ASSET PURCHASE AGREEMENT
BY AND AMONG
RECYCLING INDUSTRIES OF SOUTH CAROLINA, INC.
a Colorado corporation
("RISCI")
AND
RECYCLING INDUSTRIES, INC.
a Colorado corporation
(THE "PARENT")
AND
ADDLESTONE INTERNATIONAL CORPORATION
a Delaware corporation
("AIC")
AND
XXXXXX ADDLESTONE
President and Stockholder of AIC
("ADDLESTONE")
APRIL 8, 1997
Table of Contents
-----------------
ARTICLE 1
DEFINITIONS -1-
ARTICLE 2
ACQUISITION OF AIC ASSETS -5-
2.1 Purchase and Sale of the AIC Assets -5-
2.2 Excluded Assets -7-
2.3 Assumed Contracts -7-
2.4 Assumption of Liabilities -7-
2.5 Collection of Accounts Receivable -7-
ARTICLE 3
PURCHASE PRICE AND CLOSING -8-
3.1 Purchase Price for AIC Assets -8-
3.2 Determination of Unprocessed Inventory Value -8-
3.3 Allocation of the Purchase Price -8-
3.4 Closing of the Purchase -9-
ARTICLE 4
REPRESENTATIONS OF AIC AND ADDLESTONE -9-
4.1 Due Organization and Qualification -9-
4.2 Title to Property -9-
4.3 Authority of AIC; Consents -10-
4.4 Disclosed AIC Information; Absence of Changes -11-
4.5 No Tax Liens; No Waiver -12-
4.6 Compliance with Laws -12-
4.7 Permits -12-
4.8 Litigation -12-
4.9 Contracts and Other Agreements -13-
4.10 Tangible Property -13-
4.11 Inventory -13-
4.12 Intellectual Property -14-
4.13 Real Property -14-
4.14 Liabilities -14-
4.15 Suppliers and Customers -15-
4.16 Employee Benefit Plans -15-
4.17 Curtailment of Operations -15-
4.18 Employee Relations -15-
4.19 Insurance -15-
4.20 Relationships -15-
4.21 No Material Changes Prior to Closing Date -16-
4.22 Broker's or Finder's Fees -16-
4.23 Employee Transition -16-
4.24 Environmental Matters -16-
4.25 OSHA -16-
4.26 Disclosure -16-
4.27 Best Efforts -17-
ARTICLE 5
REPRESENTATIONS OF RISCI AND THE PARENT -17-
5.1 Due Incorporation and Qualification of RISCI -17-
5.2 Due Incorporation and Qualification of the Parent -17-
5.3 Articles of Incorporation and Bylaws -17-
5.4 Authority of RISCI and the Parent -17-
5.5 Consideration Stock -18-
5.6 Broker's or Finder's Fees -18-
5.7 Disclosure -18-
5.8 Best Efforts -19-
ARTICLE 6
REGULATORY COMPLIANCE -19-
6.1 Bulk Sales Compliance -19-
6.2 Xxxx-Xxxxx-Xxxxxx Act -19-
6.3 The WARN Act -19-
6.4 COBRA -19-
ARTICLE 7
COVENANTS TO BE PERFORMED PRIOR TO THE CLOSING -19-
7.1 Environmental Studies -19-
7.2 Title Insurance -20-
7.3 Survey. -20-
7.4 Assumed Contracts -20-
7.5 Harmonics Issue -21-
7.6 Conduct of Business -21-
7.7 Preservation of Business -21-
7.8 Notice of Events -21-
7.9 Examinations and Investigations -21-
7.10 Review of Revised Schedules and Information -22-
7.11 Retained Employees -22-
7.12 No Negotiation by AIC or Addlestone -22-
ARTICLE 8
CONDITIONS PRECEDENT TO THE OBLIGATION
OF RISCI AND THE PARENT TO CLOSE -23-
8.1 Representations, Warranties and Other Agreements -23-
8.2 Governmental Permits and Approvals -23-
8.3 Third Party Consents -23-
8.4 Litigation -23-
8.5 Real Property -23-
8.6 No Material Adverse Change -24-
8.7 Removal of Shredder Residue -24-
8.8 Transfer Documents -24-
8.9 Assignment of Contracts -25-
8.10 Release of Security Interest -25-
8.11 Harmonics Issue -25-
8.12 Subscription Agreement -25-
8.14 Books and Records -25-
8.15 Copies of Business Records -25-
8.16 Resolutions -25-
8.17 Certificates, Etc. of Addlestone and AIC -25-
8.18 Financing -25-
8.19 No Sales or Use Tax Due -26-
8.20 Payment of Accounts Payable -26-
8.21 Approval of Counsel to RISCI and the Parent -26-
ARTICLE 9
CONDITIONS PRECEDENT TO THE OBLIGATION OF AIC
AND ADDLESTONE TO CLOSE -26-
9.1 Representations, Warranties and Other Agreements -26-
9.2 Governmental Permits and Approvals -26-
9.3 Litigation -26-
9.4 Financing -27-
9.5 Resolutions -27-
9.6 Designations of Consideration Stock -27-
9.7 Release from Assumed Contracts -27-
9.8 Legal Opinion -27-
9.9 Approval of Counsel to AIC and Addlestone -27-
9.10 The Purchase Price -27-
ARTICLE 10
ACTIONS TO BE TAKEN AT THE CLOSING -27-
10.1 Transfer Documents -27-
10.2 The Purchase Price -28-
10.3 Subscription Agreement -28-
10.4 Non-Competition Agreements -28-
10.5 Special Warranty Deed -28-
10.6 Contract Assumptions -28-
10.7 Closing Certificate of AIC -28-
10.8 Closing Certificate of Addlestone -28-
10.10 Certificate Regarding Resolutions of AIC -28-
10.11 Certificate Regarding Resolutions of Parent and RISCI -28-
10.12 Legal Opinion -28-
10.13 AIC Transition Agreement -29-
10.14 Real Property Closing -29-
10.15 Titles to Vehicles, Machinery and Equipment -29-
ARTICLE 11
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION -30-
11.1 Survival of Representations and Warranties -30-
11.2 Indemnity Agreements of AIC and Addlestone -30-
11.3 Indemnity Agreement of RISCI and the Parent -31-
11.4 Indemnification Procedure for Third Party Claims -32-
11.5 Good Faith Efforts to Settle Disputes -33-
11.6 Fees and Expenses -33-
11.7 Notice of Claims -33-
11.8 Litigation Support -33-
ARTICLE 12
TERMINATION OF AGREEMENT -34-
12.1 Termination -34-
12.2 Survival -35-
12.3 Effect of Failure to Close. -35-
ARTICLE 13
CERTAIN ADDITIONAL AGREEMENTS -35-
13.1 Public Statements; Confidentiality of Information -35-
13.2 Expenses -36-
13.3 Waivers and Consents -36-
13.4 Notices -36-
13.5 Further Assurances -37-
13.6 Retention of/Access to Business Records -37-
13.7 Audit by RISCI and Parent -38-
13.8 Entire Agreement -38-
13.9 Construction -38-
13.10 Rights of Third Parties -38-
13.11 Headings -39-
13.12 Governing Law -39-
13.13 Submission to Jurisdiction; Waivers -39-
13.14 Parties in Interest -39-
13.15 Counterparts and Facsimile Signatures -39-
13.16 Severability -39-
13.17 Corporate Authority -39-
13.18 Time of Essence -39-
13.19 Right to Store -40-
LIST OF EXHIBITS -42-
LIST OF SCHEDULES -43-
ASSET PURCHASE AGREEMENT
------------------------
THIS AGREEMENT is made as of the 8th day of April, 1997, by and between
RECYCLING INDUSTRIES OF SOUTH CAROLINA, INC., a Colorado corporation ("RISCI"),
RECYCLING INDUSTRIES, INC., a Colorado corporation (the "Parent"), ADDLESTONE
INTERNATIONAL CORPORATION, a Delaware corporation ("AIC"), Xxxxxx Addlestone,
President and Stockholder of AIC ("Addlestone"). 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, RISCI is a wholly-owned subsidiary of the Parent; and
WHEREAS, RISCI desires to acquire substantially all of the assets,
excluding the Excluded Assets (as such term is hereafter defined), used in the
ferrous and nonferrous metal recycling business conducted by AIC at its facility
located in Georgetown, South Carolina and those hereafter identified
administrative office assets used in connection with the operation of AIC's
Georgetown facility and Addlestone Recycling Corporation's Metter, Georgia
facility, but excluding the Excluded Assets (collectively the "AIC Assets"); and
WHEREAS, AIC desires to sell the AIC Assets; and
WHEREAS, the Parent has a vested interest in the transactions referred to
herein and is a Party to this Agreement, amongst other things, in order to
tender the Consideration Stock referred to herein;
WHEREAS, Addlestone has a vested interest in the transactions referred to
herein and is a Party to this Agreement in order to make certain representations
and warranties and to accept certain obligations set forth herein.
NOW, THEREFORE, for and in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt, adequacy and sufficiency of which are hereby acknowledged, the parties
hereto covenant and agree as follows:
ARTICLE 1
DEFINITIONS
-----------
Unless otherwise defined in the substantive provisions of this Agreement,
the following terms will have the meanings ascribed to them in this Article 1.
1.1 "Acquisition" means the acquisition of the AIC Assets from AIC.
1.2 "AIC Payables" has the meaning set forth in Section 0, below.
1.3 "AIC Offices" means the administrative offices of AIC located at
000 Xxxxxxx Xxxxxx, Xxxxxxxxxx, Xxxxx Xxxxxxxx.
1.4 "AIC Receivables" means receivables owing to AIC by any person or
entity whomsoever, including but not limited to accounts receivable and notes
receivable.
1.5 "Assumed Contracts" means those contracts, leases and agreements
related to the Business and specifically assumed by RISCI on the Closing Date,
copies of which are listed and attached hereto as Schedule 0.
1.6 "Business" means the business and business operations as conducted
by AIC on March 20, 1997, and subsequent thereto, as a going concern.
1.7 "Closing" has the meaning set forth in Section 0, below.
1.8 "Closing Date" has the meaning set forth in Section 0, below.
1.9 "Closing Documents" means the other agreements required to be
executed and delivered under this Agreement.
1.10 "Closing Notification" has the meaning set forth in 0, below.
1.11 "Environmental Law or Laws" means any and all federal, state,
local or municipal laws, rules, orders, regulations, statutes, treaties,
ordinances, codes, decrees, or requirements of any governmental authority
regulating, relating to or imposing liability or standards of conduct
concerning environmental protection, health or safety matters, including all
requirements pertaining to reporting, licensing, permitting, investigation,
removal or remediation of emissions, discharges, releases, or threatened
releases of Hazardous Materials, chemical substances, pollutants or contaminants
or relating to the manufacture, generation, processing, distribution, use,
treatment, storage, disposal, transport, or handling of Hazardous Materials,
chemical substances, pollutants or contaminants, including, without limitation,
the Comprehensive Environmental Response, Compensation and Liability Act of 1980
("CERCLA"), the Toxic Substance Control Act ("TSCA"), the Resource Conservation
and Recovery Act ("RCRA"), the Clean Air Act ("CAA"), and the Clean Water Act
("CWA"), all as may have been amended.
