Exhibit 2.3
ASSET PURCHASE AGREEMENT
BY AND AMONG
RECYCLING INDUSTRIES OF CHARLOTTE, INC.
RECYCLING INDUSTRIES, INC.
REPUBLIC ALLOYS, INC.
XXXXXXX X. XXXXX
AND
XXXX X. XXXXX
MAY 21, 1998
(vi)
TABLE OF CONTENTS
ARTICLE 1
DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1-
ARTICLE 2
ACQUISITION OF SELLER ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . -6-
2.1 PURCHASE AND SALE OF THE SELLER ASSETS . . . . . . . . . . . . . . . -6-
2.2 EXCLUDED ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . . -8-
2.3 ASSUMED CONTRACTS. . . . . . . . . . . . . . . . . . . . . . . . . . -8-
2.4 ASSUMPTION OF LIABILITIES. . . . . . . . . . . . . . . . . . . . . . -8-
2.5 COLLECTION OF ACCOUNTS RECEIVABLE. . . . . . . . . . . . . . . . . . -8-
2.6 LEASE TO SELLER. . . . . . . . . . . . . . . . . . . . . . . . . . . -8-
ARTICLE 3
PURCHASE PRICE AND CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . -9-
3.1 PURCHASE PRICE FOR SELLER ASSETS . . . . . . . . . . . . . . . . . . -9-
3.2 INVENTORY VALUATION. . . . . . . . . . . . . . . . . . . . . . . . . -9-
3.3 ADJUSTMENT OF THE PURCHASE PRICE . . . . . . . . . . . . . . . . . . -10-
3.4 ALLOCATION OF THE PURCHASE PRICE . . . . . . . . . . . . . . . . . . -10-
3.5 CLOSING OF THE PURCHASE. . . . . . . . . . . . . . . . . . . . . . . -11-
ARTICLE 4
REPRESENTATIONS OF SELLER AND THE SHAREHOLDERS . . . . . . . . . . . . . . . . . -11-
4.1 DUE ORGANIZATION AND QUALIFICATION . . . . . . . . . . . . . . . . . -11-
4.2 TITLE TO PROPERTY. . . . . . . . . . . . . . . . . . . . . . . . . . -11-
4.3 AUTHORITY OF SELLER; CONSENTS. . . . . . . . . . . . . . . . . . . . -12-
4.4 FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . -13-
4.5 NO TAX LIENS; NO WAIVER. . . . . . . . . . . . . . . . . . . . . . . -13-
4.6 COMPLIANCE WITH LAWS . . . . . . . . . . . . . . . . . . . . . . . . -14-
4.7 PERMITS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -14-
4.8 LITIGATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -14-
4.9 CONTRACTS AND OTHER AGREEMENTS . . . . . . . . . . . . . . . . . . . -15-
4.10 NOTES AND ACCOUNTS RECEIVABLE. . . . . . . . . . . . . . . . . . . . -15-
4.11 TANGIBLE PROPERTY. . . . . . . . . . . . . . . . . . . . . . . . . . -15-
4.12 INVENTORY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -15-
4.13 INTELLECTUAL PROPERTY. . . . . . . . . . . . . . . . . . . . . . . . -16-
(i)
4.14 REAL PROPERTY. . . . . . . . . . . . . . . . . . . . . . . . . . . . -16-
4.15 LIABILITIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . -17-
4.16 SUPPLIERS AND CUSTOMERS. . . . . . . . . . . . . . . . . . . . . . . -17-
4.17 EMPLOYEE BENEFIT PLANS . . . . . . . . . . . . . . . . . . . . . . . -17-
4.18 CURTAILMENT OF OPERATIONS. . . . . . . . . . . . . . . . . . . . . . -19-
4.19 EMPLOYEE RELATIONS . . . . . . . . . . . . . . . . . . . . . . . . . -19-
4.20 INSURANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -19-
4.21 POWERS OF ATTORNEY . . . . . . . . . . . . . . . . . . . . . . . . . -20-
4.22 RELATIONSHIPS. . . . . . . . . . . . . . . . . . . . . . . . . . . . -20-
4.23 BROKER'S OR FINDER'S FEES. . . . . . . . . . . . . . . . . . . . . . -20-
4.24 EMPLOYEE TRANSITION. . . . . . . . . . . . . . . . . . . . . . . . . -20-
4.25 ENVIRONMENTAL MATTERS. . . . . . . . . . . . . . . . . . . . . . . . -20-
4.26 COMPLIANCE WITH ADA. . . . . . . . . . . . . . . . . . . . . . . . . -21-
4.27 GUARANTEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -21-
4.28 DISCLOSURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -21-
4.29 BEST EFFORTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . -21-
ARTICLE 5
REPRESENTATIONS OF RECYCLING . . . . . . . . . . . . . . . . . . . . . . . . . . -22-
5.1 DUE INCORPORATION AND QUALIFICATION OF RII SUB . . . . . . . . . . . -22-
5.2 DUE INCORPORATION AND QUALIFICATION OF THE PARENT. . . . . . . . . . -22-
5.3 ARTICLES OF INCORPORATION AND BYLAWS . . . . . . . . . . . . . . . . -22-
5.4 AUTHORITY OF RII SUB AND THE PARENT. . . . . . . . . . . . . . . . . -22-
5.5 PREFERRED STOCK CONSIDERATION. . . . . . . . . . . . . . . . . . . . -23-
5.6 COMMON STOCK CONSIDERATION . . . . . . . . . . . . . . . . . . . . . -23-
5.7 1934 ACT REGISTRATION. . . . . . . . . . . . . . . . . . . . . . . . -23-
5.8 BROKER'S OR FINDER'S FEES. . . . . . . . . . . . . . . . . . . . . . -23-
5.9 DISCLOSURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -23-
5.10 BEST EFFORTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . -24-
ARTICLE 6
REGULATORY COMPLIANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -24-
6.1 BULK SALES COMPLIANCE. . . . . . . . . . . . . . . . . . . . . . . . -24-
6.2 XXXX-XXXXX-XXXXXX ACT. . . . . . . . . . . . . . . . . . . . . . . . -24-
6.3 THE WARN ACT . . . . . . . . . . . . . . . . . . . . . . . . . . . . -24-
6.4 COBRA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -24-
6.5 OTHER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -25-
(ii)
ARTICLE 7
ENVIRONMENTAL MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -25-
7.1 ENVIRONMENTAL STUDIES. . . . . . . . . . . . . . . . . . . . . . . . -25-
7.2 REMEDIATION ESTIMATE . . . . . . . . . . . . . . . . . . . . . . . . -25-
7.3 ON-SITE ENVIRONMENTAL LIABILITIES. . . . . . . . . . . . . . . . . . -25-
ARTICLE 8
COVENANTS TO BE PERFORMED PRIOR TO THE CLOSING . . . . . . . . . . . . . . . . . -25-
8.1 TITLE INSURANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . -26-
8.2 SURVEY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -26-
8.3 MATERIAL ASSUMED CONTRACTS . . . . . . . . . . . . . . . . . . . . . -26-
8.4 CONDUCT OF BUSINESS. . . . . . . . . . . . . . . . . . . . . . . . . -26-
8.5 PRESERVATION OF BUSINESS . . . . . . . . . . . . . . . . . . . . . . -26-
8.6 NOTICE OF EVENTS . . . . . . . . . . . . . . . . . . . . . . . . . . -27-
8.7 EXAMINATIONS AND INVESTIGATIONS. . . . . . . . . . . . . . . . . . . -27-
8.8 NO NEGOTIATION BY SELLER OR THE SHAREHOLDERS . . . . . . . . . . . . -27-
8.9 SAFETY AUDITS. . . . . . . . . . . . . . . . . . . . . . . . . . . . -28-
8.10 REMOVAL OF WASTE MATERIALS . . . . . . . . . . . . . . . . . . . . . -28-
ARTICLE 9
CONDITIONS PRECEDENT TO THE OBLIGATION OF RECYCLING TO CLOSE . . . . . . . . . . -28-
9.1 REPRESENTATIONS, WARRANTIES AND OTHER AGREEMENTS . . . . . . . . . . -28-
9.2 GOVERNMENTAL PERMITS AND APPROVALS . . . . . . . . . . . . . . . . . -28-
9.3 THIRD PARTY CONSENTS . . . . . . . . . . . . . . . . . . . . . . . . -29-
9.4 LITIGATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -29-
9.5 REAL PROPERTY. . . . . . . . . . . . . . . . . . . . . . . . . . . . -29-
9.6 NO MATERIAL ADVERSE CHANGE . . . . . . . . . . . . . . . . . . . . . -30-
9.7 TRANSFER DOCUMENTS . . . . . . . . . . . . . . . . . . . . . . . . . -30-
9.8 ENVIRONMENTAL ESCROW AGREEMENT . . . . . . . . . . . . . . . . . . . -30-
9.9 ASSIGNMENT OF CONTRACTS. . . . . . . . . . . . . . . . . . . . . . . -30-
9.10 SATISFACTION WITH DUE DILIGENCE, FINANCIAL PERFORMANCE AND
APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -30-
9.11 FINANCING. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -30-
9.12 PREFERRED SUBSCRIPTION AGREEMENT . . . . . . . . . . . . . . . . . . -30-
9.13 COMMON SUBSCRIPTION AGREEMENT. . . . . . . . . . . . . . . . . . . . -30-
9.14 NON-COMPETITION AGREEMENT. . . . . . . . . . . . . . . . . . . . . . -30-
9.15 TERMINAL LEASE . . . . . . . . . . . . . . . . . . . . . . . . . . . -31-
9.16 LEGAL OPINION. . . . . . . . . . . . . . . . . . . . . . . . . . . . -31-
9.17 BOOKS AND RECORDS. . . . . . . . . . . . . . . . . . . . . . . . . . -31-
9.18 RESOLUTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . -31-
9.19 CERTIFICATES, ETC. OF SHAREHOLDERS AND SELLER. . . . . . . . . . . . -31-
(iii)
9.20 PAYMENT OF SALES OR USE TAXES BY SELLER. . . . . . . . . . . . . . . -31-
9.21 APPROVAL OF COUNSEL TO RECYCLING . . . . . . . . . . . . . . . . . . -31-
ARTICLE 10
CONDITIONS PRECEDENT TO THE OBLIGATION OF SELLER AND THE
SELLER OFFICERS TO CLOSE. . . . . . . . . . . . . -31-
10.1 REPRESENTATIONS, WARRANTIES AND OTHER AGREEMENTS . . . . . . . . . . -31-
10.2 GOVERNMENTAL PERMITS AND APPROVALS . . . . . . . . . . . . . . . . . -32-
10.3 THIRD PARTY CONSENTS . . . . . . . . . . . . . . . . . . . . . . . . -32-
10.4 LITIGATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -32-
10.5 NO MATERIAL ADVERSE CHANGE . . . . . . . . . . . . . . . . . . . . . -32-
10.6 RESOLUTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . -32-
10.7 DESIGNATIONS OF PREFERRED STOCK CONSIDERATION. . . . . . . . . . . . -32-
10.8 LEGAL OPINION. . . . . . . . . . . . . . . . . . . . . . . . . . . . -32-
10.9 THE PURCHASE PRICE . . . . . . . . . . . . . . . . . . . . . . . . . -32-
10.10 ENVIRONMENTAL ESCROW AGREEMENT . . . . . . . . . . . . . . . . . . . -33-
10.11 TERMINAL LEASE . . . . . . . . . . . . . . . . . . . . . . . . . . . -33-
10.12 APPROVAL OF COUNSEL TO SELLER AND THE SHAREHOLDERS . . . . . . . . . -33-
ARTICLE 11
ACTIONS TO BE TAKEN AT THE CLOSING . . . . . . . . . . . . . . . . . . . . . . . -33-
11.1 TRANSFER DOCUMENTS . . . . . . . . . . . . . . . . . . . . . . . . . -33-
11.2 THE PURCHASE PRICE . . . . . . . . . . . . . . . . . . . . . . . . . -33-
11.3 PREFERRED SUBSCRIPTION AGREEMENT . . . . . . . . . . . . . . . . . . -33-
11.4 COMMON SUBSCRIPTION AGREEMENT. . . . . . . . . . . . . . . . . . . . -33-
11.5 NON-COMPETITION AGREEMENTS . . . . . . . . . . . . . . . . . . . . . -33-
11.6 ENVIRONMENTAL ESCROW AGREEMENT . . . . . . . . . . . . . . . . . . . -34-
11.7 GENERAL WARRANTY DEED. . . . . . . . . . . . . . . . . . . . . . . . -34-
11.8 CONTRACT ASSUMPTIONS . . . . . . . . . . . . . . . . . . . . . . . . -34-
11.9 CLOSING CERTIFICATE OF SELLER. . . . . . . . . . . . . . . . . . . . -34-
11.10 CLOSING CERTIFICATE OF THE SHAREHOLDERS. . . . . . . . . . . . . . . -34-
11.11 CLOSING CERTIFICATE OF PARENT AND RII SUB. . . . . . . . . . . . . . -34-
11.12 CERTIFICATE REGARDING RESOLUTIONS OF SELLER. . . . . . . . . . . . . -34-
11.13 CERTIFICATE REGARDING RESOLUTIONS OF RII SUB AND PARENT. . . . . . . -34-
11.14 LEGAL OPINIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . -34-
11.15 REAL PROPERTY CLOSING. . . . . . . . . . . . . . . . . . . . . . . . -34-
11.16 TITLES TO VEHICLES, MACHINERY AND EQUIPMENT. . . . . . . . . . . . . -35-
(iv)
ARTICLE 12
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION. . . . . . . . . . . -35-
12.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . -35-
12.2 INDEMNITY AGREEMENTS OF SELLER AND THE SHAREHOLDERS. . . . . . . . . -35-
12.3 INDEMNITY AGREEMENT OF RII SUB AND THE PARENT. . . . . . . . . . . . -37-
12.4 INDEMNIFICATION PROCEDURE FOR THIRD PARTY CLAIMS . . . . . . . . . . -38-
12.5 LIMIT ON OBLIGATIONS . . . . . . . . . . . . . . . . . . . . . . . . -38-
12.6 GOOD FAITH EFFORTS TO SETTLE DISPUTES. . . . . . . . . . . . . . . . -38-
12.7 FEES AND EXPENSES. . . . . . . . . . . . . . . . . . . . . . . . . . -39-
12.8 LITIGATION SUPPORT . . . . . . . . . . . . . . . . . . . . . . . . . -39-
ARTICLE 13
TERMINATION OF AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . -39-
13.1 TERMINATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . -39-
13.2 SURVIVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -40-
ARTICLE 14
CERTAIN ADDITIONAL AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . -41-
14.1 PUBLIC STATEMENTS; CONFIDENTIALITY OF INFORMATION. . . . . . . . . . -41-
14.2 REASSIGNMENT OF SELLER RECEIVABLES . . . . . . . . . . . . . . . . . -41-
14.3 EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -41-
14.4 WAIVERS AND CONSENTS . . . . . . . . . . . . . . . . . . . . . . . . -41-
14.5 NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -42-
14.6 FURTHER ASSURANCES . . . . . . . . . . . . . . . . . . . . . . . . . -43-
14.7 RETENTION OF/ACCESS TO BUSINESS RECORDS. . . . . . . . . . . . . . . -43-
14.8 AUDIT BY RII SUB AND PARENT. . . . . . . . . . . . . . . . . . . . . -43-
14.9 ENTIRE AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . -43-
14.10 CONSTRUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . -44-
14.11 RIGHTS OF THIRD PARTIES. . . . . . . . . . . . . . . . . . . . . . . -44-
14.12 HEADINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -44-
14.13 GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . . . . . . . -44-
14.14 SUBMISSION TO JURISDICTION; WAIVERS. . . . . . . . . . . . . . . . . -44-
14.15 PARTIES IN INTEREST. . . . . . . . . . . . . . . . . . . . . . . . . -45-
14.16 COUNTERPARTS AND FACSIMILE SIGNATURES. . . . . . . . . . . . . . . . -45-
14.17 SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . -45-
14.18 CORPORATE AUTHORITY. . . . . . . . . . . . . . . . . . . . . . . . . -45-
14.19 PAYMENT OF ACCOUNTS PAYABLE. . . . . . . . . . . . . . . . . . . . . -45-
LIST OF EXHIBITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -48-
LIST OF SCHEDULES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -49-
(v)
ASSET PURCHASE AGREEMENT
THIS AGREEMENT is made as of the 21st day of May, 1998, by and among
RECYCLING INDUSTRIES OF CHARLOTTE, INC., a Colorado corporation ("RII Sub"),
RECYCLING INDUSTRIES, INC., a Colorado corporation ("Parent"), REPUBLIC ALLOYS,
INC., a North Carolina corporation ("Seller"), Xxxxxxx X. Xxxxx, President and
an individual shareholder of Seller ("Xxxxx"), Xxxx X. Xxxxx, an individual
shareholder of Seller ("Xxxxx"). Throughout this Agreement, RII Sub and the
Parent may be collectively referred to as "Recycling;" and Xxxxx, and Xxxxx may
be collectively referred to as the "Shareholders." There are numerous other
defined terms which are capitalized in this Agreement, all of which are defined
in the substantive provisions of this Agreement or in Article 1, below.
