Exhibit 10.38

 

CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY ASTERISKS
[*], HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.

 

APPLIANCE SALES AND RECYCLING AGREEMENT

 

This Appliance Sales and Recycling Agreement (the “Agreement”) is made and
entered into as of October 21, 2009, (the “Effective Date”) by and between the
General Electric Company, a New York corporation, acting through its GE
Consumer & Industrial business component located at Appliance Park, Louisville,
Kentucky 40225 (“GE”), and Appliance Recycling Centers of America, Inc., a
Minnesota corporation, located at 7400 Excelsior Blvd., Minneapolis, Minnesota
55426 (“ARCA”).  GE and ARCA are sometimes each referred to as a “Party” or
jointly as the “Parties.”

 

WHEREAS, GE is engaged in the design, manufacture, sale, distribution and home
delivery of major home appliances including, without limitation, refrigerators,
freezers, air conditioners, dehumidifiers, home laundry, dishwashers, trash
compactors, garbage disposals, cooking products, water heaters, water softeners,
water dispensers, water filters and related accessories (“Appliances”);

 

WHEREAS, GE in the course of its distribution and home delivery of Appliances,
receives substantial quantities of used and/or damaged recyclable Appliances of
GE and non-GE brands (hereinafter “Recyclable Appliances” is used
interchangeably to refer to used and/or damaged recyclable Appliances of GE and
non-GE brands, either resulting from GE’s distribution and home delivery,
referral under Article 3 herein or otherwise);

 

WHEREAS, ARCA is engaged in large scale processing and recycling of Recyclable
Appliances and is the authorized North American distributor of advanced
recycling equipment and systems for UNTHA Recycling Technology GmbH (“UNTHA”);
and

 

WHEREAS, GE and its Affiliates as hereinafter defined, wish to sell Recyclable
Appliances to ARCA for collection, processing and recycling of such Recyclable
Appliances and Other Recyclable Items (as defined in Schedule 1.1(e)) at a
regional processing center established to collect, process and recycle
Recyclable Appliances and Other Recyclable Items from a specific region of the
United States (“RPC”) established and operated by ARCA, its “Affiliates” (as
hereinafter defined), and/or subcontractors who are involved in providing the
“Services” (as hereinafter defined), hereinafter such Affiliates and/or
subcontractors of ARCA being referred to collectively as “Service Provider(s).” 
An “Affiliate” of ARCA or GE shall mean any entity directly or indirectly
controlling or controlled by, or under direct or indirect common control of ARCA
or GE, or in which ARCA or GE owns at least a 50% equity interest, whether now
existing, or subsequently created or acquired during the Term of this Agreement
(including, without limitation, joint ventures or other entities in which either
ARCA or GE is a shareholder or holder of other form of equity ownership);

 

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NOW, THEREFORE, in consideration of the premises and the mutual covenants of GE
and ARCA, and other good and valuable consideration, the Parties agree as
follows:

 

ARTICLE I REGIONAL PROCESSING CENTERS

 

1.1     Philadelphia RPC.

 

(a).                   ARCA, through its joint venture Affiliate ARCA Advanced
Processing, LLC (“AAP”) is establishing its first RPC located at 4301 N.
Delaware Ave., Philadelphia, Pennsylvania (“Philadelphia RPC”) with an initial
projected capacity of [*] Recyclable Appliances per year, with the ability to
increase the capacity to approximately [*] Recyclable Appliances per year.  The
equipment for the Philadelphia RPC initially shall include, but is not limited
to: (1) systems for receiving, sorting and conveying Recyclable Appliances and
Other Recyclable Items; (2) equipment for proper removal and handling of
hazardous components and universal waste from Recyclable Appliances,
refrigerants, used oils and any other components that are not legally authorized
or appropriate to put in a shredder; and (3) a state-of-the-art shredding system
for Recyclable Appliances capable of handling Appliances and Other Recyclable
Items that do and do not contain foam insulation.

 

(b).                  Within 90 days of execution of this Agreement, provided
that ARCA and its Service Providers have obtained all required permits and other
documentation necessary to provide the “Services” (as defined below) in
compliance with applicable law, including Environmental Laws, as defined herein,
ARCA and its Service Provider(s) will begin providing “Services” to GE at the
Philadelphia RPC.  Such “Services” shall include: (i) delivering and picking-up
of empty trailers and trailers loaded with Recyclable Appliances and Other
Recyclable Items to and from “SDS Locations” (as hereinafter defined);
(ii) transporting such trailers to and from SDS Locations; (iii) receiving,
sorting processing, recycling and shredding Recyclable Appliances or “Other
Recyclable Items,” including those described in Schedule 1.1(e); (iv) the
“Treatment, Storage or Disposal”(as defined below), of Waste Material (as
defined in Article 8) at an Approved Treatment, Storage and Disposal Facility
(“TSDF”) as defined below (“Services”).  ARCA shall provide written notice to GE
of the date that the Philadelphia RPC will begin to provide the Services.  GE
will cooperate with ARCA in selling Recyclable

 

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[*] signifies that confidential information has been omitted and filed
separately with the Securities and Exchange Commission.

 

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Appliances and Other Recyclable Items to ARCA during the ramp-up of the
Philadelphia RPC.  When ARCA notifies GE that the Philadelphia RPC has the
capacity to provide the Services for the full volume of Recyclable Appliances
and Other Recyclable Items generated by GE’s distribution and home delivery
activities in GE’s Northeastern United States delivery area, as defined by GE’s
Scheduled Delivery Service (“SDS”) locations and other distribution locations
shown on Schedule 1.1 (b) as may be supplemented by GE from time-to-time (“NE
Delivery Area”), GE will sell to ARCA all of its Recyclable Appliances and Other
Recyclable Items generated by GE’s distribution and home delivery activities in
the NE Delivery Area during the remaining Term of this Agreement.

 

“Approved TSDF” shall mean, as reasonably approved by GE in advance, the name,
address, location and facility identification number of the fully-licensed
facility used by ARCA and Service Providers for Treatment, and/or Storage,
and/or Disposal of Waste Material generated by ARCA and Service Providers in
performing the Services, and shall include without limitation, all locations to
which any materials derived from Recyclable Appliances or Other Recyclable Items
are sent for Treatment, Storage, Disposal, including recycling or reclamation.

 

“Treatment,” “Storage” or “Disposal” shall have the meanings set forth in 40
C.F.R. Part 260.10 and applicable state law and shall include without limitation
treatment, storage, disposal, recycling or reclamation of any materials derived
from Recyclable Appliances or Other Recyclable Items, including materials
regulated under the Toxic Substances Control Act, 15 U.S.C. 2601 et seq.

 

(c).                   Within fifteen (15) months of execution of this
Agreement, ARCA shall have installed at the Philadelphia RPC a fully operational
UNTHA Recycling Technology recovery system for refrigerators and freezers, which
is a slow-speed UNTHA shredder, and a state-of-the-art recovery system for
blowing agent gas entrained within rigid polyurethane foam insulation (“URT
System”).  The processing equipment and procedures for the Philadelphia RPC,
before and after installation of the URT System, and for any additional RPCs
which have and do not have the URT System, are attached as Schedule 1.1 (c).  If
the URT System at the Philadelphia RPC is not fully operational within fifteen
(15) months of execution of this Agreement, GE may terminate this Agreement upon
thirty (30) days written notice to ARCA, unless such period is extended by
written agreement of the Parties.

 

(d).                  Until expiration of a period ending six (6) months after
installation and operation of the URT System at the Philadelphia RPC (“Proof of
Performance Period”), ARCA shall not provide Services to any third party without
GE’s prior written consent (no written response by GE within ten [10] business
days of written notification by ARCA will be

 

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deemed consent, following which ARCA shall provide GE written confirmation of
ARCA’s decision to proceed), except for ARCA’s and the Service Providers’ (and
their respective Affiliates’) performance of Services for existing suppliers of
Recyclable Appliances or Other Recyclable Items to ARCA or the Service Providers
at the Philadelphia RPC (with ARCA providing a list of such existing suppliers
and volumes per supplier at the time of execution of this Agreement), as well as
Recyclable Appliances or Other Recyclable Items from public utility companies
which do not unreasonably impair GE’s priority access.

 

(e).                   GE-supplied Recyclable Appliances and Other Recyclable
Items shall have Services priority at the Philadelphia RPC over Recyclable
Appliances and Other Recyclable Items supplied by any third party (including
third party suppliers referred by GE) to the Philadelphia RPC during the Term.

 

(f).                     Schedule 1.1 (f) sets out the “Operations Overview” for
the  Philadelphia RPC. ARCA shall give GE at least thirty (30) days prior
written notice of: (i) any activity that will materially increase or decrease
the volume or alter the types of Recyclable Appliances and Other Recyclable
Items being handled at the Philadelphia RPC; (ii) any change in the list of
Approved TSDFs to be used by the Philadelphia RPC; and (iii) any activity that
will result in any material change in the operations of the Philadelphia RPC
and/or of its intent to enter into any agreement that will materially impact the
operations of the Philadelphia RPC.

