be so qualified would not have a
Material Adverse Effect on Ferex or such Ferex Subsidiary. The copies of the
Articles of Incorporation and by-laws of each Ferex Subsidiary, as amended to
date, which have been furnished to counsel for Recycling by Ferex, are
correct and complete as of the date hereof. None of the Ferex Subsidiaries
is in violation of any term of its Articles of Incorporation or by-laws.
Except as disclosed on SCHEDULE 4.4(a), none of the Ferex Subsidiaries is in
violation of (i) any term of any agreement, instrument, judgment, decree or
order applicable to such Ferex Subsidiary or to which such Ferex Subsidiary
is a party or (ii) to the Knowledge of Ferex and the Control Shareholders,
any statute, rule or government regulation applicable to such Ferex
Subsidiary except for any violation of any such statute, rule or regulation
which, individually or in the aggregate could not have a Material Adverse
Effect on Ferex and the Ferex Subsidiaries taken as a whole.
(b) Except as set forth in SCHEDULE 4.4(b), Ferex does not have
any rights or options (the "Acquisition Rights") to purchase or acquire the
capital stock or all or substantially all of the assets of any other corporation
or business organization (an "Acquisition"). SCHEDULE 4.4(b) sets forth the
name of each of the entities subject to any Acquisition Rights, the type of
transaction contemplated by the parties in each Acquisition, the termination
rights, if any, associated with such Acquisition Rights, and whether or not the
consummation of the Share Exchange requires the consent of any other party to
such transaction in order that Recycling may legally succeed to such Acquisition
Rights after the Closing. Each of the Acquisition Rights is fully enforceable,
and, after the Closing, will be fully enforceable by Recycling.
4.5 REQUIRED ACTION; AUTHORITY.
(a) Ferex has full corporate power and authority to execute and
deliver this Agreement and, subject to the approval of the holders of two thirds
of the issued and outstanding Ferex Common Stock as of the Closing Date, to
consummate the transactions contemplated hereby and thereby. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby have been duly and validly approved by unanimous vote of Ferex's Board of
Directors (the "Ferex Board"). The Ferex Board has directed that this Agreement
and the transactions contemplated hereby and thereby be submitted to the Ferex
shareholders for approval at a meeting of such shareholders or by written
consent of the holders of not less than two thirds of the issued and outstanding
Ferex Common Stock. Except for the adoption of this Agreement by the requisite
vote of the Ferex shareholders, no other corporate or shareholder proceedings on
the part of Ferex are necessary to approve this Agreement or to consummate the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by Ferex and constitutes a valid and binding obligation
of Ferex, enforceable against Ferex in accordance with its terms.
(b) The Control Shareholders have the full right, authority,
power and capacity to execute and deliver this Agreement and to consummate the
Transactions. This Agreement has been duly and validly executed and delivered
by the Control Shareholders and constitutes a valid and binding obligation of
the Control Shareholders, enforceable against them in accordance with its terms.
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4.6 NO CONFLICTS. The execution, delivery and performance by Ferex of
this Agreement and each of the Transaction Documents to be executed, delivered
or performed by Ferex or any Control Shareholder does not and will not, with or
without the giving of notice or the lapse of time or both, (a) violate any
provision of the Articles of Incorporation or by-laws of Ferex, (b) except as
set forth on SCHEDULE 4.6, constitute a violation of, or conflict with or result
in any breach of, acceleration of any obligation under, right of termination
under, or default under, any agreement or instrument to which Ferex or any
Control Shareholder is a party or by which Ferex or any Control Shareholder is
bound, (c) to the Knowledge of Ferex or any Control Shareholder, violate any
judgment, decree, order, statute, law, rule or regulation applicable to Ferex or
any Control Shareholder, (d) except as provided on SCHEDULE 4.6, require Ferex
or any Control Shareholder to obtain any approval, consent or waiver of, or to
make any filing with, any person or entity (governmental or otherwise) that has
not been obtained or made or (e) result in the creation or imposition of any
Lien on any of the properties or assets of Ferex or any Ferex Subsidiary. Each
of the officers who executes this Agreement and the other Transaction Documents
on behalf of Ferex have all requisite power to do so in the name of and on
behalf of Ferex.
4.7 TAXES.
(a) Ferex and each of the Ferex Subsidiaries has paid or caused
to be paid all Taxes required to be paid by it through the date hereof whether
disputed or not.
(b) Ferex and each of the Ferex Subsidiaries has in accordance
with applicable law filed all Tax Returns required to be filed by it through the
date hereof, and all such returns correctly and accurately set forth the amount
of any Taxes relating to the applicable period. No Tax Returns filed with
respect to Ferex or any of the Ferex Subsidiaries for any taxable period ended
on or after December 31, 1993 has been audited or is currently the subject of an
audit by the IRS or any taxing authority. No extension of time with respect to
any date on which a Tax return was or is to be filed by Ferex or any of the
Ferex Subsidiaries is in force, and no waiver or agreement by Ferex or any of
the Ferex Subsidiaries is in force for the extension of time for the assessment
or payment of any Taxes.
(c) To the knowledge of Ferex and the Control Shareholders, the
charges, accruals, and reserves with respect to Taxes on the respective books of
Ferex and each Ferex Subsidiary are adequate (determined in accordance with
GAAP) and are at least equal to the Ferex and Ferex Subsidiaries' liability for
Taxes. Neither the Internal Revenue Service ("IRS") nor any other governmental
authority is now asserting or, to the Knowledge of Ferex or any Control
Shareholder, threatening to assert against Ferex or any of the Ferex
Subsidiaries any deficiency or claim for additional Taxes. No claim has ever
been made by an authority in a jurisdiction where Ferex or any of the Ferex
Subsidiaries does not file reports and returns that such entity is or may be
subject to taxation by that jurisdiction. There are no security interests on
any of the assets of Ferex or any of the Ferex Subsidiaries that arose in
connection with any failure (or alleged failure) to pay any Taxes. Neither
Ferex nor any of the Ferex Subsidiaries has entered into a closing agreement
pursuant to Section 7121 of the IRC nor has a consent to the application of
Section 341(f)(2) of the IRC been filed for Ferex or any Ferex Subsidiary.
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(d) Neither Ferex nor any of the Ferex Subsidiaries has ever
been (or has ever had any liability for unpaid Taxes because it once was) a
member of an "affiliated group" (as defined in Section 1504(a) of the IRC)
other than the "affiliated group" of which Ferex is the parent. Neither
Ferex nor any of the Ferex Subsidiaries has ever filed, or has ever been
required to file, a consolidated, combined or unitary Tax Return with any
other entity. Neither Ferex nor any of the Ferex Subsidiaries owns or has
ever owned a direct or indirect interest in any trust, partnership,
corporation or other entity. Neither Ferex nor any of the Ferex Subsidiaries
is a party to any tax sharing agreement.
(e) For purposes of this Agreement, all references to
Sections of the IRC shall include any predecessor provisions to such Sections
and any similar provisions of federal, state, local or foreign law.
4.8 REAL AND PERSONAL PROPERTY.
(a) OWNED REAL PROPERTY. All of the real property owned by
Ferex or any Ferex Subsidiary is identified on SCHEDULE 4.8(a) (the "Ferex
Owned Real Property"). The copies of the deeds and commitments for ALTA Form
B-1990 Owner's Title Insurance Policy or Texas Land Title Insurance Policy
covering each parcel thereof delivered by Ferex and the Ferex Subsidiaries to
Recycling and the information with respect to the deeds set forth on SCHEDULE
4.8(a) is complete, accurate, true and correct in all material respects.
With respect to the Ferex Owned Real Property:
(i) EASEMENTS. Each of Ferex and the Ferex Subsidiaries has
all easements and rights necessary to conduct its business as
presently conducted;
(ii) CONDEMNATION. No portion thereof is subject to any
pending or, to the Knowledge of Ferex, threatened condemnation
proceeding or proceeding by any public authority;
(iii) CONDITION. The buildings, plants, structures and fixtures
located on the Ferex Owned Real Property and owned, leased or used
by Ferex or the Ferex Subsidiaries, including without limitation,
heating, ventilation and air conditioning systems, roof, foundation
and floors, are in the Knowledge of Ferex and the Control
Shareholders, in reasonably good condition and repair for their
present use in Ferex's or such Ferex Subsidiary's operations
(subject to normal wear and tear or repairs thereto that would not
individually or in the aggregate have a Material Adverse Effect) and
in the Knowledge of Ferex and Control Shareholders, are not in
violation of any zoning or other ordinances, codes or regulations;
nor has any written notice or, to the Knowledge of Ferex and the
Control Shareholders, any other notice of any claimed violation of
any such ordinance been served on Ferex or any of the Ferex
Subsidiaries;
(iv) SUBLEASES. Except for the leases described on
SCHEDULE 4.8(a), there are no leases, subleases, licenses,
concessions or other agreements, written or
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oral, granting to any party or parties the right of use or occupancy
of any portion of any parcel of Ferex Owned Real Property;
(v) OPTIONS. Except as set forth in SCHEDULE 4.8(a), there
are no outstanding options or rights of first refusal to purchase
any parcel of Ferex Owned Real Property, or any portion thereof or
interest therein;
(vi) POSSESSION. Except as set forth in SCHEDULE 4.8(a) or
SCHEDULE 4.8(b), there are no parties (other than Ferex or the Ferex
Subsidiaries) in possession of any parcel of Ferex Owned Real
Property, other than tenants under any leases of the Ferex Owned
Real Property who are in possession of space to which they are
entitled, and each of Ferex and the Ferex Subsidiaries, as the case
may be, enjoys peaceful and undisturbed possession under all leases
for Ferex Leased Real Property;
(vii) UTILITIES. All facilities located on each parcel of
Ferex Owned Real Property are supplied with utilities and other
services necessary for the operation of such facilities, including
gas, electricity, water and telephone, all of which services are
adequate for the operation of such facilities as presently conducted
or presently proposed by Ferex or the Ferex Subsidiaries; and
(viii) ACCESS. Each parcel of Ferex Owned Real Property abuts
on and has direct vehicular access to a public road or access to a
public road via a permanent, irrevocable, appurtenant easement
benefitting the parcel of Ferex Owned Real Property.
(b) LEASED REAL PROPERTY. All of the real property leased by
Ferex or any Ferex Subsidiary as tenant or lessee is identified on SCHEDULE
4.8(b) (collectively referred to herein as the "Ferex Leased Real Property").
The copies of the leases of the Ferex Leased Real Property (collectively, the
"Leases") delivered by Ferex and the Ferex Subsidiaries to Recycling and the
information with respect to each of the Leases set forth on SCHEDULE 4.8(b) are
complete, accurate, true and correct. With respect to each of the Leases,
except as set forth on SCHEDULE 4.8(b):
(i) each of the Leases is in full force and effect and has not
been modified, amended or altered, in writing or otherwise;
(ii) all obligations of the landlord or lessor under the Leases
which have accrued have been performed, and to the best of the
Knowledge of Ferex or any Control Shareholders, no landlord or
lessor is in default under any Lease;
(iii) all obligations of the tenant or lessee under the Leases
which have accrued have been performed, neither Ferex nor any Ferex
Subsidiary is in default under any Lease, and no circumstance
presently exists which, with notice or the passage of time, or both,
would give rise to a default by Ferex or any Ferex Subsidiary;
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(iv) Ferex and each Ferex Subsidiary have obtained the consent
of each landlord or lessor under any Leases whose consent is
required to consummate the Share Exchange, and the Share Exchange
will not give any landlord or lessor under any Lease any remedy,
including, without limitation, any right to declare a default under
any Lease;
(v) either Ferex or a Ferex Subsidiary holds a good, valid
and enforceable leasehold interest in the Ferex Leased Real
Property pursuant to the Leases, subject only to the right of
reversion of the landlord or lessor under the Leases, and to the
knowledge of Ferex and the Control Shareholders, free and clear of
all other prior or subordinate interests, including, without
limitation, mortgages, deeds of trust, ground leases, leases,
subleases, assessments, tenancies, claims, covenants, conditions,
restrictions, easements, judgments or other encumbrances or matters
affecting title, and free of encroachments onto or off of the Ferex
Leased Real Property, except for (x) easements, covenants,
restrictions and similar encumbrances that do not and could not
materially interfere with the use of the Ferex Leased Real Property
as currently used, and (y) minor encroachments that do not and
could not adversely affect the value or use of the Ferex Leased
Real Property as currently used and improved and that could be
removed without material cost ((x) and (y) are collectively
referred to as "Permitted Liens"), and except for matters set forth
on SCHEDULE 4.8(b);
(vi) except as set forth on SCHEDULE 4.8(B), there are no
material defects in the physical condition of any improvements
constituting a part of the Ferex Leased Real Property, including,
without limitation, structural elements, mechanical systems, roofs
or parking and loading areas, and all of such improvements are in
satisfactory operating condition and repair for the business as
currently operated. Except as set forth on SCHEDULE 4.8(b), none
of the Ferex Leased Real Property is subject to special flood or
mudslide hazards or within the 100 year flood plain. To the
Knowledge of Ferex or the Control Shareholder, all water, sewer,
gas, electric, telephone, drainage and other utilities required by
law or necessary for the current or presently planned operation of
the Ferex Leased Real Property have been installed and connected
pursuant to valid permits, and are sufficient to service the Ferex
Leased Real Property; and
(vii) neither Ferex nor any Ferex Subsidiary has received
notice from any governmental authority of any violation of any law,
ordinance, regulation, license, permit or authorization issued with
respect to any of the Ferex Leased Real Property that has not been
corrected heretofore, and no such violation now exists which could
have an adverse effect on the operation or value of any of the
Ferex Leased Real Property. To the Knowledge of Ferex or the
Control Shareholders, all improvements constituting a part of the
Ferex Leased Real Property are in compliance in all respects with
all applicable laws, ordinances, regulations, licenses, permits and
authorizations, and there are presently in effect all licenses,
permits and authorizations required by law, ordinance, or
regulation. Neither Ferex nor any Ferex Subsidiary has received
notice of any pending or threatened real estate tax deficiency or
reassessment or condemnation of all or any portion of any of the
Ferex Leased Real Property.
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(c) PERSONAL PROPERTY. A complete list of the material
machinery, equipment and other tangible personal property of Ferex and each
Ferex Subsidiary is contained on SCHEDULE 4.8(C). Except as specifically
disclosed in said Schedule or in the Latest Balance Sheet, Ferex and each
Ferex Subsidiary has good and marketable title to all of the personal
property used by Ferex or such Ferex Subsidiary. None of such personal
property or assets is subject to any mortgage, pledge, lien, conditional sale
agreement, security agreement, encumbrance or other charge except as
specifically disclosed in said Schedule or in the Latest Balance Sheet.
Except for changes in inventory in the ordinary course of business, none of
which have had a material adverse effect on the business of Ferex or any
Ferex Subsidiary, and additional equipment noted in SCHEDULE 4.8(c), the
Latest Balance Sheet reflects all personal property of Ferex and the Ferex
Subsidiaries, and such property is sufficient for Recycling to continue the
business of Ferex and the Ferex Subsidiaries as presently conducted. Except
as otherwise specified in SCHEDULE 4.8(c), all leasehold improvements,
furnishings, machinery and equipment of Ferex and the Ferex Subsidiaries have
been maintained in operational condition, and to the Knowledge of Ferex and
Control Shareholders, substantially comply with all applicable laws,
ordinances and regulations, and such machinery and equipment is in good
working order (subject to ordinary wear and tear). Neither Ferex nor any
Control Shareholder knows of any pending or threatened change of any such
laws, ordinances or regulations which could adversely affect Ferex and the
Ferex Subsidiaries, individually or in the aggregate.
4.9 NO LITIGATION; COMPLIANCE. Except as set forth on SCHEDULE 4.9,
(a) neither Ferex nor any Ferex Subsidiary is now involved in nor, to the
Knowledge of Ferex or any Control Shareholder, is Ferex or any Ferex
Subsidiary threatened to be involved in any litigation or legal or other
proceedings and (b) no Control Shareholder is now involved in or to the
Knowledge of Ferex or any Control Shareholder, is any holder of Ferex Common
Stock, threatened to be involved in any litigation or legal or other
proceedings relating to the business of Ferex or any Ferex Subsidiary. To
the knowledge of Ferex and the Control Shareholders, Ferex and each Ferex
Subsidiary is in compliance with all laws and governmental (federal, state
and local) rules and regulations applicable to it and its business. None of
Ferex or the Ferex Subsidiaries has been charged nor, to the Knowledge of
Ferex or any Control Shareholder, is Ferex or any Ferex Subsidiary threatened
to be charged with any violation of any provision of any federal, state or
local law or administrative rule or regulation relating to the assets or its
business. Ferex and each Ferex Subsidiary has at all times possessed and
currently possesses and has been and is in compliance with all governmental
permits, licenses and authorizations necessary for the conduct of its
business. All of such permits, licenses and authorizations are, and upon the
consummation of the Share Exchange will be, valid and in full force and
effect.
4.10 EMPLOYEE BENEFIT PROGRAMS.
(a) SCHEDULE 4.10 sets forth a list of every Employee Program
that has been maintained by Ferex, any Ferex Subsidiary or a Program
Affiliate at any time during the six-year period ending on the Closing Date.
(b) Neither Ferex nor any Ferex Subsidiary nor any Program
Affiliate (i) has ever maintained any Employee Program which has been subject
to Title IV of ERISA or IRC Section 412, including, but not limited to, any
Multiemployer Plan or (ii) has ever provided health care or any other
non-pension benefits to any employees after their employment is terminated
(other than as required
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by part 6 of subtitle B of Title I of ERISA) or has ever promised to provide
such post-termination benefits. No Employee Program obligates the Company to
pay separation severance, termination or other benefits as a result of any
transaction contemplated by this Agreement or as a result of a "Change in
Control" as such term is defined in Section 280(g) of the Code.
(c) Ferex, any Ferex Subsidiary and each Program Affiliate
has complied with the applicable notification and other applicable
requirements of the Consolidated Budget Reconciliation Act of 1985 ("COBRA"),
Health Insurance Portability and Accounting Act of 1996, the Newborns' and
Mothers' Health Protection Act of 1996, and the Mental Health Parity Act of
1996. A copy of the Company's COBRA materials has been provided to Recycling.
(d) For purposes of this Section:
(i) "Employee Program" means (A) all employee benefit plans
within the meaning of ERISA Section 3(3), including, but not
limited to, multiple employer welfare arrangements (within the
meaning of ERISA Section 3(40)), plans to which more than one
unaffiliated employer contributes and employee benefit plans
(such as foreign or excess benefit plans) which are not subject
to ERISA; and (B) all stock option plans, bonus or incentive
award plans, severance pay policies or agreements, deferred
compensation agreements, supplemental income arrangements,
vacation plans, and all other employee benefit plans, agreements,
personnel policies and arrangements not described in (A) above
whether written or unwritten, and whether or not terminated,
including without limitation, any arrangement intended to comply
with Section 120, 125, 127 or 129 of the IRC. In the case of an
Employee Program funded through an organization described in IRC
Section 501(c)(9), each reference to such Employee Program shall
include a reference to such organization.
(ii) An entity "maintains" an Employee Program if such
entity sponsors, contributes to, or provides benefits under such
Employee Program, or has any obligation (by agreement or
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under applicable law) to contribute to or provide benefits under
such Employee Program, or if such Employee Program provides
benefits to or otherwise covers employees of such entity (or
their spouses, dependents, or beneficiaries).
