ASSET PURCHASE AGREEMENT
BY AND AMONG
RECYCLING INDUSTRIES OF GREENSBORO, INC.
RECYCLING INDUSTRIES, INC.
UNITED METAL RECYCLERS
XXXXX BROTHERS, INC.
AND
XXXXXXX COMPANIES, INC.
DECEMBER 4, 1997
TABLE OF CONTENTS
ARTICLE 1
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . .-2-
ARTICLE 2
ACQUISITION OF SELLER ASSETS. . . . . . . . . . . . . . . . . . . .-6-
2.1 PURCHASE AND SALE OF THE SELLER ASSETS. . . . . . . . . . . .-6-
2.3 ASSUMED CONTRACTS . . . . . . . . . . . . . . . . . . . . . .-8-
2.4 ASSUMPTION OF LIABILITIES . . . . . . . . . . . . . . . . . .-8-
2.5 COLLECTION OF ACCOUNTS RECEIVABLE . . . . . . . . . . . . . .-9-
ARTICLE 3
PURCHASE PRICE AND CLOSING. . . . . . . . . . . . . . . . . . . . .-9-
3.1 PURCHASE PRICE FOR SELLER ASSETS. . . . . . . . . . . . . . .-9-
3.4 ALLOCATION OF THE PURCHASE PRICE. . . . . . . . . . . . . . -11-
3.5 CLOSING OF THE PURCHASE . . . . . . . . . . . . . . . . . . -11-
ARTICLE 4
REPRESENTATIONS OF SELLER AND THE OWNERS. . . . . . . . . . . . . -11-
4.1 DUE ORGANIZATION AND QUALIFICATION. . . . . . . . . . . . . -11-
4.2 TITLE TO PROPERTY . . . . . . . . . . . . . . . . . . . . . -11-
4.3 AUTHORITY OF SELLER; CONSENTS . . . . . . . . . . . . . . . -12-
4.5 NO TAX LIENS; NO WAIVER . . . . . . . . . . . . . . . . . . -13-
4.6 COMPLIANCE WITH LAWS. . . . . . . . . . . . . . . . . . . . -14-
4.7 PERMITS . . . . . . . . . . . . . . . . . . . . . . . . . . -14-
4.8 LITIGATION. . . . . . . . . . . . . . . . . . . . . . . . . -14-
4.9 CONTRACTS AND OTHER AGREEMENTS. . . . . . . . . . . . . . . -15-
4.11 TANGIBLE PROPERTY . . . . . . . . . . . . . . . . . . . . . -15-
4.12 INVENTORY . . . . . . . . . . . . . . . . . . . . . . . . . -15-
4.13 INTELLECTUAL PROPERTY . . . . . . . . . . . . . . . . . . . -15-
4.14 REAL PROPERTY . . . . . . . . . . . . . . . . . . . . . . . -16-
4.15 LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . -16-
4.16 SUPPLIERS AND CUSTOMERS . . . . . . . . . . . . . . . . . . -16-
4.17 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . -17-
4.18 CURTAILMENT OF OPERATIONS . . . . . . . . . . . . . . . . . -17-
4.19 EMPLOYEE RELATIONS. . . . . . . . . . . . . . . . . . . . . -17-
4.20 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . -18-
4.21 POWERS OF ATTORNEY. . . . . . . . . . . . . . . . . . . . . -18-
(i)
4.22 RELATIONSHIPS . . . . . . . . . . . . . . . . . . . . . . . -18-
4.23 BROKER'S OR FINDER'S FEES . . . . . . . . . . . . . . . . . -18-
4.24 EMPLOYEE TRANSITION . . . . . . . . . . . . . . . . . . . . -18-
4.25 ENVIRONMENTAL MATTERS . . . . . . . . . . . . . . . . . . . -18-
4.28 DISCLOSURE. . . . . . . . . . . . . . . . . . . . . . . . . -19-
4.29 BEST EFFORTS. . . . . . . . . . . . . . . . . . . . . . . . -20-
ARTICLE 5
REPRESENTATIONS OF RECYCLING. . . . . . . . . . . . . . . . . . . -20-
5.1 DUE INCORPORATION AND QUALIFICATION OF RII SUB. . . . . . . -20-
5.2 DUE INCORPORATION AND QUALIFICATION OF THE PARENT . . . . . -20-
5.3 ARTICLES OF INCORPORATION AND BYLAWS. . . . . . . . . . . . -20-
5.4 AUTHORITY OF RII SUB AND THE PARENT . . . . . . . . . . . . -20-
5.5 STOCK CONSIDERATION . . . . . . . . . . . . . . . . . . . . -21-
5.7 BROKER'S OR FINDER'S FEES . . . . . . . . . . . . . . . . . -21-
5.8 DISCLOSURE. . . . . . . . . . . . . . . . . . . . . . . . . -21-
5.9 BEST EFFORTS. . . . . . . . . . . . . . . . . . . . . . . . -22-
ARTICLE 6
REGULATORY COMPLIANCE . . . . . . . . . . . . . . . . . . . . . . -22-
6.1 BULK SALES COMPLIANCE . . . . . . . . . . . . . . . . . . . -22-
6.2 XXXX-XXXXX-XXXXXX ACT . . . . . . . . . . . . . . . . . . . -22-
6.3 THE WARN ACT. . . . . . . . . . . . . . . . . . . . . . . . -22-
6.4 COBRA . . . . . . . . . . . . . . . . . . . . . . . . . . . -22-
6.5 OTHER . . . . . . . . . . . . . . . . . . . . . . . . . . . -23-
ARTICLE 7
ENVIRONMENTAL MATTERS . . . . . . . . . . . . . . . . . . . . . . -23-
7.1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -23-
ENVIRONMENTAL STUDIES . . . . . . . . . . . . . . . . . . . . . . -23-
7.2 ON-SITE LIABILITIES AT THE OWNED FACILITIES . . . . . . . . -23-
7.3 ON-SITE LIABILITIES AT THE XXXXXXX FACILITY . . . . . . . . -24-
7.4 OFF-SITE LIABILITIES. . . . . . . . . . . . . . . . . . . . -25-
ARTICLE 8
COVENANTS TO BE PERFORMED PRIOR TO THE CLOSING. . . . . . . . . . -26-
8.1 TITLE INSURANCE . . . . . . . . . . . . . . . . . . . . . . -26-
8.2 SURVEY. . . . . . . . . . . . . . . . . . . . . . . . . . -27-
8.3 MATERIAL ASSUMED CONTRACTS. . . . . . . . . . . . . . . . . -27-
8.4 CONDUCT OF BUSINESS . . . . . . . . . . . . . . . . . . . . -27-
(ii)
8.5 PRESERVATION OF BUSINESS. . . . . . . . . . . . . . . . . . -27-
8.6 NOTICE OF EVENTS. . . . . . . . . . . . . . . . . . . . . . -27-
8.7 EXAMINATIONS AND INVESTIGATIONS . . . . . . . . . . . . . . -27-
8.8 NO NEGOTIATION BY SELLER OR THE OWNERS. . . . . . . . . . . -28-
ARTICLE 9
CONDITIONS PRECEDENT TO THE OBLIGATION
OF RECYCLING TO CLOSE . . . . . . . . . . . . . . . . . . . . . . -29-
9.1 REPRESENTATIONS, WARRANTIES AND OTHER AGREEMENTS. . . . . . -29-
9.2 GOVERNMENTAL PERMITS AND APPROVALS. . . . . . . . . . . . . -29-
9.3 THIRD PARTY CONSENTS. . . . . . . . . . . . . . . . . . . . -29-
9.4 LITIGATION. . . . . . . . . . . . . . . . . . . . . . . . . -29-
9.5 REAL PROPERTY . . . . . . . . . . . . . . . . . . . . . . . -30-
9.6 NO MATERIAL ADVERSE CHANGE. . . . . . . . . . . . . . . . . -30-
9.7 TRANSFER DOCUMENTS. . . . . . . . . . . . . . . . . . . . . -30-
9.10 ASSIGNMENT OF CONTRACTS . . . . . . . . . . . . . . . . . . -31-
9.11 SATISFACTION WITH DUE DILIGENCE, FINANCIAL PERFORMANCE
AND APPROVAL. . . . . . . . . . . . . . . . . . . . . . . . -31-
9.12 SUBSCRIPTION AGREEMENT. . . . . . . . . . . . . . . . . . . -31-
9.14 LEGAL OPINION . . . . . . . . . . . . . . . . . . . . . . . -31-
9.15 BOOKS AND RECORDS . . . . . . . . . . . . . . . . . . . . . -31-
9.16 CERTIFICATES, ETC. OF OWNERS AND SELLER . . . . . . . . . . -31-
9.17 PAYMENT OF SALES OR USE TAXES BY SELLER . . . . . . . . . . -31-
9.18 PAYMENT OF ACCOUNTS PAYABLE . . . . . . . . . . . . . . . . -32-
9.19 APPROVAL OF COUNSEL TO RECYCLING. . . . . . . . . . . . . . -32-
ARTICLE 10
CONDITIONS PRECEDENT TO THE OBLIGATION OF SELLER
AND THE OWNERS TO CLOSE . . . . . . . . . . . . . . . . . . . . . -32-
10.1 REPRESENTATIONS, WARRANTIES AND OTHER AGREEMENTS. . . . . . -32-
10.3 GOVERNMENTAL PERMITS AND APPROVALS. . . . . . . . . . . . . -32-
10.5 LITIGATION. . . . . . . . . . . . . . . . . . . . . . . . . -32-
10.8 DESIGNATION OF STOCK CONSIDERATION. . . . . . . . . . . . . -33-
10.9 LEGAL OPINION . . . . . . . . . . . . . . . . . . . . . . . -33-
10.10 THE PURCHASE PRICE. . . . . . . . . . . . . . . . . . . . . -33-
10.12 APPROVAL OF COUNSEL TO SELLER AND THE OWNERS. . . . . . . . -33-
ARTICLE 11
ACTIONS TO BE TAKEN AT THE CLOSING. . . . . . . . . . . . . . . . -33-
11.1 TRANSFER DOCUMENTS. . . . . . . . . . . . . . . . . . . . . -34-
11.2 THE PURCHASE PRICE. . . . . . . . . . . . . . . . . . . . . -34-
11.3 SUBSCRIPTION AGREEMENT. . . . . . . . . . . . . . . . . . . -34-
(iii)
11.4 NON-COMPETITION AGREEMENTS. . . . . . . . . . . . . . . . . -34-
11.6 GENERAL WARRANTY DEED . . . . . . . . . . . . . . . . . . . -34-
11.8 CLOSING CERTIFICATE OF SELLER . . . . . . . . . . . . . . . -34-
11.9 CLOSING CERTIFICATE OF THE OWNERS . . . . . . . . . . . . . -34-
11.11 CERTIFICATE REGARDING RESOLUTIONS OF SELLER . . . . . . . . -34-
11.12 LEGAL OPINIONS. . . . . . . . . . . . . . . . . . . . . . . -34-
11.13 REAL PROPERTY CLOSING . . . . . . . . . . . . . . . . . . . -35-
11.14 TITLES TO VEHICLES, MACHINERY AND EQUIPMENT . . . . . . . . -35-
ARTICLE 12
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION . . . -35-
12.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. . . . . . . . . -35-
12.2 INDEMNITY AGREEMENTS OF SELLER AND THE OWNERS . . . . . . . -36-
12.3 INDEMNITY AGREEMENT OF RII SUB AND THE PARENT . . . . . . . -37-
12.4 INDEMNIFICATION PROCEDURE FOR THIRD PARTY CLAIMS. . . . . . -38-
12.5 LIMIT ON OBLIGATIONS. . . . . . . . . . . . . . . . . . . . -39-
12.6 GOOD FAITH EFFORTS TO SETTLE DISPUTES . . . . . . . . . . . -39-
12.7 FEES AND EXPENSES . . . . . . . . . . . . . . . . . . . . . -39-
12.8 LITIGATION SUPPORT. . . . . . . . . . . . . . . . . . . . . -39-
ARTICLE 13
TERMINATION OF AGREEMENT. . . . . . . . . . . . . . . . . . . . . -39-
13.1 TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . -39-
13.2 SURVIVAL. . . . . . . . . . . . . . . . . . . . . . . . . . -41-
ARTICLE 14
CERTAIN ADDITIONAL AGREEMENTS . . . . . . . . . . . . . . . . . . -41-
14.1 PUBLIC STATEMENTS; CONFIDENTIALITY OF INFORMATION . . . . . -41-
14.3 EXPENSES. . . . . . . . . . . . . . . . . . . . . . . . . . -42-
14.4 WAIVERS AND CONSENTS. . . . . . . . . . . . . . . . . . . . -42-
14.5 NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . -42-
14.6 FURTHER ASSURANCES. . . . . . . . . . . . . . . . . . . . . -43-
14.7 RETENTION OF/ACCESS TO BUSINESS RECORDS . . . . . . . . . . -43-
14.8 AUDIT BY RII SUB AND PARENT . . . . . . . . . . . . . . . . -44-
14.9 ENTIRE AGREEMENT. . . . . . . . . . . . . . . . . . . . . . -44-
14.10 CONSTRUCTION. . . . . . . . . . . . . . . . . . . . . . . . -44-
14.11 RIGHTS OF THIRD PARTIES . . . . . . . . . . . . . . . . . . -44-
14.12 HEADINGS. . . . . . . . . . . . . . . . . . . . . . . . . . -44-
14.13 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . -44-
14.14 SUBMISSION TO JURISDICTION; WAIVERS . . . . . . . . . . . . -45-
(iv)
14.15 PARTIES IN INTEREST . . . . . . . . . . . . . . . . . . . . -45-
14.16 COUNTERPARTS AND FACSIMILE SIGNATURES . . . . . . . . . . . -45-
14.17 SEVERABILITY. . . . . . . . . . . . . . . . . . . . . . . . -45-
14.18 CORPORATE OR PARTNERSHIP AUTHORITY. . . . . . . . . . . . . -45-
LIST OF EXHIBITS
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -48-
LIST OF SCHEDULES . . . . . . . . . . . . . . . . . . . . . . . . -49-
(v)
ASSET PURCHASE AGREEMENT
THIS AGREEMENT is made as of the 4th day of December, 1997, by and among
RECYCLING INDUSTRIES OF GREENSBORO, INC., a Colorado corporation ("RII Sub"),
RECYCLING INDUSTRIES, INC., a Colorado corporation ("Parent"), UNITED METAL
RECYCLERS, a North Carolina general partnership ("Seller") and the general
partners of Seller, XXXXXXX COMPANIES, INC., a North Carolina corporation
("BCI"), XXXXX BROTHERS, INC., a North Carolina corporation ("LBI") and XXXXX
XXXXXXX, XXXXXXX XXXXXXX, XXXXXXX X. XXXXX and XXXX X. XXXXX, all individuals in
their capacities as equity owners, directors, officers, general partners and/or
managers of LBI and/or BCI. Throughout this Agreement, RII Sub and the Parent
may be collectively referred to as "Recycling;" LBI and BCI may be collectively
referred to as the "Owners;" and Xxxxx Xxxxxxx, Xxxxxxx Xxxxxxx and Xxxx Xxxxx
may be referred to as the "Individuals." There are numerous other defined terms
which are capitalized in this Agreement, all of which are defined in the
substantive provisions of this Agreement or in Article 1, below.