 

1.2     Additional RPCs

 

(g).                  Should ARCA plan to establish other RPC locations in the
United States in addition to the Philadelphia RPC (“Additional RPC(s)”),  either
directly or through a Service Provider, whether or not such Additional RPC is
planned to include the URT System or similar system for the collection of
refrigerator and freezer foam insulation and blowing agent, ARCA shall provide
GE written notice of the proposed location of any Additional RPC.  ARCA may not
provide such notice prior to the expiration of the Proof of Performance Period. 
Following such notice, ARCA and GE shall, for a period of sixty (60) days,
exclusively negotiate an agreement for such Additional RPC, and any modified
terms for such Additional RPC.  If the Parties have not agreed to the terms for
such Additional RPC following the expiration of such sixty (60) day period,
unless such period is extended by written agreement of the Parties, ARCA may
proceed to negotiate and enter agreements with other parties for the
establishment of the Additional RPC, subject to Section 1.2 (d) below

 

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and GE shall be free to enter into an agreement with another person or entity
for a RPC in the regional market area of the Additional RPC.

 

(a).                   Should GE plan to establish an Additional RPC, whether or
not such Additional RPC is planned to include the URT System or similar system
for the collection of refrigerator and freezer foam insulation and blowing
agent, GE shall provide written notice of the proposed location of any
Additional RPC and GE and ARCA shall, for a period of sixty (60) days,
exclusively negotiate an agreement for such Additional RPC, and any modified
terms for such Additional RPC.  If the Parties have not agreed to the terms for
such Additional RPC following the expiration of such sixty (60) day period,
unless such period is extended by written agreement of the Parties, GE may
proceed to negotiate and enter into agreements with other parties for the
establishment of the Additional RPC and ARCA shall be free to establish and
enter into an agreement with another person or entity for a RPC in the regional
market area of the Additional RPC.

 

(b).                  Nothing in this Agreement shall be construed as creating
any obligation on the part of either Party to expand the scope of this Agreement
or enter into a new agreement for any additional RPC(s).  Further, except as
provided by this Agreement as to the Philadelphia RPC or any modification
thereof, and except as to any additional facilities for which GE accepts the
Additional RPC(s) pursuant to paragraph 1.2(a) above, nothing in this Agreement
shall be construed as creating any obligation on GE’s part to sell its
Recyclable Appliances or Other Recyclable Items to, or obtain Services for
Recyclable Appliances or Other Recyclable Items through, ARCA or any Service
Providers.

 

(c).                   During the Term, ARCA shall not, either directly or
indirectly, enter into any agreement of any type with any person, corporation or
other form of entity in any way directly engaged in the manufacture of any type
of Appliances relating to a processing center, RPC or otherwise, for the
collection, transportation, processing, and recycling of Recyclable Appliances
and Other Recyclable Items or the Treatment, Storage or Disposal of Waste
Material related to the performance of those activities within the United
States.  ARCA shall not be prohibited from performing such Services for
Appliance retailers or distributors provided such operations do not interfere
with GE’s Services priority at the Philadelphia RPC as set forth in Section 1.1
(e).  Further, should ARCA provide Services for any Appliance retailer or
distributor from whom ARCA was not receiving Recyclable Appliances at the time
of execution of this Agreement, ARCA shall be required to pay GE a Referral Fee
as provided in Article 3 of this Agreement in connection with such Services,
even though GE did not

 

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refer such Appliance retailer or distributor to ARCA.  Beginning January 1,
2012, ARCA shall not be subject to the first sentence of this
Section 1.2(d) should the unit volume of Recyclable Appliances sold by GE to
ARCA during the preceding calendar year fall below [*] units.

 

ARTICLE 2 SALE OF RECYCLABLE APPLIANCES AND OTHER RECYCLABLE ITEMS

 

2.1     The sale and transfer of Recyclable Appliances and Other Recyclable
Items from GE in the NE Delivery Area to ARCA for the Services at the
Philadelphia RPC shall be subject to the following terms and conditions:

 

(a).                   All sales are made F.O.B. point of shipment from GE’s SDS
and other distribution locations in the NE Delivery Area, with title and
responsibility for risk of loss, damage and the cost of shipment passing to ARCA
at the point of shipment.

 

(b).                  Recyclable Appliances and Other Recyclable Items purchased
by ARCA shall be loaded by GE or its third party agents onto trailers provided
by ARCA or its third party agents at SDSs and transported to the Philadelphia
RPC by ARCA or its qualified third party transportation provider.  The type and
number of Recyclable Appliances and Other Recyclable Items will be documented on
a product delivery receipt (“PDR”) or comparable form (see Schedule 2.1 (b)) and
loaded on trailers or trucks at GE’s SDSs and other distribution locations in
the NE Delivery Area.  A PDR shall confirm transfer of title and an assessment
of any existing damage to the trailer or trucks and shall be signed by the
driver, the representative of the SDS or other GE distribution location, and the
representative of the RPC.  GE will not be responsible for any degradation or
damage to trailers or trucks that may be incurred as a result of the collection
and transportation activities, except when caused directly by GE or its third
party agents.

 

(c).                   In the event that collection and transportation by GE or
its third party agents to the Philadelphia RPC can provide efficiencies,
including cost efficiencies, for certain routes or satisfy GE’s customer
requirements, GE and ARCA will work together to utilize GE or GE’s third party
agents.  ARCA and GE will memorialize the cost and other terms and conditions of
any delivery of empty trailers and pick-up and transportation of loaded trailers
of Recyclable Appliances and Other Recyclable Items by GE or its third party
agents to the Philadelphia RPC in a separate agreement.

 

(d).                  At the Philadelphia RPC, the inbound trailers or trucks
will be weighed using a scale certified by the Pennsylvania Department of

 

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[*] signifies that confidential information has been omitted and filed
separately with the Securities and Exchange Commission.

 

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Agriculture, Division of Weights and Measures.  The Recyclable Appliances and
Other Recyclable Items will be verified against the PDR or comparable form to
ensure that no loss of Recyclable Appliances or Other Recyclable Items has
occurred en route.

 

(e).                   [*]

 

(f).                     Beginning with the first partial or full week of the
Philadelphia RPC’s receipt of shipments of Recyclable Appliances and Other
Recyclable

 

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[*] signifies that confidential information has been omitted and filed
separately with the Securities and Exchange Commission.

 

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Items, payment shall be made monthly on the basis of ARCA’s fiscal calendar
(which shall be provided by ARCA to GE), with full payment for each ARCA fiscal
month being received by GE via electronic funds transfer by the fourth (4th)
Friday following the expiration of each such month, with GE receiving a report
in the form of Schedule 2.1 (f) at least fourteen (14) days prior to the due
date of each monthly payment.  Such report shall be subject to audit by GE in
accordance with Article 4.

 

(g).                  The price for Recyclable Appliances and Other Recyclable
Items does not include any present or future sales, use, excise, value-added or
similar taxes.  Where applicable, such taxes shall be paid by ARCA and, where
required, invoiced by GE and paid by ARCA within thirty (30) days of the date of
the invoice.

 

(h).                  ARCA hereby grants to GE a purchase money security
interest in the Recyclable Appliances and Other Recyclable Items supplied by GE
to the Philadelphia RPC, only in the amount of ARCA’s then outstanding unpaid
obligation due to GE for such Recyclable Appliances and Other Recyclable Items
and the Referral Fee under Article 3 which shall be satisfied by payment in full
to GE.  In order to perfect GE’s security interest, GE may file a financing
statement with the appropriate authorities that ARCA will sign upon request or,
for such purpose, GE is hereby appointed by ARCA an agent of ARCA to sign
financing statements on ARCA’s behalf.

 

(i).                     NO EXPRESS, ORAL, STATUTORY OR IMPLIED WARRANTY,
INCLUDING THE IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE, SHALL APPLY.  GE’S LIABILITY ON ANY CLAIM FOR LOSS OR DAMAGE ARISING
OUT OF THIS CONTRACT OR FROM THE PERFORMANCE OR BREACH THEREOF OR CONNECTED
WITH, THE SUPPLYING OF ANY GOODS HEREUNDER, OR THEIR SALE, OPERATION OR USE,
WHETHER BASED ON CONTRACT, WARRANTY, TORT (INCLUDING NEGLIGENCE), STRICT
LIABILITY, OR OTHER GROUNDS, SHALL NOT EXCEED THE PRICE ALLOWABLE FOR SUCH GOODS
OR PART THEREOF INVOLVED IN THE CLAIM.  GE SHALL NOT IN ANY EVENT BE LIABLE,
WHETHER AS A RESULT OF BREACH OF CONTRACT, WARRANTY, TORT (INCLUDING
NEGLIGENCE), STRICT LIABILITY OR OTHER GROUNDS, FOR SPECIAL, PENAL,
CONSEQUENTIAL OR INCIDENTAL DAMAGES INCLUDING, BUT NOT LIMITED TO LOSS OF
PROFITS OR REVENUE, LOSS OF USE OF THE RECYCLABLE APPLIANCES OR OTHER RECYCLABLE
ITEMS, COST OF CAPITAL, COST OF

 

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SUBSTITUTE PRODUCTS, FACILITIES OR SERVICES, OR CLAIMS OF CUSTOMERS OF ARCA FOR
SUCH DAMAGES.

