UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 1-K

PURSUANT TO REGULATION A OF THE SECURITIES ACT OF 1933

 For the fiscal year ended December 31, 2022

TerraCycle US Inc.

(Exact name of issuer as specified in its charter)

(609) 656-5100

(Registrant’s telephone number, including area code)

Class A Preferred Stock

(Title of each class of securities issued pursuant to Regulation A)

In this Annual Report, the term “TerraCycle,” “we,” or “the company” refers to TerraCycle US Inc. and its consolidated subsidiaries. The term “TCI,” “parent,” or “parent company” refers to our parent company, TerraCycle, Inc.

This report may contain forward-looking statements and information relating to, among other things, the company, its business plan and strategy, and its industry. These forward-looking statements are based on the beliefs of, assumptions made by, and information currently available to the company’s management. When used in this report, the words “estimate,” “project,” “believe,” “anticipate,” “intend,” “expect” and similar expressions are intended to identify forward-looking statements, which constitute forward looking statements. These statements reflect management’s current views with respect to future events and are subject to risks and uncertainties that could cause the company’s actual results to differ materially from those contained in the forward-looking statements. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date on which they are made. The Company does not undertake any obligation to revise or update these forward-looking statements to reflect events or circumstances after such date or to reflect the occurrence of unanticipated events.

Item 1. BUSINESS

TerraCycle’s Business

Overview:  Operating in 20 countries, our parent company is a world leader in the collection and recycling of waste streams that are traditionally considered not recycled. We were formed in August 2017, and, our wholly owned subsidiary, TerraCycle US, LLC, has been operating in the United States since January 1, 2014. At that time, our now wholly owned subsidiary assumed all income and expenses associated with our parent company’s US operations. We conduct our business exclusively through our operating subsidiary, which generated revenues in each fiscal year since its inception.

Our company’s mission is to eliminate waste in the context of a profitable business. To do this we first focus on hard-to-recycle waste streams, and typically set up national collection platforms for them. This platform is typically funded by consumer product companies, retailers, cities, manufacturing facilities, distribution centers, small businesses and individuals. The collected waste is principally recycled and sold to manufacturers that make new products and materials. Where possible, we and our parent focus on how to integrate hard-to-recycle materials into specific products.

Over the past two decades of operation, we have focused on this neglected area of recycling, which has been profitable for both companies now for several years. The reason why most waste streams are not recycled—and are instead sent to landfill or are incinerated—is because the cost to collect and process them far outweighs the value generated from the recovered material. In order to achieve our mission, we have created an array of new business models that generate value well beyond the material value of the waste that is collected, allowing us to recycle everything from cigarette butts to chip bags and candy wrappers.

Positioning: Through a range of services (largely deploying third-party supply chains), we engage consumer product brands, manufacturing and distribution facilities, cities, retailers, small business and consumers across 48 states. Our platforms include services that are free to consumers (typically funded by consumer product companies and retailers) where individuals and locations (such as schools, community centers, religious institutions, civic organizations, etc.) can voluntarily collect and recycle products and packaging that would otherwise likely end up in landfills and oceans or waterways, or be incinerated. For small businesses and individuals, we offer low cost, turnkey recycling platforms for hundreds of hard-to-recycle waste streams from plastic packaging, disposable gloves and masks, and candy and snack wrappers; these Zero Waste Boxes are paid for by a distributor or end-user. For cities, we offer a variety of platforms and citywide programs for hard-to-recycle waste streams like cigarette butts, disposable razors, and health and nutrition packaging. By becoming a public recycling location, cities are supplied collection bins to facilitate community recycling. For laboratories, distribution centers and manufacturing facilities, we deploy large scale recycling platforms for everything from packaging write-offs to personal protective equipment.

With many of these platforms, we provide our partners a range of agency services, including traditional media/PR, social media, and communications and marketing services. We are aware of no other company that provides marketing and a range of agency services that also collects and recycles waste, or that has a Research and Development (R&D) department to analyze and innovate with diverse waste streams for recycling. To our knowledge, we are part of one of the few multinational companies operating in 20 countries that exclusively provides green/sustainability services.

Economic underpinnings of recycling:  The key to understanding TerraCycle begins with the economics of recycling. Almost all products and packages can be technically recycled (with some level of R&D and/or design investment), but practically most are not and instead are sent to landfill or incineration. Currently—with some local exceptions—only four types of waste are commonly recycled:  clear glass, uncoated paper, certain rigid plastics and certain metals. The main driver is whether it’s cheaper to produce new products and packaging from virgin materials or recycled materials.  In the case of making new glass, paper and other generally recycled items, it’s less expensive to use recycled materials than virgin materials. That is, it’s cheaper to collect, sort and recycle those waste streams than it is to extract and manufacture virgin materials.  Most other kinds of waste, such as pens, toothbrushes, candy wrappers, cigarette butts and coffee cartridges are rarely recycled, largely because collecting, sorting and recycling is more expensive than manufacturing replacement products from virgin materials.  As a result, these wastes are principally sent to landfill or incineration. To recycle “generally non-recycled” waste streams, TerraCycle works with its clients (consumer product brands, retailers, distribution and manufacturing facilities, cities, small business and individuals) to generate value beyond the material value of the waste. This incremental value ranges from communication and shopper marketing platforms for consumer product companies, to incremental foot traffic for retailers, to cleaner streets for cities, to charitable donations. Many of these clients have told us (as they renew those programs), that they have experienced increased customer loyalty, higher revenue and/or greater market share that they attribute to their TerraCycle programs.

By engaging the wide range of market participants, and increasing scope of value beyond just material value, we reverse engineer a system where waste is wasted, to one where waste is reutilized, emulating nature’s circular systems:  We turn a vicious cycle of waste into a more virtuous one, reducing the amounts of products and packaging that are dumped in landfills and oceans, or are incinerated, and thus reduce the amount of new materials that need to be extracted from the Earth to produce virgin materials for replacement products.

Our lens:  We believe that most people and waste management companies perceive waste as a liability, something to put out of sight and out of mind. At TerraCycle, we celebrate waste and continually look to innovate around how to solve for it by making it exciting, which we can do through our vision that such waste has positive not negative value. Through our programs, we’ve developed unprecedented markets for waste streams (such as contact lenses) that previously only had negative value.

Our participants:  We engage collectors, who come from all backgrounds.  Our programs are successful in red and blue states, and we engage people in collecting where they live, where they go to school, where they work and where they gather for community and service.

Innovation is at our core: We have created recycling solutions for many waste streams that were previously considered insolvable, from latex and nitrile gloves to coffee capsules, from cosmetic packaging to industrial adhesives packaging, from cigarette butts to lighters and used chewing gum to toothbrushes to toothpaste tubes. We regularly develop new business models to engage diverse participants in recycling solutions as well as continue innovate and improve within our business models.   

We think outside of the box:  We begin with the assumption that everything can be circularly solved (via reuse, upcycling or recycling) and develop systems to bring these solutions to life. Then we come up with business models that justify a stakeholder paying the price by generating value that is important to that stakeholder (i.e., foot traffic for a retailer).   We don’t own processing facilities as it produces CAPEX risk and lowers nimbleness. Also many processors are willing to either use their existing equipment to process our unique waste streams or install new equipment as needed. To our knowledge, no other company collects the waste streams we do for recycling, nor holds the knowledge of how to recycle these materials.  We have spent years developing collection models and recycling solutions for a whole spectrum of common waste streams.

Significant public exposure:  Our company is in the press almost every day, often several times per day. We have been featured on covers or prominent features of several magazines and other publications, ranging from Chief Executive and Smart CEO to Business Insider, Yahoo! News, Fast Company, as well as section covers of the New York Times and other notable newspapers. TerraCycle is covered in the press every day, averaging over 50 placements daily, which highlight our company and the innovative solutions for waste we develop for the world’s largest brands. Recent placements include outlets such as Forbes, BuzzFeed, The Guardian, Bloomberg, USA Today, Parade and many other notable mainstream media outlets. TerraCycle and Founder/CEO Tom Szaky are regularly honored with highly respected awards such as INC. 5000 List, the 2023 Real Leaders Impact Award and the Momentum 100 2022 CEO Impact Award among numerous other recognitions.

Our business is generating net income and growing; we expect these results to continue:

“The Circular Economy” is among the key themes discussed among global corporations, governments and leading academics at the World Economic Forum.  As TerraCycle’s principal focus is developing and implementing circular solutions for products and packaging where there are otherwise only linear options (landfill and incineration), our partnerships with major businesses are recognized as circular economy activities.  We are pleased to be an innovator within this timely global movement, and continue to expect to see our engagements with leading companies grow, as we provide a wide range of turnkey solutions that enable companies of any size to participate in the Circular Economy.

Growth: We continue to pursue companies to acquire that will allow us to grow our revenue and expand our service offerings. We expect to use the majority of proceeds raised from our Regulation A offering to acquire additional companies and revenue streams.

Some attributes of our stock: Subject to the availability of funds lawfully available for distribution to the stockholders under Delaware law, we commit to distribute the remaining balance of at least 50% of our after-tax profits among the Preferred and Common stockholders on a pro rata basis. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the company, the holders of Class A Preferred Stock are entitled to receive $1.00 per share from the assets of the company available to distribution to its stockholders before any payment are made to the holders of Common Stock (our parent company). In the event of an initial public offering (IPO) or sale of the company, the Preferred Stock would automatically be converted into shares of Common Stock on a one-for-one basis immediately prior to the closing of such IPO.

The Company

We operate four principal business divisions that generate revenue: Sponsored Waste Programs, Zero Waste Boxes, Material Sales, and Regulated Waste.

With our Sponsored Waste Programs, we design and administer turnkey programs through which we bring manufacturers or brands and the public together to recycle certain categories of products and/or packaging that the manufacturers produce. These programs are sponsored and funded by manufacturers or brands and are free to the public. For example, Colgate has contracted with us to set up a national recycling program to collect and recycle its oral care products and packaging. These programs offer the individuals and entities collecting the waste “TerraCycle rewards”, which are points that can be converted into donations to charities.

Regulated Waste provides products and services to help consumer facilitate the effective and compliant management of regulated, universal and hazardous waste. This may include fluorescent lamps, bulbs, batteries, and e-waste as well as organic waste, medical waste and other waste streams that are potentially harmful to the environment.

We also sell Zero Waste Boxes to customers who wish to collect a specific waste stream not sponsored by a brand. For example, customers can buy a box to recycle coffee capsules or baby food pouches. Once a box is filled with the specified waste, the customer arranges a UPS pick up to deliver the waste to our warehouse for sorting, aggregation, storage, and recycling.

In many cases, we sell waste directly to a recycler and do not retain ownership of the end product; for instance, one of our major waste processors has purchased certain polypropylene and polyethylene blends; in other cases, we resell the end product after processing by a third-party recycling plant.

We can recycle the wastes collected through these programs into new materials and sell them to companies that make new products with the recycled materials. The principal types of waste we process are combinations of HDPE/PP, PET, aluminum, and other traditionally non-recyclable combinations that include engineering grade plastics. The principal outputs of our process are lower end material mixtures (often comprised of multiple polymers), which can be used by manufacturers that make industrial type products that are traditionally more forgiving. Some examples of these products include plastic lumber, plastic containers, plastic shipping pallets and dunnage (large containers used for carrying objects).

Overview

TerraCycle, Inc, is our parent company and owns 100% of our voting stock. TerraCycle US, LLC is our wholly owned operating subsidiary. While we were formed in August 2017, our parent company has been operating in the United States since 2003, and internationally since 2009, and our operating subsidiary has been operating in the United States since January 1, 2014. At that time, our now wholly owned subsidiary assumed and has since operated all US business activities previously associated with our parent’s US operations. We conduct our business only in the United States and exclusively through our operating subsidiary, which generated revenues in each fiscal year since its inception. We own the two buildings that comprise TerraCycle’s global headquarters (our parent company pays us rent).

Principal Products and Services

In the United States, we currently operate four principal business divisions that generate revenue: Sponsored Waste Programs, Zero Waste Boxes, Material Sales, and Regulated Waste.

Sponsored Waste Programs

Sponsored Waste Programs are turnkey programs we design and administer for manufacturers/brands that seek to recycle their products or packaging. For example, Colgate has contracted with us to set up a national recycling program to collect and recycle its oral care products and packaging. These programs are free to the public and offered on our website, www.TerraCycle.com.

Everyone, including individuals, schools, office buildings, municipalities, etc. may sign up through our website to become a collector of any brand-sponsored waste. After signing up, a collector would begin collecting the waste in any box, which when full, would be shipped to one of our warehouses using a free UPS mailing label downloaded from our website.

In return, the collector receives “TerraCycle charity points.” These points are awarded based on the net weight of the waste items collected. Although programs differ, the points can usually be converted into a $0.02 payment per waste item collected to a charity or school designated by the collector.

The cost of shipping the waste to our warehouse and recycling center, storage, recycling, and charity donations/gifts associated with each shipment are incorporated into the pricing of our waste collection services in our contracts with the sponsoring brands. The sponsoring brand also pays us a management fee for administering the program as well as significant marketing and promotional services in many cases. Through our engagement with the public in our collection network, the sponsoring brands often receive positive recognition in the press and social media for their role in enabling recycling of otherwise non-recyclable waste.

The waste items collected from the programs are sorted, aggregated, and stored in our warehouses until there is sufficient quantity of a particular waste from which we can recycle into new materials. We arrange for the waste to be transported and recycled from the warehouses to a third-party recycling facility. We pay the third-party recycling center to clean, shred and recycle the waste into new plastic pellets, according to our specification. Non-compliant materials (e.g. products unrelated to category), contamination (e.g. food or other residual products), or material loss during processing (e.g. burn-off or fall-out) may impact the full extent of material recovery.

As of December 31, 2022, we have over 150 brand sponsored national recycling programs, operating in 48 states. These programs generated $16.678 million in revenue in 2022.

Zero Waste Boxes

Zero Waste Boxes can be used to collect a specific waste stream (like coffee capsules) or a category of waste (such as non-compostable kitchen or bathroom waste). Whereas Sponsored Waste Programs are paid for by the sponsoring brand and are free to the collector, Zero Waste Boxes are paid for by the collecting customer.

We sell these boxes directly to end users through our website, resellers (like Amazon and Staples), and to event organizers, such as conferences or concerts that seek to reduce their waste footprint. We also provide private label box services for companies and distributors that seek to offer a recycling option as part of their sale or service. Pricing of the boxes depends on size, weight, costs to recycle, value of recycled materials, and whether sorting is needed.

The boxes are affixed with a pre-paid shipping label. Once a box is filled with the specified waste, the customer would arrange a UPS delivery of the box to our warehouse for sorting, aggregation, storage, and ultimately recycling into new materials for sale by our Material Sales department.

Similar to the waste items collected from the brand sponsored programs, we arrange for waste to be transferred from the warehouses to a third-party recycling facility once there is sufficient quantity of a particular waste that can be recycled. We will pay the third-party recycling center to clean, shred and recycle the waste into new plastic pellets according to our specification. The cost of transportation of waste items from the warehouse to the recycling center, as well as the cost of recycling, are factored into the cost of the box sold to the customer.

We currently offer more than 80 categories of publicly offered Zero Waste Boxes on our website. This division generated $13.632 million in 2022 sales.

Material Sales

TerraCycle recycles a wide range of traditionally non-recyclable materials collected through the Sponsored Waste and Zero Waste Boxes programs. For example, coffee capsules often include both plastic and metals, as well as coffee grounds. Pens generally include a range of plastics and metals. In almost all cases, all plastics are turned into new plastic pellets that can be used to make new products by third-party manufacturers, and metals are separated and sold on to buyers of recycled metals. Organic materials such as coffee grounds and cigarette ash are separated and sent to composting.

Although we principally recycle plastic materials ranging from simple single-polymer items like Polypropylene (#5) to complex multi-layer items (that are categorized as Other (#7)), we also recycle complex streams like clothing, furniture, and electronics.

Our Material Sales team either sells the materials to a buyer before we incur the cost of recycling, in which case we pay a third-party recycler for the recycling, or we deliver the collected materials to a processor that will recycle and sell the recycled materials to a manufacturer. The manufacturers then incorporate the recycled materials into new products.

In some cases, our Material Sales team works with our R&D team to recycle collected waste into a format that meets the unique specifications requested by the buying parties. In our R&D lab at headquarters, we are able to perform relatively sophisticated sample testing; we outsource any production work to strategic processors so that we can ensure that the sample meets client needs. When an order is ready to move into production, we move aggregated loads of materials from our storage facilities to one of several third-party processing (or conversion) facilities. This third-party recycling center will then perform the necessary processing work (such as shredding, washing, drying, pelletizing, compounding, etc.) to produce recycled pellets that meet the specified deliverables of our clients. In many cases, the processed materials are then sent to our client’s third-party manufacturer for immediate incorporation into new products.

Our Material Sales division generated $3.521 million in revenue in 2022. Given that recycled materials are a commodity and thus pricing is dictated by market conditions, this division traditionally generates lower margins than other business divisions of the company that have more unique product offerings that can be priced at a premium.

Regulated Waste

We opened the TerraCycle Regulated Waste division as an extension of the Zero Waste Boxes division in November 2017, immediately after the acquisition of acquisition of the assets of Air Cycle Corporation (“Air Cycle”), a then 20-year old company that brokers recycling services for florescent light bulbs and batteries. The assets acquired from Air Cycle comprised all of Air Cycle’s tangible assets such as machinery, furniture, fixtures, supplies and certain inventory, the rights of Air Cycle under its contracts, its intellectual property and its books and records.

The Regulated Waste division includes: the sale of boxes for the pre-paid return of light bulbs and electronics, and bins for the return of batteries; bulk collections of universal waste from factories, office buildings and hotels (here, the same materials are collected as single pallets on the small side or as truckloads on the larger side); and, the Bulb Eater bulb crusher, which concentrates the mercury from light bulbs using manufactured parts and is assembled in the division’s Chicago area office.

Consistent with its practices in other operating divisions, TerraCycle does not own and operate universal waste processing facilities; rather, all collected waste is shipped directly to third-party EPA registered universal waste processing companies.

This division generated $5.834 million in sales in 2022.

Market

We do not rely on any particular customer for our Sponsored Waste business.

We do not rely on any particular customer for our Zero Waste Boxes business.

Life Science Logistics was a top customers for our Material Sales business in 2022.

The main industries served by our regulated waste line of business are contractor, distribution, government and various commercial businesses including manufacturing and property management companies.

Competition

Sponsored Waste Programs

We believe that our Sponsored Waste Program has a unique business model and therefore has no direct competition.

In many ways, our Sponsored Waste business model is an aggregation of several types of business, allowing us to engage different parties at various stages of the production and consumption cycle. Part of our work resembles that of an agency, in that we seek out and contract with clients that make products (brands) and help them implement sustainability initiatives as part of their marketing objectives. We are also an operations and logistics company managing hundreds of thousands of pick-ups, check-ins, sorting, warehousing, recycling and delivery of recycled materials nationally. Additionally, we conduct research and development activities to evaluate waste streams before we contract to collect and recycle a particular type of waste, which has resulted in our developing innovative and pioneering recycling solutions for previously non-recycled waste streams.

Because our unique business model incorporates marketing and public relations services, our customers experience market related benefits accompanying the resultant sustainability gains. These benefits justify their covering the costs of collecting and recycling traditionally “non-recyclable” waste streams, which TerraCycle implements without either losing money or obtaining government or charitable subsidies. We believe that no other companies currently collect and recycle most of the waste streams that we principally focus on.

Zero Waste Boxes

Similar to the Sponsored Waste Program, this division focuses on recycling waste streams that are rarely recycled, such as factory gloves, coffee capsules, etc. There is not much economic incentive to collect and recycle them; we are not aware of much competition for any of the waste streams collected through zero waste boxes, and know of no other company that provides a similar service for diverse categories of generally non-recyclable waste.

Regulated Waste

There is, however, significant competition in the Regulated Waste space, as there are companies, many much larger than us, that collect and process universal waste. We believe, however, that we will be able to grow a significant universal waste business, differentiating ourselves from the competition because of our name and reputation, our ability to tap into our significant corporate customers, and our unique synergies between our various business units and service offerings, including our rare ability among waste collectors to generate favorable publicity for our clients.

Material Sales

TerraCycle does not sell traditional commoditized plastics like HDPE (milk jugs) and PET (soda/water bottles). We sell traditionally non-recyclable plastics to processors and end users in the United States. Generally speaking, these materials are not in high demand; it takes a unique pitch to convince an outside company to use these materials in their supply chain. While there are plenty of other recyclers that process and sell traditional commoditized plastic, we believe TerraCycle is uniquely positioned to corner the market for non-traditional items. Our business model, starting with the front-end collection programs, gives our Material Sales team the flexibility to move material downstream using a wide range of options and pricing.

Employees

We contract for approximately 51% of the time of our parent company’s employees (discussed in more detail under the “Interest of Management and Others in Certain Transactions” below). Additionally, we have 96 full-time employees and no part-time employees.

Regulation

Our core business is to offer a service to collect, store, transport, and recycle post-consumer materials.  These materials are generally not hazardous and are not subject to federal or state regulations, as such regulations generally apply only to solid waste or hazardous materials.  Since the materials are not solid waste, TerraCycle is exempt from the requirements outlined by US EPA and the environmental departments of the 48 states in which we operate.

In some cases, TerraCycle provides solutions for materials that have slightly hazardous qualities such as aerosol containers. Shipping of aerosols is regulated by the US Department of Transportation, which provides for an exemption of limited quantity shipments of compressed gas. Our shipment of aerosols fits within the limited quantity exemption, and the aerosol canisters are shipped to third party aerosol recyclers that are licensed by the EPA.

Intellectual Property

Our parent company has registered a number of trademarks, including the Infinity Arrow logo, “TerraCycle” and “ELIMINATING THE IDEA OF WASTE”.

Neither we nor our parent hold any patents and have not applied for any patents.

Litigation

From time  to time, the Company may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. Litigation is subject to inherent uncertainties, and an adverse result in such matters may arise from time to time that may harm the Company’s business. To the knowledge of management, there is no material litigation or governmental agency proceeding pending or threatened against the Company or any of its subsidiaries.

The Company’s Property

We own two adjacent buildings at our headquarters at 121 New York Avenue and 21 Hillside Avenue, Trenton, NJ. The buildings are offices for our and our parent company’s staff. Certain areas of the buildings are not yet insulated or set up with heating and cooling. As we grow, it will be important to make improvements to expand the workspace in the buildings. The buildings are estimated to be valued at approximately $1 million. There are two mortgages on the buildings totaling to approximately $349,000 as of December 31, 2022 and $386,000 as of December 31, 2021. We receive revenue from our parent company for its pro-rata use of the buildings.

We recently acquired a new property in the Chicago area, (401 S. Highland Avenue), located in Aurora, IL for total consideration of $5.7 million (the “Chicago Property”). We expect this facility to centralize our various leased warehousing needs resulting in efficiencies and savings. For details regarding the acquisition of the new property, including financing $4,560,000 of the purchase, see “Management’s Discussion and Analysis – Liquidity and Capital Resources – Commitments.”