1.12 "Environmental Liabilities" means any and all liabilities for the
violation of, or remediation under, any Environmental Laws.
1.13 "GAAP" means generally accepted accounting principles consistently
applied in the United States.
1.14 "Hazardous Materials" means any substance (a) the presence of
which is at, on, over, beneath, in or upon any real or personal property,
building, structure, container of any nature or description, subsurface strata,
ambient air or ambient water (including surface and groundwater) or requires
investigation, removal or remediation under any Environmental Law or common
law, (b) which is or becomes defined as a "hazardous substance," "hazardous
material," "hazardous waste", "pollutant" or "contaminant" under any
Environmental Law, and/or (c) which is toxic, explosive, corrosive, flammable,
infectious, radioactive, carcinogenic, mutagenic, or otherwise hazardous and is
or becomes regulated by any governmental authority under any Environmental Law,
(d) the presence of which causes or threatens to cause a nuisance or trespass
upon real property or to adjacent properties or poses or threatens to pose a
hazard to the environment, and/or to the health or safety of persons on or about
any real property, and/or (e) which contains urea-formaldehyde, polychlorinated
biphenyls, asbestos or asbestos containing materials, radon, petroleum and
petroleum products.
1.15 "Intellectual Property" has the meaning set forth in Section 0.
1.16 "Inventory Date" shall have the meaning set forth in Section 0
below.
1.17 "IRC" means the Internal Revenue Code of 1986, as amended.
1.18 "Knowledge" means actual knowledge without independent
investigation.
1.19 "Lender" means RISCI's and the Parent's primary lender or equity
participant relating to the Transaction.
1.20 "Liability or Liabilities" means direct or indirect indebtedness,
liability, claim, loss, damage, deficiency, obligation or responsibility, known
or unknown, asserted or unasserted, fixed or unfixed, liquidated or
unliquidated, secured or unsecured, accrued, absolute, contingent or otherwise
which affects or could affect the AIC Assets or the Business, including any
liability for Taxes.
1.21 "Ordinary Course of Business" or "Ordinary Course" means the
ordinary course of business consistent with past custom and practice of AIC
(including with respect to quantity and frequency).
1.22 "Owned Facilities" means the real property and associated fixtures
owned by AIC as specifically described on Schedule 0.
1.23 "Parent Common Stock" means the common stock, $.001 par value
pershare, of Recycling Industries, Inc., a Colorado corporation.
1.24 "Parent Series E Convertible Preferred Stock" means the
Convertible Preferred Stock of Parent described in the Designation of Series
"E" Convertible Preferred Stock attached hereto as Exhibit A.
1.25 "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.
1.26 "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.
1.27 "Processed Inventory" means all ferrous and non-ferrous Inventory
that has been processed by AIC as of the Closing Date and is ready for shipment
to AIC's customers.
1.28 "Review Period" means the 30 business days after execution of this
Agreement by all of the Parties. During the Review Period, RISCI and Parent
shall have the right to review such schedules, documents and/or exhibits and
request additional documentation as needed to clarify, investigate or determine
the nature of any item disclosed which, in the opinion of the RISCI, the Parent
or their counsel or accountants could have a material adverse affect on the
operations of RISCI, the Parent, or AIC ("Adverse Items").
1.29 "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.
1.30 "Shredder Residue" means the by-product generated from the
operation of a shredder which may or may not contain Hazardous Materials.
1.31 "Tangible Property" shall include the property described in
Sections 0, 0, 0, and 0, below.
1.32 "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.
1.33 "Transaction" means the transactions contemplated by this
Agreement and the Closing Documents.
1.34 "Unprocessed Inventory" means: (i) all scrap ferrous metal
comprised of obsolete, discarded or abandoned machinery, appliances, equipment,
automobiles or other by-products to be processed by AIC for resale; and (ii)
scrap non-ferrous metal comprised of non-magnetic alloys of copper, brass,
aluminum and other related metals to be processed by AIC for resale.
Unprocessed Inventory does not include any ferrous or non-ferrous materials
contained in Shredder Residue or the other residual materials resulting from
AIC's operations or contained within dirt or other non-processable medium within
the Owned Facility.
1.35 "1934 Act" means the Securities Exchange Act of 1934, as amended.
ARTICLE 2
ACQUISITION OF AIC ASSETS
-------------------------
2.1 Purchase and Sale of the AIC Assets. At the Closing and subject to
the terms and conditions stated herein, AIC agrees to sell, assign, convey and
transfer to RISCI, and RISCI agrees to purchase from AIC, the AIC Assets
together with all of the properties, rights and goodwill associated therewith of
every kind and description, tangible and intangible, personal or mixed, as
hereinafter more particularly described, with the exception of the Excluded
Assets, as hereinafter defined. Without limitation, the AIC Assets shall
include all of the items enumerated in subparagraphs (a) through (m) below, but
excepting the Excluded Assets:
(a) The Owned Facilities, including all buildings situated thereon
and all improvements and including all rights in easements, driveways and signs,
as legally described on Schedule 0.
(b) All vehicles, machinery and equipment, tools, furniture,
leasehold improvements, fixtures, vehicles, dies, jigs, and supplies, or any
related capitalized items and other tangible property which are both (i) owned
by AIC and (ii) either (x) located at the Owned Facilities or (y) used by the
Business as of the date of this Agreement, whether at the Owned Facilities, over
the road or at any other location, all as described on Schedule 0, provided that
digs, jigs, supplies, tools and spare parts are not listed on Schedule 0 but
excluding (i) any of the foregoing located at the AIC Offices except for those
specific assets listed on Schedule 0 and (ii) all books, records, files and
shelving now located on the second floor of the building located at the Owned
Facility.
(c) Schedule 0 sets forth all of the intellectual property,
proprietary and business information of AIC relating to the Business, including,
all of AIC's right, title and interest in and to (collectively the "Intellectual
Property"):
(1) the non-exclusive use of the name "Addlestone
International" and any variations thereof, but only for a period of six months
after the Closing;
(2) all transferable Permits and telephone numbers used by
AIC to the extent the same are transferable by AIC;
(3) the non-exclusive right to all inventions, discoveries,
trade secrets, designs, prototypes, formulas and know-how relating to the
Business;
(4) all patents (whether issued or pending), copyrights,
trademarks, tradenames (but excluding rights to the name "Addlestone
International Corporation" except as provided in Section 0; and
(5) copies of all business, financial and tax records
relating to the Business, including copies of all sales data, pricing and cost
information, customer and supplier lists, credit records, sales literature and
business and marketing plans relating to the Business, provided that AIC will
not be required to make copies except as provided in Section Error! Reference
source not found..
(d) Those specific assets relating to the operation of the
Business and AIC located at the AIC Offices and listed on Schedule 0.
(e) Copies of all computer documentation, computer files, computer
disks, computer tapes and all information stored on computer media (whether
written, optical, or magnetic) used in connection with the operation of the
Business and stored at the Owned Facilities or used at the AIC Offices in
connection with the operation of the Business.
(f) All accounting and other computer software relating to the
Business owned by AIC, including information interfaced with those systems, as
maintained by AIC at the Owned Facilities or the AIC Offices, all of which are
listed on Schedule 0, provided, however, that AIC shall not warrant title to any
software;
(g) All rights to customer and supplier lists, signs, advertising,
catalogues and brochures relating to the Business.
(h) All rights of AIC under the contracts relating to the Business
to which AIC is a party, which are listed on Schedule 0, except for contracts
for the sale of Processed Inventory.
(i) All rights of AIC under open orders to purchase raw materials
or services in accordance with the Business' normal operating procedures.
(j) All rights of AIC as lessee under leases of personal property
relating to the Business, all of which are listed on Schedule 0.
(k) All purchase orders, back orders, open orders or contracts
from customers, including the backlog and parts manufactured for or assigned to
AIC but not including any contracts for the sale of Processed Inventory.
(l) All goodwill and other general intangibles related to the AIC
Assets.
(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 AIC
unless specifically described in Section 0 or on Schedule 0 as an Excluded
Asset.
AIC's sale, conveyance, assignment and transfer of the AIC Assets shall be
free and clear of all liens, encumbrances, liabilities or obligations, except
for any statutory liens for ad valorem taxes for the current year.
2.2 Excluded Assets. On the Closing Date, RISCI shall not purchase the
cash, cash equivalents, Processed Inventory, AIC Receivables, prepaid items,
books and records, or the other assets of AIC on the Closing Date as set forth
on Schedule 0 (the "Excluded Assets").
2.3 Assumed Contracts. RISCI shall assumes the obligations of AIC only
for those contracts set forth on Schedule 0.
2.4 Assumption of Liabilities. RISCI shall not assume any Liabilities
or Environmental Liabilities of AIC 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 AIC Assets not yet due
and payable shall be pro-rated at Closing based on the preceding year's actual
ad-valorem taxes paid and RISCI shall assume its pro-rata share of such taxes.
2.5 Collection of Accounts Receivable.
(a) AIC will continue to collect AIC Receivables. If RISCI
receives payment on any of the AIC Receivable, RISCI shall forthwith forward the
same to AIC.
(b) AIC shall have the right, during the normal business hours of
RISCI, to review records of RISCI solely to determine compliance with the
provisions of Section 0.
(c) If AIC receives payment of any receivables relating to the
Business for materials which are the property of RISCI and which are shipped
after the Closing, then AIC shall forthwith forward the same to RISCI.
(d) The provisions of this Section 0 shall survive Closing.
ARTICLE 3
PURCHASE PRICE AND CLOSING
--------------------------
3.1 Purchase Price for AIC Assets
-----------------------------
(a) Subject to Section 0 below, RISCI shall pay the
total amount of $6,000,000 plus an amount equal to the value of AIC's
Unprocessed Inventory, as determined in accordance with Section 0, below (the
"Purchase Price") to AIC for the purchase of the AIC Assets. The Purchase
Price shall be payable as follows:
(1) $5,500,000, plus an amount equal to the value of
AIC's Unprocessed Inventory, as determined in accordance with Section 0, below,
in immediately available funds at Closing (the "Cash Consideration");
(2) $500,000 of Parent Series E Convertible Preferred
Stock delivered on the Closing Date (as defined in Section 0 hereof) pursuant
to the terms of a customary subscription agreement (the "Subscription Agree-
ment") containing mandatory registration rights for the Parent Common Stock
issuable upon conversion of the Parent Series E Convertible Preferred Stock to
be registered (the "Consideration Stock"). The form of Subscription Agreement
is attached hereto as Exhibit B.
3.2 Determination of Unprocessed Inventory Value
--------------------------------------------
(a) The quantities of all Unprocessed Inventory shall be
determined as of the close of business of AIC on a day not more than three
business days prior to the scheduled Closing Date (the "Inventory Date").
