UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): August 16, 2019
INDUSTRIAL SERVICES OF AMERICA, INC.
(Exact name of registrant as specified in its Charter)
Florida |
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0-20979 |
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59-0712746 |
(State or other jurisdiction |
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(Commission |
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(IRS Employer |
of incorporation) |
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File Number) |
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Identification No.) |
7100 Grade Lane, Louisville, Kentucky |
40213 |
(Address of principal executive offices) |
(Zip Code) |
Company’s telephone number, including area code: (502) 366-3452
Not applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8–K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☑ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
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Trading Symbol |
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Name of each exchange on which registered |
Common, $0.0033 par value |
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IDSA |
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The Nasdaq Stock Market
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Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 1.01 Entry into a Material Definitive Agreement.
On August 16, 2019, Industrial Services of America, Inc. (the “Company”) and its subsidiaries (collectively, “Sellers”) entered into that certain Asset Purchase Agreement (the “Purchase Agreement”) with River Metals Recycling LLC (“Buyer”) and The David J. Joseph Company (“Parent”). Pursuant to the Purchase Agreement, Buyer would acquire substantially all of the assets of the Sellers (the “Assets”) on the satisfaction or waiver of the closing conditions set forth in the Purchase Agreement, which include approval by the Company’s shareholders of the transactions contemplated by the Purchase Agreement. The Company expects to call and hold a shareholders’ meeting seeking to obtain this approval and separate approval of a plan of dissolution, which is described below. The closing conditions also include the issuance by the Kentucky Energy and Environmental Cabinet (the “Cabinet”) of a Kentucky Pollutant Discharge Elimination System permit and storm water compliance agreed order (collectively, the “Permit and Order”) on terms not materially different from those currently being discussed with the Cabinet in connection with the Company’s efforts to ensure future compliance with the stormwater permit at one of its facilities.
The Company’s Board of Directors (the “Board”), by unanimous vote, approved the Purchase Agreement, the sale of the Assets and the other transactions contemplated by the Purchase Agreement.
Pursuant to the Purchase Agreement, the Assets would be sold to the Buyer for a purchase price of $23,300,000, less certain payoff amounts relating to taxes, encumbrances, and assumed capital leases, subject to an adjustment up or down based on the net working capital estimated at closing and finally determined following closing. The amount of $600,000 of the purchase price would be held in escrow to satisfy the potential net working capital purchase price adjustment, and the amount of $100,000 of the purchase price would be held in escrow to satisfy any liabilities of the Sellers relating to the Chemetco Superfund site in Hartford, Illinois. The Purchase Agreement contains negotiated representations, covenants and indemnification provisions by the parties, which are believed to be customary for transactions of this type and size. The indemnification obligations of the Sellers are subject to a specified deductible and indemnity cap. The deductible and cap on indemnification do not apply to damages relating to taxes, environmental matters, breaches of fundamental representations, breaches of covenants, and certain other matters (all of which are subject to an overall cap equal to the purchase price). The representations in the Purchase Agreement generally survive for one year after closing, with longer survival periods for the fundamental representations and representations regarding taxes and environmental matters.
Representations in the Purchase Agreement were made to allocate contractual risk between the parties as of the specified dates noted in the agreement, and are qualified by certain disclosures between the parties and a contractual standard of materiality different from those generally applicable to shareholders, among other limitations. The Company’s shareholders are not third-party beneficiaries under the Purchase Agreement and should not rely on the representations and covenants or any descriptions thereof as characterizations of the actual state of facts or condition of the Sellers or Buyer.
The Purchase Agreement contains specified termination rights for the parties. Prior to closing, the parties can mutually agree to terminate the Purchase Agreement, and either party has the right to terminate the Purchase Agreement if the other party fails to cure a material breach, or if the transaction does not close within 150 days, which period may be extended by an additional 30 days if all conditions other than those relating to the Permit and Order have been satisfied. The Board also has the right to terminate the Purchase Agreement (and cancel the shareholder meeting or withdraw its recommendation that shareholders vote to approve the Purchase Agreement) if it determines that failure to do so would reasonably be expected to be inconsistent with its fiduciary duties. Termination costs of up to $300,000 would be payable by Sellers in connection with such termination as reimbursement of Buyer’s transaction-related expenses, and a termination fee of $850,000 (with all previously paid termination costs credited against such amount) would be payable by the Sellers in connection with such termination if the Sellers also reach an agreement within 180 days following such termination to sell a controlling interest in the Company or all or substantially all of the Assets to a third party.
The foregoing descriptions of the Purchase Agreement do not purport to be complete and are qualified in their entirety by reference to the full text of the Purchase Agreement, which has been filed with this Current Report on Form 8-K as Exhibit 2.1.
Item 8.01 OTHER EVENTS.
On August 16, 2019, the Company’s board of directors approved the dissolution and liquidation of the Company pursuant to a Plan of Dissolution (the “Plan of Dissolution”), subject to shareholder approval. The Company intends to call a meeting of the shareholders to seek approval of the Plan of Dissolution and will file proxy materials with the Securities and Exchange Commission as soon as practicable. The Plan of Dissolution provides for dissolution and liquidation of the Company only upon consummation of the transactions contemplated by the Purchase Agreement.
On August 19, 2019, the Company issued a press release announcing the above transactions, a copy of which is furnished as Exhibit 99.1 to this Current Report on Form 8-K.
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS.
(d) Exhibits
Important Information for Shareholders
Communications in this Current Report on Form 8-K do not constitute a solicitation of any vote or approval. In connection with the sale of the Assets and the Plan of Dissolution, the Company will be filing documents with the SEC, including a proxy statement. Before making any voting decision, Company shareholders are urged to read carefully the proxy statement and any other relevant documents filed by the Company with the SEC when they become available because they will contain important information about the sale of the Assets and the Plan of Dissolution. You may obtain copies of all documents we file with the SEC, free of charge, at the SEC’s website (www.sec.gov), on the Company’s website (http://www.isa-inc.com/) under “Investors”, or by sending a written request to the Company at Industrial Services of America, Inc., 7100 Grade Lane, Louisville, Kentucky 40213, Attn: Todd Phillips.
The Company and its directors and executive officers and certain other members of management and employees may be deemed to be participants in the solicitation of proxies in respect of the sale of the Assets and the Plan of Dissolution. You can find information about the Company’s directors and executive officers in the Company’s annual report on Form 10-K, as amended, for the year ended December 31, 2018. Other information regarding the participants in the proxy solicitation and a description of their direct and indirect interests, by security holdings or otherwise, will be contained in the proxy statement and other relevant materials to be filed with the SEC when they become available. You can obtain free copies of these documents from the Company using the contact information above .
Cautionary Note Regarding Forward-Looking Statements
The statements in this Current Report on Form 8-K that are not historical, including without limitation statements regarding the Company’s beliefs, expectations, prospects, strategic plans and statements regarding the sale of the Assets or other future transactions, constitute “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical fact should be considered “forward-looking statements” for these purposes. In some cases, forward-looking statements can be identified by the use of such terminology as “may,” “will,” “expects,” “plans,” “anticipates,” “intends,” “believes,” “estimates,” “potential,” or “continues,” or the negative thereof or other similar words. Although we believe that the expectations reflected in our forward-looking statements are reasonable, we can give no assurance that such expectations or any of our forward-looking statements will prove to be correct. Examples of forward-looking statements include, but are not limited to, those regarding the transactions contemplated by the Purchase Agreement and the Plan of Dissolution. Forward-looking statements are subject to inherent risks and uncertainties, and actual results and developments may be materially different from those expressed or implied by the forward-looking statements. Important factors that could cause actual results to differ from those expressed or implied by the forward-looking statements include the possibility that the transactions contemplated by the Asset Purchase Agreement will not close, including without limitation as a result of the failure to satisfy the closing conditions, including failure of the Company to obtain the required shareholder approval; that disruption from the pending sale and dissolution may make it more difficult to maintain business and operational relationships for the Company; that the Company may not obtain shareholder approval of the transactions and the Plan of Dissolution; that the costs and reserves associated with the transactions and the Plan of Dissolution may be higher than anticipated; that the length of time associated with the consummation of the transactions and the Plan of Dissolution may be longer than anticipated for various reasons; and that the other anticipated benefits from the sale of the Assets and the Plan of Dissolution will not be realized.
Further information on risks we face is contained in our filings with the SEC, including our Form 10-K, as amended, for the fiscal year ended December 31, 2018, and will be contained in our SEC filings in connection with the sale of the Assets and the Plan of Dissolution. Any forward-looking statement made by us herein speaks only as of the date on which it is made. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. Because of these risks, uncertainties and assumptions, you should not place undue reliance on these forward-looking statements. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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INDUSTRIAL SERVICES OF AMERICA, INC. |
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Date: |
August 19, 2019
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By: |
/s/ Todd L. Phillips |
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Todd L. Phillips |
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President, Chief Executive Officer and Chief Financial Officer
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INDEX TO EXHIBITS
Exhibit No. |
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Description |
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2.1 | * | Asset Purchase Agreement dated as of August 16, 2019, by and among River Metals Recycling LLC, The David J. Joseph Company, Industrial Services of America, Inc., ISA Indiana, Inc., ISA Logistics LLC, ISA Real Estate, LLC, ISA Indiana Real Estate LLC, 7021 Grade Lane LLC, 7124 Grade Lane LLC, and 7200 Grade Lane LLC. |
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99.1 |
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Press Release, dated as of August 19, 2019, issued by Industrial Services of America, Inc. |
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* | Schedules omitted pursuant to Item 601(a)(5) of Regulation S-K. A copy of any omitted schedule will be furnished as a supplement to the SEC upon request. |
EXHIBIT 2.1
ASSET PURCHASE AGREEMENT
by and among
RIVER METALS RECYCLING LLC,
THE DAVID J. JOSEPH COMPANY,
INDUSTRIAL SERVICES OF AMERICA, INC.,
ISA INDIANA, INC.,
ISA LOGISTICS LLC,
ISA REAL ESTATE, LLC,
ISA INDIANA REAL ESTATE LLC,
7021 GRADE LANE LLC,
7124 GRADE LANE LLC,
AND
7200 GRADE LANE LLC
Dated as of August 16, 2019
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (this “Agreement”) is made and entered into effective as of August 16, 2019 (the “Effective Date”), by and among RIVER METALS RECYCLING LLC, a Kentucky limited liability company (“Buyer”), INDUSTRIAL SERVICES OF AMERICA, INC., a Florida corporation (“ISA”), ISA INDIANA, INC., an Indiana corporation (“ISA Indiana”), ISA LOGISTICS LLC, a Kentucky limited liability company (“ISA Logistics”), ISA REAL ESTATE, LLC, a Kentucky limited liability company (“ISA Real Estate”), ISA INDIANA REAL ESTATE LLC, a Kentucky limited liability company (“ISA Indiana RE”), 7021 GRADE LANE LLC, a Kentucky limited liability company (“7021 Grade Lane LLC”), 7124 GRADE LANE LLC, a Kentucky limited liability company (“7124 Grade Lane LLC”), and 7200 GRADE LANE LLC, a Kentucky limited liability company (“7200 Grade Lane LLC” and, together with ISA, ISA Indiana, ISA Logistics, ISA Real Estate, ISA Indiana RE, 7021 Grade Lane LLC, and 7124 Grade Lane LLC, collectively, “Sellers”), and, for the limited purposes set forth in Article X, THE DAVID J. JOSEPH COMPANY, a Delaware corporation (“Parent”).
WITNESSETH:
WHEREAS, Sellers desire to sell substantially all of the assets of the Business (as hereinafter defined) to Buyer, and Buyer desires to purchase such assets from Sellers, on the terms and subject to the conditions set forth in this Agreement.
NOW, THEREFORE, for and in consideration of the foregoing premises, and the agreements, covenants, representations and warranties hereinafter set forth, and other good and valuable consideration, the receipt and adequacy of which are forever acknowledged and accepted, the Parties (as defined below), intending to be legally bound, hereby agree as follows:
“ACA” shall mean the Patient Protection and Affordable Care Act of 2010 and the Health Care and Reconciliation Act of 2010.
“Accounting Arbitrator” shall have the meaning set forth in Section 2.06(f).
“Accounts Payable” shall mean all accounts payable of Sellers of whatever kind or nature, but only to the extent incurred in the Ordinary Course of Business.
“Accounts Receivable” shall mean all accounts and notes receivable of Sellers, except the Excluded AR, of whatever kind or nature, including all current or deferred rights to payment for finished goods produced or sold, projects completed or commenced or services rendered, the full benefit of all security for such accounts, and all claims, remedies and other rights related thereto.
“Adjustment Period” shall have the meaning set forth in Section 2.06(c).
“Affiliate” shall mean, with respect to any Person, any other Person that, directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, such Person, and for such purposes, the term “control” (including the terms “controlled by” and “under common control with”) shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through ownership of voting Equity, by contract or otherwise; provided that direct or indirect ownership of Equity of a Person carrying more than 50% of the voting rights shall be considered control of that Person, notwithstanding that control in fact may be exercised by another Person or group of Persons.
“Agreement” shall have the meaning set forth in the Preamble.
“AR Insurance” shall mean ISA’s EH Corporate Advantage II Credit Risk Insurance Policy maintained with Euler Hermes North America.