WITNESSETH:
WHEREAS, RII Sub is a wholly-owned subsidiary of the Parent;
WHEREAS, LBI and BCI are the general partners in Seller and Seller has no
other general or limited partners;
WHEREAS, RII Sub desires to acquire certain assets of Seller consisting of
substantially all of the tangible and intangible assets of Seller, including,
without limitation, all of Seller's right, title and interest in the limited
liability company interest of United Metal-X. X. Xxxxxxx Recyclers, L.L.C., a
joint venture 50% owned by Seller and 50% owned by X. X. Xxxxxxx Family Limited
Partnership (collectively, the "Seller Assets");
WHEREAS, Seller desires to sell the Seller Assets;
WHEREAS, the Parent has a vested interest in the transactions referred to
herein and is a party to this Agreement, amongst other things, in order to
tender the Stock Consideration referred to herein; and
WHEREAS, the Owners and the Individuals have a vested interest in the
transactions referred to herein and are parties to this Agreement in order to
make certain representations and warranties and to accept certain obligations
set forth herein.
NOW, THEREFORE, for and in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt, adequacy and sufficiency of which are hereby acknowledged, the parties
hereto covenant and agree as follows:
ARTICLE 1
DEFINITIONS
Unless otherwise defined in the substantive provisions of this Agreement,
the following terms will have the meanings ascribed to them in this Article 1.
1.1 "Acquisition" means the acquisition by RII Sub of the Seller Assets
from Seller.
1.2 "Assumed Contracts" means those contracts, leases and other agreements
to which Seller is a party or beneficiary or which otherwise affect the
Business, including, but not limited to, open orders to purchase raw materials
or services in accordance with the Business' normal operating procedures, leases
of real or personal property relating to the Business, all purchase orders, back
orders, open orders or contracts from customers, including the backlog and parts
manufactured for or assigned to Seller.
1.3 "Business" means the metals recycling business and business operations
as conducted by Seller on October 8, 1997, and subsequent thereto, as a going
concern.
1.4 "Closing" has the meaning set forth in Section 3.5.
1.5 "Closing Date" has the meaning set forth in Section 3.5.
1.6 "Closing Documents" means the other agreements, documents of title,
certificates, opinions and other documents required to be executed and delivered
under this Agreement as provided in Article 11, hereof.
1.7 "Closing Notification" has the meaning set forth in Section 3.5.
1.8 "Current Assets" means the current assets as defined by GAAP, net of
any reserves, including the Xxxxxxx Note, excluding cash and cash equivalents,
marketable securities, and Retained Receivables. "Retained Receivables" means
those accounts receivable of Seller to be retained by Seller and not purchased
by RII Sub, as listed on Schedule 1.8..
1.9 "Employee Benefit Plan" means any: (a) nonqualified deferred
compensation or retirement plan or arrangement which is an Employee Pension
Benefit Plan; (b) qualified defined contribution retirement plan or arrangement
which is an Employee Pension Benefit Plan; (c) qualified defined benefit
retirement plan or arrangement which is an Employee Pension Benefit Plan; or (d)
Employee Welfare Benefit Plan or material fringe benefit plan or program.
1.10 "Employee Pension Benefit Plan" has the meaning set forth in ERISA
Section 3(2).
1.11 "Employee Welfare Benefit Plan" has the meaning set forth in ERISA
Section 3(1).
-2-
1.12 "Environmental Law or Laws" means any and all federal, state, local
or municipal laws, rules, orders, regulations, statutes, treaties, ordinances,
codes, decrees, or requirements of any governmental authority regulating,
relating to or imposing liability or standards of conduct concerning
environmental protection, health or safety matters, including all requirements
pertaining to reporting, licensing, permitting, investigation, removal or
remediation of emissions, discharges, releases, or threatened releases of
Hazardous Materials, chemical substances, pollutants or contaminants or relating
to the manufacture, generation, processing, distribution, use, treatment,
storage, disposal, transport, or handling of Hazardous Materials, chemical
substances, pollutants or contaminants, including, without limitation, the
Comprehensive Environmental Response, Compensation and Liability Act of 1980
("CERCLA"), the Toxic Substance Control Act ("TSCA"), the Resource Conservation
and Recovery Act ("RCRA"), the Clean Air Act ("CAA"), the Clean Water Act
("CWA") and the Occupational Safety and Health Act of 1970 ("OSHA"), all as may
have been amended.
1.13 "Environmental Liabilities" means any and all liabilities for the
violation of, or remediation under, any Environmental Laws.
1.14 "ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
1.15 "GAAP" means generally accepted accounting principles consistently
applied in the United States.
1.16 "Xxxxxxx Note" means that Promissory Note between Seller and X.X.
Xxxxxxx Family Limited Partnership as maker dated April 30, 1996, a copy of
which is attached hereto as Schedule 1.16.
1.17 "Hazardous Materials" means any substance (a) the presence of which
at, on, over, beneath, in or upon any real or personal property, building,
structure, container of any nature or description, subsurface strata, ambient
air or ambient water (including surface and groundwater) requires investigation,
removal or remediation under any Environmental Law or common law, (b) which is
or becomes defined as a "hazardous substance," "hazardous material," "hazardous
waste," "pollutant" or "contaminant" under any Environmental Law, and/or (c)
which is toxic, explosive, corrosive, flammable, infectious, radioactive,
carcinogenic, mutagenic, or otherwise hazardous and is or becomes regulated by
any governmental authority under any Environmental Law, (d) the presence of
which causes or threatens to cause a nuisance or trespass upon real property or
to adjacent properties or poses or threatens to pose a hazard to the
environment, and/or to the health or safety of persons on or about any real
property, and/or (e) which contains urea-formaldehyde, polychlorinated
biphenyls, asbestos or asbestos containing materials, radon, petroleum or
petroleum products.
1.18 "HSR Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976, 15 U.S.C. Sections 18a.
-3-
1.19 "Intellectual Property" has the meaning set forth in Section 2.1(f).
1.20 "Inventory Date" has the meaning set forth in Section 3.3.
1.21 "IRC" means the Internal Revenue Code of 1986, as amended.
1.22 "Knowledge" with respect to corporations, shall mean knowledge of
the executive officers of the corporation and with respect to partnerships shall
mean knowledge of the partners and the general manager or operations manager of
the partnership; PROVIDED, HOWEVER, the knowledge of a particular party shall
not be imputed to any other individual party.
1.23 "Lender" means Recycling's primary lender or equity participant
relating to the Transaction.
1.24 "Liability or Liabilities" means direct or indirect indebtedness,
liability, claim, loss, damage, deficiency, obligation or responsibility, known
or unknown, asserted or unasserted, fixed or unfixed, liquidated or
unliquidated, secured or unsecured, accrued, absolute, contingent or otherwise
which affects or could affect the Seller Assets or the Business, including any
liability for Taxes.
1.25 "Market Price" when referring to the Parent Common Stock, means the
closing price for the Parent Common Stock if it is listed on a national
securities exchange or the Nasdaq National Market System or the average of the
last reported bid and asked price for the Parent Common Stock as reported on the
Nasdaq Market system.
1.26 "Material Assumed Contracts" means all Assumed Contracts other than
(a) contracts which do not require payment by Seller of $20,000 or more per year
and which otherwise are not material to the Business, (b) contracts in the
Ordinary Course of Business which do not require expenditures by Seller of
$20,000 or more per year, and (c) contracts terminable upon notice of 60 days or
less and which do not require expenditures by Seller of $20,000 or more per
year. The Material Assumed Contracts are listed on Schedule 1.26.
1.27 "Ordinary Course of Business" or "Ordinary Course" means the
ordinary course of business consistent with past custom and practice of Seller
(including with respect to quantity and frequency).
1.28 "Owned Facilities" means the real property and associated fixtures
owned by Seller as specifically described on Schedule 2.1(a).
1.29 "Parent Common Stock" means the common stock, $.001 par value per
share, of Recycling Industries, Inc., a Colorado corporation.
-4-
1.30 "Parent Series H Preferred" means the 6% Secured Redeemable
Convertible Preferred Stock of Parent described in the Designation of Series H
6% Secured Redeemable Convertible Preferred Stock attached hereto as EXHIBIT A.
1.31 "Pension Plan" means the United Metal Recyclers Retirement Plan.
1.32 "Permits" means all licenses, permits, orders and approvals of any
federal, state or local governmental or regulatory bodies that are material to
or necessary for the conduct of the Business.
1.33 "Person" means any individual, corporation, partnership, limited
liability company, joint venture, trust, association, unincorporated
organization, agency, other entity or groups of entities, or governmental body.
1.34 "Prepared Inventory" means all ferrous and non-ferrous Inventory
that has been processed by Seller or at time of purchase was in a form that
historically was deemed saleable without processing and which as of the Closing
Date is ready for shipment to Seller's customers. Prepared Inventory includes
the saleable ferrous or non-ferrous materials contained in Shredder Residue
which was either generated by Seller or purchased from other sources prior to
the Closing.
1.35 "Security Interest" means any mortgage, pledge, security interest,
encumbrance, charge, claim, or other lien, other than: (a) mechanic's,
materialman's and similar liens; (b) liens for Taxes not yet due and payable or
for Taxes that the taxpayer is contesting in good faith through appropriate
proceedings; (c) liens arising under worker's compensation, unemployment
insurance, social security, retirement and similar legislation; (d) liens
arising in connection with sales of foreign receivables; (e) liens on goods in
transit incurred pursuant to documentary letters of credit; (f) purchase money
liens and liens securing rental payments under capital lease arrangements; and
(g) other liens arising in the Ordinary Course of Business and not incurred in
connection with the borrowing of money.
1.36 "Shredder Residue" means the by-product generated from the operation
of a shredder which may or may not contain Hazardous Materials.
1.37 "Supply Inventory" means all of the parts, equipment, fuel,
lubricants, office supplies or other items consumed by or used in the operations
of the Business or the repair and maintenance of the Seller's vehicles,
machinery and equipment.
1.38 "Tangible Property" shall include the property described in Sections
2.1(a), 2.1(e), 2.1(j), and 2.1(k), below.
1.39 "Tax" means any federal, state, local or foreign income, gross
receipts, capital stock, franchise, profits, withholding, social security,
unemployment, disability, real property, personal property, stamp, excise,
occupation, sales, use, transfer, value added, alternative minimum,
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estimated, net worth, self-employment, Medicaid, or other tax, including any
interest, penalty or addition thereto, whether disputed or not.
1.40 "Transaction" means the transactions contemplated by this Agreement
and the Closing Documents.
1.41 "Seller Financial Statements" has the meaning set forth in Section
4.4(b) below.
1.42 "Seller Offices" means the administrative offices of Seller located
at 0000 Xxxx Xxxxxxxx Xxxxxx, Xxxxxxxxxxxx, Xxxxx Xxxxxxxx 00000.
1.43 "Seller Payables" has the meaning set forth in Section 9.18, below.
1.44 "Seller Receivables" has the meaning set forth in Section 2.1(c),
below.
1.45 "Unprepared Inventory" means: (i) all scrap ferrous metal comprised
of materials such as obsolete, discarded or abandoned machinery, appliances,
equipment, automobiles, metal manufacturing scrap, casting and fabricating scrap
materials or other consumer and industrial ferrous goods or by-products to be
processed by shredding, shearing, torching, baling or otherwise rendered
suitable for a customer's consumption by Seller; and (ii) scrap non-ferrous
metal comprised of various non-magnetic alloys or co-mingled ferrous and
non-ferrous (irony aluminum) which traditionally would be thermally-separated,
shredded or otherwise processed by Seller before shipment. Unprepared Inventory
does not include any ferrous or non-ferrous materials contained in Shredder
Residue, residual material resulting from Seller's operations, dirt or other
medium which are not economically processable within the Owned Facilities.
1.46 "1934 Act" means the Securities Exchange Act of 1934, as amended.
ARTICLE 2
ACQUISITION OF SELLER ASSETS
2.1 PURCHASE AND SALE OF THE SELLER ASSETS. At the Closing and subject
to the terms and conditions stated herein, Seller agrees to sell, assign, convey
and transfer to RII Sub, and RII Sub agrees to purchase from Seller, the Seller
Assets together with all of the properties, rights and goodwill associated
therewith of every kind and description, tangible and intangible, personal or
mixed, as hereinafter more particularly described, with the exception of the
Excluded Assets, as defined in Section 2.2. Without limitation, the Seller
Assets shall include all of the items enumerated in subparagraphs 2.1(a) through
2.1(o) below (with the exception of the Excluded Assets):
(a) The Owned Facilities, including all buildings situated
thereon and all real property leasehold improvements and all rights in
easements, driveways and signs, as legally described on Schedule 2.1(a);
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(b) All rights of Seller under the Assumed Contracts;
(c) All receivables of any nature, including accounts and notes
receivable (including the Xxxxxxx Note), and excluding receivables that have
been outstanding for more than 90 days as of the Closing Date and Retained
Receivables (the "Seller Receivables").
(d) All Unprepared Inventory, Processed Inventory and Supply
Inventory;
(e) All vehicles, machinery and equipment, tools, furniture,
leasehold improvements, fixtures, vehicles, dies, jigs, and supplies, or any
related capitalized items and other tangible property owned by Seller located at
the Owned Facilities and/or (y) used by the Business as of the date of this
Agreement, whether at the Owned Facilities, over the road or at any other
location, all as described on Schedule 2.1(e); PROVIDED, HOWEVER, that dies,
jigs, supplies, tools and spare parts are included in the Seller Assets whether
or not listed on Schedule 2.1(e). Schedule 2.1(e) describes certain machinery
and equipment owned jointly with others and it is understood that RII Sub will
acquire only Seller's one-half interest in such machinery and equipment and that
following the Closing RII Sub will continue to share ownership thereof.
(f) Schedule 2.1(f) sets forth all of the intellectual property,
proprietary and business information of Seller relating to the Business,
including, all of Seller's right, title and interest in and to (collectively the
"Intellectual Property"):
(1) the exclusive use of the name "United Metal Recyclers" and
any variations thereof;
(2) all transferrable Permits and telephone and facsimile
numbers used by Seller to the extent the same are transferrable by Seller;
(3) the exclusive right to all inventions, discoveries, trade
secrets, designs, prototypes, formulas and know-how relating to the
Business;
(g) All patents (whether issued or pending), copyrights,
trademarks and tradenames;
(h) All business, financial and tax records relating to the
Business, including all sales data, pricing and cost information, customer and
supplier lists, credit records, sales literature and business and marketing
plans relating to the Business.
(i) All claims, deposits, prepayments, refunds, causes of
action, choses in action, rights of recovery, rights of set-off and rights of
recoupment related to the Seller Assets or the Business, except for any income
or employment tax refunds.
(j) All computer documentation, computer files, computer disks,
computer tapes and all information stored on computer media (whether written,
optical, or magnetic) used in
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connection with the operation of the Business and stored at the Owned Facilities
or used at the Seller Offices in connection with the operation of the Business.
(k) All accounting and other computer software relating to the
Business owned by Seller, including information interfaced with those systems,
as maintained by Seller at the Owned Facilities or the Seller Offices, all of
which are listed on Schedule 2.1(k); provided, however, that Seller shall not
make any warranties with respect to any software.