Acquisition of this MRF positions us well for future growth and scaling. The facility’s size means we can meaningfully grow without needing to lease additional space or renegotiate contracts with vendors.

We are in the process of winding down our need for those third-party warehouses located in Aston, PA, Bloomington, IL and Bells, TN as a result of the Chicago property purchase.

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of our financial condition and results of operations for the fiscal years ended December 31, 2022 and December 31, 2021 should be read in conjunction with our consolidated financial statements and the related notes included in this Annual Report. The consolidated financial statements included in this Annual Report are those of TerraCycle US Inc. and represent our entire operation. The following discussion contains forward-looking statements that reflect our plans, estimates, and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements.

Overview of Business Operations and Revenue Recognition

TerraCycle US Inc. was incorporated in Delaware in August 2017 by our parent company, Terracycle, Inc. (“TCI Parent”) which continues to own all of our common stock (approximately 71.8% of our equity). The remaining 28.2% of our equity is held by stockholders from our Regulation A offering which was conducted between January 10, 2018 and September 30, 2020. Our wholly owned subsidiary, TerraCycle US, LLC (“TerraCycle US, LLC”), is also our operating subsidiary and has been operating in the United States since January 1, 2014. The consolidated financial statements include the accounts of TerraCycle US, LLC and its wholly owned domestic subsidiary, TerraCycle Regulated Waste, LLC. We conduct our business exclusively through our operating subsidiary, which generated revenues in each fiscal year since its inception. Our business focuses on helping companies and consumers find a solution to collect and recycle many kinds of waste that are not commonly recycled. We provide premium recycling services to manufacturers (brands), retailers, organizations and individuals that pay us to recycle a product and/or package they manufacture or use.

Our net sales are derived primarily from sale of products and services in four principal segments: Sponsored Waste, Zero Waste Boxes, Material Sales, and Regulated Waste. In addition, certain corporate items are included in net sales. This relates to assets that are not managed directly by the reportable segments.

In Sponsored Waste, we design and administer turnkey programs through which we bring manufacturers or brands and the public together to recycle certain categories of products and/or packaging that the manufacturers produce. These programs are sponsored and funded by manufacturers or brands and are free to the public. We generally record revenue from these programs both from management fees that we charge the sponsors as well as variable fees that we charge the sponsors based on the amount of waste received. In some programs we provide additional add-on services such as shopper marketing and sale of specialty products made from recycled materials.

We also sell recycling services via Zero Waste Boxes. Through this program we send Zero Waste Boxes to customers or clients to be returned to us once filled with the applicable waste stream. This program is used by customers or clients who wish to collect and recycle a specific waste stream not sponsored by a brand. We receive revenues from the sale of these services. In addition, we work with some Zero Waste Boxes customers to design custom programs where we provide marketing and support services to help promote the collection of certain waste streams. In addition to the revenue earned from the sale of recycling services via Zero Waste Boxes, we also earn management fees for the marketing and support service that we provide to support those programs.

In Material Sales we receive revenues from the sale of pre-processed waste directly to a recycler and/or sale of the processed recycled materials recycled through third party recycling facilities.

Regulated Waste provides products and services to mainly offices for the effective and compliant management of Regulated Universal waste. Revenue from Regulated Waste is derived from fees we charge for these products and services.

Our cost of revenues primarily consists of logistics expenses (both shipping and warehousing), redemption of charity points, processing costs and cost of employees associated with the delivery of services).

Media Placements and Awards

During 2022, we earned almost 22,900 media placements globally, resulting in a combined reach of nearly 34.7 billion readers, marking a 24% increase in placements over last year. The North American PR team generated nearly 17,200 media placements throughout 2022, resulting in a combined reach of nearly 15.5 billion readers, marking a 45% increase in placements and a 23% increase in readers over the same period in 2021. 

Estimates

The discussion and analysis of the company’s financial condition and results of operations are based on the consolidated financial statements that have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires that management make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, management evaluates the estimates, including, but not limited to, those related to receivable allowances, inventories, accruals, goodwill and other intangible assets. These estimates are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Operating Results

The Company’s financial performance has continued to be strong in 2022, in spite of the impact in our business of the COVID-19 global pandemic and the macro-economic pressures from raising inflation and looming possibility of a recession.

Net sales for the company for the fiscal year ended December 31, 2022 (“Fiscal 2022”) were approximately $42,019,000, an increase of $8,567,000 (25.6%) from $33,452,000, compared to December 31, 2021 (“Fiscal 2021”). This increase was due to:

In addition, there was approximately $2,354,000 increase as a result of the timing of revenue recognition of annual contracts. The increase was primarily attributable to the deferred revenue on the variable fees as we increase the amount of waste processed from prior years’ deferred revenue, which are not recorded at the segment level.

A breakdown of the company’s performance by each segment for Fiscal 2022 and Fiscal 2021, can be seen in Note 11 to the accompanying financial statements.

Our cost of sales primarily consists of logistics expenses (both shipping and warehousing), redemption of charity points, processing costs and cost of employees associated with the delivery of services. Our cost of sales was approximately $18,777,000 in Fiscal 2022, an increase of $7,254,000 (63%) from $11,523,000 in same period last year, primarily driven by $1,324,000 costs of the waste processed from prior years (increasing the recognized revenue as explained above) $1,905,000 in higher processing and freight costs associated with the increased sales, a $534,000 increase in warehousing, supplies and product costs also associated with higher revenue, and $2,489,000 costs associated with price increases not fully recovered in pricing, and about $1,000,000 in costs associated with the consolidation of our operation.

Our gross profit was approximately $23,242,000 in Fiscal 2022, an increase of $1,313,000 (6%) compared to Fiscal 2021 of $21,929,000. Gross margin decreased to 55.3%, compared to 65.6% same period last year, reflecting unfavorable product mix (e.g., Material Sales which has lower margins increased 2.5x), costs increased in processing and freight, by approximately 6% and 2%, respectively, and one-time operational expenses.

Our operating expenses primarily consist of selling, general and administrative expense. Operating expenses for Fiscal 2022 were approximately $20,226,000, an increase of $5,844,000 (41%), compared to the same period in the prior year of $14,382,000. This increase was driven by continued investment in resources to grow the business, primarily in the form of hiring direct company personnel ($2,297,000), and TCI Parent allocated personnel ($1,373,000). The increased operating expenses were also due to increased marketing expenses ($320,000), the impact in 2021 of the forgiveness of PPP loan ($838,000), higher office operational expenses, utilities, and supplies ($289,000), T&E ($2,193,000), bad debt ($322,000), financial transaction fees associated to the higher Zero Waste Boxes sales ($92,000), professional fees ($164,000) primarily associated to due diligence of acquisition targets, and miscellaneous expense savings ($70,000).

Other (income)/expense, primarily interest income, increased to an income of approximately $235,000 from a $14,000 expense in the same period last year. This is mainly due to the increase of the loan facility with TCI Parent resulting in higher interest income generated. See “Term Loan Agreement”, below. On  December 31, 2022, the Company entered into a guaranty and pledge agreement with TCI parent in connection with the loan facility. See Exhibit 6.11 for details.

Income tax provision decreased by approximately $984,000 to $925,000 for Fiscal 2022 from $1,909,000 in Fiscal 2021, due to the lower level of before tax profits.

As a result of the foregoing, the net income of the company decreased by approximately $3,298,000 for Fiscal 2022 to $2,326,000, from $5,624,000 in same period last year.

Liquidity and Capital Resources

Cash Flow

Operating Activities

We used approximately $4,183,000 of cash from operations during Fiscal 2022. Net income generated $2,326,000 of cash flow. Accounts receivable used approximately $1,322,000 of cash due to increased revenue. Inventory used approximately $154,000 due to an increase in raw materials and finished goods to support growth in our ZWB segment. Accounts payable used approximately $695,000 of cash related to timing of payables coming due. Intercompany payables used about $2,754,000 of cash in connection with a loan to TCI Parent. Deferred income used approximately $2,260,000 of cash due to a reduction in this liability due to higher processing of prior years’ waste collected.

Investing Activities

Investing activities used approximately $5,750,000 in cash primarily related to the purchase of the Chicago Property.

Financing Activities

Our financing activities used net cash of approximately $1,102,000 during Fiscal 2022 as a result of the annual payment of dividends to common and preferred shareholders made in May. We entered into a $4,560,000 loan with Citibank to finance the above described purchase of the Chicago property.

Capital Resources

Management believes that the company’s existing cash balances of $16,499,000 at December 31, 2022, along with cash expected to be generated from future operations, will be sufficient to fund activities for the foreseeable future.

Commitments

On March 27, 2014, TerraCycle US, LLC entered into a mortgage note payable to TD Bank, N.A. related to the purchase of office space located on 121 New York Avenue, Trenton, New Jersey. The principal amount of that loan is $300,000 and is subject to interest at 5.75%. TD Bank has a call to reset the interest rate at each five-year anniversary of the mortgage; however, we have option to pay off the entire mortgage at that time without penalty. The mortgage note is secured by the building and matures on April 1, 2029. The amount outstanding under the mortgage note payable was approximately $156,000 and $175,000 at December 31, 2022 and 2021, respectively.

On May 26, 2016, TerraCycle US, LLC entered into a mortgage note payable with Bank of America Merrill Lynch related to the purchase of additional office space for the building located on 21 Hillside Avenue in Trenton, New Jersey. The principal amount of that loan is $300,000 and is subject to interest at 4.5%. The mortgage note is secured by the building and matures on May 25, 2031. The amount outstanding under the mortgage note payable was approximately $193,000 and $211,000 at December 31, 2022 and 2021, respectively. 

The company entered into a term loan agreement with TCI Parent on July 1, 2019, as amended, under which TCI Parent may borrow up to $10 million from the company. Under the terms of the agreement, TCI Parent will pay interest on a quarterly basis at a rate of LIBOR + 2.25 percent based on the average monthly balance for each preceding quarter. The entire unpaid principal balance together with any unpaid accrued interest and other unpaid charges or fees shall be due and payable at the end of the term, which is January 1, 2024. The company may decline to advance funds under this agreement in the event of a default, which would constitute a failure to pay interest when due, failure to pay principal within fifteen days of due date or in the event any representation or warranty by TCI Parent in connection with this agreement was untrue in any material respect at the time it was made. As at December 31, 2022, the balance of the company’s loan to TCI Parent pursuant to this agreement was $3,269,153. The term loan agreement and amendment are attached to this report as Exhibits 6.4 and 6.5, respectively.

On December 14, 2022, our subsidiary, TerraCycle US, LLC, acquired the Chicago Property for total purchase price of $5,700,000. In connection with this purchase, TerraCycle US, LLC entered into a financing arrangement with Citibank, N.A. (“Citibank”) with a principal amount of the loan at $4,560,000 with an annual interest rate of 5.21%. Monthly payments of $30,819 will be paid for 119 months until a final balloon payment of $2,898,763 becomes due December 14, 2032. In the event of prepayment, TerraCycle US, LLC will be required to pay liquidated damages with respect to interest shortfalls, including prepayment as a result of acceleration of the debt.. In addition to a security interest in the Chicago Property, Citibank has a security interest in a TerraCycle US, LLC deposit account established with Citibank having a minimum balance of $100,000 and a security interest in all rents paid to TerraCycle US, LLC. We also have guaranteed the debt undertaken by TerraCycle US, LLC in the amount of $5,000,000 in principal plus interest, legal and remedial costs and expenses.

Management’s Report

The Sponsored Waste segment (recycling paid for by brands, free to the public) experienced another year of growth (as reported above) over the previous year, as many important long-term clients have continued and strengthened their commitment to their recycling programs. Retail activation (collection of waste at select retailers) continues to provide growth opportunities.

Zero Waste Boxes revenue also increased in 2022 over 2021. Our investment in digital marketing of Zero Waste Boxes (expert hires and budgeted spend, which began in 2021) has continued to provide significant targeted exposure of this product offering with a positive return on advertising spend (ROAS). We also made continued improvements to the user experience of the Zero Waste Box shop (website).

Material Sales and Regulated Waste divisions (which had both seen small declines in revenue in 2021 compared to 2020 due to the slower than expected recovery from the impact of lockdown, closed offices, and reduced economic activity) rebounded in 2022. Material Sales revenue grew meaningfully last year while Regulated Waste saw about a 2% increase in revenue as a result of marketing and sales efforts and a more pre 2020 (pandemic) marketplace returning.

Other Trend Information

COVID-19

Similar to many companies, we have been impacted by COVID-19. The largest impact on the company was the decrease in Regulated Waste sales during to office closures, which has begun to recover.

General Market Trends

Item 3. Directors and Officers

The table below sets forth the directors of our company.

The table below sets forth the executive officers, directors, and significant employees of our parent company, TerraCycle, Inc. We contract about 60% of their time from our parent company.

Tom Szaky, Chief Executive Officer and Chairman of the Board of Directors of TerraCycle, Inc. and TerraCycle US Inc.

Tom is the founder and CEO of TerraCycle, Inc. He is a world-renowned entrepreneur, business leader, innovator and public speaker, who oversees one of the world’s few green multinational companies. Through TerraCycle, Tom has pioneered a range of business models that engage manufacturers, retailers and consumers in recycling products and packaging (such as beauty care and dental care waste, cigarette butts, coffee capsules and food packaging) that would otherwise be destined for landfill or incineration. To implement circular solutions for previously disposable materials, Tom had the foresight and courage to pioneer a business model that incorporates several distinct lines of business, so that TerraCycle could serve as a unique catalyst among market participants.

While a student at Princeton University, after winning multiple contests for his business plan for TerraCycle, Tom left school to develop the company. He is now an advisor to CEOs of some of the world’s largest consumer products companies. Tom is the author of three books, “Revolution in a Bottle” (2009, Portfolio) and “Outsmart Waste” (2014, Berrett-Koehler) and “Make Garbage Great” (2015, HarperCollins). Tom created, produced, and starred in TerraCycle’s reality show, “Human Resources” which aired on Pivot TV from 2014-2016. Tom and TerraCycle have received over 200 social, environmental and business awards and recognition from a range of organizations including the United Nations, World Economic Forum, Forbes Magazine, Fortune Magazine, and the Environmental Protection Agency.

Richard Perl, Chief Administrative Officer of TerraCycle, Inc. and Director of TerraCycle US Inc.

Richard met Tom and joined TerraCycle, Inc. in 2008. He has undergraduate, law and business degrees from Columbia University. For over 35 years, Richard worked within the “green” business world in which he has extensive long-term relationships. He was involved in a range of businesses, mediations and transactions in clean energy development, carbon credits, real estate and resort planning, international tax structuring, business planning and management, all with a green/mission focus. He is one of the founders of Social Venture Network and Threshold Foundation. He has worked internationally extensively, having been to Japan over 40 times and worked with businesses in India, South America, and Europe. At TerraCycle, Richard has overseen international growth (from 1 to 20+ countries), strategic partnerships, investor relations and capital raising.

Javier Daly, Chief Financial Officer of TerraCycle, Inc. and Director of TerraCycle US Inc.

Javier has been the Chief Financial Officer at TerraCycle, Inc. since September 2011. Prior to that, he was the CFO of the American Red Cross COE of New Jersey (January 2010 to August 2011), leading the restructuring of the ARC New Jersey’s 15 chapter financial operations from multiple accounting, payroll and banking systems into one center. From October 2006 until September 2009, he was the CFO of the Pharma Unit of Wolters Kluwer Health, overseeing its global operations. From September 2002 until September 2006, he held senior financial positions at DHL-Deutsche Post, initially as its VP Accounting for the US, then as CFO for the DHL Express Latin American operations. From January 1998 until September 2002 he was CFO Latin America for Clorox. From January 1978 until December 1997, he held finance positions of increasing responsibilities at Procter & Gamble, the latest one as its CFO for the Paper Sector Latin America. He has a MA in International Affairs from Ohio University and a BS in Economics from Universidad Catolica del Peru.

Javier has announced his intention to retire in March of 2024. Mr. Daly has had a distinguished career with the company and our parent company for more than 11 years.  We are working with Mr. Daly on a planned transition to ensure the orderly transfer of responsibilities to a successor Chief Financial Officer, including working with Mr. Daly in the search for his replacement. Mr. Daly will remain in his current position and continue to perform his associated responsibilities during the search process and for a transition period following the hiring of a successor Chief Financial Officer.

Daniel Rosen, Vice President & General Counsel of TerraCycle, Inc. and Director of TerraCycle US Inc.

Daniel has held the position of Vice President & General Counsel at TerraCycle, Inc. since June 2016 after having spent the previous six years as its Vice President for Global Administration responsible for overseeing the company’s expansion into 20 foreign markets. Prior to joining TerraCycle, Inc., Daniel worked at the American Enterprise Institute in Washington, D.C., studying monetary policy. He holds a BA in Government from Cornell University and a JD from the University of Miami (FL) School of Law.

David Zaiken, Director of TerraCycle, Inc. and TerraCycle US Inc.

David has served on TerraCycle, Inc. Board of Directors since 2013 and TerraCycle US Inc. Board of Director since November 2017.  David is currently a Managing Director at Grant Thornton LLP, Washington National Tax Office focusing on International Tax and financial matters.  Prior to joining Grant Thornton, he was the Associate Vice President of International Tax Planning at Weatherford International, plc, from December 2013 until March 2017.  Prior to that he was a partner at Arthur Andersen, KPMG, and Alvarez and Marsal, where he was a senior international tax and financial consultant to numerous large global corporations and transactions.  David is a licensed CPA and a member of the AICPA. David holds a BBA in accounting from the University of Iowa and a Master in Taxation degree from the University of Texas at Austin. David filed a petition under the federal bankruptcy laws in May 2017.

Ehud “Udi” Laska, Director of TerraCycle US Inc.

Udi is an experienced senior investment banker and executive with a strong track record of funding, building, running and selling profitable and turn-around companies. Since August of 2018, Udi has been heading and supervising the investment banking activities of Strategic Capital Investments, LLC (C2M Securities). Udi is also the Chairman and CEO of Photonic Capital, Inc where he has served since 2015. Photonic Capital is a finance, sales and marketing company for the lighting retrofit market. Prior to joining Photonic, Udi served is a Director and a supervising CFO for 9 Lead Avenue, LLC, an Internet lead generation company from 2012 until 2015. From 2006-2012, Udi was President and CEO of Pelion Financial Group, Inc. a diversified financial service company he helped building. The group is composed of a pension plan administration company, a registered investment advisory company, an insurance agency and a full service broker/dealer. Among other prior engagements, Udi served as the Chairman & CEO of American Benefit Resources, Inc. (ABR), an integrated retirement benefits company. He built ABR through a series of acquisitions and at the time, it was the largest independent provider of pension administration and advisory in the country. Udi also served as a deputy CFO for Citicorp where he was responsible for long-term funding and capital compliance. He holds an undergraduate degree in engineering from the University of Massachusetts, a Masters of Science in Engineering from Brown University and an MBA from Stanford University.

Tom Miller, Director of TerraCycle US Inc.

Tom is CEO of Eagle River Capital, formed in 2017 to acquire, integrate and manage small waste collection companies in six Western US states. He has close to three decades of experience as an executive in the waste management business. From 2010 to 2016, he was Vice President for Mergers and Acquisitions for Progressive Waste Solutions, a $2 billion waste management company operating in the US and Canada. Prior to that, Tom worked at Republic Services, the second largest waste management company in the US, serving as Vice President and Regional Operations Manager. He graduated from Hanover College with a degree in Geology.

Marian Chertow, Director of TerraCycle US Inc.

Marian is a Professor of Industrial Environmental Management at the Yale School of Forestry & Environmental Studies, where she has served as Director of the Program on Solid Waste Policy and as Director of the Industrial Environmental Management Program since 1991. Her research and teaching focus on industrial ecology, business and environment, waste management, circular economy, and urban-industrial issues. She also holds academic appointments at the Yale School of Management and the National University of Singapore. Prior to her time at Yale, she spent ten years in environmental business and state and local government, including service as president of a large state bonding authority charged with developing a billion dollar waste infrastructure system. She currently serves on the Board of Directors of the Alliance for Research in Corporate Sustainability (ARCS) and the External Advisory Board of the Center for Energy Efficiency and Sustainability at Ingersoll Rand. Professor Chertow has a B.A. from Barnard College, and her M.P.P.M. and Ph.D. from Yale University.

Steven Russo, Director of TerraCycle, Inc.

Steve has been on TerraCycle, Inc. Board of Directors since 2009. With over 25 years in the industry, Steve is an accomplished leader in the Youth and Adult Handbag and Accessory market. A graduate of Wharton School of Finance, Steve worked in and studied the industry for ten years before founding FAB NY in 1997, the company where he still serves as President & CEO. FAB NY established itself as a key resource for Kid's Accessories and in 2003, with the acquisition of the industry dominant Pyramid Accessories, became a leader in the Kids Character License market, anchored by multi category license with Hello Kitty, as well as in depth partnerships with Nickelodeon, Hasbro and many others. In 2014, Steve made significant investments in E-Commerce Retailers, dELiA*s and Alloy Apparel which broadened his investment portfolio in the Fashion Industry.

Brett Johnson, Director of TerraCycle, Inc.

Brett joined TerraCycle Inc. Board of Directors in 2009. He is currently the Co-Chairman of the Phoenix Rising Football Club (www.phxrisingfc.com), a minor league professional soccer team, based in Phoenix, Arizona. From 2013 to 2015, Brett was a member of the Board of Directors, and the Chairman of the Compensation Committee, at Blyth Inc. (NYSE: BTH). Blyth is a $1 billion direct to consumer sales company and leading designer and marketer of accessories for the home and health & wellness products. During the same period, Brett was the President and Director of Greenwood Hall. Founded in 1997, Greenwood Hall is a full service education management firm. Greenwood Hall provides the infrastructure and student lifecycle solutions that enable post-secondary institutions to compete successfully in the global e-learning marketplace. In 2005, Brett founded Benevolent Capital, a private equity fund with investments in real estate, manufacturing and consumer brands, including Phoenix Rising FC, Octagon Partners, ArcherDX, TerraCycle, and NYC Office Suites.

Veronique Cremades-Mathis, Director of TerraCycle, Inc.

Veronique joined TerraCycle Inc. Board of Directors in 2021.  Ms. Cremades-Mathis was at Nestle for over thirty years.  Most recently she was the Global Head of Sustainable Packaging (2019-2021) in charge of the Sustainable Packaging transformational journey for the company across 100+ countries, 450 factories, 5000 production lines, leading the recycled food grade plastic market creation and supported the creation of Nestle Institute of Packaging Science.  Prior to that she was Global Head of Dairy, Food & Confectionery, Nestle Professional (2017-2019) and Managing Director & CEO, Nestle New Zealand (2011-2017).  Veronique holds a BA from Hotel Business School, and a Masters in Business and Food Science from Strasbourg University, France.