“Assets” shall mean all of Sellers’ assets used in, or necessary to, the operation of the Business, including those set forth in Section 2.01, but excluding the Excluded Assets.
“Assumed Accruals” shall mean only those accrual accounts of Sellers described on Schedule 2.03(c).
“Assumed Contracts” shall have the meaning set forth in Section 2.01(g).
“Assumed Crane” means the rebuilt Sennebogen 825 material handling crane acquired from Brandeis Machinery and being assumed by Buyer.
“Assumed Liabilities” shall have the meaning set forth in Section 2.03.
“Assumption Agreement” shall have the meaning set forth in Section 2.03.
“Balance Sheet” shall mean the balance sheet of ISA dated as of June 30, 2019.
“Bankruptcy” shall mean (a) the entry of a decree or order for relief against a Person by a court of competent jurisdiction in any involuntary case brought against such Person under any bankruptcy, insolvency or other similar law (collectively, “Debtor-Relief Laws”) generally affecting the rights of creditors and relief of debtors now or hereafter in effect, (b) the appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator or other similar agent under applicable Debtor-Relief Laws for such Person or for any substantial part of its assets or property, (c) the ordering of the winding up or liquidation of such Person’s affairs, (d) the filing of a petition in any such involuntary bankruptcy case, which petition remains undismissed for a period of 180 days or which is not dismissed or suspended pursuant to Section 303 of the Federal Bankruptcy Code (or any corresponding provision of any future United States bankruptcy laws), (e) the commencement by such Person of a voluntary case under any applicable Debtor-Relief Laws now or hereafter in effect, (f) the consent by such Person to the entry of an order for relief in an involuntary case under any such Debtor-Relief Laws or to the appointment of or the taking of possession by a receiver, liquidator, assignee, trustee, custodian, sequestrator or other similar agent under any applicable Debtor-Relief Laws for such Person or for any substantial part of its assets or property, or (g) the making by such Person of any general assignment for the benefit of its creditors.
“Basket Amount” shall mean $120,000.
“Bill of Sale” shall mean a bill of sale from Sellers to Buyer in form and substance reasonably acceptable to Buyer and ISA evidencing the sale, assignment, conveyance, transfer and delivery, free and clear of all Encumbrances, other than Permitted Encumbrances, by Sellers of the Assets to Buyer.
“BMP Plan” shall have the meaning set forth in Section 5.10.
“Board Termination” shall have the meaning set forth in Section 5.05(b).
“Board Termination Costs” shall have the meaning set forth in Section 8.05(c).
“Board Termination Fee” shall have the meaning set forth in Section 8.05(c).
“Business” shall mean the purchase, processing (via sorting, cutting, baling, and shredding operations) and marketing of ferrous and non-ferrous metals and other recyclable commodities and the purchase of used autos in order to sell used auto parts, as such business has been operated or conducted by Sellers as of and prior to the Effective Date.
“Business Day” shall mean any day on which the banks located in Louisville, Kentucky, are open for and conduct business, excluding any Saturday, Sunday or public holiday observed in Louisville, Kentucky.
“Buyer” shall have the meaning set forth in the Preamble.
“Buyer Indemnified Persons” shall have the meaning set forth in Section 9.02.
“Buyer’s Obligations” shall have the meaning set forth in Section 10.01.
“Cabinet” shall have the meaning set forth in Section 5.10.
“Cap” shall mean $3,600,000.
“Capital Lease Deduct” shall have the meaning set forth in Section 5.09(d).
“Cash” shall mean cash (including cash in Sellers’ ATMs as of Closing, but expressly excluding any cash loaded into such machines after Closing, whether by or on behalf of Buyer or otherwise), cash equivalents (including U.S. Treasury securities and money-market accounts) and all stocks, mutual funds and Equity interests (excluding any Equity issued by Sellers), regardless of whether they are publicly traded.
“CERCLA” shall mean the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. § 9601, et seq.
“Chemetco Escrow Agreement” shall mean the Escrow Agreement to be entered into at the Closing by ISA and the Escrow Agent, in form and substance reasonably satisfactory to such Persons and Buyer.
“Chemetco Escrow Amount” shall mean $100,000, which shall be available (subject in all cases to the terms and conditions of the Chemetco Escrow Agreement) to satisfy ISA’s ongoing obligations with respect to any Environmental Claims arising out of the Chemetco Superfund Site, but shall not be used to satisfy any indemnity obligations owed by Sellers.
“Chemetco Superfund Site” shall mean the Chemetco Superfund site in Hartford, Illinois.
“Claims” shall mean any and all claims, demands, Proceedings, Orders, obligations, rights of indemnification, contribution or subrogation (including those arising out of or in any way related to any Organizational Documents, Contracts or agreements) and liabilities whatsoever, whether known or unknown, suspected or unsuspected, foreseeable or unforeseeable, contingent or fixed, liquidated or unliquidated, insured or uninsured.
“Closing” shall have the meaning set forth in Section 8.01(a).
“Closing Agent” shall refer collectively to one or more title companies or other agents to be appointed by Buyer no later than 5 Business Days before Closing.
“Closing Date” shall mean the date on or as of which the Closing occurs.
“Closing Date Deadline” shall mean 150 days following the Effective Date, unless extended pursuant to Section 8.05(a)(iii).
“Closing Date Statement” shall have the meaning set forth in Section 2.06(b).
“Closing Statement” shall mean the statement of receipts and disbursements of funds made pursuant to or in accordance with this Agreement on the Closing Date, in form and substance satisfactory to the Parties.
“COBRA” shall mean health‑care continuation coverage required to be provided under the Consolidated Omnibus Budget Reconciliation Act of 1985 and the regulations promulgated thereunder (Section 4980B of the Code and Sections 601 through 608 of ERISA).
“Code” shall mean the Internal Revenue Code of 1986 and the Treasury Regulations promulgated thereunder, as amended.
“Computer Software” shall mean, collectively, (a) all computer software programs (including the underlying source code, if available) and all files, data, materials, manuals and other items and documentation related thereto or associated therewith (including any CAD systems, drafting, detailing or engineering software) that are owned by or licensed to any Seller or otherwise used in the Business, and (b) any hardware or equipment specifically related to or necessary to use the Computer Software.
“Confidentiality Agreement” shall refer to that certain Confidentiality Agreement entered into by Buyer, The David J. Joseph Company and ISA dated May 7, 2019.
“Contracts” shall mean all commitments, promises, contracts, leases, mortgages, licenses, agreements, bonds, indentures, purchase orders and understandings, written or oral, by which any Seller or any of the Assets, Equity or Business are bound or encumbered or relating to the Equity of any Seller, the Assets or the Business and to which any Seller is a party.
“Copyright” shall mean the rights granted under the laws of the United States or other nations to authors of original works of authorship, including literary, dramatic, musical, artistic, and certain other intellectual works of authorship, to the exclusive right of enjoyment or possession of such works, including all moral rights and all rights of publicity therein, whether or not such works are registered under national copyright laws, and all applications to register or renew the same.
“Crane Removal” shall have the meaning set forth in Section 5.10(b).
“Damages” shall have the meaning set forth in Section 9.02.
“Deeds” shall mean one or more general warranty deeds conveying to Buyer good, clear and marketable title to the Owned Real Property, free and clear of all Encumbrances, other than Permitted Encumbrances, containing covenants of title stating that the grantor thereof is seized of the Real Property in fee simple, that the grantor thereof has bargained, sold and conveyed unto Buyer and its successors and assigns title to the Owned Real Property in fee simple, and that the grantor thereof will warrant and defend title against the claims of all Persons, in form and substance reasonably satisfactory to Buyer and Sellers and in recordable form.
“Direct Claim” shall have the meaning set forth in Section 9.07.
“Disputed Adjustment Item” shall have the meaning set forth in Section 2.06(e).
“Domain Name” shall mean a series or string of alphanumeric characters arranged in a TCP/IP (transmission control protocol/internet protocol) format that identifies an addressable connection on the internet or other computer network.
“Due Diligence Investigation” shall have the meaning set forth in Section 5.04(a).
“Effective Date” shall have the meaning set forth in the Preamble.
“Employee Benefit Plans” shall mean all employee benefit plans covering employees or former employees of any Seller that are maintained or contributed to by any Seller or any ERISA Affiliate, including all plans described in Section 3(3) of ERISA, and any other deferred compensation, stock, employee or retiree pension benefit, welfare benefit or other similar fringe or employee benefit plan, program, policy, contract or arrangement, written or oral, qualified or nonqualified, funded or unfunded, foreign or domestic, covering employees or former employees of any Seller and maintained or contributed to by any Seller or any ERISA Affiliate.
“Encumbrances” shall mean any Liabilities, levies, claims, charges, assessments, mortgages, security interests, liens, pledges, conditional sales agreements, title retention contracts, building use restrictions and other restrictions, title exceptions, variances, limitations, reverter rights, judgments, options to purchase or lease, options to repurchase, severed mineral, oil and gas rights, riparian rights, rights-of-way, declarations, leases (written or oral), subleases (written or oral), rights of use or occupancy, rights of first refusal or offer, rights of setoff, rights of recompense and other similar rights, easements, licenses, covenants, other encumbrances and title defects of any nature whatsoever, and agreements or commitments to, or that do or may, create or suffer any of the foregoing.
“Entity” shall mean any general partnership (including limited liability partnership), limited partnership, limited liability company, corporation, joint venture, trust, business trust, cooperative, association or other business organization, whether domestic or foreign.
“Environmental Claim” shall mean any claim, Proceeding, Order or written notice received by any Seller in relation to the Assets or the Business from a Person alleging liability (including liability for investigatory costs, cleanup costs, Governmental Authority response costs, costs incurred pursuant to an Order, natural resource damages, property damages, personal injuries, or penalties) arising out of, based on or resulting from (a) the Release of, or exposure of any Person to, any Hazardous Material at, on or about the Real Property; (b) the Release at any other location of any Hazardous Material generated by any Seller or of which any Seller had arranged for disposal at such other location; (c) facts or circumstances forming the basis of any actual or alleged violation of any Environmental Laws by any Seller, including actual or alleged violations regarding the Chemetco Superfund Site; or (d) circumstances in which any Seller has or may have retained or assumed either contractually or by operation of law any liability for any claims relating to an occurrence of an event described in (a), (b) or (c) of this definition alleged or asserted against any Third Party.
“Environmental Conditions” shall mean the state of the environment, including natural resources (e.g., flora and fauna), soil, surface water, groundwater, any present drinking water supply, subsurface strata or ambient air, relating to or arising out of the use, handling, storage, treatment, recycling, generation, transportation, Release, or threatened Release of a Hazardous Material. With respect to Environmental Claims, Environmental Conditions also include the exposure of Persons to a Hazardous Material at the work place, or the exposure of a Person or property to Hazardous Material emitted from, migrating from or otherwise emanating from or located on property owned or occupied at any time by any Seller.
“Environmental Diligence” shall mean the Phase II Environmental Site Assessments conducted by Buyer prior to the Effective Date and any subsequent reports performed by Buyer or its Representatives in connection with Buyer’s Due Diligence Investigation.
“Environmental Laws” shall mean CERCLA, the Solid Waste Disposal Act, as amended by the Resource Conversation and Recovery Act, 42 U.S.C. §6901, et seq., the Clean Water Act, 33 U.S.C. § 1251 et seq., the Clean Air Act, 42 U.S.C. § 7401 et seq., the Toxic Substances Control Act, 15 U.S.C. § 2601 et seq., the Safe Drinking Water Act, 42 U.S.C. § 300f et seq., the Emergency Planning and Community Right to Know Act, 42 U.S.C. § 11001 et seq., the Occupational Safety and Health Act, 29 U.S.C. § 651 et seq., the Oil Pollution Act, 33 U.S.C. § 2701 et seq., or any other Legal Requirement of any Governmental Authority dealing with the pollution or protection of natural resources or the environment (including the air, surface water, ground water, wetlands, land surface or subsurface strata) or with the protection of human health or safety.
“Environmental Matters” shall mean all matters relating to Environmental Laws, Environmental Claims, or Environmental Conditions.
“Environmental Permits” shall have the meaning set forth in Section 3.10(a).
“Environmental Reports” shall mean any and all written reports dated after January 1, 2015, in the possession or control of any Seller relating to (a) any Environmental Conditions in or about any Facility or (b) any Seller’s compliance with Environmental Laws at any Facility.
“Equity” shall mean, with respect to an Entity, the capital stock, membership interests, or other equity interests (as applicable) in such Entity, which denotes an ownership interest in such Entity or grants or could grant such a right by contract or otherwise to any Person.
“ERISA” shall mean the Employee Retirement Income Security Act of 1974.
“ERISA Affiliate” shall mean any trade or business, whether or not incorporated, that together with any Seller would be deemed a “single employer” within the meaning of Section 414(b), (c), (m) or (o) of the Code or Section 4001(b) of ERISA.
“Escrow Agent” shall mean the escrow agent named in the Working Capital Escrow Agreement and the Chemetco Escrow Agreement.
“Escrow Amount” shall mean an amount equal to the sum of the Working Capital Escrow Amount and the Chemetco Escrow Amount.
“Estimated Net Working Capital” shall have the meaning set forth in Section 2.06(b).
“Estimated Working Capital Overage” shall have the meaning set forth in Section 2.06(b).
“Estimated Working Capital Underage” shall have the meaning set forth in Section 2.06(b).