WITNESSETH:
WHEREAS, RII Sub is a wholly-owned subsidiary of the Parent;
WHEREAS, RII Sub desires to acquire certain assets of Seller and Xxxxx
consisting of substantially all of the tangible and intangible assets and real
property used in the ferrous and non-ferrous metals recycling business conducted
by Seller at its facility located in Charlotte, North Carolina, and those
certain administrative office and other assets, as hereinafter identified, used
in connection with the operation of Seller's facility (collectively the "Seller
Assets");
WHEREAS, Seller and Xxxxx desire to sell the Seller Assets;
WHEREAS, the Parent has a vested interest in the transactions referred to
herein and is a party to this Agreement, amongst other things, in order to
tender the Preferred and Common Stock Consideration referred to herein; and
WHEREAS, Xxxxx and Xxxxx in their capacity as Shareholders, as defined
below, have a vested interest in the transactions referred to herein and are
parties to this Agreement in order to make certain representations and
warranties and to accept certain obligations set forth herein.
NOW, THEREFORE, for and in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt, adequacy and sufficiency of which are hereby acknowledged, the parties
hereto covenant and agree as follows:
ARTICLE 1
DEFINITIONS
Unless otherwise defined in the substantive provisions of this Agreement,
the following terms will have the meanings ascribed to them in this Article 1.
-1-
1.1 "Acquisition" means the acquisition of the Seller Assets from
Seller.
1.2 "Assumed Contracts" means those contracts, leases and other
agreements to which Seller is a party or beneficiary or which otherwise affect
the Business, including, but not limited to, open orders to purchase raw
materials or services in accordance with the Business' normal operating
procedures, leases of real or personal property relating to the Business,
software licenses, all purchase orders, back orders, open orders or contracts
from customers, including the backlog and parts manufactured for or assigned to
Seller.
1.3 "Business" means the metals recycling business as conducted by
Seller on February 16, 1998, and subsequent thereto, as a going concern.
1.4 "Closing" means the closing of the Transaction.
1.5 "Closing Date" means the date and time of the Closing as specified
by RII Sub in the Closing Notification delivered pursuant to Section 3.5, below.
1.6 "Closing Documents" means the other agreements, documents of title,
certificates, opinions and other documents required to be executed and delivered
under this Agreement as provided in Article 11, hereof.
1.7 "Closing Notification" the notice of the date and time of Closing
given by RII Sub to Seller in accordance with Section 3.5, below.
1.8 "Employee Benefit Plan" means any: plan, arrangement, agreement or
program which is: (a) an employee benefit plan as defined in Section 3(3) of the
ERISA, whether or not funded and whether or not terminated, (b) an employment
agreement, or (c) a personnel policy or fringe benefit plan, policy, program or
arrangement, whether or not subject to ERISA, whether or not funded, and whether
or not terminated, including without limitation, any stock bonus, deferred
compensation, pension, severance, bonus, vacation, travel, incentive, health,
disability or other pension or welfare plan.
1.9 "Environmental Law or Laws" means any and all federal, state, local
or municipal laws, rules, orders, regulations, statutes, treaties, ordinances,
codes, decrees, or requirements of any governmental authority regulating,
relating to or imposing liability or standards of conduct concerning
environmental protection, health or safety matters, including all requirements
pertaining to reporting, licensing, permitting, investigation, removal or
remediation of emissions, discharges, releases, or threatened releases of
Hazardous Materials, chemical substances, pollutants or contaminants or relating
to the manufacture, generation, processing, distribution, use, treatment,
storage, disposal, transport, or handling of Hazardous Materials, chemical
substances, pollutants or contaminants, including, without limitation, the
Comprehensive Environmental Response, Compensation and Liability Act of 1980
("CERCLA"), the Toxic Substance Control Act ("TSCA"), the Resource Conservation
and Recovery Act
-2-
("RCRA"), the Clean Air Act ("CAA"), the Clean Water Act ("CWA") and the
Occupational Safety and Health Act of 1970 ("OSHA"), all as may have been
amended.
1.10 "Environmental Liabilities" means any and all liabilities for the
violation of, or remediation under, any Environmental Laws.
1.11 "ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
1.12 "GAAP" means generally accepted accounting principles consistently
applied in the United States.
1.13 "Hazardous Materials" means any substance (a) the presence of which
at, on, over, beneath, in or upon any real or personal property, building,
structure, container of any nature or description, subsurface strata, ambient
air or ambient water (including surface and groundwater) requires investigation,
removal or remediation under any Environmental Law or common law, (b) which is
or becomes defined as a "hazardous substance," "hazardous material," "hazardous
waste," "pollutant" or "contaminant" under any Environmental Law, and/or (c)
which is toxic, explosive, corrosive, flammable, infectious, radioactive,
carcinogenic, mutagenic, or otherwise hazardous and is or becomes regulated by
any governmental authority under any Environmental Law, (d) the presence of
which causes or threatens to cause a nuisance or trespass upon real property or
to adjacent properties or poses or threatens to pose a hazard to the
environment, and/or to the health or safety of persons on or about any real
property, and/or (e) which contains urea-formaldehyde, polychlorinated
biphenyls, asbestos or asbestos containing materials, radon, petroleum or
petroleum products.
1.14 "HSR Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976, 15 U.S.C. Sections 18a.
1.15 "Intellectual Property" has the meaning set forth in Section 2.1(e).
1.16 "IRC" means the Internal Revenue Code of 1986, as amended.
1.17 "Knowledge" with respect to individuals means actual knowledge
without independent investigation and with respect to corporations means
knowledge of the executive officers and directors of the corporation, PROVIDED,
HOWEVER, the knowledge of a particular party shall not be imputed to any other
individual party.
1.18 "Lender" means Recycling's primary lender or equity participant
relating to the Transaction, including, without limitation, those individuals
and entities listed on Schedule 1.18.
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1.19 "Liability or Liabilities" means direct or indirect indebtedness,
liability, claim, loss, damage, deficiency, obligation or responsibility, known
or unknown, asserted or unasserted, fixed or unfixed, liquidated or
unliquidated, secured or unsecured, accrued, absolute, contingent or otherwise
which affects or could affect the Seller Assets or the Business, including any
liability for Taxes.
1.20 "Market Price" when referring to the Parent Common Stock, means the
closing price for the Parent Common Stock if it is listed on a national
securities exchange or the Nasdaq National Market or the average of the last
reported bid and asked price for the Parent Common Stock as reported on the
Nasdaq SmallCap Market.
1.21 "Material Assumed Contracts" means all Assumed Contracts other than
(a) contracts which do not require payment by Seller of $10,000 or more per year
and which otherwise are not material to the Business, (b) contracts in the
Ordinary Course of Business which do not require expenditures by Seller of
$10,000 or more per year, and (c) contracts terminable upon notice of 60 days or
less and which do not require expenditures by Seller of $10,000 or more per
year. The Material Assumed Contracts are listed on Schedule 1.21.
1.22 "Ordinary Course of Business" or "Ordinary Course" means the
ordinary course of business consistent with past custom and practice of Seller
(including with respect to quantity and frequency).
1.23 "Owned Facilities" means the real property and associated fixtures
owned by Xxxxx as specifically described on Schedule 2.1(a).
1.24 "Parent Common Stock" means the common stock, $.001 par value per
share, of Recycling Industries, Inc., a Colorado corporation.
1.25 "Parent Series K Preferred" means the Redeemable Convertible
Preferred Stock of Parent described in the Designation of Series K Redeemable
Convertible Preferred Stock attached hereto as EXHIBIT A.
1.26 "Permits" means all licenses, permits, orders and approvals of any
federal, state or local governmental or regulatory bodies that are material to
or necessary for the conduct of the Business.
1.27 "Person" means any individual, corporation, partnership, limited
liability company, joint venture, trust, association, unincorporated
organization, agency, other entity or groups of entities, or governmental body.
1.28 "Prepared Inventory" means all ferrous and non-ferrous scrap metal
inventory that has been processed or at the time of purchase was in a form that
historically was deemed
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saleable without processing by Seller and as of the Closing Date is ready for
shipment to Seller's customers.
1.29 "Retained Receivables" means any receivables of any nature arising
out of the Seller's crane and equipment sale, leasing and repair business which
are listed on Schedule 1.29.
1.30 "Security Interest" means any mortgage, pledge, security interest,
encumbrance, charge, claim, or other lien, other than: (a) mechanic's,
materialman's and similar liens; (b) liens for Taxes not yet due and payable or
for Taxes that the taxpayer is contesting in good faith through appropriate
proceedings; (c) liens arising under worker's compensation, unemployment
insurance, social security, retirement and similar legislation; (d) liens
arising in connection with sales of foreign receivables; (e) liens on goods in
transit incurred pursuant to documentary letters of credit; (f) purchase money
liens and liens securing rental payments under capital lease arrangements; and
(g) other liens arising in the Ordinary Course of Business and not incurred in
connection with the borrowing of money.
1.31 "Seller Financial Statements" means the financial statements, other
than tax returns, delivered pursuant to Section 4.4, below.
1.32 "Seller Payables" means all payables of any nature arising out of
the Business, including accounts and notes payable.
1.33 "Seller Receivables" means all receivables of any nature arising out
of the Business, including accounts and notes receivable but excluding any
receivables that have been outstanding for more than 60 days as of the Closing
Date.
1.34 "Supply Inventory" means all of the parts, equipment, fuel,
lubricants, office supplies or other items consumed by or used in the operations
of the Business or the repair and maintenance of the Seller's vehicles,
machinery and equipment used in the operation of the Business, but does not
include any inventory spare parts or tools for use in the Seller's crane and
equipment sales, leasing and repair business.
1.35 "Tangible Property" shall include the property described in Sections
2.1(a), 2.1(d), 2.1(h), and 2.1(i), below.
1.36 "Tax" means any federal, state, local or foreign income, gross
receipts, capital stock, franchise, profits, withholding, social security,
unemployment, disability, real property, personal property, stamp, excise,
occupation, sales, use, transfer, value added, alternative minimum, estimated,
net worth, self-employment, Medicaid, or other tax, including any interest,
penalty or addition thereto, whether disputed or not.
1.37 "Transaction" means the transactions contemplated by this Agreement
and the Closing Documents.
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1.38 "Unprepared Inventory" means: (i) all scrap ferrous metal
comprised of materials such as obsolete, discarded or abandoned machinery,
appliances, equipment, automobiles, metal manufacturing scrap, casting and
fabricating scrap materials or other consumer and industrial ferrous goods or
by-products to be processed by shearing, torching, baling or otherwise
rendered suitable by Seller for its customers' consumption; and (ii) scrap
non-ferrous metal comprised of various non-magnetic alloys or co-mingled
ferrous and non-ferrous which traditionally would be processed by Seller
before shipment. Unprepared Inventory does not include any non-saleable
ferrous or non-ferrous materials resulting from Seller's operations or
contained within dirt or other non-processable medium within the Owned
Facilities.
1.39 "1934 Act" means the Securities Exchange Act of 1934, as amended.
ARTICLE 2
ACQUISITION OF SELLER ASSETS
2.1 PURCHASE AND SALE OF THE SELLER ASSETS. At the Closing and subject
to the terms and conditions stated herein, Seller agrees to sell, assign, convey
and transfer to RII Sub, and RII Sub agrees to purchase from Seller, the Seller
Assets together with all of the properties, rights and goodwill associated
therewith of every kind and description, tangible and intangible, personal or
mixed, as hereinafter more particularly described, with the exception of the
Excluded Assets, as defined in Section 2.2. Without limitation, the Seller
Assets shall include all of the items enumerated in subparagraphs (a) through
(n) below (with the exception of the Excluded Assets):
(a) The Owned Facilities, including all buildings situated
thereon and all real property leasehold improvements and all rights in
easements, driveways and signs, as legally described on Schedule 2.1(a).
(b) All Seller Receivables other than the Retained Receivables,
including those listed on Schedule 2.1(b);
(c) All Unprepared Inventory, Processed Inventory and Supply
Inventory;
(d) All vehicles, machinery and equipment, tools, furniture,
leasehold improvements, fixtures, vehicles, dies, jigs, and supplies, or any
related capitalized items and other tangible property owned by Seller and used
in the Business as of the date of this Agreement located at the Owned Facilities
or over the road or at any other location, all as described on Schedule 2.1(d),
provided that dies, jigs, supplies, tools and spare parts used in the Business
are included in the Seller Assets whether or not listed on Schedule 2.1(d).