(iii) An entity is an "Program Affiliate" of Ferex if it
would have ever been considered a single employer with Ferex
under ERISA Section 4001(b) and Code Section 414 or part of the
same "controlled group" as Ferex for purposes of ERISA
Section 302(d)(8)(c).
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(iv) "Multiemployer Plan" means an employee benefit plan
(pension or non-pension) to which more than one unaffiliated
employer contributes and which is maintained pursuant to one or
more collective bargaining agreements.
4.11 INTEREST OF FEREX IN CUSTOMERS, ETC. Except as set forth in
SCHEDULE 4.11, neither Ferex nor any of its Affiliates (including the
Subsidiaries and their Affiliates) nor any of their Related Persons has any
direct or indirect interest in any competitor, supplier or customer of its
business or in any Person from whom or to whom Ferex or any of the Ferex
Subsidiaries leases any real or personal property or in any other Person with
whom Ferex or any of the Ferex Subsidiaries has any business relationship.
4.12 FINANCIAL STATEMENTS; LIABILITIES AND PROJECTIONS.
(a) Ferex has provided Recycling with the following financial
statements, copies of which are attached hereto as SCHEDULE 4.12(a) (the
"Financial Statements"):
(i) Audited consolidated balance sheets of Ferex and the
Ferex Subsidiaries as at December 31, 1997, December 31, 1996, and December
31, 1995, and audited consolidated statements of operations, retained
earnings and cash flows for each of the three (3) years then ended.
(ii) An unaudited consolidated balance sheet of Ferex and
the Ferex Subsidiaries as of the Latest Balance Sheet Date (the "Latest
Balance Sheet"), and unaudited consolidated statements of operations and
cash flows for the period then ended, certified by the Chief Executive
Officer of Ferex (collectively, the "Latest Financial Statements").
The Financial Statements (i) have been prepared in accordance with GAAP
applied consistently during the periods covered thereby (except with respect
to the Latest Financial Statements for the absence of footnotes and certain
year-end adjustments which adjustments are listed on Schedule 4.12(a)) and
(ii) are complete and correct in all material respects and present fairly the
financial condition of each of Ferex and the Ferex Subsidiaries at the dates
of said statements and the results of their respective operations for the
periods covered thereby.
(b) Except as set forth on SCHEDULE 4.12(b), neither Ferex
nor any Ferex Subsidiary has, any liabilities of any nature, whether accrued,
absolute, contingent or otherwise, asserted or unasserted, (including without
limitation, liabilities as guarantor or otherwise with respect to obligations
of others, liabilities for Taxes due or then accrued or to become due, or
contingent or potential liabilities relating to activities of Ferex or its
Ferex Subsidiary or the conduct of their respective businesses prior to the
date hereof regardless of whether claims in respect thereof have been
asserted), except liabilities stated or adequately reserved against on the
Latest Balance Sheet, or reflected in the Schedules.
(c) Attached hereto as SCHEDULE 4.12(c) are projected results
of Ferex and the Ferex Subsidiaries on a consolidated basis for the fiscal
year ending December 31, 1998 (the "Projections"). The Projections represent
the Control Stockholders' good faith estimates of the future
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performance of Ferex and the Ferex Subsidiaries based upon assumptions (all
of which are set forth in SCHEDULE 4.12(C)) which Ferex in good faith
believes are reasonable as of the date hereof.
4.13 ORDINARY COURSE. Since the Latest Balance Sheet Date, Ferex and
the Ferex Subsidiaries have conducted their respective businesses in the
usual and customary manner in the ordinary and regular course of business,
consistent with their prior practices.
4.14 ACCOUNTS RECEIVABLE. All of the accounts receivable of Ferex and
the Ferex Subsidiaries are valid and enforceable claims, collectible within
90 days after creation and are not subject to set off or counterclaim.
SCHEDULE 4.14 contains a complete and accurate list identifying by customer
the amount of accounts receivable as of the Latest Balance Sheet Date for
each such customer. Except as set forth in SCHEDULE 4.14, neither Ferex nor
any of the Ferex Subsidiaries has any accounts receivable or loans receivable
from any Related Person of Ferex, any Ferex Subsidiary or any Control
Shareholder or any director, officer or employee of Ferex or any Ferex
Subsidiary.
4.15 INVENTORIES. The inventories stated in the Latest Balance Sheet
reflect the normal inventory valuation policies of Ferex and the Ferex
Subsidiaries and are based upon and are consistent with, the inventory
records of Ferex and the Ferex Subsidiaries, and to the Knowledge of Ferex,
are properly valued. Except as set forth on SCHEDULE 4.15, since the date of
the Latest Balance Sheet, no inventory items have been sold or disposed of
except through sales in the ordinary course of business, at profit margins
consistent with the past experience of Ferex and the Ferex Subsidiaries.
4.16 ABSENCE OF CERTAIN CHANGES. Except as disclosed in SCHEDULE 4.16
and in the Financial Statements, since the Latest Balance Sheet Date, there
has not been:
(a) Any change in the condition (financial or otherwise),
properties, assets, liabilities, business, operations or prospects of Ferex
or any of the Ferex Subsidiaries, which change by itself or in conjunction
with all other such changes, whether or not arising in the ordinary course of
business, could have a Material Adverse Effect on the business of Ferex and
the Ferex Subsidiaries, taken as a whole;
(b) Any amendment or termination or, to the Knowledge of
Ferex, proposed or threatened amendment or termination, whether written or
oral, of any Ferex Material Contract or material Lease;
(c) Any contingent liability incurred by Ferex or any Ferex
Subsidiary as guarantor or otherwise with respect to the obligations of
others;
(d) Any mortgage, encumbrance or lien placed on any of the
properties of Ferex or any Ferex Subsidiary;
(e) Any cancellation of any material debt or claim owing to,
or waiver of a material right of, Ferex or any Ferex Subsidiary;
(f) Any obligation or liability of any nature, whether
accrued, absolute, contingent or otherwise, asserted or unasserted, known or
unknown (including, without limitation, liabilities for
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Taxes due or to become due or contingent or potential liabilities relating to
products or services provided by Ferex or any Ferex Subsidiary or the conduct
of their respective businesses since the date of the Latest Balance Sheet
regardless of whether claims in respect thereof have been asserted), incurred
by Ferex or any Ferex Subsidiary other than obligations and liabilities
incurred in the ordinary course of business (it being understood that product
or service liability claims shall not be deemed to be incurred in the
ordinary course of business);
(g) Except for the acquisition of the assets of McKinney
Smelting, Inc., any purchase, sale or other acquisition or disposition, or
any agreement or other arrangement for the purchase, sale or other
acquisition or disposition, of any of the properties or assets of another
entity by Ferex or any Ferex Subsidiary, other than in the ordinary course of
business;
(h) Any damage, destruction or loss, whether or not covered
by insurance, materially and adversely affecting the properties, assets or
business of Ferex or any Ferex Subsidiary;
(i) Any declaration, setting aside or payment of any dividend
by Ferex or any Ferex Subsidiary, or the making of any other distribution in
respect of the capital stock of Ferex or any Ferex Subsidiary, or any direct
or indirect redemption, purchase or other acquisition by Ferex or any Ferex
Subsidiary of Ferex capital stock;
(j) Any dispute or claim of unfair labor practices involving
Ferex or any Ferex Subsidiary; any change in the compensation payable or to
become payable by Ferex or any Ferex Subsidiary to any of its officers,
employees, agents or independent contractors other than normal merit
increases in accordance with its usual practices, or any bonus payment or
arrangement made to or with any of such officers, employees, agents or
independent contractors;
(k) Any change with respect to the officers or management of
Ferex or any Ferex Subsidiary;
(l) Any payment or discharge of a material Lien of Ferex or
any Ferex Subsidiary which was not shown on the Latest Balance Sheet or
otherwise in the ordinary course of business thereafter;
(m) Any obligation or liability incurred or payment made by
Ferex or any Ferex Subsidiary to any of its officers, directors, stockholders
or employees, or any loans or advances made by Ferex or any Ferex Subsidiary
to any of its officers, directors, stockholders or employees, except normal
compensation and expense allowances payable to officers or employees; or
(n) Any change in accounting methods or practices, credit
practices or collection policies used by Ferex or any Ferex Subsidiary.
4.17 MATERIAL CONTRACTS. Except for contracts, commitments, plans,
agreements and licenses described in SCHEDULE 4.17, true and complete copies
of which have been delivered to Recycling (and other than the Leases set
forth on SCHEDULE 4.8(b)), neither Ferex nor any Ferex Subsidiary is a party
to or subject to:
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(a) any agreement for the sale or other disposition of leases
or other assets, including, without limitation, any such sale or disposition
into the secondary markets creating or providing for any recourse obligation
of Ferex or any Ferex Subsidiary;
(b) any plan or contract providing for bonuses, pensions,
options, stock purchases, deferred compensation, retirement payments, profit
sharing, collective bargaining or the like, or any contract or agreement with
any labor union;
(c) any employment contract or contract for services which is
not terminable within thirty (30) days by Ferex or a Ferex Subsidiary without
liability for any penalty or severance payment;
(d) any contract or agreement for the purchase of equipment
except purchase orders in the ordinary course not exceeding $25,000 in the
aggregate;
(e) any other contracts or agreements creating any
obligations of Ferex or any Ferex Subsidiary of $25,000 or more on an
individual basis, or $100,000 or more on an aggregate basis, with respect to
any such contract or agreement not specifically disclosed elsewhere under
this Agreement;
(f) any contract or agreement providing for the purchase of
all or substantially all of its requirements of a particular product from a
supplier;
(g) any contract or agreement which by its terms does not
terminate or is not terminable without penalty by Ferex, a Ferex Subsidiary
or its successors within one (1) year after the date hereof;
(h) any contract or agreement for the sale or lease of its
products not made in the ordinary course of business;
(i) any contract or arrangement with any sales agent or
distributor;
(j) any contract containing covenants limiting the freedom of
Ferex or any Ferex Subsidiary to compete in any line of business or with any
person or entity;
(k) any contract or agreement for the purchase of any fixed
asset for a price in excess of $25,000 whether or not such purchase is in the
ordinary course of business;
(l) any license agreement other than licenses of computer
software entered into in the ordinary course of business;
(m) any indenture, mortgage, promissory note, loan agreement,
guaranty or other agreement or commitment for the borrowing of money; or
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(n) any contract or agreement with any officer, employee,
director of Ferex or any Ferex Subsidiary, any Ferex Shareholder or with any
persons or organizations controlled by or affiliated with any of them.
Neither Ferex nor any Ferex Subsidiary is in default under any such
contracts, commitments, plans, agreements or licenses described in said
Schedule (individually a "Ferex Material Contract" and collectively the
"Ferex Material Contracts") and neither Ferex nor any Control Shareholder has
any Knowledge of conditions or facts which with notice or passage of time, or
both, would constitute a default, except where such a default could not
reasonably be expected to, individually or in the aggregate, have a Material
Adverse Effect on the condition (financial or otherwise), properties, assets,
liabilities, business, operations or prospects of Ferex or any Ferex
Subsidiary. Each of the Ferex Material Contracts is valid and in full force
and effect, and will be enforceable by Ferex or the Ferex Subsidiary against
the other party thereto in accordance with its terms, except for any
non-competition provision or agreement limiting the freedom of any party
thereto to compete in any line of business or with any person or entity, the
benefits of which run to Ferex or any Ferex Subsidiary, the enforceability of
which may be limited by the principles governing the availability of
equitable remedies.
4.18 INSURANCE. The physical properties and assets of Ferex and the
Ferex Subsidiaries are insured to the extent disclosed in SCHEDULE 4.18, and
all such insurance policies and arrangements are disclosed in said SCHEDULE
4.18. Said insurance policies and arrangements are in full force and effect,
all premiums with respect thereto are currently paid, and Ferex and each
Ferex Subsidiary are in compliance in all material respects with the terms
thereof. Said insurance is sufficient for compliance by each of Ferex and the
Ferex Subsidiaries with all requirements of law and all agreements to which
it is a party.
4.19 APPROVALS; CONSENTS. Except as set forth on SCHEDULE 4.19, no
approval, consent, authorization or exemption from or filing with any person
or entity not a party to this Agreement is required to be obtained or made by
Ferex or any Ferex Subsidiary in connection with the execution and delivery
of this Agreement and the Transaction Documents or the consummation of the
transactions contemplated hereby and thereby.
4.20 BANKING RELATIONSHIPS. SCHEDULE 4.20 contains a list of all the
arrangements and accounts Ferex or any Ferex Subsidiary has with any banking
institution, trust company, savings and loan association or other financial
institution. SCHEDULE 4.20 completely and accurately describes each such
arrangement, including with respect to the type of account and the persons
authorized to have access thereto.
4.21 LICENSES AND PERMITS. To the Knowledge of Ferex and the Control
Shareholders, each of Ferex and the Ferex Subsidiaries holds, or can obtain
without undue expense or delay, all the permits, licenses, franchises and
approvals of governmental authorities and agencies necessary for the current
conduct, ownership, use, occupancy or operation of its business or the Ferex
Owned Real Property or the Ferex Leased Real Property, except where failure
to have such permits would not individually have a Material Adverse Effect
and such material permits are identified on SCHEDULE 4.21 ("Ferex Permits").
Each of Ferex and the Ferex Subsidiaries is in compliance in all material
respects
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with such Ferex Permits, all of which are in full force and effect, and
neither Ferex nor any of the Ferex Subsidiaries has received any notices
(written or oral) to the contrary.
4.22 ENVIRONMENTAL MATTERS.
(a) Except as set forth in SCHEDULE 4.22, in material
violation of any Environmental Laws, (i) neither Ferex nor any Ferex
Subsidiary has ever generated, transported, used, stored, treated, disposed
of, or managed any hazardous waste (as that term is defined under RCRA or any
other Environmental Law); (ii) no Hazardous Material has ever been or is
threatened to be spilled, released, or disposed of by Ferex or any Ferex
Subsidiary or to the Knowledge of Ferex or any Control Shareholders, by any
other Person, at any site presently or formerly owned, operated, leased, or
used by Ferex or any Ferex Subsidiary, or has ever been located in the soil
or groundwater at any such site; (iii) no Hazardous Material has ever been
transported by Ferex or any Ferex Subsidiary or to the Knowledge Ferex or any
Control Shareholders, by any other Person, from any site presently or
formerly owned, operated, leased, or used by Ferex or any Ferex Subsidiary
for treatment, storage, or disposal at any other place; (iv) neither Ferex
nor any Ferex Subsidiary presently owns, operates, leases, or uses, or has
previously owned, operated, leased, or used any site on which underground
storage tanks are or were located and (v) no Lien has ever been imposed by
any governmental agency on any property, facility, machinery, or equipment
owned, operated, leased, or used by Ferex or any Ferex Subsidiary in
connection with the presence of any Hazardous Material.
(b) Except as set forth in SCHEDULE 4.22, (i) neither Ferex
nor any Ferex Subsidiary has any liability under, or to the Knowledge of
Ferex and the Control Shareholders, has ever violated, any Environmental Law;
(ii) Ferex and each Ferex Subsidiary, any property owned, operated, leased,
or used by Ferex or any Ferex Subsidiary, and any facilities and operations
thereon are presently in compliance with all applicable Environmental Laws;
(iii) neither Ferex nor any Ferex Subsidiary has ever entered into or been
subject to any judgment, consent decree, compliance order, or administrative
order with respect to any environmental or health and safety matter or
received any request for information, notice, demand letter, administrative
inquiry, or formal or informal complaint or claim with respect to any
environmental or health and safety matter or the enforcement of any
Environmental Law; and (iv) neither Ferex nor any Control Shareholder has any
Knowledge or any reason to know that any of the items enumerated in clause
(iii) of this subsection will be forthcoming.
(c) Except as set forth in SCHEDULE 4.22 hereto, to the
Knowledge of Ferex and the Control Shareholders, there is not any asbestos or
asbestos-containing material, any polychlorinated biphenyls (PCBs) or
equipment containing PCBs, or any urea formaldehyde foam insulation present
at, on, over, beneath, in or upon any site owned, operated, leased, or used
by Ferex or any Ferex Subsidiary.
(d) Ferex and each Ferex Subsidiary has provided to Recycling
copies of all documents, records, and information in the possession of Ferex
or any Ferex Subsidiary or any consultant of Ferex or any Ferex Subsidiary
concerning any environmental or health and safety matter relevant to Ferex or
any Ferex Subsidiary, whether generated by Ferex, any Ferex Subsidiary or
others, including, without limitation, environmental audits, environmental
risk assessments, site
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assessments, documentation regarding off-site disposal of Hazardous
Materials, spill control plans, and reports, correspondence, permits,
licenses, approvals, consents, and other authorizations related to
environmental or health and safety matters issued by any governmental agency.
4.23 PROPRIETARY RIGHTS.
(a) Except as described in SCHEDULE 4.23, neither Ferex nor any
Ferex Subsidiary has ownership of, or license to use, any Proprietary Rights.
To the Knowledge of Ferex and the Control Shareholders, except as set forth in
SCHEDULE 4.23, all of the rights of Ferex or any Ferex Subsidiary in such
Proprietary Rights are freely transferable. To the Knowledge of Ferex and the
Control Shareholders, there are no claims or demands of any other person
pertaining to any of such Proprietary Rights and no proceedings have been
instituted, or are pending or threatened, which challenge the rights of Ferex or
the pertinent Ferex Subsidiary in respect thereof. To the Knowledge of Ferex
and the Control Shareholders, Ferex and each Ferex Subsidiary has the right to
use, free and clear of claims or rights of other persons, all customer lists,
designs, manufacturing or other processes, computer software, systems, data
compilations, research results and other information required for or incident to
its products or its business as presently conducted or contemplated.
(b) All Proprietary Rights which are owned by or licensed to
Ferex or any Ferex Subsidiary or used or to be used by Ferex or any Ferex
Subsidiary in its businesses as presently conducted or contemplated, and which
are material to the business or operations of Ferex or any Ferex Subsidiary, are
listed in SCHEDULE 4.23.
(c) To the Knowledge of Ferex and the Control Shareholders, the
present and contemplated business, activities and products of Ferex and the
Ferex Subsidiaries do not infringe any Proprietary Rights of any other Person.
No proceeding charging Ferex or any Ferex Subsidiary with infringement of any
adversely held Proprietary Rights has been filed or, to the Knowledge of Ferex,
is threatened to be filed. To the Knowledge of Ferex and the Control
Shareholders, neither Ferex nor any Ferex Subsidiary is making unauthorized use
of any confidential information or trade secrets of any person, including
without limitation, any former employer of any past or present employee of Ferex
or any Ferex Subsidiary. Except as set forth in SCHEDULE 4.23, neither Ferex or
any Ferex Subsidiary nor, to the Knowledge of Ferex and the Control
Shareholders, any of its employees have any agreements or arrangements with any
persons other than Ferex or a Ferex Subsidiary related to confidential
information or trade secrets of such persons or restricting any such employee's
ability to engage in business activities of any nature. The activities of its
employees on behalf of Ferex or any Ferex Subsidiary do not violate any such
agreements or arrangements known to Ferex or any Ferex Subsidiary.
4.24 NO ILLEGAL PAYMENTS. Neither Ferex nor any of the Ferex
Subsidiaries has at any time made or committed to make any payments for illegal
political contributions or made any bribes, kickback payments or other illegal
payments.
4.25 BOOKS AND RECORDS. The minute and stock record books of Ferex and
each Ferex Subsidiary have been made available to Recycling and their
representatives and are substantially complete and are correct in all material
respects. At the Closing, all of such books and records will be in the
possession of Recycling.
