**Exhibit 10.38**

 

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

 

APPLIANCE SALES AND RECYCLING AGREEMENT

 

ThisAppliance Sales and Recycling Agreement (the “Agreement”) is made and enteredinto as of October 21, 2009, (the “Effective Date”) by and between theGeneral Electric Company, a New York corporation, acting through its GEConsumer & 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 ARCAare sometimes each referred to as a “Party” or jointly as the “Parties.”

 

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

 

WHEREAS,GE in the course of its distribution and home delivery of Appliances, receivessubstantial quantities of used and/or damaged recyclable Appliances of GE andnon-GE brands (hereinafter “Recyclable Appliances” is used interchangeably torefer 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 3herein or otherwise);

 

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

 

WHEREAS,GE and its Affiliates as hereinafter defined, wish to sell RecyclableAppliances to ARCA for collection, processing and recycling of such RecyclableAppliances and Other Recyclable Items (as defined in Schedule 1.1(e)) at aregional processing center established to collect, process and recycleRecyclable Appliances and Other Recyclable Items from a specific region of theUnited States (“RPC”) established and operated by ARCA, its “Affiliates” (ashereinafter defined), and/or subcontractors who are involved in providing the “Services”(as hereinafter defined), hereinafter such Affiliates and/or subcontractors ofARCA being referred to collectively as “Service Provider(s).”  An “Affiliate” of ARCA or GE shall mean anyentity directly or indirectly controlling or controlled by, or under direct orindirect common control of ARCA or GE, or in which ARCA or GE owns at least a50% equity interest, whether now existing, or subsequently created or acquiredduring the Term of this Agreement (including, without limitation, jointventures or other entities in which either ARCA or GE is a shareholder orholder of other form of equity ownership);

 

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

 

# Article IRegional Processing Centers

#  

1.1     PhiladelphiaRPC.

 

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

 

(b).                  Within 90 days of executionof this Agreement, provided that ARCA and its Service Providers have obtainedall required permits and other documentation necessary to provide the “Services”(as defined below) in compliance with applicable law, including EnvironmentalLaws, as defined herein, ARCA and its Service Provider(s) will beginproviding “Services” to GE at the Philadelphia RPC.  Such “Services” shall include: (i) deliveringand picking-up of empty trailers and trailers loaded with Recyclable Appliancesand Other Recyclable Items to and from “SDS Locations” (as hereinafterdefined); (ii) transporting such trailers to and from SDS Locations; (iii) receiving,sorting processing, recycling and shredding Recyclable Appliances or “OtherRecyclable 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 definedbelow (“Services”).  ARCA shall providewritten notice to GE of the date that the Philadelphia RPC will begin toprovide the Services.  GE will cooperatewith ARCA in selling Recyclable

 

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**[*] signifies that confidentialinformation has been omitted and filed separately with the Securities andExchange Commission.**

 

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Appliances and Other Recyclable Items to ARCA duringthe ramp-up of the Philadelphia RPC. When ARCA notifies GE that the Philadelphia RPC has the capacity toprovide the Services for the full volume of Recyclable Appliances and OtherRecyclable Items generated by GE’s distribution and home delivery activities inGE’s Northeastern United States delivery area, as defined by GE’s ScheduledDelivery Service (“SDS”) locations and other distribution locations shown onSchedule 1.1 (b) as may be supplemented by GE from time-to-time (“NEDelivery Area”), GE will sell to ARCA all of its Recyclable Appliances andOther Recyclable Items generated by GE’s distribution and home deliveryactivities 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 thefully-licensed facility used by ARCA and Service Providers for Treatment,and/or Storage, and/or Disposal of Waste Material generated by ARCA and ServiceProviders in performing the Services, and shall include without limitation, alllocations to which any materials derived from Recyclable Appliances or OtherRecyclable Items are sent for Treatment, Storage, Disposal, including recyclingor reclamation.

 

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

 

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

 

(d).                  Until expiration of a periodending six (6) months after installation and operation of the URT Systemat the Philadelphia RPC (“Proof of Performance Period”), ARCA shall not provideServices to any third party without GE’s prior written consent (no writtenresponse by GE within ten [10] business days of written notification by ARCAwill be

 

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

 

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

 

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

 

1.2     AdditionalRPCs

 

(g).                  Should ARCA plan toestablish other RPC locations in the United States in addition to thePhiladelphia RPC (“Additional RPC(s)”),  eitherdirectly or through a Service Provider, whether or not such Additional RPC isplanned to include the URT System or similar system for the collection ofrefrigerator and freezer foam insulation and blowing agent, ARCA shall provideGE written notice of the proposed location of any Additional RPC.  ARCA may not provide such notice prior to theexpiration 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 anymodified terms for such Additional RPC. If the Parties have not agreed to the terms for such Additional RPC followingthe expiration of such sixty (60) day period, unless such period is extended bywritten agreement of the Parties, ARCA may proceed to negotiate and enteragreements with other parties for the establishment of the Additional RPC,subject to Section 1.2 (d) below

 

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

 

(a).                   Should GE plan to establishan Additional RPC, whether or not such Additional RPC is planned to include theURT System or similar system for the collection of refrigerator and freezerfoam insulation and blowing agent, GE shall provide written notice of theproposed location of any Additional RPC and GE and ARCA shall, for a period ofsixty (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 RPCfollowing the expiration of such sixty (60) day period, unless such period isextended by written agreement of the Parties, GE may proceed to negotiate andenter into agreements with other parties for the establishment of theAdditional RPC and ARCA shall be free to establish and enter into an agreementwith another person or entity for a RPC in the regional market area of theAdditional RPC.