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(e) Schedule 2.1(e) sets forth all of the intellectual
property, proprietary and business information of Seller relating to the
Business, including, all of Seller's right, title and interest in and to
(collectively the "Intellectual Property"):
(1) the exclusive use of the name "Republic Alloys," and any
variations thereof;
(2) all transferrable Permits and telephone and facsimile
numbers used by Seller to the extent the same are transferrable by Seller;
(3) the exclusive right to all inventions, discoveries, trade
secrets, designs, prototypes, formulas and know-how relating to the
Business;
(f) All patents (whether issued or pending), copyrights,
trademarks and tradenames;
(g) All business, financial and tax records relating to the
Business, including all sales data, pricing and cost information, customer and
supplier lists, credit records, sales literature and business and marketing
plans relating to the Business.
(h) All computer documentation, computer files, computer disks,
computer tapes and all information stored on computer media (whether written,
optical, or magnetic) used in connection with the operation of the Business and
stored at the Owned Facilities or used at the Seller Offices in connection with
the operation of the Business.
(i) All accounting and other computer software relating to the
Business owned by Seller, including information interfaced with those systems,
as maintained by Seller at the Owned Facilities or the Seller Offices, all of
which are listed on Schedule 2.1(i); provided, however, that Seller shall not
make any warranties with respect to any software.
(j) All rights to customer and supplier lists, signs,
advertising, catalogues and brochures relating to the Business.
(k) All goodwill and other general intangibles related to the
Seller Assets.
(l) All claims, deposits, prepayments, refunds, rights of Seller
under the Assumed Contracts, causes of action, chooses in action, rights of
recovery, rights of set-off and rights of recoupment related to the Seller
Assets or the Business, except for any income or employment tax refunds.
(m) All other assets of any nature useful and/or beneficial to
the Business and located at the Owned Facilities whether owned or leased by
Seller unless specifically described in Section 2.2 or on Schedule 2.2 as an
Excluded Asset.
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Seller's sale, conveyance, assignment and transfer of the Seller Assets
shall be free and clear of all Security Interests, encumbrances, liabilities or
other obligations, except for those that have been insured over in the title
insurance policy obtained by RII Sub pursuant to Section 8.1.
2.2 EXCLUDED ASSETS. On the Closing Date, RII Sub shall not purchase
the assets of Seller on the Closing Date as set forth on Schedule 2.2 (the
"Excluded Assets").
2.3 ASSUMED CONTRACTS. RII Sub shall assume the obligations of Seller
under the Assumed Contracts.
2.4 ASSUMPTION OF LIABILITIES. Other than as provided in Section
2.3, RII Sub shall not assume any Liabilities or Environmental Liabilities of
Seller arising on or before the Closing or with respect to any action, event
or occurrence of any party on or prior to the Closing, provided, however,
that ad-valorem taxes on the Seller Assets not yet due and payable shall be
pro-rated at Closing based on the preceding year's actual ad-valorem taxes
paid and RII Sub shall assume its pro-rata share of such taxes.
2.5 COLLECTION OF ACCOUNTS RECEIVABLE.
(a) If Seller receives payment on any of the Seller Receivables
included in the Seller Assets, Seller shall forthwith forward the same to RII
Sub. RII Sub shall have the right, during the normal business hours of Seller,
to review records of Seller solely to determine compliance with the provisions
of Section 2.5(a).
(b) If RII Sub receives payment on any Retained Receivables or
any receivables assigned back to the Seller pursuant to Section 14.2, RII Sub
shall forthwith forward same to Seller. Seller shall have the right, during
normal business hours of RII Sub, to review the records of RII Sub solely to
determine compliance with the provisions of this Section 2.5(b).
(c) The provisions of this Section 2.5 shall survive the
Closing.
2.6 LEASE TO SELLER. On the Closing Date, RII Sub will lease to
Seller the office, shop and storage space located on the portion of the Owned
Facilities formerly used as a truck terminal (the "Terminal Lease"). The
Lease shall provide, among other things, for the lessee to be responsible for
its pro-rata share of utilities, taxes and insurance on the leased premises,
for rental at the rate of $1.00/annum, and for a term of five years with two
five year renewals at the option of the Seller and early termination
available to either party on six months prior written notice. Lessee shall
be responsible for any upfitting or improvements to the premises provided
that any such improvements shall become the property of the lessor upon
termination of the Terminal Lease. The Terminal Lease shall not be assigned
or transferred by Seller nor may Seller sublet any portion of the Terminal
Lease without the prior written consent of RII Sub. The form of Terminal
Lease is attached hereto as Exhibit A.
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ARTICLE 3
PURCHASE PRICE AND CLOSING
3.1 PURCHASE PRICE FOR SELLER ASSETS.
(a) At Closing, RII Sub shall pay the total amount of
$12,700,000, plus the Market Price of the Common Stock Consideration, as
defined below, on the day immediately preceding the Closing Date, subject to
adjustment in accordance with Section 3.3(a) below (the "Purchase Price") to
Seller and Xxxxx for the purchase of the Seller Assets. The Purchase Price
shall be payable as follows:
(1) $10,160,000, as adjusted in accordance with Section 3.3(a)
below, in immediately available funds (the "Cash Consideration");
(2) $2,540,000 of Parent Series K Preferred (the "Preferred
Stock Consideration") delivered at Closing pursuant to the terms of a
customary subscription agreement (the "Preferred Subscription Agreement").
The form of Preferred Subscription Agreement is attached hereto as Exhibit
B; and
(3) 30,000 shares of Parent Common Stock (the "Common Stock
Consideration") delivered at Closing pursuant to the terms of a customary
subscription agreement containing piggyback registration right for the
Common Stock Consideration (the "Common Subscription Agreement"). The form
of Common Subscription Agreement is attached hereto as Exhibit D.
The amount of the Cash Consideration, Preferred Stock Consideration and
Common Stock Consideration to be paid to each of the Seller and Xxxxx at Closing
shall be as set forth on Schedule 3.1.
3.2 INVENTORY VALUATION.
(a) The aggregate value of the Processed and Unprocessed
Inventory shall be determined jointly by representatives of the Seller and
Recycling prior to the Closing Date, and such value will be set forth on
Schedule 3.2, initialed by Seller and Recycling. This valuation shall be
updated to the Closing Date by adjusting for all shipments in and out and
changes in accounts receivable which occur through the close of business the
date immediately preceding the Closing Date. For purposes of calculating the
value of inventory, Unprepared Inventory shall be valued at a price equal to
the average price Seller has paid for comparable material received across its
scales in the ten business days immediately preceding the valuation, and
Prepared Inventory shall be valued at market price, less the cost of
shipping.
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(b) If the parties are not able to mutually determine the
value of the inventory and receivables, an independent third party shall be
jointly selected by Seller and Recycling to determine such value. The value
determination by such third party shall be binding on Seller and Recycling.
The Closing shall occur as soon as practicable after third party value
determination, if such is required, provided all other conditions to Closing
are satisfied or waived.
3.3 ADJUSTMENT OF THE PURCHASE PRICE.
(a) PRE-CLOSING ADJUSTMENTS.
(i) The aggregate value of Processed and Unprocessed
Inventory and Seller Receivables, net of any reserves, included in the Seller
Assets, as determined in accordance with Section 3.2 shall not be less than
$1,650,000 on the Closing Date. If the value of the Processed and
Unprocessed Inventory and Seller Receivables exceeds or is less than this
amount, the Purchase Price shall be adjusted accordingly and the Cash
Consideration shall be increased or decreased, as appropriate, to reflect the
adjustment; and
(ii) The Cash Consideration shall be reduced by the amount of
accrued liabilities assumed by RII Sub in connection with the Sellers Assets,
including accrued employee benefits such as vacation and sick leave, on a
pro-rata basis to the Closing Date and increased by (i) the amount of prepaid
assets acquired by RII Sub in connection with the Sellers Assets (e.g.
prepaid postage), (ii) the cost of roll offs and/or lugger pans purchased by
Seller as provided by Section 8.4; (iii) the cost of stationary and other
office supplies purchased by Seller at Recycling's request and not used prior
to closing, and (iv) deposits in accounts opened by Seller at Recycling's
request prior to Closing.
(b) POST-CLOSING ADJUSTMENT. If the parties are not able to
complete the adjustments contemplated by Sections and 3.3(a) immediately
prior to the Closing, within 45 days after the Closing such adjustments shall
be completed and an adjustment payment, in immediately available funds, will
be made by the party who is determined to be responsible therefor no later
than the 50th day after the Closing.
3.4 ALLOCATION OF THE PURCHASE PRICE.
(a) The Purchase Price shall be allocated among the Seller
Assets as set forth on Schedule 3.4.
(b) The parties agree that they will not take any tax or
other position inconsistent with any allocation of the Purchase Price set
forth on Schedule 3.4. RII Sub shall provide to Seller a Treasury Form 8594
within 45 days following the Closing Date.
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(c) RII Sub and Seller each covenant with the other that it
will promptly give written notice to the other of any inquiry or challenge of
such allocation by any federal, state or local tax authority.
3.5 CLOSING OF THE PURCHASE. The Closing shall take place at the
offices of Friedlob Xxxxxxxxx Xxxxxx Xxxxxxx & Xxxxxxxxxxx, LLC, 1400 Glenarm
Place, Third Floor, Denver, Colorado, or at such other place as selected by
the Lender, in its sole and absolute discretion, on the Closing Date set
forth in the Closing Notification, given by RII Sub in accordance with this
section. The Closing Date shall be no later than May 31, 1998, PROVIDED,
HOWEVER, the Closing Date will be automatically extended to a date that is
not less than 45 days after delivery of the Remediation Estimates as provided
in Section 7.2.
3.6 ADDITIONAL COMPENSATION. As additional compensation, RII Sub
will pay to Seller the net rents received, as and when received, from
independent third parties currently renting space on the Owned Facilities as
listed on Schedule 3.6. Such payments will be net of costs associated with
the relevant parcels of real property, including but not limited to real
estate taxes and assessments, insurance and utilities. RII Sub will make
such payments to Seller for so long as the property is leased to independent
third parties. Seller acknowledges that RII Sub intends to terminate such
leases as soon as practicable and then to utilize such real property in the
operation of its scrap metal recycling business.
ARTICLE 4
REPRESENTATIONS OF SELLER AND THE SHAREHOLDERS
As an inducement to Recycling to enter into this Agreement and to
complete the Transaction, and with the knowledge that Recycling will rely
thereon, Seller and the Shareholders, jointly and severally, represent and
warrant to Recycling that all of the representations and warranties in this
Article 4 are true, correct and complete as of the date of this Agreement and
as of the Closing Date.
4.1 DUE ORGANIZATION AND QUALIFICATION. (a) Seller is a corporation
duly organized, validly existing and in good standing under the laws of North
Carolina and has the corporate power and lawful authority to carry on its
business as now being conducted.
(b) Seller is duly qualified or otherwise authorized to
transact business in each jurisdiction, listed in Schedule 4.1(b), in which
the nature of the business conducted or the character or location of the
properties owned makes such qualification necessary.
4.2 TITLE TO PROPERTY. Seller has good, valid and marketable title
to all real and personal property and Xxxxx has good, valid and marketable
title to all real property included in the Seller Assets (tangible and
intangible), in each case subject to no Security Interest, option, right of
first refusal, or other restriction of any kind or character, other than
those exceptions
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acceptable to RII Sub in its reasonable discretion and included as an
exception to the title policy to be obtained by RII Sub.
4.3 AUTHORITY OF SELLER; CONSENTS. (a) Seller and the Shareholders
have full power and authority to execute and deliver this Agreement and the
Closing Documents and to carry out the Transaction and Seller and the
Shareholders have taken all requisite corporate, partnership, or other action
to authorize the execution, delivery and performance of the Closing Documents.
(b) This Agreement and the Closing Documents are valid and
binding agreements of Seller and the Shareholders enforceable in accordance
with their terms.
(c) Except for any necessary consents to the Material Assumed
Contracts, no consent, authorization or approval of, or declaration, filing
or registration with, any governmental or regulatory authority or any
consent, authorization or approval of any other third party is required to
enable Seller to enter into and perform its obligations under this Agreement
and the Closing Documents, and neither the execution and delivery of this
Agreement and the Closing Documents nor the consummation of the Transaction
by Seller or the Shareholders will:
(1) Be in violation of its respective Articles of Incorporation,
Bylaws or any other organizational document, or constitute a breach of any
evidence of indebtedness or agreement to which they are a party;
(2) Cause a default under any mortgage or deed of trust or other
lien, charge or encumbrance to which any of the Seller Assets is subject or
under any contract to which they are a party, or permit the termination of
any such contract by another person;
(3) Result in the creation or imposition of any Security
Interest upon any of the Seller Assets under any agreement or commitment to
which they or the Seller Assets are bound;
(4) Conflict with or result in the breach of any writ,
injunction or decree of any court or governmental instrumentality;
(5) Violate any statute, law or regulation of any jurisdiction
as such statute, law or regulation related to the Seller Assets; or
(6) Violate or cause any revocation of, or limitation on, any
Permit.
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4.4 FINANCIAL STATEMENTS.
(a) On or before May 15, 1998, Seller will furnish to Recycling
the following financial information, Schedules, and other disclosures:
(1) Audited financial statements for the Business as of and for
its fiscal years ended December 31, 1997 and 1996, prepared in accordance
with GAAP (the "Audited Financial Statements"). RII Sub will reimburse
Seller for the cost of the audit as of and for the year ended December 31,
1996.
(2) Unaudited financial statements for the Business as of and
for the years ended December 31, 1995 and 1996 and monthly and year to date
financial statements for each monthly period commencing January 1, 1998
through the Closing Date prepared in the same manner which they are
currently prepared (collectively the "Unaudited Financial Statements").
(3) Copies of Seller's tax returns for its tax years ended in
1993, 1994, 1995 and 1996.
(b) The Audited Financial Statements have been prepared in
accordance with GAAP and the Unaudited Financial Statements will be or have been
prepared in the same manner which they are currently prepared and present fairly
the financial condition of Seller as of such dates and the results of operations
of Seller for such periods; PROVIDED, HOWEVER, that the Unaudited Financial
Statements are subject to normal year-end adjustments and lack footnotes and
other presentation items.
(c) Since December 31, 1997, there has been (1) no material
adverse change in the assets or liabilities, or in the business or financial
condition or in the results of operations of the Business, whether as a result
of any legislative or regulatory change, revocation of any Permits, fire,
explosion, accident, casualty, labor trouble, flood, drought, riot, storm,
condemnation or act of God or other public force or otherwise; and (2) no change
in the assets or liabilities, or in the Business or condition, financial or
otherwise, or in the results of operations, or any loss of customers or
prospects of Seller, except in the Ordinary Course which have not, in the
aggregate or individually, had a material adverse effect on the Business.
4.5 NO TAX LIENS; NO WAIVER.
(a) None of the Seller Assets are subject to any lien in favor
of the United States pursuant to the IRC for nonpayment of federal taxes, or any
lien in favor of any state under any comparable provision of state law, under
which transferee liability might be imposed upon RII Sub as purchaser under the
IRC or any comparable provision of state or local law, except for ad-valorem
taxes which are not yet due and payable.
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(b) Seller has not waived any statute of limitations with
respect to the assertion of any liability under any federal, state, or local tax
law.