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4.26 TRANSACTIONS WITH RELATED PERSONS. Except as set forth in SCHEDULE
4.26, no Related Person of Ferex, any Ferex Subsidiary or any Control
Shareholder nor, to the Knowledge of Ferex or the Control Shareholders, owns
directly or indirectly on an individual or joint basis any material interest in,
or serves as an officer or director or in another similar capacity of, any
competitor or supplier of Ferex or any Ferex Subsidiary or any other
organization which has a material contract or arrangement with Ferex or any
Ferex Subsidiary.
4.27 NO BROKERS. Except as set forth in SCHEDULE 4.27, neither Ferex nor
any Ferex Subsidiary nor any Control Shareholder has employed any broker or
finder or incurred any liability for any brokerage fees, commissions or finders'
fees in connection with the transactions contemplated by this Agreement or any
other document contemplated hereby.
4.28 EMPLOYEES: LABOR MATTERS. Ferex and the Ferex Subsidiaries employ
approximately 168 full-time employees and one part-time employees. Neither
Ferex nor any Ferex Subsidiary is delinquent in payments to any of its employees
for any wages, salaries, commissions, bonuses or other direct compensation for
any services performed for it to the date hereof or amounts required to be
reimbursed to such employees. Neither Ferex nor any Ferex Subsidiary nor
Recycling will by reason of the Share Exchange or anything done prior to the
Closing be liable to any of said employees for so-called severance pay or any
other payments, except as set forth in SCHEDULE 4.28. Neither Ferex nor any
Ferex Subsidiary has any policy, practice, plan or program of paying severance
pay or any form of severance compensation in connection with the termination of
employment, except as set forth in said Schedule. To the Knowledge of Ferex or
the Control Shareholders, Ferex and each Ferex Subsidiary is in compliance with
all applicable laws and regulations respecting labor, employment, fair
employment practices, work place safety and health, terms and conditions of
employment, and wages and hours. There are no charges of employment
discrimination or unfair labor practices, nor are there any strikes, slowdowns,
stoppages of work, or any other concerted interference with normal operations
existing, pending or to the Knowledge of Ferex or the Control Shareholders
threatened against or involving Ferex or any Ferex Subsidiary. No question
concerning representation exists respecting any group of employees of Ferex or
any Ferex Subsidiary. There are no grievances, complaints or charges that have
been filed against Ferex or any Ferex Subsidiary under any dispute resolution
procedure (including, but not limited to, any proceedings under any dispute
resolution procedure under any collective bargaining agreement) that might have
a material adverse effect on Ferex or any Ferex Subsidiary or the conduct of its
business and no arbitration or similar proceeding is pending and no claim
therefor has been asserted. No collective bargaining agreement is in effect or
is currently being or is about to be negotiated by Ferex or any Ferex
Subsidiary. Neither Ferex nor any Ferex Subsidiary has received information to
indicate that any of its employment policies or practices is currently being
audited or investigated by any federal, state or local government agency. Ferex
and each Ferex Subsidiary is, and at all times since its incorporation has been,
in compliance with the requirements of the Immigration Reform Control Act of
1986.
4.29 DIRECTORS, OFFICERS AND KEY EMPLOYEES. SCHEDULE 4.29 contains a
true and complete list of all current directors and officers of Ferex and each
Ferex Subsidiary. In addition, SCHEDULE 4.29 contains a list of each officer,
employee and consultant of Ferex or any Ferex Subsidiary who, individually, has
received or is scheduled to receive compensation from Ferex or any Ferex
Subsidiary for the fiscal year ending December 31, 1997, in excess of $35,000.
In each case such Schedule includes the current job title and aggregate annual
compensation of each such individual.
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4.30 SUPPLIERS. SCHEDULE 4.30 is a complete and correct list of the five
largest suppliers (in terms of the dollar volume of Ferex's and the Ferex
Subsidiaries' purchases from such suppliers during the twelve months ended
December 31, 1997) to Ferex and the Ferex Subsidiaries of key materials and
services and commodities, exclusive of utility services. In the last twelve
months, no such supplier has canceled or otherwise terminated, or threatened in
writing to cancel or terminate, its relationship with Ferex or any of the Ferex
Subsidiaries. Ferex nor any of the Ferex Subsidiaries has received any notice,
nor does Ferex or any of the Ferex Subsidiaries have any Knowledge, that any
such supplier intends to cancel or otherwise modify its relationship with Ferex
or the Ferex Subsidiaries.
4.31 CUSTOMERS. SCHEDULE 4.31 is a complete and correct list of the
two largest customers of Ferex and each Ferex Subsidiary (in terms of the
dollar volume of Ferex's and the Ferex Subsidiaries' sales made or services
provided to such customers during the twelve months ended December 31, 1997).
In the last twelve months, no such customer has cancelled or otherwise
terminated or threatened in writing to cancel or terminate, its relationship
with Ferex or any of the Ferex Subsidiaries. Neither Ferex nor any of the
Ferex Subsidiaries has received any notice, nor does Ferex or any of the
Ferex Subsidiaries have any Knowledge, that any such customer intends to
cancel or otherwise modify its relationship with Ferex or the Ferex
Subsidiaries.
4.32 DISCLOSURE. The representations, warranties and statements
contained in this Agreement and in the Exhibits and Schedules delivered by
Ferex, any Ferex Subsidiary, or any Control Shareholders pursuant to this
Agreement do not contain any untrue statement of a material fact, and, when
taken together, do not omit to state a material fact required to be stated
therein or necessary in order to make such representations, warranties or
statements not misleading in light of the circumstances under which they were
made.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF RECYCLING
5.1 MAKING OF REPRESENTATIONS AND WARRANTIES. As a material inducement to
Ferex and the Control Shareholders to enter into this Agreement and to
consummate the Share Exchange and the other transactions contemplated hereby,
Recycling and the Exchange Sub hereby make to the representations and
warranties contained in this Section 5.
5.2 ORGANIZATION. Recycling and Exchange Sub are corporations duly
organized, validly existing and in good standing under the laws of the State of
Colorado and Texas respectively.
5.3 AUTHORIZATION. Recycling and Exchange Sub each has full power,
right and authority to enter into and perform its obligations under this
Agreement and each of the other Transaction Documents to which it is a party.
The execution, delivery and performance of this Agreement and each of the
other Transaction Documents to which it is a party by Recycling and Exchange
Sub have been duly and properly authorized by all requisite corporate action
in accordance with applicable law and with the Articles of Incorporation and
by-laws of Recycling and Exchange Sub. This Agreement and each of the other
Transaction Documents to which Recycling and Exchange Sub are a party have
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been duly executed and delivered by Recycling and are the valid and binding
obligation of Recycling and Exchange Sub and are enforceable against
Recycling and Exchange Sub in accordance with their respective terms. Except
for consent pursuant to the HSR Act, no permits, approvals or consents of or
notifications to (i) any governmental entities or (ii) any other Persons are
necessary in connection with the execution, delivery and performance by
Recycling and Exchange Sub of this Agreement and the other Transaction
Documents and the consummation by Recycling and Exchange Sub of the
transactions contemplated hereby or thereby.
5.4 TRANSACTION NOT A BREACH. Neither the execution and delivery of
this Agreement and the Transaction Documents nor the performance by each
Recycling and Exchange Sub of its obligations hereunder or thereunder will
violate or conflict with or result in a breach of any provision of any rules
of any court or other tribunal or any governmental entity or agency binding
on Recycling or Exchange Sub; conflict with or result in the breach of any of
the terms, conditions or provisions thereof; constitute a default under the
Articles of Incorporation or the by-laws of Recycling and Exchange Sub or any
contract, agreement, mortgage, note, bond, license or other instrument or
obligation of any nature to which Recycling and Exchange Sub is a party or by
which each of Recycling and Exchange Sub, its assets or property is bound;
constitute an event which would permit any party to terminate, or accelerate
the maturity of any indebtedness or other obligation under, any contract,
agreement, indenture, mortgage, note, bond, license or other instrument to
which Recycling and Exchange Sub is a party or by which Recycling and
Exchange Sub or Recycling's or Exchange Sub's properties is bound or subject;
result in the creation or imposition of any Lien upon Recycling's or Exchange
Sub's capital stock or assets; or require any authorization, consent,
approval, exemption or other action by or notice to any court or
administrative or governmental body pursuant to the Articles of Incorporation
or by-laws of Recycling or Exchange Sub. No permits, approvals or consents
of or notifications to any persons or governmental entities (other than to
any state's securities commission or division as to Ferex) are necessary in
connection with the execution and delivery by Recycling and Exchange Sub of
this Agreement or the Transaction Documents or the payment by Exchange Sub of
the Purchase Consideration.
5.5 SECURITIES. At the Closing, the 556,944 shares of Recycling
Common Stock deposited in the Indemnity Consideration Escrow Account will
have been duly authorized and validly issued and upon issuance, will be fully
paid and non-assessable.
5.6 NO MISREPRESENTATION. None of the representations and warranties
of Recycling set forth in this Agreement or in any of the certificates,
schedules, lists, documents, exhibits, or other instruments delivered, or to
be delivered, to Ferex or the Control Shareholders as contemplated by any
provision hereof (including, without limitation, the Transaction Documents),
contains any untrue statement of a material fact or omits to state a material
fact necessary to make the statements contained herein or therein not
misleading.
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ARTICLE 6
COVENANTS OF FEREX AND THE CONTROL SHAREHOLDERS
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6.1 MAKING OF COVENANTS AND AGREEMENTS. Ferex and each Control
Shareholder hereby make to Recycling for the benefit of Recycling and
Exchange Sub the covenants and agreements set forth in this Article 6, and
agree to use commercially reasonable efforts to cause Ferex, each Ferex
Subsidiary and each Control Shareholder to comply with and perform all
covenants and agreements contained in this Article 6 that are applicable to
Ferex, any Ferex Subsidiary or any Control Shareholder.
6.2 COOPERATION. Ferex, each Ferex Subsidiary and the Control
Shareholders shall cooperate with all reasonable requests of Recycling or any of
its representatives and agents to more effectively consummate the transactions
contemplated hereby and the transactions referred to herein.
6.3 CONSENTS. Ferex, each Ferex Subsidiary and the Control Shareholders
shall use commercially reasonable efforts to obtain, or cooperate with Recycling
in obtaining, all consents, authorizations and approvals of third parties
including, without limitation, any requisite consent of any governmental
authorities, regulatory agencies and other entities necessary in connection with
the consummation of the Transactions, except to the extent that the failure to
obtain any of the foregoing individually or in the aggregate, could not have a
Material Adverse Effect on Ferex or any Ferex Subsidiary.
6.4 NOTICE OF DEFAULT. Promptly upon the occurrence of, or promptly
upon Ferex any Ferex Subsidiary or any Control Shareholder becoming aware of the
impending or threatened occurrence of, any event which would cause or constitute
a breach or default, or would have caused or constituted a breach or default had
such event occurred or been known to Ferex, any Ferex Subsidiary or any Control
Shareholder prior to the date hereof, of any of the representations, warranties
or covenants of Ferex, the Ferex Subsidiaries or any Control Shareholder
contained in or referred to in this Agreement or in any Schedule or Exhibit
referred to in this Agreement, Ferex, any Ferex Subsidiary or any Control
Shareholder shall give detailed written notice thereof to Recycling, and Ferex,
such Ferex Subsidiary or any Control Shareholder shall use their commercially
reasonable efforts to prevent or promptly remedy the same.
6.5 CONDUCT OF BUSINESS. Except as contemplated by this Agreement or as
is necessary to effectuate the Transactions, between the date of this Agreement
and the Closing Date, Ferex and each Ferex Subsidiary shall:
(a) Conduct its business in the ordinary course and refrain from
changing or introducing any method of arrangement or operations including,
without limitation entering into any contractual arrangement with brokers,
vendors or other third parties which obligates the Ferex or any Ferex Subsidiary
to make payments in an aggregate amount in excess of $25,000 or having a term of
one year or more except in the ordinary course of business consistent with prior
practices;
(b) Refrain from making any change or incurring any obligation
to make a change in its Articles of Incorporation, By-laws or authorized or
issued capital stock;
(c) Refrain from declaring, setting aside or paying any
dividend, making any other distribution in respect of its capital stock or
making any direct or indirect redemption, purchase or other acquisition of its
stock;
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(d) Refrain from making any purchase, sale of disposition of any
asset or property costing more than $25,000 or $100,000 in the aggregate other
than in the ordinary course of business, from purchasing any capital asset for
use in the business costing more than $50,000 or $100,000 in the aggregate and
from mortgaging, pledging, subjecting to a lien or otherwise encumbering any of
the assets of Ferex other than in the ordinary course of business.
(e) Refrain from incurring or assuming any liability, obligation
or indebtedness for borrowed money in an aggregate amount in excess of $25,000
incurring or assuming any contingent liability as a guarantor or otherwise with
respect to the obligations of others, and from incurring any other contingent or
fixed obligations or liabilities except in the ordinary course of business;
(f) Refrain from canceling any material indebtedness owed to
Ferex or any Ferex Subsidiary or waiving any claims or rights of substantial
value, other than in the ordinary course of business consistent with past
practice;
(g) Refrain from making any change in the compensation payable,
or to become payable, to any of its officers, employees, agents or independent
contractors except in connection with promotions made, or bonuses paid, in the
ordinary course of business consistent with past practices;
(h) Refrain from adopting or amending any Employee Program or
collective bargaining agreement, except as may be required by law;
(i) Refrain from prepaying loans (if any) from its shareholders,
officers or directors or making any change in such borrowing arrangements;
(j) Refrain from making any change in any method of accounting
or accounting practice or policy other than those required by generally accepted
accounting principles;
(k) Use its commercially reasonable efforts consistent with its
prior business practices to prevent any change with respect to its management
and supervisory personnel and banking arrangements;
(l) Use its commercially reasonable efforts consistent with its
past practices to keep intact its business organization, to keep available its
present employees and to preserve the goodwill of all suppliers, customers and
others having business relations with it in connection with Ferex or any Ferex
Subsidiary; and
(m) Use its commercially reasonable efforts to have in effect
and maintain at all times all insurance of the kind described in Section 4.18
above or equivalent insurance with any substitute insurers.
6.6 ACQUISITION PROPOSALS. Except in connection with the transactions
contemplated hereby unless and until this Agreement shall have been terminated
in accordance with its terms, Ferex and the Control Shareholders shall not (a)
take any action to solicit, initiate submission of or encourage any Acquisition
Proposal (as defined below), (b) participate in any substantive discussions
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or negotiations regarding an Acquisition Proposal with any person other than
Recycling and their representatives (c) furnish any information with respect
to or afford access to the properties,books or records of Ferex or any Ferex
Subsidiary to any person who is known by Ferex or the Control Shareholders to
be considered making or has made an offer with respect to an Acquisition
Proposal other than Recycling or (d) otherwise cooperate in any way with, or
assist or participate in, facilitate or encourage, any effort or attempt by
any person other than by Recycling, and its representatives to do or seek any
of the foregoing. Ferex and the Control Shareholders shall promptly notify
Recycling upon receipt of any offer or notice that any person is considering
making an offer with respect to an Acquisition Proposal and shall not accept
any such offer for so long as this Agreement remains in effect. For purposes
hereof, an "Acquisition Proposal" shall include any offer or other proposal
to acquire or purchase all or a portion of the Ferex capital stock or any
assets of, or any equity interest in, Ferex or any Ferex Subsidiary, any
public or private offering of shares of the capital stock of Ferex or any
Ferex Subsidiary, or any other acquisition or financing involving Ferex or
any Ferex Subsidiary, and any such transaction shall constitute an
"Acquisition Transaction".
6.7 TRANSFERS OF SHARES; VOTING. Unless and until this Agreement shall
have been terminated, the Control Shareholders shall not directly or indirectly
exchange, deliver, assign, pledge, encumber or otherwise transfer or dispose of
any of the capital stock of Ferex which they hold, nor shall the Control
Shareholders directly or indirectly grant any right of any kind to acquire,
dispose of, vote or otherwise control in any manner any such shares or in each
case as contemplated herein.
6.8 CONFIDENTIALITY. Ferex and the Control Shareholders each agrees
that, except as may be agreed to in writing by Recycling, Ferex and each Ferex
Subsidiary, their respective officers, directors,agents and representatives and
the Control Shareholders will hold in strict confidence,and will not use, any
confidential or proprietary data or information obtained from Recycling with
respect to Recycling's business or financial condition except for the purpose of
evaluating, negotiating and completing the transaction contemplated hereby.
Information generally known in Recycling's industry or which has been disclosed
to Ferex or any of Ferex Subsidiaries by third parties which have a right to do
so shall not be deemed confidential or proprietary information for purposes of
this Agreement. If the transaction contemplated by this Agreement is not
consummated, Ferex and the Control Shareholders will return to Recycling (or
certify that it has destroyed) all copies of such data and information,
including but not limited to financial information, customer lists, business and
corporate records, worksheets, test reports, tax returns, lists, memoranda, and
other documents prepared by or made available to Ferex or any of the Ferex
Subsidiaries or any of the Control Shareholders in connection with the
transaction.
6.9 HART-SCOTT-RODINO FILINGS. Ferex and each Ferex Subsidiary shall
cooperate with the Recycling in connection with all filings ("HSR Filings")
under the HSR Act, required in connection with the transactions contemplated by
this Agreement and shall furnish all follow-up information required in
connection therewith. Each party shall pay its respective filing fees in
connection with such HSR Filings.
6.10 TAX RETURNS. Ferex and each Ferex Subsidiary shall use its best
efforts cause Ferex and each Ferex Subsidiary, in accordance with applicable
law, (i) to promptly prepare and file on or before the due date including any
extension thereof all federal, state and local tax returns required to be filed
by them with respect to any returns due (including extensions) on or before the
Closing and
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(ii) to pay all Taxes of Ferex and each Ferex Subsidiary shown on such
returns due on or before the Closing.
6.11 OPTIONS AND OTHER RIGHTS. Ferex and each Ferex Subsidiary shall
cause each person or entity which holds options, warrants or other rights or
securities exercisable for or convertible into shares of any class of equity
security of Ferex or any Ferex Subsidiary, to agree to the termination or
cancellation of such rights or securities pursuant to a written agreement in
form and substance reasonably satisfactory to the Recycling and its counsel in
exchange for the stock options to purchase 101,308 shares of Recycling Common
Stock pursuant to the Stock Option Agreement in the form of EXHIBIT M hereto.
6.12 SHAREHOLDER CONSENT. Prior to the Closing, Ferex shall obtain in
accordance with all applicable laws, rules and regulations the requisite consent
of the holders of Ferex Common Stock to approve the Transactions in accordance
with the Texas BCA.
6.13 CONSUMMATION OF AGREEMENT. Ferex and each Ferex Subsidiary shall
use its commercially reasonable efforts to perform and fulfill all conditions
and obligations on its part to be performed and fulfilled under this Agreement
to the end that the transactions contemplated by this Agreement be fully carried
out.
6.14 MCKINNEY SMELTING. Simultaneous with the Closing, Ferex shall
assign and transfer or cause to be assigned to Exchange Sub all of the capital
stock of Ferex Metals Recycling of McKinney, Inc. in exchange for such funds as
are necessary as of the Closing to consummate the asset acquisition of McKinney
Smelting, Inc. on the terms outlined in SCHEDULE 6.14.
6.15 LIABILITIES AND OBLIGATIONS. Ferex shall not incur liabilities and
obligations in excess of $14,000,000 unless the Purchase Consideration is
reduced by the amount of such excess.