“Excluded AR” shall have the meaning set forth in Section 2.02(n).
“Excluded Assets” shall have the meaning set forth in Section 2.02.
“Excluded Liabilities” shall have the meaning set forth in Section 2.04.
“Excluded Real Property Leases” shall mean that certain (i) lease agreement dated August 29, 1956 by and between Louisville and Nashville Railroad Company and Tri-City Scrap Bailing Co., Inc. for an irregular shaped parcel of land located east of yard track No. 927 used for scrap storage; (ii) lease agreement dated November 9, 2017 by and between ISA and Redden's Mobile Mechanics, Inc. for a portion of property located at 7110 Grade Lane, Louisville, Kentucky; and (iii) lease agreement dated August 1, 2013, by and between ISA and TT Repairs, Inc. for a portion of property located at 7100 Grade Lane, Louisville, Kentucky.
“Facilities” shall mean the Louisville West Facility, the Main Facility, the New Albany Facility, and the Seymour Facility.
“FCPA” shall have the meaning set forth in Section 3.20.
“Financial Statements” shall have the meaning set forth in Section 3.05(a).
“Fluff” shall have the meaning set forth in Section 5.11(a).
“GAAP” shall mean United States generally accepted accounting principles, as in effect from time to time, applied on a consistent basis.
“Governmental Authorities” shall mean all agencies, authorities, bodies, boards, commissions, courts, instrumentalities, legislatures and offices of any nature whatsoever, foreign or domestic, of any federal, state, county, district, municipal, city or other political subdivision.
“Hazardous Material” shall mean any chemicals, pollutants, contaminants, medical waste or specimens, toxic substances, petroleum or petroleum products, or other material, whether or not discarded, that are regulated by Environmental Laws or the Release or disposal of which creates or could create responsibility under Environmental Laws, including hazardous wastes under the Resource, Conservation and Recovery Act, 42 U.S.C. §6903 et seq., hazardous substances under CERCLA, extremely hazardous substances under the Emergency Planning and Community Right-to-Know Act of 1986, 42 U.S.C. §11001, et seq., asbestos, polychlorinated biphenyls and urea formaldehyde, and low‑level nuclear materials, special nuclear materials or nuclear‑byproduct materials, all within the meaning of the Atomic Energy Act of 1954, and any rules or regulations promulgated thereunder.
“Hazardous Material Personal Injury” shall mean any actual or alleged exposure of any current or former employee, contractor or agent of any Seller to a Hazardous Material in any way relating to the Business or occurring on the Real Property prior to the Closing, regardless of whether any such injury or alleged injury arising therefrom is now known or hereafter discovered.
“Indemnified Person” shall have the meaning set forth in Section 9.06(a).
“Indemnifying Person” shall have the meaning set forth in Section 9.06(a).
“Initial Payment” shall have the meaning set forth in Section 2.05(a).
“Intellectual Property” shall mean all Patents, Copyrights, Inventions, Know-How, Trade Secrets, and Domain Names that are used in the Business, and all License Agreements to which any Seller is a party.
“Invention” shall mean a novel, useful and non-obvious process, machine, composition of matter, or article of manufacture, and any novel, useful and non-obvious improvement thereof.
“Inventory” shall mean the inventories of any Seller related to the Business and consisting only of finished goods, work in progress and raw materials.
“Inventory Value” shall mean an amount, calculated by Buyer during the Adjustment Period, equal to (a) the Preliminary Inventory Value minus the sum of (b) (i) $20 for each net ton of Fluff remaining at any Facility as of the Closing, plus (ii) the costs, including lab fees, necessary to properly characterize such Fluff as Hazardous Material or non-Hazardous Material, as applicable, plus (iii) any additional costs incurred by Buyer in disposing of such Fluff to the extent such Fluff is characterized as anything other than non-Hazardous Material; provided, however, with respect to clauses (ii) and (iii), that such costs are reasonable, are consistent with customary industry practices and Buyer’s past practices, and are incurred on an arms-length basis with Persons who are not Affiliates of Buyer.
“IRS” shall mean the Internal Revenue Service.
“ISA” shall have the meaning set forth in the Preamble.
“ISA Board” shall have the meaning set forth in Section 3.03.
“ISA Shareholder Meeting” shall have the meaning set forth in Section 5.05(b).
“KDOW” shall have the meaning set forth in Section 5.10.
“Know-How” shall mean knowledge and experience of a technical, commercial, administrative, financial or other nature, which has practical application to the operation of the Business.
“Knowledge of Buyer” shall mean (a) the actual knowledge of any of the persons listed on Schedule 1.01(a); or (b) any information that those individuals listed on Schedule 1.01(a) would reasonably be expected to be aware of in the prudent discharge of their duties in the Ordinary Course of Business, but that may not be actually known to such persons.
“Knowledge of Sellers” shall mean (a) the actual knowledge of any of the persons listed on Schedule 1.01(b); or (b) any information that those individuals listed on Schedule 1.01(b) would reasonably be expected to be aware of in the prudent discharge of their duties in the Ordinary Course of Business, but that may not be actually known to such persons.
“KPDES Fines” shall have the meaning set forth in Section 2.04(i).
“KPDES Order” shall have the meaning set forth in Section 5.10.
“KPDES Permit” shall have the meaning set forth in Section 5.10.
“Leased Property” shall mean all real property that is leased, licensed, or subleased by any Seller in the Business (but excluding the Owned Real Property), including all improvements, buildings, structures, and all fixtures related thereto, and together with all beneficial easements appurtenant thereto, all as set forth on Schedule 2.01(e).
“Legal Requirements” shall mean all statutes, ordinances, codes (including building codes, zoning codes or licensing requirements), rules, regulations, restrictions (including land use restrictions), covenants, Permits, Permit terms and conditions, Orders, legally binding determinations or awards of any Governmental Authorities or arbitrator.
“Liability” shall mean, with respect to any Person, any liability or obligation of such Person of any kind, character or description, whether known or unknown, absolute or contingent, accrued or unaccrued, disputed or undisputed, liquidated or unliquidated, secured or unsecured, joint or several, due or to become due, vested or unvested, executory, determined, determinable or otherwise, and whether or not the same is required to be accrued on the financial statements of such Person.
“License Agreement” shall mean any Contract pursuant to which any Seller has rights in or to any Intellectual Property or Computer Software from any Person, and any Contract pursuant to which any Seller has licensed or transferred or agreed to license or transfer any rights in or to any Intellectual Property or Computer Software to any Person.
“Louisville West Facility” shall mean Sellers’ facility located on Camp Ground Road in Louisville, Kentucky.
“Main Facility” shall mean Sellers’ facility located on Grade Lane in Louisville, Kentucky.
“Material Adverse Effect” shall mean a condition, fact or circumstance that, individually or in the aggregate, has (or could reasonably be expected to have) a material adverse effect on (a) the ownership or use of the Assets, taken as a whole, (b) the operation of the Business as operated by Sellers on the Effective Date or as contemplated to be operated by Buyer after the Closing, taken as a whole, or (c) the ability of any Seller to perform its obligations hereunder; provided, however, that “Material Adverse Effect” shall not include any condition, fact or circumstance directly or indirectly arising out of or attributable to: (i) general economic or political conditions; (ii) conditions generally affecting the industry in which the Business operates; (iii) any changes in financial, banking or securities markets in general, including any disruption thereof and any decline in the price of any security or any market index or any change in prevailing interest rates; (iv) acts of war (whether or not declared), armed hostilities or terrorism, or the escalation or worsening thereof; (v) any action taken (or omitted to be taken) with the written consent of or at the written request of Buyer; (vi) any changes in applicable Legal Requirements or accounting rules (including GAAP) or the enforcement, implementation or interpretation thereof; (vii) the announcement, pendency or completion of the Transaction, including losses or threatened losses of employees, customers, suppliers, distributors or others having relationships with Sellers and the Business; or (viii) any failure by the Business to meet any internal or published projections, forecasts or revenue or earnings predictions (provided that the underlying causes of such failures (subject to the other provisions of this definition) shall not be excluded); provided further, however, that any condition, fact or circumstance referred to in clauses (i) through (iv) and (vi) above shall be taken into account in determining whether a Material Adverse Effect has occurred or could reasonably be expected to occur to the extent such condition, fact or circumstance has a disproportionate effect on the Business compared to other participants in the industry in which the Business operates.
“Material Consumers” shall have the meaning set forth in Section 3.21.
“Material Contracts” shall have the meaning set forth in Section 3.13.
“Material Suppliers” shall have the meaning set forth in Section 3.22.
“Net Working Capital” shall mean, at the time of determination, the sum of (a) an amount equal to the Inventory Value plus (b) an amount equal to the aggregate value of Accounts Receivable plus (c) an amount equal to the aggregate value of the Prepaid Expenses minus (d) an amount equal to the aggregate value of Accounts Payable minus (e) an amount equal to the aggregate value of the Assumed Accruals.
“New Albany Facility” shall mean Sellers’ facility located on State Road in New Albany, Indiana.
“Objection Notice” shall have the meaning set forth in Section 2.06(e).
“OFAC” shall have the meaning set forth in Section 3.26.
“Off-Site Environmental Matters” shall mean the Liability or potential Liability pursuant to Environmental Laws that arises from an arrangement (whether by contract, agreement, or otherwise) made by any Seller in connection with the Business or a Facility prior to the Closing Date (a) with a transporter for the transport, disposal or treatment of Hazardous Material owned or possessed by any Seller or by any other Person, or (b) for the disposal or treatment of Hazardous Material owned or possessed by any Seller or by any other Person. Off-Site Environmental Matters include Liability or potential Liability pursuant to CERCLA § 104(e) requests for information, CERCLA special notices, response costs and demand letters and CERCLA orders (including administrative orders on consent) and decrees related to such arrangements.
“Order” shall mean any award, writ, injunction, judgment, order or decree entered, issued, made or rendered by any Governmental Authority or arbitrator pursuant to a Proceeding.
“Ordinary Course of Business” shall mean, with respect to any action taken by a Person, that such action (a) is consistent in nature, scope and magnitude with the past practices of such Person and is taken in the ordinary course of the normal, day-to-day operations of such Person; and (b) does not require authorization by the board of directors, board of managers or Equity holders of such Person (or by any Person or group of Persons exercising similar authority).
“Organizational Documents” shall mean, with respect to any Person, the articles of incorporation or organization, certificate of incorporation or formation, by-laws, operating agreement, shareholders’ agreement, trust agreement or other organizational or governing documents of such Person.
“Overall Cap” shall mean an amount equal to the Purchase Price.
“Owned Real Property” shall mean all real property that is owned by any Seller and used in the Business (including all improvements, buildings, structures, and all fixtures related thereto), all as set forth on Schedule 2.01(d).
“Parent” shall have the meaning set forth in the Preamble.
“Party” shall mean any party to this Agreement, its permitted successors and assigns.
“Patent” shall mean Letters Patent, issued under the laws of the United States or other nation, granting an inventor the exclusive right to the enjoyment or possession of its Invention for a limited time; and including all original applications for Letters Patent, all divisional, continuation, continuation-in-part, reissue, reexamination, and extension applications for Letters Patent, and all counterpart Letters Patent and applications for Letters Patent claiming priority therefrom.
“Payoff Amounts” shall have the meaning set forth in Section 5.09(d).
“Permits” shall mean all licenses, permits, consents, approvals and other authorizations of or from all Governmental Authorities (including certificates of occupancy, building or construction permits, business licenses or permits required by any Environmental Laws) that are required by any Governmental Authority for the ownership of the Assets, or the conduct of the Business, as of the Effective Date. Permits shall also include any certifications, authorizations, approvals or endorsements of accreditation bodies applicable to the Business or the ownership or operation thereof.
“Permitted Encumbrances” shall mean (i) any Encumbrances for Taxes or assessments not yet due and payable as of the Closing Date or being contested in good faith by appropriate procedures, (ii) zoning, building codes and other land use laws regulating the use or occupancy of Real Property or the activities conducted thereon which are imposed by any Governmental Authority having jurisdiction over such Real Property, (iii) easements, covenants, conditions, restrictions and other similar matters affecting title to Real Property and other title defects which do not materially impair the use, valuation or occupancy of Real Property or the operation of the Business, and (iv) mechanics’, carriers’, workmen’s, repairmen’s or other like liens arising or incurred in the Ordinary Course of Business and not attributable to past due payment obligations of any Seller, (v) other than with respect to Owned Real Property, liens arising under the original purchase price conditional sales contracts and equipment leases with third parties entered into in the Ordinary Course of Business and set forth on Schedule 1.01(c)(v); and (vi) those Encumbrances set forth on Schedule 1.01(c)(vi).
“Person” shall mean any individual, Entity, trustee or Governmental Authority.
“Physical Inventory” shall have the meaning set forth in Section 2.06(a)(i).
“Post-Closing Tax Period” shall mean (i) any Tax period beginning and ending after the Closing Date; and (ii) the portion of any Straddle Period beginning after the Closing Date.
“Pre-Closing Tax Period” shall mean (i) any Tax period beginning and ending on or before the Closing Date; and (ii) the portion of any Straddle Period ending on (and including) the Closing Date.
“Preliminary Inventory Value” shall have the meaning set forth in Section 2.06(a)(ii).