(c) Except as provided on Schedule 4.5(c), Seller is not in
default under, nor has it failed to pay, any Tax liability to any federal,
state, or local authority, and no audit or other review by any such authority is
pending, or, to the Knowledge of Seller and the Shareholders, contemplated.
4.6 COMPLIANCE WITH LAWS. Except as set forth on Schedule 4.6:
(a) Neither Seller nor any of the Shareholders is in violation
or has violated any applicable order, judgment, injunction, award or decree
relating to the Seller Assets. To the Knowledge of Seller and the Shareholders,
except as disclosed on Schedule 4.25 or otherwise disclosed in the Environmental
Studies, neither Seller nor the Shareholders has violated or is in violation of
any federal, state, local or foreign law, ordinance or regulation or any other
requirement of any governmental or regulatory body, court or arbitrator
applicable to the Seller Assets.
(b) Without limiting the generality of the foregoing (1) the
buildings included in the Owned Facilities do not encroach on the property of
others, (2) except as otherwise disclosed on Schedule 4.25 or in the
Environmental Studies, there is not pending or threatened any notification of
any governmental authority that Seller is not in compliance with applicable laws
and regulations respecting employment and employment practices, occupational
safety and health laws and regulations, and Environmental Laws, and neither
Seller nor any Shareholder has Knowledge of any basis therefor, and (3) except
as disclosed on Schedule 4.25, neither Seller nor any Shareholder has received
any such notification of past violations of such laws or regulations which have
not been resolved.
4.7 PERMITS. Schedule 4.7 lists all Permits required by any
governmental entity related to the Business or operations of Seller. Except as
described on Schedule 4.7 Seller validly holds all Permits and all Permits are
in full force and effect and no proceeding to revoke or limit any of such
Permits is pending or, to the Knowledge of Seller or any Shareholder,
threatened.
4.8 LITIGATION. Except as set forth on Schedule 4.8, there are no
outstanding orders, judgments, injunctions, awards or decrees of any court,
governmental or regulatory body or arbitration tribunal against or involving the
Seller Assets or the Business. There are no actions, suits or claims against
Seller or any Shareholder, or, to the Knowledge of Seller or any Shareholder,
investigations (whether or not the defense thereof or liabilities in respect
thereof are covered by insurance) pending or, to the Knowledge of Seller or any
Shareholder, threatened against or involving the Seller Assets or the Business,
nor to the Knowledge of Seller or any Shareholder, is there any basis therefor.
Responsibility for any litigation involving the Seller Assets or the Business
pending or arising from acts that occurred prior to the Closing and the
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satisfaction of judgments (including related costs and fees) shall remain with
Seller and the Shareholders.
4.9 CONTRACTS AND OTHER AGREEMENTS.
(a) Except for the contracts and agreements listed on Schedule
4.9(a), the Assumed Contracts or the contracts, leases, and other agreements
which will be completed or canceled at or prior to the Closing, Seller is not a
party to any (1) contract for the employment of any officer or individual
employee, (2) contract with any union, (3) bank loan or other credit agreement,
(4) bonus, deferred compensation, profit sharing, pension or retirement
arrangement, (5) lease for real or personal property, (6) partnership or joint
venture agreement, or (7) other material contract, agreement or commitment.
(b) All of the contracts, leases and other agreements which
constitute a part of the Assumed Contracts are valid and binding upon Seller in
accordance with their terms, and Seller is not in default nor has it received
any notice of default under, or with respect to, any such contracts, leases, or
other agreements.
(c) No approval or consent of any Person is needed in order that
the contracts, leases, and other agreements which are listed on Schedule 1.21
will continue in full force and effect following the completion of the
Transaction. Seller is not in the process of negotiating or entering into any
contracts, leases, or other agreements described in this Section 4.9.
4.10 NOTES AND ACCOUNTS RECEIVABLE. The Seller Receivables are reflected
properly in the books and records of Seller, are valid receivables subject to no
setoffs or counterclaims, are current, not over 60 days old and are collectible
and will be collected at their recorded amounts within 60 days after the
Closing, subject only to the reserve for bad debts set forth on the face of the
Seller Financial Statements. Seller Receivables not timely collected as
provided herein shall be subject to reassignment to Seller in accordance with
Section 14.2.
4.11 TANGIBLE PROPERTY. All Tangible Property being used in the Business
at the date hereof or thereafter is in good operating condition and repair,
subject only to normal wear and tear. Neither Seller nor any of the
Shareholders has received notice that any of the Tangible Property is in
violation of any existing law or any building, zoning, health, safety or other
ordinance, code or regulation.
4.12 INVENTORY. The piles of Unprepared and Prepared Inventory included
in the Seller Assets are located on level ground and are comprised solely,
throughout the pile, of the quality and grade of material visible on the outer
surface of the pile.
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4.13 INTELLECTUAL PROPERTY.
(a) All Intellectual Property is owned outright by Seller, free
and clear of any Security Interest and there exist no obligations with respect
to any Intellectual Property requiring Seller to make any payment in respect of
its use or otherwise. Seller has never agreed to indemnify any Person for or
against any interference, infringement, misappropriation or other conflict with
respect to the Intellectual Property.
(b) Neither Seller nor any of the Shareholders is aware of any
patent, invention, trade secret, trademark, service xxxx, trade name or
copyright of any other Person that is infringed by Seller, nor do they have
notice of any infringement claim of any other Person relating to any of the
Intellectual Property or any process or confidential information of Seller, and
neither Seller nor the Shareholders know of any basis for any such charge or
claim.
4.14 REAL PROPERTY. The Owned Facilities include all real property
included in the Seller Assets. To the Knowledge of Seller and the Shareholders,
with respect to each parcel of owned real property included within the Owned
Facilities:
(a) Except as otherwise disclosed herein or in the Environmental
Studies the Owned Facilities have received all approvals of governmental
authorities (including licenses and permits) required in connection with the
ownership or operation thereof and have been operated and maintained in
accordance with applicable laws, rules and regulations including zoning.
(b) There are no leases, subleases, licenses, easements,
concessions, or other agreements, written or oral, granting to any party or
parties the right of use or occupancy of any portion of the Owned Facilities
except such short-term tenancies as are identified on Schedule 3.6 and except
those matters reflected on the Survey described in Section 8.2.
(c) There are no outstanding options or rights of first refusal
to purchase the Owned Facilities or any portion thereof or interest therein.
(d) with the exception of those short-term tenancies identified
on Schedule 3.6, there are no parties other than Seller in possession of the
Owned Facilities or any portion thereof.
(e) The Owned Facilities are supplied with utilities and other
services necessary for their operation, including electricity, water, telephone,
and sewage disposal, all of which services are adequate in accordance with all
applicable laws, ordinances, rules, and regulations and are provided ingress and
egress via public roads or via permanent, irrevocable, appurtenant easements
benefitting the Owned Facilities.
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4.15 LIABILITIES. Except as otherwise set forth in this Agreement or any
Schedule hereto, to the Knowledge of Seller and the Shareholders, the Business
has no Liabilities other than (a) Liabilities fully and adequately reflected or
reserved against in the Seller Financial Statements and (b) Liabilities incurred
since December 31, 1997, in the Ordinary Course of Business and (c) liabilities
for tax and accounting and legal services incurred in connection with this
transaction.
4.16 SUPPLIERS AND CUSTOMERS. Schedule 4.16 lists the 19 largest
suppliers and 13 largest customers of the Business and all customers and
suppliers of the Business whose purchases from or sales to the Business during
the preceding 12 months exceeded $25,000. All purchase orders and customer
contracts were issued by Seller in the Ordinary Course of Business. There are
no agreements or understandings with any customers of the vendors to Seller as
to adjustments in pricing or cost which would reduce the profit margin of any
existing or contemplated contract or other relationship.
4.17 EMPLOYEE BENEFIT PLANS.
(a) Schedule 4.17 contains an accurate and complete list of all
Employee Benefit Plans, contributed to, maintained or sponsored by Seller, to
which Seller is obligated to contribute or with respect to which Seller has any
liability or potential liability, whether direct or indirect (collectively the
"Plans" or individually a "Plan").
(b) Except as disclosed in Schedule 4.17, Seller does not
contribute to, have an obligation to contribute to or otherwise have any
liability or potential liability with respect to (a) any Multiemployer Plan (as
such term is defined in Section 3(37) of ERISA), (b) any plan of the type
described in Sections 4063 and 4064 of ERISA or in Section 413 of the IRC (and
regulations promulgated thereunder), or (c) any plan which provides heath, life
insurance, accident or other welfare-type benefits to current or future retirees
or current former employees, their spouses or dependents, other than in
accordance with Section 4980B of the IRC or applicable state continuation
coverage law.
(c) Except as disclosed in Schedule 4.17, none of the Plans
obligates Seller to pay separation, severance, termination or similar-type
benefits solely as a result of any transaction contemplated by this Agreement or
solely as a result of a change in control, as such term is used in Section 280G
of the IRC (and regulations promulgated thereunder).
(d) Each Plan and all related trusts, insurance contracts, and
funds have been maintained, funded and administered in compliance in all
respects with all applicable laws and regulations, including but not limited to
ERISA and the IRC. None of Seller, any trustee or administrator of any Plan, or
any other Person has engaged in any transaction with respect to any Plan which
could subject Seller, or any trustee or administrator of any Plan, or any party
dealing with any Plan, or Recycling to any tax or penalty imposed by ERISA or
the IRC. No actions, suits, claims, complaints, charges, proceedings, hearings,
investigations, or demands
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with respect to the Plans (other than routine claims for benefits) are
pending or, to the Knowledge of Seller, threatened, and Seller has no
Knowledge of any facts which could reasonably be expected to give rise to any
actions, suits, claims, complaints, charges, proceedings, hearings,
investigations, or demands. No Plan that is subject to the funding
requirements of Section 412 of the IRC or Section 302 of ERISA has incurred
any accumulated funding deficiency as such term is defined in such Sections
of ERISA and the IRC, whether or not waived. No liability to the Pension
Benefit Guaranty Corporation (PBGC) (except for routine payment of premiums)
has been or is expected to be incurred with respect to any Plan that is
subject to Title IV of ERISA, no reportable event (as such term is defined in
Section 4043 of ERISA) has occurred with respect to any such Plan, and the
PBGC has not commenced or, to Seller's Knowledge, threatened the termination
of any Plan. None of the Seller Assets are the subject to any lien arising
under Section 302(f) of ERISA or Section 412(n) of the IRC, Seller has not
been required to post any security pursuant to Section 307 of ERISA or
Section 401(a)(29) of the IRC, and neither Seller, nor any officers or
directors of Seller, has Knowledge of any facts which could reasonably be
expected to give rise to such lien or such posting of security.
(e) Each Plan that is intended to be qualified under Section
401(a) of the IRC, and each trust (if any) forming a part thereof, has received
a favorable determination letter from the Internal Revenue Service as tot he
qualifications under the IRC of such Plan and the tax exempt status of such
related trust, and nothing has occurred since the date of such determination
letter that could adversely affect the qualification of such Plan or the tax
exempt status of such related trust.
(f) No underfunded defined benefit plan (as such term is defined
in Section 3(35) of ERISA) has been, during the five years preceding the Closing
Date, transferred out of the controlled group of companies (within the meaning
of Sections 414(b), (c), (m) and (o) of the IRC) of which Seller is a member or
was a member during such five-year period.
(g) As of the Closing Date, the fair market value of the assets
of each Plan that is a defined benefit pension plan equals or exceeds the
present value of all vested and non-vested liabilities thereunder determined in
accordance with applicable PBGC methods, factors and assumptions applicable to a
defined benefit pension plan terminating on such date. With respect to each
Plan that is subject to the funding requirements of Section 412 of the IRC and
Section 302 of ERISA, all required or recommended contributions for all periods
ending prior to or as of the Closing Date (including periods from the first day
of the then-current plan year to the Closing Date and including all quarterly
contributions required in accordance with Section 412(m) of the IRC) shall have
been made. With respect to each other Plan, all required or recommended
payments, premiums, contributions, reimbursements or accruals for all periods
ending prior to or as of the Closing Date shall have been made. No Plan has any
unfunded liabilities.
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(h) The Board of Directors of Seller (or committees or officers
authorized by such Board) has authority to amend or terminate the Plans at any
time without limitation (subject to the requirements of ERISA), and neither the
consideration or implementation of the transactions contemplated under this
Agreement nor the amendment or termination of any or all of the Plans on or
after the date of this Agreement will increase (a) the obligation of Seller to
make contributions or any other payments to fund benefits accrued under any
Employee Benefit Plans as of the date of this Agreement or (b) the benefits
accrued or payable with respect to any participant under any Employee Benefit
Plans.
(i) With respect to each Plan, Seller has provided Recycling
with true, complete and correct copies, to the extent applicable, of (a) all
documents pursuant to which the Plans are maintained, funded and administered,
(b) the two most recent annual reports (Form 5500 Series) filed with the
Internal Revenue Service (with attachments), (c) the two most recent actuarial
reports, (d) the two most recent financial statements, and (e) all governmental
rulings, determinations, and opinions (and pending requests for governmental
rulings, determinations, and opinions).
(j) Except as provided on Schedule 4.17(j), Seller does not
provide any post-retirement or post-employment health, life insurance, accident
or other welfare-type benefits. Schedule 4.17(j) includes the most recent
valuation (but in any case at least one that has been completed within the last
calendar year) of the present and future obligations with respect to Employee
Benefit Plans and benefits listed thereon, if any.
4.18 CURTAILMENT OF OPERATIONS. No labor disputes or work stoppages
involving the Business are pending or threatened which, either singly or in the
aggregate, might have an adverse effect on the Business. To the Knowledge of
Seller and the Shareholders, no material customer of or supplier to the Business
is involved in, or affected by, any dispute, arbitration, lawsuit, or
administrative proceedings which might materially adversely affect the Business,
operations, properties, assets or condition, financial or otherwise, of the
Business.
4.19 EMPLOYEE RELATIONS. Seller is not a party to a collective
bargaining agreement and, to its and the Shareholders' Knowledge, Seller is in
compliance with all federal, state or other applicable laws, domestic or
foreign, respecting employment and employment practices, terms and conditions of
employment (including issues related to independent contractor status of
personnel) and wages and hours, and Seller has not and is not engaged in any
unfair labor practice. There have been no organization efforts by any trade
unions within the last five years.
4.20 INSURANCE. Schedule 4.20 lists all insurance policies maintained by
Seller relating to the Business or the Owned Facilities, copies of which have
been provided to RII Sub, which cover the Seller Assets or the Business, the
nature of such policies, the amount and types of coverage, and the name of the
insurers and expiration dates. Seller has paid all premiums and other amounts
due on such policies and will not cancel any insurance or permit any insurance
to lapse or terminate prior to the Closing.
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4.21 POWERS OF ATTORNEY. There are no outstanding powers of attorney
executed on behalf of Seller, except in connection with Employee Benefit Plans.