 

(b).                  Nothing in this Agreementshall be construed as creating any obligation on the part of either Party toexpand the scope of this Agreement or enter into a new agreement for anyadditional RPC(s).  Further, except asprovided by this Agreement as to the Philadelphia RPC or any modificationthereof, and except as to any additional facilities for which GE accepts theAdditional RPC(s) pursuant to paragraph 1.2(a) above, nothing in thisAgreement shall be construed as creating any obligation on GE’s part to sellits Recyclable Appliances or Other Recyclable Items to, or obtain Services forRecyclable Appliances or Other Recyclable Items through, ARCA or any ServiceProviders.

 

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

 

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

 

# Article 2Sale of Recyclable Appliances and Other Recyclable Items

#  

2.1     Thesale and transfer of Recyclable Appliances and Other Recyclable Items from GEin the NE Delivery Area to ARCA for the Services at the Philadelphia RPC shallbe 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 NEDelivery Area, with title and responsibility for risk of loss, damage and thecost of shipment passing to ARCA at the point of shipment.

 

(b).                  Recyclable Appliances andOther Recyclable Items purchased by ARCA shall be loaded by GE or its thirdparty agents onto trailers provided by ARCA or its third party agents at SDSsand transported to the Philadelphia RPC by ARCA or its qualified third partytransportation provider.  The type andnumber of Recyclable Appliances and Other Recyclable Items will be documentedon 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 locationsin the NE Delivery Area.  A PDR shallconfirm transfer of title and an assessment of any existing damage to thetrailer or trucks and shall be signed by the driver, the representative of theSDS or other GE distribution location, and the representative of the RPC.  GE will not be responsible for any degradationor damage to trailers or trucks that may be incurred as a result of thecollection and transportation activities, except when caused directly by GE orits third party agents.

 

(c).                   In the event that collectionand transportation by GE or its third party agents to the Philadelphia RPC canprovide efficiencies, including cost efficiencies, for certain routes orsatisfy GE’s customer requirements, GE and ARCA will work together to utilizeGE or GE’s third party agents.  ARCA andGE will memorialize the cost and other terms and conditions of any delivery ofempty trailers and pick-up and transportation of loaded trailers of RecyclableAppliances and Other Recyclable Items by GE or its third party agents to thePhiladelphia RPC in a separate agreement.

 

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

 

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**[*] signifies that confidentialinformation has been omitted and filed separately with the Securities andExchange Commission.**

 

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

 

(e).                   [*]

 

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

 

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**[*] signifies that confidentialinformation has been omitted and filed separately with the Securities andExchange Commission.**

 

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

 

(g).                  The price for RecyclableAppliances and Other Recyclable Items does not include any present or futuresales, use, excise, value-added or similar taxes.  Where applicable, such taxes shall be paid byARCA 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 apurchase money security interest in the Recyclable Appliances and OtherRecyclable Items supplied by GE to the Philadelphia RPC, only in the amount ofARCA’s then outstanding unpaid obligation due to GE for such RecyclableAppliances and Other Recyclable Items and the Referral Fee under Article 3which 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 ARCAwill sign upon request or, for such purpose, GE is hereby appointed by ARCA anagent of ARCA to sign financing statements on ARCA’s behalf.

 

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

 

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

 

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

 

# Article 3Referral Fee

#  

3.1     ARCAshall pay GE a referral fee (“Referral Fee”) for any third party supplier ofRecyclable Appliances or Other Recyclable Items (including, without limitation,the items listed in Schedule 1.1 (e)) that GE refers to ARCA for thePhiladelphia RPC or for any Recyclable Appliances or Other Recyclable Itemsreceived by ARCA from any Appliance retailer or distributor from whom ARCA(excluding its Affiliates) was not receiving Recyclable Appliances or OtherRecyclable Items at the time of execution of this Agreement, even though GE didnot refer such Appliance retailer or distributor to ARCA (“Referral Business”).  ARCA shall not be required to acceptproducts, materials or substances materially different from RecyclableAppliances or Other Recyclable Items listed in Schedule 1.1(e) unless bothGE 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 deemedconsent, following which the Party seeking consent shall provide to the otherParty written confirmation of its decision to proceed) to include suchproducts, materials or substances for processing by ARCA.  The Referral Fee shall not be paid for anysupplier, who is not an appliance retailer or appliance distributor, of Recyclable Appliances or Other RecyclableItems that is already a supplier to ARCA or its Affiliates at the time ofreferral.  ARCA’s purchase of, andproviding of Services for, third party Recyclable Appliances and OtherRecyclable Items referred by GE shall have Services priority over RecyclableAppliances and Other Recyclable Items purchased by ARCA or its Affiliates fromother third parties but not over Recyclable Appliances and Other RecyclableItems purchased from GE.

 

3.2     [*]

 

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

 

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**[*] signifies that confidentialinformation has been omitted and filed separately with the Securities andExchange Commission.**

 

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# Article 4ARCA Books and Records/Site Access

#  

4.1     ARCAshall maintain, at its offices or at the Philadelphia RPC, complete andaccurate books and records, supporting data and other sufficient detailrelating to the performance under, or transactions directly related to, thepurchase of Recyclable Appliances and Other Recyclable Items by ARCA from GE orthe Referral Business, or which allow for an adequate evaluation of the pricingand fees data related thereto, and/or which relate to ARCA’s or its ServiceProviders’ provision of Services hereunder or compliance with any provisions ofthis Agreement in accordance with, and for such period as required by,generally accepted accounting principles, and applicable law (collectively “Booksand Records”).  During the Term of thisAgreement and for seven (7) years thereafter, or for such longer period asmay be reasonably required by GE pursuant to written notice to ARCA, ARCA andits Service Providers agree to maintain such books and records for: (i) financialor tax purposes required by any government agency, or required by any law, rule orregulation, or (ii) in connection with any ongoing or threatenedlitigation, suit or proceeding.