“Prepaid Expenses” shall mean those prepaid expenses set forth in Schedule 1.01(d) in the amounts so set forth on such Schedule.
“Prepared Inventory” shall mean any Inventory that is segregated in a pile, baled, bundled or otherwise ready for shipment (whether or not loaded onto a trailer at a Facility) as is customary for the applicable product type, consistent with the prepared inventory schedule attached for illustrative purposes as Schedule 1.01(e). For the avoidance of doubt, Prepared Inventory shall include (i) ferrous material that is sold as loose material, has been sorted and/or baled and needs no further segregation, handling or processing (other than loading), (ii) non-ferrous metal that has been packaged and tagged in accordance with a consumer’s specifications, (iii) non-ferrous metal that is sold as loose material, has been sorted and needs no further segregation, handling or processing (other than loading), and (iv) all other non-ferrous metal that can be sold to Sellers’ consumers as presently stored by any Seller without any further segregation, handling or processing (other than loading and/or off-loading).
“Proceeding” shall mean any action, arbitration, audit, collection action, hearing, cause of action, litigation, or suit (whether civil, criminal, administrative or investigative) commenced, brought, conducted, or heard by or before, or otherwise involving, any Governmental Authority, or any private arbitration, mediation or other alternative dispute resolution proceeding.
“Purchase Price” shall mean an amount equal to $23,300,000, plus or minus, as applicable, the Purchase Price Adjustment.
“Purchase Price Adjustment” shall have the meaning set forth in Section 2.06(c).
“Purchase Price Adjustment Deficit” shall have the meaning set forth in Section 2.06(g)(i).
“Purchase Price Adjustment Statement” shall have the meaning set forth in Section 2.06(c).
“Purchase Price Allocation” shall have the meaning set forth in Section 5.06.
“Real Property” shall mean, collectively, the Owned Real Property and the Leased Property.
“Real Property Leases” shall mean those leases set forth on Schedule 2.01(e), pursuant to which Sellers lease or sublease the Owned Real Property and/or Leased Property.
“Related Party” shall mean any partner, shareholder, director, officer, trust, trustee or similar fiduciary of any Seller or any of its Affiliates.
“Release” shall mean any spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping or disposing into the environment of any Hazardous Material other than in full compliance with Environmental Laws.
“Representatives” shall mean, with respect to a Party, such Party’s officers, directors, employees, representatives, consultants, counsel and agents, and anyone acting on the behalf of such Party.
“Restricted Territory” shall have the meaning set forth in Section 5.08(a).
“Retained Crane” means the rebuilt Sennebogen 825 material handling crane acquired from Brandeis Machinery and being retained by Sellers.
“Schedule Supplement” shall have the meaning set forth in Section 5.13.
“Seller Indemnified Persons” shall have the meaning set forth in Section 9.04.
“Sellers” shall have the meaning set forth in the Preamble.
“Sellers’ Fundamental Representations and Warranties” shall mean the representations and warranties of Sellers in Sections 3.01, 3.02, 3.03, 3.04, 3.07(a), 3.09(a) and 3.18.
“Seymour Facility” shall mean Sellers’ facility located on County Road 900 West in North Vernon, Indiana.
“Shareholder Approval” shall have the meaning set forth in Section 5.05(b).
“Straddle Period” shall mean any Tax period beginning on or before the Closing Date and ending thereafter.
“Subsidiary” shall mean as to any Person, an Entity of which 50% or more of the voting power of the outstanding voting Equity or 50% or more of the outstanding economic Equity is held or controlled, directly or indirectly, by such Person.
“Tangible Personal Property” shall mean all machinery, equipment, trade fixtures, tools, furniture, office equipment, computers and related hardware components, supplies, materials, motor vehicles, tractor trailer rigs, and other items of tangible personal property (including all spares and maintenance parts but excluding Inventory on hand as of the Closing Date) of every kind owned or leased by any Seller wherever located and however affixed to any real property, together with any express or implied warranties (if and to the extent transferable) by the manufacturers, vendors or lessors of such property or of any item or component part thereof, and all maintenance records and other documents related thereto, except for the Excluded Assets.
“Target Net Working Capital” means $8,400,000.
“Tax” or “Taxes” shall mean any federal, state, local or foreign income, unrelated business income, gross receipts, license, payroll, employment, excise, severance, occupation, privilege, premium, windfall profits, environmental (including taxes under §59A of the Code), customs duties, capital stock, franchise, profits, withholding, social security, unemployment, disability, real property, personal property, stamp, sales, use, transfer, transaction privilege, private car, registration, unclaimed property, value added, alternative or add‑on minimum, estimated or other tax of any kind whatsoever, including payment in lieu of Taxes, interest or penalties on and additions to all of the foregoing, that are due to any Governmental Authority.
“Tax Return” shall mean any return, declaration, report, claim for refund, or information return or statement relating to Taxes, including schedules and attachments thereto and including amendments thereof.
“Third Party” shall mean any Person other than Buyer, any Seller and any of their respective Affiliates.
“Third-Party Claim” shall have the meaning set forth in Section 9.06(a).
“Title IV Plan” shall mean an Employee Benefit Plan that is subject to Section 302 or Title IV of ERISA or Section 412 of the Code.
“Trade Secret” shall mean business or technical information, including any formula, pattern, program, device, compilation of information, method, technique, or process that: (a) derives independent actual or potential commercial value from not being generally known or readily ascertainable through independent development or reverse engineering by persons who can obtain economic value from its disclosure or use; and (b) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.
“Trademark” shall mean the rights granted a Person under state or federal laws of the United States or other nations, to use the words, names, symbols, sounds, or colors it uses to identify itself as the source of the goods or services it provides in commerce, whether such words, names, symbols, sounds, or colors are used as a trademark, trade dress, service mark, logo, trade name, corporate name, or assumed name, and whether or not such are registered under state or national trademark laws, and including all applications to register or renew the same.
“Transaction” shall mean the sale and purchase of the Assets and assumption of the Assumed Liabilities contemplated by this Agreement, together with any and all related transactions and proceedings designed to implement, facilitate or expedite such sale and purchase of the Assets and assumption of the Assumed Liabilities.
“Unprepared Inventory” shall mean all Inventory that is not Prepared Inventory.
“Working Capital Escrow Agreement” shall mean the Escrow Agreement to be entered into at the Closing by Buyer, ISA and the Escrow Agent, in form and substance reasonably satisfactory to such Persons.
“Working Capital Escrow Amount” shall mean $600,000, which shall be available (subject in all cases to the terms and conditions of the Escrow Agreement) to satisfy the potential Purchase Price Adjustment owed by Sellers, but shall not be used to satisfy any indemnity obligations owed by Sellers.
“Working Capital Overage” shall exist when (and shall be equal to the amount by which) the Net Working Capital exceeds the Target Net Working Capital.
“Working Capital Underage” shall exist when (and shall be equal to the amount by which) the Target Net Working Capital exceeds the Net Working Capital.
As used in this Agreement, and unless the context requires otherwise:
Upon the terms and subject to the conditions of this Agreement, at the Closing, Sellers shall sell, assign, convey, transfer and deliver to Buyer, and Buyer shall purchase from Sellers, all right, title and interest in and to the Assets, free and clear of all Encumbrances other than the Permitted Encumbrances. The sale, assignment, conveyance, transfer, and delivery of the Assets by Sellers to Buyer shall be made at the Closing by the execution and delivery of one or more Deeds, Bills of Sale, Assumption Agreements and such other assignments, licenses, endorsements and other appropriate instruments of transfer as Buyer shall reasonably request to vest in Buyer good and marketable title to the Assets, free and clear of all Encumbrances other than Permitted Encumbrances. Without limiting the generality of the foregoing, the Assets shall include all of the following:
Notwithstanding the generality of Section 2.01, the following assets are not a part of the Transaction and are excluded from the Assets (collectively, the “Excluded Assets”):
As of the Closing, Buyer shall assume and agree to perform and discharge only (a) the Accounts Payable, (b) subject to the provisions of Section 2.04(f), the performance obligations of the applicable Seller arising under the Assumed Contracts from and after Closing pursuant to the terms thereof, (c) the Assumed Accruals, (d) any liabilities for non-compliance with the KPDES Permit or the final KPDES Order and BMP Plan, including any civil penalties, stipulated penalties, or other fines or liabilities, but only to the extent arising thereunder and attributable to post-Closing operations at the Main Facility, and (e) the liabilities and obligations for Taxes relating to the Business, the Assets, or the other Assumed Liabilities for any Post-Closing Tax Period ((a) through (e), collectively, the “Assumed Liabilities”). At the Closing, Sellers will assign to Buyer the Assumed Liabilities, and Buyer will assume and agree to timely perform and fully discharge the Assumed Liabilities, pursuant to an assignment and assumption agreement with Sellers, in form and substance reasonably acceptable to both Buyer and ISA (the “Assumption Agreement”).
Notwithstanding anything herein to the contrary, Buyer does not and will not assume, or otherwise become liable or responsible for, any Liabilities of any Seller of any type or nature other than the Assumed Liabilities (all Liabilities of any Seller other than the Assumed Liabilities, collectively, the “Excluded Liabilities”) as a result of this Agreement or the Transaction, regardless of whether or not any of such Excluded Liabilities are the subject matter of any of the representations and warranties of Sellers in this Agreement. Sellers shall retain and agrees to satisfy and discharge, or otherwise be responsible for, all of the Excluded Liabilities, including the following Excluded Liabilities:
Sellers hereby jointly and separately represent and warrant to Buyer that the statements contained in this Article III are true, correct and complete as of the Effective Date and, except where expressly limited to a specific date, shall be true, correct and complete as of the Closing Date.
Each Seller is duly organized or formed, validly existing and in good standing under the laws of the state set forth opposite its name on Schedule 3.01. Each Seller is licensed, registered, qualified or admitted to do business, and in good standing, in each jurisdiction in which the ownership, use or leasing of the Assets, or the conduct or nature of the Business, makes such licensing, qualification, or admission necessary, except where such failure would not have a Material Adverse Effect. There are no outstanding options, warrants or other securities or rights to acquire, directly or indirectly, the Equity of any Seller, nor are there any outstanding securities that are convertible or exchangeable into Equity of any Seller.
Except as set forth on Schedule 3.02, no Seller owns any Equity of any other Person. Each Seller has all requisite entity power and authority to conduct its respective portion of the Business as presently conducted. Each Seller has all requisite entity power and authority to enter into, execute and deliver this Agreement and all other agreements, instruments, certificates and documents to which it is a party, executed or to be executed in connection herewith, to consummate the transactions contemplated hereby and thereby and to perform its respective obligations hereunder and thereunder. Further, the execution, delivery and performance hereof, and the consummation of the Transaction, as applicable:
Except for the Shareholder Approval, which approval shall be solicited pursuant to Section 5.05(b), this Agreement, and all other agreements, instruments, certificates and documents executed or to be executed in connection with the Transaction, to which any Seller is or becomes a party (a) have been (or upon execution and delivery will have been) duly authorized by all necessary entity action on the part of such Seller, as applicable (including Equity holder action, if required), and (b) constitute (or upon execution and delivery will constitute) valid, legal and binding obligations of such Seller, enforceable against such Seller in accordance with the respective terms hereof or thereof, except as enforceability may be subject to general principles of equity and as may be restricted, limited or delayed by Bankruptcy or other laws affecting creditors’ rights generally. As of the Effective Date, the ISA Board of Directors (the “ISA Board”) has resolved to recommend that the shareholders of ISA approve this Agreement and directed that such matter be submitted for consideration of the shareholders of ISA at the ISA Shareholder Meeting. The Shareholder Approval is the only vote or approval of the holders of Capital Stock of ISA or any of its Subsidiaries necessary to approve this Agreement and the Transaction.
There are no Contracts with, or options, commitments or rights in favor of, any Person to directly or indirectly acquire (a) the Business, any portion thereof or any interest therein or, (b) except for sales of Inventory in the Ordinary Course of Business, any of the Assets.
Since January 1, 2019, except as set forth on Schedule 3.06:
All Inventory of Sellers consists of items of a quality and quantity usable and salable in the Ordinary Course of Business, is owned by Sellers free and clear of all Encumbrances other than Permitted Encumbrances, and is generally sufficient to conduct the Business in the ordinary course. An adequate reserve has been established for missing, damaged, spoiled, obsolete, defective or slow moving Inventory, and such reserve is consistent with both the operation of the Business in the Ordinary Course of Business. The values at which such Inventory is carried are stated in accordance with GAAP at the lower of historic cost or market, with cost being determined on a rolling-average-cost basis that approximates the first-in, first-out method. Other than as set forth on Schedule 3.08, no Seller has any Inventory that has been consigned to third parties or that otherwise is not in the physical possession of such Seller.
Except as set forth on Schedule 3.12, (a) Schedule 2.01(h) contains a complete and accurate list of all material Permits (including applications therefor) used in connection with the Business, all of which are valid, validly issued, remain in effect and good standing, and are legally transferable to Buyer, and (b) there are no material permits required under applicable Legal Requirements in connection with the ownership or operation of the Business or the use and possession of the Assets other than those set forth on Schedule 2.01(h).