6.16 SHAREHOLDER LOANS. Simultaneous with the Closing, the Control
Shareholders shall cause all shareholders and/or employees of Ferex and any
Ferex Subsidiary to repay in full all outstanding and unpaid loans including
unpaid interest thereon.
6.17 ENVIRONMENTAL REMEDIATION. Simultaneous with the Closing, the
Control Shareholders shall deliver an executed contract from an environmental
construction firm reasonably acceptable to Recycling [CONFIDENTIAL TREATMENT
REQUESTED]
6.18 LIST OF ASSETS AND LIABILITIES. Ferex shall deliver to Recycling a
detailed list of its assets and liabilities as of a date not more than seven
days prior to the Closing, certified by Ferex's chief financial officer as being
true and accurate in all material respects.
ARTICLE 7
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COVENANTS OF RECYCLING
7.1 MAKING OF COVENANTS AND AGREEMENTS. Recycling hereby makes to Ferex
and the Control Shareholders the covenant and agreements set forth in this
Article 7, and agrees to use reasonable efforts to comply with and perform all
covenants and agreements contained in this Article 7.1.
7.2 CONSENTS. Recycling shall use commercially reasonable efforts to
obtain all consents, authorizations and approvals of third parties including any
governmental authorities, regulatory agencies and other entities necessary in
connection with the consummation of the Transactions except to the extent that
the failure to obtain any of the foregoing could not have a Material Adverse
Effect on Recycling.
7.3 CONSUMMATION OF AGREEMENT. Recycling shall use its commercially
reasonable efforts to perform and fulfill all conditions and obligations on its
or his part to be performed and fulfilled under this Agreement to the end that
the transactions contemplated by this Agreement be fully carried out.
7.4 CONFIDENTIALITY. Recycling agrees that, except as may be agreed to
in writing by Ferex, Recycling and Exchange Sub, their respective officers,
directors, agents and representatives will hold in strict confidence,and will
not use, any confidential or proprietary data or information obtained from Ferex
or the Ferex Subsidiaries with respect to Ferex's or Ferex's Subsidiaries'
business or financial condition except for the purpose of evaluating,
negotiating and completing the transaction contemplated hereby. Information
generally known in Ferex's or Ferex's Subsidiaries' industry or which has been
disclosed to Recycling and Exchange Sub by third parties which have a right to
do so shall not be deemed confidential or proprietary information for purposes
of this Agreement. If the transaction contemplated by this Agreement is not
consummated, Recycling will return to Ferex (or certify that it has destroyed)
all copies of such data and information, including but not limited to financial
information, customer lists, business and corporate records, worksheets, test
reports, tax returns, lists, memoranda, and other documents prepared by or made
available to Recycling and Exchange Sub in connection with the transaction.
ARTICLE 8
CONDITIONS PRECEDENT TO THE SHARE EXCHANGE
8.1 CONDITIONS TO EACH PARTY'S OBLIGATION. The respective obligations
of each party hereto to effect the Share Exchange shall be subject to the
satisfaction as of the Closing Date of the following conditions:
(a) no material suit, action or proceeding by any third party or
governmental authority with respect to the transactions contemplated hereby
shall be pending or threatened in writing except for such suits, actions or
proceedings relating to the Dissenting Holders;
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(b) no injunction, restraining order or order of any nature
shall have been issued by any court of competent jurisdiction or any
governmental authority challenging the validity or legality of the transactions
contemplated hereby or restraining or prohibiting the consummation of such
transactions or compelling Recycling to dispose of or discontinue or materially
restrict the operations of a significant portion of the business of Ferex or any
Ferex Subsidiary, or of the business conducted by Recycling, as a result of the
consummation of the Transactions; and
(c) the waiting period, and any extension thereof, under the HSR
Act and any other applicable federal or state antitrust or fair trade law shall
have terminated or expired.
8.2 CONDITIONS TO OBLIGATIONS OF RECYCLING. The obligations of
Recycling to effect the Share Exchange and to take the other actions required to
by taken by Recycling at the Closing are subject to the satisfaction of the
following conditions (any of which may be waived by Recycling, in whole or in
part):
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Ferex and the Control Shareholders set forth in this Agreement
shall be true and correct in all material respects as of the date of this
Agreement, and as of the Closing Date as though made on and as of the Closing
Date (in each case, except to the extent such representations are by their
express provisions made as of a specified date, in which case they shall be true
and correct in all material respects as of the specified date); provided,
however, that for the purposes of determining satisfaction of this condition, no
effect shall be given to any exception in such representations and warranties to
materiality. Each of the representations and warranties of Ferex and the
Control Shareholders in Section 4.3, 4.4, 4.5 and 4.32 shall be true and correct
in all respects as of the date of this Agreement and as of the Closing Date as
if made on the Closing Date; and Recycling shall have received a certificate
signed on behalf of Ferex by the Chief Executive Officer of Ferex and by the
Shareholders Representatives on behalf of the Control Shareholders to such
effect;
(b) PERFORMANCE OF OBLIGATIONS OF FEREX AND CONTROL
SHAREHOLDERS. Ferex and the Control Shareholders shall have performed in all
material respects all obligations required to be performed by them under this
Agreement at or prior to the Closing Date, and Recycling shall have received a
certificate signed by the Chief Executive Officer of Ferex on behalf of Ferex
and the Shareholders Representatives on behalf of the Control Shareholders, to
such effect. Each document and other item required to be delivered pursuant to
Section 3.2(a) must have been delivered and each of the covenants in Section 6.3
must have been complied within all respects;
(c) THIRD PARTY CONSENTS. Recycling shall have received all
written consents, authorizations, assignments, waivers or other certificates
listed on SCHEDULE 4.19 ("Ferex Consents"), which Ferex Consents shall be in
substantially the form of EXHIBIT N;
(d) NO MATERIAL ADVERSE CHANGE. Since the Latest Balance Sheet
Date, there shall have been no change in the assets, condition (financial or
otherwise), prospects or operating results of Ferex or the Ferex Subsidiaries
which would reasonably be likely to have a Material Adverse Effect;
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(e) SHAREHOLDER APPROVAL. This Agreement and the other
Transactions shall have been approved and adopted by the affirmative vote of
the holders of not less than two-thirds of the outstanding shares of Ferex
capital stock entitled to vote thereon and otherwise as required by the Texas
BCA or the Articles of Incorporation of Ferex;
(f) LIABILITIES. Ferex's total liabilities and obligations
to the extent they exceed $14,000,000 shall cause the Purchase Consideration
to be reduced;
(g) MCKINNEY SMELTING. Ferex shall have consummated the
McKinney Smelting, Inc. acquisition on the terms outlined in SCHEDULE 6.14;
and
(h) REAL ESTATE DELIVERIES. Recycling Sub shall have
received the following:
(i) from each lessor of any of the Ferex Leased Real Property
an Estoppel Certificate in form that is acceptable to Recycling
which will include, without limitation, a waiver of all lien
rights against property of the lessee situated on the Ferex
Leased Real Property for the benefit of Recycling's lender;
(ii) surveys of the Ferex Owned Real Property being obtained by
Recycling, which surveys, at the election of Recycling, shall be
made in accordance with ALTA land survey standards and show no
encroachments, overlaps, easements or other matters which are
unacceptable to Recycling and which surveys shall, further, set
forth the applicable flood hazard designation, if any; and
(iii) commitments for title insurance on the Ferex Owned Real
Property, in amounts and with endorsements and waivers reasonably
acceptable to Recycling.
8.3 CONDITIONS OF OBLIGATIONS OF FEREX AND THE CONTROL SHAREHOLDERS.
The obligations of Ferex and the Control Shareholders to effect the Share
Exchange and to take the other actions required to be taken by Ferex and the
Control Shareholders in whole or in part, is subject to the satisfaction of the
following conditions (any of which may be waived by Ferex and the Shareholders
Representatives):
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Recycling set forth in this Agreement shall be true and correct in
all material respects as of the date of this Agreement, and as of the Closing
Date as though made on and as of the Closing Date (in each case, except to the
extent such representations are by their express provisions made as of a
specified date, in which case they shall be true and correct in all material
respects as of the specified date), and Ferex shall have received a certificate
signed on behalf of Recycling by the Chief Executive Officer of Recycling to
such effect;
(b) PERFORMANCE OF OBLIGATIONS OF RECYCLING. Recycling shall
have performed in all material respects all obligations required to be performed
by it under this Agreement at or prior
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to the Closing Date, and Ferex shall have received a certificate signed on
behalf of Recycling by the Chief Executive Officer of Recycling to such
effect;
(c) DELIVER OF OTHER CLOSING ITEMS AND DOCUMENTS. Ferex and the
Control Shareholders shall have received all payments, documents and other items
to be delivered under Section 3.2(b).
ARTICLE 9
TERMINATION AND AMENDMENT
9.1 TERMINATION. This Agreement may be terminated at any time prior to the
Closing Date, whether before or after approval of the matters presented in
connection with the Share Exchange, by Ferex or Recycling:
(a) by mutual consent of Recycling and Ferex;
(b) by Recycling, pursuant to written notice by Recycling to
Ferex and the Control Shareholders if any of the conditions set forth in
Sections 8.1 or 8.2 of this Agreement have not been satisfied at or prior to the
Closing, or if it has become reasonably and objectively certain that any of such
conditions, other than a condition within the control of Recycling, will not be
satisfied at or prior to the Closing, such written notice to set forth such
conditions which have not been or will not be so satisfied;
(c) by Ferex or the Shareholders Representatives, on behalf of
the Control Shareholders, pursuant to written notice to Recycling if any of the
conditions set forth in Sections 8.1 and 8.3 of this Agreement have not been
satisfied at or prior to the Closing, or if it has become reasonably and
objectively certain that any of such conditions, other than a condition within
the control of Ferex or the Control Shareholders, will not be satisfied at or
prior to the Closing, such written notice to set forth such conditions which
have not been or will not be so satisfied; or
(d) by Recycling or Ferex, if the Closing has not occurred on or
prior to June 30, 1998.
9.2 EFFECT OF TERMINATION. All obligations of the parties hereunder
shall cease upon any termination pursuant to Section 9.1; provided, however,
that (i) the provisions of this Article 9, Article 10, Section 6.8, Section 7.4,
Section 12.6 and Section 12.15 hereof shall survive any termination of this
Agreement; (ii) nothing herein shall relieve any party from any liability for a
failure to comply with any of its covenants, or agreements contained herein, and
(iii) the parties shall have right to proceed as further set forth in Section
9.3 below.
9.3 RIGHT TO PROCEED. Anything in this Agreement to the contrary
notwithstanding, if any of the conditions specified in Section 8.1 or 8.2 hereof
have not been satisfied, Recycling shall have the right to proceed with the
transactions contemplated hereby without waiving any of its rights hereunder,
and if any of the conditions specified in Section 8.1 or 8.3 hereof have not
been satisfied,
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Ferex and the Control Shareholders shall have the right to proceed with the
Transactions without waiving any of their rights hereunder.
ARTICLE 10
INDEMNIFICATION
10.1 INDEMNIFICATION BY THE CONTROL SHAREHOLDERS. The Control
Shareholders agree severally, in direct proportion to the relative portion of
the Purchase Consideration which each Control Shareholder receives, to
indemnify, defend and save Recycling and Exchange Sub and their respective
Affiliates and Program Affiliates, and each of their respective officers,
directors, employees, agents, employee benefit plans and fiduciaries, plan
administrators or other parties dealing with any such plans (each, a "Recycling
Indemnified Party"), harmless from and against, and to promptly pay to such
Recycling Indemnified Party or reimburse a Recycling Indemnified Party for, any
and all liabilities (whether contingent, fixed or unfixed, liquidated or
unliquidated, or otherwise), obligations, deficiencies, demands, claims, suits,
actions, or causes of action, assessments, losses, costs, expenses, interest,
fines, penalties, damages or costs or expenses of any and all investigations,
proceedings, judgments, environmental analyses, remediations, settlements and
compromises (including reasonable fees and expenses of attorneys, accountants
and other experts) and any diminution in value, whether or not involving a Third
Party Claim (individually and collectively, the "Losses") directly or indirectly
sustained or incurred by any such Recycling Indemnified Party relating to,
resulting from, arising out of or otherwise by virtue of any of the following:
(a) any misrepresentation or breach of a representation or
warranty made herein by Ferex or any of the Control Shareholders, or
non-compliance with or breach by Ferex or any of the Control Shareholders of
any of the covenants or agreements contained in this Agreement or the
Transaction Documents to be performed by Ferex or any of the Control
Shareholders or any of their Affiliates;
(b) any action, demand, proceeding, investigation or claim
(whenever made) by any third party (including governmental agencies) against
or affecting a Recycling Indemnified Party, which if successful, would give
rise to or evidence the existence of or relate to a misrepresentation or
breach of any of the representations, warranties or covenants of Ferex or any
of the Control Shareholders;
(c) any action, demand, proceeding, investigation or claim
(whenever made) by any third party against or affecting Recycling relating to
any personal injury or property damage caused, or alleged to be caused, by
any products sold by Ferex or any Ferex Subsidiary or former Ferex Subsidiary
prior to the Closing Date;
(d) any action, demand, proceeding, investigation or claim
(whenever made) by any shareholder of Ferex, including, without limitation,
any claim of a dissenting shareholder under the Texas BCA;
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(e) the litigation matters disclosed on Schedule 4.9 hereto,
net of any insurance recoveries;
(f) the failure to obtain a Certificate of Occupancy from the
City of McKinney, Texas for the property located at 300 North McDonald
Street, McKinney, Texas; and (g) any claim for payment of
fees and/or expenses as a broker or finder in connection with the origin,
negotiation, execution or consummation of this Agreement based upon any
alleged agreement between the claimant and Ferex or any Affiliate thereof.
10.2 INDEMNIFICATION BY THE CONTROL SHAREHOLDERS - ENVIRONMENTAL
MATTERS. In addition to the provisions of Section 10.1, after the Closing,
the Control Shareholders, severally, in direct proportion to the relative
portion of the Purchase Consideration which each Control Shareholder
receives, will indemnify and hold harmless Recycling Indemnified Parties for,
and will pay to Recycling Indemnified Parties the amount of, any Losses
(including costs of cleanup, containment, or other remediation) directly or
indirectly sustained or incurred by any such Recycling Indemnified Party
arising, directly or indirectly, from or in connection with:
(a) the disposal or other disposition at any location other
than the Ferex Owned Real Property or Ferex Leased Real Property, of any
hazardous materials or other contaminants, wherever located, that were, or
were allegedly, generated, transported, stored, treated, released, or
otherwise handled by Ferex or any Ferex Subsidiary or by any other Person for
whose conduct they are or may be held responsible at any time on or prior to
the Closing Date; and
(b) any bodily injury (including illness, disability, and
death, and regardless of when any such bodily injury occurred, was incurred,
or manifested itself), personal injury, property damage (including trespass,
nuisance, wrongful eviction, and deprivation of the use of real property), or
other damage of or to any Person, including any employee or former employee
of Ferex or any Ferex Subsidiary or any other Person for whose conduct they
are or may be held responsible, in any way arising from or allegedly arising
from any Hazardous Activity conducted or allegedly conducted with respect to
the Ferex Owned Real Property or Ferex Leased Real Property or the operation
of Ferex or the Ferex Subsidiaries prior to the Closing Date, or from
Hazardous Material that was (i) present or suspected to be present on or
before the Closing Date on or at the Facilities (or present or suspected to
be present on any other property, if such Hazardous Material emanated or
allegedly emanated from any of the Facilities and was present or suspected to
be present on any of the Facilities on or prior to the Closing Date) or (ii)
released or allegedly released by Ferex or any Ferex Subsidiary or any other
Person for whose conduct they are or may be held responsible, at any time on
or prior to the Closing Date.
10.3 INDEMNIFICATION BY RECYCLING. Recycling agrees to indemnify,
defend and save the Control Shareholders (each, a "Ferex Indemnified Party")
forever harmless from and against, and to promptly pay to such Ferex
Indemnified Party or reimburse such Ferex Indemnified Party for, any and all
Losses directly or indirectly sustained or incurred by any such Ferex
Indemnified Party relating to, resulting from, arising out of or otherwise by
virtue of any of the following:
(a) any misrepresentation or breach of a representation or
warranty made herein by Recycling, or non-compliance with or breach by
Recycling of any of the covenants or agreements
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contained in this Agreement or the Transaction Documents to be performed by
Recycling or any of its Affiliates;
(b) any action, demand, proceeding, investigation or claim
(whenever made) by any third party (including governmental agencies) against
or affecting Ferex and the Control Shareholders which, if successful, would
give rise to or evidence the existence of or relate to a misrepresentation or
breach of any of the representations, warranties or covenants of Recycling;
(c) any claim for payment of fees and/or expenses as a broker
or finder in connection with the origin, negotiation, execution or
consummation of this Agreement based upon any alleged agreement between the
claimant and Recycling or any of its Affiliates; and
(d) any action, demand, proceeding or claim by any party
against the Ferex Indemnified Parties or any of them relating to the business
of Ferex or any Ferex Subsidiary with respect to the period after the Closing
to the extent that any Recycling Indemnified Party is not entitled to
indemnification under this Section 10 or such Ferex Indemnified Party is not
responsible therefor under any of the Transaction Documents.
10.4 INDEMNIFICATION PROCEDURE FOR THIRD PARTY CLAIMS. In the event
that any person or entity entitled to indemnification under this Agreement
(an "Indemnified Party") asserts a claim for indemnification or receives
notice of the assertion of any claim or of the commencement of any action or
proceeding by any entity that is not a party to this Agreement or an
Affiliate of a party to this Agreement (including, but not limited to any
domestic or foreign court or governmental authority, federal, state or local)
(a "Third Party Claim") against such Indemnified Party, against which a party
to this Agreement is required to provide indemnification under this Agreement
(an "Indemnifying Party"), the Indemnified Party shall give written notice
together with a statement of any available information regarding such claim
to the Indemnifying Party within 30 days after learning of such claim (or
within such shorter time as may be necessary to give the Indemnifying Party a
reasonable opportunity to respond to such claim). The Indemnifying Party
shall have the right, upon written notice to the Indemnified Party (the
"Defense Notice") within 30 days after receipt from the Indemnified Party of
notice of such claim, which notice by the Indemnifying Party shall specify
the counsel it will appoint to defend such claim ("Defense Counsel"), to
conduct at its expense the defense against such claim in its own name, or if
necessary in the name of the Indemnified Party; provided, however, that the
Indemnified Party shall have the right to approve the Defense Counsel, which
approval shall not be unreasonably withheld, and in the event the
Indemnifying Party and the Indemnified Party cannot agree upon such counsel
within ten days after the Defense Notice is provided, then the Indemnifying
Party shall propose an alternate Defense Counsel, which shall be subject
again to the Indemnified Party's approval. If the parties still fail to
agree on Defense Counsel, then, at such time, they shall mutually agree in
good faith on a procedure to determine the Defense Counsel.
(a) In the event that the Indemnifying Party shall fail to
give the Defense Notice, it shall be deemed to have elected not to conduct
the defense of the subject claim, and in such event the Indemnified Party
shall have the right to conduct such defense in good faith and to compromise
and settle the claim without prior consent of the Indemnifying Party and the
Indemnifying Party will
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be liable for all costs, expenses, settlement amounts or other Losses paid or
incurred in connection therewith.
