shell script to read values from one file and replace it in other file

I would like to replace a set of strings into a new file. Source file file1.json values has to be replaced by values from file1.config into file file2.json. I have following script that is failing to do so.

file1.json

{
    "colorsArray":[{
            "red":"$ALERT_LEVEL",
            "green":"$NORMAL_LEVEL",
            "blue":"$RELAX_LEVEL"
        }
    ]
}

file1.config

[root@ip10]# cat file1.config
ALERT_LEVEL=DANGER
NORMAL_LEVEL=NORMAL
RELAX_LEVEL=RELAX

run.sh

    #!/bin/bash
set -x
if [ $# -ne 3 ]; then
  echo "USAGE:
        ./$0 file1.json file2.json file1.config"
  exit 1
fi
echo "#!/bin/bash
cat > $2 << EOF
`cat $1`
EOF" > $2;
chmod +x $2;
# load variables into env
. $3
# actually replace variables
./$2

Error:

[root@ip10]# ./run2.sh file1.json file2.json file1.config
./file2.json: line 11: warning: here-document at line 2 delimited by end-of-file (wanted `EOF')

file2.json appears, but it has no values replaced.

root@ip10]# cat file2.json 
    {
        "colorsArray":[{
                "red":"",
                "green":"",
                "blue":""
            }
        ]
    }

Answer

Just explaining the comment of @user3159253. Your file1.config should look like this for your code to work properly:

export ALERT_LEVEL=DANGER
export NORMAL_LEVEL=NORMAL
export RELAX_LEVEL=RELAX

P.S. IMHO the way you do the thing is a bit overelaborate. I’d prefer using sed to complete this task — takes only one string:

sed file1.json -e 's/$ALERT_LEVEL/DANGER/g' -e's/$NORMAL_LEVEL/NORMAL/g' -e's/$RELAX_LEVEL/RELAX/g' >file2.json