Schedule 3.13 is a true, complete and correct list of all Contracts (including any Assumed Contracts) as of the Effective Date conforming to the descriptions set forth in this Section 3.13 (collectively, “Material Contracts”), copies of each of which have been delivered or made available to Buyer:
Sellers have delivered to Buyer true, correct and complete copies of the Assumed Contracts (including any amendments, supplements, modifications, annexes or schedules thereto). Except as set forth on Schedule 3.14:
Except as set forth in Part I of Schedule 3.16, there are no Claims or Proceedings (other than investigations) pending or, to the Knowledge of Sellers, threatened against any Seller relating in any way to the Assets or the Business, and to the Knowledge of Sellers there is no basis, and no fact or circumstance exists that could reasonably be expected to be a basis, for the institution of any such Claim or Proceeding. To the Knowledge of Sellers, there are no investigations pending against any Seller relating in any way to the Assets or the Business, and to the Knowledge of Sellers there is no basis, and no fact or circumstance exists that could reasonably be expected to be a basis, for the institution of any such investigation. No Seller is now under or subject to any Order, and to the Knowledge of Sellers no fact or circumstance exists that could reasonably be expected to be a basis for the institution of any Order against or applicable to any Seller. Except as set forth in Part II of Schedule 3.16, there are no Persons holding general or special powers of attorney from any Seller with respect to the Business or the Assets.
Schedule 3.17 sets forth a true, correct and complete list of the insurance policies held by, or for the benefit of, any Seller, including the underwriter of such policies and the amount of coverage thereunder. True, correct and complete copies of such insurance policies have been made available to Buyer and, except as otherwise specified therein, such policies are in full force and effect on the Effective Date, shall be maintained in full force and effect through the Closing and all due premiums have been and will be paid. There are no pending claims in excess of the applicable deductible amount against such insurance policies as to which insurers have denied liability, and to the Knowledge of Sellers, there exist no claims that have not been timely submitted by the applicable Seller to the applicable insurers.
No Seller nor any Person acting on any Seller’s behalf has engaged any broker, finder, agent or any other Person that would be entitled to any brokerage commission, finder’s fee or other compensation of any form or type in respect of the execution of this Agreement or the consummation of the Transaction.
No Seller has, directly or indirectly, paid or delivered, or agreed to pay or deliver, any fee, commission or other sum of money or item of property, however characterized, to any Person that is in any manner related to the Assets or the Business in violation of any Legal Requirement. Neither any Seller nor, to the Knowledge of Sellers, any member, manager, officer, agent, employee or Affiliate or any other person acting in such capacity on behalf of any Seller, with respect to the Business or the Assets, (i) has violated or are in violation of any provision of the Foreign Corrupt Practices Act of 1977 (the “FCPA”); (ii) has taken any action in furtherance of an offer, payment, promise to pay, or authorization or approval of the payment or giving of money, property, gifts or anything else of value, directly or indirectly, to any “foreign official” (as such term is defined in the FCPA) in violation of any Legal Requirements; (iii) has made, or as a result of consummation of the Transaction will receive, any bribe, rebate, payoff, influence payment, kickback or other payment that violates any Legal Requirements; or (iv) has used any corporate funds for any contribution, gift, entertainment or other expense in violation of any Legal Requirements.
Sellers have provided Buyer with a true, correct and complete list of the names and addresses of the top ten (10) ferrous and non-ferrous consumers of Sellers (in the aggregate and by weight and by dollar volume of sales to such consumers) for the five-month period ended May 31, 2019, and each of the fiscal years ended December 31, 2017 and 2018 (collectively, the “Material Consumers”). As of the Effective Date, (i) no Seller has been notified, orally or in writing, by any Material Consumer to the effect that such Material Consumer will stop, materially decrease the rate of, or materially change the terms (whether related to payment, price or otherwise) with respect to, buying materials, products or services from any Seller, and (ii) there are no material disputes with any Material Consumer.
Sellers have provided Buyer with a true, correct and complete list of the names and addresses of the top ten (10) ferrous and non-ferrous suppliers of Sellers (in the aggregate and by weight and by dollar volume of purchases from such suppliers) for the six-month period ended June 30, 2019, and each of the fiscal years ended December 31, 2017 and 2018 (collectively, the “Material Suppliers”). As of the Effective Date, except as set forth on Schedule 3.22, (i) no Material Supplier has notified any Seller that it intends to terminate its business relationship with any Seller or to materially decrease the rate of, or materially change the terms (whether related to payment, price or otherwise) with respect to, supplying materials, products or services to any Seller, and (ii) there are no material disputes with any Material Supplier.
Each Seller has complied with all material Legal Requirements applicable to it or otherwise related to the Assets or the Business, and no material Proceeding, Claim or notice has been filed or commenced against any Seller alleging failure to so comply, nor has any Seller received any notice of any material violation thereof that has not been remedied, nor to the Knowledge of Sellers, is any Proceeding, Claim, notice or investigation threatened nor, to the Knowledge of Sellers, has any investigation commenced. Notwithstanding anything to the contrary in this Section 3.23, none of the representations or warranties in this Section 3.23 shall be deemed to relate to Environmental Matters (which are governed solely by Section 3.10), employee benefits matters (which are governed solely by Section 3.15), or Tax matters (which are governed solely by Section 3.18).
Except as set forth on Schedule 3.24, no Related Party (nor Affiliate of a Related Party) (a) has borrowed money from or loaned money to any Seller that is currently outstanding, (b) has any Claim against any Seller, (c) has any ownership interest in any property or Asset used by any Seller in the conduct of the Business (other than Excluded Assets), (d) is a party to any Contract (except employment agreements made available to Buyer) with any Seller or Affiliate thereof, or (e) to the Knowledge of Sellers, owns, directly or indirectly, any interest in (excepting less than 2% Equity holdings for investment purposes in securities of publicly held and traded companies), or is an officer, director, employee or consultant of, any Person that is, or is engaged in business as, a competitor, lessor, lessee, supplier, distributor, sales agent, consumer or client of any Seller.
The Sellers, taken as a whole, are not insolvent, nor has any Seller ever declared or been subject to Bankruptcy. As of the Closing and immediately after giving effect to the Transaction: (a) Sellers will collectively have and maintain assets the value of which will exceed (i) the value of all liabilities of Sellers, including contingent and other liabilities, and (ii) the amount that will be required to pay the probable liabilities of Sellers on their existing debts (including contingent liabilities) as such debts become absolute and matured; (b) Sellers will collectively not have an unreasonably small amount of capital for the limited operations in which they intend to be engaged after the Closing; and (c) Sellers will collectively be able to pay their liabilities, including contingent and other liabilities, as they mature. For purposes of the foregoing, “not have an unreasonably small amount of capital for the limited operations in which they intend to be engaged after the Closing” and “able to pay their liabilities, including contingent and other liabilities, as they mature” means that Sellers will have enough cash to meet their obligations as they become due. In completing the Transaction, no Seller intends to hinder, delay or defraud any present or future creditors of Buyer or such Seller.
No Seller is (a) the target of any sanctions program that is established by Executive Order of the President or published by the Office of Foreign Assets Control, U.S. Department of the Treasury (“OFAC”); (b) designated by the President or OFAC pursuant to the Trading with the Enemy Act, 50 U.S.C. App. § 5, the International Emergency Economic Powers Act, 50 U.S.C. §§ 1701-06, the Patriot Act, Public Law 107-56, Executive Order 13224 (September 23, 2001) or any Executive Order of the President issued pursuant to such statutes; or (c) named on the “List of Specially Designated Nationals and Blocked Persons” as published by OFAC.
Sellers have delivered to Buyer a list of all Accounts Receivable as of August 15, 2019, together with an aging thereof. To the Knowledge of Sellers, all Accounts Receivable are collectable at the aggregate recorded amounts thereof, in the Ordinary Course of Business, and are not subject to any offsets, defenses or counterclaims. Sellers have delivered to Buyer a list of all Accounts Payable as of August 15, 2019, together with an aging thereof. All Accounts Payable arose in the Ordinary Course of Business and, except as set forth on Schedule 3.27, none are delinquent or past due by more than 30 days. Sellers have disclosed to Buyer in writing any objections, defenses or setoff rights to the Accounts Payable.
Except for the representations and warranties contained in this Article III (including the related portions of the Schedules), neither any Seller nor any other Person has made or makes any other express or implied representation or warranty, either written or oral, on behalf of Sellers.
Buyer hereby represents and warrants to Sellers that the statements contained in this Article IV are true, correct and complete as of the Effective Date and, except where expressly limited to a specific date, shall be true, correct and complete as of the Closing Date.
Buyer is a limited liability company duly organized, validly existing and in good standing under the laws of the Commonwealth of Kentucky. Buyer is licensed, registered, qualified or admitted to do business, and in good standing, in each jurisdiction in which the ownership, use or leasing of its assets, or the conduct or nature of its business, makes such licensing, qualification, or admission necessary, except where such failure would not have a material adverse effect on Buyer’s ability to consummate the Transaction.
Buyer has all requisite company power and authority to enter into, execute and deliver this Agreement and all other agreements, instruments, certificates and documents to which it is a party executed or to be executed in connection herewith, and to consummate the transactions contemplated hereby and thereby and to perform its obligations hereunder and thereunder. Further, the execution, delivery and performance hereof, and the consummation of the Transaction:
This Agreement, and all other agreements, instruments, certificates and documents executed or to be executed in connection herewith, to which Buyer is or becomes a party (a) as of the Closing shall have been duly authorized by all necessary company action on the part of Buyer, and (b) constitute (or upon execution and delivery will constitute) valid, legal and binding obligations of Buyer enforceable against Buyer in accordance with the respective terms hereof or thereof, except as enforceability may be subject to general principles of equity and as may be restricted, limited or delayed by Bankruptcy or other laws affecting creditors’ rights generally.
Neither Buyer nor any Affiliate of Buyer nor any Person acting on their behalf has engaged any broker, finder, agent or any other Person that would be entitled to any brokerage commission, finder’s fee or other compensation of any form or type in respect of the execution of this Agreement or the consummation of the Transaction.
Buyer shall have, as of the Closing Date, sufficient funds to pay Sellers the Initial Payment and to remit the amounts required under Section 2.05(b).
Buyer has conducted its own independent investigation, review and analysis of the Business and the Assets. Buyer acknowledges and agrees that (a) in making its decision to enter into this Agreement and to consummate the Transaction, Buyer has relied solely upon its own investigation and the express representations and warranties of Sellers set forth in Article III of this Agreement (including related portions of the Schedules), and (b) neither any Seller nor any other Person has made, and Buyer has not relied upon, any representation or warranty as to Sellers, the Business, the Assets or this Agreement, except as set forth in Article III of this Agreement (including the related portions of the Schedules). Nothing set forth in this Section 4.06 shall in any way limit any claim that Buyer may have against Sellers for fraud.
Except for the representations and warranties contained in this Article IV (including the related portions of the Schedules), neither Buyer nor any other Person has made or makes any other express or implied representation or warranty, either written or oral, on behalf of Buyer.
From the Effective Date until the earlier of the Closing or the date of termination of this Agreement pursuant to Section 8.05, each Seller shall:
From the Effective Date until the earlier of the Closing or the date of termination of this Agreement pursuant to Section 8.05, except as otherwise expressly provided in this Agreement, as required by a Legal Requirement, or as consented to in writing by Buyer, no Seller shall:
It is Buyer’s present intention, subject to business needs and Buyer’s standard pre-employment screening, to offer employment to substantially all of the employees of Sellers; provided, however, nothing contained in this Agreement shall confer upon any employee of any Seller any right to employment with Buyer. For purposes of clarification and not limitation, Buyer shall not assume any Liability of any Seller with respect to or in favor of any employee of any Seller, including with respect to any benefit or compensation to employees as a result of the Closing; provided, however, employees of Sellers who are hired by Buyer will have service with Sellers credited for purposes of eligibility and vesting in Buyer’s vacation/paid time policy and employees of Sellers who are hired by Buyer who have sixty (60) days or more of service with Sellers will be entitled to participate in Buyer’s health insurance plan effective as of the first day of employment. Effective as of the Closing, each Seller will terminate all employees of the Business, other than those employees set forth on Schedule 5.03. All employer responsibilities arising related to such release pursuant to Legal Requirements shall be the responsibility of Sellers, and Sellers agree to lawfully discharge all such responsibilities. Sellers covenant to hold Buyer harmless from and against all Liabilities of any sort arising from or relating to any Claims by or on behalf of present or former employees of any Seller in respect to any and all matters arising or incurred relating to the release of employees contemplated hereby and in respect to severance, termination or accrued vacation pay and similar obligations relating to the termination of such employees’ employment with such Seller. At such time Sellers are no longer responsible, pursuant to the applicable Legal Requirements, for Liabilities for or arising from any COBRA health care continuation coverage required to be provided under Section 4980B of the Code and Sections 601 through 608 of ERISA to employees, former employees and any other COBRA qualified beneficiaries of any Seller, including those who incur a COBRA qualifying event in connection with the Transaction, Buyer will assume and discharge such Liabilities to the extent required under applicable Legal Requirements. Prior to the Closing Date, Sellers shall provide Buyer with a list of all M&A qualified beneficiaries and each beneficiary’s last known address.