(l) All rights to customer and supplier lists, signs,
advertising, catalogues and brochures relating to the Business.
(m) All goodwill and other general intangibles related to the
Seller Assets.
(n) All of Seller's right, title and interest in UMR-Xxxxxxx
Recyclers, LLC, a limited liability company organized and existing under the
laws of the State of North Carolina, which represents a joint venture 50% owned
by Seller and 50% owned by X.X. Xxxxxxx Family Limited Partnership (the "LLC
Interest").
(o) All other assets of any nature useful and/or beneficial to
the Business and located at the Owned Facilities whether owned or leased by
Seller unless specifically described in Section 2.2 or on Schedule 2.2 as an
Excluded Asset.
Seller's sale, conveyance, assignment and transfer of the Seller Assets
shall be free and clear of all Security Interests, liabilities or other
obligations, except for those that have been insured over in the title insurance
policy to be delivered pursuant to Section 8.1.
2.2 EXCLUDED ASSETS. On the Closing Date, RII Sub shall not purchase
the assets of Seller as set forth on Schedule 2.2 (the "Excluded Assets").
2.3 ASSUMED CONTRACTS. RII Sub shall assume the obligations of Seller
under the Assumed Contracts.
2.4 ASSUMPTION OF LIABILITIES. Other than as provided in Sections 2.3,
7.2, 7.3, 7.4 and 7.5, RII Sub shall not assume any Liabilities or Environmental
Liabilities of Seller arising on or before the Closing or with respect to any
action, event or occurrence of any party on or prior to the Closing, provided,
however, that ad-valorem taxes on the Seller Assets not yet due and payable
shall be pro-rated at Closing based on the preceding year's actual ad-valorem
taxes paid and RII Sub shall assume its pro-rata share of such taxes.
2.5 COLLECTION OF ACCOUNTS RECEIVABLE.
(a) If Seller receives payment on any of the Seller Receivables
included in the Seller Assets, Seller shall forthwith forward the same to RII
Sub. RII Sub shall have the right,
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during the normal business hours of Seller, to review records of Seller
solely to determine compliance with the provisions of Section 2.5(a).
(b) If RII Sub receives payment on any Retained Receivables, RII
Sub shall forthwith forward same to Seller. Seller shall have the right, during
the normal business hours of RII Sub, to review the records of RII Sub solely to
determine compliance with the provisions of this Section 2.5(b).
(c) The provisions of this Section 2.5 shall survive the
Closing.
ARTICLE 3
PURCHASE PRICE AND CLOSING
3.1 PURCHASE PRICE FOR SELLER ASSETS. RII Sub shall pay the total
amount of $42,000,000, subject to adjustment determined in accordance with
Section 3.2 (the "Purchase Price") to Seller for the purchase of the Seller
Assets. The Purchase Price shall be payable as follows:
(a) $36,000,000, as adjusted in accordance with Section 3.2, in
immediately available funds at Closing (the "Cash Consideration") of which
$100,000 shall be allocated and paid to Xxxxx Xxxxxxx in exchange for his
Non-Competition Agreement described in Section 11.4;
(b) $6,000,000 of Parent Series H Preferred (the "Stock
Consideration") delivered at Closing pursuant to the terms of a customary
subscription agreement (the "Subscription Agreement") containing mandatory
registration rights for the Parent Common Stock issuable upon conversion of the
Stock Consideration. The form of Subscription Agreement is attached hereto as
EXHIBIT B.
3.2 VALUE OF CURRENT ASSETS. On the Closing Date, the value of Current
Assets included in the Seller Assets will be at least $4,000,000, as shown on a
preliminary closing balance Sheet (the "Preliminary Closing Balance Sheet")
dated as of the Closing Date and prepared by Seller on a basis consistent with
the Seller Financial Statements, except that Inventory shall be valued as
provided in Section 3.3 below and various accruals are to be estimated. RII Sub
will acquire the first $7,000,000 of Seller's Current Assets and 50% of Seller's
Current Assets in excess of $10,000,000. Seller will retain Current Assets in
excess of $7,000,000 and not more than $10,000,000, and 50% of Current Assets in
excess of $10,000,000. The value of the Current Assets shall be adjusted as
follows:
(a) Within 30 days after the Closing Date, Recycling and Seller
shall mutually prepare a substitute closing balance sheet for the Preliminary
Closing Balance Sheet, prepared as of the Closing Date on a basis consistent
with the Seller Financial Statements, except for Inventory which shall be valued
as provided in Section 3.3 below, and except that accruals which were estimated
on the Preliminary Closing Balance Sheet shall be determined based on actual
experience
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to the extent practicable. Such substitute balance sheet (the "Final Closing
Balance Sheet") shall reflect any and all adjustments that should properly have
been reflected on the Preliminary Closing Balance Sheet. The Current Assets as
shown on the Final Closing Balance Sheet shall be determinative for the purpose
of applying this Section 3.2. If the payment to Seller at Closing (based on the
Preliminary Closing Balance Sheet) shall be greater than the payment to which
Seller is entitled under the Final Closing Balance Sheet, Seller shall refund to
RII Sub the amount of the overpayment, in immediately available funds, within
five business days following demand therefor. If such payment to Seller at
Closing shall be less than the payment to which Seller is entitled under the
Final Closing Balance Sheet, RII Sub shall pay to Seller the amount of the
underpayment, in immediately available funds, within five business days
following demand therefor.
(b) In addition to any adjustment resulting from the preparation
of the Final Closing Balance Sheet, after Closing the value of the Seller
Receivables included in Current Assets at Closing will be adjusted to reflect
Ordinary Course adjustments for shortages, weight variations, quality and
quantity. Any increase in the value of the Seller Receivables as a result of
the foregoing adjustments shall be paid to Seller by the RII Sub in immediately
available funds. Any decrease in the value of the Seller Receivables as a
result of the foregoing adjustments shall be paid to the RII Sub by Seller in
immediately available funds. Any payments required pursuant to this Section
3.2(b) shall be paid within five days of the determination of the adjustment
amount.
3.3 VALUATION OF INVENTORY. For purposes of determining Current Assets
included in the Seller Assets, inventory will be valued based upon a physical
inventory taken by Seller and observed by Recycling and its representatives on a
date not more than fifteen business days preceding the Closing (the "Inventory
Date") as follows:
(a) Unprepared Inventory will be valued pursuant to a mutually
agreed upon formula which formula will reasonably reflect the cost of such
material to Seller and similar operators in the local marketplace in the
ten business days immediately preceding the Closing; and
(b) Prepared ferrous and non-ferrous Inventory will be valued at
market prices f.o.b. shipping point as of the date of the Inventory
valuation, less $1.00 per ton for handling of ferrous Inventory and $50.00
per trailer load for handling of non-ferrous Inventory.
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3.4 ALLOCATION OF THE PURCHASE PRICE.
(a) The Purchase Price shall be allocated among the Seller
Assets as set forth on Schedule 3.4.
(b) The parties agree that they will not take any tax or other
position inconsistent with any allocation of the Purchase Price set forth on
Schedule 3.4. RII Sub shall provide to Seller a Treasury Form 8594 at Closing.
(c) RII Sub and Seller each covenant with the other that it will
promptly give written notice to the other of any inquiry or challenge of such
allocation by any federal, state or local tax authority.
3.5 CLOSING OF THE PURCHASE. The closing of the Transaction (the
"Closing") shall take place at the offices of Friedlob Xxxxxxxxx Xxxxxx Xxxxxxx
& Xxxxxxxxxxx, LLC, 1400 Glenarm Place, Third Floor, Denver, Colorado, or at
such other place as selected by the Lender, in its sole and absolute discretion,
on the date and at the time set forth in the Closing Notification, given by RII
Sub in accordance with this section (the "Closing Date"). The Closing Date
shall be no later than December 5, 1997.
ARTICLE 4
REPRESENTATIONS OF SELLER AND THE OWNERS
As an inducement to Recycling to enter into this Agreement and to complete
the Transaction, and with the knowledge that Recycling will rely thereon, Seller
and the Owners, jointly and severally, represent and warrant to Recycling that
all of the representations and warranties in this Article 4 are true, correct
and complete as of the date of this Agreement.
4.1 DUE ORGANIZATION AND QUALIFICATION. (a) Seller is a general
partnership duly organized, validly existing and in good standing under the laws
of North Carolina, and has the power and lawful authority to carry on its
business as now being conducted.
(b) Seller is duly qualified or otherwise authorized to
transact business in each jurisdiction, listed in Schedule 4.1(b), in which the
nature of the business conducted or the character or location of the properties
owned makes such qualification necessary.
4.2 TITLE TO PROPERTY. Seller has good, valid and marketable title to
all real and personal property included in the Seller Assets (tangible and
intangible), in each case subject to no Security Interest, option, right of
first refusal, or other restriction of any kind or character, other than those
exceptions acceptable to RII Sub in its reasonable discretion and included as an
exception to the title policy to be delivered pursuant to Section 8.1.
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4.3 AUTHORITY OF SELLER; CONSENTS. (a) Seller has full power and
authority to execute and deliver this Agreement and the Closing Documents and to
carry out the Transaction and Seller has taken all requisite partnership or
other action to authorize the execution, delivery and performance of the Closing
Documents.
(b) This Agreement and the Closing Documents are valid and
binding agreements of Seller enforceable in accordance with their terms.
(c) Except for compliance with the HSR Act and any necessary
consents to the Material Assumed Contracts, no consent, authorization or
approval of, or declaration, filing or registration with, any governmental or
regulatory authority or any consent, authorization or approval of any other
third party is required to enable Seller to enter into and perform its
obligations under this Agreement and the Closing Documents, and neither the
execution and delivery of this Agreement and the Closing Documents nor the
consummation of the Transaction by Seller will:
(1) Be in violation of its partnership agreement or any
other organizational document, or constitute a breach of any evidence of
indebtedness or agreement to which it is a party;
(2) Cause a default under any mortgage or deed of trust or
other lien, charge or encumbrance to which any of the Seller Assets is
subject or under any contract to which it is a party, or permit the
termination of any such contract by another person;
(3) Result in the creation or imposition of any Security
Interest upon any of the Seller Assets under any agreement or commitment to
which it or the Seller Assets are bound;
(4) Conflict with or result in the breach of any writ,
injunction or decree of any court or governmental instrumentality;
(5) Violate any statute, law or regulation of any
jurisdiction as such statute, law or regulation related to the Seller
Assets; or
(6) Violate or cause any revocation of, or limitation on,
any Permit.
4.4 FINANCIAL STATEMENTS.
(a) Seller has furnished, or will furnish, to Recycling the
following financial information, Schedules, and other disclosures:
(1) Audited financial statements for Seller for its fiscal
years ended December 31, 1994, 1995 and 1996, each prepared in accordance
with GAAP (collectively
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the "Audited Financial Statements"). RII Sub and Parent acknowledge
receipt of the Audited Financial Statements prior to the execution of this
Agreement.
(2) Unaudited financial statements prepared for the period
from January 1, 1997 through September 30, 1997 and within 20 business days
after each month ending following the date of this Agreement, unaudited
financial statements prepared in the same manner which they are currently
prepared (collectively the "Unaudited Financial Statements").
(3) Copies of Seller's tax returns for its tax years ended
in 1993, 1994, 1995 and 1996.
(b) The Audited Financial Statements have been prepared in
accordance with GAAP and the Unaudited Financial Statements will be or have been
prepared in the same manner which they are currently prepared and present fairly
the financial condition of Seller as of such dates and the results of operations
of Seller for such periods; PROVIDED, HOWEVER, that the Unaudited Financial
Statements are subject to normal year-end adjustments and lack footnotes and
other presentation items. The Audited Financial Statements and the Unaudited
Financial Statements are collectively referred to as the "Seller Financial
Statements."
(c) Since December 31, 1996, there has been (1) no material
adverse change in the assets or liabilities, or in the business or financial
condition or in the results of operations of the Business, whether as a result
of any legislative or regulatory change, revocation of any Permits, fire,
explosion, accident, casualty, labor trouble, flood, drought, riot, storm,
condemnation or act of God or other public force or otherwise; and (2) no change
in the assets or liabilities, or in the Business or condition, financial or
otherwise, or in the results of operations, or any loss of customers or
prospects of Seller, except in the Ordinary Course which have not, in the
aggregate or individually, had a material adverse effect on the Business.
4.5 NO TAX LIENS; NO WAIVER.
(a) None of the Seller Assets are subject to any lien in favor of
the United States pursuant to the IRC for nonpayment of federal taxes, or any
lien in favor of any state under any comparable provision of state law, under
which transferee liability might be imposed upon RII Sub as purchaser under the
IRC or any comparable provision of state or local law, except for ad-valorem
taxes which are not yet due and payable.
(b) Seller has not waived any statute of limitations with
respect to the assertion of any liability under any federal, state, or local tax
law.
(c) Except as provided on Schedule 4.5(c), Seller is not in
default under, nor has it failed to pay, any Tax liability to any federal,
state, or local authority, and no audit or other
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review by any such authority is pending, or, to the Knowledge of Seller and the
Owners, contemplated.
4.6 COMPLIANCE WITH LAWS. Except as set forth on Schedule 4.6:
(a) Neither Seller nor any of the Owners is in violation or has
violated any applicable order, judgment, injunction, award or decree relating to
the Seller Assets. To the Knowledge of Seller and the Owners, except as
otherwise disclosed on Schedule 4.25 or otherwise disclosed in the Environmental
Studies, neither Seller nor the Owners has violated or is in violation of any
federal, state, local or foreign law, ordinance or regulation or any other
requirement of any governmental or regulatory body, court or arbitrator
applicable to the Seller Assets.
(b) Without limiting the generality of the foregoing (1) the
buildings included in the Owned Facilities do not encroach on the property of
others, (2) except as otherwise disclosed on Schedule 4.25 or in the
Environmental Studies or other documents provided to Recycling's agent, X.X.
Xxxxxxxxxxx and Associates ("Xxxxxxxxxxx"), there is not pending or threatened
any notification of any governmental authority that Seller is not in compliance
with applicable laws and regulations respecting employment and employment
practices, occupational safety and health laws and regulations, and
Environmental Laws, and neither Seller nor any Owner has Knowledge of any basis
therefor, and (3) except as disclosed on Schedule 4.25, neither Seller nor any
Owner has received any such notification of past violations of such laws or
regulations which have not been resolved.
4.7 PERMITS. Schedule 4.7 lists all Permits required by any
governmental entity related to the Business or operations of Seller. Except as
described on Schedule 4.7 or in the Environmental Studies delivered pursuant to
Section 7.1, Seller validly holds all Permits and all Permits are in full force
and effect and no proceeding to revoke or limit any of such Permits is pending
or, to the Knowledge of Seller or any Owner, threatened.
4.8 LITIGATION. Except as set forth on Schedule 4.8, there are no
outstanding orders, judgments, injunctions, awards or decrees of any court,
governmental or regulatory body or arbitration tribunal against or involving the
Seller Assets or the Business. There are no actions, suits or claims against
Seller or any Owner, or, to the Knowledge of Seller or any Owner, investigations
(whether or not the defense thereof or liabilities in respect thereof are
covered by insurance) pending or, to the Knowledge of Seller or any Owner,
threatened against or involving the Seller Assets or the Business, nor to the
Knowledge of Seller or any Owner, is there any basis therefor. Responsibility
for any litigation involving the Seller Assets or the Business (other than as
provided in Article VII) pending or arising from acts that occurred prior to the
Closing and the satisfaction of judgments (including related costs and fees)
shall remain with Seller and the Owners.