In conjunction with the determination of the quantities of Unprocessed
Inventory, RISCI and its representatives shall be entitled to participate in
determining the physical inventory thereof as well as to inspect all work
papers, schedules and other supporting materials.
(b) The Purchase Price of the Unprocessed Inventory shall be
based on AIC's average cost for the ten business days preceding the Inventory
Date, exclusive of any purchases from related or affiliated persons or enti-
ties.
3.3 Allocation of the Purchase Price
--------------------------------
(a) The Purchase Price, exclusive of the value of the Unpro-
cessed Inventory as determined in accordance with Section 0, above, shall be
allocated among the AIC Assets as set forth on Schedule 0.
(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 0.
(c) RISCI and AIC each covenant with the other that it will
promptly give written notice to the other of any inquiry or challenge of such
allocation by any federal, state or local tax authority.
3.4 Closing of the Purchase. The closing of the Transaction (the
"Closing") shall take place at the offices of NationsBank, Charleston, South
Carolina, or at such other place in Charleston, South Carolina as selected by
the Lender, in its sole and absolute discretion, on the date and at the time
set forth in the Closing Notification, which shall be a Monday, given by RISCI
in accordance with this section (the "Closing Date"). The Closing Date shall
be no later than June 30, 1997, provided, however, the Closing Date shall be
automatically extended to provide for RISCI and Parent's review pursuant to
Sections 0 and 0. RISCI shall give written notice to AIC that RISCI intends to
consummate the Transaction on a date which is at least 15 days following the
date of such notice (the "Closing Notification"); provided, however, that AIC,
in its sole discretion, may waive the requirement of the Closing Notification.
ARTICLE 4
REPRESENTATIONS OF AIC AND ADDLESTONE
-------------------------------------
As an inducement to RISCI and the Parent to enter into this Agreement and to
complete the Transaction, and with the knowledge that RISCI and the Parent
will rely thereon, AIC and Addlestone, jointly and severally, represent and
warrant to RISCI and the Parent that all of the representations and warranties
in this Article 4 are true, correct and complete as of the date of this Agree-
ment and will be correct and complete as of the Closing Date (as though made
then and as though the Closing Date were substituted for the date of this
Agreement throughout this Article 4), except as set forth in the Schedules to
be attached to this Agreement which may be revised by AIC at any time or times
prior to Closing and which Schedules, as the same may be so revised, will be
initialed by the Parties at the Closing.
4.1 Due Organization and Qualification.
(a) AIC is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware, and has the corporate
power and lawful authority to carry on its business as now being conducted.
(b) AIC is duly qualified or otherwise authorized to transact
business in South Carolina, being the only jurisdiction in which the nature of
the business conducted or the character or location of the properties owned
makes such qualification necessary.
4.2 Title to Property. AIC has good, valid and marketable title to
all real and personal property included in the AIC Assets (tangible and
intangible), in each case subject to no Security Interest, option, right of
first refusal, or other restriction of any kind or character, subject, however,
to (i) the title exceptions disclosed by the title commitment and the survey as
described in Sections 0 and 0; and (ii) a security interest in favor of
NationsBank of South Carolina, N.A. as described in Schedule 0.
4.3 Authority of AIC; Consents. (a) AIC has full power and authority
to execute and deliver this Agreement and the Closing Documents and to carry
out the Transaction; and AIC has taken all requisite corporate, partnership, or
other action to authorize the execution, delivery and performance of the
Closing Documents.
(b) This Agreement and the Closing Documents are valid and
binding agreements of AIC enforceable in accordance with their terms.
(c) Except as set forth in the Schedules to this Agreement or
any document supplied by AIC and Addlestone to RISCI and Parent, no consent,
authorization or approval of, or declaration, filing or registration with, any
governmental or regulatory authority or any consent, authorization or approval
of any other third party is required to enable AIC to enter into and perform
its obligations under this Agreement and the Closing Documents, and neither the
execution and delivery of this Agreement and the Closing Documents nor the
consummation of the Transaction thereby will:
(1) Be in violation of the Certificate of
Incorporation, Bylaws or other organizational document of AIC, or constitute a
breach of any evidence of indebtedness or agreement to which AIC is a party;
(2) Cause a default under any mortgage or deed of
trust or other lien, charge or encumbrance to which any of the AIC Assets is
subject or under any contract to which it is a party, or permit the termination
of any such contract by another person;
(3) Result in the creation or imposition of any
Security Interest upon any of the AIC Assets under any agreement or commitment
to which AIC or the AIC Assets are bound;
(4) Conflict with or result in the breach of any writ,
injunction or decree of any court or governmental instrumentality;
(5) To the Knowledge of AIC and Addlestone, violate
any statute, law or regulation of any jurisdiction as such statute, law or
regulation related to the AIC Assets; or
(6) To the Knowledge of AIC and Addlestone, violate or
cause any revocation of, or limitation on, any Permit.
4.4 Disclosed AIC Information; Absence of Changes. (a) AIC has
furnished, or will prior to April 30, 1997 (or such later date as hereafter set
forth) furnish, RISCI and the Parent the following financial information,
Schedules, and other disclosures:
(1) A copy of the unaudited financial statements for
AIC for its fiscal years ended December 31, 1994, 1995 and 1996, and a
description of its material assets (including any real property, equipment,
and other assets owned as of the end of each fiscal year). Further, AIC will
promptly furnish to RISCI any interim financial statements for any months in
1997 after the same become available;
(2) Copies of AIC's tax returns for its tax years
ended in 1993, 1994, and 1995;
(3) Copies of all of AIC's Permits;
(4) All schedules referred to in this Agreement.
AIC will update such information to the Closing Date (such information
being collectively referred to in this Section 0 as the "Disclosed AIC
Information").
(b) The Disclosed AIC Information, including the footnotes
thereto, present fairly, in all material respects, the financial and
operational condition of the Business, the AIC Assets, and AIC at the dates
thereof and reflect all material claims against, and all material debts and
liabilities of AIC, fixed or contingent, as at the dates thereof, and the
statements of income and retained earnings which are a part of the Disclosed
AIC Information present fairly, in all material respects, the results of the
operations of AIC and the changes in its financial position for the periods
indicated except as otherwise disclosed in this Agreement and the Exhibits and
Schedules hereto. The financial statements which are included within the
Disclosed AIC Information have been prepared substantially in accordance with
GAAP, except that as to any interim financial statements, the customary year-
end adjusting entries may not have been made.
(c) Since December 31, 1996, there has been (1) no material
adverse change in the assets or liabilities, or in the business or condition,
financial or otherwise, or in the results of operations of the Business,
whether as a result of any legislative or regulatory change, revocation of any
Permits, fire, explosion, accident, casualty, labor trouble, flood, drought,
riot, storm, condemnation or act of God or other public force or otherwise; and
(2) no change in the assets or liabilities, or in the Business or condition,
financial or otherwise, or in the results of operations, or any loss of
customers or prospects of AIC, except in the Ordinary Course of Business which
have not, in the aggregate or individually, been materially adverse.
(d) AIC, during the pendency of this Agreement will operate
the Business only in the Ordinary Course.
(e) AIC will provide prompt notice to RISCI of any material
change (including but not limited to the institution of legal proceedings by or
against AIC.
4.5 No Tax Liens; No Waiver. Except as set forth on Schedule 0:
(a) None of the AIC 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 RISCI as purchaser under
the IRC or any comparable provision of state or local law, except for ad-
valorem taxes which are not yet due and payable.
(b) AIC has not waived any statute of limitations with respect
to the assertion of any liability under any federal, state, or local tax law.
(c) AIC 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 AIC and
Addlestone, contemplated.
4.6 Compliance with Laws. Except as set forth on Schedule 0, (a)
neither AIC nor any of Addlestone is in violation or has violated any
applicable order, judgment, injunction, award or decree relating to the AIC
Assets. To the Knowledge of AIC and Addlestone, except as otherwise disclosed
in the Environmental Studies, neither AIC nor Addlestone 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 AIC Assets.
(b) Without limiting the generality of the foregoing (1) the
buildings included in the Owned Facilities do not encroach on the property of
others, (2) except as otherwise disclosed in the Environmental Studies, to the
Knowledge of AIC and Addlestone there is not pending or threatened any
notification of any governmental authority that AIC 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 AIC nor Addlestone has Knowledge of any basis therefor, and (3)
neither AIC nor Addlestone has received any such notification of past
violations of such laws or regulations.
4.7 Permits. To the Knowledge of AIC and Addlestone, Schedule 0 lists
all Permits required by any governmental entity related to the Business or
operations of AIC. Except as described on Schedule 0, AIC 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 AIC or
Addlestone, threatened.
4.8 Litigation. Except as set forth on Schedule 0, there are no
outstanding orders, judgments, injunctions, awards or decrees of any court,
governmental or regulatory body or arbitration tribunal against or involving
the AIC Assets or the Business. Except as set forth on Schedule 0, there are
no actions, suits or claims against AIC or Addlestone, or, to the Knowledge of
AIC or Addlestone, investigations (whether or not the defense thereof or
liabilities in respect thereof are covered by insurance) pending or, to the
Knowledge of AIC or Addlestone, threatened against or involving the AIC Assets
or the Business, nor to the Knowledge of AIC or Addlestone, is there any basis
therefor. Responsibility for any litigation involving the AIC Assets or the
Business pending or arising from acts that occurred prior to the Closing and
the satisfaction of judgments (including related costs and fees) shall remain
with AIC and Addlestone.
4.9 Contracts and Other Agreements. Except as set forth on Schedule 0
(a) Except for the Assumed Contracts or the contracts,
leases, and other agreements which will be repaid or canceled at or prior to
the Closing, AIC is not a party to any (1) contract for the employment of any
officer or individual employee, (2) contract with any union, (3) bank loan or
other credit agreement, (4) bonus, deferred compensation, profit sharing,
pension or retirement arrangement, (5) lease for real or personal property, (6)
partnership or joint venture agreement, or (7) other material contract,
agreement or commitment except for contracts to sell Processed Inventory.
(b) All of the contracts, leases and other agreements which
constitute a part of the Assumed Contracts are valid and binding upon AIC in
accordance with their terms, and AIC is not in default nor has it received any
notice of default under, or with respect to, any such contracts, leases, or
other agreements.
(c) No approval or consent of any Person is needed in order
that the contracts, leases, and other agreements which constitute a part of the
Assumed Contracts will continue in full force and effect following the
completion of the Transaction. AIC is not in the process of negotiating or
entering into any contracts, leases, or other agreements described in this
Section 0.
4.10 Tangible Property. Except as set forth on Schedule 0, all
Tangible Property is reflected in the Disclosed AIC Information and to the
extent such Tangible Property was being used in the Business at March 20, 1997,
or thereafter, is in good operating condition and repair, subject only to
normal wear and tear. Except as set forth on Schedule 0, neither AIC nor
Addlestone has received notice that any of the Tangible Property is in
violation of any existing law or any building, zoning, health, safety or other
ordinance, code or regulation.
4.11 Inventory. The piles of Unprocessed Inventory observed and
measured on the Inventory Date are located on level ground and are comprised
solely, throughout the pile, of the quality and grade of material visible on
the outer surface of the pile.