4.22 RELATIONSHIPS. Except as described on Schedule 4.22, no officer or
director of Seller possesses, directly or indirectly, any financial interest in,
or is a director, officer, stockholder or employee of, any corporation, firm,
association or business organization which is a manufacturer for, or client,
supplier, customer, lessor, lessee, or competitor of the Business. The Business
is not indebted to any officer, director, partner, or employee of Seller or to
any entity in which any such Person has a financial interest.
4.23 BROKER'S OR FINDER'S FEES. No agent, broker, Person or firm acting
on behalf of Seller or the Shareholders is, or will be, entitled to any
commission or broker's or finder's fees from any of the parties hereto, or from
any Person controlling, controlled by or under common control with any of the
parties hereto, in connection with the Transaction.
4.24 EMPLOYEE TRANSITION. Schedule 4.24 lists all employees of Seller
who work or are customarily stationed at the Owned Facilities, their current
employment compensation (including 1997 bonus, if any), and other amounts if any
payable to each employee. Immediately prior to the Closing, Seller will
terminate all of its employees (the "Terminated Employees") and RII Sub will
hire all employees listed on Schedule 4.24 upon consummation of the Closing.
Seller will pay all compensation due the Terminated Employees on or before the
first day subsequent to the Closing. RII Sub will not be responsible for any
salaried or hourly health and life insurance obligations incurred prior to the
Closing for any Terminated Employees, nor for payment of claims to insureds, or
payment of any premiums for coverage prior to the Closing Date. All liabilities
of the Business to Terminated Employees will be retained by Seller, including
those accruing by reason of termination by Seller. All employees of Seller hired
by RII Sub will receive credit for their employment period with Seller for
purposes of determining vesting and eligibility under the terms of RII Sub's or
the Parent's Employee Benefit Plans, to the extent allowable under applicable
law, and will be entitled to take vacation time in accordance with the policies
of Seller (including credit for time employed by Seller).
4.25 ENVIRONMENTAL MATTERS. Except as may be provided in the
Environmental Studies to be performed as contemplated by Section 7.1 of this
Agreement, or disclosed on Schedule 4.25, to the Knowledge of Seller and the
Shareholders:
(1) No Hazardous Material has been disposed of on, released
to or from, threatened to be released to or from or is presently at, on,
beneath, in or upon any of the Owned Facilities or upon adjacent parcels of
real estate in amounts or concentrations which constitute or constituted a
violation of, or which could reasonably be expected to give rise to
liability under, any Environmental Law.
-20-
(2) There has been no generation, production, refining,
processing, manufacturing, use, storage, disposal, treatment, shipment or
receipt of a Hazardous Material at or from the Owned Facilities or relating
to the operation of Seller in violation of or in a manner that could give
rise to liability under Environmental Laws.
(3) The operations of Seller are in compliance and have
been in compliance with all applicable Environmental Laws, and there is no
violation of any Environmental Law with respect to the Owned Facilities
which could interfere with continued operation Seller's business or impair
its fair saleable value.
(4) Neither Seller nor the Shareholders have received any
notice of violation, alleged violation, non-compliance, liability or
potential liability regarding environmental matters or compliance with
Environmental Laws with regard to the Owned Facilities from any Person, nor
does Seller or any of the Shareholders have Knowledge or reason to believe
that any such notice will be received from or is being threatened by any
Person.
(5) No judicial proceedings, governmental administrative
actions, investigations or internal or non-public agency proceedings are
pending or threatened, under any Environmental Law, to which Seller is or
will be named as a party, nor are there any consent decrees, or other
decrees, consent orders, agreements, administrative orders or other orders,
judicial or administrative requirements outstanding under any Environmental
Law with respect to Seller.
4.26 COMPLIANCE WITH ADA. Seller has substantially complied with the
Americans with Disabilities Act of 1991, 42 U.S.C. Sections 12111, 12112 and
12209, as amended, and any similar applicable state regulations.
4.27 GUARANTEES. Seller is not a guarantor or otherwise is liable for
any liability or obligation of any other person, except as described in Schedule
4.27.
4.28 DISCLOSURE. Neither this Agreement nor any Schedule, Exhibit or
certificate delivered in accordance with the terms hereof or any document or
statement in writing which has been supplied by or on behalf of Seller or the
Shareholders in connection with the Transaction, contains any untrue statement
of a material fact or omits any statement of a material fact necessary in order
to make the statements contained herein or therein not misleading.
4.29 BEST EFFORTS. Seller will use its best efforts to obtain all
permits, consents and approvals and take such other actions in order to complete
the Transaction by the Closing Date. Seller will execute and deliver such
instruments and take such other action as may be reasonable or appropriate to
carry out the Acquisition and the intentions of this Agreement.
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ARTICLE 5
REPRESENTATIONS OF RECYCLING
As an inducement to Seller and the Shareholders to enter into this
Agreement and to complete the Transaction and with the knowledge that Seller and
the Shareholders will rely thereon, RII Sub and the Parent jointly and severally
represent and warrant to Seller and the Shareholders the following (both as of
the date hereof and as of the Closing Date):
5.1 DUE INCORPORATION AND QUALIFICATION OF RII SUB. RII Sub is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Colorado, and has the corporate power and lawful authority to
carry on its business as now being conducted. On or before the Closing Date,
RII Sub will be duly qualified or otherwise authorized as a foreign corporation
to transact business and will be in good standing in the State of North
Carolina.
5.2 DUE INCORPORATION AND QUALIFICATION OF THE PARENT. The Parent is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of Colorado, and has the corporate power and lawful authority
to carry on its business as now being conducted.
5.3 ARTICLES OF INCORPORATION AND BYLAWS. On or before the Closing
Date, RII Sub and the Parent will deliver to Seller true and complete copies of
their respective Articles of Incorporation (certified by the Secretary of State
of Colorado) and Bylaws (certified by its corporate secretary) as then in
effect.
5.4 AUTHORITY OF RII SUB AND THE PARENT. RII Sub and the Parent have
full power and authority to execute and deliver this Agreement and the Closing
Documents and to carry out the Transaction. The Closing Documents are valid
and binding agreements of RII Sub and the Parent, enforceable in accordance with
their terms. No consent, authorization or approval of, or declaration, filing
or registration with, any governmental or regulatory authority or any consent,
authorization or approval of any other third party is necessary in order to
enable RII Sub or the Parent to enter into and perform its obligations under the
Closing Documents, and neither the execution and delivery of the Closing
Documents nor the completion of the Transaction will, with respect to RII Sub
and the Parent, individually:
(a) Be in violation of its Articles of Incorporation or Bylaws
or constitute a breach of any evidence of indebtedness or agreement to which it
is a party;
(b) Cause a default under any mortgage or deed of trust or other
lien, charge or encumbrance to which any of its property is subject or under any
contract to which it is a party, or permit the termination of any such contract
by another Person;
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(c) Result in the creation or imposition of any Security
Interest upon any of its property or assets under any agreement or commitment to
which it is bound;
(d) Accelerate, or constitute an event entitling, or which would
upon notice or lapse of time or both, entitle the holder of any indebtedness to
accelerate the maturity of any such indebtedness;
(e) Conflict with or result in the breach of any writ,
injunction or decree of any court or governmental instrumentality;
(f) Violate any statute, law or regulation of any jurisdiction
as such statute, law or regulation relates to it; or
(g) Violate or cause any revocation of or limitation on any
Permit.
5.5 PREFERRED STOCK CONSIDERATION. The Preferred Stock
Consideration when issued, and the Parent Common Stock issuable upon
conversion of the Preferred Stock Consideration, will be duly authorized,
fully paid and non-assessable, and not subject to any preemptive rights, and
free and clear of any Security Interests or other encumbrances, except for
transfer restrictions required under federal and state securities laws.
5.6 COMMON STOCK CONSIDERATION. The Common Stock Consideration when
issued will be duly authorized, fully paid and non-assessable, and not subject
to any preemptive rights, and free and clear of any Security Interests or other
encumbrances, except for transfer restrictions required under federal and state
securities laws.
5.7 1934 ACT REGISTRATION. The common stock of the Parent is registered
under Section 12(g) of the 1934 Act, and in accordance therewith, the Parent
files periodic reports, proxy statements, and other informational reports
required under the 1934 Act. The Parent has made all filings with the
Securities and Exchange Commission that it has been required to make under the
1934 Act (collectively, the "Public Reports"). The Public Reports were complete
and accurate when filed and no material events have occurred subsequent to the
filing of the Public Reports which would require additional filings or other
disclosure, other than a press release or similar announcement which has been
made when required.
5.8 BROKER'S OR FINDER'S FEES. No agent, broker, Person or firm acting
on behalf of RII Sub or the Parent is, or will be, entitled to any commission or
broker's or finder's fees from any of the parties hereto, or from any Person
controlling, controlled by or under common control with any of the parties
hereto, in connection with the Transaction.
5.9 DISCLOSURE. Neither this Agreement nor any Schedule, Exhibit or
certificate delivered in accordance with the terms hereof or any document or
statement in writing which has been supplied by or on behalf of RII Sub or the
Parent in connection with the Transaction,
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contains any untrue statement of a material fact, or omits any statement of a
material fact necessary in order to make the statements contained herein or
therein not misleading.
5.10 BEST EFFORTS. RII Sub and the Parent will use their best efforts to
timely apply for and obtain all permits, consents and approvals and to complete
any due diligence deemed necessary by RII Sub and the Parent in order to
complete the Transaction by the Closing Date. RII Sub and the Parent will
execute and deliver such instruments and take such other action as may be
reasonable or appropriate to carry out the Acquisition and the intentions of
this Agreement.
ARTICLE 6
REGULATORY COMPLIANCE
6.1 BULK SALES COMPLIANCE. RII Sub and Parent hereby waive compliance
by Seller with the provisions of the bulk sales or bulk transfer law of the
State of North Carolina and Seller and the Shareholders agree to indemnify and
hold RII Sub and Parent harmless from any liability incurred as a result of the
failure to so comply.
6.2 XXXX-XXXXX-XXXXXX ACT. As soon as practicable, but in no event
later than ten business days after the date hereof, each party, including their
respective affiliates, shall make any and all filings required to be made under
the HSR Act if such filings are required to be made in the opinion of
Recycling's legal counsel. Each of the parties will assist the other as may be
reasonably requested in connection with the preparation of the Notification and
Report Forms and related materials that it may be required to file pursuant to
the HSR Act and will use its best efforts to obtain an early termination of the
applicable waiting period and will make any further filings that may be
necessary, proper or advisable in connection therewith. Each party will pay
their respective costs of preparing and making each initial filing and any
additional filings under the HSR Act, including the costs and expenses of Seller
and its personnel and legal fees incurred by Seller in connection with such
filings.
6.3 THE WARN ACT. Seller will comply with the provisions of the WARN
Act, 29 U.S.C. Sections 2101, ET SEQ., and any similar state statute, relating
to notice to employees, if such provisions apply to the transaction contemplated
hereunder.
6.4 COBRA. Seller will comply with the provisions of COBRA, Pub. L. No.
99-272, 99th Cong., 2d Sess. (1987), and any similar statute, relating to
continuation of health benefits to employees, as they apply to the transaction
contemplated hereby. Seller has complied with all of its COBRA requirements for
all persons who were participants in the Seller's medical benefit plans prior to
the Closing Date or who became eligible for COBRA due to qualifying events that
occurred under Seller's medical benefit plans prior to the Closing Date. Any
liabilities for COBRA claims or COBRA administration that relate to Seller's
medical benefit plans as in existence on or prior to the Closing Date shall be
the responsibility of the Seller and
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or Shareholders. After the Closing Date, Seller shall remain responsible for
COBRA claims and administration arising out of qualifying events that
occurred prior to or on the Closing Date.
6.5 OTHER. The parties shall prepare and promptly file all reports,
documents or notices with appropriate regulatory or other governmental
authorities, as may be required of them.
ARTICLE 7
ENVIRONMENTAL MATTERS
With respect to matters governed by Environmental Laws, the Parties hereby
agree as follows:
7.1 ENVIRONMENTAL STUDIES. Recycling, at its sole cost and expense, has
engaged an environmental auditing firm (the "EAF") to complete an ASTM E 1527-97
Phase I and Phase II Environmental Site Assessment and Transaction Screen
Process of the Business, facilities and operations of Seller (the "Environmental
Studies"). The Environmental Studies are attached hereto as Schedule 7.1
7.2 REMEDIATION ESTIMATE. The Environmental Studies have indicated that
remediation is required to ensure that the Business, real property, facilities
and operations of Seller meet and comply with all applicable environmental laws
and regulations, and Recycling has directed and the EAF has completed an
estimate of the cost of such remediation (the "Remediation Estimate") which has
been delivered to Seller. [CONFIDENTIAL TREATMENT REQUESTED].
7.3 ON-SITE ENVIRONMENTAL LIABILITIES. Seller and the
Shareholders, jointly and severally, will indemnify, defend, and hold
harmless RII Sub, Parent, and their respective officers, directors,
successors and assigns, from and against any and all claims, demands, suits,
judgments, settlements, penalties, liabilities, cleanup costs and expenses,
including reasonable fees of counsel and environmental consultants, arising
out of or resulting from on-site events or occurrences on or before the
Closing Date or any migration of contamination onto or under the Owned
Facilities prior to the Closing Date ("On-Site Environmental Liabilities")
[CONFIDENTIAL TREATMENT REQUESTED].
ARTICLE 8
COVENANTS TO BE PERFORMED PRIOR TO THE CLOSING
The parties hereto covenant and agree that between the date hereof and the
Closing Date:
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8.1 TITLE INSURANCE. Prior to the Closing, RII Sub at its sole cost
and expense will obtain a title insurance commitment or commitments, with
respect to the Owned Facilities, using a current North Carolina standard form
of American Land Title Association Owner's Title Insurance Commitment in the
amount specifically allocated by the parties on Schedule 3.4 to the Owned
Facilities, insuring title to the Owned Facilities to be in RII Sub as of the
Closing Date, subject only to such exceptions and exclusions as provided in
this Agreement or set forth on Schedule 8.1, or are acceptable to RII Sub and
insuring against all possible contractors', suppliers' and mechanics' lien
claims. Such title commitment is to contain a complete copy of each
easement, restriction, limitation, or condition of title which is referred to
therein that burdens or benefits said real property. When delivered, the
title commitment shall be attached as Schedule 8.1.
8.2 SURVEY. RII Sub, at its expense, will obtain an updated survey of
the Owned Facilities, certified to RII Sub, any mortgagee of RII Sub, and the
title insurer issuing title insurance in the Transaction as provided in
Section 8.1, prepared by a licensed surveyor and conforming to Minimum
Technical Standards adopted by the North Carolina Society of Professional
Surveyors, or equivalent professional body or licensing agency, disclosing
the location of all improvements, easements, party walls, sidewalks,
roadways, utility lines, setback requirements, and other matters customarily
shown on such surveys, and showing access affirmatively to public streets and
roads. When delivered, the Survey shall be attached as Schedule 8.2.