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4.9 CONTRACTS AND OTHER AGREEMENTS.
(a) Except for the contracts and agreements listed on Schedule
4.9(a), the Assumed Contracts or the contracts, leases, and other agreements
which will be completed or canceled at or prior to the Closing, Seller is not a
party to any (1) contract for the employment of any officer or individual
employee, (2) contract with any union, (3) bank loan or other credit agreement,
(4) bonus, deferred compensation, profit sharing, pension or retirement
arrangement, (5) lease for real or personal property, (6) partnership or joint
venture agreement, or (7) other material contract, agreement or commitment.
(b) All of the contracts, leases and other agreements which
constitute a part of the Assumed Contracts are valid and binding upon Seller in
accordance with their terms, and Seller is not in default nor has it received
any notice of default under, or with respect to, any such contracts, leases, or
other agreements.
(c) No approval or consent of any Person is needed in order that
the contracts, leases, and other agreements which are listed on Schedule 1.26
will continue in full force and effect following the completion of the
Transaction. Seller is not in the process of negotiating or entering into any
contracts, leases, or other agreements described in this Section 4.9.
4.10 NOTES AND ACCOUNTS RECEIVABLE. The Seller Receivables are reflected
properly in the books and records of Seller, are valid receivables subject to no
setoffs or counterclaims, are current--not over 90 days old--and are collectible
and will be collected within 90 days after the Closing, subject only to the
reserve for bad debts set forth on the face of the Seller Financial Statements.
Seller Receivables not timely collected as provided herein shall be subject to
reassignment to Seller in accordance with Section 14.2.
4.11 TANGIBLE PROPERTY. All Tangible Property being used in the Business
at the date hereof is in good operating condition and repair, subject only to
normal wear and tear. Neither Seller nor any of the Owners has received notice
that any of the Tangible Property is in violation of any existing law or any
building, zoning, health, safety or other ordinance, code or regulation.
4.12 INVENTORY. The piles of Unprepared and Prepared Inventory included
in the Seller Assets are located on level ground and are comprised solely,
throughout the pile, of the quality and grade of material visible on the outer
surface of the pile.
4.13 INTELLECTUAL PROPERTY.
(a) All Intellectual Property is owned outright by Seller, free and
clear of any Security Interest and there exist no obligations with respect to
any Intellectual Property requiring Seller to make any payment in respect of its
use or otherwise. Seller has never agreed to indemnify any Person for or
against any interference, infringement, misappropriation or other conflict with
respect to the Intellectual Property.
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(b) Neither Seller nor any of the Owners is aware of any patent,
invention, trade secret, trademark, service xxxx, trade name or copyright of any
other Person that is infringed by Seller, nor do they have notice of any
infringement claim of any other Person relating to any of the Intellectual
Property or any process or confidential information of Seller, and neither
Seller nor the Owners know of any basis for any such charge or claim.
4.14 REAL PROPERTY. The Owned Facilities include all real property
included in the Seller Assets. To the Knowledge of Seller and the Owners, with
respect to each parcel of owned real property included within the Owned
Facilities:
(a) Except as otherwise disclosed herein, in the Environmental
Studies or documents provided to Xxxxxxxxxxx, the Owned Facilities have received
all approvals of governmental authorities (including licenses and permits)
required in connection with the ownership or operation thereof and have been
operated and maintained in accordance with applicable laws, rules and
regulations.
(b) There are no leases, subleases, licenses, easements,
concessions, or other agreements, written or oral, granting to any party or
parties the right of use or occupancy of any portion of the Owned Facilities,
other than those which do not materially affect RII Sub's right to full
enjoyment of the Owned Facilities, and except as reflected in the survey
described in Section 8.2.
(c) There are no outstanding options or rights of first refusal
to purchase the Owned Facilities or any portion thereof or interest therein.
(d) There are no parties other than Seller in possession of the
Owned Facilities or any portion thereof.
(e) The Owned Facilities are supplied with utilities and other
services necessary for their operation, including electricity, water, telephone,
and sewage disposal, all of which services are adequate in accordance with all
applicable laws, ordinances, rules, and regulations and are provided ingress and
egress via public roads or via permanent, irrevocable, appurtenant easements
benefitting the Owned Facilities.
4.15 LIABILITIES. Except as otherwise set forth in this Agreement or any
Schedule hereto, to the Knowledge of Seller and the Owners, the Business has no
Liabilities other than (a) Liabilities fully and adequately reflected or
reserved against in the Seller Financial Statements and (b) Liabilities incurred
since December 31, 1996 in the Ordinary Course of Business.
4.16 SUPPLIERS AND CUSTOMERS. Schedule 4.16 lists the 20 largest
suppliers and the 20 largest customers of the Business. All purchase orders and
customer contracts were issued by Seller in the Ordinary Course of Business.
Other than Ordinary Course adjustments for shortages, weight variations, quality
and quantity, there are no agreements or understandings with any customers of
the
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vendors to Seller as to adjustments in pricing or cost which would reduce the
profit margin of any existing or contemplated contract or other relationship.
4.17 EMPLOYEE BENEFIT PLANS. Schedule 4.17 lists all Employee Benefit
Plans maintained by Seller or to which it contributes for the benefit of any of
its current or former employees.
(a) To the Knowledge of Seller and the Owners, each Employee
Benefit Plan (and each related trust or insurance contract) complies in
form and in operation in all respects with the applicable requirements of
ERISA and the IRC;
(b) All contributions (including all employer contributions and
employees salary reduction contributions) which are due have been paid to
each Employee Benefit Plan;
(c) No unsatisfied liability has been incurred by Seller or any
ERISA affiliate of Seller and there is no material risk that such liability
will be incurred;
(d) To the Knowledge of Seller and the Owners, no charge,
complaint, action, suit, proceeding, hearing, investigation, claim, or
demand with respect to the administration or the investment of the assets
of any Employee Benefit Plan (other than routine claims for benefits) is
pending;
(e) Seller does not provide any medical or other similar
benefits to employees beyond retirement; and
(f) Seller has delivered to RII Sub and Parent correct and
complete copies of the plan documents and summary plan descriptions, the
most recent Form 5500 Annual Report, and all related trust agreements,
insurance contracts, and other funding agreements which implement each
Employee Benefit Plan.
4.18 CURTAILMENT OF OPERATIONS. No labor disputes or work stoppages
involving the Business are pending or threatened which, either singly or in the
aggregate, might have an adverse effect on the Business. To the Knowledge of
Seller and the Owners, no material customer of or supplier to the Business is
involved in, or affected by, any dispute, arbitration, lawsuit, or
administrative proceedings which might materially adversely affect the Business,
operations, properties, assets or condition, financial or otherwise, of the
Business.
4.19 EMPLOYEE RELATIONS. Seller is not a party to a collective
bargaining agreement and, to its and the Owners' Knowledge, Seller is in
compliance with all federal, state or other applicable laws, domestic or
foreign, respecting employment and employment practices, terms and conditions of
employment (including issues related to independent contractor status of
personnel) and wages and hours, and Seller has not and is not engaged in any
unfair labor practice. There have been no organization efforts by any trade
unions within the last five years.
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4.20 INSURANCE. Schedule 4.20 lists all insurance policies maintained by
Seller relating to the Business or the Owned Facilities, copies of which have
been provided to RII Sub, which cover the Seller Assets or the Business, the
nature of such policies, the amount and types of coverage, and the name of the
insurers and expiration dates. Seller has paid all premiums and other amounts
due on such policies and will not cancel any insurance or permit any insurance
to lapse or terminate prior to the Closing.
4.21 POWERS OF ATTORNEY. There are no outstanding powers of attorney
executed on behalf of Seller, except in connection with Employee Benefit Plans.
4.22 RELATIONSHIPS. Except as described on Schedule 4.22, no Owner of
Seller possesses, directly or indirectly, any financial interest in, or is a
director, officer, stockholder or employee of, any corporation, firm,
association or business organization which is a manufacturer for, or client,
supplier, customer, lessor, lessee, or competitor of the Business. The Business
is not indebted to any officer, director, owner or employee of Seller or to any
entity in which any such Person has a financial interest.
4.23 BROKER'S OR FINDER'S FEES. No agent, broker, Person or firm acting
on behalf of Seller or the Owners is, or will be, entitled to any commission or
broker's or finder's fees from any of the parties hereto, or from any Person
controlling, controlled by or under common control with any of the parties
hereto, in connection with the Transaction.
4.24 EMPLOYEE TRANSITION. Schedule 4.24 lists all employees of Seller who
work or are customarily stationed at the Owned Facilities, their current
employment compensation (excluding bonus), and other amounts if any payable to
each employee. RII Sub will hire all employees of the Business upon
consummation of the Closing but is not obligated to employ such persons for any
specified length of time (except to the extent RII Sub shall agree contractually
to do so). RII Sub will not be responsible for any salaried or hourly health
and life insurance obligations incurred prior to the Closing for any Seller
employees, nor for payment of claims to insureds, or payment of any premiums for
coverage prior to the Closing Date. All employees of Seller hired by RII Sub
will receive credit for their employment period with Seller for purposes of
determining vesting and eligibility under the terms of RII Sub's or the Parent's
Employee Benefit Plans, to the extent allowable under applicable law, and will
be entitled to take vacation time in accordance with the policies of Seller
(including credit for time employed by Seller).
4.25 ENVIRONMENTAL MATTERS. Except as may be provided in the
Environmental Studies to be performed as contemplated by Section 7.2 of this
Agreement, or in documents provided to Xxxxxxxxxxx, copies of which have been
delivered to RII Sub, or disclosed on Schedules 4.8 or 4.25, to the Knowledge of
Seller and the Owners:
(1) No Hazardous Material has been disposed of on, released
to or from, threatened to be released to or from or is presently at, on,
beneath, in or upon any of the Owned Facilities or upon adjacent parcels of
real estate in amounts or concentrations
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which constitute or constituted a violation of, or which could reasonably
be expected to give rise to liability under, any Environmental Law.
(2) There has been no generation, production, refining,
processing, manufacturing, use, storage, disposal, treatment, shipment or
receipt of a Hazardous Material at or from the Owned Facilities or relating
to the operation of Seller in violation of or in a manner that could give
rise to liability under Environmental Laws.
(3) The operations of Seller are in compliance and have
been in compliance with all applicable Environmental Laws, and there is no
violation of any Environmental Law with respect to the Owned Facilities
which could interfere with continued operation Seller's business or impair
its fair saleable value.
(4) Neither Seller nor the Owners have received any notice
of violation, alleged violation, non-compliance, liability or potential
liability regarding environmental matters or compliance with Environmental
Laws with regard to the Owned Facilities from any Person, nor does Seller
or any of the Owners have Knowledge or reason to believe that any such
notice will be received from or is being threatened by any Person.
(5) No judicial proceedings, governmental administrative
actions, investigations or internal or non-public agency proceedings are
pending or threatened, under any Environmental Law, to which Seller is or
will be named as a party, nor are there any consent decrees, or other
decrees, consent orders, agreements, administrative orders or other orders,
judicial or administrative requirements outstanding under any Environmental
Law with respect to Seller.
4.26 COMPLIANCE WITH ADA. Seller has substantially complied with the
Americans with Disabilities Act of 1991, 42 U.S.C. Sections 12111, 12112 and
12209, as amended, and any similar applicable state regulations.
4.27 GUARANTEES. Seller is not a guarantor or otherwise liable for any
liability or obligation of any other person, except as described in Section
4.25.
4.28 DISCLOSURE. Neither this Agreement nor any Schedule, Exhibit or
certificate delivered in accordance with the terms hereof or any document or
statement in writing which has been supplied by or on behalf of Seller or the
Owners in connection with the Transaction, contains any untrue statement of a
material fact or omits any statement of a material fact necessary in order to
make the statements contained herein or therein not misleading.
4.29 BEST EFFORTS. Seller and the Owners will use their best efforts to
obtain all permits, consents and approvals and take such other actions in order
to complete the Transaction by the Closing Date. Seller and the Owners will
execute and deliver such instruments and take such other
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action as may be reasonable or appropriate to carry out the Acquisition and the
intentions of this Agreement.
ARTICLE 5
REPRESENTATIONS OF RECYCLING
As an inducement to Seller and the Owners to enter into this Agreement and
to complete the Transaction and with the knowledge that Seller and the Owners
will rely thereon, RII Sub and the Parent jointly and severally represent and
warrant to Seller and the Owners the following both as of the date hereof and as
of the Closing Date:
5.1 DUE INCORPORATION AND QUALIFICATION OF RII SUB. RII Sub is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Colorado, and has the corporate power and lawful authority to
carry on its business as now being conducted. On or before the Closing Date,
RII Sub will be duly qualified or otherwise authorized as a foreign corporation
to transact business and will be in good standing in the State of North
Carolina.
5.2 DUE INCORPORATION AND QUALIFICATION OF THE PARENT. The Parent is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of Colorado, and has the corporate power and lawful authority
to carry on its business as now being conducted.
5.3 ARTICLES OF INCORPORATION AND BYLAWS. On or before the Closing
Date, RII Sub and the Parent will deliver to Seller true and complete copies of
their respective Articles of Incorporation (certified by the Secretary of State
of Colorado) and Bylaws (certified by its corporate secretary) as then in
effect.
5.4 AUTHORITY OF RII SUB AND THE PARENT. RII Sub and the Parent have
full power and authority to execute and deliver this Agreement and the Closing
Documents and to carry out the Transaction. The Closing Documents are valid
and binding agreements of RII Sub and the Parent, enforceable in accordance with
their terms. No consent, authorization or approval of, or declaration, filing
or registration with, any governmental or regulatory authority or any consent,
authorization or approval of any other third party is necessary in order to
enable RII Sub or the Parent to enter into and perform its obligations under the
Closing Documents, and neither the execution and delivery of the Closing
Documents nor the completion of the Transaction will, with respect to RII Sub
and the Parent, individually:
(a) Be in violation of its Articles of Incorporation or Bylaws
or constitute a breach of any evidence of indebtedness or agreement to which it
is a party;
(b) Cause a default under any mortgage or deed of trust or other
lien, charge or encumbrance to which any of its property is subject or under any
contract to which it is a party, or permit the termination of any such contract
by another Person;
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(c) Result in the creation or imposition of any Security
Interest upon any of its property or assets under any agreement or commitment to
which it is bound;
(d) Accelerate, or constitute an event entitling, or which would
upon notice or lapse of time or both, entitle the holder of any indebtedness to
accelerate the maturity of any such indebtedness;
(e) Conflict with or result in the breach of any writ,
injunction or decree of any court or governmental instrumentality;
(f) Violate any statute, law or regulation of any jurisdiction
as such statute, law or regulation relates to it; or
(g) Violate or cause any revocation of or limitation on any
Permit.