Compensation of Directors and Executive Officers

For the fiscal year ended December 31, 2022, we compensated our three highest-paid directors and executive officers as follows:

Our parent company did not provide any cash compensation to its board members for year 2022. Each parent company board member was awarded approximately 2,000 shares of options to purchase our parent company's stock at strike price for each of the three board meetings attended. All options vest immediately upon grant and may be exercised anytime within 10 years of grant date.

For the fiscal year ended December 31, 2022, we compensated the independent directors serving on our board with stock options to purchase parent company stock (at a strike price) with a value approximating $50,000 as a group. There are four independent directors serving on our board. Management directors are not compensated for director service. All options vest immediately upon grant and may be exercised anytime within 10 years of grant date.

Item 4. Security Ownership of Management and Certain Security Holders

The following table sets out, as of December 31, 2022, our voting securities that are owned by executive officers and directors, and other persons holding more than 10% of our voting securities, or having the right to acquire those securities.

TerraCycle US Inc. Beneficial Ownership Table

The following table sets out, as of December 31, 2022, the voting securities of our parent company that are owned by executive officers and directors, and other persons holding more than 10% of our voting securities, or having the right to acquire those securities.

TerraCycle, Inc. Beneficial Ownership Table

Item 5. Interest of Management and Others in Certain Transactions

Operational Support Services Agreement

We have entered into an “Operational Support Services Agreement” with our parent company, TerraCycle, Inc. Under this agreement, our parent company provides trained and experienced executive, administrative and operational staff services in support of our business, specifically, services including executive services, Sponsored Waste Program management, business development, corporate communication, program design, graphic presentation, engineering, financial reporting, human resources, information systems, insurance, internal audit, internet technology, legal, licensing and material sales, operational planning and oversight, and public relations training and management.

To provide this full range of services, TerraCycle, Inc (our parent, or “TCI”). employs about 85 staff in the US and its international operations. In addition, TCI contracts with an exclusive IT services provider in Budapest with about 30 employees and two providers based in Ukraine with about 15 employees. Due to the relatively small number of contractors based in Ukraine, we do not believe the current conflict in that area will have a material impact in our operations. This team of staff employed by the parent company (“Global Services Team”) is dedicated to serving all of our parent company’s subsidiaries in all countries, including us. We draw upon the Global Services Team in the same manner as other subsidiaries outside of the US. We share the cost of the Global Services Team based on an activity-based costing analysis prepared at the beginning of the year, where each subsidiary is charged based on the time required by the Global Services Team to support them. In addition to the actual cost of the Global Services Team, our parent company also charges a 6% mark-up on the costs related to services rendered for: (1) business development, (2) Sponsored Waste Program management, (3) engineering services, and (4) executive services. For the fiscal years 2022 and 2021, our share of the cost and fees of the Global Services Team was 51%, and 54%, respectively. For the fiscal years 2022 and 2021, we paid our parent company a total of $9,487,000 and $7,929,000, respectively, for the services we received from the Global Services team. We anticipate our share will increase to 56% for fiscal year 2023.

Company Funding to the Parent

On a regular basis, we advance funds to our parent to cover items such as payroll. At the same time, our parent incurs on expenses on behalf of its subsidiaries including our company, expenses which are charged on a quarterly basis. Finally, as indicated under the Tax Sharing Agreement section, we reimburse the parent for the federal income tax we would had paid had we not made use of the parent’s NOL carryforward. In the event the net of these transactions results in a net receivable from the parent, we charge the parent an interest of LIBOR + 2.25%, accrued on a quarterly basis. At December 31, 2022 and 2021, we had a net payable to the parent of $3,269,153 and $370,477, respectively.

Office Rental Agreements

We own two adjacent buildings at our headquarters at 121 New York Avenue and 21 Hillside Avenue, Trenton, NJ. The buildings are offices for our and our parent company’s staff. We have entered into rental agreements with our parent company for our pro rata use of the office space. In fiscal years 2022 and 2021, our parent company paid us approximately $253,000 and $225,000 in rent, respectively.

GRN Movement Agreement

Steven Russo, a director of TerraCycle, Inc. and CEO of FAB NY (as further described in “Item 3. Directors and Officers”), formed a new company called GRN Movement in late 2021.  GRN Movement approached TerraCycle in connection with purchasing recycled materials from TerraCycle’s Storied Plastics division to be used in the manufacturing of new products in categories such as back-to-school items (backpacks, totes, laptop cases, etc.), dorm room decor items (laundry bags, couch pillows, blankets, etc.) and beach items (towels, insulated bags, hats, swimwear, etc.).  On March 28, 2022, TerraCycle entered into an agreement with GRN Movement, in which TerraCycle agreed to (i) sell such materials to GRN Movement at a lower margin than is customary in TerraCycle’s ordinary course of business and (ii) charge a lower research and development fee for costs associated with specific formulations required by GRN Movement (if applicable) in exchange for GRN Movement’s agreement to pay TerraCycle a higher royalty than GRN normally pays in its ordinary course of business (percentage of the wholesale price) for products it sells to retailers. In addition, TerraCycle has granted GRN Movement an exclusive license to use the TerraCycle name and logo in the product categories for the goods it manufactures using the storied materials. GRN Movement will need to maintain certain sales goals to maintain this right. The deal also provides for the possibility that customers may be able to return same category products for recycling at end of life to a TerraCycle collection point at the retailer where the products are sold.

Though this agreement is with TerraCycle US Inc., the (parent company) TerraCycle, Inc. Board reviewed and discussed this matter at its December 7, 2021 Board meeting. Mr. Russo recused himself from the discussions and dropped off the call as they took place. The Board agreed that Mr. Russo has vast experience in selling back-to-school category and the other products to major retailers and Mr. Russo had indicated he would be prepared to invest heavily to build the GRN Movement business, it was in the company’s best interest to strike a deal that would provide GRN Movement with lower up-front costs and TerraCycle with higher success-based returns, making sure we still cover all costs at the lower margin through fees charged up front.  If this business works with GRN Movement, it could open doors with other manufacturers in other categories and into the fashion industry which is still in its infancy stage in terms of growth opportunties around sustainability. As a result, this deal could also result in incremental business for TerraCycle, that could help grow the sale of recycled materials as well as potentially collection of more post-consumer waste from retailers where products made from these recycled materials are sold. Accordingly, the TerraCycle, Inc. Board unanimously conceptually approved the proposed transactions between GRN Movement and TerraCycle US, noting that this would be recognized as a related party transaction.

A copy of this agreement is attached as an exhibit to this report.

HBS Agreement

In the fourth quarter of 2022, the company’s subsidiary, TerraCycle US, LLC (“TerraCycle LLC”), entered into an agreement with HBSCO LLC (“HBS”) under which TerraCycle LLC and HBS will operate a collection and recycling program for hear-to-recycle materails leveraging TerraCycle ZW Bags and HBS collection, sorting and/or transportation services. Fees will be split such that TerraCycle LLC will pay to HBS approximately 64% of amounts paid by the customer for each Small ZW Bag and 66% of amounts paid by the customer for each Large ZW Bag. Tom Miller who serves as director on the company’s board is also a principal of HBS.

Item 6. Other Information

None.

Item 7. Financial Statements
 

TerraCycle US Inc. and Subsidiaries

Consolidated Financial Statements

Years Ended December 31, 2022 and 2021

TerraCycle US Inc. and Subsidiaries

Contents

Independent Auditor's Report

Board of Directors

TerraCycle US Inc. and Subsidiaries

Opinion

We have audited the consolidated financial statements of TerraCycle US Inc. and its subsidiaries (the Company), which comprise the consolidated balance sheets as of December 31, 2022 and 2021, the related consolidated statements of operations, equity and cash flows for the years then ended, and the related notes to the consolidated financial statements (collectively, the financial statements).

In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of their operations and their cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.

Basis for Opinion

We conducted our audits in accordance with auditing standards generally accepted in the United States of America (GAAS). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the Company and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audits. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Emphasis of Matter

As discussed in Note 2 to the financial statements, as of January 1, 2022, the Company adopted Accounting Standards Update (ASU) 2016-02, Leases (Topic 842). Our opinion is not modified with respect to this matter.

Responsibilities of Management for the Financial Statements

Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the financial statements are issued or available to be issued.

Auditor’s Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.

In performing an audit in accordance with GAAS, we:

We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters that we identified during the audit.

Blue Bell, Pennsylvania

May 1, 2023

TerraCycle US Inc. and Subsidiaries

Consolidated Balance Sheets

                   See accompanying notes to consolidated financial statements.

TerraCycle US Inc. and Subsidiaries

Consolidated Statements of Operations

           See accompanying notes to consolidated financial statements.

TerraCycle US Inc. and Subsidiaries

Consolidated Statements of Equity

                 See accompanying notes to consolidated financial statements.

TerraCycle US Inc. and Subsidiaries

Consolidated Statements of Cash Flows

               See accompanying notes to consolidated financial statements.

TerraCycle US Inc. and Subsidiaries

Notes to Consolidated Financial Statements

Note 1 - Organization

TerraCycle US Inc. ("TCUSI") was incorporated on August 14, 2017 under the laws of the State of Delaware. At the same date, TerraCycle US LLC (“LLC”) which had been incorporated on September 16, 2013 under the laws of the State of Delaware, transferred 100% of its membership units to TCUSI, becoming a 100% owned operating subsidiary of TCUSI. LLC has two US operating subsidiaries which are also 100% wholly owned. As used herein, the "Company" refers to TCUSI and its subsidiaries. All the operating activities are conducted under LLC and subsidiaries, while TCUSI only has holding company activities. The consolidated financial statements represent full years of operations for LLC for the years ended December 31, 2022 and 2021.

The Company is a subsidiary of TerraCycle, Inc. (“TCI” or “Parent Company”). The consolidated financial statements include certain assumptions and estimates to allocate a reasonable share of TCI’s corporate overhead to the Company through a global management fee so that the accompanying consolidated financial statements reflect substantially all costs of doing business. For the years ended December 31, 2022 and 2021, overhead charges, include primarily compensation and related benefits, were approximately 9,487,000 and $7,929,000, respectively. The overhead corporate charges were allocated to the Company based on their revenues relative to the total consolidated revenues of the Parent Company.

The Company designs and manages programs to collect a wide range of non-recyclable waste materials for repurposing. Such materials are either sold as is, processed into a form which can be used by a manufacturer, or in some cases, manufactured into an eco-friendly product, which is sold directly to consumers. In addition, TerraCycle Regulated Waste (“TCRW”), a subsidiary of LLC, is a sustainable solutions and technologies company with products and services designed to enable companies to implement comprehensive environmental program for their facilities, focusing on regulated waste (e.g., fluorescent lamps, batteries and e-waste).

Note 2 - Summary of Significant Accounting Policies

The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The consolidated financial statements include the accounts of TCUSI and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of certain assets and liabilities and the revenue and expenses reported for the periods covered by the financial statements and certain amounts disclosed in the accompanying notes to the consolidated financial statements. Actual amounts could differ significantly from those estimates and assumptions. The estimates affecting the consolidated financial statements that are particularly significant include revenue calculations, allowance for doubtful accounts receivable, inventory provision, useful lives and impairment of long-lived assets, income tax provision, right-of-use assets, operating lease liabilities and commitments and contingencies.

TerraCycle US Inc. and Subsidiaries

Notes to Consolidated Financial Statements

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and accounts receivable. The Company maintains cash balances with a high-credit quality financial institution. At times, cash may exceed federally insured limits. At December 31, 2022 and 2021, the Company had cash balances in excess of federally insured limits of approximately $15,232,000 and $26,532,000, respectively.

The Company routinely assesses the financial strength of its customers and establishes an allowance for doubtful accounts based upon factors surrounding the credit risk of specific customers, historical trends and other information. The Company writes off accounts receivable as a charge to the allowance for doubtful accounts when, in the Company's estimation, it is probable that the receivable is worthless.

Long-lived assets, consisting of property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation and amortization are computed using the straight-line method over the estimated useful lives of the assets. Maintenance and repairs of property and equipment are charged to expense as incurred. Significant replacements, betterments and leasehold improvements are capitalized. When assets are retired or disposed of, the cost and accumulated depreciation are removed from the accounts and any gain or loss on disposition is reflected in other expense in the accompanying consolidated statements of operations.

The Company assesses the recoverability of the carrying value of its long-lived assets whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of the asset exceeds the estimated future cash flows, then an impairment charge is recognized for the amount by which the carrying amount of the asset exceeds the fair value of the asset. There were no events that would indicate an impairment as of December 31, 2022 and 2021.

Goodwill from the acquired Air Cycle Corporation business is not amortized and is tested annually for impairment on a quantitative basis. There was no impairment during the year ended December 31, 2022. Other identifiable intangible assets are amortized on a straight-line basis over a 15-year period. Amortization expense amounted to approximately $104,000 for the years ended December 31, 2022 and 2021.

The Company accounts for its foreign currency transactions in accordance with the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 830, Foreign Currency Matters. Transactions affecting revenues and expenses are generally translated at the exchange rate in effect on the transaction date. For the years ended December 31, 2022 and 2021, the Company recognized a foreign currency transaction loss of $3,935 and $2,956, respectively.

The Company is part of the consolidated tax return of the Parent Company and as such it includes the Company’s taxable income or loss on its income tax returns through February 2020. After February 2020, the Company files its own tax return separate from the Parent Company. The Company signed a Tax Sharing Agreement with its Parent Company effective January 1, 2017 by which the Company pays its Parent for the estimated income tax liability had it been a deconsolidated entity for income tax purposes. Prior to January 1, 2017, the Company was treated as a limited liability company for federal and state income tax purposes, and the Parent Company includes the Company’s taxable income or loss on its income tax returns.

The Company follows FASB guidance for how uncertain tax positions should be recognized, measured, disclosed and presented in the consolidated financial statements. This requires evaluations of tax positions taken or expected to be taken in the course of preparing the Parent Company’s tax returns to determine whether the tax positions are “more-likely-than-not” of being sustained “when challenged” or “when examined” by the applicable tax authority. Tax positions not deemed to meet the more-likely-than not threshold would be recorded as a tax expense and liability in the current year. Management evaluated the Company’s tax positions and concluded that the Company had taken no uncertain tax positions that require adjustment to the consolidated financial statements to comply with the provisions of this guidance. The Company is not currently under audit by any tax jurisdiction however, the 2018 through 2020 tax years are still subject to tax examinations at the Federal, State, and local level.

TerraCycle US Inc. and Subsidiaries

Notes to Consolidated Financial Statements

Inventory, which consists of post-consumer waste, supplies and finished goods is stated at the lower of cost or net realizable value. A reserve is recorded when the Company determines inventory is obsolete or in excess of expected use.

Revenue is recognized when (1) a contract with a customer exists, (2) performance obligations promised in a contract are identified based on the products or services that will be transferred to the customer, (3) the transaction price is determined based on the consideration to which the Company will be entitled in exchange for transferring products or services to the customer, (4) the transaction price is allocated to the performance obligations in the contract, and (5) the Company satisfies performance obligations.

The Company has various recycling programs for which revenue is generated. The Company enters into agreements with customers under various programs that seek to recycle their products or packaging through a sponsored collection or zero waste program. If the Company receives an up-front payment (annual fee and sometimes an exclusivity fee) to allow the customers to use the Company logo on its packages and advertise that the Company is a partner, revenue recognition is deferred and recorded to income over the term of the contract which usually spans one year, with some contracts as long as three years. An unearned amount related to such fees of approximately $3,922,000 and $3,837,000 is included in deferred income at December 31, 2022 and 2021, respectively.

The Company also receives a variable fee, usually billed monthly for the collection and recycling of products. Revenue is deferred until such waste is processed. An unearned amount of approximately $1,148,000 and $3,493,000 is included in deferred revenue at December 31, 2022 and 2021, respectively.

Merchandise sold is recorded as revenue upon shipment.

Shipping and handling costs are included in cost of sales. For the years ended December 31, 2022 and 2021, shipping and handling costs were approximately $6,288,000 and $4,329,000, respectively.

The Company expenses the costs of advertising as incurred. For the years ended December 31, 2022 and 2021, advertising expenses amounted to approximately $738,000 and $418,000, respectively.

Research and development costs are charged to operations as incurred and amounted to approximately $20,000 and $27,000 for the years ended December 31, 2022 and 2021, respectively. These costs do not include research and development costs incurred by TCI which are proportionately allocated to the Company through the global management fee charge. Such costs are included in selling, general and administrative expenses in the accompanying consolidated statements of operations.

TerraCycle US Inc. and Subsidiaries

Notes to Consolidated Financial Statements

Participants of certain waste collection programs earn points (usually two points) per unit or weight (usually pounds) collected depending on each specific program rules. These points can be redeemed every six months for payments to charitable 501(c)(3) organizations. Points not redeemed are cancelled after one year, as long as participants have not had activity in their account for the past twelve months. The Company recognizes a liability for the outstanding points not yet redeemed. As of December 31, 2022 and 2021, this liability amounted to approximately $440,000 and $353,000, respectively.

Changes to U.S. GAAP are typically established by the Financial Accounting Standards Board (“FASB”) in the form of Accounting Standards Updates (“ASUs”) to the FASB’s Accounting Standards Codification (“ASC”). The Company considers the applicability and impact of all ASUs and based on its assessment, determined that any recently issued or proposed ASUs not listed below are either not applicable to the Company or adoption will have minimal impact on its consolidated financial statements.

Recently Adopted Accounting Pronouncements

Leases. On January 1, 2022, the Company adopted ASU 2016-2, Leases (Topic 842), which required the Company to recognize lease assets and lease liabilities (related to leases previously classified as operating under previous U.S. GAAP) on its consolidated balance sheet for all leases in excess of one year in duration. The adoption of this ASU impacted the Company’s financial statements in that all existing operating leases were recorded as right-of-use (“ROU”) assets and liabilities on the balance sheet.

The Company elected to adopt the guidance using the modified retrospective method and, therefore, have not recast comparative periods presented in its consolidated financial statements. The Company elected the package of transition practical expedients for existing leases and therefore the Company has not reassessed the following: lease classification for existing leases, whether any existing contracts contained leases, if any initial direct costs were incurred and whether existing land easements should be accounted for as leases. The Company did not apply the hindsight practical expedient; accordingly, the Company did not use hindsight in its assessment of lease terms. As permitted under ASU 2016-2, the Company elected as accounting policy elections to not recognize ROU assets and related liabilities for leases with terms of twelve months or less and to not separate lease and non-lease components, and instead account for the non-lease components together with the lease components as a single lease component.

In connection with the adoption of the new standard, the Company recorded $2,200,250 of operating lease right of use assets and operating lease liability as of January 1, 2022. See Note 7 for additional information and required disclosures.

Under Topic 842, the Company determined if an arrangement is a lease at inception. ROU assets and liabilities are recognized at commencement date based on the present value of remaining lease payments over the lease term. For this purpose, the Company considers only payments that are fixed and determinable at the time of commencement. As most of the Company’s leases do not provide an implicit rate, the Company utilizes a risk-free discount rate based on the information available at commencement date in determining the present value of lease payments. The ROU asset also include any lease payments made prior to commencement and is recorded net of any lease incentives received and net of the deferred rent balance on the date of implementation. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that it will exercise such options.

Income Taxes. In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in ASC 740 and also clarifies and amends existing guidance to improve consistent application. This ASU is effective for the Company beginning on January 1, 2022. The Company adopted this guidance on January 1, 2022. The adoption of this ASU did not have a material impact on the consolidated financial statements and related disclosures.

TerraCycle US Inc. and Subsidiaries

Notes to Consolidated Financial Statements

Recently Issued Accounting Pronouncements

In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326). The new guidance requires organizations to measure all expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. This affects loans, debt securities, trade receivables, net investments in leases, off-balance-sheet credit exposures, reinsurance receivables, and any other financial assets not excluded from the scope that have the contractual right to receive cash. The new guidance will be effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company is currently evaluating the impact of adopting the new standard on its consolidated financial statements.

Note 3 - Inventory

Inventory consists of the following:

Note 4 - Property and Equipment, Net

Property and equipment are comprised as follows:

For the years ended December 31, 2022 and 2021, depreciation expense amounted to approximately $67,000 and $64,000.

Note 5 - Related Party Transactions

On a regular basis, the Company enters into various transactions with its parent (TCI) and subsidiaries of TCI. The most material activities occur with TCI and include a quarterly global management fee charge from TCI to the Company, a tax sharing agreement between TCI and the Company, as well as the Company funding TCI with cash to cover such items as payroll. At December 31, 2022 and 2021, the Company has a net related party short term receivable to TCI in the amount of $3,269,153 and $370,477, respectively. At December 31, 2022 and 2021 the Company has a net related party receivable from other subsidiaries of the Parent Company in the amount of $50,883 and $195,342, respectively, and has a net related party payable to other subsidiaries of the Parent Company in the amount of $255,497 and $225,739, respectively.

TerraCycle US Inc. and Subsidiaries

Notes to Consolidated Financial Statements

The Company allocated approximately $1,159,000 and $844,000 for the years ended December 31, 2022 and 2021, respectively, of office and related expenses to the Parent Company and related subsidiaries, which is recorded as a reduction in selling, general and administrative expenses in the consolidated statements of operations.

The Company entered into a lease agreement with a stockholder of the Company to rent a storage facility that expired on January 31, 2021. The initial base rent at the commencement of the new lease was $15,450 per month. The lease continued a month-to-month basis following the expiration date at the existing base rate amount. The base rent as of December 31, 2021 was $16,268 per month. For the year ended December 31, 2021, rent expense paid to this stockholder was approximately $179,000. The lease was terminated as of November 30, 2021. No future minimum lease payments are expected.

Note 6 - Debt Obligations

On March 27, 2014, the Company entered into a mortgage note payable with TD Bank, N.A. related to the purchase of additional office space in Trenton, New Jersey. The mortgage note is payable in $2,446 monthly installments of principal plus interest at 5.75% and matures on April 1, 2029. The mortgage note payable is secured by the mortgaged premises. The amount outstanding under the mortgage note payable was approximately $156,000 and $175,000 at December 31, 2022 and 2021, respectively.

On May 26, 2016, the Company entered into a mortgage note payable with Bank of America Merrill Lynch. The mortgage is secured by the building located on Hillside Avenue in Trenton, NJ. The mortgage note is payable in $2,305 monthly installments of principal plus interest at 4.50% and matures on May 25, 2031. The amount outstanding under the mortgage note payable was approximately $193,000 and $211,000 at December 31, 2022 and 2021, respectively.

On February 25, 2019, the Company opened a $2,000,000 Line of Credit with Bank of America. Terms are interest rate of daily LIBOR plus 2.75%, collateralized by fixed assets, inventory and receivables, and expiring on December 31, 2019 with a temporary renewal until June 30, 2022. This line of credit was closed out in November 2022.

On April 14, 2020, the Company was granted a loan (“PPP Loan”) of approximately $838,000 from the Paycheck Protection Program (“PPP”) as authorized by the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act. Funds from the PPP Loan may only be used for payroll costs, costs used to continue group health care benefits, mortgage payments, rent, and utilities. Under the terms of the PPP, certain amounts of the PPP Loan may be forgiven if they are used for qualifying expenses as described in the CARES Act. On March 30, 2021, the Company received written notice that the full value of the PPP Loan has been forgiven.