8.3 MATERIAL ASSUMED CONTRACTS. Seller will use its best efforts to
obtain the written consent to the assumption by RII Sub of each of the
Material Assumed Contracts listed on Schedule 1.21 which require such consent.
8.4 CONDUCT OF BUSINESS. Seller will not engage in any practice,
take any action, incur any Liabilities, dispose of any assets or enter into
any transaction outside the Ordinary Course of Business and shall conduct the
Business in the Ordinary Course and in such a manner so that the
representations and warranties contained herein shall continue to be true,
correct and complete on and as of the Closing Date. Notwithstanding the
foregoing, Seller may spend up to $40,000 to acquire new roll offs and/or
lugger pans to service new accounts and such amounts, if expended, will be
added to the Purchase Price and paid at Closing and a listing of such
equipment will be provided on Schedule 8.4 attached hereto.
8.5 PRESERVATION OF BUSINESS. Seller will keep the Business and the
Seller Assets substantially intact, including its present operations,
physical facilities and working conditions, and will use its best efforts to
maintain relationships with lessors, licensor, suppliers, customers, and
employees. Seller will provide to RII Sub a mailing list of all customers and
a listing of their accounts within ten business days (or the earliest
possible date) prior to the Closing Date to permit RII Sub to send
announcements to the customers on or after the Closing Date.
-26-
8.6 NOTICE OF EVENTS. Seller and the Shareholders shall promptly
notify RII Sub and Parent with reasonable specificity of: (1) any event,
condition or circumstance occurring from the date hereof through the Closing
Date that would constitute a violation or breach of this Agreement; or (2)
any event, occurrence, transaction or other item which would have been
required to have been disclosed on any Schedule, Exhibit or statement
delivered hereunder, had such event, occurrence, transaction or item existed
on the date hereof, other than items arising in the Ordinary Course of
Business which would not render any of the representations, warranties or
other agreements of Seller or the Shareholders misleading.
8.7 EXAMINATIONS AND INVESTIGATIONS. (a) Prior to the Closing Date,
during normal business hours between 8:00 a.m. and 5:00 p.m., Eastern Time,
Monday through Friday, or such other hours as to which the parties mutually
agree, Recycling shall be entitled, through its employees and
representatives, including counsel, lenders, appraisers and accountants, to
make such investigation of the assets, properties, business and operations of
the Business, and such examination and copies of the books, records and
financial condition of the Business as Recycling deems necessary. No review,
examination or investigation by Recycling shall diminish or obviate any of
the representations, warranties, covenants or agreements of Seller and the
Shareholders under this Agreement.
(b) If this Agreement terminates: (1) RII Sub shall keep
confidential and shall not use in any manner any information or documents
obtained from Seller concerning the Business or the Seller Assets, unless
readily ascertainable from public or published information, or trade sources,
or subsequently developed by RII Sub independent of any investigation of the
Business, or received from a third party not under an obligation to Seller to
keep such information confidential, and (2) any documents obtained from
Seller shall be promptly returned to it.
8.8 NO NEGOTIATION BY SELLER OR THE SHAREHOLDERS. Between the date
hereof and the earlier of (1) the Closing Date; and (2) the date of
termination of this Agreement, neither the Shareholders nor Seller shall,
directly or indirectly:
(a) Solicit, initiate or encourage the submission of
inquiries, proposals or offers from any Person (other than Recycling)
relating to any acquisition or purchase of assets (other than Prepared
Inventory) of, or any equity interest in, the Seller Assets or any exchange
offer, merger, consolidation, purchase of assets, liquidation, dissolution or
similar transaction involving the Seller Assets (each, an "Acquisition
Proposal");
(b) Enter into or participate in any discussions or negotiations
regarding any of the foregoing, or furnish to any Person (other than Recycling
and its representatives) any information with respect to the Seller Assets,
other than in the Ordinary Course of Business; or
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(c) Otherwise cooperate in any way with, or assist or
participate in, facilitate or encourage, any effort or attempt by any Person
(other than Recycling) to do or seek any of the foregoing.
Seller and the Shareholders will notify Recycling within 24 hours if any
such Acquisition Proposal is received or if any such discussions, negotiations
or other events occur or are sought to be initiated, and such notice will set
forth in detail the terms or other particulars thereof.
8.9 SAFETY AUDITS. Recycling may perform safety audits at each of the
Seller's facilities through a consulting firm mutually acceptable to the parties
to ensure compliance with OSHA and any other applicable safety standards. All
costs related to these audits shall be paid by the Seller and, if the
transaction is completed shall be paid out of assets other than the Seller
Assets.
8.10 REMOVAL OF WASTE MATERIALS. Seller shall remove, at its cost, all
waste materials (e.g. shredder fluff, waste oil, Hazardous Materials, other
materials or substances which currently form the basis of liability under any
Environmental Laws) from the Owned Facilities prior to the Closing.
ARTICLE 9
CONDITIONS PRECEDENT TO THE OBLIGATION
OF RECYCLING TO CLOSE
The obligation of Recycling to enter into and to complete the Transaction
is subject to the fulfillment on or prior to the Closing Date of the following
conditions, any one or more of which may be waived by Recycling only in writing:
9.1 REPRESENTATIONS, WARRANTIES AND OTHER AGREEMENTS. The
representations, warranties and other agreements of Seller and the Shareholders
contained in this Agreement shall be true, correct and complete in all material
respects on and as of the Closing Date, with the same force and effect as though
made on and as of the Closing Date. Seller and the Shareholders shall have
performed and complied in all material respects with all covenants and
agreements required by this Agreement to be performed or complied with by them
on or prior to the Closing Date. Seller and the Shareholders shall have
delivered to Recycling certificates, dated the Closing Date, to such effect.
9.2 GOVERNMENTAL PERMITS AND APPROVALS. All permits and approvals from
any governmental or regulatory body required for the lawful completion of the
Transaction, including, if applicable, early termination of the waiting period
under the HSR Act, shall have been obtained and all shall have been transferred
to the name of RII Sub to the extent such permits are transferrable.
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9.3 THIRD PARTY CONSENTS. All consents, permits and approvals from
parties to any Material Assumed Contracts that may be required in connection
with the performance by Seller of its obligations under this Agreement or the
continuance of such contracts or other agreements without material
modification after the Closing Date shall have been obtained.
9.4 LITIGATION. No action, suit or proceeding shall have been
instituted before any court or governmental or regulatory body, or instituted
or threatened by any governmental or regulatory body, to restrain, modify or
prevent the carrying out of the Transaction or to seek damages or a
discovery order in connection with such transactions, or that has or could
reasonably be expected to have, in the opinion of RII Sub or the Parent a
materially adverse effect on the Seller Assets or the Business.
9.5 REAL PROPERTY. Except as set forth on Schedules 2.1(a) and 8.1,
with respect to the Owned Facilities:
(a) RII Sub shall receive good and marketable title by
general warranty deed for the Owned Facilities in proper form for recording
in the State of North Carolina;
(b) The Owned Facilities shall be free and clear of any
Security Interest, easement, covenant, or other restriction, except for
installments of special assessments not yet delinquent and recorded
easements, covenants, matters shown by the Survey attached as Schedule 8.2
and other restrictions which do not impair the current use or occupancy, or
the marketability of title, of the property subject thereto;
(c) There shall not be pending or threatened condemnation
proceedings, lawsuits, or administrative actions of any type relating to the
Owned Facilities, or other matters affecting adversely the current use, or
occupancy thereof, including unpaid tap fees, contemplated special
assessments or zoning changes;
(d) The legal description for the Owned Facilities contained
in the deed therefor shall describe the real property forming a part of the
Owned Facilities fully and adequately. The building and improvements located
within the boundary lines of the described parcel of land (1) shall not be in
violation of applicable setback requirements, zoning laws, and ordinances,
(2) shall not encroach on any easement which may burden the land, and
described parcel of land not serve any adjoining property for any purpose
inconsistent with the use of the land, and (3) shall not be located within
any flood plain or be included in any wetlands or be subject to any similar
type restriction for which any permits or licenses necessary to the use
thereof shall have not been obtained; and
(e) The Owned Facilities shall abut and have direct vehicular
access to a public road, direct access to an operational railroad spur, or
have vehicular access to a public road via a permanent, irrevocable,
appurtenant easement benefitting the Owned Facilities.
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9.6 NO MATERIAL ADVERSE CHANGE. There shall be no material adverse
change in the Business or the Seller Assets taken as a whole, financial or
otherwise, or, to either Seller's or the Shareholders' Knowledge, Seller's
customers, regardless of reason, including those changes that are as a result
of any legislative or regulatory change, revocation of any Permits, licenses
or rights to do business, failure to obtain any Permit at the normal time or
in the manner applied for by Seller, fire, explosion, accident, casualty,
labor trouble, flood, riot, storm, condemnation or act of God or otherwise,
and Seller shall have delivered to Recycling a certificate, dated the Closing
Date, to such effect.
9.7 TRANSFER DOCUMENTS. RII Sub shall have received assignments and
such other instruments of sale, transfer, conveyance and assignment
transferring all of the Seller Assets from Seller to RII Sub, each in proper
legal form to transfer the Seller assets under applicable law.
9.8 ENVIRONMENTAL ESCROW AGREEMENT. RII Sub shall have received from
Seller the Environmental Escrow Agreement in the form attached hereto as
Exhibit E.
9.9 ASSIGNMENT OF CONTRACTS. Seller shall have delivered to RII Sub
written consents to the assignment or assumption of each of the Material
Assumed Contracts as provided by Section 8.3.
9.10 SATISFACTION WITH DUE DILIGENCE, FINANCIAL PERFORMANCE AND
APPROVAL. Recycling shall be satisfied, in its sole discretion, with (a) the
results of its legal, accounting and financial due diligence investigation of
Seller and its operations, including, without limitation, the results of the
Environmental Studies and any Safety Audits, and (b) Seller's financial
performance up to the Closing Date. Further, the terms and conditions of
this Agreement shall have been approved by Recycling's senior management, its
Board of Directors, and the Lender, each in their sole discretion.
9.11 FINANCING. Recycling shall have obtained a commitment for
financing from the Lender to effect the purchase of the Seller Assets as
contemplated hereunder.
9.12 PREFERRED SUBSCRIPTION AGREEMENT. The Parent shall have received
from Seller the Common Subscription Agreement for the Preferred Stock
Consideration in the form attached hereto as Exhibit C.
9.13 COMMON SUBSCRIPTION AGREEMENT. The Parent shall have received
from Seller the Common Subscription Agreement for the Common Stock
Consideration in the form attached hereto as Exhibit D.
9.14 NON-COMPETITION AGREEMENT. Recycling shall have received from
Seller, and Xxxxxxx X. Xxxxx, executed Non-Competition Agreements in the form
attached hereto as Exhibit F.
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9.15 TERMINAL LEASE. Recycling shall have received from Seller an
executed Terminal Lease in the form attached hereto as Exhibit A.
9.16 LEGAL OPINION. Recycling and its Lender shall receive an opinion
from counsel to the Seller and the Shareholders in the Form attached hereto
as Exhibit G.
9.17 BOOKS AND RECORDS. RII Sub shall have received the books, books
of account, papers, records, correspondence and instruments of, or relating
to, the Seller Assets and/or Business including, but not limited to, the
information set forth in Section 4.4(a) above.
9.18 RESOLUTIONS. There shall have been delivered to RII Sub and the
Parent a copy of the resolutions duly adopted by the board of directors and
Owners of Seller, authorizing and approving the execution and delivery by
Seller of this Agreement, and the completion by Seller of the Transaction,
certified by the secretary of Seller, dated as of the Closing Date.
9.19 CERTIFICATES, ETC. OF SHAREHOLDERS AND SELLER. The Shareholders
and Seller shall have delivered all certified resolutions, certificates,
documents or instruments with respect to Seller's authority and such other
matters as RII Sub's and the Parent's counsel may have reasonably requested
prior to the Closing Date.
9.20 PAYMENT OF SALES OR USE TAXES BY SELLER. Seller shall have paid
all sales, use or personal property taxes or other similar taxes payable as a
result of the completion of the Transaction.
9.21 APPROVAL OF COUNSEL TO RECYCLING. All actions and proceedings
hereunder and all documents or other papers required to be delivered by
Seller hereunder or in connection with the completion of the Transaction, and
all other related matters shall have been approved by Friedlob Xxxxxxxxx
Xxxxxx Xxxxxxx & Xxxxxxxxxxx, LLC, counsel to Recycling, as to their form,
which approval shall not be unreasonably withheld or delayed.
ARTICLE 10
CONDITIONS PRECEDENT TO THE OBLIGATION OF SELLER AND THE
SELLER OFFICERS TO CLOSE
The obligations of Seller and the Shareholders to enter into and to
complete the Transaction is subject to the fulfillment on or prior to the
Closing Date (except for a sooner date, if so provided) of the following
conditions, any one or more of which may be waived by Seller and the
Shareholders only in writing:
10.1 REPRESENTATIONS, WARRANTIES AND OTHER AGREEMENTS. The
representations, warranties and other agreements of Recycling contained in
this Agreement shall be true on and as of the Closing Date with the same
force and effect as though made on and as of the Closing
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Date. Recycling shall have performed and complied with all covenants and
agreements required by this Agreement to be performed or complied with by it
on or prior to the Closing Date. Recycling shall have delivered to Seller
certificates, dated the Closing Date, to such effect.
10.2 GOVERNMENTAL PERMITS AND APPROVALS. All permits and approvals
from any governmental or regulatory body required for the lawful completion
of the Transaction, including, if applicable, early termination of the
waiting period under the HSR Act, shall have been obtained.
10.3 THIRD PARTY CONSENTS. All consents, permits and approvals from
parties to any Material Assumed Contracts that may be required in connection
with the performance by Seller of its obligations under this Agreement or the
continuance of such contracts or other agreements without material
modification after the Closing Date shall have been obtained.
10.4 LITIGATION. No action, suit or proceeding shall have been
instituted before any court or governmental or regulatory body, or instituted
or threatened by any governmental or regulatory body, to restrain, modify or
prevent the carrying out of the Transaction, or to seek damages or a
discovery order in connection with such Transactions, or that has or could
reasonably be expected to have, in the opinion of Seller, a materially
adverse effect on the assets, properties, businesses, operations or financial
condition of RII Sub or the Parent.
10.5 NO MATERIAL ADVERSE CHANGE. There shall be no material adverse
change in the business or operations of RII Sub or Parent taken as a whole,
financial or otherwise, regardless of reason, including those changes that
are as a result of any legislative or regulatory change, and RII Sub and
Parent shall have delivered to Seller a certificate, dated the Closing Date,
to such effect.
10.6 RESOLUTIONS. There shall have been delivered to Seller a copy of
the resolutions duly adopted by the respective boards of directors of RII Sub
and Parent, authorizing and approving the execution and delivery by RII Sub
and Parent of this Agreement, and the completion by RII Sub and Parent of the
Transaction, certified by the secretary of RII Sub and Parent, dated as of
the Closing Date.