5.5 STOCK CONSIDERATION. The Stock Consideration when issued, and the
Parent Common Stock issuable upon conversion of the Stock Consideration, will be
duly authorized, fully paid and non-assessable and not subject to any preemptive
rights, and free and clear of any Security Interests or other encumbrances,
except for transfer restrictions required under federal and state securities
laws.
5.6 1934 ACT REGISTRATION. The common stock of the Parent is registered
under Section 12(g) of the 1934 Act, and in accordance therewith, the Parent
files periodic reports, proxy statements, and other informational reports
required under the 1934 Act. The Parent has made all filings with the
Securities and Exchange Commission that it has been required to make under the
1934 Act (collectively, the "Public Reports"). The Public Reports were complete
and accurate when filed and no material events have occurred subsequent to the
filing of the Public Reports which would require additional filings or other
disclosure other than a press release or similar announcement which has been
made when required.
5.7 BROKER'S OR FINDER'S FEES. No agent, broker, Person or firm acting
on behalf of RII Sub or the Parent is, or will be, entitled to any commission or
broker's or finder's fees from any of the parties hereto, or from any Person
controlling, controlled by or under common control with any of the parties
hereto, in connection with the Transaction.
5.8 DISCLOSURE. Neither this Agreement nor any Schedule, Exhibit or
certificate delivered in accordance with the terms hereof or any document or
statement in writing which has been supplied by or on behalf of RII Sub or the
Parent in connection with the Transaction, contains any untrue statement of a
material fact, or omits any statement of a material fact necessary in order to
make the statements contained herein or therein not misleading.
5.9 BEST EFFORTS. RII Sub and the Parent will use their best efforts to
timely apply for and obtain all permits, consents and approvals and to complete
any due diligence deemed necessary
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by RII Sub and the Parent in order to complete the Transaction by the Closing
Date. RII Sub and the Parent will execute and deliver such instruments and take
such other action as may be reasonable or appropriate to carry out the
Acquisition and the intentions of this Agreement.
ARTICLE 6
REGULATORY COMPLIANCE
6.1 BULK SALES COMPLIANCE. RII Sub and Parent hereby waive compliance
by Seller with the provisions of the bulk sales or bulk transfer law of the
State of North Carolina, and Seller and the Owners agree to indemnify and hold
RII Sub and Parent harmless from any liability incurred as a result of the
failure to so comply.
6.2 XXXX-XXXXX-XXXXXX ACT. As soon as practicable, but in no event
later than five days after the date hereof, each party shall make any and all
filings required to be made under the HSR Act. Each of the parties will assist
the other as may be reasonably requested in connection with the preparation of
the Notification and Report Forms and related materials that it may be required
to file pursuant to the HSR Act and will use its best efforts to obtain an early
termination of the applicable waiting period and will make any further filings
that may be necessary, proper or advisable in connection therewith. Recycling
will pay all costs of preparing and making each initial filing and any
additional filings under the HSR Act, other than the costs and expenses of
Seller and its personnel and legal fees incurred by Seller in connection with
such filings.
6.3 THE WARN ACT. Seller will comply with the provisions of the WARN
Act, 29 U.S.C. Sections 2101, ET SEQ., and any similar state statute, relating
to notice to employees, if such provisions apply to the transaction contemplated
hereunder.
6.4 COBRA. Seller has complied with the provisions of COBRA, Pub. L. No.
99-272, 99th Cong., 2d Sess. (1987), and any similar state statute, relating to
continuation of health benefits to employees terminated prior to the Closing.
Recycling shall offer COBRA benefits to all persons who became eligible for
COBRA due to a qualifying event that occurred under Seller's medical benefit
plans prior to the Closing Date, and who elected to receive COBRA benefits prior
to the Closing Date (and are eligible to continue to receive such benefits
following the Closing Date), or who were notified in timely manner of their
COBRA rights (or were not so notified but the notice period has not expired
prior to the Closing Date) and did not so elect but remain eligible to elect to
receive such benefits following the Closing Date. Other than as provided in the
immediately preceding sentence, any liabilities for any COBRA claims arising out
of transactions occurring prior to the Closing Date shall be the sole
responsibility of Seller.
6.5 OTHER. The parties shall prepare and promptly file all reports,
documents or notices with appropriate regulatory or other governmental
authorities, as may be required of them.
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ARTICLE 7
ENVIRONMENTAL MATTERS
With respect to matters governed by Environmental Laws, the Parties hereby
agree as follows:
7.1 ENVIRONMENTAL STUDIES. Xxxxxxxxxxx has commenced preparation of
ASTM Phase I and Phase II Environmental Site Assessments and Transaction Screen
Process (the "Environmental Studies"). Upon completion, the Environmental
Studies shall be delivered to Recycling and attached as Schedule 7.1. Recycling
shall pay for the costs of the Environmental Studies, except that Recycling
shall be reimbursed by Seller, out of assets other than Seller Assets, for the
cost of the initial visual reconnaissance performed by Xxxxxxxxxxx.
7.2 ON-SITE LIABILITIES AT THE OWNED FACILITIES.
(a) The Parties will work together in good faith and will seek
to achieve consensus regarding how to respond to any "Environmental Claims" (as
defined below) at the Owned Facilities, and will mutually agree on the timing of
any cleanup. Recycling will have the right to incur response costs up to $5,000
per occurrence, limited to no more than three occurrences per year, without
approval by Seller. Any other response costs must be approved by Seller or will
be resolved by arbitration, with each party paying one-half of the arbitration
costs (neither party's share of the arbitration costs will be from the "Seller
Environmental Escrow Account," as defined below).
(b) Subject to Section 7.5, Seller will indemnify, defend, and
hold harmless RII Sub and Parent, and their officers, directors, successors and
assigns, from and against any and all claims, demands, suits, judgments,
settlements, penalties, liabilities, cleanup costs and expenses, including
reasonable fees of counsel and environmental consultants ("Environmental
Claims"), arising out of or resulting from on-site events or occurrences at the
Owned Facilities on or before the Closing Date or any migration of contamination
onto or under the Owned Facilities prior to the Closing Date (collectively,
"On-Site Liabilities"). Seller will have no liability or indemnification
obligations, however, if it does not receive notice of an Environmental Claim
within four years after the Closing Date. Notwithstanding the foregoing,
Seller's liability for all On-Site Liabilities shall not exceed [CONFIDENTIAL
TREATMENT REQUESTED BY REGISTRANT] in the aggregate. At Closing, the parties
will create an escrow account, funded by [CONFIDENTIAL TREATMENT REQUESTED BY
REGISTRANT] (the "Seller Environmental Escrow Account") (all of which amounts
will be contributed to the Environmental Escrow Account by Seller at the
Closing). The Environmental Escrow Account will be administered as provided in
the Seller Environmental Escrow Agreement in the form attached hereto as
EXHIBIT C. Recycling will look solely to the Seller Environmental Escrow Account
to satisfy Seller's obligations for On-Site Liabilities as provided in this
Section 7.2.
(c) RII Sub and Recycling will indemnify, defend, and hold
harmless Seller and the Owners, and their officers, directors, successors and
assigns, from and against any and all Environmental Claims arising out of or
resulting from: (i) on-site events or occurrences at the Owned
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Facilities after the Closing Date, and (ii) On-Site Liabilities before the
Closing Date if Seller's indemnification obligations pursuant to Section 7.2(b)
above, have expired.
7.3 ON-SITE LIABILITIES AT THE XXXXXXX FACILITY.
(a) The Parties will work together in good faith and will seek
to achieve consensus regarding how to respond to any Environmental Claims, and
will mutually agree on the timing of any cleanup, at the real property owned by
UMR-X.X. Xxxxxxx Recyclers, LLC in Smithfield, North Carolina (the "Xxxxxxx
Facility"). Recycling will have the right to incur response costs up to $5,000
per occurrence, limited to no more than three occurrences per year, without
approval by Seller. Any other response costs must be approved by Seller or will
be resolved by arbitration, with each party paying one-half of the arbitration
costs (neither party's share of the arbitration costs will be from the "Xxxxxxx
Environmental Escrow Account").
(b) Seller will indemnify, defend, and hold harmless RII Sub and
Parent and their officers, directors, successors and assigns, from and against
any and all Environmental Claims, arising out of or resulting from on-site
events or occurrences at the Xxxxxxx Facility on or before the Closing Date.
Seller will have no liability or indemnification obligations, however, if it
does not receive notice of an Environmental Claim within four years after the
Closing Date. Notwithstanding the foregoing, Seller's liability and indemnity
obligation for all On-Site Liabilities shall not exceed [CONFIDENTIAL TREATMENT
REQUESTED BY REGISTRANT] in the aggregate. At Closing, the parties will create
an escrow account, [CONFIDENTIAL TREATMENT REQUESTED BY REGISTRANT] (the
"Xxxxxxx Environmental Escrow Account") (all of which amounts will be
contributed to the Environmental Escrow Account by Seller at the Closing). The
Xxxxxxx Environmental Escrow Account will be administered as provided in the
Xxxxxxx Environmental Escrow Agreement in the form attached hereto as EXHIBIT D.
Recycling will look solely to the Xxxxxxx Environmental Escrow Account to
satisfy Seller's obligations for On-Site Liabilities as provided in this Section
7.3.
(c) RII Sub and Recycling will indemnify, defend, and hold
harmless Seller and the Owners, and their officers, directors, successors and
assigns, from and against any and all Environmental Claims at the Xxxxxxx
Facility arising out of or resulting from: (i) on-site events or occurrences
after the Closing Date, and (ii) On-Site Liabilities before the Closing Date if
Seller's indemnification obligations pursuant to Section 7.3(b) above, have
expired.
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7.4 OFF-SITE LIABILITIES.
(a) Subject to the following conditions, RII Sub and Parent will
indemnify, defend and hold harmless Seller and the Owners, and their officers,
directors, successors and assigns, from and against any and all Environmental
Claims pertaining to any non-owned disposal sites (I.E., waste disposal sites
that neither Seller nor any controlled party of Seller had any ownership
interest in or control over; referred to herein as "NODS"). The aggregate
indemnification obligation of RII Sub and Parent shall be limited to
[CONFIDENTIAL TREATMENT REQUESTED BY REGISTRANT] for all NODS, subject to a
maximum liability for any individual NODS of [CONFIDENTIAL TREATMENT REQUESTED
BY REGISTRANT], up to a maximum of five NODS which must be identified by Seller
to Recycling on or before the Closing. For the foregoing indemnification to be
available for a NODS, that NODS must meet the following conditions on the
Closing Date, to the Knowledge of Seller and the Owners:
(1) The NODS are not included on the National Priorities List or
subject to any ongoing investigation by the United States Environmental
Protection Agency (the "EPA") or equivalent state agencies;
(2) the NODS are in material compliance with currently
applicable EPA regulations; and
(3) The NODS has any Pollution Legal Liability Insurance if
currently required by law.
(b) RII Sub and Parent will have 45 days after the Closing to
investigate each facility identified in subsection (a) above by Seller. If RII
Sub and Parent conclude that any listed facility fails to meet any of the three
conditions listed in subsection (a) (irrespective of whether or not Seller or
the Owners had knowledge of such failure), it may notify Seller within the
45-day period of its intention to remove that facility from the list. Within 45
days after receipt of such notice, Seller will take either of the following
actions:
(1) It may identify a replacement facility for each facility
removed by RII Sub and Parent. In that event, RII Sub and Parent will have
an additional 45 days to investigate each replacement facility in the same
manner as if each such facility had been designated at the Closing.
(2) If more than one facility has already been removed from the
list, and if Seller disagrees with RII Sub's and Parent's conclusion that a
particular facility does not meet one or more of the three conditions in
subsection (a) above, Seller may notify RII Sub and Parent of its
disagreement. In that event, the parties will submit the issue to
expedited, binding arbitration before a single arbitrator, in accordance
with the commercial arbitration rules and procedures of the American
Arbitration Association. If the arbitrator concludes that the proposed
facility does not meet any of the three conditions listed in subsection (a)
above, Seller will have 45 days after receipt of the arbitrator's decision
to
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identify a replacement facility. The parties will follow the same
procedure set forth in this subsection (b) for review of the replacement
facility.
By using the procedure outlined in this subsection (b), the parties will reach
agreement as to the five facilities to which RII Sub's and Parent's
indemnification and defense obligations under this Section will apply.
(c) Subject to subsection (a) of this Section 7.4, Seller will
indemnify, defend, and hold harmless RII Sub and Parent and their officers,
directors, successors and assigns, from and against any and all off-site
Environmental Claims arising out of the operations of Seller on or before the
Closing Date.
(d) RII Sub and Parent, jointly and severally, will indemnify,
defend, and hold harmless Seller and the Owners and their officers, directors,
successors and assigns, from and against any and all off-site Environmental
Claims arising out of the operations of RII Sub or Parent after the Closing
Date. Except as provided in this Section 7.4, with respect to NODS RII Sub and
Parent do not assume any liability for off-site Environmental Claims, whether
known or unknown, arising from Seller's operations on or before the Closing
Date.
7.5 LANDFILL CLOSURE. The Purchase Price will be reduced by the present
value of the estimated costs of closing the landfill owned and operated by
Seller, not to exceed $750,000 (the "Closure Reduction"), and Recycling will
assume the responsibility for closing the landfill. Recycling's consultant,
Xxxxxxxxxxx, will estimate the costs of closure. Seller will deliver free and
clear title to the land to be used as a buffer on the east side of the property,
and will receive a credit against the Closure Reduction, not to exceed $439,000,
with the actual credit amount to be determined by actual purchase and
transactional costs associated with the acquisition of the buffer property, not
to exceed $439,000). The Closure Reduction as reduced by such credit will
reduce the Stock Consideration deliverable at Closing.
ARTICLE 8
COVENANTS TO BE PERFORMED PRIOR TO THE CLOSING
The parties hereto covenant and agree that between the date hereof and the
Closing Date:
8.1 TITLE INSURANCE. Prior to the Closing, Seller will obtain a title
insurance commitment, including obligations to issue endorsements as may be
required by RII Sub, with respect to the Owned Facilities, using a current North
Carolina standard form of American Land Title Association Owner's Title
Insurance Commitment issued by a title insurer satisfactory to RII Sub in the
amount specifically allocated by the parties on Schedule 3.4 to the Owned
Facilities, insuring title to the Owned Facilities to be in RII Sub as of the
Closing Date, subject only to such exceptions and exclusions as provided in this
Agreement or set forth on Schedule 8.1, or are acceptable to RII Sub and
insuring against all possible contractors', suppliers' and mechanics' lien
claims. Such title commitment is to contain a complete copy of each easement,
restriction, limitation, or condition of
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title which is referred to therein that burdens or benefits said real property.
At the Closing, the costs and premium for the owner's policy of title insurance
shall be paid by Seller. RII Sub shall pay the cost of any endorsements to the
owner's policy of title insurance which may be requested by it and the cost of
the mortgagee's policy of title insurance. When delivered, the title commitment
shall be attached as Schedule 8.1.
8.2 SURVEY. Seller, at its expense, will deliver to RII Sub an updated
survey of the Owned Facilities, certified to RII Sub, any mortgagee of RII Sub,
and the title insurer issuing title insurance in the Transaction as provided in
Section 8.1, prepared by a licensed surveyor and conforming to Minimum Technical
Standards adopted by the North Carolina Society of Professional Surveyors, or
equivalent professional body or licensing agency, disclosing the location of all
improvements, easements, party walls, sidewalks, roadways, utility lines,
setback requirements, and other matters customarily shown on such surveys, and
showing access affirmatively to public streets and roads.