On December 14, 2022, the Company took out a home equity loan on its building in Illinois with a promissory note payable to Citibank, N.A. The note is payable in 119 regular payments of $30,819 and a final balloon payment of $2,898,736 due on December 14, 2032. Payments include principal plus interest at 5.21% and matures on December 14, 2032. The note payable is collateralized by the building. The amount outstanding under the note payable was $4,560,000 at December 31, 2022.

Estimated future annual maturities of debt, excluding capital lease obligations, as of December 31, 2022 are as follows:

TerraCycle US Inc. and Subsidiaries

Notes to Consolidated Financial Statements

Note 7 - Commitments and Contingencies

Leases

The Company leases office spaces, equipment and various properties for storage facilities. Many of the Company’s operating leases include one or more options to renew at the Company’s sole discretion. The lease renewal option terms are generally within 12 months. The determination of whether to include any renewal options is made by the Company at lease inception when establishing the term of the lease. Leases with an initial term of 12 months or less are not recorded in the consolidated balance sheet as of December 31, 2022.

Rent expense for operating leases is recognized on a straight-line basis over the lease term from the lease commencement date through the scheduled expiration date. Lease expense of approximately $565,000 and $598,000 for the years ended December 31, 2022 and 2021, respectively, is included in selling, general and administrative expenses in the consolidated statements of operations. Of the operating lease expense for the year ended December 31, 2022, $160,000 was associated with leases with an initial term of 12 months or less and variable costs.

Variable costs include certain lease arrangements that require periodic increases in the Company’s base rent that may be subject to certain economic indexes, among other items. In addition, variable costs include a portion of the lease arrangement where the Company is to pay property taxes, utilities and other costs related to several of its leased office facilities that fluctuate based on the actual amounts incurred by the Company’s lessor.

The following is a schedule, by years of maturities of lease liabilities as of December 31, 2022:

Litigation

The Company, from time to time, may be involved with lawsuits arising in the ordinary course of business. In the opinion of the Company's management, any liability resulting from such litigation would not be material in relation to the Company's consolidated financial position, results of operations and cash flows.

Note 8 - Benefit Plan

The Company maintains a 401(k) Profit Sharing Plan and Trust (the “401(k) Plan”) for qualified employees who elect to participate. The terms of the 401(k) Plan define qualified employees as those who work an average of thirty hours a week or more and have completed at least thirty days of service. The Company matches employee contributions equal to 100% of salary deferrals that do not exceed 3% of employee compensation plus 50% of salary deferrals between 3% and 5% of employee compensation. For the years ended December 31, 2022 and 2021, the Company recognized expense amounting to $184,000 and $153,000, respectively, which is included in selling, general and administrative expenses in the consolidated statements of operations.

TerraCycle US Inc. and Subsidiaries

Notes to Consolidated Financial Statements

Note 9 - Income Tax Provision

The provision for income taxes consists of the following:

Deferred tax assets and liabilities are determined based on the differences between the financial statement carrying amounts and tax bases of assets and liabilities using enacted tax rates in effect for years in which differences are expected to reverse.

Significant components of the Company's deferred tax assets for federal income taxes as of December 31, 2022 and December 31, 2021 consisted of the following:

The Company does not have unrecognized tax benefits as of December 31, 2022 or December 31, 2021. The Company recognizes interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense.

In December 2017, the Tax Cuts and Jobs Act (the “2017 Tax Act”) was enacted. The 2017 Tax Act includes a number of changes to existing U.S. tax laws that impact the company, most notably a reduction of the U.S. corporate income tax rate from 34 percent to 21 percent for tax years beginning after December 31, 2017. The 2017 Tax Act also provides for a one-time transition tax on certain foreign earnings and the acceleration of depreciation for certain assets placed into service after September 27, 2017 as well as prospective changes beginning in 2018, including repeal of the domestic manufacturing deduction, acceleration of tax revenue recognition, capitalization of research and development expenditures, additional limitations on executive compensation and limitations on the deductibility of interest.

TerraCycle US Inc. and Subsidiaries

Notes to Consolidated Financial Statements

Effective January1, 2022, we are subject to mandatory capitalization of Section 174 research and development expenditures. The capitalized expenses are subject to amortization over five and fifteen years for expenses incurred within the U.S. and outside of U.S., respectively.

A reconciliation of income tax benefit at the statutory federal income tax rate and income taxes as reflected in the financial statements as of December 31, 2022 and December 31, 2021 is as follows:

The Company files income tax returns in the U.S. federal jurisdiction and various states. The Company’s 2019-2021 tax years remain open and subject to examination.

Note 10 – Stockholders’ Equity

The Company has an irrevocable option to repurchase any or all shares of Class A Preferred Stock under defined circumstances following 18 months of issuance at a price equal to the greater of the original issue price plus any declared but unpaid dividends or the fair market value as defined. The Class A preferred stock has a liquidation preference of $1 per share.

Upon the closing of the sale of shares of Common Stock to the public in a public offering, each outstanding share of Class A Preferred Stock shall automatically be converted into one share of Common Stock and such share may not be reissued by the Company.

At December 31, 2018, the 34,182 shares of the Company’s non-voting Class A Preferred stock are held by a shareholder who exchanged shares in TCI for the Class A Preferred stock. 29,221 shares were sold pursuant to the Company’s Regulation A+ offering throughout 2019, as described below. On December 27, 2019, the remaining 4,961 unsold shares were put back to TCI in the ratio of one share of the Company’s preferred shares to 493 shares of the TCI Series D and Series C shares, in a defined formula.

On January 11, 2019, the Company had elected a partial closing of the Regulation A+ capital raise of Non-voting Class A Preferred Stock. The gross cash received from this closing was $2,595,200. Total shares associated with the closing are 25,952, 18,166 shares are new shares and 7,786 shares came from shares sold by the existing shareholder.

On February 25, 2019, ACC exercised the option to exchange 2,000 shares of Non-voting Class A Preferred Stock as payment against an outstanding promissory note. The 2,000 shares are new shares.

On April 5, 2019, the Company had elected a partial closing of the Regulation A+ capital raise of Non-voting Class A Preferred Stock. The gross cash received from this closing was $786,400. Total shares associated with the closing are 7,864, 5,505 shares are new shares and 2,359 shares came from shares sold by the existing shareholder.

On September 16, 2019, the Company had elected a partial closing of the Regulation A+ capital raise of Non-voting Class A Preferred Stock. The gross cash received from this closing was $5,497,400. Total shares associated with the closing are 54,974, 38,482 shares are new shares and 16,492 shares came from shares sold by the existing shareholder.

TerraCycle US Inc. and Subsidiaries

Notes to Consolidated Financial Statements

On December 18, 2019, the Company had elected a partial closing of the Regulation A+ capital raise of Non-voting Class A Preferred Stock. The gross cash received from this closing was $861,400. Total shares associated with the closing are 8,614, 6,030 shares are new shares and 2,584 shares came from shares sold by the existing shareholder.

On March 2, 2020, the Company had elected a partial closing of the Regulation A+ capital raise of Non-voting Class A Preferred Stock. The gross cash received from this closing was $2,751,200. Total shares associated with the closing are 27,512, all of which are new shares.

On July 31, 2020, the Company had elected a partial closing of the Regulation A+ capital raise of Non-voting Class A Preferred Stock. The gross cash received from this closing was $1,995,000. Total shares associated with the closing are 19,950, all of which are new shares.

On September 30, 2020, the Company had elected to close the Regulation A+ capital raise of Non-voting Class A Preferred Stock.

On November 13, 2020, the Company had elected a final closing of the Regulation A+ capital raise of Non-voting Class A Preferred Stock. The gross cash received from this closing was $4,938,350. Total shares associated with the closing are 49,276, all of which are new shares.

Note 11 - Segments

The Company defines its business in four segments: 1) Sponsored Waste (SW), 2) Zero Waste Boxes (ZW), 3) Material Sales (MS), and 4) Regulated Waste (RW). The Company defines its segments as those operations that engage in business activities from which it may recognize revenue and incur expenses, whose results its chief operating decision maker regularly reviews to analyze performance and allocate resources and for which discrete financial information is available. The Company measures the results of its segments using, among other measures, each segment’s net sales and operating income, which includes certain corporate overhead allocations.

Information for the Company’s segments, as well as certain corporate operating and non-operating results that are not used internally to measure and evaluate the business, including the reconciliation to income before income taxes, is provided in the following table:

Note 12 - Subsequent Events

The Company has evaluated subsequent events through May 1, 2023, the date the consolidated financial statements were available to be issued and has disclosed all required events.

Item 8. Exhibits

The documents listed in the Exhibit Index of this report are incorporated by reference or are filed with this report, in each case as indicated below.

he documents listed in the Exhibit Index of this report are incorporated by reference or are filed with this report, in each case as indicated below.

SIGNATURE

Pursuant to the requirements of Regulation A, the issuer has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Trenton, New Jersey, on May 1, 2023.

Pursuant to the requirements of Regulation A, this report has been signed below by the following persons on behalf of the issuer and in the capacities and on the dates indicated.

Exhibit 6.6

 CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THIS EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND IS THE TYPE OF INFORMATION THE COMPANY TREATS AS PRIVATE OR CONFIDENTIAL

TERRACYCLE ZERO WASTE BAG COLLECTION SERVICES AGREEMENT

This TerraCycle Zero Waste Bag Collection Services and Licensing Agreement (“Agreement”) is entered into by and between HBSCO LLC. (hereinafter referred to as “HBS”) and TerraCycle US, LLC (hereinafter referred to as “TerraCycle”) (each herein a “Party” together the “Parties”) this ____12th ____day of __ October ____, 2022 (“Effective Date”).

Whereas, TerraCycle, based in Trenton, New Jersey, works with companies to develop platforms to collect and recycle traditionally hard to recycle or non-recyclable products and packaging, and to provide consultation to companies to effectively communicate such recycling to consumers and

Whereas, HBS is a waste management company based in Firestone, Colorado providing resource management expertise and services to residential, commercial, municipal and industrial customers, as well as homebuilders, in the areas of solid waste collection and disposal, transfer and recycling services, and

Whereas, the Parties wish to work together to integrate a TerraCycle’s Zero Waste Bag (the “ZW Bags”) into and along services being provided by HBS as described in more detail herein.

Now, in consideration of the mutual covenants and obligations set forth herein, the Parties agree as follows:

1.            Term. Except as otherwise set forth herein, the term of this Agreement shall be for a period of 1 (one) year from the Effective Date (the “Initial Term”). This Agreement may be renewed for additional one (1) year terms (each a “Renewal Term”) as mutually agreed upon by both Parties in writing at least thirty (30) days prior to the end of the then current Term. The Initial Term together with any Renewal Terms shall be referred to herein as the “Term.”

2.            Description of Program. The parties will operate a collection and recycling program (hereinafter “Program”) for hard-to-recycle materials defined in Exhibit 1 (“Accepted Materials”) leveraging TerraCycle ZW Bags and HBS collection, sorting and/or transportation services. The Program details are further described in Exhibit 2.

a.            Program Geographies. The parties shall agree, in writing, to the geographies in which they agree to launch the Program. These agreed upon geographies (hereinafter “Geographies”) shall be added to Exhibit 3 which shall become part hereof and which may be amended by the parties by and through written agreement. Further details concerning a right of first offer for additional Program locations is further described in Section 6c. herein.

3.            Scope of Services. The Parties shall provide services set forth below in connection with the Program.

(i)            HBS shall provide collection of all ZW Bags, sorting of ZW Bags from the mixed recycling, and where necessary and agreed upon, the delivery of empty ZW Bags.

(ii)           HBS shall also provide appropriate staging of ZW Bages until transportation of Material has been arranged as further described in Exhibit 2

(iii)          PR and marketing support shall be provided as agreed to by the Parties in writing.

(i)            TerraCycle shall design the collection ZW Bags and any other supplies as may be agreed to by the Parties in writing, and arrange for their manufacturing, in consultation with HBS.

(ii)           TerraCycle shall sell ZW Bags directly to consumers and, where required by the Program, deliver ZW Bags to consumers.

(iii)          TerraCycle shall also provide additional design, IT and marketing services, in consultation with HBS, as set forth herein or as may be agreed to by the Parties in writing.

c.            Accepted Materials. Prior to the launch of the Program, the Parties shall confer and agree, in writing, on which waste streams will be accepted through the Program (hereinafter “Accepted Materials”). This list of acceptable waste streams shall be added to Exhibit 1 and shall merge and be part of this Agreement and may be updated by and through written agreement of the Parties.

d.            Non-Compliant Material. The Parties agree that all compliant and recoverable Accepted Material collected through the Program will be aggregated, stored, and later recycled in accordance with the laws of the Territory (herein defined as being the United States), though non-compliant materials may be collected not due to the fault of either Party, but due to the consumer’s intentional or mistaken placement of such non-compliant Material into the collection stream. TerraCycle, at its sole discretion, and with using all commercially reasonable efforts, will either recycle such non-compliant material or use them for research and development purposes. All compliant Material collected through the Program will be recycled in accordance with the laws of the Territory. TerraCycle will utilize the services of third-party strategic processing facilities to process the collected Material and/or move them down the appropriate supply chain as needed.

e.            Supplies. The Parties agree that the costs of gaylords and pallets shall be shared equally between the Parties. The Parties shall agree on the type of gaylords and pallets to be purchased, as well as the number to be purchased, in writing (email shall suffice).

i.            TerraCycle will send HBS draft copies of all advertising, promotional, press releases, and other materials bearing the HBS Trademarks (“TerraCycle Advertising Materials”) before TerraCycle prints them. TerraCycle will obtain HBS’s approval before producing them.

ii.           HBS will use reasonable efforts to approve or disapprove any of TerraCycle’s Advertising Materials within five (5) business days.

iii.          TerraCycle is responsible for ensuring that all of its Advertising Materials comply with all applicable laws, regulations, standards and industry practices.

i.            HBS will send TerraCycle draft copies of all advertising, promotional, press releases, and other materials bearing TerraCycle’s Trademarks (“HBS Advertising Materials”) and obtain TerraCycle’s approval before distributing them.

ii.           TerraCycle will use reasonable efforts to approve or disapprove any of HBS’s Advertising Materials within five (5) business days.

iii.          HBS is responsible for ensuring that all of its Advertising Materials comply with all applicable laws, regulations, standards and industry practices.

i.            The Parties shall [*****] share all marketing costs associated with any and all marketing on which the Parties have agreed to in writing, in an amount not to exceed [*****] per party, for a total of $[*****] for the Term unless agreed otherwise in writing. Payment shall be made within thirty (30) days of presentation of invoice. Parties shall submit documentation (which may be an invoice) which substantiates the marketing costs submitted for allocation between the parties.

ii.            To the extent a Party incurs a cost associated with marketing which has not been mutually agreed to by the parties, the Party incurring that cost shall be solely responsible.

iii.            Only directly incurred marketing and advertising costs shall be subject to allocation between the parties. Time spent by respective corporate employees, etc. shall not be charged to either Party (by way of example, an individual hired to hold a sign marketing the service may be included in marketing costs to be allocated).

iv.            To support marketing and advertising efforts, and to expand participation, TerraCycle shall make best efforts to deliver three (3) or more brand-sponsored TerraCycle ZW Bag events, in which consumer brands fund the service for select materials, during the course of the Initial Term.

v.            The Parties may agree to promotions such as the offer of a free ZW Bag for customers who purchase several ZW Bags at one time. In the event the parties agree to such a promotion, the Base Price of the free ZW Bag shall be absorbed [*****] between the parties. As TerraCycle is purchasing the ZW Bags, HBS’s [*****]% share of any free ZW Bags shall be paid to TerraCycle as provided for in Paragraph 5 below.

vi.            The Parties may also agree to additional promotions and marketing such as setting aside agreed upon amounts from ZW Bag sales to be utilized for the construction and installation of benches made from recycled materials. In the event the Parties agree to such a promotion, the amounts to be set aside from ZW Bag sales shall be in [*****] amounts. For example, if the Parties agree to withhold $[*****] from each ZW Bag sale, $[*****] shall come from each Party. TerraCycle shall invoice HBS as provided for in Paragraph 5 below.

a.      Service Fee to HBS. Specific pricing is defined in the Pricing Schedule within Exhibit 2. The parties may elect to change the pricing upon mutual agreement in writing. Changes in pricing shall be reasonable and consent to such change shall not be unreasonably withheld. To the extent new ZW Bags, products or waste streams are added which may impact pricing, the Parties shall consult as to any adjustments in pricing. The amount due HBS, based on the Pricing Schedule set forth in Exhibits 2 shall be paid by TerraCycle to HBS within thirty (30) days after the end of each quarter. For the avoidance of doubt, and by way of example, if within the first quarter upon commencement of the program TerraCycle sells [*****] large ZW Bags for a total of $[*****], HBS would be entitled to $[*****] which shall be paid by TerraCycle to HBS within thirty days after the end of the quarter.

b.     Startup Fee. HBS will also pay TerraCycle a one-time startup fee (“Startup Fee”) in the amount of [*****] which amount shall cover the construction and design of a microsite, operational testing, opening inventory of co-branded ZW Bags. The Startup fee shall be billable upon the signing of this Agreement and paid within thirty (30) days of invoice.

c.      Marketing Costs. TerraCycle shall invoice HBS for HBS’s share of the [*****]% share of agreed upon marketing costs as provided for Paragraph 4(c) and any other agreed upon costs as provided for subparagraphs 4(c)(v) and (vi) above. TerraCycle shall invoice these amounts quarterly and HBS shall make payment on the invoices within thirty (30) days of receipt of invoice.

a.      TerraCycle Exclusivity. TerraCycle agrees that it shall not partner with any waste management company that competes with HBS to operate the Program or similar service or launch any independent service similar to the Program in any Geographies in which HBS and TerraCycle have agreed to operate the Program during the term of this Agreement. In the event TerraCycle terminates this Agreement, the exclusivity clause set forth in this section 6a. shall continue for a period of two (2) years in the State of Colorado.

b.     HBS Exclusivity. HBS agrees that it shall not partner with any other company to operate the Program or similar service or launch any independent services similar to the Program anywhere during the term of this Agreement. In the event HBS terminates this Agreement, the exclusivity clause set forth in this section 6b. shall continue for a period of two (2) years in Colorado after the termination of this Agreement.

The Parties agree that the exclusivity restrictions shall only apply to B2C programs, and must include the elements of a bag-based (for the avoidance of doubt this shall also mean “bags”) capture of a wide range (For the avoidance of doubt, wide range shall more than 1) of hard to manage materials, all to be recycled, via the usage of sponsored and/or or consumer purchased bags, and not B2B programs operated by HBS.

c.      Right of First Offer. In the event TerraCycle either independently or with a third party seeks to launch a service similar to the Program in a geography in which HBS operates but in which TerraCycle and HBS have not agreed to operate the Program, HBS shall have the right of first offer (“ROFO”) to partner with TerraCycle to operate the Program. HBS shall indicate its decision, in writing, within fifteen (15) days of receiving notice from TerraCycle. In the event HBS declines to exercise this ROFO, TerraCycle shall have the right to launch and operate the Program or similar service, either independently or with a third party without any limitation in that geography. This ROFO shall also extend to any geography in which TerraCycle independently already operates the TerraCycle ZW Bag collection (also known as TerraCycle Home) recycling service. The geographies in which HBS currently operates is set forth in Exhibit 4.

7.      Data. The parties acknowledge and agree that, to the extent either party collects data (consumer name, address, etc.) which may need to be shared in order to perform the services under this Agreement, the parties shall enter into a formal Data Sharing Agreement (“DSA”) with appropriate confidentiality provisions.

a.      The Parties hereby represent and warrant that the making of this Agreement: (i) does not violate any agreements, rights or obligations of any person, firm or corporation, (ii) exhibit and conduct behavior in a manner consistent with the high image, reputation and credibility of HBS and HBS activities, and (iii) not engage in any activities that reflect adversely on HBS.

b.     HBS hereby represents that it will use best efforts to maintain those ZW Bags that are stored in its warehouse, in good order and support the Program. So long as the ZW Bags contain Accepted Material, HBS also represents that no ZW Bags (or contents therein) will be incinerated or sent to landfill, except in the event of broken ZW Bags, missed ZW Bags (defined as those either missed by MRF employees, inadvertently not separated out of regular recycling, etc), and/or ZW Bags otherwise known to contain non-compliant Material. During the Initial Term, HBS will keep record of any known broken, missed, or non-compliant ZW Bags.

c.     Without limiting the foregoing, the Parties shall: (i) ensure its performance and all Services are provided in a timely and professional manner by appropriately skilled personnel, (ii) conform to reasonable industry standards for quality, and (iii) are free from material errors or defects, and are performed in compliance with (and will not cause or create any violation of) any and all applicable laws and regulations.

d.     Additionally, The Parties represent and warrant that: (i) they will comply, to the best of its knowledge, with the applicable legal requirements and industry standards as called for by the national laws of the countries where they do business; (ii) will compensate its employees fairly by providing wages and benefits that comply with the national laws and prevailing local standards in the countries where they does business; (iii) will maintain reasonable employee work hours that comply with the local standards and applicable national laws of the countries where they does business; (iv) will provide its employees with safe and healthy working conditions; and (v) will protect the environment in its manufacturing process, if applicable.

Definitions.

“Claim” means any claim for an out-of-pocket expense, liability, damage, injury, loss, claim, suit, judgment, and expense (including reasonable legal fees and court costs).

“Indemnifying Party” means the party required to indemnify under this Section. Each party is responsible under this Section for the actions of its directors, officers, employees, agents, and subcontractors.

“Indemnitee” means the party or individual entitled to indemnification (including the party’s affiliates, shareholders, directors, officers, employees, agents, subcontractors, suppliers, and customers).

Indemnification by Both HBS and TerraCycle. Unless this Agreement says otherwise, the Indemnifying Party will indemnify, defend and hold the Indemnitee harmless from Claims arising from the Indemnifying Party’s: (i) breach of this Agreement, or (ii) acts or omissions related to this Agreement. For the avoidance of doubt, the Indemnifying Party will not be responsible to the extent that any Claim results from the acts or omissions of a potential Indemnitee.

Handling Indemnified Claims. An Indemnitee must notify the Indemnifying Party of a Claim and the related facts as soon as possible (but no later than ten (10) days after learning of the Claim), otherwise the Indemnitee (while still entitled to indemnification) will be responsible for any harm that results from such delay.

The Indemnifying Party may take over the defense of any indemnified Claim upon notice to the Indemnitee, in which case the Indemnitee agrees not to admit liability, settle, compromise, or discharge the Claim. If an Indemnifying Party refuses to take over an indemnified Claim, then it must pay the Indemnitee’s counsel’s fees and expenses.

The Indemnifying Party will pay to an Indemnitee, payments relating to an indemnified Claim within fifteen (15) days after written demand for payment from the Indemnitee.