 

(j).                      ARCA agrees that it will, and will ensure that its
Service Providers and any sub-tier Service Providers will, only recycle and will
not sell for re-use or resale any Recyclable Appliances or Other Recyclable
Items sold to ARCA by GE or by a third party supplier referred by GE.

 

ARTICLE 3 REFERRAL FEE

 

3.1     ARCA shall pay GE a referral fee (“Referral Fee”) for any third party
supplier of Recyclable Appliances or Other Recyclable Items (including, without
limitation, the items listed in Schedule 1.1 (e)) that GE refers to ARCA for the
Philadelphia RPC or for any Recyclable Appliances or Other Recyclable Items
received by ARCA from any Appliance retailer or distributor from whom ARCA
(excluding its Affiliates) was not receiving Recyclable Appliances or Other
Recyclable Items at the time of execution of this Agreement, even though GE did
not refer such Appliance retailer or distributor to ARCA (“Referral Business”). 
ARCA shall not be required to accept products, materials or substances
materially different from Recyclable Appliances or Other Recyclable Items listed
in Schedule 1.1(e) unless both GE and ARCA have agreed in writing (no written
response by one Party within ten [10] business days of written notification by
the other Party will be deemed consent, following which the Party seeking
consent shall provide to the other Party written confirmation of its decision to
proceed) to include such products, materials or substances for processing by
ARCA.  The Referral Fee shall not be paid for any supplier, who is not an
appliance retailer or  appliance distributor, of Recyclable Appliances or Other
Recyclable Items that is already a supplier to ARCA or its Affiliates at the
time of referral.  ARCA’s purchase of, and providing of Services for, third
party Recyclable Appliances and Other Recyclable Items referred by GE shall have
Services priority over Recyclable Appliances and Other Recyclable Items
purchased by ARCA or its Affiliates from other third parties but not over
Recyclable Appliances and Other Recyclable Items purchased from GE.

 

3.2     [*]

 

3.3     ARCA’s payment of the Referral Fee to GE shall be made on the same basis
and procedures as provided in Section 2.1 (f).

 

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[*] signifies that confidential information has been omitted and filed
separately with the Securities and Exchange Commission.

 

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ARTICLE 4 ARCA BOOKS AND RECORDS/SITE ACCESS

 

4.1     ARCA shall maintain, at its offices or at the Philadelphia RPC, complete
and accurate books and records, supporting data and other sufficient detail
relating to the performance under, or transactions directly related to, the
purchase of Recyclable Appliances and Other Recyclable Items by ARCA from GE or
the Referral Business, or which allow for an adequate evaluation of the pricing
and fees data related thereto, and/or which relate to ARCA’s or its Service
Providers’ provision of Services hereunder or compliance with any provisions of
this Agreement in accordance with, and for such period as required by, generally
accepted accounting principles, and applicable law (collectively “Books and
Records”).  During the Term of this Agreement and for seven (7) years
thereafter, or for such longer period as may be reasonably required by GE
pursuant to written notice to ARCA, ARCA and its Service Providers agree to
maintain such books and records for: (i) financial or tax purposes required by
any government agency, or required by any law, rule or regulation, or (ii) in
connection with any ongoing or threatened litigation, suit or proceeding.

 

4.2     GE, its employees, agents and representatives, shall have the right, but
not the responsibility, at any time during normal business hours, and with no
less than seventy-two (72) hours notice, to inspect and audit the Books and
Records. Adjustments in favor of GE arising from any such audit of ARCA or its
Service Providers shall be recognized as an adjustment of any future payment due
GE or, if no future payment is due GE, ARCA shall promptly pay the amount of any
such adjustment to GE. ARCA shall cooperate fully with GE or its employees,
agents, and representatives, in connection with audit functions or any
inspections.

 

4.3     Subject to the confidentiality and nondisclosure provisions of Article 7
of this Agreement, GE, its employees, agents and representatives shall have the
right, but not the responsibility, to access the site(s) where the Services are
performed in order to assess the work quality, the condition and housekeeping of
the Philadelphia RPC, the environment, health and safety management systems of
the Philadelphia RPC and conformance with ARCA’s representations, warranties and
covenants under this Agreement.

 

4.4     GE’s exercise of its rights, or failure to exercise its rights, under
any part of this Article 4 shall in no way: relieve ARCA or its Service
Providers of their respective obligations under this Agreement or any applicable
laws or regulations, including without limitation, Environmental Laws (as
hereinafter defined), or in equity; imply any approval by GE of ARCA’s or its
Service Providers’ environment, health and safety management systems; or to make
GE responsible for any act or omission of ARCA or its Service Providers with
respect to compliance or noncompliance with any applicable laws or regulations,
including without limitation, Environmental Laws.

 

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ARTICLE 5 COVENANTS, REPRESENTATIONS AND WARRANTIES

 

5.1       During the Term, ARCA covenants, represents and warrants that: (i) it
has the legal right to provide the Services in the jurisdictions where the
Services are provided; (ii) its Services hereunder will be performed by
qualified individuals in a professional and workmanlike manner conforming to the
highest generally applicable industry standards and practices, including without
limitation those set forth in Schedules 1.1(c) and 1.1(f) hereof (or such
modifications to such standards and practices as may be reasonably agreed with
GE in writing); and (iii) it will perform its duties and obligations under this
Agreement in compliance with all applicable laws, regulations, codes and
standards of government agencies or authorities having jurisdiction in
connection with its obligations under this Agreement including, without
limitation, Environmental Laws (as hereinafter defined).

 

5.2       During the Term, ARCA further covenants, represents and warrants for
itself and its Affiliates, including AAP, that:

 

(a).                   it and its Service Providers will, in the performance of
this Agreement or anywhere at the Philadelphia RPC facility: (i) use no forced,
indentured or prison labor, or labor which violates any applicable minimum
working age, working condition, wage or overtime laws; (ii) comply with the tax,
immigration, and employment laws of all jurisdictions in which its employees
perform work under this Agreement; and (iii) comply with all applicable privacy
or data protection laws relating to this Agreement;

 

(b).                  it is and its Service Providers are business
organization(s) duly incorporated or otherwise organized, validly existing and
in good standing under the Laws of the jurisdiction in which it was
incorporated, and is in good standing in each other jurisdiction where the
failure to be in good standing would have a material adverse effect on its
business or its ability to perform its obligations under this Agreement;

 

(c).                   except as disclosed by ARCA or its Service Providers,
neither its nor its Service Providers’ owners, directors or senior managers have
been charged with or convicted of a felony, are the subject of any lawsuit or
proceeding involving charges of misconduct or violations of law (excluding small
claims and minor traffic violations), including Environmental Laws and no
judgment, order or decree (excluding small claims and minor traffic violations)
has been issued against ARCA, its Affiliates or Service Providers, their
respective owners, directors and senior managers with any claim that ARCA, its
Affiliates or Service Providers or their respective owners, directors or senior

 

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management has violated any criminal or other laws, including any Environmental
Laws;

 

(d).                  it shall remain primarily responsible and liable to GE and
its Affiliates for performance of or failure to perform the Services, regardless
of whether GE and/or its Affiliates has given approval or consent to a specific
Service Provider including without limitation, a TSDF;

 

(e).                   it and its Service Providers will transport Waste
Material to and store, treat, and/or dispose of Waste Material only at Approved
TSDFs and in accordance with all Environmental Laws;

 

(f).                     it and its Service Providers’ Services shall be
performed using personnel, equipment, and material qualified and/or suitable to
perform the Services requested, including, without limitation, the proper
installation, operation and maintenance of the URT System;

 

(g).                  services performed by or delivered through ARCA or a
Service Provider shall be in accordance with the highest generally accepted
standards of the industry at the time of performance and shall conform to the
provisions of this Agreement;

 

(h).                  all Services shall be materially free from defects and
shall meet any specifications provided or approved by GE and its Affiliates; any
equipment utilized in connection with performance hereunder shall be safe and in
proper working order and conform to all applicable regulatory requirements.  If
any of the Services performed are found at any time to be defective in material
or workmanship, or otherwise not in conformity with the requirements of this
Agreement, GE and its Affiliates, in addition to such other rights, remedies and
choices as it may have by contract or by law, at its option and sole discretion
may: (i) upon notice to ARCA, take such necessary and reasonable actions as may
be required to cure all defects and/or bring the Services and materials into
conformity with all the requirements of this Agreement, in which event all costs
and expenses thereby incurred by GE and its Affiliates shall be to ARCA’s
account; and (ii) require ARCA to re-perform, at its own expense, any defective
portion of the Services performed;

 

(i).                      it will assure that its officers, directors,
employees, agents, Affiliates and Service Providers at every tier shall comply
with all of the requirements of federal, state, and local laws, rules,
regulations and ordinances applicable to the Services to be performed hereunder,
including Environmental Laws and laws related to the take-back or management of
Recyclable Appliances and Other Recyclable Items; ARCA shall be solely
responsible for obtaining, maintaining and complying with, or assuring that its
Service Providers obtain, maintain

 

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and comply with, all licenses, permits, approvals or other documents which are
or shall be required for performance hereunder, and shall be responsible for the
satisfaction of all legal and regulatory requirements of any governmental entity
having jurisdiction over the purchase of Recyclable Appliances or Other
Recyclable Items or the performance of Services hereunder;