8.3 MATERIAL ASSUMED CONTRACTS. Seller will use its best efforts obtain
the written consent to the assumption by RII Sub of each of the Material Assumed
Contracts listed on Schedule 1.26 which require such consent.
8.4 CONDUCT OF BUSINESS. Seller will not engage in any practice, take
any action, incur any Liabilities, dispose of any assets or enter into any
transaction outside the Ordinary Course of Business and shall conduct the
Business in the Ordinary Course and in such a manner so that the representations
and warranties contained herein shall continue to be true, correct and complete
on and as of the Closing Date.
8.5 PRESERVATION OF BUSINESS. Seller will keep the Business and the
Seller Assets substantially intact, including its present operations, physical
facilities, and working conditions, and will use its best efforts to maintain
relationships with lessors, licensors, suppliers, customers, and employees.
Seller will provide to RII Sub a mailing list of all customers and a listing of
their accounts within ten business days (or the earliest possible date) prior to
the Closing Date to permit RII Sub to send announcements to the customers on or
after the Closing Date.
8.6 NOTICE OF EVENTS. Seller and the Owners shall promptly notify RII
Sub and Parent with reasonable specificity of: (1) any event, condition or
circumstance occurring from the date hereof through the Closing Date that would
constitute a violation or breach of this Agreement; or (2) any event,
occurrence, transaction or other item which would have been required to have
been disclosed on any Schedule, Exhibit or statement delivered hereunder, had
such event, occurrence, transaction or item existed on the date hereof, other
than items arising in the Ordinary Course of Business which would not render any
of the representations, warranties or other agreements of Seller or the Owners
misleading.
8.7 EXAMINATIONS AND INVESTIGATIONS. (a) Prior to the Closing Date,
during normal business hours between 8:00 a.m. and 5:00 p.m., Eastern Time,
Monday through Friday, or such other hours as to which the parties mutually
agree, Recycling shall be entitled, through its employees
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and representatives, including counsel, lenders, appraisers and accountants, to
make such investigation of the assets, properties, business and operations of
the Business, and such examination and copies of the books, records and
financial condition of the Business as Recycling deems necessary. No review,
examination or investigation by Recycling shall diminish or obviate any of the
representations, warranties, covenants or agreements of Seller and the Owners
under this Agreement.
(b) If this Agreement terminates: (1) RII Sub shall keep
confidential and shall not use in any manner any information or documents
obtained from Seller concerning the Business or the Seller Assets, unless
readily ascertainable from public or published information, or trade sources, or
subsequently developed by RII Sub independent of any investigation of the
Business, or received from a third party not under an obligation to Seller to
keep such information confidential, and (2) any documents obtained from Seller
shall be promptly returned to it.
8.8 NO NEGOTIATION BY SELLER OR THE OWNERS. Between the date hereof and
the earlier of (1) the Closing Date; and (2) the date of termination of this
Agreement, neither the Owners nor Seller shall, directly or indirectly:
(a) Solicit, initiate or encourage the submission of inquiries,
proposals or offers from any Person (other than Recycling) relating to any
acquisition or purchase of assets (other than Prepared Inventory) of, or any
equity interest in, the Seller Assets or any exchange offer, merger,
consolidation, purchase of assets, liquidation, dissolution or similar
transaction involving the Seller Assets (each, an "Acquisition Proposal");
(b) Enter into or participate in any discussions or negotiations
regarding any of the foregoing, or furnish to any Person (other than Recycling
and its representatives) any information with respect to the Seller Assets,
other than in the Ordinary Course of Business; or
(c) Otherwise cooperate in any way with, or assist or
participate in, facilitate or encourage, any effort or attempt by any Person
(other than Recycling) to do or seek any of the foregoing.
Seller and the Owners will notify Recycling immediately if any such
Acquisition Proposal is received or if any such discussions, negotiations or
other events occur or are sought to be initiated, and such notice will set forth
in detail the terms or other particulars thereof.
8.9 SAFETY AUDITS. If requested by Recycling, Seller shall have safety
audits at each of its facility sites performed by a consulting firm mutually
acceptable to the parties to ensure compliance with OSHA and any other
applicable safety standards. All costs related to these audits shall be borne
by Recycling.
8.10 REMOVAL OF WASTE MATERIALS. Seller shall remove, at its cost, all
waste materials from the Seller Facilities and real property prior to the
Closing excluding those materials which are consigned to the on-site landfill in
the normal course of operations as of the date of the closing and
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other minimal amounts of waste materials mutually agreed to by the parties
(e.g., waste oil in limited quantities typically consigned to a third party for
disposal in the normal course of operations).
8.11 EMPLOYMENT AGREEMENTS. Parent and RII Sub shall use their
reasonable best efforts to enter into Employment Agreements with certain
employees of Seller substantially in the form of Exhibit H.
ARTICLE 9
CONDITIONS PRECEDENT TO THE OBLIGATION
OF RECYCLING TO CLOSE
The obligation of Recycling to enter into and to complete the Transaction
is subject to the fulfillment on or prior to the Closing Date of the following
conditions, any one or more of which may be waived by Recycling only in writing:
9.1 REPRESENTATIONS, WARRANTIES AND OTHER AGREEMENTS. The
representations, warranties and other agreements of Seller and the Owners
contained in this Agreement shall be true, correct and complete in all material
respects on and as of the Closing Date, with the same force and effect as though
made on and as of the Closing Date. Seller and the Owners shall have performed
and complied in all material respects with all covenants and agreements required
by this Agreement to be performed or complied with by them on or prior to the
Closing Date. Seller and the Owners shall have delivered to Recycling
certificates, dated the Closing Date, to such effect.
9.2 GOVERNMENTAL PERMITS AND APPROVALS. All permits and approvals from
any governmental or regulatory body required for the lawful completion of the
Transaction, including early termination of the waiting period under the HSR
Act, shall have been obtained and all shall have been transferred to the name of
RII Sub to the extent such permits are transferable.
9.3 THIRD PARTY CONSENTS. All consents, permits and approvals from
parties to any Material Assumed Contracts that may be required in connection
with the performance by Seller of its obligations under this Agreement or the
continuance of such contracts or other agreements without material modification
after the Closing Date shall have been obtained.
9.4 LITIGATION. No action, suit or proceeding shall have been
instituted before any court or governmental or regulatory body, or instituted or
threatened by any governmental or regulatory body, to restrain, modify or
prevent the carrying out of the Transaction or to seek damages or a discovery
order in connection with such transactions, or that has or could reasonably be
expected to have, in the opinion of RII Sub or the Parent a materially adverse
effect on the Seller Assets or the Business.
9.5 REAL PROPERTY. Except as set forth on Schedules 2.1(a) and 8.1,
with respect to the Owned Facilities:
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(a) RII Sub shall receive good and marketable title by general
warranty deed for the Owned Facilities in proper form for recording in the State
of North Carolina;
(b) The Owned Facilities shall be free and clear of any Security
Interest, easement, covenant, or other restriction, except for installments of
special assessments not yet delinquent and recorded easements, covenants,
matters shown by the Survey attached as Schedule 8.2 and other restrictions
which do not impair the current use or occupancy, or the marketability of title,
of the property subject thereto;
(c) There shall not be pending or threatened condemnation
proceedings, lawsuits, or administrative actions of any type relating to the
Owned Facilities, or other matters affecting adversely the current use, or
occupancy thereof, including unpaid tap fees, contemplated special assessments
or zoning changes;
(d) The legal description for the Owned Facilities contained in
the deed therefor shall describe the real property forming a part of the Owned
Facilities fully and adequately. The building and improvements located within
the boundary lines of the described parcel of land (1) shall not be in violation
of applicable setback requirements, zoning laws, and ordinances, (2) shall not
encroach on any easement which may burden the land, and described parcel of land
not serve any adjoining property for any purpose inconsistent with the use of
the land, and (3) shall not be located within any flood plain or be included in
any wetlands or be subject to any similar type restriction for which any permits
or licenses necessary to the use thereof shall have not been obtained; and
(e) The Owned Facilities shall abut and have direct vehicular
access to a public road, direct access to an operational railroad spur, or have
vehicular access to a public road via a permanent, irrevocable, appurtenant
easement benefitting the Owned Facilities.
9.6 NO MATERIAL ADVERSE CHANGE. There shall be no material adverse
change in the Business or the Seller Assets taken as a whole, financial or
otherwise, or, to either Seller's or the Owners' Knowledge, Seller's customers,
regardless of reason, including those changes that are as a result of any
legislative or regulatory change, revocation of any Permits, licenses or rights
to do business, failure to obtain any Permit at the normal time or in the manner
applied for by Seller, fire, explosion, accident, casualty, labor trouble,
flood, riot, storm, condemnation or act of God or otherwise, and Seller shall
have delivered to Recycling a certificate, dated the Closing Date, to such
effect.
9.7 TRANSFER DOCUMENTS. RII Sub shall have received assignments and
such other instruments of sale, transfer, conveyance and assignment transferring
all of the Seller Assets from Seller to RII Sub, each in proper legal form to
transfer the Seller assets under applicable law.
9.8 ACQUISITION OF THE XXXXXXX COMPANIES, INC. Parent or an entity
controlled by Parent shall have acquired or be simultaneously acquiring the
assets and business of The Xxxxxxx Companies, Inc., a North Carolina
corporation.
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9.9 ENVIRONMENTAL ESCROW AGREEMENTS. RII Sub shall have received from
Seller the Seller Environmental Escrow Agreement in the form attached hereto as
EXHIBIT C and the Xxxxxxx Environmental Escrow Agreement in the form attached
hereto as EXHIBIT D.
9.10 ASSIGNMENT OF CONTRACTS. Seller shall have delivered to RII Sub
written consents to the assignment or assumption of each of the Material Assumed
Contracts as provided by Section 8.3.
9.11 SATISFACTION WITH DUE DILIGENCE, FINANCIAL PERFORMANCE AND APPROVAL.
Recycling shall be satisfied, in its sole discretion, with (a) the results of
its legal, accounting and financial due diligence investigation of Seller and
its operations, including, without limitation, the results of the Environmental
Studies and any Safety Audits, and (b) Seller's financial performance up to the
Closing Date. Further, the terms and conditions of this Agreement shall have
been approved by Recycling's senior management, its Board of Directors, and the
Lender, each in their sole discretion.
9.12 SUBSCRIPTION AGREEMENT. The Parent shall have received from Seller
the Subscription Agreement for the Stock Consideration in the form attached
hereto as EXHIBIT E.
9.13 NON-COMPETITION AGREEMENT. Recycling shall have received from
Seller and the Owners and Xxxxx Xxxxxxx, executed Non-Competition Agreements in
the form attached hereto as EXHIBIT F.
9.14 LEGAL OPINION. Recycling shall receive an opinion from counsel to
the Seller and the Owners in the Form attached hereto as EXHIBIT G.
9.15 BOOKS AND RECORDS. RII Sub shall have received the books, books of
account, papers, records, correspondence and instruments of, or relating to, the
Seller Assets and/or Business including, but not limited to, the information set
forth in Section 4.4(a) above.
9.16 CERTIFICATES, ETC. OF OWNERS AND SELLER. The Owners and Seller
shall have delivered all certified resolutions, certificates, documents or
instruments with respect to Seller's authority and such other matters as RII
Sub's and the Parent's counsel may have reasonably requested prior to the
Closing Date.
9.17 PAYMENT OF SALES OR USE TAXES BY SELLER. Seller shall have paid all
sales, use or personal property taxes or other similar taxes payable as a result
of the completion of the Transaction.
9.18 PAYMENT OF ACCOUNTS PAYABLE. Within 60 days of the Closing Date,
Seller shall have paid in full all of its outstanding accounts payable as of the
Closing Date, other than amounts which are the subject of a bona fide dispute
(the "Seller Payables").
9.19 APPROVAL OF COUNSEL TO RECYCLING. All actions and proceedings
hereunder and all documents or other papers required to be delivered by Seller
hereunder or in connection with the completion of the Transaction, and all other
related matters shall have been approved by Friedlob
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Xxxxxxxxx Xxxxxx Xxxxxxx & Xxxxxxxxxxx, LLC, counsel to Recycling, as to their
form, which approval shall not be unreasonably withheld or delayed.
ARTICLE 10
CONDITIONS PRECEDENT TO THE OBLIGATION OF SELLER
AND THE OWNERS TO CLOSE
The obligations of Seller and the Owners to enter into and to complete the
Transaction is subject to the fulfillment on or prior to the Closing Date
(except for a sooner date, if so provided) of the following conditions, any one
or more of which may be waived by Seller and the Owners only in writing:
10.1 REPRESENTATIONS, WARRANTIES AND OTHER AGREEMENTS. The
representations, warranties and other agreements of Recycling contained in this
Agreement shall be true on and as of the Closing Date with the same force and
effect as though made on and as of the Closing Date. Recycling shall have
performed and complied with all covenants and agreements required by this
Agreement to be performed or complied with by it on or prior to the Closing
Date. Recycling shall have delivered to Seller certificates, dated the Closing
Date, to such effect.
10.2 ACQUISITION OF THE XXXXXXX COMPANIES, INC. Parent or an entity
controlled by Parent shall have acquired or be simultaneously acquiring the
assets and business of The Xxxxxxx Companies, Inc., a North Carolina
corporation.
10.3 GOVERNMENTAL PERMITS AND APPROVALS. All permits and approvals from
any governmental or regulatory body required for the lawful completion of the
Transaction, including early termination of the waiting period under the HSR
Act, shall have been obtained.
10.4 THIRD PARTY CONSENTS. All consents, permits and approvals from
parties to any Material Assumed Contract that may be required in connection with
the performance by Seller of its obligations under this Agreement or the
continuance of such contracts or other agreements without material modification
after the Closing Date, shall have been obtained.
10.5 LITIGATION. No action, suit or proceeding shall have been
instituted before any court or governmental or regulatory body, or instituted or
threatened by any governmental or regulatory body, to restrain, modify or
prevent the carrying out of the Transaction, or to seek damages or a discovery
order in connection with such Transactions, or that has or could reasonably be
expected to have, in the opinion of Seller, a materially adverse effect on the
assets, properties, businesses, operations or financial condition of RII Sub or
the Parent.
10.6 NO MATERIAL ADVERSE CHANGE. There shall be no material adverse
change in the business or operations of RII Sub or Parent taken as a whole,
financial or otherwise, regardless of reason, including those changes that are
as a result of any legislative or regulatory change, and RII Sub and Parent
shall have delivered to Seller a certificate, dated the Closing Date, to such
effect.
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10.7 RESOLUTIONS. There shall have been delivered to Seller and the
Owners a copy of the resolutions duly adopted by the respective boards of
directors of RII Sub and Parent, authorizing and approving the execution and
delivery by RII Sub and Parent of this Agreement, and the completion by RII Sub
and Parent of the Transaction, certified by the secretary of RII Sub and Parent,
dated as of the Closing Date.