 

4.2     GE,its employees, agents and representatives, shall have the right, but not theresponsibility, at any time during normal business hours, and with no less thanseventy-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 ServiceProviders 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 suchadjustment to GE. ARCA shall cooperate fully with GE or its employees, agents,and representatives, in connection with audit functions or any inspections.

 

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

 

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

 

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#  

# Article 5Covenants, Representations and Warranties

#  

5.1       Duringthe Term, ARCA covenants, representsand warrants that: (i) it has the legal right to provide the Services inthe jurisdictions where the Services are provided; (ii) its Services hereunder will be performed byqualified individuals in a professional and workmanlike manner conforming tothe highest generally applicable industry standards and practices, includingwithout 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 reasonablyagreed with GE in writing); and (iii) it will perform its dutiesand obligations under this Agreement in compliance with all applicable laws, regulations, codes and standards of governmentagencies or authorities having jurisdiction in connection with itsobligations under this Agreement including, without limitation, EnvironmentalLaws (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 Providerswill, in the performance of this Agreement or anywhere at the Philadelphia RPCfacility: (i) use no forced, indentured or prison labor, or labor whichviolates any applicable minimum working age, working condition, wage orovertime laws; (ii) comply with the tax, immigration, and employment lawsof all jurisdictions in which its employees perform work under this Agreement;and (iii) comply with all applicable privacy or data protection lawsrelating to this Agreement;

 

(b).                  it is and its ServiceProviders are business organization(s) duly incorporated or otherwiseorganized, validly existing and in good standing under the Laws of thejurisdiction in which it was incorporated, and is in good standing in eachother jurisdiction where the failure to be in good standing would have amaterial adverse effect on its business or its ability to perform itsobligations under this Agreement;

 

(c).                   except as disclosed by ARCAor 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 orviolations of law (excluding small claims and minor traffic violations),including Environmental Laws and no judgment, order or decree (excluding smallclaims and minor traffic violations) has been issued against ARCA, itsAffiliates or Service Providers, their respective owners, directors and seniormanagers with any claim that ARCA, its Affiliates or Service Providers or theirrespective owners, directors or senior

 

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managementhas violated any criminal or other laws, including any Environmental Laws;

 

(d).                  it shall remain primarilyresponsible and liable to GE and its Affiliates for performance of or failureto perform the Services, regardless of whether GE and/or its Affiliates hasgiven approval or consent to a specific Service Provider including withoutlimitation, a TSDF;

 

(e).                   it and its Service Providerswill transport Waste Material to and store, treat, and/or dispose of WasteMaterial 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 qualifiedand/or suitable to perform the Services requested, including, withoutlimitation, the proper installation, operation and maintenance of the URTSystem;

 

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

 

(h).                  all Servicesshall be materially free from defects and shall meet any specificationsprovided or approved by GE and its Affiliates; any equipment utilized inconnection with performance hereunder shall be safe and in proper working orderand conform to all applicable regulatory requirements.  If any of the Services performed are found atany time to be defective in material or workmanship, or otherwise not inconformity with the requirements of this Agreement, GE and its Affiliates, in additionto such other rights, remedies and choices as it may have by contract or bylaw, at its option and sole discretion may: (i) upon notice to ARCA, takesuch necessary and reasonable actions as may be required to cure all defectsand/or bring the Services and materials into conformity with all therequirements of this Agreement, in which event all costs and expenses therebyincurred by GE and its Affiliates shall be to ARCA’s account; and (ii) requireARCA to re-perform, at its own expense, any defective portion of the Servicesperformed**;**

 

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

 

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andcomply with, all licenses, permits, approvals or other documents which are orshall be required for performance hereunder, and shall be responsible for thesatisfaction of all legal and regulatory requirements of any governmentalentity having jurisdiction over the purchase of Recyclable Appliances or OtherRecyclable Items or the performance of Services hereunder;

 

(j).                      it shall notifyGE immediately if (i) ARCA, its Affiliates, or, to ARCA’s knowledge, anyService Provider, including an Approved TSDF is served with notice of violationof any laws, rules, regulations, ordinances, licenses, approvals or permits,including Environmental Laws related to the purchase of Recyclable Appliancesor Other Recyclable Items, the Services provided hereunder or the WasteMaterials; (ii) proceedings are commenced against ARCA or it Affiliatesor, to ARCA’s knowledge, any Service Provider or Approved TSDF that could leadto suspension, fines, or revocation of permits, approvals or licenses whichrelate 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 orotherwise become aware that any equipment or facility related to Services isnot in compliance with applicable laws, rules, regulations, ordinances,licenses, permits or approvals, including Environmental Laws; and/or, (v) anyrelease of Waste Material occurs to any environmental media at the RPC orduring the transport of Waste Materials, including any such release that isrequired to be reported to any governmental agency.  For purposes of this paragraph, ARCA shall bedeemed to have knowledge when it actually knows a fact or when, by means ofreasonable due inquiry, it would have become aware of a fact.  In addition, GE and its Affiliates have theright, but not the responsibility, to request an annual summary of any noticesof violation issued by the United States Environmental Protection Agency, orany local, state or federal governmental body with jurisdiction over theServices, against ARCA, its Affiliates or Service Providers.  Upon receiving any notice under thisparagraph 5.2(j), GE and its Affiliates have the right to suspend the sale ofany Recyclable Appliances and Other Recyclable Items and the performance ofadditional Services by ARCA, its Affiliates or Service Providers until thematter giving rise to such notice has been resolved or corrected to GE’sreasonable satisfaction;