4.12 Intellectual Property. Except as set forth on Schedule 0:
(a) All Intellectual Property is owned outright by AIC, free
and clear of any Security Interest and there exist no obligations with respect
to any Intellectual Property requiring AIC to make any payment in respect of
its use or otherwise. AIC has never agreed to indemnify any Person for or
against any interference, infringement, misappropriation or other conflict with
respect to the Intellectual Property.
(b) AIC and Addlestone are not aware of any patent, invention,
trade secret, trademark, service xxxx, trade name or copyright of any other
Person that is infringed by AIC, 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 AIC, and neither AIC nor Addlestone know
of any basis for any such charge or claim.
4.13 Real Property. To the best of AIC's and Addlestone's Knowledge,
except as set forth on Schedule 0, the Owned Facilities include all real
property included in the AIC Assets. To the best of AIC's and Addlestone's
Knowledge, except as set forth on Schedule 0, with respect to each parcel of
owned real property included within the Owned Facilities:
(a) Except as otherwise disclosed herein or in the
Environmental Studies, the Owned Facilities have received all approvals of
governmental authorities (including licenses and permits) required in
connection with the ownership or operation thereof and have been operated and
maintained in accordance with applicable laws, rules and regulations.
(b) There are no leases, subleases, licenses, easements,
concessions, or other agreements, written or oral, granting to any party or
parties the right of use or occupancy of any portion of the Owned Facilities.
(c) There are no outstanding options or rights of first
refusal to purchase the Owned Facilities or any portion thereof or interest
therein.
(d) There are no parties other than AIC 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, to the Knowledge of
AIC and Addlestone, adequate in accordance with all applicable laws,
ordinances, rules, and regulations and are provided ingress and egress via
public roads or via permanent, irrevocable, appurtenant easements benefiting
the Owned Facilities.
4.14 Liabilities. Except as otherwise set forth in this Agreement or
any Schedule hereto, to the best of the Knowledge of AIC and Addlestone, the
Business has no Liabilities other than (a) Liabilities fully and adequately
reflected or reserved against in the Disclosed AIC Information and (b)
Liabilities incurred since December 31, 1996, in the Ordinary Course of
Business.
4.15 Suppliers and Customers. Schedule 0 sets forth a list of (1) any
supplier from whom AIC annually purchases $5,000 or more, and (2) any customer
whose annual purchases from the Business are $25,000 or more. All purchase
orders and customer contracts were issued by AIC in the Ordinary Course of
Business. Except as set forth on Schedule 0, there are no agreements or
understandings with any customers or the vendors to AIC as to adjustments in
pricing or cost which would reduce the profit margin of any existing or
contemplated contract or other relationship.
4.16 Employee Benefit Plans. AIC does not now maintain or contribute
to, and has never maintained or contributed to, any employee pension benefit
plan relating to or including the employees of the Business subject to the
Employee Retirement Income Security Act of 1974.
4.17 Curtailment of Operations. Except as set forth on Schedule 0, no
labor disputes or work stoppages involving the Business are pending or
threatened which, either singly or in the aggregate, might have an adverse
effect on the Business. Except as set forth on Schedule 0, to the Knowledge of
AIC and Addlestone, no material customer of or supplier to the Business is
involved in, or affected by, any dispute, arbitration, lawsuit, or
administrative proceedings which might materially adversely affect the
Business, operations, properties, assets or condition, financial or otherwise,
of the Business.
4.18 Employee Relations. AIC is not a party to a collective bargaining
agreement and, to its and Addlestone's Knowledge, except as set forth on
Schedule 0, AIC 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 AIC has not and is not
engaged in any unfair labor practice. Except as set forth on Schedule 0, there
have been no organization efforts by any trade unions within the last five
years.
4.19 Insurance. Schedule 0 lists all insurance policies maintained by
AIC relating to the Business or the Owned Facilities, copies of which have been
provided to RISCI, which cover the AIC Assets or the Business, the nature of
such policies, the amount and types of coverage, and the name of the insurers
and expiration dates. AIC has paid all premiums and other amounts due on such
policies and will not cancel any insurance or permit any insurance to lapse or
terminate prior to the Closing, provided, however, AIC shall not be responsible
for the termination of any insurance by the insurer unless the cancellation was
caused by the failure of AIC to pay any premiums or other amounts when due.
4.20 Relationships. Except as described on Schedule 0, no officer or
director of AIC possesses, directly or indirectly, any financial interest in,
or is a director, officer, stockholder or employee of, any corporation, firm,
association or business organization which is a manufacturer for, or client,
supplier, customer, lessor, lessee, or competitor or potential competitor of,
the Business. Except as described on Schedule 0, the Business is not indebted
to any officer, director, partner, or employee of AIC or to any entity in which
any such Person has a financial interest.
4.21 No Material Changes Prior to Closing Date. Except for (i) the
sale of Processed Inventory and (ii) the occurrence of an event of force
majeure, up until the Closing Date, the Business will be operated without
incurring any additional material liabilities or making any material
disposition of assets.
4.22 Broker's or Finder's Fees. No agent, broker, Person or firm
acting on behalf of AIC or Addlestone is, or will be, entitled to any
commission or broker's or finder's fees from any of the parties hereto, or from
any Person controlling, controlled by or under common control with any of the
parties hereto, in connection with the Transaction.
4.23 Employee Transition. Schedule 0 lists all employees of AIC who
work or are customarily stationed at the Owned Facility, their term of
employment, compensation history (including bonus, if any), benefits and
accrued vacation and other amounts payable to each employee. As of the
expiration of the day immediately preceding Closing Date, AIC will terminate
all employees of the Business who work and are customarily stationed at the
Owned Facilities who will not be hired by RISCI as indicated by the list
delivered to AIC by RISCI in accordance with Section 0 hereof (the "Terminated
Employees"), and will pay all compensation due the Terminated Employees on or
before the seventh day subsequent to the Closing. RISCI will not be
responsible for any salaried or hourly health and life insurance obligations
incurred prior to the Closing for any Terminated Employee, nor for payment of
claims to insureds, or payment of any premiums for coverage prior to the
Closing Date. All liabilities of the Business to the Terminated Employees will
be retained by AIC, including those accruing by reason of termination by AIC.
RISCI shall have the right, in its sole discretion, to determine which of AIC's
employees it will hire following the Closing.
4.24 Environmental Matters. Except as may be provided in the
Environmental Studies to be performed as contemplated by Section 0 of this
Agreement, copies of which will be delivered to RISCI prior to the Closing as
provided in Section 0, or disclosed on Schedule 0, AIC and Addlestone have no
Knowledge of any environmental problems or Environmental Liabilities,
contingent or otherwise, relating to the Business, the Owned Facilities or any
contiguous realty.
4.25 OSHA. Except as set forth on Schedule 0, AIC and Addlestone have
no Knowledge that AIC is in violation of the Occupational Safety and Health Act
of 1970, as amended.
4.26 Disclosure. To the Knowledge of AIC and Addlestone, 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 AIC in connection with the Transaction, contains
any untrue statement of a material fact or omits any statement of a material
fact necessary in order to make the statements contained herein or therein not
misleading.
4.27 Best Efforts. AIC and Addlestone will use their best efforts to
obtain all permits, consents and approvals and take such other actions in
order to complete the Transaction by the Closing Date. AIC and Addlestone will
execute and deliver such instruments and take such other action as may be
reasonable or appropriate to carry out the Acquisition and the intentions of
this Agreement.
ARTICLE 5
REPRESENTATIONS OF RISCI AND THE PARENT
---------------------------------------
As an inducement to AIC and Addlestone to enter into this Agreement and
to complete the Transaction and with the knowledge that AIC and Addlestone
will rely thereon, RISCI and the Parent jointly and severally represent and
warrant to AIC and Addlestone the following (both as of the date hereof and as
of the Closing Date):
5.1 Due Incorporation and Qualification of RISCI. RISCI 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, RISCI will be duly qualified or otherwise authorized as a
foreign corporation to transact business and will be in good standing in South
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. Not less than three
business days prior to the Closing Date, RISCI and the Parent will deliver to
AIC 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 RISCI and the Parent. RISCI 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 RISCI 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 RISCI and the Parent to enter into and perform its obligations under the
Closing Documents, and neither the execution and delivery of the Closing
Documents nor the completion of the Transaction will, with respect to RISCI and
the Parent individually:
(a) Be in violation of its Articles of Incorporation or Bylaws
or constitute a breach of any evidence of indebtedness or agreement to which it
is a party;
(b) Cause a default under any mortgage or deed of trust or
other lien, charge or encumbrance to which any of its property is subject or
under any contract to which it is a party, or permit the termination of any
such contract by another Person;
(c) Result in the creation or imposition of any Security
Interest upon any of its property or assets under any agreement or commitment
to which it is bound;
(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 juris-
diction as such statute, law or regulation relates to it; or
(g) Violate or cause any revocation of or limitation on any
Permit.
5.5 Consideration Stock. (a) The Consideration Stock upon issuance
and the Parent Common Stock issuable upon conversion of the Consideration
Stock, will be duly authorized, fully paid and non-assessable and not subject
to any preemptive rights; (b) except for the Parent's currently outstanding
Series C and Series D Convertible Preferred Stock, the Parent does not have
outstanding any shares of preferred stock that have liquidation, dividend or
other preference senior to the Consideration Stock; and (c) until the
Consideration Stock is converted into shares of Parent Common Stock or re-
deemed by the Parent, the Parent will not issue as consideration for the
acquisition of any business or for the acquisition of an entity or the stock
of an entity owning any business, a series of preferred stock that has a
liquidation, dividend or other preference or restriction senior to the
Consideration Stock.
5.6 Broker's or Finder's Fees. No agent, broker, Person or firm
acting on behalf of RISCI or the Parent is, or will be, entitled to any
commission or broker's or finder's fees from any of the parties hereto, or
from any Person controlling, controlled by or under common control with any of
the parties hereto, in connection with the Transaction.
5.7 Disclosure. Neither this Agreement nor any Schedule, Exhibit or
certificate delivered in accordance with the terms hereof or any document or
statement in writing which has been supplied by or on behalf of RISCI or the
Parent in connection with the Transaction, contains any untrue statement of a
material fact, or omits any statement of a material fact necessary in order to
make the statements contained herein or therein not misleading.
5.8 Best Efforts. RISCI 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 RISCI and the Parent in order to complete
the Transaction by the Closing Date. RISCI 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. RISCI and Parent hereby waive compliance
by AIC with the provisions of the bulk sales or bulk transfer law of the State
of South Carolina and AIC and Addlestone agree to indemnify and hold RISCI and
the Parent harmless from any liability incurred as a result of the failure to
so comply.
6.2 Xxxx-Xxxxx-Xxxxxx Act. The provisions of the Xxxx-Xxxxx-Xxxxxx
Act, 15 U.S.C. sections 18a, relating to antitrust review by the federal govern-
ment, and any similar state statute, are inapplicable to the Transaction based
upon information furnished by RISCI to AIC and by AIC to RISCI.