10.7 DESIGNATIONS OF PREFERRED STOCK CONSIDERATION. There shall have
been delivered to Seller and the Shareholders a certified copy of the
Certificates of Designations, Rights and Preferences of the Parent Series K
Preferred.
10.8 LEGAL OPINION. Seller shall receive an opinion from counsel to
Parent and RII Sub in the Form attached hereto as Exhibit H.
10.9 THE PURCHASE PRICE. RII Sub and the Parent shall have paid to
Seller the full Purchase Price for the Seller Assets and executed and
delivered all documents related thereto.
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10.10 ENVIRONMENTAL ESCROW AGREEMENT. Seller and the Shareholders
shall have received from RII Sub the Environmental Escrow Agreement in the
form attached hereto as Exhibit E.
10.11 TERMINAL LEASE. Seller shall have received from Recycling an
executed Terminal Lease in the form attached hereto as Exhibit A.
10.12 APPROVAL OF COUNSEL TO SELLER AND THE SHAREHOLDERS. All actions
and proceedings hereunder and all documents or other papers required to be
delivered by RII Sub and the Parent hereunder or in connection with the
completion of the Transaction, and all other related matters shall have been
approved by Xxxxxxx, Moon & Xxxxx, P.A., counsel to Seller and the
Shareholders as to their form, which approval shall not be unreasonably
withheld or delayed.
ARTICLE 11
ACTIONS TO BE TAKEN AT THE CLOSING
The following actions shall be taken at the Closing, each of which shall
be conditioned on completion of all the others and all of which shall be
deemed to have taken place simultaneously:
11.1 TRANSFER DOCUMENTS. Seller shall deliver duly executed transfer
documents and/or instruments of assignment.
11.2 THE PURCHASE PRICE.
(a) RII Sub shall deliver to Seller the Cash Consideration; and
(b) Parent shall deliver to Seller the Preferred Stock
Consideration.
(c) Parent shall deliver to Seller the Common Stock
Consideration.
11.3 PREFERRED SUBSCRIPTION AGREEMENT. Seller shall deliver to the
Parent the Preferred Subscription Agreement.
11.4 COMMON SUBSCRIPTION AGREEMENT. Seller shall deliver to the
Parent the Common Subscription Agreement.
11.5 NON-COMPETITION AGREEMENTS. Seller, and Xxxxx shall deliver to
RII Sub and the Parent their duly executed Non-Competition Agreements.
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11.6 ENVIRONMENTAL ESCROW AGREEMENT. Seller and the Shareholders
shall deliver to RII Sub and RII Sub shall deliver to Seller and the
Shareholders the Environmental Escrow Agreement, duly executed by the parties
thereto.
11.7 GENERAL WARRANTY DEED. Seller shall deliver a general warranty
deed for the Owned Facilities in proper form for recording in the State of
North Carolina.
11.8 CONTRACT ASSUMPTIONS. Seller shall deliver the written consents
to the assumption by RII Sub of the Material Assumed Contracts.
11.9 CLOSING CERTIFICATE OF SELLER. Seller shall deliver to RII Sub a
closing certificate dated the Closing Date, in a form satisfactory to RII
Sub. Such certificate shall be signed on behalf of Seller by an executive
officer of Seller.
11.10 CLOSING CERTIFICATE OF THE SHAREHOLDERS. The Shareholders shall
deliver to RII Sub a closing certificate dated the Closing Date, in a form
satisfactory to RII Sub.
11.11 CLOSING CERTIFICATE OF PARENT AND RII SUB. Parent and RII Sub
shall deliver to Seller a closing certificate dated the Closing Date, in a
form satisfactory to Seller. Said certificate shall be signed on behalf of
RII Sub by an executive officer of RII Sub.
11.12 CERTIFICATE REGARDING RESOLUTIONS OF SELLER. Seller shall
deliver to Recycling copies of resolutions certified as required by Section
9.19.
11.13 CERTIFICATE REGARDING RESOLUTIONS OF RII SUB AND PARENT. RII Sub
and Parent shall deliver to Seller copies of resolutions certified as
required by Section 10.7.
11.14 LEGAL OPINIONS. Counsel to the Parent and to Seller and the
Shareholders shall deliver their respective legal opinions as required by
Sections 9.17 and 10.9.
11.15 REAL PROPERTY CLOSING. As part of the Closing it is acknowledged
that a settlement statement shall be separately prepared relating to the
Owned Facilities, which settlement statement shall be prepared by the
attorney for Seller at least one business day prior to the Closing. Normal
closing adjustments shall be charged to the parties as follows:
(a) ADJUSTMENTS CHARGED TO SELLER. Seller shall be charged
with the following expenses, which shall be reflected on the closing
statement and shall be withheld from the Cash Consideration and be disbursed
to the Person to which each such expense is payable:
(1) Any amount necessary to satisfy and discharge of record any
lien or encumbrance that is not an Assumed Liability, including the cost of
recording or filing any necessary release or termination document;
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(2) Any and all real property taxes due and payable, it being
agreed that all real property taxes and personal property taxes shall be
prorated as of the expiration of the day immediately preceding Closing and;
(3) Any and all utility charges through the expiration of the
day immediately preceding Closing Date;
(4) Fees for documentary stamps due upon the recordation of the
deeds from Seller to RII Sub and the closing costs associated for the
Owned Facilities which shall be paid by the RII Sub and Seller in
accordance with local custom for commercial real estate transactions.
11.16 TITLES TO VEHICLES, MACHINERY AND EQUIPMENT. Seller shall
deliver to RII Sub duly executed titles to all vehicles, machinery and
equipment included in the Seller Assets free and clear of any Security
Interests.
11.17 TERMINAL LEASE. RII Sub and Seller will execute the Terminal
Lease.
ARTICLE 12
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
12.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All of the
representations and warranties of the parties contained in this Agreement
shall survive the Closing and continue for a period of 13 months after
Closing except for the representations and warranties contained in Section
4.5, which shall survive for a period of time which is equal to the statute
of limitations period applicable to the respective Tax liability being
asserted.
12.2 INDEMNITY AGREEMENTS OF SELLER AND THE SHAREHOLDERS.
(a) Seller and the Shareholders, jointly and severally, shall
indemnify, defend, reimburse and hold harmless RII Sub and the Parent from
and against any and all claims, demands, penalties, fines, liabilities,
obligations, losses, settlements, damages, costs and expenses resulting from:
(1) any inaccuracy in, or breach of, any representation or
warranty or nonfulfillment of any covenant on the part of Seller or the
Shareholders contained in this Agreement;
(2) any misrepresentation in or omission from or nonfulfillment
of any covenant on the part of Seller or the Shareholders contained in any
other agreement, certificate or other instrument furnished or to be
furnished to RII Sub or the Parent by Seller or the Shareholders pursuant
to Article 11 of this Agreement;
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(3) all federal, state, county, local, foreign and other taxes,
including income taxes, excise taxes, sales taxes, use taxes, gross
receipts taxes, franchise taxes, employment and payroll related taxes,
property taxes and import duties, and any penalties or interest, whether or
not measured in whole or in part by net income required to be paid by
Seller or the Shareholders relating to the Business through the Closing
Date which are not paid by either Seller or the Shareholders and which RII
Sub or the Parent pays;
(4) any and all negligence claims arising out of occurrences and
events prior to the Closing Date except for [CONFIDENTIAL TREATMENT
REQUESTED];
(5) any and all product liability and warranty claims for
products manufactured, fabricated (in whole or in part) or sold prior to
the Closing Date;
(6) the violation or alleged violation by Seller or the
Shareholders of any Environmental Law or any orders, requirements or
demands of any governmental authorities related thereto, arising out of
events or circumstances occurring on or before the Closing Date PROVIDED,
HOWEVER [CONFIDENTIAL TREATMENT REQUESTED];
(7) the failure of Seller to comply with the bulk sales or bulk
transfer law of the State of North Carolina;
(8) any liability of Seller not assumed by RII Sub;
(9) any infringement claim related to any patent, invention,
trade secret, trademark, service xxxx, trade name or copyright where the
infringement alleged is related to products designed prior to the Closing
Date unless subsequently modified by RII Sub in a manner which renders the
product to be infringing, to the extent that RII Sub and Parent are not
otherwise entitled to indemnification from another party;
(10) any liabilities to employees of the Business terminated in
accordance herewith and any future related actions; and
(11) reasonable fees and disbursements of counsel incident to any
of the foregoing.
(b) Notwithstanding the foregoing, Seller and the
Shareholders shall not be required to indemnify RII Sub and Parent until the
aggregate amount of indemnification for all matters equals or exceeds
$50,000, at which xxxx Xxxxxx and the Shareholders shall indemnify and
reimburse RII Sub and the Parent for all such amounts incurred (including the
first $50,000) up to an aggregate liability for all such claims of $950,000
PROVIDED, HOWEVER, that the foregoing
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limitations shall not apply to (i) [CONFIDENTIAL TREATMENT REQUESTED]; (ii)
the reassignment of any Seller Receivables as provided in Section 14.2, or
(iii) the failure of Seller to comply with the bulk sales or bulk transfer
law of the State of North Carolina.
12.3 INDEMNITY AGREEMENT OF RII SUB AND THE PARENT. RII Sub and the
Parent shall jointly and severally indemnify, defend, reimburse and hold
harmless Seller and the Shareholders from and against:
(a) any and all claims, demands, penalties, fines,
liabilities, obligations, losses, settlements, damages, costs and expenses
pertaining to the Seller Assets and Business which arise from any event
occurring on or after the Closing resulting from:
(1) any inaccuracy in, or breach of, any representation and
warranty or nonfulfillment of any covenant on the part of RII Sub or the
Parent contained in this Agreement;
(2) any misrepresentation in or omission from or nonfulfillment
of any covenant on the part of RII Sub or the Parent contained in any other
agreement, certificate or other instrument furnished or to be furnished to
Seller by RII Sub or the Parent pursuant to Article 11 of this Agreement;
(3) any liability of Seller arising out of the Assumed
Contracts, unless such liability is due to the actions of Seller, or other
action, events and occurrences prior to the Closing Date;
(4) the violation or alleged violation by RII Sub or the Parent
of any Environmental Law or any orders, requirements or demands of any
governmental authorities related thereto, arising out of events or
circumstances occurring after the Closing Date;
(5) any liability for tort claims which are the result of
actions, events, occurrences or the operation of the business by RII Sub on
or after the Closing Date; and
(6) reasonable fees and disbursement of counsel incident to any
of the foregoing.
(b) Notwithstanding the foregoing, RII Sub and Parent shall
not be required to indemnify Seller and the Shareholders until the aggregate
amount of indemnification for all matters equals or exceeds $50,000, at which
time RII Sub and Parent shall indemnify and reimburse Seller and the
Shareholders for all such amounts incurred (including the first $50,000) up
to an aggregate liability for such claims of $950,000 PROVIDED, HOWEVER, that
the foregoing
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limitations shall not apply to the failure of RII Sub or Parent to deliver
the Purchase Price as and when required herein.
12.4 INDEMNIFICATION PROCEDURE FOR THIRD PARTY CLAIMS.
(a) NOTICE OF CLAIM AND DEFENSE.
(1) The party seeking indemnification under this Article 12
shall give the party from whom indemnification is sought prompt written
notice of the assertion of any third party claim of which said party has
knowledge which is covered by the indemnity agreements set forth in Section
12.2 or Section 12.3, and the party obligated to indemnify will undertake
the defense thereof by representatives chosen by the party seeking
indemnification but acceptable to the party obligated to indemnify.
(2) If the party obligated to indemnify, within a reasonable
period of time after notice of any such claim fails to defend, the party
seeking indemnification will have the right to undertake the defense,
compromise or settlement of such claim on behalf of and for the account and
risk of the party obligated to indemnify, subject to the right of the party
seeking indemnification to assume the defense of such claim at any time
prior to settlement, compromise or final determination thereof.
(3) If the claim for which indemnification is being sought is
the result of a breach of this Agreement by the party obligated to
indemnify, such party shall have a period of 45 days to cure such breach.
If the obligated party does not cure the breach within 45 days, the party
seeking indemnification may proceed with all remedies available under this
agreement.
(b) PAYMENT OF SUMS DUE. After any final judgment or award
shall have been rendered by a court, arbitration board or administrative
agency of competent jurisdiction, or a settlement shall have been completed,
or the parties shall have arrived at a mutually binding agreement, with
respect to each separate third party claim indemnified by the party obligated
to indemnify, the party seeking indemnification shall forward to the party
obligated to indemnify notice of any sums due and owing (and the times when
due) by the party seeking indemnification with respect to such claim and the
party obligated to indemnify shall pay such sums to the party seeking
indemnification in cash, within 30 days after the date of such notice or, if
any such sums are due after such 30 day period, ten days prior to the date
each such sums are due.
12.5 LIMIT ON OBLIGATIONS. In no event shall either party have any
indemnification obligation under this Section 12 unless the party from whom
indemnification is sought receives a notice of a claim for indemnification
within the survival period described in Section 12.1.
12.6 GOOD FAITH EFFORTS TO SETTLE DISPUTES. Each of the parties agrees
that, prior to commencing any litigation against the other concerning any matter
with respect to which such
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party intends to claim a right of indemnification in such proceeding, such
parties shall meet in a timely manner and attempt in good faith to negotiate
a settlement of such dispute during which time such parties shall disclose to
the others all relevant information relating to such dispute.
12.7 FEES AND EXPENSES. Notwithstanding any other provision in this
Article 12, in the event of any dispute or controversy between any of the
parties to this Agreement, the prevailing party in such dispute shall, in
addition to any other remedies the prevailing party may obtain in such
dispute, be entitled to recover from the other party all of its reasonable
legal fees and out-of-pocket costs incurred by such party in enforcing or
defending its rights hereunder, excluding any costs occurred under Section
12.4(b).
12.8 LITIGATION SUPPORT. If, and for so long as, any party actively
is contesting or defending against any action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand in connection with (1) any
transaction contemplated hereunder, or (2) any fact, situation, circumstance,
status, condition, activity, practice, plan, occurrence, event, incident,
action, failure to act, or transaction on or prior to the Closing Date
involving the Business, the other party will cooperate with the contesting or
defending party and its counsel in the contest or defense, make available its
personnel and provide such testimony and access to its books and records as
shall be necessary in connection with the contest or defense, all at the sole
cost and expense of the contesting or defending party, unless the contesting
or defending party is entitled to indemnification therefor under this Article
12, exclusive of per diem or hourly rates of any personnel of the other party.