 

(j).                      it shall notify GE immediately if (i) ARCA, its
Affiliates, or, to ARCA’s knowledge, any Service Provider, including an Approved
TSDF is served with notice of violation of any laws, rules, regulations,
ordinances, licenses, approvals or permits, including Environmental Laws related
to the purchase of Recyclable Appliances or Other Recyclable Items, the Services
provided hereunder or the Waste Materials; (ii) proceedings are commenced
against ARCA or it Affiliates or, to ARCA’s knowledge, any Service Provider or
Approved TSDF that could lead to suspension, fines, or revocation of permits,
approvals or licenses which relate to the Services; (iii) permits, approvals or
licenses held by ARCA, its Affiliates or, to ARCA’s knowledge, any Service
Provider or Approved TSDF, relating to Services are revoked; (iv) ARCA or its
Affiliates determine or otherwise become aware that any equipment or facility
related to Services is not in compliance with applicable laws, rules,
regulations, ordinances, licenses, permits or approvals, including Environmental
Laws; and/or, (v) any release of Waste Material occurs to any environmental
media at the RPC or during the transport of Waste Materials, including any such
release that is required to be reported to any governmental agency.  For
purposes of this paragraph, ARCA shall be deemed to have knowledge when it
actually knows a fact or when, by means of reasonable due inquiry, it would have
become aware of a fact.  In addition, GE and its Affiliates have the right, but
not the responsibility, to request an annual summary of any notices of violation
issued by the United States Environmental Protection Agency, or any local, state
or federal governmental body with jurisdiction over the Services, against ARCA,
its Affiliates or Service Providers.  Upon receiving any notice under this
paragraph 5.2(j), GE and its Affiliates have the right to suspend the sale of
any Recyclable Appliances and Other Recyclable Items and the performance of
additional Services by ARCA, its Affiliates or Service Providers until the
matter giving rise to such notice has been resolved or corrected to GE’s
reasonable satisfaction;

 

(k).                   any transporter used for shipment of any Waste Material:
(i) shall be  in compliance with, and shall continue to comply with, all federal
and state laws and regulations applicable to it, including those regulations
promulgated under 49 CFR Part 385; (ii) shall not have received an
“Unsatisfactory” safety rating from Federal Motor Carrier Safety

 

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Administration within the last 24 months and shall have taken all necessary
steps to correct all issues that resulted in any previous “Unsatisfactory”
safety rating; and (iii) shall not have been found liable or responsible, during
the previous five years, for violation of a single acute regulation or two or
more critical regulations pursuant to 49 CFR Part 385, Appendix B. VII, or any
analogous state law or regulation  for motor carrier safety.  Also, any
transporter used for shipment of any Waste Material containing PCB wastes in any
quantity, waste oil, or hazardous wastes, must be licensed under Environmental
Laws to handle and transport such materials and must be approved by GE.  Only
transporters that have been specifically approved by GE to transport PCB-wastes
may be used to transport any waste-containing PCBs;

 

(l).                      it and its Service Providers shall take all necessary
or appropriate precautions for the health and safety of their employees in the
performance of the Services and at all locations involved in the performance of
the Services.  In addition, GE and its Affiliates have the right, but not the
responsibility, to request an annual summary (including safety statistics) of
the health and safety performance of ARCA, its Service Providers, its
transporters, and all TSDFs in connection with their purchase of Recyclable
Appliances and Other Recyclable Items and the performance of Services under this
Agreement;

 

(m).                it and its Service Providers shall maintain an
environmental, health and safety management system including the elements set
forth in Schedule 5.2 (m);

 

(n).                  until the expiration of the Proof of Performance Period
and only as reasonably approved by GE otherwise, it and its Service
Providers will not make any public statements or claims, including without
limitation issuing advertising media, press releases, or discussions with other
potential customers, regarding the Services it is providing for GE in the
Philadelphia RPC;

 

(o).                  it will handle the Recyclable Appliances and Other
Recyclable Items in accordance with this Agreement which shall include the
destruction, through incineration, conversion or disassociation (or other
available technology acceptable to ARCA and in compliance with all applicable
laws) of any recovered CFC refrigerants or CFC blowing agent in the foam from
Recyclable Appliances that GE provides for the Services; for the avoidance of
doubt, neither ARCA nor its Service Providers will under any circumstances, sell
Recyclable Appliances, Other Recyclable Items or any recovered CFC refrigerants
or foam blowing agent from Recyclable Appliances that GE sells to ARCA;

 

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(p).                  it will track the price of carbon credits on the Chicago
Climate Exchange (CCX) monthly to determine whether the selling price of carbon
credits that may be obtained for disposing of refrigerant or foam blowing
agents, exceeds the value of selling them on the open market to third parties. 
ARCA will provide a report to GE every sixty (60) days showing the value of
carbon credits versus open market sale value.  If the value of the carbon
credits, after considering the disposal costs, exceeds the sale value of the
refrigerants or foam blowing agents on the open market, ARCA and GE will, in
good faith, negotiate an amendment to this Agreement under which ARCA would
share with GE the revenues from the carbon credits obtained by ARCA’s disposal
of the refrigerants or foam blowing agents.  If other financial incentives are
offered in the future for the disposal of refrigerants or foam blowing agents,
including without limitation, a “bounty,” ARCA will, at GE’s request, negotiate
an amendment to this Agreement to provide GE with a share of any such financial
incentive;

 

(q).                  it and its Service Providers will ensure that all of its
personnel providing Services are in compliance with all visas, passports, and
work permits being used by them and ARCA will use commercially reasonable
efforts to obtain, or have obtained, all such permits, licenses, visas,
passports and work permits in a timely manner to avoid any unnecessary delay;

 

(r).                     it is in compliance with Section 404 of the Sarbanes
Oxley Act of 2002 and that it will supply to GE, in a manner reasonably
specified by GE, documents attesting that it has in place controls that are
effective and have been tested by a third party, such as an outside auditor,
that monitor and ensure compliance with Section 404 of the Sarbanes-Oxley Act of
2002, and, at GE’s reasonable request, but no more than once per calendar year,
ARCA will furnish to the Company SAS 70 (type I and II) reports and evidence of
compliance with ISO 17799;

 

(s).                   it has all of the necessary corporate or organizational
power and authority to own, lease and operate its assets and to carry on its
business as presently conducted and as it will be conducted pursuant to this
Agreement and the consummation of the transactions contemplated thereby have
each been authorized by all necessary corporate action and do not violate any
judgment, order, or decree;

 

(t).                     it and its Service Providers shall comply with
provisions or contractual clauses required by the Office of Federal Contract
Compliance Programs as set forth in 41 Code of Federal Regulations (CFR) Chapter
60, as well as any Executive Orders as now or hereafter issued, amended or
codified, where applicable to ARCA,

 

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including but not limited to the Equal Opportunity Clause; the Affirmative
Action Clause regarding Disabled Veterans and Veterans of the Vietnam Era; the
Affirmative Action Clause regarding Handicapped Workers; and the requirements
for non-segregated facilities set forth in Chapter 60-1.8 of the 41 CFR, as well
as comply with such similar laws in jurisdictions outside the United States;

 

(u).                  in carrying out its responsibilities under the Agreement,
it and its Service Providers shall not pay, offer or promise to pay, or
authorize the payment directly or indirectly of any monies or anything of value
to any government official or employee or any political party or candidate for
political office, for the purpose of inducing or rewarding any favorable action
in any commercial transaction or in any governmental matter, and it has and will
maintain and enforce its own company policy requiring adherence to ethical
business practices, including a prohibition on bribery of government officials;

 

(v).                  no owner, partner, officer or director of ARCA or of any
Affiliate of ARCA is or will become an official or employee of any government or
of an agency or instrumentality of any government during the Term of this
Agreement without the prior written approval of GE;

 

(w).                no part of the Services and/or the equipment used by ARCA
and its Service Providers shall violate, infringe on or misappropriate any
copyright, trademark, patent, trade secret or personal, proprietary or
intellectual property rights of any third party; and, further, ARCA and/or its
Service Providers are either the owner or are authorized to use any equipment
that ARCA and its Service Providers may use in providing of the Services;

 

(x).                    it and its Service Providers have and will maintain
security measures consistent with international standards where applicable to
ARCA and its Service Providers for the protection of its operations and
facilities against exploitation by criminal or terrorist individuals and
organizations;

 

(y).                  it and its Service Providers will allow their workers to
freely choose whether or not to organize or join associations for the purpose of
collective bargaining as provided by local law;

 

(z).                    as of the Effective Date, as applicable, there is no
pending or anticipated claim, suit, or proceeding that involves ARCA or its
Service Providers that might adversely affect ARCA’s and its Service Providers’
ability to perform their obligations under this Agreement;

 

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(aa).             neither ARCA nor any of its Service Providers, nor any
employee, agent or representative of either, has used or shall use any GE
Confidential Information, as defined herein, to obtain financial gain for ARCA,
any of its Service Providers, any of their employees, agents or representatives,
or any other entity other than in performance of the Services in accordance with
this Agreement;

 

(bb).           it has all intellectual property rights and licenses to perform
the Services free and clear of claims of infringement; and;

 

(cc).             it has established an effective program to ensure its Service
Providers and any suppliers it utilizes to provide any Services under this
Agreement will be in conformance with this Agreement.