 

(k).                   any transporter used forshipment of any Waste Material: (i) shall be  in compliance with, and shall continue tocomply with, all federal and state laws and regulations applicable to it,including those regulations promulgated under 49 CFR Part 385; (ii) shallnot have received an “Unsatisfactory” safety rating from Federal Motor CarrierSafety 

 

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Administration within the last 24 months and shallhave taken all necessary steps to correct all issues that resulted in anyprevious “Unsatisfactory” safety rating; and (iii) shall not have beenfound liable or responsible, during the previous five years, for violation of asingle 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 ofany Waste Material containing PCB wastes in any quantity, waste oil, orhazardous wastes, must be licensed under Environmental Laws to handle andtransport such materials and must be approved by GE.  Only transporters that have been specificallyapproved by GE to transport PCB-wastes may be used to transport anywaste-containing PCBs;

 

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

 

(m).                it and its Service Providersshall maintain an environmental, health and safety management system includingthe elements set forth in Schedule 5.2 (m);

 

(n).                  until the expiration of theProof of Performance Period and only as reasonably approved by GEotherwise, it and its Service Providers will not makeany public statements or claims, including without limitation issuingadvertising media, press releases, or discussions with otherpotential customers, regarding the Services it is providing for GE in thePhiladelphia RPC;

 

(o).                  it will handle theRecyclable Appliances and Other Recyclable Items in accordance with this Agreementwhich shall include the destruction, through incineration, conversion ordisassociation (or other available technology acceptable to ARCA and incompliance with all applicable laws) of any recovered CFC refrigerants or CFCblowing agent in the foam from Recyclable Appliances that GE provides for theServices; for the avoidance of doubt, neither ARCA nor its Service Providerswill under any circumstances, sell Recyclable Appliances, Other RecyclableItems or any recovered CFC refrigerants or foam blowing agent from RecyclableAppliances that GE sells to ARCA;

 

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(p).                  it will track the price ofcarbon credits on the Chicago Climate Exchange (CCX) monthly to determinewhether the selling price of carbon credits that may be obtained for disposingof refrigerant or foam blowing agents, exceeds the value of selling them on theopen market to third parties.  ARCA willprovide a report to GE every sixty (60) days showing the value of carboncredits versus open market sale value. If the value of the carbon credits, after considering the disposalcosts, exceeds the sale value of the refrigerants or foam blowing agents on theopen market, ARCA and GE will, in good faith, negotiate an amendment to thisAgreement under which ARCA would share with GE the revenues from the carboncredits obtained by ARCA’s disposal of the refrigerants or foam blowingagents.  If other financial incentivesare offered in the future for the disposal of refrigerants or foam blowingagents, 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 suchfinancial incentive;

 

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

 

(r).                     it is in compliance with Section 404of the Sarbanes Oxley Act of 2002 and that it will supply to GE, in a mannerreasonably specified by GE, documents attesting that it has in place controlsthat are effective and have been tested by a third party, such as an outsideauditor, that monitor and ensure compliance with Section 404 of theSarbanes-Oxley Act of 2002, and, at GE’s reasonable request, but no more thanonce 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 necessarycorporate or organizational power and authority to own, lease and operate itsassets and to carry on its business as presently conducted and as it will be conductedpursuant to this Agreement and the consummation of the transactionscontemplated thereby have each been authorized by all necessary corporateaction and do not violate any judgment, order, or decree;

 

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

 

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

 

(u).                  in carrying out itsresponsibilities under the Agreement, it and its Service Providers shall notpay, offer or promise to pay, or authorize the payment directly or indirectlyof any monies or anything of value to any government official or employee orany political party or candidate for political office, for the purpose ofinducing or rewarding any favorable action in any commercial transaction or inany governmental matter, and it has and will maintain and enforce its owncompany policy requiring adherence to ethical business practices, including a prohibitionon bribery of government officials;

 

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

 

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

 

(x).                    it and its Service Providershave and will maintain security measures consistent with internationalstandards where applicable to ARCA and its Service Providers for the protectionof its operations and facilities against exploitation by criminal or terrorist individualsand organizations;

 

(y).                  it and its Service Providerswill allow their workers tofreely choose whether or not to organize or join associations for the purposeof collective bargaining as provided by local law;

 

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

 

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

 

(bb).           it has all intellectualproperty rights and licenses to perform the Services free and clear of claimsof infringement; and;

 

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

 

5.3     Inthe event GE determines at any time that any of ARCA’s representations,warranties or covenants are untrue, GE shall have the right, in addition toother remedies available to it at law or in equity, to terminate this Agreementas provided in Section 6.2, with ARCA remaining obligated to pay GE anyamounts 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 RecyclableAppliances and Other Recyclable Items and the performance of additionalServices by ARCA, its Affiliates or Services Providers until the matter givingrise to such notice and right to cure has been resolved or corrected to GE’sreasonable satisfaction.

 

# Article 6Term and Termination

#  

6.1     This Agreement shall commence on the EffectiveDate and shall remain in effect for a period of six (6) years from thefirst 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) additionalone (1) year terms (the “Renewal Terms”), each at GE’s sole optionexercisable within one hundred twenty (120) days prior to the expiration of theInitial Term or subsequent Renewal Term (the Initial Term and any Renewal Term(s) arecollectively referred to as the “Term”).