(b) In the event that the Indemnifying Party does deliver a
Defense Notice and thereby elects to conduct the defense of the subject
claim, the Indemnified Party will cooperate with and make available to the
Indemnifying Party such assistance and materials as it may reasonably
request, all at the expense of the Indemnifying Party, and the Indemnified
Party shall have the right at its expense to participate in the defense
assisted by counsel of its own choosing, provided that the Indemnified Party
shall have the right to compromise and settle the claim only with the prior
written consent of the Indemnifying Party, which consent shall not be
unreasonably withheld or delayed.
(c) Without the prior written consent of the Indemnified
Party, the Indemnifying Party will not enter into any settlement of any Third
Party Claim or cease to defend against such claim, if pursuant to or as a
result of such settlement or cessation, (i) injunctive or other equitable
relief would be imposed against the Indemnified Party, or (ii) such
settlement or cessation would lead to liability or create any financial or
other obligation on the part of the Indemnified Party for which the
Indemnified Party is not entitled to indemnification hereunder.
(d) The Indemnifying Party shall not be entitled to control,
and the Indemnified Party shall be entitled to have sole control over, the
defense or settlement of any claim to the extent that claim seeks an order,
injunction or other equitable relief against the Indemnified Party which, if
successful, could materially interfere with the business, operations, assets,
condition (financial or otherwise) or prospects of the Indemnified Party (and
the cost of such defense shall constitute an amount for which the Indemnified
Party is entitled to indemnification hereunder).
(e) Any judgment entered or settlement agreed upon in the
manner provided herein shall be binding upon the Indemnifying Party, and
shall conclusively be deemed to be an obligation with respect to which the
Indemnified Party is entitled to prompt indemnification hereunder.
10.5 DIRECT CLAIMS. All direct claims by an Indemnified Party against
a party hereto not arising out of Third Party Claims ("Direct Claims") shall
be subject to and benefit from the terms of this Article 10. Any Direct
Claim under this Article 10 by an Indemnified Party for indemnification other
than indemnification against a Third Party Claim will be asserted by giving
the Indemnifying Party reasonably prompt written notice thereof, and the
Indemnifying Party will have a period of 30 calendar days within which to
satisfy such Direct Claims. If the Indemnifying Party does not so respond
within such 30 calendar day period, the Indemnifying Party will be deemed to
have rejected such claim, in which event the Indemnified Party will be free
to pursue such remedies as may be available to the Indemnified Party under
this Article 10 or otherwise, at law or in equity. Any claim by an
Indemnified Party arising out of a claim by an entity that is not a party to
this Agreement or an Affiliate of a party to this Agreement shall in the
first instance be dealt with as a Third Party Claim pursuant to the
procedures set forth in Section 10.4.
10.6 FAILURE TO GIVE TIMELY NOTICE. A failure by an Indemnified Party
to give timely, complete or accurate notice as provided in Section 10.4 will
not affect the rights or obligations of any party hereunder except and only
to the extent that, as a result of such failure, any party entitled to
receive such notice was deprived of its right to recover any payment under
its applicable insurance
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coverage or was otherwise directly and materially damaged as a result of such
failure to give timely notice.
10.7 LIMITATIONS ON INDEMNITIES.
(a) THRESHOLD AND MAXIMUM LIABILITY OF THE CONTROL
SHAREHOLDERS. The Control Shareholders shall not have any liability for any
Losses for breaches of representations or warranties pursuant to Section 10.1
(a) or (b) hereof or claims under Section 10.1(c) hereof unless and until the
aggregate amount of all Losses of the Recycling Indemnified Parties accrued
pursuant to Section 10.1 (a) and (b) for breaches of representations or
warranties together with claims under Sections 10.1(c), (e) and (f) is
greater than or equal to $300,000 (the "Threshold Level"). Once such Losses
equal or exceed the Threshold Level in the aggregate, Losses in excess of the
Threshold Level for breaches of representations and warranties pursuant to
Section 10.1 (a) or (b) or claims under Sections 10.1(c),(e) and (f) hereof
shall be subject to indemnification pursuant to Section 10.1. [CONFIDENTIAL
TREATMENT REQUESTED]
(b) THRESHOLD FOR RECYCLING. Recycling shall not have any
liability for any Losses for breaches of representations or warranties
pursuant to Section 10.3 hereof unless and until the aggregate amount of all
Losses of the Ferex Indemnified Parties accrued for breaches of
representations or warranties pursuant to Section 10.3 is greater than or
equal to the Threshold Level. Once the Losses equal or exceed the Threshold
Level, Losses in excess of the Threshold Level shall be subject to
indemnification pursuant to Section 10.3.
(c) EXCEPTIONS. Notwithstanding anything to the contrary
herein, Losses arising in connection with (i) the representations and
warranties contained in Sections 4.3, 4.4 (other than the last sentence of
Section 4.4(a)), 4.5, 4.6, 4.16(i) and 4.16(m) shall not be subject to the
limitations set forth in this Section 10.7 and (ii) the representations and
warranties contained in Section 4.7 shall have a Threshold Level of $15,000.
(d) PAYMENT OF INDEMNIFICATION OBLIGATIONS. Payment of any
indemnification obligation under Section 10 shall be made by the Indemnifying
Party, by delivering to Indemnified Party cash in an amount equal to total
amount of pertinent Loss or Losses.
(e) NO CONSTRUCTION. If the Share Exchange is consummated,
the Control Shareholders shall not have, and shall hereby waive, any right
the Control Shareholders otherwise have, or may have, to make one or more
claims for contribution against Ferex or any Ferex Subsidiary with respect to
any Loss or Losses.
(f) EXCLUSION FROM INDEMNIFICATION. Notwithstanding anything
to the contrary set forth herein, no Recycling Indemnified Party shall have a
claim for indemnification against the Control Shareholders based upon any
environmental remediation conducted at Ferex Owned Real Property
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or Ferex Leased Real Property. The Environmental Escrow Amount shall be the
exclusive source of recovery for any such costs.
10.8 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS. All
representations, warranties, covenants and agreements contained herein or in
any schedule, exhibit, certificate or financial statement delivered by any
party to the other party incident to the Share Exchange shall survive the
execution and delivery of this Agreement and the Closing, notwithstanding any
investigation or due diligence inquiry made by or on behalf of the parties
hereto or their respective representatives, agents or Affiliates; provided,
however, that such representations and warranties shall expire on the same
dates as and to the extent that the rights of indemnification with respect
thereto under Section 10.9 shall expire.
10.9 TIME LIMITATION. Notwithstanding anything to the contrary
herein, no indemnification shall be payable by the Control Shareholders to a
Recycling Indemnified Party with respect to claims asserted for breach of
representations and warranties made by Ferex or the Control Shareholders
pursuant to Section 10.1 or claims under Section 10.1(c) after the date which
is 12 months after the Closing Date or by Ferex or the Control Shareholders
with respect to claims for breaches of representations and warranties
asserted pursuant to Section 10.3 after the date which is 12 months after the
Closing Date [CONFIDENTIAL TREATMENT REQUESTED] (any such date, as may be
applicable, the "Expiration Date"); PROVIDED, HOWEVER, that if on or prior to
the Expiration Date, a claim for indemnification shall have been made, then
the right to indemnification with respect to such claim shall remain in
effect without regard to when such matter shall be finally determined and
disposed of; provided further such time limitation shall not apply to Losses
resulting from breaches of representations and warranties contained in
Sections 4.3, 4.4 (other than the last sentence of Section 4.4(a)), 4.5, 4.6,
4.7, 4.16(i) and 4.16(m) or claims pursuant to Section 10.1(e) or (f).
10.10 CUMULATIVE REMEDIES. The indemnification provided for in this
Article 10 shall be the exclusive remedy for breaches of representations and
warranties under this Agreement; provided that in the case of fraud in the
making of representations and warranties, the defrauded party shall have all
remedies available at law and at equity without giving effect to any of the
limitations set forth in this Article 10.
10.11 ACCOUNTS RECEIVABLE. Upon expiration of 90 days following the
Closing Date, Recycling shall have the right to assign to the Control
Shareholders any or all of the accounts receivable of Ferex and each Ferex
Subsidiary outstanding as of the Closing Date, which have not been collected
within 90 days after the Closing. Prior to the assignment of any such
accounts receivable, Recycling 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 assignment of any such accounts receivable, to the extent not
paid, the Control Shareholders, agree that they shall reimburse Recycling
dollar-for-dollar for the accounts receivable so assigned with such payment
being made in immediately available funds.
10.12 CHARACTERIZATION OF INDEMNIFICATION. All payments made pursuant
to this Article 10 shall be deemed to be adjustments to the Purchase
Consideration.
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ARTICLE 11
THE SHAREHOLDERS REPRESENTATIVES
By executing and delivering this Agreement, the Control Shareholders
agree as follows:
11.1 AUTHORIZATION OF THE REPRESENTATIVE. Lloyd B. Fletcher and James
R. Eddings (and each successor appointed in accordance with Section 11.2
below) (the "Shareholders Representatives") hereby are appointed, authorized
and empowered to act as the Shareholders Representatives, on behalf of the
Control Shareholders, in connection with and to facilitate the consummation
of the transactions contemplated by this Agreement for the purposes and with
the powers and authority hereinafter set forth in this Article 11, which
shall include the power and authority:
(a) To execute and deliver such waivers and consents in
connection with this Agreement and the consummation of the transactions
contemplated hereby as the Shareholders Representatives, in their sole
discretion, may deem necessary or desirable;
(b) As the Shareholders Representatives of the Control
Shareholders, to enforce and protect the rights an interests of the Control
Shareholders and to enforce and protect the rights and interests of the
Shareholders Representatives arising out of or under or in any manner
relating to this Agreement the transactions provided for herein (including,
without limitation, in connection with any and all claims for indemnification
brought by any Control Shareholders under Section 10.3) and, in connection
therewith, to (i) assert any claim or institute any action, proceeding or
investigation; (ii) investigate, defend, contest or litigate any claim,
action, proceeding or investigation initiated by Control Shareholders, or any
person, firm or corporation or by any federal, state or local governmental or
regulatory authority against the Shareholders Representatives, and receive
process on behalf of any or all Control Shareholders in any such claim,
action, proceeding or investigation and compromise or settle on such terms as
the Shareholders Representatives shall determine to be appropriate, and give
receipts, releases and discharges on behalf of all of the Control
Shareholders with respect to, any such claim, action, proceeding or
investigation; (iii) file any proofs of debts, claims and petitions as the
Representatives may deem advisable or necessary; (iv) settle or compromise
any claims asserted under Article 10; (v) assume, on behalf of all of the
Control Shareholders the defense of any Third Party Claim; and (vi) file and
prosecute appeals from any decision, judgment or award rendered in any of the
foregoing actions, proceedings or investigations, it being understood that
the Control Representatives shall hot have any obligation to take any such
actions, and shall not have any liability for any failure to take any such
actions;
(c) To refrain from enforcing any right of the Control
Shareholders or any of them and/or of the Shareholders Representatives
arising out of or under or in any manner relating to this Agreement or any
other agreement, instrument or document in connection with the foregoing;
(d) To make, execute, acknowledge and deliver all such other
agreements, guarantees, orders, receipts, endorsements, notices, requests,
instructions, certificates, stock powers, letters and other writings, and, in
general, to do any and all things and to take any and all action that the
Shareholders Representatives, in its sole and absolute discretion, may
consider necessary or
50
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proper or convenient in connection with or to carry out the activities
described in paragraphs (a) through (c) above and the Transactions.
The grant of authority provided for in this Section 11.1 is coupled with
an interest and being granted, in part, as an inducement to Recycling to
enter into this Agreement and shall be irrevocable and survive the death,
incompetency, bankruptcy or liquidation of any Control Shareholder and shall
be binding on any successor thereto.
11.2 REPLACEMENT OF A SHAREHOLDERS REPRESENTATIVE; SUCCESSOR
REPRESENTATIVE; ACTION BY SHAREHOLDERS REPRESENTATIVE.
(a) If the Shareholders Representatives are unable or
unavailable to perform their duties hereunder, a successor Shareholders
Representative, who shall be a Control Shareholder or a representative of a
non-individual Control Shareholder unless such person is unable or unwilling
to accept such appointment, shall be appointed by those Control Shareholder
who on the Closing Date, held a majority of the shares of the Ferex Common
Stock owned by the Control Shareholders.
(b) Any successor Shareholders Representatives shall have all
of the authority and responsibilities conferred upon or delegated to a
Shareholders Representatives pursuant to this Article 11.
ARTICLE 12
MISCELLANEOUS
12.1 NOTICES, CONSENTS, ETC. Any notices, consents or other
communication required to be sent or given hereunder by any of the parties
shall in every case be in writing and shall be deemed properly served if (a)
delivered personally, (b) sent by registered or certified mail, in all such
cases with first class postage prepaid, return receipt requested, (c)
delivered by a recognized overnight courier service, or (d) sent by facsimile
transmission to the parties at the addresses as set forth below or at such
other addresses as may be furnished in writing.
(a) If to Ferex:
Ferex Corporation
15252 CR 1134
Tyler, Texas 75709
with a copy to:
Powell, Sweet & Coleman, L.L.P.
One Northpark East
Suite 130
8950 North Central Expressway
Dallas, Texas 75231
51
<PAGE>
Attention: John G. Peisen, Esq.
(b) If to the Control Shareholders:
Mr. Lloyd B. Fletcher
c/o Ferex Corporation
15252 CR 1134
Tyler, Texas 75709
and to:
Mr. James R. Eddings
Galt Medical Corp.
2475 Merritt Drive
Garland, Texas 75041-6146
(c) If to Recycling:
Recycling Industries, Inc.
9780 South Meridian Boulevard
Englewood, Colorado 80111
Attention: Thomas J. Wiens, Chairman and CEO
with a copy to:
Katten Muchin & Zavis
525 West Monroe Street
Suite 1600
Chicago, Illinois 60661
Attention: David A. Bronner, Esq.
Date of service of such notice shall be (w) the date such notice is
personally delivered, (x) three days after the date of mailing if sent by
certified or registered mail, (y) one day after date of delivery to the
overnight courier if sent by overnight courier or (z) the next succeeding
business day after transmission by facsimile.
12.2 SEVERABILITY. The unenforceability or invalidity of any
provision of this Agreement shall not affect the enforceability or validity
of any other provision.
12.3 AMENDMENT AND WAIVER. This Agreement may be amended, or any
provision of this Agreement may be waived, provided that any such amendment
or waiver will be binding on a party hereto only if such amendment or waiver
is set forth in a writing executed by the parties hereto. The waiver by any
such party hereto of a breach of any provision of this Agreement shall not
operate or be construed as a waiver of any other breach.
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<PAGE>
12.4 DOCUMENTS. Each party will execute all documents and take such
other actions as any other party may reasonably request in order to
consummate the transactions provided for herein and to accomplish the
purposes of this Agreement.
12.5 COUNTERPARTS. This Agreement may be executed simultaneously in
two or more counterparts, each of which shall be deemed an original but all
of which together shall constitute one and the same Agreement and shall
become effective when one or more counterparts have been signed by each of
the parties hereto and delivered to the other.
12.6 EXPENSES. Except as specifically provided herein, each of the
parties shall pay all costs and expenses incurred or to be incurred by it or
him, as the case may be, in negotiating and preparing this Agreement and in
closing and carrying out the transactions contemplated by this Agreement;
provided that (a) the fees for the environmental studies and remediation
recommendations and related costs and expenses incurred prior to Closing to
pay CBS Environmental shall be shared equally by Recycling, on the one hand,
and the holders of Ferex Common Stock, on the other hand, and (b) the title
commitments and surveys for the Ferex Owned Property described in Section
3.2(a)(xviii) shall be borne by the holders of Ferex Common Stock. All HSR
filing fees shall be paid by Recycling.
Notwithstanding the foregoing, to the extent the Shareholders' Equity as
of the Closing does not exceed $3,657,922 by an amount equal to (x) one half
of all costs and expenses incurred by Recycling in connection with its
environmental studies and remediation investigations (other than to CBS
Environmental) and (y) the fees and expenses of Ferex's legal counsel and
accounting firm with respect to the transaction (the "deficiency"), the
Control Shareholders, after being given written notice thereof, shall
promptly reimburse Recycling or Ferex, as the case may be, for the amount of
such deficiency.
12.7 CONSTRUCTION. This Agreement shall be construed and enforced in
accordance with, and all questions concerning the construction, validity,
interpretation and performance of this Agreement shall be governed by, the
laws of the State of Colorado, without giving effect to provisions thereof
regarding conflict of laws.
12.8 HEADINGS. The subject headings of Articles and Sections of this
Agreement are included for purposes of convenience only and shall not affect
the construction or interpretation of any of its provisions.
12.9 ASSIGNMENT. This Agreement will be binding upon and inure to the
benefit of the parties hereto and their respective successors and permitted
assigns, but will not be assignable or delegable by any party without the
prior written consent of the other parties except that Recycling may assign
any of its rights under this Agreement (a) to Recycling Sub and (b) any
lender of Recycling which assignment shall not relieve Recycling of its
liabilities and responsibilities hereunder.
12.10 ENTIRE AGREEMENT. This Agreement, the Preamble and all the
Schedules attached to this Agreement (all of which shall be deemed
incorporated in the Agreement and made a part hereof) and certain provisions
of the Letter of Intent between Recycling, Ferex and the Control Shareholders
set forth the entire understanding of the parties with respect to the subject
matter hereof, and shall not be modified or affected by any offer, proposal,
statement or representation, oral or written, made
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by or for any party in connection with the negotiation of the terms hereof,
and may be modified only by instruments signed by all of the parties hereto.
12.11 THIRD PARTIES. Nothing herein expressed or implied is intended or
shall be construed to confer upon or give to any person or entity, other than
the parties to this Agreement and their respective permitted successors and
assigns, any rights or remedies under or by reason of this Agreement.
12.12 INTERPRETATIVE MATTERS. Unless the context otherwise requires,
(a) all references to Articles, Sections or Schedules are to Articles,
Sections or Schedules in this Agreement, (b) each accounting term not
otherwise defined in this Agreement has the meaning assigned to it in
accordance with GAAP, and (c) words in the singular or plural include the
singular and plural and pronouns stated in either the masculine, the feminine
or neuter gender shall include the masculine, feminine and neuter.
12.13 NO STRICT CONSTRUCTION. The language used in this Agreement will
be deemed to be the language chosen by the parties hereto to express their
mutual intent, and no rule of strict construction will be applied against any
party hereto.
12.14 CONSENT TO JURISDICTION. Solely for the purpose of allowing a
party to enforce its rights hereunder, each party hereby consents to personal
jurisdiction service of process and venue in federal or state courts in the
State of Colorado.
12.15 PUBLICITY AND DISCLOSURES. No press releases or public
disclosure, either written or oral, of the transactions contemplated by this
Agreement, shall be made by any party to this Agreement without the prior
knowledge ad written consent of Recycling, on the one hand, and Ferex and the
Control Shareholders, on the other hand.
12.16 FURTHER ASSURANCES. Each of the parties hereto hereby agrees to
take or cause to be taken such further actions, to execute, deliver and file
or cause to be executed delivered and filed, such further documents and
instruments, and to obtain such consents, as may be reasonably requested in
order to fully effectuate the purposes, terms and conditions of this
Agreement, whether before, at or after the Closing.
12.17 REMEDIES. Each of the parties to this Agreement acknowledges and
agrees that remedies at law may be inadequate with respect to any breach of
any provision of this Agreement. Each of the parties hereto shall be
entitled to enforce the terms and provisions of this Agreement by a decree of
specific performance or injunctive relief requiring the fulfillment of
obligations under this Agreement in addition to all other remedies provided
hereunder or available to the parties at law or in equity.