 

5.3     In the event GE determines at any time that any of ARCA’s
representations, warranties or covenants are untrue, GE shall have the right, in
addition to other remedies available to it at law or in equity, to terminate
this Agreement as provided in Section 6.2, with ARCA remaining obligated to pay
GE any amounts due to GE up to the effective date of termination.  During any
cure period under Section 6.2, GE and its Affiliates have the right to suspend
the sale of any Recyclable Appliances and Other Recyclable Items and the
performance of additional Services by ARCA, its Affiliates or Services Providers
until the matter giving rise to such notice and right to cure has been resolved
or corrected to GE’s reasonable satisfaction.

 

ARTICLE 6 TERM AND TERMINATION

 

6.1     This Agreement shall commence on the Effective Date and shall remain in
effect for a period of six (6) years from the first date of collection of
Recyclable Appliances from GE’s NE Delivery Area (the “Initial Term”), with an
option to renew for up to three (3) additional one (1) year terms (the “Renewal
Terms”), each at GE’s sole option exercisable within one hundred twenty (120)
days prior to the expiration of the Initial Term or subsequent Renewal Term (the
Initial Term and any Renewal Term(s) are collectively referred to as the
“Term”).

 

6.2     Either Party may terminate this Agreement if the other Party is in
material breach of this Agreement and has not cured the breach within sixty (60)
days after receiving written notice from the other Party specifying the breach. 
Consent to extend the cure period shall not be unreasonably withheld, so long as
the breaching Party has commenced a cure during the sixty (60) day notice period
and expeditiously pursues cure of the breach in good faith.

 

6.3     In the event ARCA’s ownership interest in AAP decreases, ARCA sells or
otherwise transfers a material portion of the assets of its recycling business
or another party acquires a controlling interest in ARCA that, in GE’s sole
discretion, is unacceptable to GE, then GE may: (a) upon ninety (90) days prior
written

 

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notice to ARCA, terminate this Agreement; or (b) terminate the Agreement
immediately upon written notice to ARCA if the representations in
Section5.2(c) hereof are not true at the time that the acquiring party obtains a
material portion of the assets of ARCA’s recycling business or a controlling
interest in ARCA.

 

6.4     If ARCA becomes insolvent, a receiver for ARCA is appointed or applied
for, a petition is filed by or for ARCA under any federal or state bankruptcy
law or ARCA makes an assignment for the benefit of creditors, GE may terminate
this Agreement upon one (1) day prior written notice to ARCA.

 

6.5     Termination of this Agreement shall not limit either Party from pursuing
any other remedies available to it, including injunctive relief, nor shall
termination relieve ARCA of its obligation to pay all amounts due to GE that
have accrued prior to such termination.  Either Party’s obligations under
Section 2.1(h), Article 4, Section 6.6, Articles 7, 8 and 12 and Sections 13.1,
13.3, 13.5, 13.6, 13.7, 13.8 and 13.9 of this Agreement shall survive
termination cancellation or expiration of this Agreement.

 

6.6     Upon termination or expiration of this Agreement each party shall
promptly, upon written request, return to the other all Confidential
Information, papers, materials and other properties of the other held by each
for the purposes of and in connection with this Agreement.  In addition, each
Party, at its own cost and expense, will assist the other in orderly termination
or expiration of this Agreement and the transfer of all aspects hereof, tangible
and intangible, as may be reasonably necessary for the timely, orderly,
non-disrupted business continuation of each Party.

 

ARTICLE 7 CONFIDENTIALITY AND PROPRIETARY INFORMATION

 

7.1     As used in this Agreement, “Confidential Information” shall mean, with
respect to either Party, their respective Affiliates and Service Providers all
information and data, including GE Personal Data (as hereinafter defined),
whether technical or non-technical, in any medium, furnished or made available
directly or indirectly by one Party (the “Disclosing Party”) to the other (the
“Receiving Party”) in connection with this Agreement, and that includes without
limitation: (i) information that is marked confidential, restricted,
proprietary, or with a similar designation; (ii) computer software and programs
(including object code and source code), database technologies and systems (and
related information technology); (iii) all information concerning the
operations, affairs, methods, transactions and businesses of the Disclosing
Party (including without limitation, ideas, marketing plans, business plans or
strategies, business volumes or usage, data and other information that are trade
secrets or are competitively sensitive), the financial information or affairs of
the Disclosing Party, pricing information and the relations of the Disclosing
Party with its employees; (iv) either Party’s nonpublic personal information
relating to its customers; and (v) the terms and conditions of this Agreement
except where such disclosure is required

 

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by law.  Each Party’s Confidential Information shall remain the property of that
Party except as expressly provided otherwise by the other provisions of this
Agreement.

 

7.2     Confidential Information shall not include information that the
Receiving Party can demonstrate: (i) is or becomes publicly available through no
wrongful act or omission of the Receiving Party; (ii) is obtained by the
Receiving Party from a third party without a breach of Receiving Party’s or
third party’s confidentiality obligations; (iii) was in the possession of the
Receiving Party at the time of disclosure without any confidentiality
obligations; or (iv) was independently developed by the Receiving Party without
reference to Confidential Information.

 

7.3     The Receiving Party shall protect the Disclosing Party’s Confidential
Information against unauthorized use or disclosure using at least those measures
that it takes to protect its own Confidential Information of a similar nature,
but no less than reasonable care, and shall not use or disclose the Disclosing
Party’s Confidential Information for any purpose except in connection with its
performance of this Agreement; in connection with obtaining any financing or
raising of capital where any recipients of such information are required to
execute appropriate nondisclosure agreements as a condition to receiving such
information; or as set forth in Section7.7 hereof.  Notwithstanding the
foregoing, the Receiving Party may disclose the Disclosing Party’s Confidential
Information to any Affiliate; provided, however, each person to whom such
Confidential Information is disclosed is subject to confidentiality obligations
comparable in scope to those herein.

 

7.4     Upon request of the Disclosing Party or upon termination of this
Agreement, all materials containing Confidential Information will be destroyed
or returned to the Disclosing Party and the Receiving Party will retain no
copies or reproductions of the Confidential Information unless required by law,
except that the Receiving Party may retain one record copy for archival
purposes, subject to the reasonable instructions of the Disclosing Party with
respect to such copy.

 

7.5     In the event of any unauthorized use or disclosure or loss of any
Confidential Information of the Disclosing Party, the Receiving Party shall
promptly, at its own expense: (i) notify the Disclosing Party in writing;
(ii) take such actions as may be necessary or reasonably requested by the
Disclosing Party to minimize the violation or the damage resulting therefrom;
and (iii) cooperate in all reasonable respects with the Disclosing Party to
minimize the violation and any damage resulting therefrom.

 

7.6     The Receiving Party acknowledges that any actual or threatened violation
of this Article may cause irreparable, non-monetary injury to the Disclosing
Party, the extent of which may be difficult to ascertain, and therefore agrees
that the

 

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Disclosing Party shall be entitled to seek injunctive relief in addition to all
other remedies available at law and/or in equity.

 

7.7     Should the Receiving Party be compelled by court decree, subpoena or
other requirements of law, rule, regulation, ordinance, permit, or approval to
disclose any of the Confidential Information, it shall promptly notify the
Disclosing Party in writing, and use reasonable good faith efforts to:
(a) disclose only the specific Confidential Information legally required to be
disclosed; and (b) assist the Disclosing Party (if and to the extent requested
by the Disclosing Party) in obtaining a protective order or other appropriate
assurances that the confidential nature of the Confidential Information shall be
protected and preserved.

 

7.8     The foregoing obligations shall supersede the confidentiality
obligations in the Mutual Confidentiality and Non-Disclosure Agreement between
the Parties dated April 24, 2009 and shall be continuing and binding until the
date on which the Disclosing Party’s Confidential Information is no longer
confidential; protection for trade secrets under this Article 7 shall extend for
as long as the relevant information qualifies as a trade secret under applicable
law.

 

ARTICLE 8 INDEMNIFICATION

 

8.1                  To the fullest extent permitted by law, ARCA agrees to
indemnify, defend and hold harmless GE and its Affiliates, directors, officers,
employees, agents, successors and assigns and all other persons and entities
acting on behalf of or under the control of the other Party from and against any
and all claims, demands, suits, causes of action, debts or liabilities, losses,
judgment, damages, costs (including all reasonable attorney’s fees), expenses,
fines and penalties (“Loss(es)”) arising out of, or concerning or connected
with, (1) ARCA’s performance, or failure to perform, any of the Services,
transactions or activities contemplated under this Agreement; (2) ARCA’s breach
of any of the representations, warranties, or covenants contained in this
Agreement; (3) any infringement or alleged infringement of the Services upon any
patent, copyright, trade secret, or other proprietary right of any third party;
(4) Environmental Impact Claims (as defined hereinafter) at or affecting the
Philadelphia RPC, any property affected by transport of the Recyclable
Appliances or Other Recyclable Items, or any Approved TSDF (but as to the TSDF,
only to the extent related to Waste Materials under this Agreement);
(5) violations of Environmental Laws, permits, or approvals in connection with
the Philadelphia RPC or any Services performed under this Agreement; or (4) the
Waste Material, as hereinafter defined , including, but not limited to, the
possession, transportation, Storage, Treatment and/or Disposal of Waste
Material, arising out of or relating to the performance of the Services and any
resulting release or threat of release of Waste Material, contamination of or
adverse effects on the environment arising out of or relating to the Waste
Materials. This indemnity is absolute and unconditional and

 

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includes, but is not limited to, any claims or actions whether in negligence,
strict liability, breach of warranty or otherwise, but does not extend to Losses
to the extent directly caused by the gross negligence or willful misconduct of
GE or its Affiliates.