10.    LIMITATION OF LIABILITY. EXCEPT WITH RESPECT TO DAMAGES FOR THE UNAUTHORIZED USE, DISCLOSURE, MISAPPROPRIATION OR INFRINGEMENT OF INTANGIBLE PROPERTY SUBJECT TO COPYRIGHT, PATENT RIGHT, TRADE SECRET OR OTHER PROPRIETARY RIGHTS, NEITHER PARTY SHALL BE LIABLE TO THE OTHER FOR INCIDENTAL PUNITIVE, OR CONSEQUENTIAL DAMAGES, REGARDLESS OF WHETHER SUCH DAMAGES ARE FORESEEABLE OR WHETHER SUCH DAMAGES ARE DEEMED TO RESULT FROM THE FAILURE OR INADEQUACY OF ANY EXCLUSIVE OR OTHER REMEDY.

a.      The Parties will maintain, at their respective cost, commercial general liability insurance (sometimes called public liability insurance) covering its obligations under this Agreement from a carrier with an AM Best rating of at least A-VII (or the equivalent) with combined single limits of at least the equivalent of [*****] per occurrence and in the aggregate of not less than [*****] with respect to products and completed operations liability.

b.      The Parties must comply with the applicable workers’ compensation legislation in force in the location where they are doing the work. Each Party shall also carry Employer’s Liability insurance with limits of at least [*****] may use primary plus umbrella coverage to reach the required limits.

c.      Automobile Liability Insurance covering hired, owned and non-owned vehicles with coverage of at least [*****] per occurrence, combined single limit for bodily injury and property damage;

d.     At any time that either Party may reasonably request it, a Party must provide a certificate of insurance that shows that these required coverages are in place and confirms that the other Party shall receive at least thirty (30) days’ prior written notice of any cancellation, termination, or material change in coverage. Both Parties must maintain all insurance required under this Section for as long as this Agreement is in effect. All required insurance coverages must be on an occurrence basis.

Termination: Either party may terminate this Agreement by written notice to the other at any time if that other party: (a) commits a breach of this contract and, in the case of a breach capable of remedy, it fails to remedy the breach within fourteen (14) business days of being required to do so in writing (unless otherwise agreed upon by the parties); or (b) becomes insolvent, or has a liquidator, receiver, manager or administrative receiver appointed. Either party may terminate this Agreement for any reason whatsoever, and without any cause necessary, upon ninety (90) days written notice to the other party.

(b)   Discontinue Use of the Trademarks. Upon termination of this Agreement, both parties shall immediately stop using the other party’s Trademarks and Advertising Materials.

a.     Protecting Confidential Information. Each Party will treat as confidential any non-public or proprietary information that the other Party may receive from or learn about each Party or its business model and methods (“Confidential Information”). Confidential Information may only be disclosed to employees, agents and subcontractors on a need-to-know basis. The disclosing party of such Confidential Information (the “Disclosing Party”) owns the Confidential Information and, when this Agreement expires or terminates, the Party to whom Confidential Information is disclosed (the “Receiving Party”) must return it, together with any copies thereof, to the Disclosing Party if requested. Employees, agents and subcontractors must protect the Confidential Information in the same way that a Party to this Agreement is required. Both Parties also must keep confidential anything regarding this Agreement. Confidential Information may only be used in connection with the performance of services set forth in this Agreement and may not be used to compete, circumvent, or bypass the other Party. If the Receiving Party violates this Section 13, the Disclosing Party would be seriously harmed and may seek a court order or other injunctive relief to require the Receiving Party to comply with these confidentiality obligations, prevent further violations, and obtain any other available relief. If a Party brings an action based on a breach of this Section 13, the other Party agrees to waive the requirements for the posting of a bond.

b.     Exceptions. Parties do not have to keep confidential any information that is: (a) public at the time of disclosure or becomes public afterward (unless the party to whom such information was disclosed made it public in violation of this Agreement), (b) known to the Receiving Party before it was disclosed by the Disclosing Party as documented by the Receiving Party’s business records, (c) told to the Receiving Party by an independent party (unless their disclosure violated confidentiality obligations owed to the Disclosing Party), or (d) authorized by the Disclosing Party in writing.

c.      Court Orders. In case Confidential Information is required to be disclosed by the Receiving Party by virtue of a court order or statutory duty, the Receiving Party shall be allowed to do so, provided that it shall, without delay, inform the Disclosing Party in writing of receipt of such order or coming into existence of such duty and enable the Disclosing Party to seek protection against such order or duty.

(a)    Disputes. If a claim or dispute arises out of this Agreement or its performance, the parties agree to endeavor in good faith to resolve it equitably through negotiation or mediation or, if that fails, through non-binding arbitration under the rules of the American Arbitration Association, before having recourse to the courts. Mediation and arbitration shall take place at a location mutually agreed to by the parties However, prior to or during negotiation or mediation, either party may initiate litigation that would otherwise become barred by a statute of limitations.

a.      Counterparts. Each Party may sign separate signature pages of this Agreement, which together will constitute an original signed version of this Agreement.

b.      Entire Agreement, Amendment, and Waiver. Any reference to “Agreement” includes this Agreement and any and all exhibits, attachments and amendments. This Agreement is the entire agreement between the parties concerning the Products and the Program and no prior discussion, agreement, or conduct between the Parties will affect it. Any changes to this Agreement must be in a written document signed by both Parties. Neither Party waives any rights under this Agreement by delaying or failing to exercise them.

c.      Negotiated Agreement. This Agreement has been negotiated by the Parties and neither Party will be deemed its author, nor will the Agreement be construed against either Party.

d.      Force Majeure. Neither Party will be liable to the other for failure to perform under this Agreement, in whole or in part, when such failure is due to governmental restrictions, failure of utilities, strikes, labor troubles, riots, storms, fires, explosions, floods, wars, embargoes, blockades, legal restrictions, insurrections, acts of God or any other cause similar thereto which is beyond the reasonable control of a Party. In the event of such delay, the Party unable to perform shall give prompt notice of such Force Majeure event to the other Party

e.      Governing Law. This Agreement shall be governed and construed in accordance with the laws of the State of Delaware and all claims relating to or arising out of this contract, or the breach thereof, whether sounding in contract, tort or otherwise, shall likewise be governed by the laws of the State of Delaware.

f.       Severability. This entire Agreement should be interpreted to be effective and valid under applicable law. However, if any part of this Agreement is found to be illegal or invalid under applicable law, that part should be stricken or modified to conform to the law without invalidating the remainder of the Agreement. If striking or modifying the Agreement will significantly affect the economic expectations of the parties, the parties will make whatever changes to the Agreement may be necessary to fairly address this impact.

g.      Survival. Termination or expiration of this Agreement will not affect any rights or obligations which expressly survive nor any rights or obligations that accrued before the Agreement’s termination or expiration, whichever happens first. Paragraphs 6(a), 6(b), 9, 10, 12(b), 13, 14, and 15 shall survive Termination.

h.     Remedies Not Exclusive. Any remedy granted in this Agreement is in addition to any other legal or equitable rights or remedies.

i.      Headings for Convenience. The headings and subheadings in this Agreement are for convenience purposes only and have no substantive effect.

j.      No Public Disclosure. In addition to the confidentiality obligations in Section 13 above, neither Party will publicly disclose the terms of this Agreement or the business relationship between the Parties, nor use the other’s name or intellectual property (including the HBS Trademarks and the TerraCycle Trademarks) without prior written consent of the other Party; however, HBS may disclose this Agreement to a third-party (other than direct competitors of TerraCycle) for strategic “due diligence” purposes so long as the third-party has signed a confidentiality agreement.

k.     No Assignment. Except for an assignment to an affiliate as permitted below, neither Party will assign any of its rights or obligations under this Agreement without the other Party’s written approval, which may not be unreasonably withheld. “Assign” includes all transfers of control, whether by stock or asset transfer or merger. Upon giving notice, either Party may assign this Agreement without the other Party’s consent to any affiliate or to any corporation or entity purchasing all or substantially all of the assets or stock of the assigning Party’s business operations to which this Agreement relates. In the event of a permitted assignment under this Subsection, the assigning Party will have no further obligations arising after the date of the assignment with respect to this Agreement.

IN WITNESS WHEREOF, TerraCycle and HBS have executed this Agreement as of the Effective Date.

The Company agrees to furnish supplementally a copy of any omitted schedule to the Commission upon request.

EXHIBIT 1

ACCEPTED MATERIALS

EXHIBIT 2

MODEL 1

EXHIBIT 3

AGREED UPON GEOGRAPHIES FOR LAUNCH OF PROGRAM

EXHIBIT 4

GEOGRAPHIES IN WHICH HBS OPERATES

Exhibit 6.7

CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THIS EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND IS THE TYPE OF INFORMATION THE COMPANY TREATS AS PRIVATE OR CONFIDENTIAL

PURCHASE AND SALE AGREEMENT

THIS PURCHASE AND SALE AGREEMENT (this “Agreement”) is made as of July 13, 2022 (the “Effective Date”), by and between TerraCycle US LLC, a Delaware limited liability company (“Purchaser”), and HENRY PRATT COMPANY, LLC, a Delaware limited liability company (“Seller”).

ARTICLE 1

PURCHASE AND SALE

1.1            Agreement of Purchase and Sale. Subject to the terms and conditions hereinafter set forth, Seller agrees to sell and convey and Purchaser agrees to purchase the following:

(a)            that certain real property known generally as 401 S. Highland Avenue, Aurora, Illinois, Kane County, and more particularly described on Schedule 1.1(a), attached hereto and by this reference made a part hereof (the property described in this clause (a) being herein referred to as the “Land”);

(b)            to the extent assignable by and at no cost to Seller, those rights, easements and appurtenances pertaining to the Land, including (i) all right, title and interest of Seller (if any) in and to adjacent streets, alleys or rights – of - way, (ii) strips, gaps and gores, if any, in connection with the Land, (iii) any and all oil, gas and minerals lying under, in, on or about or constituting a part of the Land, regardless of whether the minerals are considered part of the surface estate or part of the mineral estate, and (iv) all right, title and interest of Seller with respect any easements or covenants that benefit or burden the Land (the property described in this clause (b) herein referred to collectively as the “Related Rights”);

(c)            the structures and other improvements (if any) on the Land (the property described in this clause (c) being herein referred to as the “Improvements”, and the Land, the Related Rights and the Improvements being hereinafter sometimes collectively referred to as the “Real Property”);

(d)            to the extent assignable by and at no cost to Seller, all of Seller’s right, title and interest in, to and under all governmental and non-governmental permits (including any previously paid permit fees), licenses, consents, approvals and authorizations (including zoning approvals) if any, belonging to or inuring to the benefit of Seller and pertaining to the Real Property, to the extent that such permits, licenses, consents. approvals, and authorizations are assignable (the property described in this clause (d), being sometimes herein referred to collectively as the “Intangible Property”).

1.2            Property Defined. The Land, the Related Rights, the Improvements and the Intangible Property are hereinafter sometimes referred to collectively as the “Property.”

1.3            Permitted Exceptions. The Property shall be conveyed, and Purchaser shall accept the Property, subject to the matters which are Permitted Exceptions pursuant to ARTICLE 2 hereof (herein referred to collectively as the “Permitted Exceptions”).

1.4            Purchase Price. Seller is to sell and Purchaser is to purchase the Property for a total purchase price of Five Million Seven Hundred Thousand Dollars ($5,700,000.00) (the “Purchase Price”).

1.5            Payment of Purchase Price. The Purchase Price, as adjusted by prorations and adjustments as herein provided, shall be payable in full at Closing in cash by wire transfer of immediately available federal funds to a bank account of Escrow Agent designated by Escrow Agent in writing to Purchaser prior to the Closing (“Escrow Agent’s Account”), and, as adjusted by prorations and adjustments as herein provided, shall be subsequently payable in full at Closing in cash by wire transfer of immediately available federal funds to a bank account designated by Seller in writing to Escrow Agent prior to the Closing. The Title Company shall serve as Escrow Agent hereunder.

1.6           Earnest Money.

(a)            Within two (2) business days following the Effective Date, Purchaser shall deposit with Escrow Agent the sum of One Hundred Thousand Dollars ($100,000.00) (the “Earnest Money”) by wire transfer of immediately available funds, which, when and to the extent deposited, shall constitute earnest money.

(b)            If Purchaser fails to deposit the Earnest Money within the time provided above for such deposit to be made, then Purchaser shall be deemed to have elected to terminate the Agreement pursuant to Section 3.2.

(c)            In any event, if Purchaser is entitled to have the Earnest Money returned to Purchaser pursuant to any provision of this Agreement, then One Hundred Dollars ($100.00) of the Earnest Money shall nevertheless be paid to Seller as good and sufficient consideration for entering into this Agreement.

ARTICLE 2

TITLE AND SURVEY

2.1            Title Examination; Commitment for Title Insurance. Within fifteen (15) days after the Effective Date, Seller shall cause to be furnished to Purchaser a Commitment for Owner's ALTA Title Insurance Form B ("Commitment") with extended coverage, setting forth the state of title to the Property and all exceptions and restrictions of record including deed restrictions, liens and covenants; it being expressly understood that the premium cost of the base policy shall be paid for by Seller and the premium cost of extended coverage shall be paid by Purchaser. Purchaser shall have the right to request endorsements from the Title Company (as such term is defined below) and Seller shall reasonably cooperate with Purchaser in obtaining same. The cost of all endorsements requested by the Purchaser shall be at Purchaser’s expense. Said Commitment shall indicate that Seller is the sole owner of the Property, that it is fully authorized to convey the Property and it shall indicate the amount of any real estate taxes attributable to the Property. Simultaneous with delivery of such Commitment, the Title Company shall also furnish Purchaser with copies of all documents affecting the Property and reflected in the Commitment. In the event any exceptions appear in such Commitment or title documents other than the standard printed exceptions (which shall be modified in the Owner's Title Policy as hereafter provided) or in the Survey that are unacceptable to Purchaser, then Purchaser shall, within ten (10) days after Purchaser’s receipt of the Commitment and title documents, notify Seller in writing of such fact. Seller may, at Seller's option, undertake to commit to eliminate or modify such unacceptable exceptions to the satisfaction of Purchaser. If Seller is unwilling or unable to commit to cure such objections within fifteen (15) days after Seller's receipt of Purchaser’s objections, Purchaser may elect, upon notice to Seller within ten (10) days after expiration of such fifteen (15) day period to: (i) terminate this Agreement, in which event the Earnest Money shall forthwith be returned to Purchaser, together with any and all interest earned thereon; or (ii) accept title subject only to such then unreleased security interests, judgments and tax liens (other than Permitted Exceptions) of a definite or ascertainable amount, which shall be paid by Seller at Closing. Purchaser’s failure to notify Seller within said ten (10) day period shall be deemed an election by Purchaser of option (ii) in the preceding sentence. Any exceptions not objected to by Purchaser shall hereinafter be referred to as "Permitted Exceptions". A copy of the "Permitted Exceptions," when available, shall be attached hereto and made a part hereof as Exhibit "C".

2.2            Survey. Within two (2) days after the Effective Date, as part of Seller Deliverables, Seller shall cause to be furnished to Purchaser any and all existing surveys of the Property. Within thirty (30) days after Seller’s delivery of the Commitment to Purchaser, Purchaser shall obtain a new ALTA Survey of the Property prepared by a licensed Illinois surveyor which Survey shall be dated after the Effective Date and shall be certified to Purchaser, Seller, the Title Company and Purchaser’s lender (if any).The Survey shall: (i) show the Property and locate and delineate any easements whether recorded or visible, the street address of the Property if any, access to public roads and any setback lines; (ii) show any encroachments onto the Property by any adjoining property; and (iii) show the square footage of the Property. The Survey shall be made by a registered Illinois land surveyor in accordance with American Land Title Association standards. The Survey shall further certify that the Property is not located in an area identified by an agency or department of the federal government as having special flood or mudslide hazards which would require flood insurance under the Flood Insurance Act of 1968, as amended from time to time, or under any other applicable law or regulation. Any objections to the Survey shall be handled in the same manner and with respect to the same time periods as applicable to the objections to the Commitment. Such survey shall constitute the “Survey” hereunder. For purposes of the Deed to be delivered to Purchaser at the Closing, the legal description of the Real Property shall be the legal description attached hereto as Schedule 1.1(a). If, however, the metes and bounds description drawn from the Survey reflects a legal description different from the legal description attached hereto as Exhibit A, Seller may shall deliver a quit claim deed, at Closing, containing the legal description drawn from the Survey. The Purchase Price shall not be dependent on the acreage of the Property as determined by the Survey.

2.3            Monetary Liens. Notwithstanding anything contained herein to the contrary, Seller shall be obligated at Closing to discharge all mortgages and other monetary liens encumbering the Property which were voluntarily entered into and agreed upon by Seller in writing (regardless of whether Purchaser objects to such mortgage or monetary lien). (The term “mortgage” as used herein includes any mortgage, deed of trust, deed to secure debt and similar security instrument securing an indebtedness and encumbering the Property or any portion thereof; the terms “discharge” and “discharged” as used herein include compliance with a statutory bonding procedure that has the legal effect of removing the mortgage or other item as a lien on the Property).

2.4            Conveyance of Title. At Closing, Seller shall convey and transfer the Property to Purchaser. It shall be a condition to Purchaser’s obligation to close this transaction that a nationally recognized title company selected by Seller the (“Title Company”) shall have issued the Title Commitment to Purchaser (or unconditionally committed to issue the Title Policy to Purchaser upon receipt of the title insurance premium therefor). “Title Commitment” means a Commitment for Title Insurance for an American Land Title Association (ALTA) Owner’s Policy of Title Insurance issued by the Title Company, together with legible copies of all restrictive covenants, easements, and other items listed therein (collectively, the “Title Commitment”), subject only to the following matters, which shall be deemed to be Permitted Exceptions:

(a)            any item contained in the Title Commitment or shown on the Survey to which Purchaser does not object on or before the expiration of the Inspection Period (as such term is defined below);

(b)            the lien of all ad valorem real estate taxes and assessments not yet due and payable as of the date of Closing, subject to proration and adjustment as herein provided;

(c)            local, state and federal laws, ordinances or governmental regulations, including but not limited to, building, zoning and land use laws, ordinances and regulations, now or hereafter in effect relating to the Property;

2.5            Pre-Closing “Gap” Title Defects. Whether or not Purchaser shall have furnished to Seller any notice of title objections pursuant to the foregoing provisions of this Agreement, Purchaser may, at or prior to Closing, notify Seller in writing (as required herein) of any objections to title first raised by the Title Company or the surveyor after the effective date of the Title Commitment or Survey, as appropriate; provided, however, that Purchaser must notify Seller of any such objections within ten (10) days of Purchaser’s first receipt of the updated title commitment or updated survey, whichever first provides notice of the condition giving rise to any such objection. With respect to any objections to title set forth in such notice, Seller shall have the same option to cure and Purchaser shall have the same option to accept title subject to such matters or to terminate this Agreement as those which apply to any notice of objections made by Purchaser on or before the expiration of the Inspection Period.

ARTICLE 3

INSPECTION PERIOD

(a)            Beginning upon the Effective Date and continuing until 5:00 CST on that date which is sixty (60) days after the Effective Date (the “Inspection Period”), Purchaser, at its sole cost and expense, shall have the right to investigate title and conduct feasibility studies, make a physical inspection of the Property, and Purchaser, personally or through agents, employees or contractors, may go upon the Property during normal business hours or at other reasonable times (if approved by Seller in its sole discretion) to make boundary line or topographical surveys and to conduct such non-invasive studies, tests, samplings, investigations and analyses of any and all aspects of the Property as Purchaser deems desirable, including, without limitation, geotechnical tests, samplings, investigations and studies of the Property; NOTWITHSTANDING THE FOREGOING, IN NO EVENT SHALL PURCHASER OR ITS AGENTS CONDUCT ANY INVASIVE SOIL OR GROUNDWATER SAMPLING AT THE PROPERTY (E.G., A PHASE II STUDY) OR ANY OTHER INVASIVE OR DESTRUCTIVE TESTING WITHIN THE PROPERTY UNLESS SUCH TESTING IS EXPRESSLY APPROVED BY SELLER IN ADVANCE AND IN WRITING, WHICH APPROVAL MAY BE GIVEN BY SELLER IN ITS SOLE DISCRETION.

Provided, however, in the event Purchaser obtains a Phase I Site Assessment which indicates there are any environmental conditions at the Property or areas of concern for which a Phase II Site Investigation is recommended, Purchaser shall obtain Seller’s prior written consent to any physically intrusive testing of, on or under the Property, it being understood that if Seller denies consent to such testing, Purchaser shall be entitled to terminate this Agreement, receive a return of the Deposit and Seller shall reimburse Purchaser for its actual and verified due diligence costs, including reasonable attorneys’ fees.

(b)           Purchaser’s right to enter and inspect the Property during the Inspection Period shall be in accordance with and subject to the following terms and conditions:

(ii)            Purchaser shall promptly restore the Property to the same condition that existed prior to Purchaser’s entry and inspection of the Property;

(iii)            Purchaser shall indemnify, hold harmless and defend Seller, its affiliates and their respective successors and assignees (collectively, the “Seller Indemnitees”) from and against any and all claims, liens, demands, causes of action, liabilities, losses, costs, damages and expenses (including reasonable attorneys’ fees and expenses and court costs incurred in defending any such claim or in enforcing this indemnity) of whatsoever nature (individually, a “Claim,” and collectively, “Claims”) that may be incurred by the Seller Indemnitees and arise solely out of or in connection with the acts or omissions of Purchaser and its agents, representatives, contractors and consultants, or any of them. Such Claims shall include, but are not limited to, Claims arising out of or in connection with personal injury or death of persons, loss, destruction or damage to property, failure to comply with, or breach or violation of, by Purchaser or by any of its affiliates, successors, assignees, tenants or subtenants of any Environmental Law, or this Agreement or liens or Claims of lien filed against the Property. This indemnity obligation shall survive the Closing or any early termination of this Agreement and shall not be conditioned or limited by any limitation of liability or other limitations on Seller’s remedies set forth herein;

(iv)            Prior to Purchaser entering the Property to conduct the inspections and tests described above, Purchaser shall obtain and maintain, at Purchaser’s sole cost and expense, and shall deliver to Seller evidence of, the following insurance coverages, and shall also cause each of its agents and contractors entering the Property to obtain and maintain such insurance coverages, and, upon request of Seller, shall deliver to Seller evidence of, the following insurance coverage: commercial general liability insurance with policy limits no less than $1,000,000 each occurrence, $2,000,000 general aggregate, and $2,000,000 aggregate for products-completed operations hazard. Purchaser shall cause all such insurance maintained by Purchaser and its agents and contractors to name the Seller as an additional insured on a primary non-contributory basis to any insurance coverage maintained by Seller, shall apply to both ongoing operations and completed operations, and shall provide coverage against any claim for personal liability or property damage caused by Purchaser or its agents, employees, or contractors in connection with such inspections and tests. The policy limits applicable to Seller as additional insured shall be the same amount applicable to the named insured or, if the policy provides otherwise, policy limits not less than the amounts required herein. Upon renewal or replacement of Purchaser’s insurance policies, Purchaser shall cause Seller to be added as additional insured as required herein. Attached hereto as Schedule 3.1(c) is a copy of Purchaser’s insurance liability certificate. This insurance requirement shall survive Closing or any termination of this Agreement;

(v)            Purchaser shall (i) keep all information contained in the studies and reports pertaining to the Property (whether prepared by or on behalf of Seller or Purchaser) confidential, and not disclose or reveal such information, reports, or studies to any other person except the agents or employees of Purchaser who are actively involved in the evaluation of the acquisition of the Property and except as required by law or ordered by a court of competent jurisdiction or by subpoena; and (ii) not use any such information for any purpose other than in connection with the evaluation of the acquisition of the Property; and

(vi)            Seller shall have the right, in its sole and absolute discretion, at its election, to accompany Purchaser and its agents, or any one or more of them, during any inspection of the Property.