(a) From the Effective Date until the Closing Date, each Seller shall (i) use commercially reasonable efforts to obtain prior to the Closing all consents, approvals, authorizations and clearances of Governmental Authorities and other Persons required to consummate the Transaction (including obtaining any consents required for the assignment of the Assumed Contracts and the Permits to Buyer; provided, however, that nothing in this Section 5.05(a) or elsewhere in this Agreement shall require, or be construed to require, any Seller or any Seller’s Affiliate to agree to (x) sell, hold, or divest any assets, (y) make any material payments to any third party, or (z) amend, terminate, or enter into any agreement (other than an assignment agreement reasonably satisfactory to Sellers) with any third party), (ii) provide such information and communications to Governmental Authorities as Buyer may reasonably request, and (iii) assist and cooperate with Buyer to obtain all other Permits and clearances of Governmental Authorities that Buyer reasonably deems necessary or appropriate, and to prepare any document or other information reasonably required to consummate the Transaction.
(b) ISA shall take all action necessary in accordance with the Florida Business Corporation Act and its Organizational Documents to duly call, give notice of, convene and hold a meeting of its shareholders (the “ISA Shareholder Meeting”) as promptly as practicable following the Effective Date, for the purpose of obtaining the approval of such percentage of the ISA shareholders as are required to approve this Transaction pursuant to the Florida Business Corporation Act and ISA’s Organizational Documents (the “Shareholder Approval”); provided that ISA may postpone or adjourn the ISA Shareholder Meeting (i) with the consent of Buyer, (ii) for the absence of a quorum or to solicit more proxies or (iii) to allow reasonable additional time for any supplemental or amended disclosure which ISA has determined in good faith (after consultation with outside counsel) is necessary under applicable Legal Requirements and for such supplemental or amended disclosure to be disseminated and reviewed by ISA’s shareholders prior to the ISA Shareholder Meeting. ISA shall, through the ISA Board and its Special Committee, use commercially reasonable efforts to solicit proxies in favor of the Shareholder Approval. Notwithstanding any provision of this Agreement to the contrary, the ISA Board may withdraw its recommendation, cancel the ISA Shareholder Meeting, and/or, subject to Section 8.05(c), terminate this Agreement at any time prior to the Closing if the ISA Board determines in good faith that recommending Shareholder Approval, holding the ISA Shareholder Meeting, or not terminating this Agreement would reasonably be expected to be inconsistent with its fiduciary duties under applicable Legal Requirements (any such action of the ISA Board, a “Board Termination”).
The Purchase Price (and all other capitalized costs plus other relevant items that are considered assumed liabilities for United States federal income tax purposes, if any) shall be allocated among the Assets consistent with the principles of Section 1060 of the Code (the “Purchase Price Allocation”). As soon as practicable after the Closing, Buyer shall deliver to ISA the Purchase Price Allocation. If within twenty (20) days after the delivery of the Purchase Price Allocation, ISA notifies Buyer that it objects to the Purchase Price Allocation, Buyer and ISA shall use commercially reasonable efforts to resolve such dispute within thirty (30) days. In the event that Buyer and ISA are unable to resolve such dispute within such 30-day period, the disputed items shall be resolved in accordance with the provisions set forth in Section 2.06(f), mutatis mutandis. Buyer and ISA shall use the asset values determined from such agreed or determined allocation for purposes of all reports and Tax Returns with respect to Taxes, including Internal Revenue Service Form 8594 or any equivalent statement.
(a) Following the Closing, any amounts remitted to any Seller or any of their respective Affiliates that are owed to Buyer pursuant to this Agreement (including to satisfy amounts owed with respect to any Accounts Receivable) will be remitted by such Seller or its respective Affiliate to Buyer within 5 Business Days of Seller’s or any of its Affiliate’s receipt of such amounts. Following the Closing, any amounts remitted to Buyer or any of its Affiliates that are owed to any Seller pursuant to this Agreement (including by being solely attributable to an Excluded Asset) will be remitted by Buyer or its Affiliate to the applicable Seller within 5 Business Days of Buyer’s or its Affiliate’s receipt of such amounts.
(b) Following the Closing, Sellers will cooperate with Buyer to make any insurance claims against the AR Insurance for Accounts Receivable that become delinquent or otherwise eligible for reimbursement pursuant to the terms of the AR Insurance. Any amounts recovered from the AR Insurance pursuant to such claims shall be promptly remitted to Buyer.
(c) At any time and from time to time at and after the Closing, upon request of either Party, the other Party shall do, assist, execute, acknowledge and deliver, or cause to be done, executed, acknowledged and delivered, such further acts, deeds, assignments, transfers, conveyances, powers of attorney, confirmations and assurances as such Party may reasonably request to more effectively carry out the purposes and intent of this Agreement, including to more effectively convey, assign and transfer to and vest in Buyer, its successors and assigns, full legal right, title and interest in and actual possession of the Assets. Sellers shall also furnish Buyer (upon Buyer’s reasonable request) with such information and documents in their possession or under their control, or that a Seller can execute or cause to be executed, as will enable Buyer to prosecute any and all petitions, applications and Claims relating to or constituting a part of the Assets or the Business.
For and during the period of time commencing on the Closing Date and expiring 5 years thereafter, no Seller shall, and each Seller shall cause its Subsidiaries not to, directly or indirectly, whether individually or in partnership or association with any one or more persons or entities, or as a principal, partner, member, manager, shareholder, agent, employee, consultant, or contractor, or in any other capacity:
(a) establish or participate in, or lend money to or otherwise finance, a business competing with the Business within a 150 miles radius of any Facility (the “Restricted Territory”); provided, however, that an ownership interest of less than 2% of the outstanding stock of any publicly traded corporation that is engaged in a business competing with the Business shall not be deemed to violate this Section 5.08(a), so long as no officer, manager or director of any Seller or any Affiliate of any Seller is a member of the board of directors (or other similar governing body) of such publicly traded corporation;
(b) solicit, contact, request, induce or attempt to influence any Person that is or was a customer, supplier or vendor of the Business as of the Closing Date or at any time during the 2 years prior to the Effective Date to purchase or provide products or services that are the same or substantially similar to those offered to such customer by such Seller or provided to such Seller by such supplier or vendor pursuant to the Business as of the Effective Date; provided, however, that this Section 5.08(b) shall not prevent Sellers or their Subsidiaries from purchasing products or services from suppliers or vendors who provide general products or services (including commercially available software, office equipment, and the like) to the business public at large;
(c) (i) solicit for employment (or assist anyone in soliciting the employment of) any individual employed by any Seller with respect to the Business that is subsequently retained by Buyer as an employee; or (ii) induce, or assist anyone in inducing, any individual employed by any Seller with respect to the Business that is subsequently retained by Buyer as an employee to resign or sever employment, or to terminate or breach any employment agreement, with Buyer; provided, that general advertisements or solicitation programs conducted by or on behalf of a Seller or any of its Affiliates that are not specifically directed toward such employees shall not be deemed to violate this Section 5.08(c); or
(a) Except as otherwise expressly set forth in this Agreement, all expenses of the negotiation and preparation of this Agreement and related to the Transaction, including legal counsel, accounting, brokerage and investment advisor fees and disbursements, shall be borne by the respective Party incurring such expense, whether or not the Transaction is consummated. Sellers shall be responsible for paying any fees and expenses of any Seller’s investment banker or other advisers, if any, incurred in connection with the Transaction.
(b) Any ad valorem property Taxes with respect to the Assets shall be prorated between the Parties as of the Closing Date, with Sellers liable to the extent such items relate to any time on or prior to the Closing Date, and with Buyer liable to the extent such items relate to periods subsequent to the Closing Date. Buyer shall be liable for all transfer, deed, conveyance, recording, transaction privilege, sales and use taxes and fees related to the transfer of the Assets or the Business.
(c) Sellers shall pay all amounts required to remove all Encumbrances on the Assets that exist at or prior to the Closing and that are not Permitted Encumbrances.
(d) Buyer shall withhold from the Purchase Price an amount equal to Sellers’ liability for, and cause to be paid at Closing (to the extent applicable), all such Taxes, Encumbrance discharge amounts and other costs, fees and expenses described in Sections 5.09(b) and 5.09(c) (such amount, collectively, the “Payoff Amounts”). The aggregate amount recorded as a liability on the Balance Sheet of ISA applicable to the capital leases set forth on Schedule 5.09(d) (the “Capital Lease Deduct”) shall also be included in the Payoff Amounts. Upon ISA’s request, Sellers’ advisor expenses and fees described in Section 5.09(a) may also be included in the Payoff Amounts, to the extent additional Purchase Price proceeds are available.
(a) ISA shall cause and permit Buyer to fully participate in negotiations with respect to, and the opportunity to review and provide comments on, the draft Kentucky Pollutant Discharge Elimination System permit (the “KPDES Permit”), draft storm water compliance agreed order (the “KPDES Order”), and draft best management practices plan which is to be incorporated into the KPDES Order (“BMP Plan”) for the Main Facility currently being negotiated with the Kentucky Energy and Environment Cabinet (the “Cabinet”). Buyer may, at its sole election, attend any and all in-person meetings, conference calls, and any other discussions, whether open to the public or not, scheduled with the Cabinet to discuss storm water compliance, the KPDES Permit, the KPDES Order and/or the BMP Plan for the Main Facility. Further, Sellers shall (i) neither seek to materially alter the terms of the KPDES Permit (as shown in the April 22, 2019 draft provided to ISA by the Kentucky Division of Water (“KDOW”), a full and accurate copy of which is attached to Schedule 5.10(a)), the KPDES Order (as described in Schedule 5.10(a)), or the BMP Plan (as submitted by ISA to KDOW on July 25, 2019, a full and accurate copy of which is attached to Schedule 5.10(a)), nor accept changes requested by the Cabinet that would materially alter these documents, except with Buyer’s prior written consent and (ii) use commercially reasonable efforts to procure the KPDES Permit, the KPDES Order and the BMP Plan on such terms as soon as possible following the Effective Date. Following the Closing, Buyer shall comply with the final KPDES Permit and the terms of the final KPDES Order and BMP Plan, in each case to the extent relating to post-Closing operations at the Main Facility, and shall be solely liable for any non-compliance with the KPDES Permit or the final KPDES Order and BMP Plan, including any civil penalties, stipulated penalties, or other fines or liabilities arising thereunder solely with respect to post-Closing operations at the Main Facility.
(b) From and after the Closing, ISA or its designee shall pay, or shall cause or make arrangements to cause to be paid, in each case first from the Chemetco Escrow Amount in accordance with the terms and conditions of the Chemetco Escrow Agreement, to the applicable Person, any Liabilities arising out of or attributable to any Environmental Claims related to the Chemetco Superfund Site for which ISA or any of its Affiliates is liable, including ISA’s percentage share under or pursuant to the Chemetco Site Informational Group and Cost Sharing Agreement (as amended), the Administrative Settlement Agreement and Order on Consent for Remedial Investigation/Feasibility Study, CERCLA Docket No. V-W-15- C-019 (RI/FS AOC) with U.S. EPA to perform a Remedial Investigation/Feasibility Study (RI/FS) at the Chemetco Superfund Site, and any amendments, replacements or successor agreements and/or orders to fund and perform a Remedial Design/Remedial Action, final remedy, and any other remedial action required by a Governmental Authority at the Chemetco Superfund Site.
Each Party will execute and deliver at the Closing each agreement, instrument or other document that such Party is required by this Agreement to execute and deliver as a condition to the Closing, and will take all commercially reasonable steps necessary or desirable and proceed diligently and in good faith to satisfy each other condition to the obligations of the Parties contained in this Agreement, to the extent that satisfaction of such condition is within the control of such Party.
From time to time prior to the Closing, Sellers shall have the right (but not the obligation) to supplement or amend the Schedules hereto with respect to any matter hereafter first arising after the date hereof (each a “Schedule Supplement”). Any disclosure in any such Schedule Supplement shall not be deemed to have cured any inaccuracy in or breach of any representation or warranty contained in this Agreement, including for purposes of the indemnification or termination rights contained in this Agreement or of determining whether or not the conditions set forth in Section 7.01(a) have been satisfied; provided, however, that if Buyer obtains the right to, but does not elect to, terminate this Agreement arising out of its receipt of such Schedule Supplement, then Buyer shall be deemed to have irrevocably waived any right to terminate this Agreement with respect to such matter unless Buyer elects to terminate this Agreement within five (5) Business Days following its receipt of such Schedule Supplement. Buyer’s failure to terminate this Agreement in response to any Schedule Supplement shall in no event be construed as a waiver of any of its right to indemnification under Section 9.02 with respect to such matter.
Sellers understands that, subsequent to the Closing, Buyer shall own the names “Industrial Services of America” and “ISA” as well as those trade names set forth on Schedule 2.01(j) and that such names and any and all derivations thereof and any other business names under which the Business currently operates are included in the Assets. Within ninety (90) days following the Closing, Sellers shall change their names to names that are not confusingly similar with those names included in the Assets (to the extent applicable), and after the Closing, no Seller shall use, directly or indirectly, any such names or any other name that is confusingly similar thereto, except as necessary to satisfy its obligations hereunder.
The obligations of Sellers to consummate the Transaction is subject to the satisfaction on or prior to the Closing Date of the following conditions, unless waived in writing by ISA:
No Governmental Authority shall have taken or, to the Knowledge of Sellers, threatened to take any action restraining or prohibiting the Transaction and as a result of which any Seller reasonably and in good faith deems it inadvisable to proceed with the Transaction, and there shall not be in effect any Order restraining, enjoining or otherwise preventing consummation of the Transaction; provided that the Parties shall have used their respective commercially reasonable efforts to cause any such Order to be vacated or lifted. No Proceeding shall have been instituted or threatened by any Person to prohibit, restrain or delay the Transaction or otherwise challenge the power and authority of the Parties to enter into this Agreement or to carry out their obligations hereunder or the legality and validity of the Transaction.