 

8.2     Definitions

 

(a) In connection with the foregoing, the phrase “Losses” shall be understood in
its most comprehensive sense, which includes any and all claims, losses,
damages, fines, penalties, costs or other detriments, and, without limiting the
foregoing, specifically includes all statutory or common law claims brought
against GE, ARCA or their respective Affiliates, including claims brought
pursuant to Sections 106, 107 or 113 of the Comprehensive Environmental
Response, Compensation and Liability Act of 1980 (42 U.S.C. 9601 et seq.), as
amended, including future amendments thereto, Sections 7002 and 7003 of the
Resource Conservation and Recovery Act, (42 U.S.C. Section 6901 et seq.) as
amended, including any future amendments thereto, the Toxic Substances Control
Act, 15 U.S.C. 2601 et seq. as amended, including any future amendments thereto,
or similar state and local Environmental Laws including claims for damage to the
environment or property or claims for bodily injury. Notwithstanding anything to
the contrary stated hereinabove, “Losses” shall expressly include, without
limitation, any and all costs incurred due to any investigation of the
Philadelphia RPC or other sites or any cleanup, removal or restoration mandated
by or pursuant to any Environmental Laws.

 

(b) “Environmental Impact Claims” are Losses which arise out of, are related to,
or are based on the actual or threatened dispersal, discharge, escape, or
release of chemicals, liquids, gases, Waste Material (as defined hereinafter) or
any other material, contaminant or pollutant in or into the atmosphere, or on,
onto, upon, in or into the surface or subsurface (i) soils, (ii) water or water
course, (iii) objects, or (iv) any tangible or intangible matter, whether sudden
or not.

 

“Environmental Laws” shall mean any federal, state or local laws, statutes,
regulations, rules, codes or ordinances or any judicial or administrative
decree, judgment, orders permit or decision, and any amendments thereto,
including future amendments, relating to the public health and safety or the
protection of the environment, including without limitation the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C. 9601 et seq.,
as amended (CERCLA), the Resource Conservation and Recovery Act, as amended 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., and the Safe Drinking Water Act, 42 U.S.C. 300f through 300j.

 

(d) “Waste Material” shall mean wastes that meet the descriptions set forth
below generated in providing the Services whether generated and/or stored at an
RPC or other sites: any solids, liquids, sludges, semisolids, or contained gases
which

 

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fall within the definition of “solid wastes” as set forth in 40 C.F.R. section
261.2 (and any applicable state law or regulation that is more stringent than
federal law or regulation), or as defined under Environmental Laws.  The term
“Waste Material” includes any and all materials or substances which are defined
as “hazardous waste,” “extremely hazardous waste” or as “hazardous substances”
pursuant to Environmental Laws, and also includes asbestos, polychlorinated
biphenyls (“PCBs”) and petroleum products and any materials sent for Treatment,
Storage, Disposal, recycling or reclamation.  Where there exists a conflict in
the definitions employed by two or more governmental agencies that have
overlapping jurisdiction over wastes generated by ARCA, and its Service
Providers, “Waste Material” shall be construed to have the broadest of the
meanings employed by such agencies.

 

8.3     In connection with the forgoing indemnities, ARCA and its Affiliates
specifically waive and relinquish all statutory or common law claims against GE
and its Affiliates, including its present and future officers, directors,
shareholders, subsidiaries, divisions, employees and agents, that ARCA and its
Affiliates may otherwise have in connection with transfer to ARCA and its
Affiliates of title and responsibility for the Recyclable Appliances, Other
Recyclable Items, Referral Business or Waste Material, including any claims
arising under Environmental Laws, claims for property damage or bodily injuries,
including death.

 

8.4     The foregoing indemnities are conditioned on: (a) GE notifying ARCA in
writing within ninety (90) days of becoming aware of any covered Loss, provided,
however, that the failure of GE to give ARCA such written notice will not
relieve ARCA of its obligations hereunder except to the extent such failure
materially prejudices (or results in material prejudice to) ARCA’s defense of
such claim; and (b) GE providing ARCA with the assistance, information, and
authority reasonably necessary to defend such claim.  Reasonable out-of-pocket
expenses incurred by GE in providing such assistance will be reimbursed by
ARCA.  ARCA will keep GE promptly and fully informed regarding all material
developments with respect to such Loss.  In no event shall ARCA by its action or
inaction, or by default, concede or admit liability, or enter into any judgment
or settlement regarding any indemnified Loss without GE’s prior written consent,
which such consent shall not be unreasonably withheld or delayed.  If GE has to
file suit against ARCA to enforce this indemnity, ARCA shall reimburse GE for
all legal fees and expenses GE incurs in connection with such enforcement.  GE
reserves the right, at its own expense, to participate in the defense of any
matter subject to indemnification by the ARCA.

 

ARTICLE 9 INSURANCE

 

9.1     Without limiting the indemnification provisions of this Agreement, ARCA
shall obtain, during the Initial Term and any Renewal Terms, and maintain in
force the following insurance coverage at its own cost and expense:

 

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(a).      Worker’s Compensation with applicable minimum statutory limits per
occurrence, Disability and Unemployment Insurance, and all other insurance as
required by law and as customarily maintained in ARCA’s industry for all ARCA
employees performing the Services hereunder, including Employer’s Liability
Insurance with limits of no less than $500,000 per occurrence, or any amount
required by applicable law, whichever is greater.

 

(b).      Commercial General Liability, on an occurrence basis, including but
not limited to premises-operations, product completed-operations, broad form
property damage, contractual liability, independent contractors and personal
liability, with a minimum combined single limit of $3,000,000 per occurrence. 
This policy shall be endorsed to name GE and its Affiliates as additional
insureds.

 

(c).      Full “All Risk” and “Extended Coverage” Replacement Cost Coverage
Property Insurance on any and all equipment belonging to GE that may be within
ARCA’s possession or control.

 

(d).      Umbrella Liability on an occurrence basis with a minimum limit of at
least $4,000,000 per occurrence, in excess of the applicable insurance under
policies indicated in Sections 9 (a), (b) and (c).  This policy shall be
endorsed to name GE and its Affiliates as additional insureds.

 

(e).      Comprehensive Errors and Omissions Liability covering the liability
for financial loss due to error, omission, negligence of employees and machine
malfunction in an amount of at least $5,000,000 per occurrence.  This policy
shall be endorsed to name GE and its Affiliates as additional insureds.

 

(f).       Comprehensive Crime Policy on an occurrence basis, with limits of at
least $5,000,000 per occurrence.

 

(g).      Pollution Legal Liability Insurance for the Philadelphia RPC, with a
minimum of coverage limit of $5,000,000 per incident and $10,000,000 aggregate. 
The policy shall cover all activities at the Philadelphia RPC or individual
policies with the same coverage limits shall be obtained for each legal entity
operating at the Philadelphia RPC.  The policy(ies) shall be endorsed to name GE
and its Affiliates as additional named insureds.  Similar policies shall be
purchased for any Additional RPCs established under Section 1.2 hereof.

 

9.2           ARCA shall cause its insurers to issue, before the Effective Date
of this Agreement, certificates of insurance evidencing that the required
coverages and policy endorsements are maintained in force, and that not less
than thirty (30)

 

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days written notice shall be given to GE prior to any modification, cancellation
or non-renewal of the policies.

 

9.3           The foregoing insurance coverage shall be primary and
non-contributing with respect to any other insurance or self-insurance that may
be maintained by GE.  Each insurance policy carried by ARCA shall grant waiver
of subrogation on all policies indicated in this Article.  Upon request by GE,
the insurers selected by ARCA shall have an A.M. Best rating of A- or better or,
if such ratings are no longer available, with a comparable rating from a
recognized insurance rating agency.  ARCA shall ensure that its Service
Providers maintain insurance coverage as specified in this Article 9.

 

ARTICLE 10 COMPLIANCE WITH GE POLICIES

 

10.1         ARCA and its Service Providers will supply and review with all ARCA
and Service Provider personnel who provide Services under this Agreement a copy
of GE’s Integrity Guide for Suppliers (Schedule 10.1), and will cause all such
ARCA and Service Provider personnel to comply with such policies to the extent
that such policies are applicable to the activities conducted by ARCA and its
Service Provider personnel in performing the Services.