6.3 The WARN Act. AIC 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. AIC will comply with the provisions of COBRA, Pub. L. No.
99-272, 99th Cong., 2d Sess. (1987), and any similar state statute, relating to
continuation of health benefits to employees as they apply to the Transaction.
ARTICLE 7
COVENANTS TO BE PERFORMED PRIOR TO THE CLOSING
----------------------------------------------
The parties hereto covenant and agree that between the date hereof and the
Closing Date:
7.1 Environmental Studies. (a) On or before May 7, 1997, AIC will
deliver to the Parent and RISCI updated and current ASTM Phase I and Phase II
Environmental Site Assessments and Transaction Screen Process of the Owned
Facilities and the Business prepared by Law Engineering and Environmental
Services, Inc. which shall be attached hereto as Schedule 0 (the "Environmental
Studies"). The cost of the Environmental Studies has been, is being and will
be borne solely by AIC out of assets other than the AIC Assets, provided,
however, that Parent and RISCI shall bear the cost of any additional testing
work performed at their request that exceeds the ASTM testing or sampling
requirements for the Environmental Studies provided for in this Section 0.
(b) Upon receipt, the Parent and RISCI shall have ten business
days to review the Environmental Studies.
(c) If the Environmental Studies indicate that remediation is
required to ensure that the business, real property, facilities and operations
of AIC meet and comply with all environmental laws and regulations, Parent and
RISCI shall have 30 business days after the delivery of the Environmental
Studies to assess the nature and extent of such contamination and to retain an
environmental engineering firm acceptable to Parent and RISCI to determine the
cost of remediation. On or before 30 business days after delivery of the
Environmental Studies, Parent and RISCI may either (i) terminate this Agreement
without liability to any party; or (ii) elect to proceed with the Acquisition
and assume responsibility for and the cost of remediation without reduction in
the Purchase Price, with such assumption to survive the Closing.
7.2 Title Insurance. Prior to the Closing, AIC will obtain a title
insurance commitment, including obligations to issue endorsements as may be
required by RISCI, with respect to the Owned Facilities, using a current South
Carolina standard form of American Land Title Association Owner's Title
Insurance Commitment issued by a title insurer satisfactory to RISCI in such
amount as allocated by the parties on Schedule 0 to such real property,
insuring title to such real property to be in RISCI as of the Closing Date,
subject only to such exceptions and exclusions as provided in this Agreement or
set forth on Schedule 0, or are acceptable to RISCI and insuring against all
possible contractors', suppliers' and mechanics' lien claims. Such title
commitment is to contain a complete copy of each easement, restriction,
limitation, or condition of title which is referred to therein that burdens or
benefits said real property. At the Closing, the costs and premium for the
owner's policy of title insurance shall be paid by AIC out of assets other than
the AIC Assets. RISCI and Parent shall pay the cost of any endorsements to the
owner's policy of title insurance which may be requested by them and the cost
of the mortgagee's policy of title insurance. When delivered, the title
commitment shall be attached as Schedule 0.
7.3 Survey. AIC will deliver to RISCI a survey of the Owned
Facilities and will have such survey updated and re-certified to RISCI, any
mortgagee of RISCI, and the title insurer issuing title insurance in the
Transaction as provided in Section 0 above, at the cost and expense of AIC.
When delivered, the Survey shall be attached hereto as Schedule 0.
7.4 Assumed Contracts. AIC will use its best efforts obtain the
written consent to the assumption by RISCI of each of the Assumed Contracts.
7.5 Harmonics Issue. AIC, in cooperation with the appropriate
Georgetown, South Carolina agencies, will contribute up to $75,000 to the cost
to cure the electrical interference problem created by the operation of the
Business at the Owned Facilities, commonly referred to as the "Harmonics
Issue," provided, however, AIC will not be required to expend more than
$75,000. If the cost to cure the Harmonics Issue exceeds $75,000, RISCI may
either (i) elect to assume the cost in excess of $75,000 or (ii) terminate
this Agreement.
7.6 Conduct of Business. AIC shall conduct the Business in the
Ordinary Course and in such a manner so that the representations and warranties
contained herein shall continue to be true and correct on and as of the Closing
Date as if made on and as of the Closing Date.
7.7 Preservation of Business. AIC shall exert reasonable efforts
consistent with its past business practices to preserve the Business, keep
available the services of its present employees, consultants and agents,
maintain its present suppliers and customers and preserve its goodwill. AIC
will provide to RISCI a mailing list of all customers and a listing of their
accounts within ten business days prior to the Closing Date, or at the earliest
possible date prior to the Closing Date, to permit RISCI to send announcements
to the customers on or after the Closing Date. Notwithstanding the foregoing,
in no event shall RISCI have the right to send any announcements to customers
prior to consummation of Closing.
7.8 Notice of Events. AIC and Addlestone shall promptly notify RISCI
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 AIC or Addlestone
materially misleading.
7.9 Examinations and Investigations. (a) Prior to the Closing Date,
during normal business hours between 8:00 a.m. and 5:00 p.m., Eastern Time,
Monday through Friday, or such other hours as to which the parties mutually
agree, RISCI and the Parent shall be entitled, through their employees and
representatives, including counsel, lenders, appraisers and accountants, to
make such investigation of the assets, properties, business and operations of
the Business, and such examination and copies of the books, records and
financial condition of the Business as RISCI and the Parent wish. RISCI and
the Parent shall cause all such employees, representatives, counsel, lenders,
appraisers and accountants to execute on behalf of themselves and their
respective representatives agreements to keep all information so obtained
confidential to the same extent as RISCI so agrees herein. No review,
examination or investigation by RISCI or the Parent shall diminish or obviate
any of the representations, warranties, covenants or agreements of AIC and
Addlestone under this Agreement.
(b) If this Agreement terminates: (1) RISCI shall keep
confidential and shall not use in any manner any information or documents
obtained from AIC concerning the Business or the AIC Assets, unless readily
ascertainable from public or published information, or trade sources, or
subsequently developed by RISCI independent of any investigation of the
Business, or received from a third party not under an obligation to AIC to
keep such information confidential, and (2) any documents obtained from AIC
shall be promptly returned to it.
7.10 Review of Revised Schedules and Information. At any time
to Closing, AIC and Addlestone shall have the right to revise any schedule or
make further disclosure, as well as to make any disclosure as herein provided
or referenced and the Parent and RISCI shall have a period of ten business days
to review any revised Schedule or further disclosure made by AIC or Addlestone
solely with respect to the Schedule so revised or the new information so
disclosed, provided, however, such ten day review period shall not apply to
extend the Closing Date if the new information disclosed on any schedule or
the further disclosure is not of a material nature adverse to RISCI in its
reasonable determination and further provided that in any event the Closing
Date will not be extended beyond July 14, 1997, unless the Parties agree
otherwise.
7.11 Retained Employees. No later than two business days prior to the
Closing, RISCI shall deliver a list of the AIC employees that it shall retain
and hire subsequent to Closing.
7.12 No Negotiation by AIC or Addlestone. Between the date hereof and
the earlier of (1) the Closing Date; and (2) the date of termination of this
Agreement, neither Addlestone nor AIC shall, directly or indirectly:
(a) Solicit, initiate or encourage the submission of
inquiries, proposals or offers from any Person (other than RISCI and the
Parent) relating to any acquisition or purchase of assets (other than Pro-
cessed Inventory) of, or any equity interest in, the AIC Assets or any exchange
offer, merger, consolidation, purchase of assets, liquidation, dissolution or
similar transaction involving the AIC 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 RISCI or the Parent and their representatives) any information with
respect to the AIC Assets, other than in the Ordinary Course of Business; or
(c) Otherwise cooperate in any way with, or assist or
participate in, facilitate or encourage, any effort or attempt by any Person
(other than RISCI and the Parent) to do or seek any of the foregoing.
AIC and Addlestone will notify RISCI immediately if any such Acquisition
Proposal is received or if any such discussions, negotiations or other events
occur or are sought to be initiated, and such notice will set forth in detail
the terms or other particulars thereof.
ARTICLE 8
CONDITIONS PRECEDENT TO THE OBLIGATION
--------------------------------------
OF RISCI AND THE PARENT TO CLOSE
--------------------------------
The obligation of RISCI and the Parent to enter into and to complete the
Transaction is subject to the fulfillment on or prior to the Closing Date of
the following conditions, any one or more of which may be waived by RISCI
and the Parent only in writing:
8.1 Representations, Warranties and Other Agreements. The
representations, warranties and other agreements of AIC and Addlestone
contained in this Agreement shall be true on and as of the Closing Date, with
the same force and effect as though made on and as of the Closing Date. AIC
and Addlestone shall have performed and complied with all covenants and
agreements required by this Agreement to be performed or complied with by them
on or prior to the Closing Date. AIC and Addlestone shall have delivered to
RISCI and the Parent certificates, dated the Closing Date, to such effect.
8.2 Governmental Permits and Approvals. All permits and approvals
from any governmental or regulatory body required for the lawful completion of
the Transaction shall have been obtained and all transferable Permits shall
be transferred to the name of RISCI.
8.3 Third Party Consents. All consents, permits and approvals from
parties to any contracts or other agreements that may be required in
connection with the performance by AIC of its obligations under this Agree-
ment or the continuance of such contracts or other agreements without material
modification after the Closing Date shall have been obtained.
8.4 Litigation. No action, suit or proceeding shall have been
instituted before any court or governmental or regulatory body, or instituted
or threatened by any governmental or regulatory body, to restrain, modify or
prevent the carrying out of the Transaction or to seek damages or a discovery
order in connection with such transactions, or that has or could reasonably be
expected to have, in the opinion of RISCI or the Parent a materially adverse
effect on the AIC Assets or the Business.
8.5 Real Property. Except as set forth on Schedules 0 and 0, with
respect to the Owned Facilities:
(a) RISCI shall receive good and marketable title by special
warranty deeds for the Owned Facilities in proper form for recording in the
State of South 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 0 and other
restrictions which do not impair the current use or occupancy, or the
marketability of title, of the property subject thereto;
(c) There shall not be pending or threatened condemnation
proceedings, lawsuits, or administrative actions of any type relating to the
Owned Facilities, or other matters affecting adversely the current use, or
occupancy thereof, including unpaid tap fees, contemplated special assessments
or zoning changes;
(d) The legal description for the Owned Facilities contained
in the deed thereof shall describe the real property forming a part of the
Owned Facilities fully and adequately. The building and improvements located
within the boundary lines of the described parcel of land (1) shall not be in
violation of applicable setback requirements, zoning laws, and ordinances, (2)
shall not encroach on any easement which may burden the land, and described
parcel of land not serve any adjoining property for any purpose inconsistent
with the use of the land, and (3) shall not be located within any flood plain
or be included in any wetlands or be 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 benefiting the Owned Facility.
8.6 No Material Adverse Change. There shall be no material adverse
change in the Business or the AIC Assets taken as a whole, financial or
otherwise, or, to either AIC's or the Addlestone's Knowledge, AIC'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 AIC, fire, explosion, accident, casualty, labor
trouble, flood, riot, storm, condemnation or act of God or otherwise, and AIC
shall have delivered to RISCI and the Parent a certificate, dated the Closing
Date, to such effect.