The Shareholder Approval shall have been obtained in accordance with applicable Legal Requirements and the Organizational Documents of ISA.
Buyer shall have delivered to ISA those deliverables set forth in Section 8.03.
The KPDES Permit and KPDES Order have been issued by the Cabinet, each on terms not materially different (in a manner adverse to Sellers with respect to the KPDES Fines) from those described in Schedule 5.10(a); provided, however, that if the Cabinet issues a KPDES Permit or KPDES Order materially different (in a manner adverse to Sellers with respect to the KPDES Fines) from such terms and ISA has appealed such issuance in accordance with applicable Legal Requirements, then the senior executives of ISA and Buyer shall work together in good faith for a period of 30 days to attempt to negotiate and resolve any outstanding issues relating to the KPDES Permit and KPDES Order, and the condition set forth in this Section 6.05 shall not be deemed to be impossible to satisfy until the end of such 30-day negotiation period, provided further, however, that nothing set forth in this Section 6.05 shall prevent ISA from terminating this Agreement pursuant to Section 8.05(a)(iii) at any time after the Closing Date Deadline has passed.
The obligation of Buyer to consummate the Transaction is subject to the satisfaction on or prior to the Closing Date of each of the following conditions, unless waived in writing by Buyer:
No Governmental Authority shall have taken or, to the Knowledge of Buyer, threatened to take any action restraining or prohibiting the Transaction and as a result of which Buyer reasonably and in good faith deems it inadvisable to proceed with the Transaction, and there shall not be in effect any Order restraining, enjoining or otherwise preventing consummation of the Transaction; provided that the Parties shall have used their respective commercially reasonable efforts to cause any such Order to be vacated or lifted. No Proceeding shall have been instituted or threatened by any Person to prohibit, restrain or delay the Transaction or otherwise challenge the power and authority of the Parties to enter into this Agreement or to carry out their obligations hereunder or the legality and validity of the Transaction.
Buyer shall have obtained or received from the Sellers documentation or other evidence reasonably satisfactory to Buyer that Sellers or Buyer has received or will receive the consents, permits, approvals, authorizations and clearances required to be obtained in order for (a) the Assumed Contracts, Real Property Leases and Permits set forth on Schedule 7.03 to be transferred to Buyer and (b) the Transaction to be lawfully consummated in all material respects. The Shareholder Approval shall have been obtained in accordance with applicable Legal Requirements and the Organizational Documents of ISA.
There shall have been no Material Adverse Effect.
Buyer shall have obtained or received from Sellers documentation or other evidence reasonably satisfactory to Buyer, issued by the Kentucky Department of Revenue, stating that no Taxes are due by any Seller.
Sellers shall have delivered to Buyer those deliverables set forth in Section 8.02.
The KPDES Permit and KPDES Order have been issued by the Cabinet, each on terms not materially different (in a manner adverse to Buyer) from those described in Schedule 5.10(a); provided, however, that if the Cabinet issues a KPDES Permit or KPDES Order materially different (in a manner adverse to Buyer) from such terms, then the senior executives of ISA and Buyer shall work together in good faith for a period of 30 days to attempt to negotiate and resolve any outstanding issues relating to the KPDES Permit and KPDES Order, and the condition set forth in this Section 7.07 shall not be deemed to be impossible to satisfy until the end of such 30-day negotiation period, provided further, however, that nothing set forth in this Section 7.07 shall prevent Buyer from terminating this Agreement pursuant to Section 8.05(a)(iii) at any time after the Closing Date Deadline has passed.
At the Closing and unless otherwise waived in writing by Sellers, Buyer shall deliver or cause to be delivered to ISA on behalf of all Sellers:
Upon receipt of the instructions referenced in Section 8.02(a), the Closing Agent shall perform a title update through the Closing Date. So long as such update does not reveal any new Encumbrances other than Permitted Encumbrances, the Closing Agent shall record the Deeds and notify Buyer and ISA of such actions. At such time, the Parties shall take the actions described in Sections 2.05, 8.02(b) and 8.03.
Sellers agree that they shall jointly and severally indemnify and hold harmless Buyer, Buyer’s Affiliates, and each of their respective officers, directors, employees, agents, successors and assigns (collectively, the “Buyer Indemnified Persons”) from, and will pay to the Buyer Indemnified Persons the amount of, any loss, Liability, Claim, damage, expense, fine or penalty (including the same as they relate to injury to any Person or property, reasonable costs of investigation and defense, and reasonable attorneys’ fees, whether or not involving a Third‑Party Claim) (collectively, “Damages”), arising, directly or indirectly, from or in connection with:
Buyer will indemnify and hold harmless Sellers, and Sellers’ Affiliates, officers, directors, employees and agents (collectively, the “Seller Indemnified Persons”) from, and will pay to the Seller Indemnified Persons the amount of any Damages arising, directly or indirectly, from or in connection with:
Buyer shall not be subject to any liability under this Article IX with respect to any breach of any of Buyer’s representations and warranties under Article IV until all Damages of the Seller Indemnified Persons exceed the Basket Amount, at which point Buyer shall indemnify the Seller Indemnified Persons with respect to all Damages in excess of the Basket Amount, but such indemnification amount shall not exceed the Cap; provided, however, neither the Basket Amount nor the Cap shall apply (but the Overall Cap shall apply) to any Damages in connection with (a) any Claim based on fraud or (b) any Claim under Section 9.04(b), (c) or (d). For purposes of this Article IX, the determination of the amount of Damages (but not the determination of whether any breach, untruth or inaccuracy of any Buyer representation or warranty has occurred) shall be determined without regard to any materiality, Material Adverse Effect or other similar qualification contained in or otherwise applicable to such representation or warranty.
The Indemnifying Person’s obligation to indemnify the Indemnified Persons shall terminate at the conclusion of the time periods set forth in this Article IX, except with respect to Damages that are the subject of a Third-Party Claim or Direct Claim notice issued by any Indemnified Person in accordance herewith, setting forth in reasonable detail the basis of the Claim for which indemnification is sought and such notice is issued within the time period set forth in Section 9.01(g).
Parent hereby unconditionally and irrevocably guarantees to Sellers the timely performance of all payment obligations of Buyer under this Agreement up to and including the Closing (for purposes of this Article X, the “Buyer’s Obligations”); provided, however, that Parent’s guaranty of Buyer’s obligations pursuant to this Article X shall terminate immediately after the Closing, subject to reinstatement pursuant to Section 10.04 hereof. Sellers acknowledge and agree that Buyer’s Obligations are subject to and shall be determined in accordance with the express terms and conditions of this Agreement.
Parent agrees that this guaranty may be enforced by Sellers without the necessity at any time of resorting to or exhausting any other remedy or without the necessity at any time of having recourse to this Agreement. Parent hereby waives the right to require Sellers to proceed against Buyer or any other Person or to require Sellers to pursue any other remedy or enforce any other right. Until such time as all amounts owing hereunder have been paid in full, Parent shall have no rights or claims for subrogation, indemnity, reimbursement or contribution for any amounts paid under this guaranty. Parent agrees that nothing contained herein shall prevent Sellers from exercising any and all rights or remedies under this Agreement or any other document or instrument executed in connection with this Agreement if neither Buyer nor Parent timely performs Buyer’s Obligations, and the exercise of any of the aforesaid rights and the completion of any proceedings related thereto shall not constitute a discharge of any of Parent’s obligations hereunder, it being the express purpose and intent of Parent that Parent’s obligations hereunder shall be absolute, independent and unconditional under any and all circumstances. Neither Parent’s obligations under this guaranty nor any remedy for the enforcement thereof shall be impaired, modified, changed or released in any manner whatsoever by an impairment, modification, change, release or limitation of the liability of Buyer or by reason of bankruptcy or insolvency.
Parent expressly waives (a) protest, (b) notice of acceptance of this guaranty by Sellers, (c) demand for payment of any of Buyer’s Obligations and (d) promptness, diligence, notice of non-performance, default, dishonor and protest, and all other notices of any kind. Parent acknowledges that it will receive substantial direct and indirect benefits from the Transaction and that the waivers set forth in this Article X are knowingly made in contemplation of such benefits.
This guaranty shall continue to be effective, or be reinstated, as the case may be, if at any time payment or performance, or any part thereof, of any of Buyer’s Obligations is rescinded or must otherwise be restored or returned by Sellers upon insolvency, bankruptcy, dissolution, liquidation or reorganization of Buyer, or upon or as a result of the appointment of any receiver, intervenor or conservator of, or trustee or similar officer for Buyer or any substantial part of its property; or otherwise, as if such payments or performances had not been made.
If at any time or times hereafter Sellers employ counsel to pursue collection, to intervene, to sue for enforcement of the terms hereof, or to file a petition, complaint, answer, motion or other pleading in any suit or proceeding related to this guaranty, then in each such event where Sellers prevail, all of the reasonable attorneys’ fees and expenses and court costs related thereto shall be an additional liability of Parent to Sellers, payable on demand.
Except as otherwise provided in Section 9.06(d), this Agreement will be governed by and construed in accordance with the domestic laws of the State of Delaware without giving effect to any choice or conflict of law provision or rule (whether of the State of Delaware or any other jurisdiction) that would cause the application of the laws of any other jurisdiction. Each Party hereby submits to the exclusive jurisdiction of the state and federal courts located in Wilmington, Delaware, for purposes of all legal proceedings arising out of or relating to this Agreement. Each Party irrevocably waives, to the fullest extent permitted by law, any objection that it may now or hereafter have to the laying of the venue of any such proceeding brought in such a court and any claim that any such proceeding brought in such a court has been brought in an inconvenient forum. Each Party hereby irrevocably waives any and all right to trial by jury in any legal proceeding arising out of or relating to this Agreement.
The Schedules and all Exhibits and documents referred to in or attached to this Agreement are integral parts of this Agreement as if fully set forth herein and all statements appearing therein shall be deemed to be representations. Any item disclosed in any section or subsection of the Schedules shall be deemed to have been disclosed with respect to any other section and/or subsection of the Agreement for which a cross reference is expressly included to such other section and/or subsection or which relates (to the extent reasonably apparent on the face of such disclosure, based on a plain reading) to such other section and/or subsection.
The Parties agree to report the Transaction as an asset purchase and sale for the purposes of calculating the Parties’ respective Liabilities for Taxes. Each Party represents that it has obtained, or may obtain, independent Tax advice with respect to the Transaction and upon which it, if so obtained, has solely relied. This Section 11.03 in no way limits the Sellers’ representations in Section 3.18 or any Party’s covenants in Section 5.06.
Except with respect to the Buyer Indemnified Persons and the Seller Indemnified Persons in their capacity as such, the terms and provisions of this Agreement (including provisions regarding employee and employee benefit matters) are intended solely for the benefit of the Parties, and their respective successors and permitted assigns, and are not intended to confer third‑party beneficiary rights upon any other Person.
The waiver by any Party of any breach or violation by another Party of any provision of this Agreement or of any right or remedy of the waiving Party in this Agreement (a) shall not waive or be construed to waive any subsequent breach or violation of the same provision, unless expressly contemplated in such waiver, (b) shall not waive or be construed to waive a breach or violation of any other provision, and (c) shall be in writing and may not be presumed or inferred from any Party’s conduct. In addition to any other rights and remedies any Party may have at law or in equity for breach of this Agreement, each Party shall be entitled to seek an injunction to enforce the provisions of this Agreement.
All representations and warranties hereunder shall be given independent effect so that if a particular representation or warranty proves to be incorrect or is breached, the fact that another representation or warranty concerning the same or similar subject matter is correct or is not breached will not affect the incorrectness of or a breach of a representation and warranty hereunder.
In the event notice is required to be given to a Party pursuant to any provision of this Agreement, such notice shall be properly given and in full compliance with this Agreement if such notice is in writing and is delivered: (a) by an internationally recognized overnight courier, postage prepaid; (b) by personal delivery to the Party; or (c) by facsimile transmission or electronic mail delivery receipt confirmed as follows:
If to Buyer or Parent: |
River Metals Recycling LLC c/o The David J. Joseph Company 300 Pike Street Cincinnati, OH 45202 |
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Attn: Facsimile: Email: |
Christopher J. Bedell (513) 345-4363 CJB@DJJ.com |
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with a copy (which shall not constitute notice) to: |
Moore & Van Allen PLLC 100 North Tryon Street, Suite 4700 Charlotte, NC 28202 |
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Attn: Facsimile: Email: |
Rob Rust (704) 339-5820 robrust@mvalaw.com |
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If to a Seller: |
Industrial Services of America, Inc. 7100 Grade Lane Louisville, KY 40213 |
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Attn:
Email:
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Todd Phillips TPhillips@isa-inc.com
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with a copy (which shall not constitute notice) to: |
Frost Brown Todd LLC 400 West Market Street, 32nd Floor Louisville, KY 40202-3363 |
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Attn: Facsimile: Email: |
James Giesel and Jeff Hallos (502) 581-1087 jgiesel@fbtlaw.com jhallos@fbtlaw.com |
or at such other address as the Parties may have furnished to the other in writing in accordance with this Section 11.07. Such notice shall be deemed delivered upon receipt.