 

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

 

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

 

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notice to ARCA, terminate this Agreement; or (b) terminatethe Agreement immediately upon written notice to ARCA if the representations inSection5.2(c) hereof are not true at the time that the acquiring partyobtains a material portion of the assets of ARCA’s recycling business or acontrolling interest in ARCA**.**

 

6.4     If ARCA becomes insolvent, a receiver for ARCA isappointed or applied for, a petition is filed by or for ARCA under any federalor state bankruptcy law or ARCA makes an assignment for the benefit ofcreditors, GE may terminate this Agreement upon one (1) day prior writtennotice to ARCA.

 

6.5     Terminationof this Agreement shall not limit either Party from pursuing any other remediesavailable to it, including injunctive relief, nor shall termination relieveARCA of its obligation to pay all amounts due to GE that have accrued prior tosuch termination.  Either Party’sobligations 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 13.9of this Agreement shall survive termination cancellation or expiration of thisAgreement.

 

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

 

# Article 7Confidentiality and Proprietary Information

#  

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

 

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bylaw.  Each Party’s ConfidentialInformation shall remain the property of that Party except as expresslyprovided otherwise by the other provisions of this Agreement.

 

7.2     ConfidentialInformation shall not include information that the Receiving Party candemonstrate: (i) is or becomes publicly available through no wrongful actor omission of the Receiving Party; (ii) is obtained by the ReceivingParty from a third party without a breach of Receiving Party’s or third party’sconfidentiality obligations; (iii) was in the possession of the ReceivingParty at the time of disclosure without any confidentiality obligations; or (iv) wasindependently developed by the Receiving Party without reference toConfidential Information.

 

7.3     TheReceiving Party shall protect the Disclosing Party’s Confidential Informationagainst unauthorized use or disclosure using at least those measures that ittakes to protect its own Confidential Information of a similar nature, but noless than reasonable care, and shall not use or disclose the Disclosing Party’sConfidential Information for any purpose except in connection with itsperformance of this Agreement; in connection with obtaining any financing orraising of capital where any recipients of such information are required toexecute appropriate nondisclosure agreements as a condition to receiving suchinformation; or as set forth in Section7.7 hereof.  Notwithstanding the foregoing, the ReceivingParty may disclose the Disclosing Party’s Confidential Information to anyAffiliate; provided, however, each person to whom such Confidential Informationis disclosed is subject to confidentiality obligations comparable in scope tothose herein.

 

7.4     Uponrequest of the Disclosing Party or upon termination of this Agreement, allmaterials containing Confidential Information will be destroyed or returned tothe Disclosing Party and the Receiving Party will retain no copies orreproductions of the Confidential Information unless required by law, exceptthat the Receiving Party may retain one record copy for archival purposes,subject to the reasonable instructions of the Disclosing Party with respect tosuch copy.

 

7.5     Inthe event of any unauthorized use or disclosure or loss of any ConfidentialInformation of the Disclosing Party, the Receiving Party shall promptly, at itsown expense: (i) notify the Disclosing Party in writing; (ii) takesuch actions as may be necessary or reasonably requested by the DisclosingParty to minimize the violation or the damage resulting therefrom; and (iii) cooperatein all reasonable respects with the Disclosing Party to minimize the violationand any damage resulting therefrom.

 

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

 

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DisclosingParty shall be entitled to seek injunctive relief in addition to all otherremedies available at law and/or in equity.

 

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

 

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

 

# Article 8 Indemnification

#  

8.1                  Tothe fullest extent permitted by law, ARCA agrees to indemnify, defend and holdharmless GE and its Affiliates, directors, officers, employees,agents, successors and assigns and all other persons and entities acting onbehalf of or under the control of the other Party from and against any and allclaims, 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 connectedwith, (1) ARCA’s performance, or failure to perform, any of the Services,transactions or activities contemplated under this Agreement; (2) ARCA’sbreach of any of the representations, warranties, or covenants contained inthis Agreement; (3) any infringement or alleged infringement of theServices upon any patent, copyright, trade secret, or other proprietary rightof any third party; (4) Environmental Impact Claims (as definedhereinafter) at or affecting the Philadelphia RPC, any property affected bytransport of the Recyclable Appliances or Other Recyclable Items, or anyApproved TSDF (but as to the TSDF, only to the extent related to WasteMaterials under this Agreement); (5) violations of Environmental Laws,permits, or approvals in connection with the Philadelphia RPC or any Servicesperformed under this Agreement; or (4) the Waste Material, as hereinafterdefined , including, but not limited to, the possession, transportation,Storage, Treatment and/or Disposal of Waste Material, arising out of orrelating to the performance of the Services and any resulting release or threatof release of Waste Material, contamination of or adverse effects on theenvironment arising out of or relating to the Waste Materials. This indemnityis absolute and unconditional and

 

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

 

8.2     Definitions

 

(a) In connection with the foregoing, thephrase “Losses” shall be understood in its most comprehensive sense, whichincludes any and all claims, losses, damages, fines, penalties, costs or otherdetriments, and, without limiting the foregoing, specifically includes allstatutory or common law claims brought against GE, ARCA or their respectiveAffiliates, including claims brought pursuant to Sections 106, 107 or 113 ofthe Comprehensive Environmental Response, Compensation and Liability Act of1980 (42 U.S.C. 9601 et seq.), as amended, including future amendments thereto,Sections 7002 and 7003 of the Resource Conservation and Recovery Act, (42U.S.C. Section 6901 et seq.) as amended, including any future amendmentsthereto, the Toxic Substances Control Act, 15 U.S.C. 2601 et seq. as amended,including any future amendments thereto, or similar state and localEnvironmental Laws including claims for damage to the environment or propertyor claims for bodily injury. Notwithstanding anything to the contrary stated hereinabove,“Losses” shall expressly include, without limitation, any and all costsincurred due to any investigation of the Philadelphia RPC or other sites or anycleanup, removal or restoration mandated by or pursuant to any EnvironmentalLaws.