8.7 Removal of Shredder Residue. AIC shall have removed all Shredder
Residue and other waste materials from the Owned Facilities.
8.8 Transfer Documents. RISCI shall have received assignments and
such other instruments of sale, transfer, conveyance and assignment transfer-
ring all of the AIC Assets from AIC to RISCI, each substantially in correct
and proper legal form to transfer assets under applicable law.
8.9 Assignment of Contracts. AIC shall have delivered to RISCI writ-
ten consents to the assignment or assumption of each of the Assumed Contracts
as provided by Section 0.
8.10 Release of Security Interest. AIC shall have satisfied all
amounts due to NationsBank of South Carolina, N.A. such that the security
interest described on Schedule 0 shall be fully released.
8.11 Harmonics Issue. AIC and the appropriate Georgetown, South
Carolina agencies shall have cured or determined a method to cure the
Harmonics Issue as provided in Section 0, without any adverse impact on
the operations of the Business.
8.12 Subscription Agreement. The Parent shall have received from AIC
the Subscription Agreement for the Consideration Stock in the form attached
hereto as Exhibit B.
8.13 Non-Competition Agreement. RISCI and the Parent shall have
received from Addlestone, an executed Non-Competition Agreement in the form
attached hereto as Exhibit C.
8.14 Books and Records. RISCI shall have received the books, books of
account, papers, records, correspondence and instruments of, or relating to,
the AIC Assets and/or Business including, but not limited to, the information
set forth in Section 0 above.
8.15 Copies of Business Records. RISCI shall have received copies of
the books of account, papers, records, correspondence and instruments of, or
relating to, the AIC Assets and/or Business not stored or maintained at the
Owned Facilities and reasonably requested by RISCI or its accountants prior to
Closing. The receipt of such information shall not, in any manner, limit
RISCI's right to access set forth in Section 0, below.
8.16 Resolutions. There shall have been delivered to RISCI and the
Parent a copy of the resolutions duly adopted by the board of directors and
shareholders of AIC, authorizing and approving the execution and delivery by
AIC of this Agreement, and the completion by AIC of the Transaction, certified
by the secretary of AIC, dated as of the Closing Date.
8.17 Certificates, Etc. of Addlestone and AIC. Addlestone and AIC
shall have delivered all certified resolutions, certificates, documents or
instruments with respect to AIC's authority and such other matters as RISCI's
and the Parent's counsel may have reasonably requested prior to the Closing
Date.
8.18 Financing. On or before May 15, 1997, RISCI and the Parent shall
have obtained a commitment for financing from the Lender to effect the
purchase of the AIC Assets contemplated hereunder. If RISCI and the Parent
shall not have obtained a commitment by May 15, 1997, then they shall give
notice thereof to AIC no later than three business days subsequent to May 15,
1997; otherwise, they shall be deemed to have waived the provisions of this
Section. Further, if such notice shall be given, AIC shall have the right to
elect to terminate this Agreement and, in such event, the same shall be deemed
terminated and such termination shall be in accordance with the provisions of
Section 0.
8.19 No Sales or Use Tax Due. There shall be no sales, use or
personal property tax or other similar tax payable by RISCI or the Parent as a
result of the completion of the Acquisition.
8.20 Payment of Accounts Payable. Within 60 days of the Closing Date,
AIC shall have paid in full all of its outstanding accounts payable as of the
Closing Date, other than amounts which are the subject of a bona fide dispute
(the "AIC Payables").
8.21 Approval of Counsel to RISCI and the Parent. All actions and
proceedings hereunder and all documents or other papers required to be
delivered by AIC 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 RISCI and the
Parent, as to their form, which approval shall not be unreasonably withheld or
delayed.
ARTICLE 9
CONDITIONS PRECEDENT TO THE OBLIGATION OF AIC
---------------------------------------------
AND ADDLESTONE TO CLOSE
-----------------------
The obligation of AIC and Addlestone 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 AIC and Addlestone only in writing:
9.1 Representations, Warranties and Other Agreements. The
representations, warranties and other agreements of RISCI and the Parent
contained in this Agreement shall be true on and as of the Closing Date with
the same force and effect as though made on and as of the Closing Date. RISCI
and the Parent shall have performed and complied with all covenants and
agreements required by this Agreement to be performed or complied with by it
on or prior to the Closing Date. RISCI and the Parent shall have delivered to
AIC certificates, dated the Closing Date, to such effect.
9.2 Governmental Permits and Approvals. All permits and approvals
from any governmental or regulatory body required for the lawful completion of
the Transaction shall have been obtained.
9.3 Litigation. No action, suit or proceeding shall have been
instituted before any court or governmental or regulatory body, or instituted
or threatened by any governmental or regulatory body, to restrain, modify or
prevent the carrying out of the Transaction, or to seek damages or a discovery
order in connection with such Transactions, or that has or could reasonably be
expected to have, in the opinion of AIC, a materially adverse effect on the
assets, properties, businesses, operations or financial condition of RISCI or
the Parent.
9.4 Financing. Within three business days following May 15, 1997,
RISCI and the Parent shall have delivered to AIC a copy of a written com-
mitment for financing from the Lender to effect the purchase of the AIC Assets
contemplated hereunder.
9.5 Resolutions. There shall have been delivered to AIC and
Addlestone a copy of the resolutions duly adopted by the boards of directors
of Parent and RISCI, authorizing and approving the execution and delivery by
RISCI and Parent of this Agreement, and the completion by RISCI and Parent of
the Transaction, certified by the secretaries of RISCI and Parent, dated as of
the Closing Date.
9.6 Designations of Consideration Stock. There shall have been
delivered to AIC and Addlestone a certified copy of the Certificate of
Designations, Rights and Preferences of the Series E Convertible Preferred
Stock of the Parent.
9.7 Release from Assumed Contracts. AIC and Addlestone shall be
released from liability under the Assumed Contracts pursuant to the assign-
ments delivered under Section 0.
9.8 Legal Opinion. AIC shall receive an opinion from counsel to the
Parent concerning the issuance of the Consideration Stock in the Form attached
hereto as Exhibit D. 0.
9.9 Approval of Counsel to AIC and Addlestone. All actions and pro-
ceedings hereunder and all documents or other papers required to be delivered
by RISCI and the Parent hereunder or in connection with the completion of the
Transaction, and all other related matters shall have been approved by
Ansbacher and Xxxxxxxxx, P.A., counsel to AIC and Addlestone as to their form,
which approval shall not be unreasonably withheld or delayed.
9.10 The Purchase Price. RISCI and the Parent shall have paid to AIC
the full Purchase Price for the AIC Assets and executed and delivered all
documents related thereto.
ARTICLE 10
ACTIONS TO BE TAKEN AT THE CLOSING
----------------------------------
The following actions shall be taken at the Closing, each of which shall
be conditioned on completion of all the others and all of which shall be
deemed to have taken place simultaneously:
10.1 Transfer Documents. AIC shall deliver duly executed transfer
documents and/or instruments of assignment.
10.2 The Purchase Price. RISCI shall deliver to AIC:
(a) the Cash Consideration; and
(b) the Consideration Stock.
10.3 Subscription Agreement. AIC shall deliver to the Parent the
Subscription Agreement.
10.4 Non-Competition Agreements. Addlestone shall deliver to RISCI
and the Parent a Non-Competition Agreement, duly executed by the parties
thereto.
10.5 Special Warranty Deed. AIC shall deliver a special warranty
deed for the Owned Facilities in proper form for recording in the State of
South Carolina.
10.6 Contract Assumptions. AIC shall either (i) deliver the written
consents to the assumption by RISCI of the Assumed Contracts, or (ii) if AIC
or Addlestone will not be released from liability under the Assumed Contracts,
the Parties shall execute assignment agreements reasonably satisfactory to the
Parent, RISCI, AIC and Addlestone and containing, among others, the provisions
set forth on Schedule 0
10.7 Closing Certificate of AIC. AIC shall deliver to RISCI a closing
certificate dated the Closing Date, in a form reasonably satisfactory to
RISCI. Such certificate shall be signed on behalf of AIC by an executive
officer of AIC.
10.8 Closing Certificate of Addlestone. Addlestone shall deliver to
RISCI a closing certificate dated the Closing Date, in a form reasonably
satisfactory to RISCI.
10.9 Closing Certificate of RISCI. RISCI shall deliver to AIC a closing
certificate dated the Closing Date, in a form satisfactory to AIC. Said
certificate shall be signed on behalf of RISCI by an executive officer of RISCI.
10.10 Certificate Regarding Resolutions of AIC. AIC shall deliver to
RISCI and the Parent copies of resolutions certified as required by Section 0.
10.11 Certificate Regarding Resolutions of Parent and RISCI. The
Parent and RISCI shall deliver to AIC and Addlestone copies of resolutions
certified as required by Section 0.
10.12 Legal Opinion. Counsel to the Parent shall deliver the legal
opinion as required by Section 0.
10.13 AIC Transition Agreement. The Parties shall execute the AIC
Transition Agreement providing for the use of the AIC Offices and personnel
for AIC matters for a reasonable period of time subsequent to Closing, in the
form attached hereto as Exhibit E.
10.14 Real Property Closing. As part of the Closing it is acknowledged
that a settlement statement shall be separately prepared relating to the Owned
Facilities, which settlement statement shall be prepared by the attorney for
AIC at least one business day prior to the Closing. Normal closing adjust-
ments shall be charged to the parties as follows:
(a) Adjustments Charged to AIC. AIC shall be charged with
the following expenses, which shall be reflected on the closing statement and
shall be withheld from the Cash Consideration and be disbursed to the Person
to which each such expense is payable:
(1) Any amount necessary to satisfy and discharge of record
any lien or encumbrance that is not an Assumed Liability, including the cost
of recording or filing any necessary release or termination document;
(2) Any and all real property taxes due and payable, it
being agreed that all real property taxes and personal property taxes shall be
prorated as of the expiration of the day immediately preceding Closing;
(3) Any and all utility charges through the expiration of the
day immediately preceding Closing Date;
(4) The cost of the Survey;
(5) The cost of the title insurance policy for the Owned
Facilities; and
(6) Fees for documentary stamps due upon the recordation of
the deeds from AIC to RISCI and the closing costs associated for the Owned
Facilities which shall be paid by the RISCI and AIC in accordance with local
custom for commercial real estate transactions.
10.15 Titles to Vehicles, Machinery and Equipment. AIC shall deliver
to RISCI duly executed titles to all vehicles, machinery and equipment
included in the AIC Assets (provided such vehicles, machinery and equipment
are titled) free and clear of any Security Interests.
ARTICLE 11
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
-----------------------------------------------------------
11.1 Survival of Representations and Warranties. All of the
representations and warranties of the parties contained in this Agreement shall
survive the Closing for a period of three years after the Closing Date with the
exception of the representations and warranties contained in Section 0, which
shall survive for a period of time which is equal to the statute of limitations
period applicable to the respective Tax liability being asserted.