If any provision of this Agreement is held or determined to be illegal, invalid or unenforceable under any present or future law by a court of competent jurisdiction: (a) such provision will be fully severable; (b) this Agreement will be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a part hereof; (c) the remaining provisions of this Agreement will remain in full force and effect and will not be affected by the illegal, invalid or unenforceable provision or by its severance herefrom; and (d) in lieu of such illegal, invalid or unenforceable provision, ISA and Buyer agree to negotiate in good faith a legal, valid and enforceable provision as similar in terms to such illegal, invalid or unenforceable provision as may be possible.
This Agreement, the Confidentiality Agreement and the other documents contemplated by this Agreement collectively supersede all prior or contemporaneous contracts, agreements and understandings and constitute the entire agreement of whatsoever kind or nature existing between or among the Parties regarding the subject matter of this Agreement, and no Party shall be entitled to benefits other than those specified herein and therein. This Agreement may be executed in 2 or more counterparts (and with facsimile or electronic signatures), each and all of which shall be deemed an original and all of which together shall constitute but one and the same instrument. This Agreement may not be amended except in a written instrument executed by the Parties.
Except as expressly permitted by Section 8.01(b), no Party may assign its rights, or delegate its duties, under this Agreement, whether by operation of law or otherwise, without the prior written consent of the other Parties, and any such purported assignment shall be void ab initio.
Except as otherwise provided herein, the Parties shall adhere to the terms and conditions of the Confidentiality Agreement, and the Confidentiality Agreement shall continue in full force and effect until such time as the Confidentiality Agreement expires or terminates pursuant to its terms; provided, however, the Parties agree that all Confidential Information (as defined in the Confidentiality Agreement) of Sellers that was included in the Assets shall, for purposes of the Confidentiality Agreement and otherwise, be deemed to be the Confidential Information of Buyer, and no Seller shall disclose such Confidential Information except with the prior written consent of Buyer, as necessary to discharge the Excluded Liabilities, in a dispute between Buyer and Sellers, or as otherwise contemplated by this Agreement. Any public announcement or similar publicity with respect to this Agreement or the Transaction will be issued, if at all, at such time and in such manner as mutually agreed to by ISA and Buyer; provided, however, the foregoing shall not prohibit any Party from making, issuing or releasing any public announcements, statements or acknowledgments that such Party is required to make, issue or release by applicable Legal Requirements or by any listing agreement with or listing rules of any national securities exchange, provided further, however, that, with the exception of the announcement of this Transaction and the filing of Form 8-K on or immediately following the Effective Date and the making of any other statement substantially consistent therewith in subsequent filings with the U.S. Securities and Exchange Commission, to the extent not prohibited by applicable Legal Requirements, the issuing Party shall use commercially reasonable efforts to provide the other Party with written notice of such announcement, statement or acknowledgement (including a copy of the same) at least two (2) Business Days prior to any such issuance. In the event of a conflict between the terms of this Agreement and the Confidentiality Agreement, the terms of this Agreement shall control.
The Parties are sophisticated and have been represented throughout the Transaction by attorneys who have carefully negotiated the provisions hereof. As a consequence, the Parties do not intend that the presumptions of laws or rules relating to the interpretation of contracts against the drafter of any particular clause should be applied to this Agreement or any agreement or instrument executed in connection herewith, and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any provisions of this Agreement
[ remainder of page intentionally left blank ]
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed in multiple originals by their duly authorized officers as of the Effective Date.
BUYER: |
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RIVER METALS RECYCLING LLC, |
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a Kentucky limited liability company |
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By: /s/ Bob E. Eviston |
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Name: Bob E. Eviston |
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Title: President |
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PARENT: |
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THE DAVID J. JOSEPH COMPANY |
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(for the limited purposes set forth in Article X), |
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a Delaware corporation |
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By: /s/ David Steigerwald |
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Name: David Steigerwald |
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Title: EVP |
Signature Page to Asset Purchase Agreement
SELLERS: |
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INDUSTRIAL SERVICES OF AMERICA, INC., |
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a Florida corporation |
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By: /s/ Todd L. Phillips |
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Todd L. Phillips, Chief Executive Officer |
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ISA INDIANA, INC., |
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an Indiana corporation |
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By: /s/ Todd L. Phillips |
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Todd L. Phillips, President |
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ISA LOGISTICS LLC, |
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a Kentucky limited liability company |
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By: INDUSTRIAL SERVICES OF AMERICA, INC., |
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Sole Member |
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By: /s/ Todd L. Phillips |
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Todd L. Phillips, Chief Executive Officer |
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ISA REAL ESTATE, LLC, |
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a Kentucky limited liability company |
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By: INDUSTRIAL SERVICES OF AMERICA, INC., |
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Manager |
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By: /s/ Todd L. Phillips |
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Todd L. Phillips, Chief Executive Officer |
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ISA INDIANA REAL ESTATE LLC, |
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a Kentucky limited liability company |
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By: INDUSTRIAL SERVICES OF AMERICA, INC., |
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Manager
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By: /s/ Todd L. Phillips |
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Todd L. Phillips, Chief Executive Officer |
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7021 GRADE LANE LLC, |
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a Kentucky limited liability company |
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By: INDUSTRIAL SERVICES OF AMERICA, INC., |
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Manager |
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By: /s/ Todd L. Phillips |
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Todd L. Phillips, Chief Executive Officer |
Signature Page to Asset Purchase Agreement
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7124 GRADE LANE LLC, |
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a Kentucky limited liability company
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By: INDUSTRIAL SERVICES OF AMERICA, INC., |
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Manager |
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By: /s/ Todd L. Phillips |
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Todd L. Phillips, Chief Executive Officer |
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7200 GRADE LANE LLC, |
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a Kentucky limited liability company |
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By: INDUSTRIAL SERVICES OF AMERICA, INC., |
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Manager |
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By: /s/ Todd L. Phillips |
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Todd L. Phillips, Chief Executive Officer |
Signature Page to Asset Purchase Agreement
62 |
EXHIBIT 99.1
Industrial Services of America, Inc.
Announces Agreement to Sell Substantially All of Its Assets
LOUISVILLE, KY (August 19, 2019) – Industrial Services of America, Inc. (NASDAQ: IDSA) (the “Company” or “ISA”), a company that buys, processes and markets ferrous and non-ferrous metals and other recyclable commodities, today announced that it has entered into a definitive agreement to sell substantially all of its assets (the “Transaction”) to River Metals Recycling LLC (“River Metals”), a subsidiary of The David J. Joseph Company.
The purchase price is $23,300,000, less certain payoff amounts relating to taxes, encumbrances, and assumed capital leases, and is subject to a net working capital adjustment. The Company expects the net proceeds available for distribution to shareholders following the payment of debt, transaction costs and other expenses to be an estimated $1.15 to $1.35 per share, in one or more distribution installments. The mid-point of this range represents a 70% premium to the Company’s closing stock price on the business day immediately prior to this announcement and a 38% premium to the Company’s average closing stock price over the past thirty trading days. These estimates are subject to a number of factors, including the Company’s operating results up until the closing.
The Transaction follows an extended process in which a special committee of the Company’s board of directors explored strategic alternatives available to the Company and evaluated sale opportunities with the advice and assistance of its financial advisor, Conway MacKenzie Capital Advisors LLC. The Transaction was unanimously approved by the Company’s board of directors.
The Transaction is subject to satisfaction or waiver of closing conditions set forth in the purchase agreement, including approval by the Company’s shareholders. The Company will call and hold a shareholders’ meeting seeking to obtain this approval. The closing of the Transaction is also conditioned on the issuance of a storm water permit and agreed order on terms not materially different from those currently being discussed with the state agency in connection with the Company’s efforts to ensure future compliance with the stormwater permit at one of its facilities. The Company expects the Transaction to close in late fourth quarter 2019 or early first quarter 2020.
Although Todd Phillips, the Company’s CEO, is not expected to join River Metals, River Metals intends to hire substantially all of ISA’s employees immediately after the closing of the Transaction.
The Company does not expect any changes for ISA’s valued customers and suppliers. ISA will continue to operate in the normal course until the Transaction closes.
Todd Phillips, the Company’s CEO, stated: “ISA has a long and proud history, dating back to its founding by Harry Kletter in the mid-1950s. I’m excited that the ISA legacy will live on within River Metals and The David J. Joseph Company. As the consolidation of the domestic steel recycling industry continues, our board, its special committee and management became convinced that combining the ISA business with River Metals will lead to the best outcome for our shareholders, our employees, our customers and our suppliers.”
The Company’s board of directors also unanimously adopted a Plan of Dissolution (the “Plan of Dissolution”), which contemplates the eventual sale of any remaining assets and a wind down of the Company’s business affairs. Following closing of the Transaction and payment of outstanding liabilities, along with other actions specified in the Plan of Dissolution, including reserving for contingent liabilities, the Company intends to distribute net proceeds from the Transaction and Plan of Dissolution to its shareholders in one or more distribution installments. The Plan of Dissolution is subject to completion of the Transaction and shareholder approval.
Further details on the Transaction and the Plan of Dissolution are contained in the Company’s current report on Form 8-K filed on or about the date of this press release. More information regarding the Transaction and the Plan of Dissolution will be included in a proxy statement that ISA intends to file with the Securities and Exchange Commission (“SEC”) and distribute to shareholders. Such proxy statement will include information regarding the timing of the shareholders’ meeting to consider approval of the Transaction and the Plan of Dissolution.
About ISA
Headquartered in Louisville, Kentucky, Industrial Services of America, Inc., is a publicly traded company that buys, processes and markets ferrous and non-ferrous metals and other recyclable commodities, and buys used autos in order to sell used auto parts. More information about ISA is available at www.isa-inc.com.
Important Information for Shareholders
Communications in this press release do not constitute a solicitation of any vote or approval. In connection with the Transaction and the Plan of Dissolution, the Company will be filing documents with the SEC, including a proxy statement. Before making any voting decision, Company shareholders are urged to read carefully the proxy statement and any other relevant documents filed by the Company with the SEC when they become available because they will contain important information about the sale of the assets and the Plan of Dissolution. This press release is not a substitute for any proxy statement or any other document which the Company may file with the SEC in connection with the proposed transaction. You may obtain copies of all documents we file with the SEC, free of charge, at the SEC’s website (www.sec.gov), on the Company’s website (http://www.isa-inc.com/) under “Investors”, or by sending a written request to the Company at Industrial Services of America, Inc., 7100 Grade Lane, Louisville, Kentucky 40213, Attn: Todd Phillips.
The Company and its directors and executive officers and certain other members of management and employees may be deemed to be participants in the solicitation of proxies in respect of the Transaction and the Plan of Dissolution. You can find information about the Company’s directors and executive officers in the Company’s annual report on Form 10-K, as amended, for the year ended December 31, 2018. Other information regarding the participants in the proxy solicitation and a description of their direct and indirect interests, by security holdings or otherwise, will be contained in the proxy statement and other relevant materials to be filed with the SEC when they become available. Shareholders can obtain free copies of these documents from the Company using the contact information above.
Forward-Looking Statements
The statements in this press release that are not historical, including without limitation statements regarding the Company’s beliefs, expectations, prospects, strategic plans and statements regarding the sale of the assets or other future transactions, constitute “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical fact should be considered “forward-looking statements” for these purposes. In some cases, forward-looking statements can be identified by the use of such terminology as “may,” “will,” “expects,” “plans,” “anticipates,” “intends,” “believes,” “estimates,” “potential,” or “continues,” or the negative thereof or other similar words. Although we believe that the expectations reflected in our forward-looking statements are reasonable, we can give no assurance that such expectations or any of our forward-looking statements will prove to be correct. Examples of forward-looking statements include, but are not limited to, those regarding the transactions contemplated by the Asset Purchase Agreement and the Plan of Dissolution. Forward-looking statements are subject to inherent risks and uncertainties, and actual results and developments may be materially different from those expressed or implied by the forward-looking statements. Important factors that could cause actual results to differ from those expressed or implied by the forward-looking statements include the possibility that the transactions contemplated by the Asset Purchase Agreement will not close, including without limitation as a result of the failure to satisfy the closing conditions, including failure of the Company to obtain the required shareholder approval; that disruption from the pending sale and dissolution may make it more difficult to maintain business and operational relationships for the Company; that the Company may not obtain shareholder approval of the Transaction and the Plan of Dissolution; that the costs and reserves associated with the Transaction and the Plan of Dissolution may be higher than anticipated; that operating results of the Company are less favorable than currently estimated by management, which would negatively impact the amounts distributable to the shareholders; that the length of time associated with the consummation of the Transaction and the Plan of Dissolution may be longer than anticipated for various reasons; and that the other anticipated benefits from the sale of the assets and the Plan of Dissolution will not be realized.
Further information on risks we face is contained in our filings with the SEC, including our Form 10-K, as amended, for the fiscal year ended December 31, 2018, and will be contained in our SEC filings in connection with the sale of the assets and the Plan of Dissolution. Any forward-looking statement made by us herein speaks only as of the date on which it is made. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. Because of these risks, uncertainties and assumptions, you should not place undue reliance on these forward-looking statements. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law.