 

(b) “EnvironmentalImpact Claims” are Losses which arise out of, are related to, or are based onthe 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 orinto the surface or subsurface (i) soils, (ii) water or water course,(iii) objects, or (iv) any tangible or intangible matter, whethersudden or not.

 

“EnvironmentalLaws” 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 futureamendments, relating to the public health and safety or the protection of theenvironment, including without limitation the Comprehensive EnvironmentalResponse, 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. 6901et seq., the Clean Water Act, 33 U.S.C. 1251 et seq., the Clean Air Act, 42U.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”****shallmean wastes that meet the descriptions set forth below generated in providingthe Services whether generated and/or stored at an RPC or other sites: anysolids, liquids, sludges, semisolids, or contained gases which

 

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fallwithin 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 federallaw or regulation), or as defined under Environmental Laws.  The term “Waste Material” includes any andall materials or substances which are defined as “hazardous waste,” “extremelyhazardous waste” or as “hazardous substances” pursuant to Environmental Laws,and also includes asbestos, polychlorinated biphenyls (“PCBs”) and petroleumproducts and any materials sent for Treatment, Storage, Disposal, recycling orreclamation.  Where there exists aconflict in the definitions employed by two or more governmental agencies thathave overlapping jurisdiction over wastes generated by ARCA, and its ServiceProviders, “Waste Material” shall be construed to have the broadest of themeanings employed by such agencies.

 

8.3     Inconnection with the forgoing indemnities, ARCA and its Affiliates specificallywaive and relinquish all statutory or common law claims against GE and itsAffiliates, including its present and future officers, directors, shareholders,subsidiaries, divisions, employees and agents, that ARCA and its Affiliates mayotherwise have in connection with transfer to ARCA and its Affiliates of titleand responsibility for the Recyclable Appliances, Other Recyclable Items,Referral Business or Waste Material, including any claims arising underEnvironmental Laws, claims for property damage or bodily injuries, includingdeath.

 

8.4     Theforegoing indemnities are conditioned on: (a) GE notifying ARCA in writingwithin ninety (90) days of becoming aware of any covered Loss, provided,however, that the failure of GE to give ARCA such written notice will notrelieve ARCA of its obligations hereunder except to the extent such failure materially prejudices (or results in materialprejudice to) ARCA’sdefense of such claim; and (b) GE providing ARCA with theassistance, information, and authority reasonably necessary to defend suchclaim.  Reasonable out-of-pocket expensesincurred by GE in providing such assistance will be reimbursed by ARCA.  ARCA will keep GE promptly and fully informedregarding all material developments with respect to such Loss.  In no event shall ARCA by its action or inaction, or by default, concede or admitliability, or enter into any judgment or settlement regarding any indemnified Loss withoutGE’s prior written consent, whichsuch 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 GEincurs in connection with such enforcement. GE reserves the right, at its own expense, to participate in the defenseof any matter subject to indemnification by the ARCA.

 

# Article 9Insurance

#  

9.1     Withoutlimiting the indemnification provisions of this Agreement, ARCA shall obtain,during the Initial Term and any Renewal Terms, and maintain in force thefollowing insurance coverage at its own cost and expense:

 

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(a).      Worker’s Compensation withapplicable minimum statutory limits per occurrence, Disability and UnemploymentInsurance, and all other insurance as required by law and as customarilymaintained in ARCA’s industry for all ARCA employees performing the Serviceshereunder, including Employer’s Liability Insurance with limits of no less than$500,000 per occurrence, or any amount required by applicable law, whichever isgreater.

 

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

 

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

 

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

 

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

 

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

 

(g).      Pollution Legal LiabilityInsurance 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 thePhiladelphia RPC or individual policies with the same coverage limits shall beobtained for each legal entity operating at the Philadelphia RPC.  The policy(ies) shall be endorsed to name GEand its Affiliates as additional named insureds.  Similar policies shall be purchased for anyAdditional RPCs established under Section 1.2 hereof.

 

9.2           ARCA shall cause itsinsurers to issue, before the Effective Date of this Agreement, certificates ofinsurance evidencing that the required coverages and policy endorsements aremaintained in force, and that not less than thirty (30)

 

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dayswritten notice shall be given to GE prior to any modification, cancellation ornon-renewal of the policies.

 

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

 

# Article 10Compliance with GE Policies

 

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

 

# Article 11 Relationship Between the Parties

 

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

 

11.2         Notices.** **All notices, including notices ofaddress change, required to be sent hereunder shall be sent by facsimile (withthe original to promptly follow by applicable national mail service orovernight courier), by overnight courier, or transmitted electronically.  Notices will be deemed given on the datedelivered to the recipient if sent by fax or overnight courier (it being agreedthat the sender shall retain proof of transmission or delivery, as the case maybe), or when accessible electronically if sent electronically.  Notices shall be sent to the Parties asfollows (or as otherwise directed by a Party):

 

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GE:

 

[*]

GM,Distribution and Services

AppliancePark, Bldg. 4 Room 126C

Louisville,KY 40225

Fax:  [*]

Email:  [*]

 

[*]

Manager,Local Delivery Service

AppliancePark, Bldg. 4 Room 116

Louisville,KY 40225

Fax:  [*]

Email:  [*]

 

[*]

VicePresident and General Counsel

AppliancePark, Bldg 2 Room 226

Louisville,KY 40225

Fax:  [*]

Email:  [*]

 

ARCA:                   [*]

ApplianceRecycling Centers of America, Inc.