 

ARTICLE 11 RELATIONSHIP BETWEEN THE PARTIES

 

11.1         Independent Contractor.  ARCA is an independent contractor.
 Nothing in this Agreement shall be construed to create a partnership, joint
venture, or agency relationship between the Parties.  Nothing in this Agreement
shall be interpreted or construed as creating or establishing the relationship
of employer and employee between GE and either ARCA or any ARCA personnel or
Service Provider of ARCA.  Each Party will be solely responsible for payment of
all compensation owed to its employees, as well as federal and state income tax
withholding, social security taxes, and unemployment insurance applicable to
such personnel as employees of the applicable Party, and each Party shall bear
sole responsibility for any health or disability insurance, retirement benefits,
or other welfare or pension benefits (if any) to which such Party’s employees
may be entitled.  Neither Party nor their respective personnel shall have any
right or authority to assume or create any obligation of any kind expressed or
implied in the name of or on behalf of the other Party.

 

11.2         Notices.  All notices, including notices of address change,
required to be sent hereunder shall be sent by facsimile (with the original to
promptly follow by applicable national mail service or overnight courier), by
overnight courier, or transmitted electronically.  Notices will be deemed given
on the date delivered to the recipient if sent by fax or overnight courier (it
being agreed that the sender shall retain proof of transmission or delivery, as
the case may be), or when accessible electronically if sent electronically. 
Notices shall be sent to the Parties as follows (or as otherwise directed by a
Party):

 

24

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GE:

 

[*]

GM, Distribution and Services

Appliance Park, Bldg. 4 Room 126C

Louisville, KY 40225

Fax:  [*]

Email:  [*]

 

[*]

Manager, Local Delivery Service

Appliance Park, Bldg. 4 Room 116

Louisville, KY 40225

Fax:  [*]

Email:  [*]

 

[*]

Vice President and General Counsel

Appliance Park, Bldg 2 Room 226

Louisville, KY 40225

Fax:  [*]

Email:  [*]

 

ARCA:                   [*]

Appliance Recycling Centers of America, Inc.

7400 Excelsior Boulevard

Minneapolis, MN 55426

Fax:  [*]

Email:  [*]

 

11.3         Warrant Agreement.  The parties intend to contemporaneously enter
into a Warrant Agreement with the execution of this Agreement.  The Parties
agree that this Agreement shall have no force and effect unless a Warrant
Agreement in the form attached hereto as Schedule 11.3 is executed by both
Parties.

 

Article 12 Alternative Dispute Resolution

 

12.1.        In the event of any dispute between the Parties hereto arising from
or relating to this Agreement, then, upon the written request of either Party,
each of the Parties will appoint a designated representative to resolve such
dispute.  The designated representatives will be executives with sufficient
authority to engage in good faith negotiations and bind the Party she/he
represents.  If the designated representatives are unable to resolve the dispute
within a reasonable

 

--------------------------------------------------------------------------------

[*] signifies that confidential information has been omitted and filed
separately with the Securities and Exchange Commission.

 

25

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period (but in no event more than thirty (30) days from the date of receipt of
written request), then the dispute will be escalated to representatives of each
party at least one (1) level higher in their respective organizations than those
involved in the previous round of negotiations (“Escalated Representatives”). 
Except if a court determines preliminary injunctive relief is warranted upon
application of one of the Parties to this Agreement, no formal proceedings
relating to such dispute may be commenced until the Escalated Representatives
conclude in good faith that amicable resolution through continued negotiation of
the matter in issue does not appear likely.  If the Escalated Representatives
are unable to resolve the dispute within a reasonable period, (but in no event
more than thirty (30) days from the date negotiations commenced between the
Escalated Representatives), the Parties shall submit the dispute for non-binding
mediation by a single mediator in accordance with the rules of the CPR Institute
for Dispute Resolution (www.cpradr.org) (“CPR”), utilizing rules and procedures
in place at the time of the dispute.  Such mediator shall be competent in any
technical, legal or other issue(s) involved in the dispute. In the event the
Parties are unable to resolve the dispute within thirty (30) days of
commencement of the mediation, or if one party fails to participate in the
mediation as agreed herein, either party may refer the dispute to arbitration by
a sole arbitrator (for claims estimated at $5 million or less) or 3 arbitrators
(for claims estimated at over $5 million) in accordance with the CPR Rules for
Non-Administered Arbitration of Business Disputes then currently in effect. 
Unless otherwise agreed by the Parties, the mediator shall be disqualified from
serving as arbitrator in the case. The place of arbitration shall be New York,
New York, and the language of the arbitration shall be English. The Federal
Arbitration Act shall govern the arbitration and any court having jurisdiction
thereof may enter judgment upon the award rendered by the arbitrator(s).  The
Parties will participate in the arbitration in good faith, and, unless awarded
to the contrary by the mediator or arbitrator, will share equally in the
administrative costs of the mediation and arbitration.  The arbitrator shall not
be empowered to award damages in excess of compensatory damages, and each party
irrevocably waives all rights to recover such non-compensatory damages with
respect to any dispute resolved by arbitration hereunder.  The Parties
irrevocably waive all objections to venue, jurisdiction of the court, and right
to trial by jury in any judicial action, proceeding or claim ancillary to an
arbitration arising out of this Agreement.

 

Article 13 General Provisions

 

13.1         Severability. If any provision of this Agreement is illegal or
unenforceable, its invalidity shall not affect the other provisions of this
Agreement that can be given effect without the invalid provision.  If any
provision of this Agreement does not comply with any law, ordinance or
regulation, such provision, to the extent possible, shall be interpreted in such
a manner so as to comply with such law, ordinance or regulation, or, if such
interpretation is not possible, it shall be deemed to satisfy the minimum
requirements thereof.

 

26

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13.2         Assignability/Subcontractors.

 

(a).          Unless otherwise approved or agreed in writing by GE, ARCA shall
not assign, delegate or subcontract any of its rights or responsibilities under
this Agreement to any Affiliate or to any third party or entity. This Agreement
may not be assigned by ARCA, or involuntarily assigned or assigned by operation
of law, without the express written consent of GE, which consent shall be in
GE’s sole discretion.  There shall be no restriction on GE’s ability to assign
this Agreement, provided that GE shall not be released upon making any such
assignment.

 

(b).          If GE consents to the use of any subcontractors by ARCA to perform
the Services, such Service Providers shall be engaged to do so under written
contracts with ARCA under terms and conditions no less restrictive than those
set forth herein, including but not limited to Articles 5 and 10.  ARCA shall
also ensure that each Service Provider has obtained and maintains all licenses
required in connection with the Services for which such Service Provider is
responsible. ARCA shall include in its subcontracts provisions equivalent to
those in this Agreement to the extent such terms and conditions are relevant to
the Services to be provided by the Service Provider (including, without
limitation, a restriction on the Service Provider’s right to further subcontract
its obligations without GE’s prior written consent), and shall identify GE as a
direct and intended third party beneficiary thereof.  Upon GE’s request from
time-to-time, an officer of ARCA shall certify in writing that each Service
Provider is in full compliance with this Section.

 

(c).          Notwithstanding the foregoing, it is understood and agreed that
ARCA may without notice to GE subcontract certain ministerial and non-core
responsibilities, including by way of example and not limitation, mailing and
copying.

 

(d).          ARCA shall remain responsible, as primary obligor, for all
obligations performed by Service Providers to the same extent as if such
obligations were directly performed by ARCA, including any acts or omissions by
the Service Providers.  In no event shall ARCA be relieved of its obligations
under this Agreement as a result of its use of any Service Providers.  ARCA
shall supervise the activities and performance of each Service Provider and
shall be jointly and severally liable with each such Service Provider for any
act or failure to act by such Service Provider.  If GE determines that the
performance or conduct of any Service Provider is unsatisfactory, GE may notify
ARCA of its determination in writing, indicating the reasons therefor, in which
event ARCA promptly shall take all

 

27

--------------------------------------------------------------------------------

 

necessary actions to remedy the performance or conduct of such Service Provider
or, if such remediation is not possible, replace such Service Provider.

 

(e).          Any attempt by ARCA to so assign or delegate any of the foregoing
(except as permitted, above) without consent as provided for herein shall be
void.

 

13.3         Governing Law.  This Agreement shall be construed and enforced in
accordance with, and governed by, the substantive laws of the State of New York,
United States of America, without regard to the conflict of laws principles
thereof, and all actions arising out of or relating to this Agreement must be
brought in the State of New York.  The Parties agree that they will not object
to the choice of New York law or arbitration in New York in any proceeding to
adjudicate a dispute under this Agreement or to enforce an arbitral award
related to this Agreement.

 

13.4         Publicity/Advertising.  As a material obligation of this Agreement
and except as otherwise required by law, GE and its Affiliates or agents, and
ARCA, its Affiliates, Service Providers or its agents shall not release
information with respect to the existence or terms of this Agreement or an
amendment or any other document thereto and shall not without the consent of the
other Party use the name, logo, trademarks, photographs, or any reference either
direct or indirect of either Party in advertising, marketing, public relations
or similar publications (such as, but not limited to, marketing brochures, press
releases, case studies or references).  Neither Party is under any obligation,
express or implied, to provide any such consent; and, in the event that any such
consent should be granted for a particular communication, neither Party shall
not be under any further obligation to provide consent in any future request.

 

13.5         Electronic Communications.  Any document properly transmitted and
received by the other Party by computer access shall be considered a writing
delivered in connection with this Agreement.  Electronic documents shall be
deemed received by a Party when accessible by the recipient on the recipient’s
computer system.