[Intentionally Left Blank]
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IN WITNESS WHEREOF, the parties have executed this Agreement and Plan of
Share Exchange as of the date first written above.
Dated: May 28, 1998 FEREX CORPORATION
/s/ Lloyd B. Fletcher
---------------------------------------
By: Lloyd B. Fletcher
Its: President
Dated: May 28, 1998 RECYCLING INDUSTRIES, INC.
/s/ Thomas J. Wiens
---------------------------------------
By: Thomas J. Wiens
Its: Chairman and CEO
CONTROL SHAREHOLDERS:
Dated: May 28, 1998 /s/ Lloyd B. Fletcher
---------------------------------------
Lloyd B. Fletcher
Dated: May 28, 1998 /s/ James R. Eddings
---------------------------------------
James R. Eddings
KIAM INVESTMENTS, LTD., a Texas Limited
Partnership
Dated: May 28, 1998 /s/ James R. Eddings
---------------------------------------
By: James R. Eddings
Its: Sole General Partner
55
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LIST OF EXHIBITS
<TABLE>
<S> <C>
Exhibit A List of Control Shareholders
Exhibit B Form of Texas Articles of Share Exchange
Exhibit D Form of Environmental Escrow Agreement
Exhibit G-1 Form of Indemnity Consideration Escrow Agreement
Exhibit G-2 Form of Shareholders Agreement
Exhibit H Form of Opinion of Ferex's and Control Shareholders' Counsel
Exhibit I-1-4 Forms of Employment Agreements
Exhibit J Form of General Release
Exhibit K-1-5 Forms of Non-Competition Agreements
Exhibit L Form of Opinion of Recycling's Counsel
Exhibit M Stock Option Agreement
Exhibit N Third Party Consents
</TABLE>
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LIST OF SCHEDULES
<TABLE>
<S> <C>
Schedule 3.2(a)(xi) List of Non-Control Shareholders Executing Employment
Agreements
Schedule 4.3(a) Ferex Capitalization and Voting Agreements
Schedule 4.3(b) Liens
Schedule 4.4(a) Ferex Subsidiaries
Schedule 4.4(b) Acquisition Rights
Schedule 4.6 Approvals
Schedule 4.8(a) Ferex Owned Real Property
Schedule 4.8(b) Ferex Leased Real Property
Schedule 4.8(c) Ferex Personal Property
Schedule 4.9 Ferex Litigation
Schedule 4.10 Ferex Employee Programs
Schedule 4.11 Interest of Ferex in Customers
Schedule 4.12(a) Ferex Financial Statements and List of Year End Adjustments
Schedule 4.12(b) Ferex Liabilities
Schedule 4.12(c) Ferex Financial Projections
Schedule 4.14 Ferex Accounts Receivable
Schedule 4.15 Ferex Inventories
Schedule 4.16 Absence of Certain Changes
Schedule 4.17 Ferex Material Contracts
Schedule 4.18 Ferex Insurance Policies
Schedule 4.19 Approvals and Consents
Schedule 4.20 Ferex Bank Relationships
Schedule 4.21 Ferex Permits
Schedule 4.22 Ferex Environmental Matters
Schedule 4.23 Ferex Proprietary Rights
Schedule 4.26 Ferex Related Party Transactions
Schedule 4.27 Brokers
Schedule 4.28 Ferex Severance Arrangements
Schedule 4.29 Ferex Directors, Officers and Key Employees
Schedule 4.30 Ferex Suppliers
Schedule 4.31 Ferex Customers
Schedule 6.14 Ferex Acquisition of McKinney Smelting, Inc.
</TABLE>
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<PAGE>
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is made and entered
into as of this 15th day of April, 1998, by and among MCKINNEY SMELTING, INC.,
a Texas corporation ("McKinney Smelting"), and BENJAMIN L. SMITH, the
principal shareholder of Seller ("Smith) (McKinney Smelting and Smith shall
be referred to collectively as "Sellers"), and FEREX METALS RECYCLING OF
MCKINNEY, INC., a Texas corporation ("Purchaser").
WHEREAS, Sellers are engaged in the operation of a scrap metal
collection yard located in McKinney, Collin County, Texas (the "Collection
Facility"); and
WHEREAS, Purchaser desires to acquire from Sellers and Sellers have
agreed to sell to Purchaser the Collection Facility and the assets used by
Sellers in connection with the operation thereof;
NOW, THEREFORE, in consideration of the premises, the mutual covenants
herein contained, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE 1
GENERAL
1.1 DEFINITIONS. Unless otherwise stated in this Agreement, the
following terms shall have the following meanings (the following definitions
to be equally applicable to both the singular and plural forms of any of the
terms herein defined):
"AFFILIATE": Any Person that, directly or indirectly, controls, or is
controlled by or under common control with, another Person. For the purposes
of this definition, "control" (including the terms "controlled by" and "under
common control with"), as used with respect to any Person, means the power to
direct or cause the direction of the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities or
by contract or otherwise.
"AGREEMENT": As defined in the first paragraph hereof.
"ASSETS": As defined in Section 1.2(a).
"BALANCE SHEETS": As defined in Section 2.1(c).
"BUSINESS": the business of operating the Collection Facility.
<PAGE>
"CLAIM": As defined in Section 6.2(a).
"CLOSING": As defined in Section 3.1.
"CLOSING DATE": As defined in Section 3.1.
"CODE": The Internal Revenue Code of 1986, as amended.
"CUSTOMER DATA": All of Sellers' customer lists, sales records and other
customer data (including credit data) relating to the Business.
"DAMAGES": As defined in Section 6.1(a).
"EFFECTIVE TIME OF CLOSING": As defined in Section 3.2.
"EMPLOYEES": Officers or employees of Sellers who perform services to,
in the name of, or on behalf of the Business.
"ENVIRONMENTAL LAWS": Any applicable federal, state, or local laws,
rules, regulations, codes or orders, and any judicial or administrative
interpretations thereof, including any judicial or administrative
interpretations thereof relating to pollution, protection of the environment,
public health and safety, air emissions, water discharges, hazardous or toxic
substances, solid or hazardous waste or occupational health and safety, as
any of these terms are or may be defined in such statutes, laws, rules,
regulations, codes, orders, rulings or ordinances, or judicial or
administrative interpretations thereof, including, without limitation, the
United States Department of Transportation Table (49 CFR 172, 101) or by the
Environmental Protection Agency, as hazardous substances (40 CFR Part 302)
and any amendments thereto; the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended by the Superfund Amendment
and Reauthorization Act of 1986, 42 U.S.C. Section 9601, et seq. (hereinafter
collectively "CERCLA"); the Solid Waste Disposal Act, as amended by the
Resource Conversation and Recovery Act of 1976 and subsequent Hazardous and
Solid Waste Amendments of 1984, 42 U.S.C. Section 6901 et seq.; the Hazardous
Materials Transportation Act, as amended, 49 U.S.C. Section 1801, et seq.;
the Clean Water Act, as amended, 33 U.S.C. Section 1311, et seq.; the Clean
Air Act, as amended (42 U.S.C. Section 7401-7642); the Toxic Substance
Control Act, as amended, 15 U.S.C. Section 2601 et seq.; the Federal
Insecticide, Fungicide, and Rodenticide Act as amended, 7 U.S.C. Section
136-13y; the Emergency Planning and Community Right-to-Know Act of 1986 as
amended, 42 U.S.C. Section 11001, et seq. (Title III of SARA); the
Occupational Safety and Health Act of 1970, as amended, 29 U.S.C. Section
651, et seq.; or any similar state statute.
"EQUIPMENT": As defined in Section 1.2(b)(2).
"ERISA": Employee Retirement Income Security Act of 1974, as amended.
-2-
<PAGE>
"ERISA AFFILIATE": Any corporation or trade or business which is a
member of the same controlled group of corporations (within the meaning of
Section 414(b) of the Code) as Seller or is under common control (within the
meaning of Section 414(c) of the Code) with Sellers.
"FINANCIAL STATEMENTS": As defined in Section 2.1(c).
"GENERAL CONVEYANCE, TRANSFER AND ASSIGNMENT": As defined in Section 1.6.
"GOVERNMENTAL BODY": Any court or any federal, state, municipal or
other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign.
"HOLD-BACK AMOUNT": As defined in Section 1.4(b).
"INDEMNITEES": "PURCHASER INDEMNITEES," as defined in Section 6.1(a),
or "Sellers Indemnitees," as defined in Section 7.1(b), as the context shall
require.
"INDEMNITOR": As defined in Section 6.2.
"INTANGIBLE ASSETS": As defined in Section 1.2(b)(4).
"INVENTORIES": As defined in Section 1.2(b)(5).
"LICENSES": As defined in Section 2.1(n)(2).
"LEASE": The lease agreement between Purchaser and the owner of the
Collection Facility, the form of which is attached hereto as EXHIBIT "A".
"LIEN": All mortgages, deeds of trust, liens, security interests,
pledges, leases, conditional sale contracts, judgment liens, claims, rights
of first refusal, options, liabilities, obligations, agreements, easements,
rights-of-way, reservations, restrictions or other encumbrances of any kind,
whether created under contract or arising as a matter of law.
"MATERIAL ADVERSE EFFECT": "Material Adverse Effect" means (a) any
change or effect in the business, results of operations, condition (financial
or otherwise), properties, assets, liabilities or prospects which change (or
effect), individually or in the aggregate, is materially adverse to such
condition, business, results of operations, properties, assets, liabilities
or prospects.
"OPERATIVE DOCUMENTS": This Agreement and all other agreements,
instruments, documents and certificates executed and delivered by or on
behalf of Sellers or Purchaser at or before the Closing pursuant to this
Agreement.
-3-
<PAGE>
"PBGC": The Pension Benefit Guaranty Corporation.
"PERMITS": All permits, authorizations, licenses or approvals,
necessary for Sellers' conduct of the Business.
"PERMITTED ENCUMBRANCES": (a) Liens for current taxes and assessments
not yet due and payable, and (b) such liens, minor imperfections of title, or
easements on real property, leasehold estates, or personalty as do not in any
material respect detract from the value thereof and do not interfere with the
present use of the property subject thereto.
"PERSON": An individual, partnership, joint venture, corporation, bank,
trust, unincorporated organization or a Governmental Body.
"PLAN": Any employee benefit or other plan established or maintained by
Borrower or any ERISA Affiliate and which is covered by Title IV of ERISA.
"PURCHASE PRICE": As defined in Section 1.3(a).
"PURCHASER": As defined in the opening paragraph of this Agreement.
"PURCHASER INDEMNITEES": As defined in Section 6.1(a).
"RECORDS": As defined in Section 1.2(b)(6).
"REPORTABLE EVENT": Any of the events set forth in Section 4043 of ERISA.
"SELLERS": As defined in the opening paragraph of this Agreement.
"SELLERS INDEMNITEES": As defined in Section 6.1(b).
"SETTLEMENT AGREEMENT(S)": The Agreement and Covenant Not to Sue
entered into by and among Ferex Metals Recycling of McKinney, Inc., The
United States Department of Justice, The Environmental Protection Agency and
the agreement with the Texas Natural Resource Conservation Commission
regarding breaches of the Environmental Laws.
"STATEMENT OF WORK": The Statement of Work attached to the Settlement
Agreement that sets forth the actions required to remedy environmental
contamination at and around the Collection Facility.
"SUPPLIER DATA": All of Sellers' supplier lists and other supplier data
relating to the purchase of scrap metal, raw materials, utilities and other
supplies used in connection with the Business.
-4-
<PAGE>
"TRANSACTION": The sale and purchase of the Assets contemplated by this
Agreement.
1.2 AGREEMENT TO PURCHASE AND SELL.
(a) SALE OF ASSETS. On and subject to the terms and conditions of
this Agreement, Sellers hereby agree to sell, convey, transfer, assign and
deliver to Purchaser, and Purchaser hereby agrees to purchase from Sellers,
the assets, rights, franchises and properties described in Section 1.2(b)
(all such assets, rights, franchises and properties being herein collectively
referred to as the "Assets" and individually referred to as an "Asset") free
and clear of all Liens other than Permitted Encumbrances.
(b) TRANSFERRED ASSETS. The Assets shall consist of the assets,
rights, and properties described in the following clauses (1) through (8):
(1) VEHICLES. All the trucks, trailers and other certificated
vehicles described in EXHIBIT B attached hereto and made a part hereof (the
"Vehicles").
(2) EQUIPMENT. All furniture, equipment, machinery, apparatus,
tools, spare parts, computer equipment and supplies and all other tangible
personal property of every kind and description (other than the Vehicles
and the Inventories) located either on the Property or elsewhere insofar as
any of the foregoing relates to or is used in connection with the Business
(the "Equipment"). The Equipment includes, without limitation, all of the
items owned by Sellers listed in EXHIBIT C attached hereto and made a part
hereof and all the items leased by Sellers for use in the Business listed
on EXHIBIT C-1.
(3) PERMITS. All right, title and interest of Sellers in, to
and under all Permits relating to the Business or all or any of the Assets
to the extent that such rights are assignable by Sellers.
(4) INTANGIBLE ASSETS. All right, title and interest of Sellers
in, to and under all trade names, service marks, logos, trade secrets,
Customer Data, Supplier Data designs, rights and privileges related to or
used in the conduct of the Business, including all of Sellers' rights in
the names "McKinney Smelting, Inc.", "McKinney Metals, Inc." and "Mckinney
Junk Company", including any right to recover for the infringement thereof
(past or present) and any and all goodwill and going concern value
associated with the Business. All guaranties, warranties, indemnities and
similar rights in favor of Sellers with respect to any Asset (collectively,
the "Intangible Assets").
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(5) INVENTORIES. All of Sellers' inventories of scrap metal
located either at the Collection Facility or elsewhere (the
"Inventories").
(6) BOOKS AND RECORDS. All of Sellers' books, records, papers
and instruments of whatever nature and wherever located that relate to the
Business or the Assets or which are required or necessary in order for
Purchaser to conduct the Business from and after the Effective Time of
Closing in the manner in which it is presently being conducted, including,
without limitation, plats, maps, surveys, building and machinery diagrams,
accounting and financial records, maintenance records, personnel and labor
relations records, environmental records and reports, sales and property
tax records and returns, sales records, the Customer Data and the Supplier
Data, but excluding income tax records and returns and corporate minute
books and stock records (the "Records").
(7) TELEPHONE NUMBERS; POST OFFICE BOXES. The right to use all
telephone numbers and Post Office Boxes currently used in the Business.
(8) OTHER PROPERTY. All other or additional privileges, rights,
interests, properties and assets of Sellers of every kind and description
and wherever located that are used or intended for use in connection with,
or that are necessary to the continued conduct of, the Business as
presently being conducted, other than the Excluded Assets.
(c) EXCLUDED ASSETS. The following assets (the "Excluded Assets")
shall be excluded from the assets conveyed to Sellers:
(i) cash and cash equivalents; and
(ii) all accounts receivable of Sellers; and
(iii) the real property of Sellers.
1.3 PURCHASE PRICE. The purchase price for the Assets (the "Purchase
Price") shall be the sum of $2,940,000.
1.4 PAYMENT OF PURCHASE PRICE. The Purchase Price shall be payable to
Sellers as follows:
(a) PAYMENT OF ADVANCES BY PURCHASER'S AFFILIATES. The Purchase
Price shall be reduced by the amount of any advances made to Sellers by
Purchaser or its Affiliates prior to the Closing and any interest accrued on
said advances.
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(b) ESTIMATED COSTS OF PERFORMING STATEMENT OF WORK. The Purchase
Price shall be reduced by $600,000, the amount reasonably estimated by
Purchaser's contractors as the cost of completing the remediation plan
described in the Statement of Work (the "Holdback Amount"). In the event
that the actual cost of completing the remedial measures specified in the
Statement of Work is less than the Holdback Amount, the excess shall be paid
to Sellers.
(c) DISCHARGE OF LIENS OR ACQUISITION OF SECURED DEBT. The
Purchase Price shall be reduced by the amounts owed to the Sellers' creditors
holding Liens against the Assets in connection with securing the release of
such Liens or the acquisition of the debt underlying such Liens by the
Purchaser on or before the Closing.
(d) DIRECT PAYMENT OF CERTAIN TRADE CREDITORS. At or prior to
Closing, Purchaser shall have the right to apply portions of the Purchase
Price directly to the payment of amounts owed to unsecured creditors of
Seller, if, in the reasonable judgment of Purchaser, the failure to pay such
creditors would have a material adverse effect on the continuing business of
the Collection Facility. Such creditors shall include, without limitation,
those creditors listed on SCHEDULE 1.4(d) hereof.
(e) NET AMOUNT TO SELLERS. The balance of the Purchase Price
shall be paid to Sellers at the Closing in cash.
1.5 NO ASSUMPTION OF LIABILITIES. EXCEPT WITH RESPECT TO ANY CONTRACTS
SPECIFICALLY ASSUMED BY PURCHASER, AND LISTED ON EXHIBIT I-1 HEREOF,
PURCHASER DOES NOT ASSUME OR AGREE TO PAY, PERFORM OR DISCHARGE, AND SHALL
NOT BE RESPONSIBLE FOR, ANY LIABILITIES OR OBLIGATIONS OF SELLERS, WHETHER
ACCRUED, ABSOLUTE, CONTINGENT OR OTHERWISE.
1.6 INSTRUMENTS OF TRANSFER; FURTHER ASSURANCES. In order to
consummate the transactions contemplated hereby, at the Closing Sellers shall
execute and deliver to Purchaser a completed General Conveyance, Transfer and
Assignment, in the form attached hereto as EXHIBIT D and made a part hereof
("General Conveyance, Transfer and Assignment"), covering all of the Assets
and a Lease in the form of EXHIBIT A hereto. At the Closing, and at all
times thereafter as may be necessary, Sellers shall execute and deliver to
Purchaser such other instruments of transfer as shall be reasonably necessary
or appropriate to vest in Purchaser good and indefeasible title to the Assets
and to comply with the purposes and intent of this Agreement.
1.7 VALUE ASSIGNED TO THE ASSETS. The proportion of the consideration
to be allocated to each of the Assets purchased pursuant to this Agreement
shall be set forth in EXHIBIT E to be appended to this Agreement; provided,
however, that the value of inventory shall be agreed to be $150,000.
Purchaser and Sellers agree that they
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will not take any position or action inconsistent with such allocation in the
filing of any federal income tax returns.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
2.1 REPRESENTATIONS AND WARRANTIES OF SELLERS. Sellers hereby jointly
and severally represent and warrant to Purchaser that the following are true
and correct on and as of the date of this Agreement and will be true and
correct through the Effective Time of Closing as if made on and as of that
date:
(a) CORPORATE STATUS OF SELLER. McKinney Smelting is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Texas and is qualified to transact business and is in
good standing as a foreign corporation in the jurisdictions where it is
required to qualify in order to conduct its business as presently conducted.
McKinney Smelting has the corporate power and authority to own, lease or
operate all properties and assets now owned, leased or operated by it and to
carry on its business as now conducted. McKinney Smelting has heretofore
delivered to Purchaser complete and correct copies of its Articles of
Incorporation and Bylaws, as amended and in effect on the date hereof.
(b) CONSENTS, AUTHORIZATIONS AND BINDING EFFECT.
(1) Sellers may execute, deliver and perform this Agreement
(including without limitation execution, delivery and performance of the
Operative Documents to which Sellers are a party) without the necessity of
Sellers obtaining any consent, approval, authorization or waiver or giving
any notice or otherwise, except for such consents, approvals,
authorizations, waivers and notices which have been obtained and are
unconditional and are in full force and effect.