10.8 DESIGNATION OF STOCK CONSIDERATION. There shall have been delivered
to Seller and the Owners a certified copy of the Certificates of Designations,
Rights and Preferences of the Parent Series H Preferred.
10.9 LEGAL OPINION. Seller shall receive an opinion from counsel to
Parent and RII Sub in the form attached hereto as EXHIBIT I.
10.10 THE PURCHASE PRICE. RII Sub and the Parent shall have paid to
Seller (or directly to the Owners with the consent of both RII Sub and Seller)
the full Purchase Price for the Seller Assets and executed and delivered all
documents related thereto.
10.11 ENVIRONMENTAL ESCROW AGREEMENTS. Seller and the Owners shall have
received from RII Sub the Seller Environmental Escrow Agreement in the form
attached hereto as EXHIBIT C and the Xxxxxxx Environmental Escrow Agreement in
the form attached hereto as EXHIBIT D.
10.12 APPROVAL OF COUNSEL TO SELLER AND THE OWNERS. All actions and
proceedings hereunder and all documents or other papers required to be delivered
by RII Sub and the Parent hereunder or in connection with the completion of the
Transaction, and all other related matters shall have been approved by Xxxxxx
Xxxxxxx Xxxxxxxxx & Xxxx, PLLC, counsel to Seller and the Owners as to their
form, which approval shall not be unreasonably withheld or delayed.
ARTICLE 11
ACTIONS TO BE TAKEN AT THE CLOSING
The following actions shall be taken at the Closing, each of which shall be
conditioned on completion of all the others and all of which shall be deemed to
have taken place simultaneously:
11.1 TRANSFER DOCUMENTS. Seller shall deliver duly executed transfer
documents and/or instruments of assignment.
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11.2 THE PURCHASE PRICE. RII Sub shall deliver to Seller:
(a) the Cash Consideration; and
(b) the Stock Consideration.
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11.3 SUBSCRIPTION AGREEMENT. Seller shall deliver to the Parent the
Subscription Agreement.
11.4 NON-COMPETITION AGREEMENTS. Seller and the Owners and Xxxxx Xxxxxxx
shall deliver to RII Sub and the Parent their duly executed Non-Competition
Agreement.
11.5 ENVIRONMENTAL ESCROW AGREEMENTS. Seller and the Owners shall
deliver to RII Sub and RII Sub shall deliver to Seller and the Owners the Seller
Environmental Escrow Agreement and the Xxxxxxx Environmental Escrow Agreement,
duly executed by the parties thereto.
11.6 GENERAL WARRANTY DEED. Seller shall deliver a general warranty deed
for the Owned Facilities in proper form for recording in the State of North
Carolina.
11.7 CONTRACT ASSUMPTIONS. Seller shall deliver the written consents to
the assumption by RII Sub of the Material Assumed Contracts.
11.8 CLOSING CERTIFICATE OF SELLER. Seller shall deliver to RII Sub a
closing certificate dated the Closing Date, in a form satisfactory to RII Sub.
Such certificate shall be signed on behalf of Seller by an executive officer of
Seller.
11.9 CLOSING CERTIFICATE OF THE OWNERS. The Owners shall deliver to RII
Sub a closing certificate dated the Closing Date, in a form satisfactory to RII
Sub.
11.10 CLOSING CERTIFICATE OF RII SUB. RII Sub shall deliver to Seller a
closing certificate dated the Closing Date, in a form satisfactory to Seller.
Said certificate shall be signed on behalf of RII Sub by an executive officer of
RII Sub.
11.11 CERTIFICATE REGARDING RESOLUTIONS OF SELLER. Seller shall deliver
to Recycling copies of resolutions certified as required by Section 9.16.
11.12 LEGAL OPINIONS. Counsel to the Parent and to Seller and the Owners
shall deliver their respective legal opinions as required by Sections 9.14 and
10.9.
11.13 REAL PROPERTY CLOSING. As part of the Closing it is acknowledged
that a settlement statement shall be separately prepared relating to the Owned
Facilities, which settlement statement shall be prepared by the attorney for
Seller at least one business day prior to the Closing. Normal closing
adjustments shall be charged to the parties as follows:
(a) ADJUSTMENTS CHARGED TO SELLER. Seller shall be charged with
the following expenses, which shall be reflected on the closing statement and
shall be withheld from the Cash Consideration and be disbursed to the Person to
which each such expense is payable:
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(1) Any amount necessary to satisfy and discharge of record any
lien or encumbrance that is not an Assumed Liability, including the cost of
recording or filing any necessary release or termination document;
(2) Any and all real property taxes due and payable, it being
agreed that all real property taxes and personal property taxes shall be
prorated as of the expiration of the day immediately preceding Closing;
(3) Any and all utility charges through the expiration of the
day immediately preceding Closing Date;
(4) The cost of the Survey;
(5) The cost of the title insurance policy for the Owned
Facilities; and
(6) Fees for documentary stamps due upon the recordation of the
deeds from Seller to RII Sub and the closing costs associated for the
Owned Facilities which shall be paid by the RII Sub and Seller in
accordance with local custom for commercial real estate transactions.
11.14 TITLES TO VEHICLES, MACHINERY AND EQUIPMENT. Seller shall deliver
to RII Sub duly executed titles to all vehicles, machinery and equipment
included in the Seller Assets free and clear of any Security Interests.
ARTICLE 12
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
12.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All of the
representations and warranties of the parties contained in this Agreement shall
survive the Closing and continue until Recycling's independent public
accountants shall have completed their first audit of the RII Sub subsequent to
the Closing, except as follows:
(a) the representations and warranties contained in Section 4.5,
which shall survive for a period of time which is equal to the statute of
limitations period applicable to the respective Tax liability being asserted;
and
(b) the representations and warranties with respect to on-site
liabilities contained in Section 4.25 and Sections 7.2 and 7.3, which shall
survive for a period of four years after the Closing Date.
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12.2 INDEMNITY AGREEMENTS OF SELLER AND THE OWNERS.
(a) Seller and the Owners, jointly and severally, shall indemnify,
defend, reimburse and hold harmless RII Sub and the Parent from and against any
and all claims, demands, penalties, fines, liabilities, obligations, losses,
settlements, damages, costs and expenses resulting from:
(1) any inaccuracy in, or breach of, any representation or
warranty or nonfulfillment of any covenant on the part of Seller or the
Owners contained in this Agreement;
(2) any misrepresentation in or omission from or nonfulfillment
of any covenant on the part of Seller or the Owners contained in any other
agreement, certificate or other instrument furnished or to be furnished to
RII Sub or the Parent by Seller or the Owners pursuant to this Agreement;
(3) all federal, state, county, local, foreign and other taxes,
including income taxes, excise taxes, sales taxes, use taxes, gross
receipts taxes, franchise taxes, employment and payroll related taxes,
property taxes and import duties, and any penalties or interest, whether or
not measured in whole or in part by net income required to be paid by
Seller or the Owners relating to the Business through the Closing Date
which are not paid by either Seller or the Owners and which RII Sub or the
Parent pays;
(4) any and all negligence claims arising out of occurrences and
events prior to the Closing Date except for environmental matters as
provided in Sections 7.2, 7.3 and 7.4;
(5) for Environmental Claims limited to the extent provided in
Sections 7.2, 7.3 and 7.4;
(6) the failure of Seller or the Owners to comply with the bulk
sales or bulk transfer law of the State of North Carolina;
(7) any liability of Seller not assumed by RII Sub;
(8) any infringement claim related to any patent, invention,
trade secret, trademark, service xxxx, trade name or copyright where the
infringement alleged is related to products designed prior to the Closing
Date unless subsequently modified by RII Sub in a manner which renders the
product to be infringing to the extent that RII Sub and Parent are not
otherwise entitled to indemnification from another party;
(9) any liabilities to employees of the Business terminated in
accordance herewith and any future related actions; and
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(10) reasonable fees and disbursements of counsel incident to any
of the foregoing.
(b) Notwithstanding the foregoing, Seller and the Owners shall not be
required to indemnify RII Sub and the Parent until the amount of indemnification
for any individual matter equals or exceeds $15,000 and the aggregate amount of
indemnification for all matters equals or exceeds $100,000, at which xxxx Xxxxxx
and the Owners shall indemnify and reimburse RII Sub and the Parent for all such
amounts incurred for each matter in excess of $15,000, up to an aggregate
liability for all such claims of $3,500,000; PROVIDED, HOWEVER, that the
foregoing limitations shall not apply to any Environmental Claims pursuant to
Sections 7.2, 7.3 and 7.4, any obligation of Seller and Seller Owners under
Section 14.19, the reassignment of any Seller Receivables as provided in Section
14.2, or the failure of Seller to comply with the bulk sales or bulk transfer
laws of the State of North Carolina.
12.3 INDEMNITY AGREEMENT OF RII SUB AND THE PARENT. RII Sub and the Parent
shall jointly and severally indemnify, defend, reimburse and hold harmless
Seller and the Owners from and against:
(a) any and all claims, demands, penalties, fines, liabilities,
obligations, losses, settlements, damages, costs and expenses pertaining to the
Seller Assets and Business which arise from any event occurring on or after the
Closing resulting from:
(1) any inaccuracy in, or breach of, any representation and
warranty or nonfulfillment of any covenant on the part of RII Sub or the
Parent contained in this Agreement;
(2) any misrepresentation in or omission from or nonfulfillment
of any covenant on the part of RII Sub or the Parent contained in any other
agreement, certificate or other instrument furnished or to be furnished to
Seller by RII Sub or the Parent pursuant to this Agreement;
(3) any liability of Seller arising out of the Assumed
Contracts, unless such liability is due to the actions of Seller, or other
action, events and occurrences prior to the Closing Date;
(4) for Environmental Claims limited to the extent provided in
Sections 7.2, 7.3 and 7.4;
(5) any liability for tort claims which are the result of
actions, events, occurrences or the operation of the business by RII Sub on
or after the Closing Date; and
(6) reasonable fees and disbursement of counsel incident to any
of the foregoing.
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(b) Notwithstanding the foregoing, RII Sub and Parent shall not be
required to indemnify Seller and the Owners until the amount of indemnification
for any individual matter equals or exceeds $15,000 and the aggregate amount of
indemnification for all matters equals or exceeds $100,000, at which time RII
Sub and Parent shall indemnify and reimburse Seller and the Owners for all such
amounts incurred for each matter in excess of $15,000, up to an aggregate
liability for all such claims of $3,500,000; PROVIDED, HOWEVER, that the
foregoing limitations shall not apply to any Environmental Claims pursuant to
Sections 7.4, 7.3 and 7.5, or to any claims for breach of the Assumed Contracts,
or to failure of RII Sub or Parent to deliver the consideration as required
under Section 11.2.
12.4 INDEMNIFICATION PROCEDURE FOR THIRD PARTY CLAIMS.
(a) NOTICE OF CLAIM AND DEFENSE.
(1) The party seeking indemnification under this Article 12
shall give the party from whom indemnification is sought prompt written
notice of the assertion of any third party claim of which said party has
knowledge which is covered by the indemnity agreements set forth in Section
12.2 or Section 12.3, and the party obligated to indemnify will undertake
the defense thereof by representatives chosen by the party seeking
indemnification but acceptable to the party obligated to indemnify.
(2) If the party obligated to indemnify, within a reasonable
period of time after notice of any such claim fails to defend, the party
seeking indemnification will have the right to undertake the defense,
compromise or settlement of such claim on behalf of and for the account and
risk of the party obligated to indemnify, subject to the right of the party
seeking indemnification to assume the defense of such claim at any time
prior to settlement, compromise or final determination thereof.
(3) If the claim for which indemnification is being sought is
the result of a breach of this Agreement by the party obligated to
indemnify, such party shall have a period of 45 days to cure such breach.
If the obligated party does not cure the breach within 45 days, the party
seeking indemnification may proceed with all remedies available under this
Agreement.
(b) PAYMENT OF SUMS DUE. After any final judgment or award shall
have been rendered by a court, arbitration board or administrative agency of
competent jurisdiction, or a settlement shall have been completed, or the
parties shall have arrived at a mutually binding agreement, with respect to each
separate third party claim indemnified by the party obligated to indemnify, the
party seeking indemnification shall forward to the party obligated to indemnify
notice of any sums due and owing (and the times when due) by the party seeking
indemnification with respect to such claim and the party obligated to indemnify
shall pay such sums to the party seeking indemnification in cash, within 30 days
after the date of such notice or, if any such sums are due after such 30 day
period, ten days prior to the date each such sums are due.
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12.5 LIMIT ON OBLIGATIONS. In no event shall either party have any
indemnification obligation under this Section 12 unless the party from whom
indemnification is sought receives a notice of a claim for indemnification
within the survival period described in Section 12.1.
12.6 GOOD FAITH EFFORTS TO SETTLE DISPUTES. Each of the parties agrees
that, prior to commencing any litigation against the other concerning any matter
with respect to which such party intends to claim a right of indemnification in
such proceeding, such parties shall meet in a timely manner and attempt in good
faith to negotiate a settlement of such dispute during which time such parties
shall disclose to the others all relevant information relating to such dispute.
12.7 FEES AND EXPENSES. Notwithstanding any other provision in this
Article 12, in the event of any dispute or controversy between any of the
parties to this Agreement, each party shall pay its own legal fees and
out-of-pocket costs incurred by such party in enforcing or defending its rights
hereunder.
12.8 LITIGATION SUPPORT. If, and for so long as, any party actively is
contesting or defending against any action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand in connection with (1) any
transaction contemplated hereunder, or (2) any fact, situation, circumstance,
status, condition, activity, practice, plan, occurrence, event, incident,
action, failure to act, or transaction on or prior to the Closing Date involving
the Business, the other party will cooperate with the contesting or defending
party and its counsel in the contest or defense, make available its personnel
and provide such testimony and access to its books and records as shall be
necessary in connection with the contest or defense, all at the sole cost and
expense of the contesting or defending party, unless the contesting or defending
party is entitled to indemnification therefor under this Article 12.8, exclusive
of per diem or hourly rates of any personnel of the other party.
ARTICLE 13
TERMINATION OF AGREEMENT
13.1 TERMINATION. This Agreement may be terminated prior to or on the
Closing Date as follows:
(a) At the election of RII Sub or the Parent at any time prior
to Closing if:
(1) if any one or more of the material conditions precedent
to the obligation of Recycling to close has not been fulfilled as of the
Closing Date, or if Seller or the Owners has breached any material
representation or warranty, or failed to perform any covenant or agreement
contained in this Agreement PROVIDED, HOWEVER, Seller and the Owners shall
have, at the election of Seller and the Owners, at least 15 days' notice to
cure any such breach and the Closing Date shall be extended by each day of
such cure period;
(2) within 15 days after the receipt of the Environmental
Studies as provided in as provided in Section 7.1;
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(3) RII Sub and Parent are unable to satisfy themselves
that any Adverse Item will not have a material adverse effect on the
operations of the Business; or
(4) Prior to the Closing, RII Sub and the Parent are unable
to complete due diligence in a manner satisfactory to a company obligated
to file reports under the 1934 Act or if they discover discrepancies in the
books and records of Seller or any other matters unacceptable to them, in
their sole discretion.