ARTICLE 13
TERMINATION OF AGREEMENT
13.1 TERMINATION. This Agreement may be terminated prior to or on the
Closing Date as follows:
(a) At the election of RII Sub or the Parent at any time prior
to Closing if:
(1) if any one or more of the material conditions precedent to
the obligation of Recycling to close has not been fulfilled as of the
Closing Date, or if Seller or the Shareholders has breached any material
representation or warranty, or failed to perform any covenant or agreement
contained in this Agreement PROVIDED, HOWEVER, Seller and the Shareholders
shall have, at the election of Seller and the Shareholders, at least 15
days' notice to cure any such breach and the Closing Date shall be extended
by each day of such cure period;
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(2) RII Sub and Parent are unable to satisfy themselves that any
Adverse Item will not have a material adverse effect on the operations of
the Business; or
(3) Prior to the Closing, RII Sub and the Parent are unable to
complete due diligence in a manner satisfactory to a company obligated to
file reports under the 1934 Act or if they discover discrepancies in the
books and records of Seller or any other matters unacceptable to them, in
their sole discretion.
(b) At the election of Seller or the Shareholders at any time
prior to Closing if:
(1) any one or more of the material conditions precedent to the
obligation of Seller to close has not been fulfilled as of the Closing
Date;
(2) within 15 days after the receipt of the Remediation Estimate
as provided in Section 7.2;
(3) Seller is unable to obtain any required consent to the
assignment of any of the Material Assumed Contracts and such failure would
constitute a breach of the Material Assumed Contract;
(4) RII Sub or the Parent has breached any material
representation or warranty, or failed to perform any covenant or agreement
contained in this Agreement; provided, however, RII Sub and the Parent
shall have at least 15 days' notice to cure any such breach, except that in
no event shall Closing Date be extended by virtue thereof; or
(c) At the election of any party to this Agreement, if any
legal proceeding is commenced or threatened by any governmental or regulatory
body or other Person directed against the completion of the Transaction and
any of the parties, as the case may be, reasonably and in good xxxxx xxxx it
impractical or inadvisable to proceed in view of such legal proceeding or
threat thereof.
(d) At any time on or prior to the Closing Date, by mutual
written consent of the parties.
(e) At any time after May 31, 1998 unless extended pursuant
to Section 3.5, at the election of any party so long as such party is not in
default under the terms of this Agreement.
13.2 SURVIVAL. If this Agreement is terminated pursuant to Section
13.1, this Agreement shall become void and of no further force and effect,
except for the provisions of
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Section 8.7(b), and none of the parties hereto shall have any liability in
respect of such termination, except that any party shall be liable to the
extent that failure to satisfy the conditions contained herein results from
the intentional or willful violation of the representations, warranties,
covenants or agreement of such party under this Agreement.
ARTICLE 14
CERTAIN ADDITIONAL AGREEMENTS
14.1 PUBLIC STATEMENTS; CONFIDENTIALITY OF INFORMATION. (a) No party
will make any public disclosure (including, without limitation, disclosure to
Seller's employees or customers) of this Agreement, the Acquisition, the
Purchase Price or the other terms and conditions of the Transaction without
the prior written consent of the other parties hereto, which consent shall
not be unreasonably withheld, provided that the foregoing shall not preclude
any party from making any disclosure which, in the opinion of its or his
counsel, is required to be made under applicable federal and state securities
laws. In no event shall any disclosure be made without giving the other
party an opportunity to comment on the proposed disclosure.
(b) Subject to the Parent's obligation as a public company to
issue appropriate public announcements of material events, and subject to
this Section 14.1 hereof, each party will maintain the confidentiality of all
non-public information obtained from any other party.
(c) Notwithstanding anything in this Agreement to the
contrary, the Environmental Studies described in this Agreement under Section
7.1 above, shall remain confidential and Recycling shall not make any
disclosures of these studies or estimates to any Person (other than its legal
counsel, independent accountants and lenders) without the prior written
approval of Seller.
14.2 REASSIGNMENT OF SELLER RECEIVABLES. For 120 days following the
Closing Date, RII Sub shall have the right to reassign to Seller any or all
of the Seller Receivables which have not been collected within 60 days of the
Closing, as provided in Section 4.10. Prior to the reassignment of any
Seller Receivable, RII Sub agrees to use commercially reasonable efforts to
collect any past due amount, but shall not be required to engage a collection
agent or commence arbitration or litigation to collect. Within 15 days after
any reassignment of any Seller Receivables, to the extent not paid Seller
and/or the Shareholders shall reimburse RII Sub dollar-for-dollar for the
Seller Receivables so reassigned with such payment being made in immediately
available funds.
14.3 EXPENSES. Each party shall pay its own costs and expenses,
including the fees and disbursements of its respective counsel, in connection
with the negotiation, preparation and execution of this Agreement and
completion of the Transaction whether or not the Transaction is completed.
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14.4 WAIVERS AND CONSENTS. All waivers and consents given hereunder
shall be in writing. No waiver by any party hereto of any breach or
anticipated breach of any provision hereof by any other party shall be deemed
a waiver of any other contemporaneous, preceding or succeeding breach or
anticipated breach, whether or not similar, on the part of the same or any
other party.
14.5 NOTICES. All notices and other communications hereunder shall be
in writing and shall be deemed to have been given only if and when: (1)
personally delivered; or (2) three business days after mailing, postage
prepaid, by certified mail; or (3) when delivered (and receipted for) by an
overnight delivery service; or (4) when delivered by facsimile transmission
for which automatic confirmation has been received, addressed in each case as
follows:
IF TO RII SUB OR THE PARENT:
Xxxxxx X. Xxxxx, Chairman and CEO
Recycling Industries, Inc.
Recycling Industries of Charlotte, Inc.
0000 Xxxxx Xxxxxxxx Xxxx., Xxxxx 000
Xxxxxxxxx, Xxxxxxxx 00000
telephone: (000) 000-0000
facsimile: (000) 000-0000
WITH A COPY TO:
Xxxx X. Xxxxxxx, Esq.
Friedlob Xxxxxxxxx Xxxxxx Xxxxxxx & Xxxxxxxxxxx, LLC
0000 Xxxxxxx Xxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxx 00000
telephone: (000) 000-0000
facsimile: (000) 000-0000
IF TO SELLER OR THE SHAREHOLDERS:
Xxxxxxx X. Xxxxx, President
Republic Alloys, Inc.
000 Xxxxxx Xxxxxx
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000
telephone: (704)
facsimile: (704)
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WITH A COPY TO:
C. Xxxxxxx Xxxxxxx, Xx.
Xxxxxxx, Moon & Xxxxx, P.A.
000 Xxxx Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000
telephone: (000) 000-0000
facsimile: (000) 000-0000
Any party may change its address by giving notice to every other party.
14.6 FURTHER ASSURANCES. From and after the date of this Agreement,
each of the parties hereto will cooperate with each other and will use its or
his best efforts to obtain all necessary waivers and consents from third
parties. Seller and the Shareholders, at any time and from time to time on
and after the Closing, upon request by RII Sub or the Parent and without
further consideration, shall take or cause to be taken such actions and
execute, acknowledge and deliver, or cause to be executed, acknowledged and
delivered, such transfers, conveyances and assurances as may be reasonably
requested by RII Sub or the Parent for the better conveying, transferring,
assigning, delivering, assuring and confirming the Seller Assets to RII Sub.
14.7 RETENTION OF/ACCESS TO BUSINESS RECORDS. For at least three
years following the Closing Date, RII Sub shall retain all business records
related to the Seller Assets or the Business. Following such three-year
retention period, and until six years following the Closing Date, records
shall be destroyed in accordance with the policies mutually agreed upon by
Seller or the Shareholders and RII Sub. Following such six-year period, such
records shall be destroyed in accordance with the policies of RII Sub.
During the six-year period following the Closing Date, upon reasonable
request by Seller or the Shareholders from time to time, and without further
consideration, RII Sub shall provide Seller or the Shareholders access to or
copies of said business records which have not been previously destroyed.
14.8 AUDIT BY RII SUB AND PARENT. For a period of five years after
the Closing, Seller and the Shareholders shall give Parent and RII Sub's
independent certified public accountants full access to the financial books
and records and shall fully cooperate with such accountants in conducting and
completing any audits necessary to enable the Parent to meet the disclosure
and financial reporting requirements of the 1934 Act and the rules and
regulations promulgated thereunder.
14.9 ENTIRE AGREEMENT. This Agreement, including all Schedules and
Exhibits hereto, and the other Closing Documents constitute the entire
agreement of the parties with respect to the subject matter hereof and may
not be modified, amended or terminated except by a written instrument
specifically referring to this Agreement signed by each of the parties hereto
or as otherwise provided in this Agreement.
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14.10 CONSTRUCTION. In the event of an ambiguity or a question of
intent or interpretation arises, this Agreement shall be construed as if
drafted jointly by the parties and no presumption or burden of proof shall
arise favoring or disfavoring any party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local
or foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise.
The word "including" means including without limitation. The parties intend
that each representation, warranty and covenant contained herein shall have
independent significance. If any party has breached any representation,
warranty or covenant contained herein in any respect, the fact that there
exists another representation, warranty or covenant relating to the same
subject matter, regardless of the relative levels of specificity, which the
party has not breached shall not detract from or mitigate the fact that the
party is in breach of the first representation, warranty or covenant.
14.11 RIGHTS OF THIRD PARTIES. All conditions of the obligations of
the parties hereto, and all undertakings herein, except as otherwise provided
by a written consent, are solely and exclusively for the benefit of the
parties hereto and their successors and assigns, and no other Person or
entity shall have standing to require satisfaction of such conditions or to
enforce such undertakings in accordance with their terms or be entitled to
assume that any party hereto will refuse to complete the Transaction
contemplated hereby in the absence of strict compliance with any or all
thereof, and no other Person or entity shall, under any circumstances, be
deemed a beneficiary of such conditions or undertakings, any or all of which
may be freely waived in whole or in part, by mutual consent of the parties
hereto at any time, if in their sole discretion they deem it desirable to do
so.
14.12 HEADINGS. The Table of Contents and Article and Section headings
contained in this Agreement are for reference purposes only and shall not
affect in any way the meaning or interpretation of this Agreement.
14.13 GOVERNING LAW. The interpretation and construction of this
Agreement, and all matters relating hereto, shall be governed by the internal
laws of the State of Colorado, without regard to principles of conflicts or
choice of law.
14.14 SUBMISSION TO JURISDICTION; WAIVERS. The parties each hereby
irrevocably and unconditionally: (1) agree that any action or proceeding
related to this Agreement shall be brought in, and hereby submits itself and
its property to the jurisdiction of, the courts of the State of Colorado
located in Denver, Colorado, the courts of the United States of America for
the District of Colorado, and the appellate courts from any thereof; (2)
consent to the venue of any such action or proceeding in any of said courts
and waives any objection that it may have, now or hereafter, that such action
or proceeding was brought in an inconvenient court and agrees not to plead or
claim the same; and (3) agree that service of process in any such action or
proceeding may be effected by mailing a copy thereof by registered or
certified mail (or any substantially similar form of mail), postage prepaid,
to the party against whom the action or proceeding is brought at its address
set forth in Section 14.5.
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14.15 PARTIES IN INTEREST. This Agreement may not be transferred,
assigned, pledged or hypothecated by any party hereto, other than by
operation of law, by assignment to the Lender, or with the consent of the
other parties. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and permitted
assigns.
14.16 COUNTERPARTS AND FACSIMILE SIGNATURES. This Agreement may be
executed in two or more counterparts, all of which taken together shall
constitute one instrument. Execution and delivery of this Agreement by
exchange of facsimile copies bearing the facsimile signature of a Party shall
constitute a valid and binding execution and delivery of this Agreement by
such Party. Such facsimile copies shall constitute enforceable original
documents.
14.17 SEVERABILITY. In case any provision in this Agreement shall be
held invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions hereof will not in any way be
affected or impaired thereby.
14.18 CORPORATE AUTHORITY. The undersigned have executed this
Agreement with all requisite corporate authority.
14.19 PAYMENT OF ACCOUNTS PAYABLE. Within 30 days of the Closing Date,
Seller shall have paid in full all of the Seller Payables outstanding as of
the Closing Date other than, amounts which are the subject of a bona fide
dispute.
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IN WITNESS WHEREOF, the parties hereto have caused their names to be
hereunto subscribed, all as of the day and year first above written.
"RII SUB"
RECYCLING INDUSTRIES OF CHARLOTTE, INC.
Dated: May 21, 1998 By: /s/ Xxxxxxx X. XxXxxxxxx
-------------------------------------
Xxxxxxx X. XxXxxxxxx, Vice
President
"PARENT"
RECYCLING INDUSTRIES, INC.
Dated: May 21, 1998 By: /s/ Xxxxxxx X. XxXxxxxxx
-------------------------------------
Xxxxxxx X. XxXxxxxxx, Vice
President of Acquisitions
"SELLER"
REPUBLIC ALLOYS, INC.
Dated: May 21, 1998 By: /s/ Xxxxxxx X. Xxxxx
-------------------------------------
Xxxxxxx X. Xxxxx, President
"XXXXX"
Dated: May 21, 1998 By: /s/ Xxxxxxx X. Xxxxx
------------------------------------
Xxxxxxx X. Xxxxx
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"XXXXX"
By: /s/ Xxxx X. Xxxxx
Dated: May 21, 1998 ------------------------------------
Xxxx X. Xxxxx
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LIST OF EXHIBITS
----------------
Exhibit A Form of Terminal Lease Agreement
Exhibit B Certificate of Designations, Rights and Preferences of the Series
K Redeemable Convertible Preferred Stock of Recycling Industries,
Inc.
Exhibit C Form of Preferred Subscription Agreement
Exhibit D Form of Common Subscription Agreement
Exhibit E Environmental Escrow Agreement
Exhibit F Non-Competition Agreement
Exhibit G Form of Legal Opinion from Counsel for Seller and the
Shareholders
Exhibit H Form of Legal Opinion from Counsel for RII Sub and Parent
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LIST OF SCHEDULES
-----------------
Schedule 1.18 Lender
Schedule 1.21 Material Assumed Contracts
Schedule 1.29 Retained Receivables
Schedule 2.1(a) Owned Facilities - Legal Description
Schedule 2.1(b) Seller Receivables
Schedule 2.1(d) Equipment
Schedule 2.1(e) Intellectual Property
Schedule 2.1(j) Computer Software
Schedule 2.2 Excluded Assets
Schedule 3.1 Payment Instructions
Schedule 3.2 Inventory Valuation
Schedule 3.4 Allocation of Purchase Price
Schedule 3.6 Tenants of Owned Facilities
Schedule 4.1(b) Jurisdictions of Seller
Schedule 4.5(c) Tax Matters
Schedule 4.6 Legal Compliance
Schedule 4.7 Permits
Schedule 4.8 Litigation
Schedule 4.9(a) Other Contracts and Agreements
Schedule 4.16 Suppliers and Customers
Schedule 4.17 Employee Benefit Plans
Schedule 4.17(j) Post-Retirement Benefits
Schedule 4.20 Insurance Policies
Schedule 4.22 Relationships
Schedule 4.24 Employee Information
Schedule 4.25 Environmental Matters
Schedule 4.27 Guarantees
Schedule 7.1 Environmental Studies
Schedule 8.1 Title Commitment
Schedule 8.2 Survey
Schedule 8.4 Equipment Purchased Prior to Closing
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