(2) McKinney Smelting has the corporate power to enter into this
Agreement and to carry out its obligations hereunder. This Agreement has
been duly authorized, executed and delivered by Sellers and constitutes the
legal, valid and binding obligation of Sellers, enforceable against them in
accordance with its terms, except as may be limited by bankruptcy,
reorganization, fraudulent conveyance, insolvency and similar laws of
general application relating to or affecting the enforcement of rights of
creditors and subject to general principles of equity.
(3) The execution, delivery and performance of this Agreement by
Sellers does not and will not:
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(i) constitute a violation of the Articles of
Incorporation, as amended, or Bylaws, as amended of McKinney Smelting,
(ii) result in any Lien against the Assets,
(iii) constitute a violation of any statute, judgment,
order, decree or regulation or rule of any Governmental Body
applicable or relating to Sellers or the Assets or the Business, or
(iv) [RESERVED]
(4) Without limiting the foregoing, the execution, delivery and
performance of the Operative Documents, and consummation of the
transactions contemplated thereby, have been duly authorized and approved
by the Board of Directors and the shareholders of Sellers entitled to vote
on the Transaction.
(c) FINANCIAL STATEMENTS, ETC. Sellers have delivered to
Purchaser balance sheets of the Business as of December 31, 1995 and December
31, 1996 (the "Balance Sheets") and operating statements for the calendar
years 1995 and 1996 (together with related notes and schedules) (such Balance
Sheets and operating statements and the related notes and schedules being
hereinafter together referred to as the "Financial Statements"). The
Financial Statements have been prepared from the books and records of Sellers
on a basis consistent with preceding years and throughout the periods
involved and present fairly the financial position of the Business as of the
respective balance sheet dates and the results of operations for the periods
covered thereby.
Sellers' books of account have been kept accurately in all material
respects in the ordinary course of business, the transactions entered therein
represent bona fide transactions, and the revenues, expenses, assets and
liabilities of Sellers have been properly recorded in such books in all
material respects.
(d) TITLE AND CONDITION OF ASSETS. Except for the Liens set forth
on Exhibit F hereto (which exhibit sets forth the Liens against Sellers'
Assets, the holders of such Liens and the amounts owed to the holders of such
Liens), Sellers have good and indefeasible title to the tangible and
intangible personal property owned by it that comprise the Assets, free and
clear of Liens, other than Permitted Encumbrances.
To Sellers' knowledge except for the possible encroachment of a
fence on property owned by the Texas Department of Transportation, no
improvement or
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structure on any real property owned by Sellers encroaches on any adjacent
property. No improvement or structure on any real property owned or used by
Sellers has been damaged by any casualty or act of God, or been subject to
any condemnation proceedings which, individually or in the aggregate, would
have a Material Adverse Effect.
The tangible Assets (i) are in good operating condition and repair,
subject to ordinary wear and tear (taking into account the age of the
Equipment), and have been maintained in accordance with standard industry
practice, (ii) are capable of being used in the Business as presently being
conducted without present need for repair or replacement except in the
ordinary course of the Business and (iii) conform in all material respects
with all applicable legal requirements.
Since the date of the December 31, 1996 Balance Sheet, Sellers have
not sold, transferred, leased, distributed or otherwise disposed of any of
its assets, or agreed to do so, except in the ordinary course of business.
The Assets constitute all material assets and properties, real,
personal, tangible and intangible, that are necessary for the continued
conduct of the Business as conducted by Sellers prior to February 18, 1998.
(e) INSURANCE. Exhibit G attached hereto contains a list of all
policies of insurance maintained as of the date of this Agreement by Sellers
(the "Insurance Policies").
(f) LITIGATION AND COMPLIANCE WITH LAWS, ETC. Except as disclosed
on EXHIBIT H hereto, there are no claims, actions, suits or proceedings,
whether in equity or at law, or any governmental or administrative
investigations pending or, to the knowledge of Sellers, threatened against
Sellers or any Asset, except (1) for any claims, actions, suits or
proceedings which pertain to routine claims by Persons other than
Governmental Bodies that are covered by insurance (subject to the applicable
insurance deductibles), and (2) for other claims, actions, suits, or
proceedings which, individually or in the aggregate, would not have, if
prosecuted to judgment against Sellers or their Assets, a Material Adverse
Effect.
As of the date of this Agreement,
(1) Except with respect to the Environmental Laws, to Sellers'
knowledge the Business is in compliance in all material respects with, have
conducted and does conduct its business and operations in compliance with,
and is not in default or violation in any respect under any law,
regulation, writ, injunction, decree or order applicable to Sellers or the
Assets, including without limitation all safety and health, labor, equal
employment opportunity or employment discrimination laws, rules and
regulations, and
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(2) except as otherwise disclosed in writing to Purchaser, there
are no judgments outstanding and unsatisfied against Sellers or the Assets,
and
(g) ERISA. Sellers do not have and have never adopted any ERISA
Plans.
(h) COLLECTION FACILITY.
(1) Except with respect to the violations of Environmental Laws
previously disclosed to Purchaser in writing, to Sellers' knowledge the
real property on which the Collection Facility is located does not violate
any provisions of any applicable building code, fire, health or safety
regulations, or other governmental ordinances, orders or regulations. No
condition exists with respect to the Collection Facility which would
prevent, or require repair or modification thereof as a prerequisite to,
Purchaser using the Real Property in the ordinary conduct of the Business
except with respect to ordinary wear and tear and scheduled maintenance
and repair. Except for the OSHA report dated ______________, Sellers have
received no notice of noncompliance with any building code, fire, health or
safety regulations.
(2) The zoning classification of the real property on which the
Collection Facility is located is such that the Collection Facility may be
used as currently used in the Business.
(3) Except as otherwise disclosed to Purchaser in writing, there
are no parties in possession of any portion of the real property on which
the Collection Facility is located as lessees, tenants at sufferance or
trespassers.
(4) There is no pending or threatened condemnation or similar
proceeding or assessment affecting the real property on which the
Collection Facility is located, or any part thereof, nor to the best
knowledge and belief of Sellers is any such proceeding or assessment
contemplated by any Governmental Body.
(5) Except with respect to violations of the Environmental Laws
previously disclosed to Purchaser in writing, Sellers have complied with
all applicable laws, ordinances, regulations, statutes, rules and
restrictions relating to the Real Property, or any part thereof, to the
extent that any noncompliance would have a Material Adverse Effect.
(6) There are water, sewer, and electricity lines to the Real
Property which are available for "tap in" by Purchaser and which are
sufficient
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for service on the Real Property with respect to the ordinary conduct of
the Business.
(7) The real property on which the Collection Facility is
located has full and free access to and from public highways, streets or
roads and, to the best knowledge and belief of Seller, there is no pending
or threatened proceeding by any Governmental Body which would impair or
result in the termination of such access.
(i) ABSENCE OF CERTAIN CHANGES, ETC. Since December 31, 1996 Sellers
have
(1) not entered into any transaction or contract with any party
other than Purchaser, or amended or terminated any transaction or contract,
except normal transactions or contracts consistent in nature and scope with
prior practices and entered into in the ordinary course of business,
(2) not mortgaged, sold, leased, transferred, distributed or
otherwise disposed of any of its material Assets, except in the ordinary
course of business,
(3) not experienced any material damage, destruction or loss to
or of any of its material Assets except in the ordinary course of business
and except to the extent that any Asset damaged, destroyed or lost has been
repaired or replaced,
(4) incurred any material capital expenditures,
(5) not made or agreed to make any change in the compensation
payable to any Employee, except for increases in compensation in the
ordinary course of business substantially consistent with past practices
of Sellers, or
(6) not granted credit to any customer on terms materially more
favorable than the terms on which credit has been extended to such customer
in the past.
(j) SUBSIDIARIES. There is no corporation, partnership, joint
venture, business trust or other legal entity in which Sellers, either
directly or indirectly through one or more intermediaries, owns or holds
beneficial or record ownership of at least a majority of the outstanding
voting shares.
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(k) MATERIAL CONTRACTS, ETC. EXHIBIT I attached hereto and made a
part hereof lists all contracts, agreements and instruments material to the
Business of Sellers except the following:
(1) employment agreements terminable at will and contracts for
miscellaneous services terminable at will without the payment of any
penalty,
(2) purchase orders and contracts with suppliers and customers
entered into in the ordinary course of business that relate to a single
transaction or that can be terminated by either party upon notice, and
(3) miscellaneous contracts, agreements and instruments (with
Persons unaffiliated with Sellers) involving liabilities under all such
contracts, leases, agreements and instruments of not more than $10,000 in
the aggregate.
Sellers have heretofore delivered, or made available, to Purchaser or its
counsel complete copies of all contracts, agreements and instruments listed
on EXHIBIT I.
Sellers are not parties to any agreement, contract or covenant
limiting the freedom of Sellers or any party contracting with Sellers from
competing in any line of business or with any Person in any geographic area.
(l) LICENSES AND PERMITS. [RESERVED]
(m) ABSENCE OF CERTAIN BUSINESS PRACTICES. Neither Sellers nor
any officer, employee or agent of McKinney Smelting, nor any other Person
acting on behalf of Sellers, has, directly or indirectly, within the past
five years, given or agreed to give any gift or similar benefit to any
customer, supplier, government employee or other Person who is or may be in a
position to help or hinder the business of Sellers (or to assist Sellers in
connection with any actual or proposed transaction) which (1) might subject
Sellers to any damage or penalty in any civil, criminal or governmental
litigation or proceeding, (2) if not given in the past, might have had a
Material Adverse Effect on the assets, business or operations of Sellers as
reflected in its December 31, 1996 financial Statements, or (3) if not
continued in the future, might materially adversely effect the assets,
business operations or prospects of Sellers or which might subject Sellers to
suit or penalty in a private or governmental litigation or proceeding.
(n) ENVIRONMENTAL MATTERS. Sellers have no knowledge of facts
that would give rise to violations of the Environmental Laws that have not
been disclosed to Purchaser and the appropriate Governmental Bodies.
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(o) NO COLLECTIVE BARGAINING AGREEMENT. There are no collective
bargaining agreements in place for any employees at the Collection Facility.
No labor unions represent, purport to represent or attempt to represent any
employees in the operation of the Business.
(p) TAXES.
(1) Sellers have (or by the closing or within thirty (30) days
after Closing will have) duly and timely filed all tax returns relating to
the Business with respect to any federal income, ad valorem, payroll,
healthcare, withholding, or other similar tax, duty or other governmental
charge, and Seller have paid all such taxes, duties and charges and
assessments thereof or deficiencies therein (including all interest and
penalties thereon) (collectively, "Taxes"), except for Taxes set forth on
EXHIBIT J hereof. Except as otherwise set forth on EXHIBIT J all Taxes
required to be withheld by, or on behalf of Sellers in connection with
amounts paid or owing to any employee, independent contractor, creditor or
other party with respect to the Business (withholding taxes) have been
withheld, and such withheld taxes have either been duly and timely paid to
the proper governmental authorities or set aside in accounts for such
purpose.
(2) Except as otherwise disclosed to Purchaser, no agreement
or other document extending or having the effect of extending the period
of assessment or collection of any Taxes, and no power of attorney with
respect to any such Taxes has been filed with the Internal Revenue
Service or any other governmental authority.
(3) Purchaser will not be required to deduct and withhold any
amount pursuant to Section 1445(a) of the Code upon the transfer of the
Business to such Purchaser.
(4) Except as otherwise set forth on EXHIBIT H, there is no
litigation or administrative appeal pending or to the best knowledge of
Sellers, threatened against or relating to Seller in connection with any
Taxes.
(q) ABSENCE OF UNDISCLOSED LIABILITIES. Sellers have no
liabilities or obligations of any nature, whether known or unknown, absolute,
accrued, contingent or otherwise and whether due or to become due, arising
out of or relating to the Business except (i) as set forth on EXHIBIT K
hereto, (ii) as and to the extent disclosed or reserved against in the
Balance Sheets (excluding the notes thereto) and (iii) liabilities and
obligations that (A) that were incurred after the date of the Balance Sheets
in the ordinary course of business consistent with prior practice, (B)
individually and in the aggregate are not material to the Business and have
not had or
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resulted in, and will not have or result in, a material adverse affect on the
Business, and (C) interest accrual on Sellers' indebtedness.
2.2 REPRESENTATIONS AND WARRANTIES OF PURCHASER. Purchaser represents
and warrants to Sellers that the following are true and correct on and as of
the date of this Agreement and will be true and correct through the Effective
Time of Closing as if made on and as of that date:
(a) CORPORATE STATUS OF PURCHASER. Purchaser is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Texas and is qualified to transact business and is in good standing
as a foreign corporation in the jurisdictions where it is required to qualify
in order to conduct its business as presently conducted. Purchaser has the
corporate power and authority to own, lease or operate all properties and
assets now owned, leased or operated by it and to carry on its businesses as
now conducted.
(b) CONSENTS, AUTHORIZATIONS AND BINDING EFFECT.
(1) Purchaser may execute, deliver and perform this Agreement
without the necessity of Purchaser obtaining any consent, approval,
authorization or waiver, except for consents, approvals, authorizations and
waivers which have been obtained and are unconditional and are in full
force and effect.
(2) The execution, delivery and performance of this Agreement do
not and will not:
(i) constitute a violation of the Articles of
Incorporation, as amended, or the Bylaws, as amended, as the case may
be, of Purchaser,
(ii) constitute a violation of any statute, judgment,
order, decree or regulation or rule of any court, governmental authority
or arbitrator applicable or relating to Purchaser, or
(iii) constitute a default under any contract to which
Purchaser is a party except where such default would not have a Material
Adverse Effect upon the ability of Purchaser to perform its obligations
under this Agreement.
(c) AUTHORIZATION. This Agreement has been duly authorized, executed
and delivered by Purchaser. This Agreement constitutes the legal, valid and
binding obligation of Purchaser, enforceable in accordance with its terms,
except as may be
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limited by bankruptcy, reorganization, insolvency and similar laws of
general application relating to or affecting the enforcement of rights of
creditors.
ARTICLE 3
CONDITIONS OF CLOSING
3.1 PURCHASER'S CONDITIONS OF CLOSING. The obligations of Purchaser to
consummate the purchase and sale under this Agreement are subject to the
satisfaction of the following conditions:
(a) DELIVERY OF INSTRUMENTS. Sellers shall deliver to Purchaser
the duly authorized and executed General Conveyance, Transfer and Assignment,
the Lease and such other conveyance documents as Purchaser may reasonably
request to effect the transfer and conveyance of the Business to Purchaser.
(b) CONSENTS, NOTICES AND APPROVALS. Sellers shall deliver to
Purchaser all consents and approvals of all Persons necessary for the
consummation of the Transaction under Sellers' articles of incorporation or
bylaws or any agreement, permit, law or regulation.
(c) LEGAL OPINION. Sellers shall have obtained the legal opinion
of Seller's counsel in form and substance reasonably satisfactory to
Purchaser and its counsel.
(d) REPRESENTATIONS WARRANTIES AND COVENANTS. All representations
and warranties of Sellers contained in this Agreement shall be true and
correct at and as of the Closing. Sellers shall have complied in all
material respects with all covenants required to be performed by Sellers
prior to the Closing. On the Closing Date, McKinney's Smelting's President
and Smith shall deliver a certificate dated as of the Closing Date to the
effect that the representations and warranties of Sellers contained in this
Agreement are true and correct in all material respects.
(e) APPROVAL OF REMEDIATION PLAN. The Settlement Agreement(s)
shall have been approved by the United States Department of Justice, the
Environmental Protection Agency and the Texas National Resource Conservation
Commission in form and content satisfactory to Purchaser, in its sole
discretion, and no material modification shall be made to the Settlement
Agreement(s) following the public hearing to be held thirty (30) days after
the execution of the Settlement Agreement(s).
(f) ADVERSE CHANGE. No Material Adverse Effect in the results of
operations, financial condition or prospects of the Collection Facility shall
have occurred, and the Assets shall not have suffered any material adverse
change, loss, or damage, whether or not covered by insurance.
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(g) LEGAL ACTIONS OR PROCEEDINGS. No action or proceeding before
a court or other governmental agency or body shall have been instituted with
threatened restrain or prohibit the consummation of the transactions
contemplated by this Agreement, and no governmental agency or body shall have
taken any other action or made any request of Sellers or Purchaser as a
result of which Purchaser deems it inadvisable to proceed with the
transactions contemplated hereunder.
(h) LEASEHOLD TITLE INSURANCE POLICY. Sellers shall obtain, at
their sole cost and expense, a leasehold title insurance policy issued
through Republic Title of Texas, Inc. covering Purchaser's leasehold interest
in the real property. The Leasehold Title Insurance Policy shall contain no
exceptions other than the standard printed exceptions and other exceptions
approved by Purchaser in writing.
(i) NONDISTURBANCE AGREEMENT. If the real property that is the
subject of the Lease is encumbered by one or more mortgages, Sellers shall
deliver to Purchaser a nondisturbance agreement executed by the holders of
all mortgages covering said property. All nondisturbance agreements obtained
by Sellers shall be satisfactory to Purchaser in form and content.
(j) CERTIFICATE OF OCCUPANCY. The Purchaser shall have received a
certificate of Occupancy from the City of McKinney.
3.2 SELLERS' CONDITIONS TO CLOSING. The obligations of Sellers to
consummate the purchaser and sale under this Agreement are subject to the
satisfaction of the following conditions:
(a) PURCHASE PRICE AND OTHER PAYMENTS. Purchaser shall deliver to
Seller the Purchase Price, reduced by the Holdback Amount and the other
payments described in Section 1.4 hereof.
(b) REPRESENTATIONS AND WARRANTIES. All representations and
warranties of Purchaser contained in this Agreement shall be true and correct
at and as of the Closing. On the Closing Date, Purchaser's President shall
deliver a certificate dated as of the Closing Date to the effect that the
representations and warranties of Purchaser contained in this Agreement are
true and correct in all material respects.
(c) LEGAL ACTIONS OR PROCEEDINGS. No action or proceeding before
a court or other governmental agency or body shall have been instituted with
threatened restrain or prohibit the consummation of the transactions
contemplated by this Agreement, and no governmental agency or body shall have
taken any other action or made any request of Sellers or Sellers as a result
of which Sellers deem it inadvisable to proceed with the transactions
contemplated hereunder.
(d) LEASE. Purchaser shall have executed and delivered the Lease.
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ARTICLE 4
CLOSING DATE AND EFFECTIVE DATE
4.1 CLOSING DATE. The closing for the consummation of the purchase and
sale contemplated by this Agreement (the "Closing") shall take place at the
offices of Powell, Sweet & Coleman, L.L.P., in Dallas, Texas at 10:00 a.m.,
Dallas, Texas time on such date and time that the parties' conditions to
Closing are satisfied (the "Closing Date").
4.2 EFFECTIVE DATE. For all purposes hereof, the term "the Effective
Time of Closing" shall occur upon the delivery to Purchaser of the Lease, the
General Conveyance, Transfer and Assignment, and the other Operative
Documents as contemplated herein on the Closing Date.