 

13.6         Waiver.  The waiver by either Party of any default or breach of
this Agreement shall not constitute a waiver of any other or subsequent default
or breach.  The Parties’ failure at any time to enforce any of the provisions of
this Agreement or any right or remedy available hereunder or at law or equity,
or to exercise any option herein provided will in no way be construed to be a
waiver of such provisions, rights, remedies or options or any other term,
condition or covenant of this Agreement, or in any way to affect the validity of
this Agreement.  The exercise by GE or ARCA of any rights, remedies or options
provided hereunder or at law or equity shall not preclude or prejudice the
exercising hereunder of the same or any other rights, remedies or options.

 

28

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13.7         Force Majeure.  Neither party shall be in default or otherwise
liable for any delay in, or failure of, its performance under this Agreement
where such delay or failure arises by reason of any act of God, or any
government or any governmental body, war, insurrection, the elements, strikes or
labor disputes, or other similar cause beyond the control of such Party.  Either
Party may terminate, at its option, the whole or any part of this Agreement if
such a situation continues for sixty (60) days.

 

13.8         Counterparts/Headings.  This Agreement may be executed in two or
more counterparts, all of which shall be considered one and the same agreement,
and shall become effective when one counterpart has been signed by each Party
and delivered to the other Party hereto.  The Article and Section headings in
this Agreement are inserted for convenience of reference only and shall not
constitute a part hereof.

 

13.9         Entire Agreement.  Time is of the essence as to each and every
provision of this Agreement requiring performance within a specified time.  This
Agreement shall constitute the complete and final expression of agreement
between the Parties and supersedes all previous or contemporaneous agreements or
representations, written or oral, with respect to the subject matter described
herein.  No course of prior dealings between Parties, no course of performance
and no usage of trade shall be relevant to determine the meaning of this
Agreement even though the accepting or acquiescing party has knowledge of the
performance and opportunity for objection.  This Agreement may not be modified,
supplemented or amended except in writing signed by a duly authorized
representative of each Party.  Any attempted modification, addition of new
terms, or submission of inconsistent terms thereto in any document submitted by
a Party, whether or not materially different, are objected to and shall have no
force or effect upon the other Party unless specifically accepted by such other
Party in writing.  Any section that by its nature should survive expiration or
termination of this Agreement, shall remain in effect after the expiration or
termination of this Agreement, including but not limited to, Section 2.1 (h),
Article 4, Section 6.6, Articles 7, 8 and 12 and Sections 13.1, 13.3, 13.5,
13.6, 13.7, 13.8 and 13.9.

 

[Signatures begin on next page.]

 

29

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IN WITNESS WHEREOF, the authorized representatives of the Parties hereto have
executed this Agreement as of the date first written above or as otherwise
specified herein.

 

 

Executed by General Electric Company:

 

Authorized

Signature:

 

 

 

Name:  [*]

 

Title:     General Manager, Distribution and Services

 

Date:     October 21, 2009

 

 

Executed by Appliance Recycling Centers of America, Inc.:

 

Authorized

Signature:

 

 

 

 

 

Name:

 

 

 

 

 

Title:

 

 

 

Date:  October 21, 2009

 

--------------------------------------------------------------------------------

[*] signifies that confidential information has been omitted and filed
separately with the Securities and Exchange Commission.

 

30

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Schedule 1.1 (b)- Scheduled Delivery Service Locations for the Northeast
Delivery area

 

[*]

 

--------------------------------------------------------------------------------

[*] signifies that confidential information has been omitted and filed
separately with the Securities and Exchange Commission.

 

--------------------------------------------------------------------------------

 

Schedule 1.1 (c) — Processing Equipment and Procedures

 

[*]

 

--------------------------------------------------------------------------------

[*] signifies that confidential information has been omitted and filed
separately with the Securities and Exchange Commission.

 

--------------------------------------------------------------------------------

 

Schedule 1.1 (e) — Other Recyclable Items

 

Scrap and Haul-Away items that are recyclable (other than Recyclable Appliances)
including, but not limited to:

 

·                  Household mechanicals such as furnaces, pressurized devices
and air compressors, lawn mowers and tractors, patio furniture, exercise
equipment and tool boxes;

 

·                  Accessories for Appliances and mechanicals such as Appliance
backsplashes, cords and spare parts; and

 

·                  Miscellaneous metal items, such as tool boxes, shopping
carts, lumber carts and racks, that may from time to time be added to loads – as
long as the load does not contain any industrial waste or other substance that
is regulated under EHS Laws and regulations.

 

--------------------------------------------------------------------------------

 

Schedule 1.1 (f) — Operations Overview

 

[*]

 

--------------------------------------------------------------------------------

[*] signifies that confidential information has been omitted and filed
separately with the Securities and Exchange Commission.

 

--------------------------------------------------------------------------------

 

Schedule 2.1 (b) — Product Delivery Receipt (example)

 

To be agreed to by the parties.

 

--------------------------------------------------------------------------------

 

Schedule 2.1 (e) — Philadelphia AMM (26 weeks)

 

[*]

 

--------------------------------------------------------------------------------

[*] signifies that confidential information has been omitted and filed
separately with the Securities and Exchange Commission.

 

--------------------------------------------------------------------------------

 

Schedule 2.1 (f) — Detailed Payment Report (example)

 

[*]

 

--------------------------------------------------------------------------------

[*] signifies that confidential information has been omitted and filed
separately with the Securities and Exchange Commission.

 

--------------------------------------------------------------------------------

 

Schedule 5.2 (m) — Environmental Health and Safety Management System
Requirements

 

Environmental, Health and Safety (EH&S) Policy

 

ARCA and its Affiliates will establish an EHS Policy, which includes the
following:

 

·      Comply with applicable EHS laws and regulations.

 

·      Take appropriate measures to prevent workplace injuries and illnesses,
and provide employees with a safe and healthy working environment.

 

·      Consider evolving industry practices, regulatory requirements and
societal standards of care.

 

·      Assess EHS impacts before starting a new activity or project or entering
a new site.

 

·      Consider EHS impacts in its operations and services.

 

·      Eliminate unreasonable risks from its facilities, products, services and
activities.

 

·      To the extent reasonably practicable, reduce the use and release of toxic
and hazardous materials, prevent pollution, and conserve, recover and recycle
materials.

 

·      Continue to improve its EHS systems and performance as an integral part
of its operational strategy.

 

--------------------------------------------------------------------------------

 

Schedule 5.2 (m) — Environmental Health and Safety Management System
Requirements

 

EMS: Environmental

 

·      To achieve the EHS Policy’s goals, ARCA and its Affiliates will implement
an Environmental Management System (EMS).

 

·      The EMS should include at least the following elements:

 

·      Air

·      Chemical Control

·      General Environmental

·      Regulated Waste and Dangerous Goods Shipping

·      Waste

·      Water

 

--------------------------------------------------------------------------------

 

Schedule 5.2 (m) — Environmental Health and Safety Management System
Requirements

 

EMS: Health and Safety

 

·      To achieve the goal of protecting its employees, ARCA and its Affiliates
will implement a Health and Safety (H&S) management system. The H&S management
system will include at least the below elements.

 

·      Industrial Hygiene

·      Chemical Management

·      Ergonomics

·      Motor Vehicle Safety

·      Medical Services

·      Program Evaluation

·      Lock Out, Tag Out

·      Site H&S Plan

·      H&S Expectations and Performance Approval

·      Hazard Analysis and Regulatory Compliance

·      Employee Involvement

·      H&S Specialist

·      Accident Reporting, Investigation and Follow-Up

·      H&S Training

·      Health, Safety and Housekeeping Inspections

·      Personal Protective Equipment

·      Contractor H&S

·      Emergency Preparedness and Fire Prevention

·      Job Safety Analysis

·      High Risk Operations

·      H&S Review of New or Modified Equipment

 

--------------------------------------------------------------------------------

 

Schedule 5.2 (m) — Environmental Health and Safety Management System
Requirements

 

EMS: Procedures

 

·      ARCA’s and its Affiliates’ management shall include an EHS leader.

 

·      To achieve its goals of the EHS Policy, the ARCA and its Affiliates will
conduct periodic EHS training to relevant personnel.  The EHS leader will
evaluate the operations, determine which personnel require training and provide
such training on at least the following topics, as appropriate:

 

·      Personal Protective Equipment

·      Toxic Substances

·      General Safety Training

·      Ergonomics

·      Lock Out/Tag Out

·      Confined Spaces

·      Hazardous Materials Management

·      Hazard Communication

 

·      ARCA and its Affiliates shall operate as to its suppliers under a
supplier relationship policy or implementation strategy and do business only
with suppliers that comply with the policy and applicable laws in the areas of
employment, environment, health and safety.

 

--------------------------------------------------------------------------------

 

Schedule 10.1 — GE Integrity Guide for Suppliers

 

[*]

 

--------------------------------------------------------------------------------

[*] signifies that confidential information has been omitted and filed
separately with the Securities and Exchange Commission.

 

--------------------------------------------------------------------------------

 

Schedule 11.3 — Warrant

 

Form of Warrant attached.

 

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