7400Excelsior Boulevard

Minneapolis,MN 55426

Fax:  [*]

Email:  [*]

 

11.3         Warrant Agreement.  The parties intend to contemporaneously enterinto a Warrant Agreement with the execution of this Agreement.  The Parties agree that this Agreement shallhave no force and effect unless a Warrant Agreement in the form attached heretoas Schedule 11.3 is executed by both Parties.

 

Article 12 Alternative Dispute Resolution

 

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

 

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

 

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period (but inno event more than thirty (30) days from the date of receipt of writtenrequest), then the dispute will be escalated to representatives of each party atleast one (1) level higher in their respective organizations than thoseinvolved in the previous round of negotiations (“Escalated Representatives”).  Except if a court determines preliminaryinjunctive relief is warranted upon application of one of the Parties to thisAgreement, no formal proceedings relating to such dispute may be commenceduntil the Escalated Representatives conclude in good faith that amicableresolution through continued negotiation of the matter in issue does not appearlikely.  If the Escalated Representativesare unable to resolve the dispute within a reasonable period, (but in no eventmore than thirty (30) days from the date negotiations commenced between theEscalated Representatives), the Parties shall submit the dispute for non-bindingmediation by a single mediator in accordance with the rules of the CPRInstitute for Dispute Resolution (www.cpradr.org) (“CPR”), utilizing rules andprocedures in place at the time of the dispute. Such mediator shall be competent in any technical, legal or other issue(s) involvedin the dispute. In the event the Parties are unable to resolve the disputewithin thirty (30) days of commencement of the mediation, or if one party failsto participate in the mediation as agreed herein, either party may refer thedispute to arbitration by a sole arbitrator (for claims estimated at $5 millionor less) or 3 arbitrators (for claims estimated at over $5 million) inaccordance with the CPR Rules for Non-Administered Arbitration of BusinessDisputes then currently in effect. Unless otherwise agreed by the Parties, the mediator shall bedisqualified from serving as arbitrator in the case. The place of arbitrationshall be New York, New York, and the language of the arbitration shall beEnglish. The Federal Arbitration Act shall govern the arbitration and any courthaving jurisdiction thereof may enter judgment upon the award rendered by thearbitrator(s).  The Parties willparticipate in the arbitration in good faith, and, unless awarded to thecontrary by the mediator or arbitrator, will share equally in theadministrative costs of the mediation and arbitration.  The arbitrator shall not be empowered toaward damages in excess of compensatory damages, and each party irrevocablywaives all rights to recover such non-compensatory damages with respect to anydispute resolved by arbitration hereunder. The Parties irrevocably waive all objections to venue, jurisdiction ofthe court, and right to trial by jury in any judicial action, proceeding orclaim ancillary to an arbitration arising out of this Agreement.

 

Article 13 General Provisions

 

13.1         Severability.****Ifany provision of this Agreement is illegal or unenforceable, its invalidityshall not affect the other provisions of this Agreement that can be given effectwithout the invalid provision.  If anyprovision of this Agreement does not comply with any law, ordinance orregulation, such provision, to the extent possible, shall be interpreted insuch a manner so as to comply with such law, ordinance or regulation, or, ifsuch interpretation is not possible, it shall be deemed to satisfy the minimumrequirements thereof.

 

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13.2         Assignability/Subcontractors.

 

(a).          Unless otherwise approved or agreed in writingby GE, ARCA shall not assign, delegate or subcontract any of its rights orresponsibilities under this Agreement to any Affiliate or to any third party orentity. This Agreement may not be assigned by ARCA, or involuntarily assignedor 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 anysubcontractors by ARCA to perform the Services, such Service Providers shall beengaged to do so under written contracts with ARCA under terms andconditions noless restrictive than those set forth herein, including butnot limited to Articles 5 and 10.  ARCA shall also ensure that each ServiceProvider has obtained and maintains all licenses required in connection withthe Services for which such Service Provider is responsible. ARCA shall includein its subcontracts provisions equivalent to those in this Agreement to theextent such terms and conditions are relevant to the Services to be provided bythe Service Provider (including, without limitation, a restriction on theService Provider’s right to further subcontract its obligations without GE’sprior written consent), and shall identify GE as a direct and intended thirdparty beneficiary thereof.  Upon GE’srequest from time-to-time, an officer of ARCA shall certify in writing thateach Service Provider is in full compliance with this Section.

 

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

 

(d).          ARCA shall remain responsible, as primaryobligor, for all obligations performed by Service Providers to the same extentas if such obligations were directly performed by ARCA, including any acts oromissions by the Service Providers.  Inno event shall ARCA be relieved of its obligations under this Agreement as aresult of its use of any Service Providers. ARCA shall supervise the activities and performance of each ServiceProvider and shall be jointly and severally liable with each such ServiceProvider for any act or failure to act by such Service Provider.  If GE determines that the performance orconduct of any Service Provider is unsatisfactory, GE may notify ARCA of itsdetermination in writing, indicating the reasons therefor, in which event ARCApromptly shall take all

 

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necessaryactions to remedy the performance or conduct of such Service Provider or, ifsuch remediation is not possible, replace such Service Provider.