11.2 Indemnity Agreements of AIC and Addlestone.
(a) AIC and Addlestone, jointly and severely, shall indemnify,
defend, reimburse and hold harmless RISCI and the Parent from and against any
and all claims, demands, penalties, fines, liabilities, obligations, losses,
settlements, damages, costs and expenses resulting from:
(1) any inaccuracy in, or breach of, any representation
and warranty or nonfulfillment of any covenant on the part of AIC or Addlestone
contained in this Agreement;
(2) any misrepresentation in or omission from or
nonfulfillment of any covenant on the part of AIC or Addlestone contained in
any other agreement, certificate or other instrument furnished or to be
furnished to RISCI or the Parent by AIC or Addlestone pursuant to this
Agreement;
(3) all federal, state, county, local, foreign and other
taxes, including income taxes, excise taxes, sales taxes, use taxes, gross
receipts taxes, franchise taxes, employment and payroll related taxes, property
taxes and import duties, and any penalties or interest, whether or not
measured in whole or in part by net income required to be paid by AIC or
Addlestone relating to the Business through the Closing: (i) which are not paid
by either AIC or Addlestone; (ii) which RISCI or the Parent pays; and (iii)
for which the liabilities were asserted during the survival period set forth
in Section 0, hereof;
(4) any and all negligence claims arising out of
occurrences and events prior to the Closing;
(5) the violation or alleged violation by AIC or
Addlestone of any Environmental Laws or any orders, requirements or demands
of any governmental authorities related thereto, arising out of events or
circumstances occurring on or before the Closing except as otherwise included
herein as an Assumed Liability;
(6) the failure of AIC or Addlestone to comply with the
bulk sales or bulk transfer law of the State of South Carolina;
(7) any liability of AIC;
(8) 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 unless subsequently modified by RISCI in a manner which renders the
product to be infringing;
(9) any liabilities to employees of the Business
terminated in accordance herewith and any future related actions;
(10) reasonable fees and disbursements of counsel
incident to any of the foregoing;
provided however, (A) that the AIC and Addlestone shall not be required to
indemnify RISCI and Parent until the aggregate amount of any such
indemnification equals or exceeds $25,000, at which time the AIC and Addlestone
shall indemnify and reimburse RISCI and the Parent for all such amounts
incurred (including the first $25,000) and (B) that the aggregate amount of
such indemnification by AIC and Addlestone and the only recourse of RISCI and
Parent on the account of the indemnifications provided in this Section 0 shall
be limited to the Consideration Stock or the proceeds thereof.
11.3 Indemnity Agreement of RISCI and the Parent. RISCI and the Parent
shall jointly and severally indemnify, defend, reimburse and hold harmless AIC
and Addlestone from and against:
(a) any and all claims, demands, penalties, fines, liabilities,
obligations, losses, settlements, damages, costs and expenses pertaining to the
AIC 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 RISCI or the
Parent contained in this Agreement;
(2) any misrepresentation in or omission from or
nonfulfillment of any covenant on the part of RISCI or the Parent contained in
any other agreement, certificate or other instrument furnished or to be
furnished to AIC by RISCI or the Parent pursuant to this Agreement;
(3) any liability of AIC arising out of the Assumed
Contracts, unless such liability is due to the actions of AIC, or other action,
events and occurrences prior to the Closing Date;
(4) the violation of any Environmental Law unless such
violation is the result of events, actions, occurrences or the operation of the
Business by AIC, or other actions, events or occurrences prior to the Closing
Date;
(5) any liability for tort claims which are the result
of actions, events, occurrences or the operation of the business by RISCI on or
after the Closing Date;
(6) any liability or tort claims arising out of RISCI's
use of the name "Addlestone International" for a period of six months after
Closing; and
(7) reasonable fees and disbursement of counsel incident
to any of the foregoing.
provided however, that RISCI and Parent shall not be required to indemnify the
AIC and Addlestone until the aggregate amount of any such indemnification
equals or exceeds $25,000, at which time the RISCI and Parent shall indemnify
and reimburse the AIC and Addlestone for all such amounts incurred (including
the first $25,000) and that, except for (i) any breach of the representations
contained in Section 0 with respect to the Consideration Stock, (ii) the breach
of any provision set forth in the Designation of Preferences, Limitations and
Relative Rights of the Series E Convertible Preferred Stock of Recycling
Industries, Inc. (copy of which is attached hereto as Exhibit A), or (iii)
the breach of any of the provisions of the Subscription Agreement (copy of
which is attached as Exhibit B), the aggregate amount of the indemnification
obligation of RISCI and Parent shall not exceed $500,000.
11.4 Indemnification Procedure for Third Party Claims.
(a) The party seeking indemnification under this Article 11
shall give the party from whom indemnification is sought prompt written notice
of the assertion of any third party claim of which said party has knowledge
which is covered by the indemnity agreements set forth in Section 0 or Section
0, and the party obligated to indemnify will undertake the defense thereof by
representatives chosen by the party seeking indemnification but acceptable to
the party obligated to indemnify.
(b) If the party obligated to indemnify, within a reasonable
period of time after notice of any such claim fails to defend, the party
seeking indemnification will have the right to undertake the defense,
compromise or settlement of such claim on behalf of and for the account and
risk of the party obligated to indemnify, subject to the right of the party
seeking indemnification to assume the defense of such claim at any time prior
to settlement, compromise or final determination thereof.
(c) Payment of Sums Due. After any final judgment or award
shall have been rendered by a court, arbitration board or administrative agency
of competent jurisdiction, or a settlement shall have been completed, or the
parties shall have arrived at a mutually binding agreement, with respect to
each separate third party claim indemnified by the party obligated to
indemnify, the party seeking indemnification shall forward to the party
obligated to indemnify notice of any sums due and owing (and the times when
due) by the party seeking indemnification with respect to such claim and the
party obligated to indemnify shall pay such sums to the party seeking
indemnification in cash, within 30 days after the date of such notice or, if
any such sums are due more than 90 days after the date of such notice, ten days
prior to the date each such sums are due.
11.5 Good Faith Efforts to Settle Disputes. Each of the parties agrees
that, prior to commencing any litigation against the other concerning any
matter with respect to which such party intends to claim a right of
indemnification in such proceeding, such parties shall meet in a timely manner
and attempt in good faith to negotiate a settlement of such dispute during
which time such parties shall disclose to the others all relevant information
relating to such dispute.
11.6 Fees and Expenses. Notwithstanding any other provision in this
Article 11, in the event of any dispute or controversy between any of the
parties to this Agreement, the prevailing party in such dispute shall, in
addition to any other remedies the prevailing party may obtain in such dispute,
be entitled to recover from the other party all of its reasonable legal fees
and out-of-pocket costs incurred by such party in enforcing or defending its
rights hereunder, excluding any costs incurred under Section 0.
11.7 Notice of Claims. No claim by any Party for indemnification under
this Article 11 shall be valid unless the Party seeking indemnification
provides written notice of such claim to the other Party on or before the
expiration of the applicable survival period stated in Section 0. The
liability of any Party for indemnification with respect to any claim for
indemnification for which the indemnified Party has timely given notice
pursuant to Section 0 shall continue until such liability for indemnification
shall have been finally determined pursuant to this Article 11.
11.8 Litigation Support. If, and for so long as, any party actively is
contesting or defending against any action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand in connection with (1) any
transaction contemplated hereunder, or (2) any fact, situation, circumstance,
status, condition, activity, practice, plan, occurrence, event, incident,
action, failure to act, or transaction on or prior to the Closing Date
involving the Business, the other party will cooperate with the contesting or
defending party and its counsel in the contest or defense, make available its
personnel and provide such testimony and access to its books and records as
shall be necessary in connection with the contest or defense, all at the sole
cost and expense of the contesting or defending party, unless the contesting or
defending party is entitled to indemnification therefor under this Article 11.
ARTICLE 12
TERMINATION OF AGREEMENT
------------------------
12.1 Termination. This Agreement may be terminated prior to or on the
Closing Date as follows:
(a) At the election of RISCI 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 RISCI and the Parent to close has not been
fulfilled as of the Closing Date, or if AIC or Addlestone has breached any
material representation, warranty, covenant or agreement contained in this
Agreement provided, however, AIC and Addlestone shall have, at the election of
AIC and Addlestone, at least fifteen days' notice to cure any such breach and
the Closing Date shall be extended by each day of such cure period;
(2) for matters reflected in the Environmental Studies
as provided in Section 0;
(3) if the cost to cure the Harmonics Issue exceeds
$75,000 as provided in Section 0;
(4) On or before May 15, 1997, RISCI and Parent's
independent certified public accountant's determine that the financial
statements of the Business cannot be audited in accordance with the
requirements of the 1934 Act and the rules and regulations promulgated
thereunder; or
(5) RISCI 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
(6) RISCI 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 AIC
or any other matters unacceptable to them, in their sole discretion, during the
Review Period.
(b) At the election of AIC or Addlestone at any time prior to
Closing if:
(1) any one or more of the material conditions
precedent to the obligation of AIC and Addlestone close has not been fulfilled
as of the Closing Date;
(2) AIC is unable to obtain any required consent to the
assignment of any of the Assumed Contracts and such failure would constitute a
breach of the Assumed Contract;
(3) RISCI or the Parent has breached any material
representation, warranty, covenant or agreement contained in this Agreement;
provided, however, RISCI and the Parent shall have at least fifteen days'
notice to cure any such breach, except that in no event shall Closing Date be
extended by virtue thereof; or
(c) At the election of any party to this Agreement, if
any legal proceeding is commenced or threatened by any governmental or
regulatory body or other Person directed against the completion of the
Transaction and any of the parties, as the case may be, reasonably and in good
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; or
(e) At any time after June 30, 1997 or as the Closing Date may
be otherwise extended pursuant to Section 0 or Section 0, at the election of
any Party.
12.2 Survival. If this Agreement is terminated pursuant to Section 0,
except as provided in Section 0, this Agreement shall become void and of no
further force and effect, and none of the parties hereto shall have any
liability in respect of such termination, except that any party shall be liable
to the extent that failure to satisfy the conditions contained herein results
from the intentional or willful violation of the representations, warranties,
covenants or agreement of such party under this Agreement.
12.3 Effect of Failure to Close. The rights of RISCI and the Parent to
consummate the transaction contemplated by this Agreement shall terminate if
RISCI and the Parent fail to consummate the Agreement on the Closing Date
as herein provided.
ARTICLE 13
CERTAIN ADDITIONAL AGREEMENTS
------------------------------
13.1 Public Statements; Confidentiality of Information. (a) No party
will make any public disclosure (including, without limitation, disclosure to
AIC's employees or customers) of this Agreement, the Acquisition, the Purchase
Price or the other terms and conditions of the Transaction without the prior
written consent of the other parties hereto, which consent shall not be
unreasonably withheld, provided that the foregoing shall not preclude any party
from making any disclosure which, in the opinion of its or his counsel, is
required to be made under applicable federal and state securities laws. In no
event shall any disclosure be made without giving the other party an
opportunity to comment on the proposed disclosure. Notwithstanding the
foregoing, AIC shall be entitled to make such limited disclosures as may be
required in order to attempt to satisfy the requirements of this Agreement.