3.2            Right of Termination. Seller agrees that in the event Purchaser determines, in Purchaser’s sole discretion, that it does not wish to acquire the Property for any reason or no reason, then Purchaser shall have the right to terminate this Agreement by giving written notice of such termination to Seller on or before the end of the Inspection Period. Upon any such termination of this Agreement pursuant to Purchaser’s rights under this Section 3.2, the Earnest Money shall be returned to Purchaser in accordance with Section 1.6, and Purchaser and Seller shall have no further rights and obligations hereunder except those which expressly survive termination of this Agreement (including, without limitation, Purchaser’s indemnity obligation under Section 3.1 above. If Purchaser fails to give Seller timely notice of termination on or before the end of the Inspection Period, then Purchaser shall be deemed to approve the Property. From and after the expiration of the Inspection Period, and except as otherwise expressly provided for in this Agreement, Purchaser’s Earnest Money shall be non-refundable, fully earned by Seller, and applicable to the Purchase Price at Closing, or payable to Seller if there is no Closing provided Seller is not in default in its obligations hereunder. Time is of the essence with respect to the provisions of this Section 3.2 and the remainder of this Agreement. In the event of any termination by Purchaser under this Agreement, Purchaser shall promptly deliver to Seller any non- proprietary reports, tests or studies generated by or on behalf of Purchaser with respect to the Property; provided, however, that no environmental reports shall be delivered to Seller except upon Seller’s express written consent.

3.3            Due Diligence Materials. Within Five (5) business days following the Effective Date, Seller shall, deliver to Purchaser copies of any existing environmental reports, surveys and title policies relating to the Property in the actual control or possession of Seller (the “Seller Materials”). Seller represents, warrants, and covenants that all Seller Materials provided shall be to Seller’s actual knowledge, true, correct, and complete.

ARTICLE 4

CLOSING

4.1          Time and Place. The consummation of the transaction contemplated hereby (“Closing”) shall occur through the Title Company via escrow using overnight courier and wire transfer of funds to the Title Company on the date which is fifteen (15) days after the expiration of the Inspection Period (as the same may be extended pursuant to the terms of Section 7.2). Notwithstanding the foregoing, Seller and Purchaser shall have the option to extend the Closing Date for fifteen (15) days to satisfy any of its obligations under Sections 4.2 and 4.3, provided that Seller or Purchaser provides written notice to the other Party on or before the scheduled date of Closing. At Closing, Seller and Purchaser shall perform the obligations set forth in, respectively, Section 4.2 and Section 4.3. The Closing may be held at such earlier time and date as Seller and Purchaser shall mutually approve in writing. The date on which the Closing is scheduled to occur hereunder (or, if earlier, the date on which Closing occurs) is sometimes referred to herein as the “Closing Date”.

(a)            deliver to Purchaser a special warranty deed in the form attached hereto as Schedule 4.2(a) and by this reference made a part hereof, duly executed by Seller, pursuant to which Seller shall convey the Real Property to Purchaser subject only to the Permitted Exceptions (the “Deed”);

(b)            To the extent assignable at no cost to Seller, deliver to Purchaser a quit claim bill of sale and assignment, without warranty of title, in the form attached hereto as Schedule 4.2(b) and by this reference made a part hereof, duly executed by Seller, pursuant to which Seller shall convey the Intangible Property to Purchaser (the “Bill of Sale and Assignment”). Seller is unaware of any Personal Property situated on the Property that is not owned by Seller;

(d)            deliver to Purchaser commercially reasonable evidence that Seller’s signatory has authority to enter into this Agreement on behalf of Seller and to convey the Property to Purchaser in accordance with the terms of this Agreement;

(e)            deliver to Purchaser an affidavit duly executed by Seller stating that Seller is not a “foreign person” as defined in the Federal Foreign Investment in Real Property Tax Act of 1980 and the 1984 Tax Reform Act;

(f)            deliver to the Title Company an affidavit regarding title in the form attached hereto as Schedule 4.2(f);

(g)            if the legal description attached hereto as Schedule 1.1(a) differs from the legal description of the Property drawn from the Survey, Seller shall at Closing deliver (in addition to the Deed) a quit claim deed conveying the Real Property pursuant to the legal description drawn from the Survey; and

(h)            deliver such additional documents as shall be reasonably requested by the Title Company required to consummate the transaction contemplated by this Agreement, including without limitation any real estate transfer declarations required by the applicable municipality or state where the property is located.

(a)            deliver to Escrow Agent the full amount of the Purchase Price, as increased or decreased by prorations and adjustments as herein provided on the Closing Date, in immediately available federal funds wire transferred to Escrow Agent’s Account pursuant to Section 1.5, it being agreed that, at Closing, the Earnest Money shall be applied towards payment of the Purchase Price, and deliver to Escrow Agent instructions to immediately release the full amount of the Purchase Price, as increased or decreased by prorations and adjustments as herein provided, to Seller;

(b)            deliver to Seller such evidence as Seller’s counsel and/or the Title Company may reasonably require as to the authority of the person or persons executing documents on behalf of Purchaser;

(c)           deliver to Seller one (1) original executed counterpart of the Bill of Sale; and

(d)            deliver such additional documents as shall be reasonably requested by the Title Company required to consummate the transaction contemplated by this Agreement, including without limitation any real estate transfer declarations required by the applicable municipality or state where the property is located, provided, however, that in no event shall Purchaser be required to undertake any other material liability not expressly contemplated in this Agreement, unless Purchaser elects to do so in its sole discretion.

(e)            Local Revenue Stamps. City of Aurora revenue stamps, if any, shall be obtained by the Seller.

(a)            All income and expenses in connection with the operation of the Property shall be apportioned, as of 12:01 A.M., on the day after the Closing Date, as if Purchaser were vested with title to the Property after the Closing Date, such that, except as otherwise expressly provided to the contrary in this Agreement, Seller shall have the benefit of income and the burden of expenses for the day of the Closing Date and the Purchaser shall have the benefit of income and the burden of expenses for the day after the Closing Date and thereafter. The items below will be prorated at Closing utilizing the information known at that time. Such prorated items shall include, without limitation, the following:

(1)            if applicable, annual assessments or similar periodic charges under any private covenants, conditions, restrictions or easements affecting the Property; and

(2)            if applicable, any rents due under any leases, licenses and occupancy agreements of all or any part of the Property;

(3)            all other items customarily prorated or required by any other provision of this Agreement to be prorated or adjusted, to the extent not specifically addressed herein; and

At Closing, the amount of prorations and adjustments as aforesaid shall be determined or estimated to the extent practicable, and no further monetary adjustment shall be made between Seller and Purchaser after Closing. All prorations shall be final at Closing, except as set forth in the following paragraph.

(b)            Notwithstanding anything contained in the foregoing provisions, any ad valorem taxes paid at or prior to Closing shall be prorated based upon the amounts actually paid. If taxes and assessments for the current year have not been paid before Closing, Seller shall be charged at Closing an amount equal to that portion of such taxes and assessments which relates to the period before Closing and Purchaser shall pay the taxes and assessments prior to their becoming delinquent. Any such apportionment made with respect to a tax year for which the tax rate or assessed valuation, or both, have not yet been fixed shall be based upon the tax rate and/or assessed valuation last fixed. To the extent that the actual taxes and assessments for the current year differ from the amount apportioned at Closing, the parties shall make all necessary adjustments by appropriate payments between themselves following Closing within thirty (30) days following the issuance of a final tax bill for the year in which Closing occurs.

(c)            Utilities. Purchaser shall arrange for utility service in its own name as of the date of Closing, and Seller shall be entitled to terminate utility service as of Closing and obtain any return of security deposits.

(a)            Seller shall pay (i) the fees of any counsel representing Seller in connection with this transaction, (ii) one-half (1/2) of any commercially reasonable escrow fees which may be charged by Escrow Agent or Title Company, (iii) the cost of the title search and exam for the Property and the base premium for the Title Policy, (iv) the costs of curing all title objections for which Seller is responsible under this Agreement and which Seller chooses to cure, and (iv) the costs of recording all mortgage cancellations, if applicable.

(b)            Purchaser shall pay (i) the fees of any counsel representing Purchaser in connection with this transaction, (ii) one-half (1/2) of any commercially reasonable escrow fees charged by the Escrow Agent or Title Company, (iii) the premium for any lender’s title policy and any premiums or additional costs attributable to any extended coverage for the Title Policy, endorsements or additional title insurance coverage for the Property, (iv) the cost of the Survey; (v) all applicable transfer taxes relating to the transfer of the Property, (vi) the cost of Purchaser’s inspections of the Property, (vi) the costs of recording documents contemplated by this agreement, and (viii) the costs of any financing (including, without limitation, any mortgage tax) obtained by Purchaser, and the costs of transferring or assigning Property warranties (including, without limitation, the roof warranty) to Purchaser.

(c)            Except as otherwise provided herein, all other costs and expenses incident to this transaction and the closing thereof shall be paid by the party incurring same.

4.6          Conditions Precedent to Obligation of Purchaser. The obligation of Purchaser to consummate the transaction hereunder shall be subject to the fulfillment on or before the date of Closing (or such earlier time as otherwise required hereby) of all of the following conditions, any or all of which may be waived by Purchaser in its sole discretion:

(a)            Seller shall have delivered to Purchaser all of the items required to be delivered to Purchaser by Seller or Seller’s agents pursuant to the terms of this Agreement, including but not limited to, those provided for in Section 4.2.

(b)            All of the representations and warranties of Seller contained in this Agreement shall be true and correct in all material respects as of the date of Closing, as if made and updated as of the Closing Date (without any reference to “knowledge” for purposes of satisfying this Closing condition).

(c)            Seller shall have performed and observed, in all material respects, all covenants and agreements of this Agreement to be performed and observed by Seller as of the date of Closing.

(d)            All other conditions precedent to Purchaser’s obligation to consummate the transaction hereunder (if any) which are set forth in this Agreement shall have been satisfied on or before the date of Closing.

In the event any of the foregoing conditions has not been satisfied by the Closing Date, then Purchaser shall have the option of (i) waiving (in writing) the Closing condition and closing in accordance with the other terms and provisions of this Agreement, or (ii) terminating this Agreement by written notice given to Seller on the Closing Date, whereupon Escrow Agent shall refund the Earnest Money to Purchaser and the parties shall have no further rights, duties or obligations hereunder, other than those which are expressly provided herein to survive the termination of this Agreement; or (iii) extending the Closing Date for a period not to exceed thirty (30) days to allow all Closing conditions precedent to be fulfilled, and if any of them are not fulfilled by the extended Closing Date, Purchaser shall once again have the option to elect (i) or (ii) immediately above.

4.7            Conditions Precedent to Obligation of Seller. The obligation of Seller to consummate the transaction hereunder shall be subject to the fulfillment on or before the date of Closing of all of the following conditions, any or all of which may be waived by Seller in its sole discretion:

(a)            Purchaser shall have paid the Purchase Price in the manner provided in Section 4.3(a).

(b)            Purchaser shall have delivered to Seller all of the items required to be delivered to Seller by Purchaser or Purchaser’s agents pursuant to the terms of this Agreement, including but not limited to, those provided for in Section 4.3.

(c)            All of the representations and warranties of Purchaser contained in this Agreement shall be true and correct in all material respects as of the date of Closing, as if made and updated as of the Closing Date (without any reference to “knowledge” for purposes of satisfying this Closing condition).

(d)            All other conditions precedent to Seller’s obligation to consummate the transaction hereunder (if any) which are set forth in this Agreement shall have been satisfied on or before the date of Closing.

In the event any of the foregoing conditions has not been satisfied by the Closing Date other than through failure of Seller to fully comply with its obligations under this Agreement, Seller shall have the right to terminate this Agreement by written notice given to Purchaser on the Closing Date, whereupon Escrow Agent shall release the Earnest Money to Seller and the parties shall have no further rights, duties or obligations hereunder, other than those which are expressly provided herein to survive a termination of this Agreement.

ARTICLE 5

REPRESENTATIONS, WARRANTIES AND COVENANTS

5.1            Representations and Warranties of Seller. Seller hereby makes as of the Effective Date the following representations and warranties to Purchaser. Such representations and warranties are subject to those matters disclosed in Seller’s disclosure statement attached hereto as Schedule 5.1 and by this reference made a part hereof (“Seller’s Disclosure Statement”). Whenever the phrase “Seller’s knowledge” is referenced below in this Section 5.1, such phrase shall refer to the knowledge of Seller. To the best of Seller’s knowledge, Seller hereby represents to Purchaser that:

(a)            Organization and Authority. Seller has been duly organized and is validly existing and in good standing as a limited liability company under the laws of the State of Delaware and Seller is qualified to conduct business in the state in which the Property is located. Seller has the full right and authority to enter into this Agreement and to transfer the Property pursuant hereto and to consummate or cause to be consummated the transactions contemplated herein. The person signing this Agreement on behalf of Seller is authorized to do so. This Agreement has been duly authorized, executed and delivered by Seller, and, assuming the due execution and delivery of this Agreement by Purchaser, is a valid and binding obligation of Seller and is enforceable against Seller in accordance with its terms subject to (A) applicable bankruptcy, insolvency, reorganization, moratorium, and other laws affecting the rights of creditors generally; and (B) the exercise of judicial discretion in accordance with general principles of equity.

(b)            Consents. Subject to Seller’s customary internal approval process for the sale of real estate, Seller has obtained all consents and permissions (if any) related to the transactions herein.

(c)            Pending Actions. No action, suit, arbitration, administrative or judicial proceeding, or unsatisfied order or judgment is pending or, to Seller’s knowledge, threatened against Seller or the Property or which otherwise pertains to the Property or the transaction contemplated by this Agreement.

(d)            Condemnation. Seller has not received any notice of, nor to the best of Seller’s knowledge is there, any pending, threatened or contemplated action by any governmental authority or agency having the power of eminent domain, which might result in the Property being taken by condemnation or conveyed in lieu thereof. If Seller receives any such notice prior to the Closing Date, Seller shall, promptly upon receiving any such notice or learning of any such contemplated or threatened action, give Purchaser written notice thereof.

(e)            No Assessments. To Seller’s knowledge, no assessments have been made against any portion of the Property which are unpaid (except ad valorem taxes for the current year, if any, that are not currently due and payable), whether or not they have become liens; and, if Seller receives any such notice prior to the Closing Date, Seller shall promptly notify Purchaser upon learning of any such assessments.

(f)            Existing Agreements; Service Contracts. Except for those certain existing leases, service contracts, maintenance contracts, management agreements, licenses, occupancy agreements and other agreements or understandings relating to the Property, in each case as set forth on Schedule 5.1(f) (collectively, the “Existing Agreements”), (i) there are no leases, occupancy agreements or licenses relating to the Property and (ii) to Seller’s knowledge, there are no service contracts, maintenance contracts, management agreements or other agreements or understandings relating to the Property, in each case except for the Permitted Exceptions.

(g)            Environmental Matters. To the best of Seller’s knowledge, (i) there are no violations which currently exist on the Property with respect to the presence of Hazardous Materials which remains uncured to the full satisfaction of the governmental authority issuing said notice or violation, (ii) the usage of Hazardous Materials and/or substances by Seller is in compliance with all applicable laws; (iii) the Property has all necessary environmental permits and authorizations; (iv) there has been no release of hazardous substances by Seller; (v) there are no pending enforcement, administrative actions or environmental claims against the Seller; and (vi) there is current compliance by Seller with Environmental Laws in all material respects. The term “Environmental Laws” as used herein includes without limitation the Resource Conservation and Recovery Act (“RCRA”) and the Comprehensive Environmental Response, Compensation, and Liability Act and other federal laws governing the environment as in effect on the date of this Agreement together with their implementing regulations as of the date of this Agreement applicable to the Property, and all applicable state, regional, county, municipal and other local laws, regulations and ordinances that are equivalent or similar to the federal laws recited above or that purport to regulate hazardous or toxic substances and materials. The term “Hazardous Materials” as used herein includes petroleum (including crude oil or any fraction thereof) polychlorinated bi-phenyls (PCBs), asbestos, lead-based paint, and any substance, material, waste, pollutant or contaminant listed or defined as hazardous or toxic under any Environmental Laws.

(h)            Binding Agreements. Seller has not made any unrecorded commitments or representations to any applicable governmental authorities, or to adjoining or surrounding property owners, which would be binding upon Purchaser. Seller has not entered into any unrecorded easements, restrictions, commitments or agreements affecting the Property that will survive the Closing or be binding upon the Property and have not otherwise been disclosed to Purchaser.

(i)            Options. Seller has not granted any unrecorded options or rights of first refusal to the purchase, lease or use the Property.

(j)            Abatement Proceedings. Seller is not a party to any pending abatement proceedings with reference to any real estate taxes assessed against the Property.

(k)            Permits and Legal Compliance. Seller has not received any written notice of an intention of any governmental authority to revoke any license, permit or certificate required for the development, use, operation or occupancy of the Property. Seller has not received any written notice that the Property is in violation of any law, statute, ordinance, regulation or order of any governmental or public authority applicable to the Property or any private covenants or restrictions encumbering the Property that remains uncured.

(l)            Financial Status. Seller is solvent, has not made a general assignment for the benefit of its creditors, and has not admitted in writing its inability to pay its debts as they become due. Seller has not filed any voluntary petition in bankruptcy. Seller has neither received notice of the appointment of a receiver to take possession of all or substantially all of its assets nor received notice of the attachment or other judicial seizure of all or substantially all of its assets. The sale of the Property will not render Seller insolvent.

EXCEPT AS SET FORTH IN THIS AGREEMENT, IT IS UNDERSTOOD AND AGREED THAT SELLER IS NOT MAKING AND SPECIFICALLY DISCLAIMS ANY WARRANTIES OR REPRESENTATIONS OF ANY KIND OR CHARACTER, EXPRESS OR IMPLIED, WITH RESPECT TO THE PROPERTY, INCLUDING, BUT NOT LIMITED TO, WARRANTIES OR REPRESENTATIONS AS TO MATTERS OF TITLE (OTHER THAN ANY WARRANTY OF TITLE SET FORTH IN THE SPECIAL WARRANTY DEED TO BE DELIVERED BY SELLER AT CLOSING), ZONING, TAX CONSEQUENCES, PHYSICAL OR ENVIRONMENTAL CONDITIONS, AVAILABILITY OF ACCESS, INGRESS OR EGRESS, OPERATING HISTORY OR PROJECTIONS, VALUATION. GOVERNMENTAL APPROVALS, GOVERNMENTAL REGULATION S OR ANY OTHER MATTER OR THING RELATING TO OR AFFECTING THE PROPERTY, INCLUDING, WITHOUT LIMITATION, (1) THE VALUE, CONDITION, MERCHANTABILITY, MARKETABILITY, PROFITABILITY, SUITABILITY OR FITNESS FOR A PARTICULAR USE OR PURPOSE OF THE PROPERTY; (2) THE MANNER OR QUALITY OF THE CONSTRUCTION OR MATERIALS INCORPORATED INTO ANY OF THE PROPERTY (IF ANY); AND (3) THE MANNER, QUALITY, STATE OF REPAIR OR LACK OF REPAIR OF THE PROPERTY. EXCEPT AS SET FORTH IN THIS AGREEMENT, PURCHASER HAS NOT RELIED UPON AND WILL NOT RELY UPON, EITHER DIRECTLY OR INDIRECTLY, ANY REPRESENTATION OR WARRANTY OF SELLER OR ANY AGENT OF SELLER (OTHER THAN ANY WARRANTY OF TITLE SET FORTH IN THE SPECIAL WARRANTY DEED TO BE DELIVERED BY SELLER AT CLOSING). PURCHASER REPRESENTS THAT EXCEPT AS SET FORTH IN THIS AGREEMENT, IT IS RELYING SOLELY ON ITS OWN EXPERTISE AND KNOWLEDGE AND THAT OF PURCHASER’S CONSULTANTS IN PURCHASING THE PROPERTY. PURCHASER WILL CONDUCT SUCH INSPECTIONS AND INVESTIGATIONS OF THE PROPERTY AS PURCHASER DEEMS NECESSARY, INCLUDING, BUT NOT LIMITED TO, THE PHYSICAL AND ENVIRONMENTAL CONDITIONS THEREOF, AND SHALL RELY UPON THE SAME. UPON CLOSING, PURCHASER SHALL ASSUME THE RISK THAT ADVERSE MATTERS, INCLUDING, BUT NOT LIMITED TO, ADVERSE PHYSICAL AND ENVIRONMENTAL CONDITIONS, MAY NOT HAVE BEEN REVEALED BY PURCHASER’S INSPECTIONS AND INVESTIGATIONS. PURCHASER ACKNOWLEDGES AND AGREES THAT UPON CLOSING, SELLER SHALL SELL AND CONVEY TO PURCHASER AND PURCHASER SHALL ACCEPT THE PROPERTY “AS IS, WHERE IS” WITH ALL FAULTS. THE TERMS AND CONDITIONS OF THIS PARAGRAPH SHALL EXPRESSLY SURVIVE THE CLOSING, SHALL NOT MERGE WITH THE PROVISIONS OF ANY CLOSING DOCUMENTS AND SHALL BE INCORPORATED INTO THE SPECIAL WARRANTY DEED (EXCEPT AS OTHERWISE SPECIFICALLY PROVIDED IN SUCH SPECIAL WARRANTY DEED). SELLER IS NOT LIABLE OR BOUND IN ANY MANNER BY ANY ORAL OR WRITTEN STATEMENTS, REPRESENTATIONS, OR INFORMATION PERTAINING TO THE PROPERTY FURNISHED BY ANY REAL ESTATE BROKER, AGENT, EMPLOYEE, SERVANT OR OTHER PERSON, UNLESS THE SAME ARE SPECIFICALLY SET FORTH OR REFERRED TO IN THIS AGREEMENT. PURCHASER FURTHER ACKNOWLEDGES AND AGREES THAT THE PROVISIONS OF THIS PARAGRAPH WERE A MATERIAL FACTOR IN THE DETERMINATION OF THE PURCHASE PRICE FOR THE PROPERTY.