 

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

 

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

 

13.4         Publicity/Advertising.  As a material obligation of this Agreement andexcept as otherwise required by law, GE and its Affiliates or agents, and ARCA,its Affiliates, Service Providers or its agents shall not release informationwith respect to the existence or terms of this Agreement or an amendment or anyother document thereto and shall not without the consent of the other Party usethe name, logo, trademarks, photographs, or any reference either direct orindirect of either Party in advertising, marketing, public relations or similarpublications (such as, but not limited to, marketing brochures, press releases,case studies or references).  NeitherParty 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 particularcommunication, neither Party shall not be under any further obligation toprovide consent in any future request.

 

13.5         Electronic Communications. Any document properly transmitted and received by the other Party bycomputer access shall be considered a writing delivered in connection with thisAgreement.  Electronic documents shall bedeemed received by a Party when accessible by the recipient on the recipient’scomputer system.

 

13.6         Waiver.** **Thewaiver by either Party of any default or breach of this Agreement shall notconstitute a waiver of any other or subsequent default or breach.  The Parties’ failure at any time to enforceany of the provisions of this Agreement or any right or remedy availablehereunder or at law or equity, or to exercise any option herein provided will inno way be construed to be a waiver of such provisions, rights, remedies oroptions or any other term, condition or covenant of this Agreement, or in anyway to affect the validity of this Agreement. The exercise by GE or ARCA of any rights, remedies or options providedhereunder or at law or equity shall not preclude or prejudice the exercisinghereunder of the same or any other rights, remedies or options.

 

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13.7         Force Majeure.** **Neither party shall be in default or otherwiseliable for any delay in, or failure of, its performance under this Agreementwhere such delay or failure arises by reason of any act of God, or anygovernment or any governmental body, war, insurrection, the elements, strikesor labor disputes, or other similar cause beyond the control of suchParty.  Either Party may terminate, atits option, the whole or any part of this Agreement if such a situationcontinues for sixty (60) days.

 

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

 

13.9         EntireAgreement.  Time is of the essence as to each andevery provision of this Agreement requiring performance within a specifiedtime.  This Agreement shall constitutethe complete and final expression of agreement between the Parties andsupersedes 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 determinethe meaning of this Agreement even though the accepting or acquiescing partyhas knowledge of the performance and opportunity for objection.  This Agreement may not be modified,supplemented or amended except in writing signed by a duly authorizedrepresentative of each Party.  Anyattempted modification, addition of new terms, or submission of inconsistentterms thereto in any document submitted by a Party, whether or not materiallydifferent, are objected to and shall have no force or effect upon the otherParty unless specifically accepted by such other Party in writing.  Any section that by its nature should surviveexpiration or termination of this Agreement, shall remain in effect after theexpiration 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.]**

 

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IN WITNESSWHEREOF, the authorized representatives of the Parties hereto have executedthis Agreement as of the date first written above or as otherwise specifiedherein.

 

 

**Executedby 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

 

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**[*] signifies that confidentialinformation has been omitted and filed separately with the Securities andExchange Commission.**

 

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

 

[*]

 

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

 

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Schedule 1.1 (c) — Processing Equipment andProcedures

 

[*]

 

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**[*] signifies that confidentialinformation has been omitted and filed separately with the Securities andExchange Commission.**

 

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Schedule 1.1 (e) — Other Recyclable Items

 

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

 

·                  Householdmechanicals such as furnaces, pressurized devices and air compressors, lawnmowers and tractors, patio furniture, exercise equipment and tool boxes;

 

·                  Accessoriesfor Appliances and mechanicals such as Appliance backsplashes, cords and spareparts; and

 

·                  Miscellaneousmetal items, such as tool boxes, shopping carts, lumber carts and racks, thatmay from time to time be added to loads – as long as the load does not containany industrial waste or other substance that is regulated under EHS Laws andregulations.

 

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Schedule 1.1 (f) — Operations Overview

 

[*]

 

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**[*] signifies that confidentialinformation has been omitted and filed separately with the Securities andExchange Commission.**

 

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

 

To be agreed to by the parties.

 

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

 

[*]

 

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**[*] signifies that confidentialinformation has been omitted and filed separately with the Securities andExchange Commission.**

 

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

 

[*]

 

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

 

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Schedule5.2 (m) — Environmental Health and Safety Management System Requirements

 

**Environmental, Health and Safety (EH&S) Policy**

 

**ARCA and its Affiliates willestablish an EHS Policy, which includes the following:**

** **

·      Comply with applicable EHS laws and regulations.

 

·      Take appropriate measures to prevent workplaceinjuries and illnesses, and provide employees with a safe and healthy workingenvironment.

 

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

 

·      Assess EHS impacts before starting a new activity orproject 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 useand release of toxic and hazardous materials, prevent pollution, and conserve,recover and recycle materials.

 

·      Continue toimprove its EHS systems and performance as an integral part of its operationalstrategy.

 

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

 

**EMS: Environmental**

 

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

 

·      The EMS should include at least the followingelements:

 

·      Air

·      Chemical Control

·      General Environmental

·      Regulated Waste andDangerous Goods Shipping

·      Waste

·      Water

 

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Schedule5.2 (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) managementsystem. 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&SExpectations 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

 

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Schedule5.2 (m) — Environmental Health and Safety Management System Requirements

 

**EMS: Procedures**

 

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

 

·      To achieve its goals of the EHS Policy, the ARCA andits 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 atleast 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 asupplier relationship policy or implementation strategy and do business onlywith suppliers that comply with the policy and applicable laws in the areas ofemployment, environment, health and safety.

 

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Schedule 10.1 — GE Integrity Guidefor Suppliers

 

[*]

 

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**[*] signifies that confidentialinformation has been omitted and filed separately with the Securities andExchange Commission.**

 

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Schedule 11.3 — Warrant

 

Form of Warrant attached.

 

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