(b) At the election of Seller or the Owners at any time prior to
Closing if:
(1) any one or more of the material conditions precedent
to the obligation of Seller and the Owners to close has not been
fulfilled as of the Closing Date;
(2) Seller is unable to obtain any required consent to the
assignment of any of the Material Assumed Contracts and such failure would
constitute a breach of the Material Assumed Contract;
(3) RII Sub or the Parent has breached any material
representation or warranty, or failed to perform any covenant or agreement
contained in this Agreement; provided, however, RII Sub and the Parent
shall have at least 15 days' notice to cure any such breach, except that in
no event shall Closing Date be extended by virtue thereof; or
(c) At the election of any party to this Agreement, if any legal
proceeding is commenced or threatened by any governmental or regulatory body or
other Person directed against the completion of the Transaction and any of the
parties, as the case may be, reasonably and in good xxxxx xxxx it impractical or
inadvisable to proceed in view of such legal proceeding or threat thereof.
(d) At any time on or prior to the Closing Date, by mutual
written consent of the parties.
(e) At any time after January 1, 1998, unless extended pursuant
to Section 3.5, at the election of any party so long as such party is not in
default under the terms of this Agreement.
13.2 SURVIVAL. If this Agreement is terminated pursuant to Section 13.1,
this Agreement shall become void and of no further force and effect, except for
the provisions of Sections 8.7(b) and 14.3, and none of the parties hereto shall
have any liability in respect of such termination, except that any party shall
be liable to the extent that failure to satisfy the conditions contained herein
results from the intentional or willful violation of the representations,
warranties, covenants or agreement of such party under this Agreement.
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ARTICLE 14
CERTAIN ADDITIONAL AGREEMENTS
14.1 PUBLIC STATEMENTS; CONFIDENTIALITY OF INFORMATION. (a) No party
will make any public disclosure (including, without limitation, disclosure to
Seller's employees or customers) of this Agreement, the Acquisition, the
Purchase Price or the other terms and conditions of the Transaction without the
prior written consent of the other parties hereto, which consent shall not be
unreasonably withheld, provided that the foregoing shall not preclude any party
from making any disclosure which, in the opinion of its or his counsel, is
required to be made under applicable federal and state securities laws. In no
event shall any disclosure be made without giving the other party an opportunity
to comment on the proposed disclosure.
(b) Subject to the Parent's obligation as a public company to
issue appropriate public announcements of material events, and subject to this
Section 14.1 hereof, each party will maintain the confidentiality of all
non-public information obtained from any other party.
(c) Notwithstanding anything in this Agreement to the contrary,
the Environmental Studies described in this Agreement under Section 7.2 above,
shall remain confidential and Recycling shall not make any disclosures of these
studies or estimates to any Person (other than its legal counsel, independent
accountants and lenders) without the prior written approval of Seller.
14.2 REASSIGNMENT OF SELLER RECEIVABLES. For 180 days following the
Closing Date, RII Sub shall have the right to reassign to Seller any or all of
the Seller Receivables which have not been collected within 90 days of the
Closing, as provided in Section 4.13. Prior to the reassignment of any Seller
Receivable, RII Sub agrees to use commercially reasonable efforts to collect any
past due amount, but shall not be required to engage a collection agency or
commence arbitration or litigation to collect. Within 15 days after any
reassignment of any Seller Receivables, to the extent not paid, Seller and/or
the Owners shall reimburse RII Sub dollar-for-dollar for the Seller Receivables
so reassigned with such payment being made in immediately available funds.
14.3 EXPENSES. Each party shall pay its own costs and expenses,
including the fees and disbursements of its respective counsel, in connection
with the negotiation, preparation and execution of this Agreement and completion
of the Transaction whether or not the Transaction is completed.
14.4 WAIVERS AND CONSENTS. All waivers and consents given hereunder
shall be in writing. No waiver by any party hereto of any breach or anticipated
breach of any provision hereof by any other party shall be deemed a waiver of
any other contemporaneous, preceding or succeeding breach or anticipated breach,
whether or not similar, on the part of the same or any other party.
14.5 NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed to have been given only if and when: (1) personally
delivered; or (2) three business days after mailing, postage prepaid, by
certified mail; or (3) when delivered (and receipted for) by an
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overnight delivery service; or (4) when delivered by facsimile transmission for
which automatic confirmation has been received, addressed in each case as
follows:
IF TO RII SUB OR THE PARENT:
Xxxxxx X. Xxxxx, Chairman and CEO
Recycling Industries, Inc.
Recycling Industries of Greensboro, Inc.
000 Xxxxxxxxx Xxxxx Xxxxx, Xxxxx 000
Xxxxxxxxx, Xxxxxxxx 00000
telephone: (000) 000-0000
facsimile: (000) 000-0000
WITH A COPY TO:
Xxxx X. Xxxxxxxxxx, Esq.
Xxxx X. Xxxxxxx, Esq.
Friedlob Xxxxxxxxx Xxxxxx Xxxxxxx & Xxxxxxxxxxx, LLC
0000 Xxxxxxx Xxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxx 00000
telephone: (000) 000-0000
facsimile: (000) 000-0000
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IF TO SELLER OR THE OWNERS:
Xxxx X. Xxxxx
000 Xxxxx Xxxx
Xxxxx 0
Xxxxxxxxxx, Xxxxx Xxxxxxxx 00000
telephone: (000) 000-0000
facsimile: (000) 000-0000
Xxxxx Xxxxxxx
0000 Xxxx Xxxxxxxx Xxxxxx
Xxxxxxxxxxxx, Xxxxx Xxxxxxxx 00000
telephone: (000) 000-0000
facsimile: (000) 000-0000
WITH A COPY TO:
Xxxxxxx X. Xxxxx XX
Womble, Carlyle, Xxxxxxxxx & Xxxx
000 Xxxx Xxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxx-Xxxxx, Xxxxx Xxxxxxxx 00000
telephone: (000) 000-0000
facsimile: (000) 000-0000
Any party may change its address by giving notice to every other party.
14.6 FURTHER ASSURANCES. From and after the date of this Agreement, each
of the parties hereto will cooperate with each other and will use its or his
best efforts to obtain all necessary waivers and consents from third parties.
Seller and the Owners, at any time and from time to time on and after the
Closing, upon request by RII Sub or the Parent and without further
consideration, shall take or cause to be taken such actions and execute,
acknowledge and deliver, or cause to be executed, acknowledged and delivered,
such transfers, conveyances and assurances as may be reasonably requested by RII
Sub or the Parent for the better conveying, transferring, assigning, delivering,
assuring and confirming the Seller Assets to RII Sub.
14.7 RETENTION OF/ACCESS TO BUSINESS RECORDS. For at least three years
following the Closing Date, RII Sub shall retain all business records related to
the Seller Assets or the Business. Following such three-year retention period,
and until six years following the Closing Date, records shall be destroyed in
accordance with the policies mutually agreed upon by Seller or the Owners and
RII Sub. Following such six-year period, such records shall be destroyed in
accordance with the policies of RII Sub. During the six year period following
the Closing Date, upon reasonable request by Seller or the Owners from time to
time, and without further consideration, RII Sub shall provide Seller or the
Owners access to or copies of said business records which have not been
previously destroyed.
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14.8 AUDIT BY RII SUB AND PARENT. For a period of five years after the
Closing, Seller and the Owners shall give Parent and RII Sub's independent
certified public accountants full access to the financial books and records and
shall fully cooperate with such accountants in conducting and completing any
audits necessary to enable the Parent to meet the disclosure and financial
reporting requirements of the 1934 Act and the rules and regulations promulgated
thereunder.
14.9 ENTIRE AGREEMENT. This Agreement, including all Schedules and
Exhibits hereto, and the other Closing Documents constitute the entire agreement
of the parties with respect to the subject matter hereof and may not be
modified, amended or terminated except by a written instrument specifically
referring to this Agreement signed by each of the parties hereto or as otherwise
provided in this Agreement.
14.10 CONSTRUCTION. In the event of an ambiguity or a question of intent
or interpretation arises, this Agreement shall be construed as if drafted
jointly by the parties and no presumption or burden of proof shall arise
favoring or disfavoring any party by virtue of the authorship of any of the
provisions of this Agreement. Any reference to any federal, state, local or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" means including without limitation. The parties intend that
each representation, warranty and covenant contained herein shall have
independent significance. If any party has breached any representation,
warranty or covenant contained herein in any respect, the fact that there exists
another representation, warranty or covenant relating to the same subject
matter, regardless of the relative levels of specificity, which the party has
not breached shall not detract from or mitigate the fact that the party is in
breach of the first representation, warranty or covenant.
14.11 RIGHTS OF THIRD PARTIES. All conditions of the obligations of the
parties hereto, and all undertakings herein, except as otherwise provided by a
written consent, are solely and exclusively for the benefit of the parties
hereto and their successors and assigns, and no other Person or entity shall
have standing to require satisfaction of such conditions or to enforce such
undertakings in accordance with their terms or be entitled to assume that any
party hereto will refuse to complete the Transaction contemplated hereby in the
absence of strict compliance with any or all thereof, and no other Person or
entity shall, under any circumstances, be deemed a beneficiary of such
conditions or undertakings, any or all of which may be freely waived in whole or
in part, by mutual consent of the parties hereto at any time, if in their sole
discretion they deem it desirable to do so.
14.12 HEADINGS. The Table of Contents and Article and Section headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement.
14.13 GOVERNING LAW. The interpretation and construction of this
Agreement, and all matters relating hereto, shall be governed by the internal
laws of the State of North Carolina, without regard to principles of conflicts
or choice of law.
14.14 SUBMISSION TO JURISDICTION; WAIVERS. The parties each hereby
irrevocably and unconditionally: (1) agree that any action or proceeding related
to this Agreement shall be brought
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in, and hereby submits itself and its property to the jurisdiction of, the
courts of the State of North Carolina located in Winston-Salem, North Carolina,
the courts of the United States of America for the District of North Carolina,
and the appellate courts from any thereof; (2) consent to the venue of any such
action or proceeding in any of said courts and waives any objection that it may
have, now or hereafter, that such action or proceeding was brought in an
inconvenient court and agrees not to plead or claim the same; and (3) agree that
service of process in any such action or proceeding may be effected by mailing a
copy thereof by registered or certified mail (or any substantially similar form
of mail), postage prepaid, to the party against whom the action or proceeding is
brought at its address set forth in Section 14.5.
14.15 PARTIES IN INTEREST. This Agreement may not be transferred,
assigned, pledged or hypothecated by any party hereto, other than by operation
of law, by assignment to the Lender, or with the consent of the other parties.
This Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors and permitted assigns.
14.16 COUNTERPARTS AND FACSIMILE SIGNATURES. This Agreement may be
executed in two or more counterparts, all of which taken together shall
constitute one instrument. Execution and delivery of this Agreement by exchange
of facsimile copies bearing the facsimile signature of a Party shall constitute
a valid and binding execution and delivery of this Agreement by such Party.
Such facsimile copies shall constitute enforceable original documents.
14.17 SEVERABILITY. In case any provision in this Agreement shall be held
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions hereof will not in any way be affected or impaired
thereby.
14.18 CORPORATE OR PARTNERSHIP AUTHORITY. The undersigned have executed
this Agreement with all requisite corporate or partnership authority, as
applicable.
14.19 ADOPTION OF SELLER'S 401(k) PLAN. RII Sub agrees to adopt and
continue to maintain Seller's 401(k) Plan until the earlier of (i) the adoption
of a new plan by RII Sub or Parent, or (ii) December 31, 1998. Seller and
Seller Owners agree to indemnify Parent and RII Sub for any costs, taxes,
liabilities or penalties Parent and RII Sub incur as a result of RII Sub
adopting Seller's 401(k) retirement plan, to the extent that such costs, taxes,
liabilities or penalties are attributable to the operation or documentation of
Seller's 401(k) retirement plan prior to the Closing Date. Seller or the Seller
Owners will reimburse RII Sub for the amount of any "top-heavy minimum
contribution" RII Sub may be required to make to Seller's 401(k) retirement plan
for the 1997 plan year, including any resulting penalties.
[THE BALANCE OF THIS PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have caused their names to be
hereunto subscribed, all as of the day and year first above written.
"RII SUB"
RECYCLING INDUSTRIES OF GREENSBORO, INC.
Dated December 4, 1997 BY: /S/ XXXXXX X. XXXXX
-----------------------------------------
Xxxxxx X. Xxxxx, Chairman and
Chief Executive Officer
"PARENT"
RECYCLING INDUSTRIES, INC.
Dated December 4, 1997 BY: /S/ XXXXXX X. XXXXX
-----------------------------------------
Xxxxxx X. Xxxxx, Chairman and Chief
Executive Officer
"SELLER"
UNITED METAL RECYCLERS, A GENERAL PARTNERSHIP
By its duly authorized partner
Xxxxxxx Companies, Inc.
Dated December 4, 1997 BY: /S/ XXXXX XXXXXXX
-----------------------------------------
Xxxxx Xxxxxxx, Its Duly Authorized
Representative
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"LBI"
XXXXX BROTHERS, INC.
Dated December 4, 1997 By: /S/ XXXXXXX X. XXXXX
-----------------------------------------
Xxxxxxx X. Xxxxx, Its Duly Authorized
Representative
Dated December 4, 1997 BY: /S/ XXXX X. XXXXX
------------------------------------------
Xxxx X. Xxxxx, Its Duly Authorized
Representative
"BCI"
XXXXXXX COMPANIES, INC.
Dated December 4, 1997 BY: /S/ XXXXX XXXXXXX
-----------------------------------------
Xxxxx Xxxxxxx, Its Duly Authorized
Representative
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LIST OF EXHIBITS
Exhibit A Certificate of Designations, Rights and
Preferences of the Series "H" 6%
Redeemable Convertible Preferred Stock
of Recycling Industries, Inc.
Exhibit B Form of Subscription Agreement
Exhibit C Seller Environmental Escrow Agreement
Exhibit X Xxxxxxx Environmental Escrow Agreement
Exhibit E Subscription Agreement for the Stock
Consideration
Exhibit F Form of Non-Competition Agreement
Exhibit G Form of Legal Opinion from Counsel for
Seller and the Owners
Exhibit H Form of Employment Agreement
Exhibit I Form of Legal Opinion from Counsel for
RII Sub and Parent
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LIST OF SCHEDULES
Schedule 1.8 Retained Receivables
Schedule 1.16 Xxxxxxx Note
Schedule 1.26 Material Assumed Contracts
Schedule 2.1(a) Owned Facilities - Legal Description
Schedule 2.1(e) Equipment
Schedule 2.1(f) Intellectual Property
Schedule 2.1(k) Computer Software
Schedule 2.2 Excluded Assets
Schedule 3.4 Allocation of Purchase Price
Schedule 4.1(b) Jurisdictions of Seller
Schedule 4.5(c) Tax Matters
Schedule 4.6 Legal Compliance
Schedule 4.7 Permits
Schedule 4.8 Litigation
Schedule 4.9(a) Contracts and Other Agreements
Schedule 4.16 Suppliers and Customers
Schedule 4.17 Employee Benefit Plans
Schedule 4.20 Insurance Policies
Schedule 4.22 Certain Relationships
Schedule 4.24 Employee Information
Schedule 4.25 Environmental Matters
Schedule 7.1 Environmental Studies
Schedule 8.1 Title Commitment
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