ARTICLE 5
COVENANTS
5.1 COVENANTS OF SELLERS. Seller hereby agrees to the following
covenants, which shall, to the extent provided therein, survive the Closing:
(a) CONDUCT OF THE BUSINESS. From the date hereof to the Closing
Date, except as expressly permitted or required by this Agreement or as
otherwise consented to by the Purchaser in writing, Sellers will:
(1) carry on the Business in, and only in, the ordinary
course, in substantially the same manner as heretofore conducted, and use all
reasonable efforts to preserve intact its present business organization,
maintain its properties in good operating condition and repair, keep
available the services of its present officers and significant employees, and
preserve its relationship with customers, suppliers and others having
business dealings with it, to the end that the goodwill and on-going business
relationships of the Business shall be in all material respects unimpaired
following the Closing;
(2) pay accounts payable and other obligations of the
Business when they become due and payable in the ordinary course of business
consistent with prior practice;
(3) perform in all material respects all of its obligations
under all contracts and other agreements and instruments relating to or
affecting the Business or the Assets, and comply in all material respects
with all laws applicable to the Business;
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(4) not enter into or assume any material agreement, contract
or instrument relating to the Business, or enter into or permit any material
amendment, supplement, waiver or other modification in respect thereof;
(5) not grant (or commit to grant) any increase in the
compensation (including incentive or bonus compensation) of any employee
employed in the operation of the Business or institute, adopt or amend (or
commit to institute, adopt or amend) any compensation or benefit plan,
policy, program or arrangement or collective bargaining agreement applicable
to any such employee; and
(6) not take any action or omit to take any action, which
action or omission would result in a breach of any of the representations and
warranties set forth in Section 2.1(i) hereof.
(b) NO SOLICITATION. During the term of this Agreement, neither
Sellers, nor their respective Affiliates, nor any Person acting on behalf of
Sellers or their Affiliates shall (i) solicit or encourage any inquiries or
proposals for, or enter into any discussions with respect to, the acquisition
of any properties and assets held for use in connection with, necessary for
the conduct of, or otherwise material to, the Business or (ii) furnish or
cause to be furnished any non-public information concerning the Business to
any Person (other than Purchaser and its agents and representatives), other
than in the ordinary course of business or pursuant to legal requirements and
after prior written notice to the Purchaser. Sellers shall not sell,
transfer or otherwise dispose of, grant any option or proxy to any Person
with respect to, create any Lien upon, or transfer any interest in, any
Asset, other than in the ordinary course of business and consistent with this
Agreement.
(c) ACCESS AND INFORMATION.
(1) So long as this Agreement remains in effect, Sellers will
(and will cause each of their Affiliates) and their respective accountants,
counsel, consultants, employees and agents) furnish to Purchaser, Purchaser's
accountants, counsel, consultants, employees and agents, full access during
normal business hours to, and furnish them with all documents, records, work
papers and information with respect to, all of such Person's properties,
assets, books, contracts, commitments, reports and records relating to the
Business, as Purchaser shall from time to time reasonably request. In
addition, the Sellers will permit Purchaser and its accountants, counsel,
consultants, employees and agents reasonable access to such personnel of
Sellers during normal business hours as may be necessary or useful to
Purchaser in its review of the properties, assets and business affairs of the
Business and the above-mentioned documents and information. Sellers will
keep Purchaser generally informed of the affairs of the Business.
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(2) Sellers will retain all books and records relating to the
Business in accordance with Sellers' record retention policies as presently
in effect. During the seven-year period beginning on the Closing Date,
Sellers shall not dispose of or permit the disposal of any such books and
records not required to be retained under such policies without first giving
60 days' prior written notice.
(d) FURTHER ASSURANCES. Following the Closing, Sellers shall
execute and deliver such additional instruments, documents, conveyances or
assurances and take such other actions as shall be necessary, or otherwise
reasonably requested by Purchaser, to confirm and assure the rights and
obligations provided for in this Agreement and the other documents executed
in connection with the transactions contemplated hereby.
(e) LIABILITY FOR TRANSFER TAXES. Sellers shall be responsible
for the timely payment of, and shall indemnify and hold harmless Purchaser
against, all sales, use, documentary, transfer, conveyance, recording,
license and other similar taxes and fees arising out of or in connection with
or attributable to the transactions effected pursuant to this Agreement, and
the documents executed in connection herewith. Sellers shall promptly
prepare and file all returns required in respect of transfer taxes.
(f) USE OF BUSINESS NAME; NONCOMPETITION. After the Closing,
neither of the Sellers shall, directly or indirectly use, do business or
assist any third party in using or doing business under the trade names used
in the Business. Also, neither of the Sellers will engage in the scrap,
salvage, recycling or similar businesses that compete with the Business as
presently conducted within a 100 mile radius of the Collection Facility.
(g) DELIVERY OF DECEMBER 1997 BALANCE SHEET. Sellers agree to furnish
Purchaser with its December 31, 1997 balance sheet and income statement as
soon as such statements are prepared by Sellers' accountants.
5.2 COVENANTS OF PURCHASER. Purchaser hereby agrees to the following
covenants, which shall, to the extent provided therein, survive the Closing:
(a) FURTHER ASSURANCES. Following the Closing, Purchaser shall
execute and deliver such additional instruments, documents, conveyances or
assurances and take such other actions as shall be necessary, or otherwise
reasonably requested by Seller to confirm and assure the rights and
obligations provided for in this Agreement and the other documents executed
in connection with the transactions contemplated hereby.
(b) ACCESS TO INFORMATION. Purchaser shall grant Sellers and
their representatives access (during normal business hours) to the books and
records of the Business for all periods prior to the Closing Date to the
extent that such access is
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necessary to enable Sellers to prepare their respective income tax returns
and for other reasonable business purposes. Sellers shall provide Purchaser
two business days's prior notice before examining the books and records of
the Business.
ARTICLE 6
INDEMNIFICATION
6.1 INDEMNITY.
(a) Subject to Section 6.1(c) hereof, Sellers hereby jointly and
severally agree to indemnify and hold Purchaser and Purchaser's officers,
directors, shareholders, Affiliates, employees and agents ("Purchaser
Indemnitees") harmless from any and all damages, losses (which shall include
any diminution in value), liabilities (joint and several), payments,
obligations, penalties, claims, litigation, demands, defenses, judgments,
suits, proceedings, costs, disbursements or expenses (including without
limitation, fees, disbursements and expenses of attorneys, accountants and
other professional advisors and of expert witnesses and costs of
investigation and preparation) of any kind or nature whatsoever (collectively
"Damages"), directly or indirectly resulting from, relating to or arising out
of:
(1) any breach of or inaccuracy in any representation or
warranty of Seller contained in Section 2.1 or in any Operative Document;
(2) any breach or non-performance, partial or total, by either
Seller of any covenant or agreement of Seller contained in this Agreement
or in any Operative Document;
(3) any liability for breach of the Environmental Laws
pertaining to matters that were not covered in the settlement agreements.
(4) the ownership, management or use of the Assets prior to the
Effective Time of Closing; the conduct of the Business prior to the
Effective Time of Closing; all contracts, agreements, obligations,
commitments and liabilities of Sellers of every kind and character relating
in any way to the assets or the business of Sellers other than any
obligations expressly assumed by Purchaser hereunder; and, all pension,
retirement, bonuses, severance pay, salaries and all other compensation
and benefits of whatsoever nature (including all liabilities to any Person
under ERISA and all liabilities to any Governmental Body) attributable to
service or to or employment by Sellers prior to the Effective Time of
Closing;
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(5) any labor organization claiming it had any right to
represent any Employees of Sellers who are employed by Purchaser subsequent
to the Closing Date of this Agreement, where such claims for representation
arise out of circumstances existing prior to the Closing Date; and
(6) any losses or costs of defending against any claims which
may be made against Purchaser by any Person claiming violations of any
local, state, or federal laws relating to employment relationships,
including, but not limited to, wages, hours, concerted activity,
nondiscrimination, occupational health and safety and the payment and
withholding of taxes, where such claims arise out of circumstances
occurring prior to the Closing Date.
(b) Subject to Section 6.1(c) hereof, Purchaser shall indemnify
and hold Sellers and Sellers' officers, directors and shareholders ("Seller
Indemnitees") harmless from, any and all Damages resulting from or arising
out of:
(1) any breach of any representation or warranty of Purchaser
contained in Section 2.2; and
(2) the non-performance, partial or total, of any covenant or
agreement of Purchaser contained in this Agreement, any Operative Document
or any instrument or agreement delivered pursuant to this Agreement.
(c) Sellers shall retain liability, and shall indemnify Purchaser,
for the payment of any tax liabilities with respect to the Assets and the
conduct of the Business during all periods ending as of or prior to the
Effective Time of Closing and the transactions contemplated by this Agreement
other than any liabilities expressly assumed by Purchaser hereunder.
6.2 NOTICE, PARTICIPATION AND DURATION.
(a) If a claim by a third party is made against a party
indemnified pursuant to this Article 6, the Indemnitee shall promptly, and in
any event within 60 days of the assertion of any claim or the discovery of
any fact upon which Indemnitee intends to base a claim for indemnification
under this Agreement ("Claim"), notify the party or parties from whom
indemnification is sought ("Indemnitor") of such Claim. In the event of any
Claim, Indemnitor, at its option, may assume (with legal counsel reasonably
acceptable to the Indemnitee) the defense of any claim, demand, lawsuit or
other proceeding in connection with the Indemnitee's Claim, and may assert
any defense of Indemnitee or Indemnitor; PROVIDED that Indemnitee shall have
the right at its own expense to participate jointly with Indemnitor in the
defense of any claim, demand, lawsuit or other proceeding in connection with
the Indemnitee's Claim. In the event that Indemnitor elects to undertake the
defense of any Claim hereunder, Indemnitee shall, at Indemnitor's expense,
cooperate with Indemnitor to the fullest
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extent possible in regard to all matters relating to the Claim (including,
without limitation, corrective actions required by applicable law, assertion
of defenses and the determination, mitigation, negotiation and settlement of
all amounts, costs, actions, penalties, damages and the like related thereto)
so as to permit Indemnitor's management of same with regard to the amount of
Damages payable by the Indemnitor hereunder. The Indemnitor shall not settle
any Claim without the prior written consent of the Indemnitee, which consent
shall not unreasonably be withheld.
6.3 INDEMNIFICATION IF NEGLIGENCE OF INDEMNITEE. The indemnification
provided in this Article 6 shall be applicable whether or not negligence of
the Indemnitee is alleged or proven.
6.4 REIMBURSEMENT. In the event that the Indemnitor shall undertake,
conduct or control the defense or settlement of any Claim and it is later
determined that such Claim was not a Claim for which the Indemnitor is
required to indemnify the Indemnitee under this Article 6, the Indemnitee
shall reimburse the Indemnitor for all its costs and expenses with respect to
such settlement or defense, including reasonable attorneys' fees and
disbursements.
6.5 NO THIRD PARTY BENEFICIARIES. The foregoing indemnification is
given solely for the purpose of protecting the parties to this Agreement and
the Purchaser Indemnitees and shall not be deemed extended to, or interpreted
in a manner to confer any benefit, right or cause of action upon, any other
Person.
6.6 OFFSET AGAINST LEASE PAYMENTS. Purchaser shall have the right to
offset from the rental payments due under the Lease any amounts which Sellers
are obligated to indemnify Purchaser under this Agreement.
ARTICLE 7
MISCELLANEOUS
7.1 FURTHER ACTIONS. From time to time, as and when requested by
Purchaser, Sellers shall execute and deliver, or cause to be executed and
delivered, such documents and instruments and shall take, or cause to be
taken, such further or other actions as may be reasonably necessary to
transfer, assign and deliver to Purchaser or its permitted assigns the
Business (or to evidence the foregoing) and to consummate and to effect the
other transactions expressly required to be performed by Seller hereunder.
7.2 NO BROKER. Sellers and Purchaser represent and warrant to the
other that they have no obligation or liability to any broker or finder by
reason of the transactions which are the subject of this Agreement. Each of
(a) Sellers and (b) Purchaser agree to indemnify the other against, and to
hold the others harmless from, at all times after
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the date hereof, any and all liabilities and expenses (including without
limitation legal fees) resulting from, related to or arising out of any claim
by any Person for brokerage commissions or finder's fees, or rights to
similar compensation, on account of services purportedly rendered on behalf
of Seller and Purchaser, as the case may be, in connection with this
Agreement or the transactions contemplated hereby.
7.3 EXPENSES. Except as otherwise specifically provided herein,
Sellers and Purchaser shall each bear their own legal fees, accounting fees
and other costs and expenses with respect to the negotiation, execution and
the delivery of this Agreement and the consummation of the transactions
hereunder, and Sellers will pay their expenses after the Effective Time of
Closing out of the Purchase Price paid by Purchaser to Sellers pursuant to
Section 1.4. Sellers shall pay all sales, transfer and documentary taxes
incident to the sale of the Business.
7.4 ENTIRE AGREEMENT. This Agreement and the Exhibits hereto, contain,
and are intended by the parties as a final expression of, the entire
agreement between Sellers and Purchaser with respect to the transactions
contemplated by this Agreement and supersede all prior oral or written
agreements, arrangements or understandings with respect thereto.
7.5 DESCRIPTIVE HEADINGS. The descriptive headings of this Agreement
are for convenience only and shall not control or affect the meaning of
construction of any provision of this Agreement.
7.6 NOTICES. All notices or other communications which are required or
permitted hereunder shall be in writing and shall be delivered either
personally or by telegram, telex, telecopy or similar facsimile means, by
registered or certified mail (postage prepaid and return receipt requested),
or by express courier or delivery service, addressed as follows:
If to Seller: McKinney Smelting, Inc.
300 North McDonald
McKinney, Texas 75069
Telecopy No.
-------------
Benjamin L. Smith
300 North McDonald
McKinney, Texas 75069
Telecopy No.
-------------
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With copies to: Larry R. Boyd, Esq.
Abernathy, Roeder, Robinson & Joplin
100 E. Davis St.
McKinney, Texas 75069
Telecopy No. (972) 562-0202
If to Purchaser: Ferex Metals Recycling of McKinney, Inc.
15252 C.R. 1134
Tyler, TX 75709-9707
Attention: Lloyd B. Fletcher
Telecopy No. (903) 592-7926
With copies to: Lester V. Baum, Esq.
Powell, Sweet & Coleman, L.L.P.
8950 N. Central Expressway
Suite 130
Dallas, Texas 75231
Telecopy No. (214) 373-8786
or such other address and number as either party shall have previously
designated by written notice given to the other party in the manner
hereinabove set forth. Notices shall be deemed given when received, if sent
by telegram, telex, telecopy or similar facsimile means (confirmation of such
receipt by confirmed facsimile transmission being deemed receipt of
communications sent by telex, telecopy or other facsimile means); and when
delivered and receipted for when sent by registered or certified mail.
7.7 APPLICABLE LAW. This Agreement shall be governed by and construed
in accordance with the internal laws of the State of Texas without giving
effect to the rules of conflicts of law.
7.8 ASSIGNABILITY. This Agreement shall not be assignable by Sellers
without the prior written consent of Purchaser. Purchaser shall have the
right to assign this Agreement to a wholly-owned subsidiary. Any other
assignments by Purchaser shall require the prior written consent of Sellers.
Any purported assignments by Purchaser contrary to the terms of this
Agreement shall be void.
7.9 WAIVERS AND AMENDMENTS. Any waiver of any term or condition of
this Agreement, or any amendment or supplementation of this Agreement, shall
be effective only if in writing. A waiver of any breach or failure to
enforce any of the terms or conditions of this Agreement shall not in any way
affect, limit or waive a
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party's rights hereunder at any time to enforce strict compliance thereafter
with every term or condition of this Agreement.
7.10 THIRD PARTY RIGHTS. Notwithstanding any other provision of this
Agreement, this Agreement shall not create benefits on behalf of any Person
who is not a party to this Agreement (including without limitation any broker
or finder, notwithstanding the provisions of Section 7.2 hereof), and this
Agreement shall be effective only as between the parties hereto, their
successors and permitted assigns; PROVIDED, HOWEVER, that Purchaser
Indemnitees are intended third party beneficiaries hereof to the extent
provided in Sections 6.1 and 6.5.
7.11 ILLEGALITIES. In the event that any provision contained in this
Agreement shall be determined to be invalid, illegal or unenforceable in any
respect for any reason, the validity, legality and enforceability of any such
provision in every other respect and the remaining provisions of this
Agreement shall not, at the election of the party for whose benefit the
provision exists, be in any way impaired.
7.12 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, and each such counterpart hereof shall be deemed to be an
original instrument, but all such counterparts together shall constitute but
one Agreement.
7.13 SURVIVAL; EXCLUSIVITY OF REMEDIES. The representations and
warranties, covenants and agreements of the parties hereto shall survive the
Closing, and the indemnification provided by Section 6.1 shall not be the
exclusive remedy available to the parties hereto.
7.14 EMPLOYEES.
(a) Sellers will permit Purchaser to offer employment to some or
all of the Employees prior to or on the Effective Date of Closing, and
Purchaser will inform Sellers of the names of any Employees who are offered
employment and of any Employees whom it employs. Purchaser shall have full
and absolute discretion in determining the terms, conditions and benefits
relating to such employment.
(b) Nothing contained in this Agreement shall obligate Purchaser
to continue the employment of any Employee. Nothing in this Section 7.14 is
intended to create any claim or right on the part of any employee of Sellers
and no such employee shall be entitled to assert any claim or right hereunder.
7.15 ACCESS TO RECORDS.
(a) Following the Effective Time of Closing, Purchaser shall give
to Sellers free and unrestricted access to (and the right to make copies at
the expense of Sellers) the Records and to the extent that such were
purchased by Purchaser
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hereunder and relate to the business, operations, income, expenses and assets
of Sellers existing on, accruing or arising prior to or occurring prior to
Effective Time of Closing, but any access pursuant to this Section 7.15 shall
be conducted in such manner as not to interfere unreasonably with the
operations of the Business following the Effective Time of Closing.
(b) Following the Effective Time of Closing, Sellers shall give to
Purchaser free and unrestricted access to (and the right to make copies at
the expense of Purchaser) the books, files, records and tax returns and
supporting schedules and work papers of Sellers to the extent that such
relate to the business, operations, income, expenses and assets of Sellers
existing on, accruing or arising prior to or occurring prior to the Effective
Time of Closing, but any access pursuant to this Section 7.15 shall be
conducted in such manner as not to interfere unreasonably with the operations
of the business of Seller following the Effective Time of Closing.
7.16 PRORATION. Notwithstanding anything to the contrary contained
elsewhere herein, ad valorem taxes on the Real Property shall be pro rated
between Sellers and Purchaser effective as of the Closing Date.
ARTICLE 8
DEFAULT AND TERMINATION
In the event any of the conditions required for the Closing of the
Transaction shall not have been met prior to the Closing Date (as the Closing
Date may be extended by the parties), for any reason other than the failure
of a party to perform its obligations under this Agreement, this Agreement
shall terminate, and the parties shall have no further obligations or
liabilities one to the other hereunder. If the Transaction is not
consummated by reason of a default by Sellers in the performance of any of
their respective obligations hereunder Purchaser may enforce specific
performance of this Agreement or exercise any other rights or remedies
available to Purchaser at law or in equity. The parties shall have the right
to terminate this Agreement by their mutual written consent.
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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date first above written.
PURCHASER:
FEREX METALS RECYCLING OF MCKINNEY, INC.
By: /s/ Lloyd B. Fletcher
-------------------------------------
Lloyd B. Fletcher
Chairman of the Board
SELLER:
MCKINNEY SMELTING, INC.
By: /s/ BENJAMIN L. SMITH
---------------------------
Name:
---------------------------
Title: Pres
---------------------------
/s/ BENJAMIN L. SMITH
-------------------------------
BENJAMIN L. SMITH, Individually
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