5.2            Limitation on Liability. No claim for a breach of any representation or warranty of Seller shall be actionable or payable unless the valid claims for all such breaches collectively aggregate to more than Seventy-Five Thousand and 00/100 Dollars ($75,000.00), in which event the full amount of such valid claims shall be actionable, up to but not exceeding the amount of One Hundred-Twenty-Five Thousand and 00/100 Dollars ($125,000.00) (the “Liability Cap”). Notwithstanding the foregoing, in the event of Seller’s willful and deliberate breach of any of Seller's representations set forth in this Agreement the Liability Cap shall not apply to limit the damages available to Purchaser.

5.3            Survival of Seller’s Representations and Warranties. The representations and warranties of Seller set forth in Section 5.1 (except for those set forth in Section 5.1(g)) shall survive Closing for a period of twelve (12) months, unless notice setting forth a specific claim under any such representation or warranty shall be given to Seller within that period, in which case such representation or warranty shall survive until such claim is finally and fully resolved.

5.4            Covenants of Seller. Seller hereby covenants with Purchaser, from the Effective Date until the Closing or earlier termination of this Agreement, as follows:

(a)            Maintenance of Property. Seller shall maintain the Property in a manner generally consistent with the manner in which Seller has maintained the Property prior to the date hereof, ordinary wear and tear excepted, and shall not construct any improvements, harvest any timber, or otherwise conduct construction activity on the Property of any material nature.

(b)            Provide Copies of Notices. Seller shall furnish Purchaser with a copy of all written notices received by Seller prior to the Closing Date from any governmental authority or other party of any violation of any law, statute, ordinance, regulation or order of any governmental or public authority relating to the Property within five (5) business days following Seller’s receipt thereof, but, if received by such date, in no event later than two (2) business days prior to the Closing Date.

(c)            Maintenance of Permits. Seller shall maintain in existence all licenses, permits and approvals, if any, that are now in existence as of the Effective Date with respect to, and are required for, the development, ownership, operation or improvement of the Property, and are of a continuing nature.

(d)            Disposition of the Property and Other Matters. For so long as this Agreement remains in force, Seller shall not:

(1)            Knowingly sell, assign, rent, lease, convey (absolutely or as security), grant a security interest in, or otherwise encumber or dispose of, the Property (or any interest or estate therein), change or request a change in the zoning classification of the Property or any development restrictions applicable to the Property, or consent to or acquiesce in any of the foregoing; or

(2)            Except with respect to Purchaser, knowingly make or accept any offers to sell or exchange the Property, engage in any discussions or negotiations with any third party with respect to the sale, exchange or other disposition of the Property, or enter into any letters of intent, contracts or other agreements (whether or not binding) regarding the sale, exchange or other disposition of the Property.

5.5            Representations and Warranties of Purchaser. Purchaser hereby makes the following representations and warranties to Seller as of the Effective Date:

(a)            Organization and Authority. Purchaser has been duly organized and is validly existing as a limited liability company under the laws of the State of Delaware. Purchaser has the full right and authority to enter into this Agreement and to purchase the Property pursuant hereto and to consummate or cause to be consummated the transactions contemplated herein. The person signing this Agreement on behalf of Purchaser is authorized to do so. Neither the execution and delivery of this Agreement nor any other documents executed and delivered, or to be executed and delivered, by Purchaser in connection with the transactions described herein, will violate any provision of Purchaser’s organizational documents or of any agreements, regulations, or laws to or by which Purchaser is bound. This Agreement has been duly authorized, executed and delivered by Purchaser, is a valid and binding obligation of Purchaser and is enforceable against Purchaser in accordance with its terms subject to (i) applicable bankruptcy, insolvency, reorganization, moratorium, and other laws affecting the rights of creditors generally; and (ii) the exercise of judicial discretion in accordance with general principles of equity.

(b)            Consents. Subject to Purchaser’s customary internal approval process for real estate purchases, Purchaser has obtained all consents and permissions (if any) related to the transactions herein contemplated and required under Purchaser’s organizational documents or any covenant, agreement, encumbrance, law or regulation by which Purchaser is bound.

(c)            Pending Actions. There is no action, suit, arbitration, administrative or judicial administrative proceeding, or unsatisfied order or judgment pending or, to Purchaser’s knowledge, threatened against Purchaser or the transaction contemplated by this Agreement, which, if adversely determined, could individually or in the aggregate have a material adverse effect on Purchaser’s ability to consummate the transaction contemplated herein.

(d)            Financial Status. Purchaser is solvent, has not made a general assignment for the benefit of its creditors, and has not admitted in writing its inability to pay its debts as they become due. Purchaser has neither filed, nor does it contemplate the filing of, any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings, or any other proceeding for the relief of debtors in general, nor has any such proceeding been instituted by or against Purchaser, nor is any such proceeding to Purchaser’s knowledge threatened or contemplated. The purchase of the Property will not render Purchaser insolvent.

5.6            Survival of Purchaser’s Representations and Warranties. The representations and warranties of Purchaser set forth in Section 5.5 shall survive Closing for a period of six (6) months after Closing, unless notice setting forth a specific claim under any such representation or warranty shall be given to Purchaser within that period, in which case such representation or warranty shall survive until such claim is finally and fully resolved.

5.7            Covenants of Purchaser. Purchaser hereby covenants with Seller, from and after the Closing, as follows:

(b)            Release. To the fullest extent permitted by applicable law, Purchaser, on behalf of itself and its respective affiliates, representatives, successors and assigns (collectively, the “Releasers”), hereby knowingly, willingly, irrevocably and expressly waives, acquits, remises, discharges and forever releases Seller and each of Seller’s affiliates, successors and assigns from any and all liabilities and obligations to such Releasers of any kind or nature whatsoever (other than this Agreement and any of the other agreements executed and delivered in connection with this Agreement, but, in each case, only to the extent set forth in this Agreement or therein), in each case whether absolute or contingent, liquidated or unliquidated, known or unknown, matured or unmatured or determined or determinable, and whether arising under any law or contract, including, without limitation, (i) with respect to any Environmental Law or any federal, state or local law, rule or regulation concerning pollution or protection of the environment, including, without limitation, all those relating to the generation, handling, transportation, treatment, storage, disposal, distribution, discharge, release, threatened release, control, or cleanup of any Hazardous Materials, (ii) the presence of Hazardous Materials or other contamination, (iii) costs associated with the discovery of, or the need to remediate, Hazardous Materials, either during development of the Property or at any other time, and (iv) otherwise at law or in equity, and each of the Releasers hereby agrees that it will not seek to recover any amounts in connection therewith or thereunder from the Seller or any of the Seller’s affiliates (except as provided for in this Agreement or any of the other agreements executed and delivered in connection with this Agreement, but, in each case, only to the extent set forth in this Agreement or therein).

ARTICLE 6

DEFAULT

6.1            Default by Purchaser. If the sale of the Property as contemplated hereunder is not consummated due to Purchaser’s default hereunder, then Seller shall be entitled, as its sole and exclusive remedy for such default, to terminate this Agreement and receive the Earnest Money as liquidated damages for the breach of this Agreement and not as a penalty, it being agreed between the parties hereto that the actual damages to Seller in the event of such breach are impractical to ascertain and the amount of the Earnest Money is a reasonable estimate thereof, Seller hereby expressly waiving and relinquishing any and all other remedies at law or in equity. Seller’s right to receive the Earnest Money is intended not as a penalty, but as full liquidated damages. The right to receive the Earnest Money as full liquidated damages is Seller’s sole and exclusive remedy in the event of default hereunder by Purchaser, and Seller hereby waives and releases any right to (and hereby covenants that it shall not) sue Purchaser: (a) for specific performance of this Agreement, or (b) to recover any damages of any nature or description other than or in excess of the Earnest Money. Purchaser hereby waives and releases any right to (and hereby covenants that it shall not) sue Seller or seek or claim a refund of the Earnest Money (or any part thereof) on the grounds it is unreasonable in amount and exceeds Seller’s actual damages or that its retention by Seller constitutes a penalty and not agreed upon and reasonable liquidated damages. This Section 6.1 is subject to Section 6.4.

6.2            Default by Seller. If the sale of the Property as contemplated hereunder is not consummated due to Seller’s default hereunder, then Purchaser shall have the right to (i) seek to obtain specific performance of Seller’s obligations hereunder, provided that any action for specific performance shall be commenced within sixty (60) days after such default, and if Purchaser prevails thereunder, Seller shall reimburse Purchaser for all reasonable, actual legal fees, court costs and all other reasonable, actual costs of such action or (ii) terminate this Agreement and to receive the return of the Earnest Money, which return shall operate to release Seller from any and all liability hereunder and to recover Purchaser’s costs and expenses incurred and paid to third parties in the investigation of the Property, not to exceed Fifty Thousand and 00/100 Dollars ($50,000.00) (the “Inspection Costs”).) (the “Inspection Costs”). In the event Purchaser elects to exercise option (ii) above, It is agreed between the parties hereto that the actual damages to Purchaser in the event of such default are impractical to ascertain and the amount of the Earnest Money and the Inspection Costs is a reasonable estimate thereof, Purchaser hereby expressly waiving and relinquishing any and all other remedies at law or in equity. Purchaser’s right to receive the Earnest Money and the Inspection Costs is intended not as a penalty, but as full liquidated damages. The right to receive the Earnest Money and the Inspection Costs as full liquidated damages is Purchaser’s sole and exclusive remedy in the event of Purchaser exercising option (ii) above in the event of default hereunder by Seller, and Purchaser hereby waives and releases any right to (and hereby covenants that it shall not) sue Seller: (a) for specific performance of this Agreement, or (b) to recover any damages of any nature or description other than or in excess of the Earnest Money and the Inspection Costs. Seller hereby waives and releases any right to (and hereby covenants that it shall not) sue Purchaser or seek or claim a refund of the Earnest Money (or any part thereof) on the grounds it is unreasonable in amount and exceeds Purchaser’s actual damages or that its retention by Purchaser constitutes a penalty and not agreed upon and reasonable liquidated damages. In the event Purchaser elects to terminate this Agreement and receive a return of the Deposit pursuant to sub-clause (ii) of the immediately preceding sentence, then upon such return and delivery, this Agreement shall terminate and neither party hereto shall have any further obligations hereunder except for those that are expressly provided in this Agreement to survive the termination hereof.

6.3            Notice of Default; Opportunity to Cure. Neither Seller nor Purchaser shall be deemed to be in default hereunder until and unless such party has been given written notice of its failure to comply with the terms hereof and thereafter does not cure such failure within five (5) business days after receipt of such notice; provided, however, that this Section 6.3 (a) shall not be applicable to Purchaser’s failure to deliver the Earnest Money or any portion thereof on the date required hereunder or to a party’s failure to make any deliveries required of such party on the Closing Date and, accordingly and (b) shall not have the effect of extending the Closing Date or the due date of any Earnest Money deposit hereunder.

6.4            Recoverable Damages. Notwithstanding Sections 6.1 and 6.2, in no event shall the provisions of Sections 6.1 and 6.2 limit (a) either Purchaser’s or Seller’s obligation to indemnify the other party or the damages recoverable by the indemnified party against the indemnifying party due to a party’s express obligation to indemnify the other party in accordance with Section 8.2, or (b) either party’s obligation to pay costs, fees or expenses under Section 4.5 or the damages recoverable by either party against the other party due to a party’s failure to pay such costs.

ARTICLE 7

CONDEMNATION

7.1            Condemnation. In the event that prior to the Closing and after Purchaser provides notice of approval of the Property, Seller becomes aware that an action is initiated for the taking by condemnation (or any conveyance in lieu thereof) of any material portion of the Property (or any interest in or rights appurtenant to the Property) by anyone having the power of eminent domain, Purchaser shall, by written notice to Seller delivered within ten (10) days of receiving written notice from Seller of such event, elect to: (a) terminate this Agreement and all of Purchaser’s obligations under this Agreement, whereupon the Earnest Money shall be returned to Purchaser, this Agreement shall terminate and Purchaser and Seller shall have no further rights and obligations hereunder except those which expressly survive termination of this Agreement; or (b) consummate the purchase of the Property without any abatement of the Purchase Price or any liability or obligation on the part of the Seller by reason of the commencement and prosecution of any such proceeding. If Purchaser does not elect to terminate this Agreement pursuant to clause (a) of this Section 7.2, then Seller shall on the Closing Date assign to Purchaser all condemnation awards and compensation then received by or to be awarded to Seller. In addition, Seller shall transfer and assign to Purchaser, in a commercially reasonable form, all rights and claims of Seller with respect to payment for damages and compensation on account of such taking. As used in this paragraph, a “material portion of the Property” shall mean any condemnation, eminent domain or similar proceeding that affects Purchaser’s access to or intended use of the Property.

7.2            Notice of Condemnation. Seller shall notify Purchaser immediately upon Seller’s receiving notice of the occurrence or existence of any condemnation affecting the Property and, at the same time, shall provide Purchaser with such information with respect thereto as is in Seller’s possession in order to aid Purchaser in making the election between the alternatives provided by clauses (a) and (b) in Section 7.1. Notwithstanding anything in this Agreement to the contrary, Purchaser shall have ten (10) days after it receives such information from Seller within which to elect between such alternatives, and, accordingly, the Closing Date shall be postponed, if and to the extent necessary, to allow Purchaser such a ten (10) day period in which to make the election under Section 7.1.

ARTICLE 8

COMMISSIONS

8.1            Broker’s Commission. The parties acknowledge that Broker has been retained by and represents Seller as broker in connection with the sale of the Property by Seller to Purchaser (the “Transaction”), and is to be compensated for its services by Seller. Seller agrees that Seller shall pay to Broker upon, but only upon, final consummation of the transaction contemplated herein, a real estate brokerage commission in the amount of six percent (6%) of the Purchase Price. Broker has executed this Agreement for the purpose of acknowledging and agreeing that no real estate commission or other fee or compensation shall be earned by it or due it if the transaction contemplated herein does not close as a result of Seller’s default, Purchaser’s default, a termination as contemplated under this Agreement or otherwise. At Closing, upon full payment of its commission, Broker shall execute and deliver to Seller and Purchaser a release of any lien or claim of lien of Broker with respect to the Property and shall execute and deliver to Purchaser and Seller a general release of any claims arising out of the transaction contemplated in this Agreement. The parties acknowledge that Purchaser has not retained or engaged a broker in connection with the Transaction.

8.2           Representation and Indemnity.

(a)            Purchaser and Seller each hereby represents and warrants to the other that it has not disclosed this Agreement or the subject matter hereof to, and has not otherwise dealt with, any real estate broker, agent or salesman (other than Broker) so as to create any legal right or claim in any such broker, agent or salesman (other than Broker) for a real estate commission or similar fee or compensation with respect to the negotiation and/or consummation of this Agreement or the conveyance of the Property by Seller to Purchaser. Except as provided in Section 8.1 with respect to Broker, Purchaser and Seller shall indemnify, hold harmless and defend each other from and against any and all claims and demands for a real estate brokerage commission or similar fee or compensation arising out of any claimed dealings with the indemnifying party and relating to this Agreement or the purchase and sale of the Property (including reasonable attorneys’ fees and expenses and court costs incurred in defending any such claim or in enforcing this indemnity).

(b)            Broker hereby represents and warrants to Seller and Purchaser that it has not disclosed this Agreement or the subject matter hereof to, and has not otherwise dealt with, any real estate broker, agent or salesman so as to create any legal right or claim in any such broker, agent or salesman for a real estate commission or similar fee or compensation with respect to the negotiation and/or consummation of this Agreement or the conveyance of the Property by Seller to Purchaser. Further, Broker shall indemnify, hold harmless and defend each of Seller and Purchaser from and against any and all claims and demands for a real estate brokerage commission or similar fee or compensation arising out of any claimed dealings with Broker and relating to this Agreement or the purchase and sale of the Property (including reasonable attorneys’ fees and expenses and court costs incurred in defending any such claim or in enforcing this indemnity).

8.3            Execution by Broker. Broker has executed this Agreement solely for the purpose of acknowledging and agreeing to the provisions of this ARTICLE 8. Broker’s consent to any modification or amendment of any provision of this Agreement other than this ARTICLE 8 shall not be required. Without limitation on the foregoing, Broker acknowledges and agrees that Broker may not enforce any provision of this Agreement except for Section 8.1 and shall not be joined in any litigation unless related to Broker’s fee or commission; that Broker is not a necessary party in any litigation or other proceeding involving this Agreement not relating directly to the payment of commissions under Section 8.1; that this Agreement may be terminated for any reason or no reason without consent of the Broker and without any obligation to the Broker; that copies of any notices given by Seller or Purchaser to the other need not be sent to Broker; and that consent of Broker is not required for any matter under this Agreement except as expressly provided in this Section 8.3.

8.4            Survival. This ARTICLE 8 shall survive the rescission, cancellation, termination or consummation of this Agreement.

ARTICLE 9

ESCROW AGENT

9.1            Investment of Earnest Money. Escrow Agent shall invest the Earnest Money pursuant to Purchaser’s reasonable directions in an interest-bearing account at a commercial bank whose deposits are insured by the Federal Deposit Insurance Corporation. Escrow Agent shall notify Seller, no later than one (1) business day after Escrow Agent’s receipt thereof, that Escrow Agent has received the Earnest Money in immediately available funds and is holding the same in accordance with the terms of this Agreement. However, Escrow Agent shall invest the Earnest Money only in such accounts as will allow Escrow Agent to disburse the Earnest Money upon no more than one (1) business days’ notice.

9.2            Payment at Closing. If the Closing takes place under this Agreement, Escrow Agent shall deliver the Earnest Money as provided in Purchaser’s closing instructions to Escrow Agent on the Closing Date consistent with this Agreement.

9.3            Payment on Demand. Upon receipt of any written certification from Seller or Purchaser claiming the Earnest Money pursuant to the provisions of this Agreement, Escrow Agent shall promptly forward a copy thereof to the other such party (i.e., Purchaser or Seller, whichever did not claim the Earnest Money pursuant to such notice) and, unless such other party within ten (10) days thereafter notifies Escrow Agent of any objection to such requested disbursement of the Earnest Money, Escrow Agent shall disburse the Earnest Money to the party demanding the same and shall thereupon be released and discharged from any further duty or obligation hereunder. Notwithstanding the foregoing, if Purchaser delivers a written request to Escrow Agent for the return of the Earnest Money at any time on or before the expiration of the Inspection Period in connection with a termination of this Agreement by Purchaser pursuant to Section 3.2, then Escrow Agent shall promptly refund the Earnest Money to Purchaser without the necessity of notice to Seller or Seller’s consent.

9.4           Exculpation of Escrow Agent. It is agreed that the duties of Escrow Agent are herein specifically provided and are purely ministerial in nature. Escrow Agent shall incur no liability whatsoever except for its willful misconduct or negligence, so long as Escrow Agent is acting in good faith. Seller and Purchaser do each hereby release Escrow Agent from any liability for any error of judgment or for any act done or omitted to be done by Escrow Agent in the good faith performance of its duties hereunder.

9.5            Stakeholder. Escrow Agent is acting as a stakeholder only with respect to the Earnest Money. If there is any dispute as to whether Escrow Agent is obligated to deliver the Earnest Money or as to whom the Earnest Money is to be delivered, Escrow Agent may refuse to make any delivery and may continue to hold the Earnest Money until receipt by Escrow Agent of an authorization in writing, signed by Seller and Purchaser, directing the disposition of the Earnest Money, or, in the absence of such written authorization, until final determination of the rights of the parties in an appropriate judicial proceeding. If such written authorization is not given, or a proceeding for such determination is not begun, within thirty (30) days of notice to Escrow Agent of such dispute, then Escrow Agent may bring an appropriate action or proceeding for leave to deposit the Earnest Money in a court of competent jurisdiction pending such determination. Escrow Agent shall be reimbursed for all costs and expenses of such action or proceeding, including, without limitation, reasonable attorneys’ fees and disbursements, by the party determined not to be entitled to the Earnest Money. Upon making delivery of the Earnest Money in any of the manners herein provided, Escrow Agent shall have no further liability or obligation hereunder.

9.6            Execution by Escrow Agent. Escrow Agent has executed this Agreement solely for the purpose of acknowledging and agreeing to the provisions of this ARTICLE 9. Escrow Agent’s consent to any modification or amendment of this Agreement other than this ARTICLE 9 shall not be required.

ARTICLE 10

MISCELLANEOUS

10.1          Public Disclosure. Prior to Closing, any press release or similar public announcement with respect to the transactions contemplated herein or any matters set forth in this Agreement will be made only in the form reasonably approved by Purchaser and Seller.

10.2          Assignment. Purchaser may not assign its rights under this Agreement without first obtaining Seller’s written approval, provided, however, that Purchaser named herein shall have the right to assign this Agreement without the consent of Seller to an Affiliate (as defined below), provided that such assignee agrees to assume all of the obligations of “Purchaser” hereunder. “Affiliate” shall mean any entity or entities (by tenancy in common or otherwise) controlled by Purchaser. “Controlled by” means the power and authority to direct the business and affairs of the assignee either by reason of the ownership of a majority of the direct or indirect ownership interests in such assignee, or by contract. No transfer or assignment by Purchaser shall release or relieve Purchaser of its obligations hereunder.

10.3          Notices. Any notice, request or other communication (a “notice”) required or permitted to be given hereunder shall be in writing and shall be delivered by hand or overnight courier (such as United Parcel Service), sent by electronic mail (provided a copy of such notice sent by facsimile or electronic mail is deposited with an overnight courier for next business day delivery) or mailed by United States registered or certified mail, return receipt requested, postage prepaid and addressed to each party at its address as set forth below. Any such notice shall be considered given on the date of such hand or courier delivery or electronic mail transmission, deposit with such overnight courier for next business day delivery, or deposit in the United States mail, but the time period (if any is provided herein) in which to respond to such notice shall commence on the date of hand or overnight courier delivery or on the date received following deposit in the United States mail as provided above. Rejection or other refusal to accept or inability to deliver because of changed address of which no notice was given shall be deemed to be receipt of the notice. By giving at least five (5) days’ prior written notice thereof, any party may from time to time and at any time change its mailing address hereunder. Any notice of any party may be given by such party’s counsel.

The parties’ respective addresses for notice purposes are as follows.

if to Purchaser, to:

TerraCycle US LLC

1 TerraCycle Way

Trenton, New Jersey 08638

Attention: Richard Perl, Chief Administrative Officer

E-mail: [*****]

with a copy to:

McCarter & English, LLP

Four Gateway Center

100 Mulberry Street

Newark, New Jersey 07102

Attention: Simone Wilson-Brito, Esq.

E-mail: [*****]

And with a copy to:

Win Wehrli, Esq.

[*****]

Naperville, IL 60540-5254

E-mail: [*****]

if to Seller to:

Henry Pratt Company

c/o Mueller Water Products, Inc.

