Item 2.01
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Completion of Acquisition or Disposition of Assets
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On December 16, 2019 (the “Closing Date”), Industrial Services of America, Inc. (the “Company”) completed its previously announced asset sale (the “Transaction”) pursuant to the Asset Purchase Agreement (the “Purchase Agreement”) dated as of August 16, 2019, by and between the Company and its subsidiaries, and River Metals Recycling LLC (“River Metals”) and its parent company, The David J. Joseph Company. The sale of the assets was made pursuant to the Purchase Agreement which was previously reported on the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission (the “SEC”) on August 19, 2019 (the “Prior 8-K”), and which was described in the Company’s definitive proxy statement first mailed to security holders on October 21, 2019.
Pursuant to the Purchase Agreement, River Metals has acquired substantially all of the assets of the Company and its wholly-owned subsidiaries and assumed certain liabilities of the Company and its wholly-owned subsidiaries.
As previously reported in the Prior 8-K, the Purchase Agreement provided for a base purchase price for the assets of $23.3 million in cash, which price was subject to increase or decrease based on a working capital adjustment, based on a target working capital amount of $8.4 million at the closing. For purposes of the closing, the working capital was estimated to be approximately $5,291,843, resulting in a negative purchase price adjustment of $3,108,157 for the working capital underage. Within 45 days after the Closing Date (plus certain objection and resolution periods), a final net working capital will be determined. The final working capital adjustment is supported by a working capital escrow of $600,000 in cash, which was funded out of the base purchase price on the Closing Date. If the final net working capital is greater than the estimated working capital as of closing, River Metals will pay the Company such excess amount and the working capital escrow amount shall be released to the Company in its entirety. If the final net working capital is less than the estimated working capital, then the shortfall amount shall be paid to River Metals by the escrow agent from the working capital escrow amount. If such shortfall is greater than the working capital escrow amount, then the Company shall pay to River Metals in cash the amount by which such shortfall amount exceeds the working capital escrow amount.
In addition, $100,000 of the purchase price will be held in escrow to satisfy potential liabilities of the Company relating to the Chemetco Superfund Site in Hartford, Illinois. The purchase price was also subject to a deduction of approximately $70,000 for a proration of taxes and fees. The Company had additional closing costs of approximately $1.3 million.
In connection with the consummation of the Transaction, on the Closing Date upon the Company’s payment of approximately $5,600,000, all amounts outstanding under the Loan and Security Agreement dated as of November 9, 2018, between the Company and Bank of America, N.A., were repaid in full. In addition, on the Closing Date the Company repaid all amounts outstanding (approximately $1.0 million) under the term notes issued to K & R, LLC and 7100 Grade Lane, LLC.
The purchase price was also subject to a deduction of approximately $765,000 related to certain capital leases that were either assumed or paid off by River Metals.
The foregoing description of the Purchase Agreement is qualified in its entirety by reference to the full text of the Purchase Agreement, a copy of which is attached hereto as Exhibit 2.1 (incorporated by reference to Exhibit 2.1 to the Prior 8-K), and is incorporated by reference herein.