Illustrative of the foregoing would be providing information to secure title
insurance commitment, survey and any and all consents and approvals required.
(b) Subject to the Parent's obligation as a public company to
issue appropriate public announcements of material events, and subject to this
Section 0 hereof, each party will maintain the confidentiality of all non-
public information obtained from any other party.
13.2 Expenses. Each party shall pay its own costs and expenses,
including the fees and disbursements of its respective counsel, in connection
with the negotiation, preparation and execution of this Agreement and the
completion of the Transaction whether or not the Transaction is completed.
13.3 Waivers and Consents. All waivers and consents given hereunder
shall be in writing. No waiver by any party hereto of any breach or
anticipated breach of any provision hereof by any other party shall be deemed
a waiver of any other contemporaneous, preceding or succeeding breach or
anticipated breach, whether or not similar, on the part of the same or any
other party.
13.4 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed to have been given only if and when: (1)
personally delivered; or (2) three business days after mailing, postage
prepaid, by certified mail; or (3) when delivered (and receipted for) by an
overnight delivery service; or (4) when delivered by facsimile transmission for
which prompt confirmation has been received from the receiving party, addressed
in each case as follows:
If to RISCI or the Parent:
Xxxxxx X. Xxxxx, Chairman and CEO
Recycling Industries, Inc.
Recycling Industries of South Carolina, Inc.
Xxxxxxxxx Xxxxx Xxxxx, Xxxxx 000
Xxxxxxxxx, Xxxxxxxx 00000
telephone: (000) 000-0000
facsimile: (000) 000-0000
With a copy to:
Xxxxxx Xxxxxx, Esq.
Xxxx X. Xxxxxxx, Esq.
Xxxxxxxx Xxxxxxxxx Xxxxxx Xxxxxxx & Xxxxxxxxxxx, LLC
Xxxxxxx Xxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxx 00000
telephone: (000) 000-0000
facsimile: (000) 000-0000
If to AIC or Addlestone:
Xx. Xxxxxx Addlestone
Addlestone International Corporation
Xxxxxxx Xxxxxx
Xxxxxxxxxx, Xxxxx Xxxxxxxx 00000
telephone: (000) 000-0000
facsimile: (000) 000-0000
With a copy to:
Xxxxx Xxxxxxxxx, Esq.
Xxxxxxxxx & Xxxxxxxxx, P.A.
Xxxxxxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxxxxxxxx, Xxxxxxx 00000
telephone: (000) 000-0000
facsimile: (000) 000-0000
A Party may change its address by notice to every other Party.
13.5 Further Assurances. From and after the date of this Agreement, each
of the parties hereto will cooperate with each other and will use its or his
best efforts to obtain all necessary waivers and consents from third parties.
AIC and Addlestone, at any time and from time to time on and after the Closing,
upon request by RISCI 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 RISCI or the Parent for the
better conveying, transferring, assigning, delivering, assuring and confirming
the AIC Assets to RISCI.
13.6 Retention of/Access to Business Records. For at least five years
following the Closing Date, AIC shall retain all business records related to
the AIC Assets or the Business not delivered to RISCI. During this period,
from time to time on and after the Closing, upon reasonable request by RISCI or
the Parent and without further consideration, AIC shall provide RISCI or the
Parent access to or copies of said business records.
(a) For at least five years following the Closing Date, RISCI
shall retain all business records related to the AIC Assets or the Business
and, during this period, from time to time on and after the Closing, upon
reasonable request by AIC or Addlestone and without further consideration,
RISCI shall provide AIC or Addlestone access in Charleston, South Carolina, to
or copies of said business records. Furthermore, AIC may use the computer
system and software located at the AIC Offices until May 15, 1998 without
charge.
13.7 Audit by RISCI and Parent. For a period of five years after the
Closing, AIC and Addlestone shall give Parent and RISCI's independent certified
public accountants full access to the financial books and records and shall
fully cooperate with such accountants in conducting and completing any audits
necessary to enable the Parent to meet the disclosure and financial reporting
requirements of the 1934 Act and the rules and regulations promulgated
thereunder.
13.8 Entire Agreement. This Agreement, including all Schedules and
Exhibits hereto, and the other Closing Documents constitute the entire
agreement of the parties with respect to the subject matter hereof and may not
be modified, amended or terminated except by a written instrument specifically
referring to this Agreement signed by each of the parties hereto or as
otherwise provided in this Agreement.
13.9 Construction. In the event of an ambiguity or a question of intent
or interpretation arises, this Agreement shall be construed as if drafted
jointly by the parties and no presumption or burden of proof shall arise
favoring or disfavoring any party by virtue of the authorship of any of the
provisions of this Agreement. Any reference to any federal, state, local or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" means including without limitation. Where appropriate to
avoid any ambiguity and to encompass the broadest meaning, the word "and" shall
mean "and/or," and the word "or" shall mean "and/or." The parties intend that
the each representation, warranty and covenant contained herein shall have
independent significance. If any party has breached any representation,
warranty or covenant contained herein in any respect, the fact that there
exists another representation, warranty or covenant relating to the same
subject matter, regardless of the relative levels of specificity, which the
party has not breached shall not detract from or mitigate the fact that the
party is in breach of the first representation, warranty or covenant.
13.10 Rights of Third Parties. All conditions of the obligations of the
parties hereto, and all undertakings herein, except as otherwise provided by a
written consent, are solely and exclusively for the benefit of the parties
hereto and their successors and assigns, and no other Person or entity shall
have standing to require satisfaction of such conditions or to enforce such
undertakings in accordance with their terms or be entitled to assume that any
party hereto will refuse to complete the Transaction contemplated hereby in the
absence of strict compliance with any or all thereof, and no other Person or
entity shall, under any circumstances, be deemed a beneficiary of such
conditions or undertakings, any or all of which may be freely waived in whole
or in part, by mutual consent of the parties hereto at any time, if in their
sole discretion they deem it desirable to do so.
13.11 Headings. The Table of Contents and Article and Section headings
contained in this Agreement are for reference purposes only and shall not
affect in any way the meaning or interpretation of this Agreement.
13.12 Governing Law. The interpretation and construction of this
Agreement, and all matters relating hereto, shall be governed by the internal
laws of the State of South Carolina, without regard to principles of conflicts
or choice of law, except to the extent this Agreement, or any agreement to be
entered into at the Closing, contemplates that the laws of Colorado will
govern.
13.13 Submission to Jurisdiction; Waivers. The parties each hereby
irrevocably and unconditionally: (1) agree that any action or proceeding
related to this Agreement shall be brought in, and hereby submits itself and
its property to the jurisdiction of, the courts of the State of South Carolina
located in Charleston County, South Carolina, the courts of the United States
of America for the District of South Carolina, Charleston Division, and the
appellate courts from any thereof; (2) consent to the venue of any such action
or proceeding in any of said courts and waives any objection that it may have,
now or hereafter, that such action or proceeding was brought in an inconvenient
court and agrees not to plead or claim the same; and (3) agree that service of
process in any such action or proceeding may be effected by mailing a copy
thereof by registered or certified mail (or any substantially similar form of
mail), postage prepaid, to the party against whom the action or proceeding is
brought at its address set forth in Section 0, provided the same is permitted
by the appropriate rules of the governing court.
13.14 Parties in Interest. This Agreement may not be transferred,
assigned, pledged or hypothecated by any party hereto, other than by operation
of law, by assignment to the Lender, or with the consent of the other parties.
This Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors and permitted assigns.
13.15 Counterparts and Facsimile Signatures. This Agreement may be
executed in two or more counterparts, all of which taken together shall
constitute one instrument. Execution and delivery of this Agreement by
exchange of facsimile copies bearing the facsimile signature of a Party shall
constitute a valid and binding execution and delivery of this Agreement by such
Party. Such facsimile copies shall constitute enforceable original documents.
13.16 Severability. In case any provision in this Agreement shall be held
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions hereof will not in any way be affected or impaired
thereby.
13.17 Corporate Authority. The undersigned have executed this Agreement
with all requisite corporate authority.
13.18 Time of Essence. Time shall be of the essence hereof.
13.19 Right to Store. AIC shall have the right to store on the Owned
Facilities any Processed Inventory existing as of the Closing Date without any
charge therefor for a period of six months following Closing. In addition,
RISCI will, at the election of AIC, (i) permit AIC to load such processed
scrap with AIC furnished equipment (but with fuel and operators supplied by
RISCI) or (ii) RISCI will load the same for AIC for $1.00 per gross ton. This
provision shall survive Closing.
[THE BALANCE OF THIS PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the parties hereto have caused their names to be hereunto
subscribed, all as of the day and year first above written.
"RISCI"
April 8, 1997 RECYCLING INDUSTRIES OF SOUTH CAROLINA, INC.
By:
------------------------------------------------
Xxxxxx X. Xxxxx, Chairman and CEO
THE "PARENT"
April 8, 1997 RECYCLING INDUSTRIES, INC.
By:
------------------------------------------------
Xxxxxx X. Xxxxx, Chairman and CEO
"AIC"
April 8, 1997 ADDLESTONE INTERNATIONAL CORPORATION
By:
------------------------------------------------
Xxxxxx Addlestone, President
"ADDLESTONE"
April 8, 1997 ---------------------------------------------------
Xxxxxx Addlestone
LIST OF EXHIBITS
Exhibit A Certificate of Designations, Rights and Preferences
of the Series E Convertible Preferred Stock of Recycling
Industries, Inc.
Exhibit B Form of Subscription Agreement
Exhibit C Form of Non-Competition Agreement
Exhibit D Form of Parent's Counsel Opinion
Exhibit E Form of AIC Transition Agreement
LIST OF SCHEDULES
Schedule 0 Owned Facilities - Legal Description
Schedule 0 Equipment
Schedule 0 Intellectual Property
Schedule 0 Office Assets
Schedule 0 Computer Software
Schedule 0 Contracts and Agreements
Schedule 0 Leases
Schedule 0 Excluded Assets
Schedule 0 Assumed Contracts
Schedule 0 Allocation of Purchase Price
Schedule 0 Title to Assets
Schedule 0 Tax Liens and Waivers
Schedule 0 Legal Compliance
Schedule 0 Permits
Schedule 0 Litigation
Schedule 0 Other Contracts
Schedule 0 Tangible Property
Schedule 0 Intellectual Property Exceptions
Schedule 0 Real Property
Schedule 0 Suppliers and Customers
Schedule 0 Curtailment of Operations
Schedule 0 Employee Relations
Schedule 0 Insurance Policies
Schedule 0 Certain Relationships
Schedule 0 Employee Information
Schedule 0 Environmental Matters
Schedule 0 OSHA Compliance
Schedule 0 Environmental Studies
Schedule 0 Title Commitment
Schedule 0 Survey
Schedule 0 Assignment Provisions