1200 Abernathy Road N.E.

Suite 1200

Atlanta, Georgia 30328

Attention: Asst. General Counsel

E-mail: [*****]

with a copy to:

Taylor English Duma, LLP

1600 Parkwood Circle, Suite 200

Atlanta, Georgia 30339

Attention: Gregory G. Schultz

Phone: [*****]

Email: [*****]

if to Escrow Agent, to:

Old Republic Title

9601 Southwest Highway

Oak Lawn, IL 60453

Attn: Kim Leland

Email: [*****]

10.4            Modifications. This Agreement cannot be changed orally, and no agreement shall be effective to waive, change, modify or discharge it in whole or in part unless such agreement is in writing and is signed by the parties against whom enforcement of any waiver, change, modification or discharge is sought. In no event shall this Agreement be altered, amended or modified by electronic mail or electronic record. The parties acknowledge and agree that this Agreement shall not be executed, entered into, altered, amended or modified by electronic means. Without limiting the generality of the foregoing, the parties hereby agree that the transactions contemplated by this Agreement shall not be conducted by electronic means.

10.5            Calculation of Time Periods. Unless otherwise specified, in computing any period of time described in this Agreement, the day of the act or event after which the designated period of time begins to run is not to be included and the last day of the period so computed is to be included, unless such last day is a Saturday, Sunday or legal holiday under the laws of the State in which the Property is located, in which event the period shall run until the end of the next day which is neither a Saturday, Sunday or legal holiday. The final day of any such period shall be deemed to end at 7:00 p.m. Eastern time.

10.6            Successors and Assigns. Subject to Section 10.2, the terms and provisions of this Agreement are to apply to and bind the permitted successors and assigns of the parties hereto.

10.7            Entire Agreement. This Agreement, including the Schedules and Exhibits, contains the entire agreement between the parties pertaining to the subject matter hereof and fully supersedes all prior written or oral agreements and understandings between the parties pertaining to such subject matter.

10.8            Further Assurances. Each party agrees that it will without further consideration execute and deliver such other documents and take such other action, whether prior or subsequent to Closing, as may be reasonably requested by the other party to consummate more effectively the purposes or subject matter of this Agreement. Without limiting the generality of the foregoing, Purchaser shall, if requested by Seller, execute acknowledgments of receipt with respect to any materials delivered by Seller to Purchaser with respect to the Property. The provisions of this Section 10.8 shall survive Closing.

10.9         Counterparts. This Agreement may be executed in counterparts, and all such executed counterparts shall constitute the same agreement. It shall be necessary to account for only one such counterpart in proving this Agreement.

10.10      Severability. If any provision of this Agreement is determined by a court of competent jurisdiction to be invalid or unenforceable, the remainder of this Agreement shall nonetheless remain in full force and effect.

10.11      Applicable Law. This Agreement is performable in the state in which the Property is located and shall in all respects be governed by, and construed in accordance with, the substantive federal laws of the United States and the laws of such state. Seller and Purchaser hereby irrevocably submit to the jurisdiction of any state or federal court sitting in the state and judicial district in which the Property is located in any action or proceeding arising out of or relating to this Agreement and hereby irrevocably agree that all claims in respect of such action or proceeding shall be heard and determined in a state or federal court sitting in the state and judicial district in which the Property is located. Purchaser and Seller agree that the provisions of this Section 10.11 shall survive the Closing of the transaction contemplated by this Agreement.

10.12      No Third Party Beneficiary. The provisions of this Agreement and of the documents to be executed and delivered at Closing are and will be for the benefit of Seller and Purchaser only and are not for the benefit of any third party, and accordingly, no third party shall have the right to enforce the provisions of this Agreement or of the documents to be executed and delivered at Closing.

10.13      Exhibits and Schedules. The following schedules or exhibits attached hereto shall be deemed to be an integral part of this Agreement:

10.14      Captions. The section headings appearing in this Agreement are for convenience of reference only and are not intended, to any extent or for any purpose, to limit or define the text of any section or any subsection hereof.

10.15      Construction. The parties acknowledge that the parties and their counsel have reviewed and revised this Agreement and that the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of this Agreement or any exhibits, schedules or amendments hereto.

10.16      Termination of Agreement. It is understood and agreed that if either Purchaser or Seller terminates this Agreement pursuant to a right of termination granted hereunder, such termination shall operate to relieve Seller and Purchaser (in which event the defaulting party shall remain liable as provided in this Agreement) from all obligations under this Agreement, except for such obligations as are specifically stated herein to survive the termination of this Agreement.

10.17      Survival. All provisions of this Agreement which are not fully performed as of Closing shall survive Closing subject to the terms and provisions set forth in Sections 5.3 and 5.6 respectively.

10.18      Removal of Inventory. Purchaser acknowledges that the Property is currently being used as a warehouse to store inventory of Seller. Seller shall make commercially reasonable efforts to remove all inventory of Seller, and all other equipment and personal property of Seller (“Seller Items”), prior to the date of Closing. Seller shall grant possession of the Property to Purchaser as the date of Closing, subject to the right of Seller to complete removal of Seller Items within thirty (30) days following Closing (the “Removal Period”). Purchaser shall exercise reasonable diligence to not damage Seller Items during the Removal Period. Seller shall provide and maintain property and liability insurance with respect to Seller Items during the Removal Period, make any repairs to the Property caused by the removal of Seller Items and to the extent not covered by insurance, shall indemnify Purchaser for any loss or damage caused by Seller’s actions with respect to such Seller Items during this period.

10.19      Time of Essence. Time is of the essence with respect to this Agreement Notwithstanding the foregoing, with respect to the performance of an obligation of Purchaser or Seller hereunder, a delay caused by Force Majeure, or the default by the other party in the performance of its obligations hereunder, shall act as an excused delay with respect to a party’s obligations hereunder. As used in this Agreement, “Force Majeure” shall mean labor disputes, governmental regulations or controls, permitting and inspection delays not caused by Seller delays in filing or requesting same, fire or other casualty, inability to obtain any material or services, riots, insurrections, martial law, civil commotion, war, fire, severe weather conditions, flood, earthquake, or other casualty or acts of God and delays attributable to Purchaser, its agents, employees and contractors, but shall not exceed ninety (90) days in any event.

[Signature pages follow.]

IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the Effective Date.

 [Signature Page to Purchase and Sale Agreement]

The Company agrees to furnish supplementally a copy of any omitted schedule as identified in Section 10.13 to the Commission upon request.

Exhibit 6.8

FIRST AMENDMENT TO PURCHASE AND SALE AGREEMENT

This FIRST AMENDMENT TO PURCHASE AND SALE AGREEMENT (this "Amendment") is made and entered into effective as of September 12,2022, by and among HENRY PRATT COMPANY, LLC, a Delaware limited liability company ("Seller"), and TERRACYCLE US, LLC, a Delaware limited liability company ("Purchaser").

WHEREAS, Seller and Purchaser entered into that certain Purchase and Sale Agreement effective as of July 13, 2022 (the "Agreement"), as amended, pursuant to which Seller agreed to sell to Purchaser and Purchaser agreed to purchase from Seller certain real property located at 401 S Highland Avenue, Aurora, Kane County, Illinois (the "Property") and as more particularly described on Schedule 1.1(a) attached to the Agreement, on the terms and conditions set forth in the Agreement;

WHEREAS, the parties desire to amend and modify certain terms and provisions of the Agreement, as set forth hereinbelow.

NOW, THEREFORE, for and in consideration of ten dollars ($10.00), the agreements set forth herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Seller and Purchaser, intending to be legally bound, agree as follows:

1.            The recitations and facts set forth above are true, accurate and complete and are incorporated herein by this reference. Any term used herein and not defined in this Amendment shall have the meaning ascribed thereto in the Agreement.

2.            The definition of "Purchase Price" is hereby modified to delete the phrase "Five Million Seven Hundred Thousand Dollars ($5,700,00.00)" and replace it with "Five Million Five Hundred Thousand Dollars ($5,500,000.00)".

3.            The Due Diligence period referenced in Sections 3.1, 3.2, and 3.3 of the Agreement is hereby extended for an additional 15-day period from the date of this Amendment.

4.            Except as specifically modified herein, all other terms, covenants, conditions and obligations of the Agreement shall remain in full force and effect and are hereby ratified and confirmed by the parties hereto. Time is of the essence hereof.

5.            This Amendment may be executed in any number of counterparts, each of which will for all purposes be deemed to be an original, provided all are identical in all other respects, and all of which taken together shall constitute one and the same agreement. The parties agree that a signed copy of this Amendment sent by facsimile, or an Adobe Acrobat PDF file sent bye mail shall be deemed an original, but the parties agree to circulate an original for signature at a later point in time upon the request of either party.

[Signature Block Follows]

IN WITNESS WHEREOF, Seller and Purchaser have caused this Amendment to be executed by its duly authorized officers as of the day and year first above written.

Exhibit 6.9

SECOND AMENDMENT TO PURCHASE AND SALE AGREEMENT

This SECOND AMENDMENT TO PURCHASE AND SALE AGREEMENT (this "Amendment") is made and entered into effective as of September 29, 2022, by and among HENRY PRATT COMPANY, LLC, a Delaware limited liability company ("Seller"), and TERRACYCLE US, LLC, a Delaware limited liability company ("Purchaser").

WHEREAS, Seller and Purchaser entered into that certain Purchase and Sale Agreement effective as of July 13, 2022 (the "Agreement"), as amended, pursuant to which Seller agreed to sell to Purchaser and Purchaser agreed to purchase from Seller certain real property located at 401 S Highland Avenue, Aurora, Kane County, Illinois (the "Property") and as more particularly described on Schedule 1.Ha) attached to the Agreement, on the terms and conditions set forth in the Agreement;

WHEREAS, the parties desire to amend and modify certain terms and provisions of the Agreement, as set forth hereinbelow.

NOW, THEREFORE, for and in consideration often dollars ($10.00), the agreements set forth herein, and other good and valuable consideration, the·receipt and sufficiency of which are hereby acknowledged, Seller and Purchaser, intending to be legally bound, agree as follows:

1.            The recitations and facts set forth above are true, accurate and complete and are incorporated herein by this reference. Any term used herein and not defined in this Amendment shall have the meaning ascribed thereto in the Agreement.

2.            The definition of "Purchase Price" is hereby modified to delete the phrase "Five Million Seven Hundred Thousand'Dollars ($5,700,00.00)" and replace it with "Five Million Five Hundred Thousand Dollars ($5 500,000.00)".

3.            For Purchaser to obtain an EPA Phase II study, at Purchaser's sole expense, the Due Diligence period referenced in Sections 3.1, 3.2, and 3.3 of the Agreement is extended for an additional 45-day period from the date of this Amendment. Purchaser agrees to provide copies of all Phase II results promptly upon receipt from its environmental consultant, and if the environmental consultant determines that remediation actions are required to comply with applicable Environmental Laws, then the Purchaser shall also share a complete copy of the remediation estimate and the supporting documentation for it. In exchange for this extension, Purchaser, on the next business day following the date of this Amendment, shall deposit an additional $150,000 of earnest money with Old Republic Title as escrowee, bringing the total of earnest money to $250,000.00. Subject to one condition in this paragraph below, the earnest money shall immediately become nonrefundable, and Purchaser shall be responsible for any costs associated with remediation, and the transaction shall close pursuant to the terms of the Agreement. However, in the event the Phase II study identifies remediation actions which are reasonably estimated to exceed $400,000, Purchaser may terminate the Agreement and receive a full refund of the earnest money. For the avoidance of doubt, the $400,000 remediation cost estimate shall only apply to the remediation of contamination that originated on the Property and not due to the migration of contamination onto the Property from anywhere offsite. The remediation cost estimate shall be determined on the basis of the continued use of the Property for industrial or commercial purposes and shall be determined using deed restrictions, covenants or other similar methods, such as engineered barriers, to the greatest degree practical so that the remediation actions achieve compliance with applicable Environmental Laws. Seller and Purchaser acknowledge that the Closing Date is extended until November 15, 2022, or sooner by agreement of the Parties.

4.            Except as specifically modified herein, all other terms, covenants, conditions and obligations of the Agreement shall remain in full force and effect and are hereby ratified and confirmed by the parties hereto. Time is of the essence hereof.

5.            This Amendment may be executed in any number of counterparts, each of which will for all purposes be deemed to be an original, provided all are identical in all other respects, and all of which taken together shall constitute one and the same agreement. The parties agree that a signed copy of this Amendment sent by facsimile, or an Adobe Acrobat PDF file sent bye mail shall be deemed an original, but the parties agree to circulate an original for signature at a later point in time upon the request of either party.

IN WITNESS WHEREOF, Seller and Purchaser have caused this Amendment to be executed by its duly authorized officers as of the day and year first above written.

Exhibit 6.10

THIRD AMENDMENT TO PURCHASE AND SALE AGREEMENT

This THIRD AMENDMENT TO PURCHASE AND SALE AGREEMENT (this "Amendment") is made and entered into effective as of November_, 2022, by and among HENRY PRATT COMPANY, LLC, a Delaware limited liability company ("Seller"), and TERRACYCLE US, LLC, a Delaware limited liability company ("Purchaser").

WHEREAS, Seller and Purchaser entered into that certain Purchase and Sale Agreement effective as of July 13, 2022 (the "Agreement"), as amended, pursuant to which Seller agreed to sell to Purchaser and Purchaser agreed to purchase from Seller certain real property located at 401 S Highland Avenue, Aurora, Kane County, Illinois (the "Property") and as more particularly described on Schedule l. l(a) attached to the Agreement, on the terms and conditions set forth in the Agreement;

WHEREAS, the parties desire to amend and modify certain terms and provisions of the Agreement, as set forth hereinbelow.

NOW, THEREFORE, for and in consideration of ten dollars ($10.00), the agreements set forth herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Seller and Purchaser, intending to be legally bound, agree as follows:

1.            The recitations and facts set forth above are true, accurate and complete and are incorporated herein by this reference. Any term used herein and not defined in this Amendment shall have the meaning ascribed thereto in the Agreement.

2.            Outside Closing Date. Section 4.1, Time and Place, is hereby deleted in its entirety and replaced with the following:

The consummation of the transaction contemplated hereby ("Closing") shall occur through the Title Company via escrow using overnight courier and wire transfer of funds to the Title Company on or before December 2, 2022 (the "Outside Closing Date"). At Closing, Seller and Purchaser shall perform the obligations set forth in, respectively, Section 4.2 and Section 4.3. Notwithstanding the Outside Closing Date set forth above, the Closing may be held at such earlier time and date as Seller and Purchaser shall mutually approve in writing. The date on which the Closing is scheduled to occur hereunder (or, if earlier, the date on which Closing occurs) is sometimes referred to herein as the "Closing Date".

3.            Deposit of Additional Earnest Money. Within one (1) business day after the execution of this Amendment by both parties, Purchaser shall deposit with Escrow Agent the sum of $5,250,000.00 (the "Additional Deposit"). The Additional Deposit shall constitute and shall be considered part of the "Earnest Money" for all purposes under the Agreement. Notwithstanding anything in the Agreement to the contrary, from and after the date of this Amendment, all Earnest Money (including but not limited to the Additional Deposit), shall be nonrefundable to Purchaser except in the event of a default by Seller, but applicable to the Purchase Price at Closing. Any Earnest Money not needed to close the purchase (overage) shall be paid to Purchaser. If Purchaser fails to deposit the Additional Deposit within the time provided above for such deposit to be made, then Purchaser shall be in default under the Agreement.

4.            Except as specifically modified herein, all other terms, covenants, conditions and obligations of the Agreement shall remain in full force and effect, and are hereby ratified and confirmed by the parties hereto. Time is of the essence hereof.

5.         This Amendment may be executed in any number of counterparts, each of which will for all purposes be deemed to be an original, provided all are identical in all other respects, and all of which taken together shall constitute one and the same agreement. The parties agree that a signed copy of this Amendment sent by facsimile or an Adobe Acrobat PDF file sent bye mail shall be deemed an original, but the parties agree to circulate an original for signature at a later point in time upon the request of either party.

IN WITNESS WHEREOF, Seller and Purchaser have caused this Amendment to be executed by its duly authorized officers as of the day and year first above written.

Exhibit 6.11

GUARANTY AND PLEDGE AGREEMENT

THIS GUARANTY AGREEMENT, made as of this 31^st day of December 2022, by and among TerraCycle, Inc. ("Borrower"); and TerraCycle US Inc. ("Lender or Secured Party”).

WHEREAS, Borrower and Lender have entered into that certain Term Loan Agreement dated July 1, 2019, as amended (“Term Loan Agreement”).

WHEREAS, the Term Loan Agreement provides for Borrower to borrow up to Ten Million dollars ($10,000,000.00) (the "Loan Limit`");

WHEREAS, Lender requires that Borrower provide a guarantee for all amounts borrowed under the Term Loan Agreement and pledge of cash and receivables (from Lender and its domestic affiliates) (“Pledged Assets”) as collateral security for the payment when due of any and all of Borrower's indebtedness to Lender under the Term Loan Agreement (collectively, the “Obligation”); and

WHEREAS, it has been made a condition of Term Loan Agreement that the Borrower enter into and deliver this Guaranty and Pledge;

NOW, THEREFORE, in consideration of the premises, and for other good and valuable consideration, the parties hereto agree as follows:

1. As collateral security for the prompt payment when due of the Obligation and Borrower’s compliance with the Obligation, together with any additions, extensions, renewals, consolidations, wraparounds or modifications thereof, Borrower hereby grants to Lender a security interest in and to the Pledged Assets.

2. The Borrower represents and warrants to Lender as follows:

(a) The Pledged Assets are validly and duly pledged with Secured Party pursuant to this Agreement, and the Borrower agrees to defend Secured Party's right, title, lien and security interest in and to the Pledged Assets; and

(b) Borrower is the owner of the Pledged Assets, and has good title to the Pledged Assets, free and clear of all agreements, options, claims, mortgages, pledges, liens, encumbrances and security interests of every nature whatsoever; no other person, firm or corporation has any interest in or claim to such Pledged Assets; and no consent or approval of any governmental or regulatory authority, or of any securities exchange, or of any person, firm or corporation, was or is necessary to the validity of this pledge (other than consent of Secured Party, which is hereby given.

3. So long as this Agreement is in effect, the Borrower covenants with Lender, except as may be agreed by Lender in writing, Borrower shall not give, transfer, assign, convey or pledge or otherwise encumber any interest in the Pledged Assets.

4. An “Event of Default” under this Agreement shall mean an Event of Default under the Term Loan (as defined therein).

5. In case an Event of Default shall have occurred which was not cured within the Event of Default’s applicable cure period, Lender shall, without upon providing prior written notice thereof to Borrower, in addition to any and all other remedies available to it, have the rights to:

(a) Exercise any and all rights of collection, conversion or exchange, and any and all other rights, privileges, options or powers of the owner of the Pledged Property pertaining or relating thereto; Borrower hereby irrevocably constitutes and appoints Secured Party as Borrower's proxy and attorney-in-fact with full power of substitution so to do, and Borrower hereby further agrees to execute at any time in the future such additional instrument or instruments as may be required in order to confirm the proxy and power hereby granted; and/or

(b) At any time after the occurrence of any uncured Event of Default within the applicable cure periods, and upon thirty (30) days' written notice of intention so to do given to Borrower, sell, assign, and/or deliver all or, from time to time, any part of the Pledged Assets. Any such sale, assignment or delivery may take place at any private sale or public auction, with or without demand, advertisement or notice of the time or place of sale or adjournment thereof or otherwise, for cash, for credit or for other property, for immediate or future delivery, and for such price or prices and on such terms as Secured Party, in its uncontrolled discretion, may determine, Borrower hereby waiving and releasing any and all right or equity of redemption whether before or after such sale hereunder. Secured Party shall have the right to bid at said sale or sales, whether public or private, and to purchase the whole or any part of the Pledged Assets, so sold at such sale or sales, free from any such right or equity or redemption; PROVIDED, HOWEVER, that prior to the sale of the Pledged Assets, Borrower may pay in full the unpaid balance of the indebtedness secured hereby, together with accrued interest, and all costs (including attorneys' fees) of Secured Party, relating to the enforcement of the Obligation, in which event the Pledged Assets shall be returned to Borrower. For the purposes hereof, an agreement to sell all or any part of the Pledged Assets shall be treated as a sale thereof, and Secured Party shall be free to carry out such sale pursuant to such agreement, and Borrower shall not be entitled to the return of any Pledged Assets subject thereto, notwithstanding that after Secured Party shall have entered into such an agreement all Events of Default may have been remedied; and/or

(c) Dispose of the Pledged Assets or any portion thereof, prior to or concurrently with or after proceeding against other collateral or guarantors of the indebtedness secured by this Agreement; and/or

(d) In addition to any and all rights herein provided (any one or more of which may be exercised by Secured Party in its discretion), and not by way of substitution or replacement therefor, Secured Party shall have any and all rights provided by the laws of the State of New Jersey, including the Uniform Commercial Code in effect therein (N.J.S.A. 12A:1-101, et seq.) and any other law, whether by statute or otherwise, applicable to the rights of a secured party, to the holder of a pledge or the holder of a security interest in stock or securities generally, before or following default in the obligations of the person creating the pledge or security interest in the said stock as collateral security for the performance of such obligations.

6. Secured Party shall apply the proceeds of any sale of the whole or any part of the Pledged Assets, together with any other monies held at the time by Secured Party under the provisions of this Agreement, after deducting all costs and expenses of collection, enforcement, sale and delivery (including without limitation, counsel fees and expenses) incurred by Secured Party in connection with such sale, to the payment of all amounts due and payable to Secured Party pursuant to the instruments of indebtedness secured hereby and any other instruments, evidences of debt or other documents executed and delivered by the Secured Party or Borrower or any other party to Secured Party in connection with the indebtedness secured hereby, the application as between such liabilities as are owing to Secured Party and as between principal and interest to be such as Secured Party may, in his sole discretion, determine. Upon payment in full of all such amounts, Secured Party shall pay over any balance of such proceeds and other monies to Borrower and/or such other party or parties as shall be properly entitled thereto.

7. Borrower hereby waives notice of acceptance hereof and right to trial by jury in any action hereunder, presentment and protest of any instrument and notice thereof, notice of default and all other notices to which he may be entitled except for such notices expressly required by this Agreement.

8. No modification or waiver of any of the provisions hereof shall be effective unless in writing and signed by all parties hereto and then only in the specific instance for which given.

9. This Agreement shall be deemed to be a contract made under the laws of the State of New Jersey and shall be construed in accordance with and governed by the laws of said State.

10. Any notices or other communications required or permitted hereby shall be sufficiently given if in writing, and (a) delivered personally, (b) via facsimile with a confirmed receipt, or (c) mailed by registered or certified mail, return receipt requested, postage prepaid, at a post office regularly maintained by the United States Postal Service, to the parties hereto, as applicable, at their appropriate addresses set forth at the beginning of this Agreement. Notices sent by courier shall be deemed given upon delivery to such courier for further delivery. Mailed notices, as provided herein, shall be deemed given upon mailing. Any party may, by notice given as aforesaid, change the address for notices to it. All notices to be provided to Secured Party and Borrower.

11. The parties hereto agree to execute and deliver such further documents and instruments as may from time to time hereafter be required to perfect Secured Party's security interest in the Pledged Assets hereunder.

IN WITNESS WHEREOF, the parties hereto have caused this Pledge Agreement to be duly executed as of the date and year first above written.

[signature page follows]