SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(MARK ONE)
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 (FEE REQUIRED)
For the fiscal year ended December 31, 1994
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OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 (NO FEE REQUIRED)
For the transition period from _____________ to ______________.
Commission file number: 1-6774
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RESOURCE RECYCLING TECHNOLOGIES, INC.
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(Exact name of registrant as specified in its charter)
Delaware 16-1352980
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(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
300 Plaza Drive, Vestal, New York 13850
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:(607) 798-7137
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Securities registered pursuant to section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
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Common Stock, $1 Par American Stock Exchange
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Securities registered pursuant to Section 12(g) of the Act:
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(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 of 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days. Yes [X] No [ ]
As of March 24, 1995, the aggregate market value of the Registrant's voting
stock (common) held by non-affiliates of the Registrant was approximately
$18,593,899. (Excludes shares held by officers, directors and controlling
stockholders.)
As of March 24, 1995, the number of shares of Common Stock outstanding was:
2,675,773.
Documents Incorporated by Reference - Part III - Proxy Statement accompanying
the notice of 1994 Annual Meeting of the Registrant.
Indicate by check mark if disclosure of delinquent filers Pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form-K or any amendment to this
Form 10-K. (x) Exhibit Index - Page 35
<PAGE>
PART I
Item 1. Business.
Introduction
Resource Recycling Technologies, Inc. (the "Company") is an enterprise
primarily engaged in several solid waste materials management activities: 1) the
operation and management of Company or municipally owned material recycling
facilities ("MRFs") ("MRF Operations") which the Company has designed and built;
2) the scrap processing, data collection and providing of accounting services to
beverage distributors in compliance with the New York State Beverage Container
Return Act (the "Bottle Bill") in upstate New York ("Bottle Bill Business"); and
3) the design and project management of the construction and installation of
separated and mixed waste recycling systems and facilities, which are intended
to be operated either by the Company, municipalities or other commercial
enterprises ("Design & Construction Business"). (See "History and Material
Developments" below). Although the Company is involved in several solid waste
materials activities, it only operates in one industry segment, as scrap and
waste materials.
History
Formation of the Company - The Company was originally incorporated in
the state of Ohio in 1960, and was merged into a wholly owned Delaware
subsidiary in 1989, so it is now a Delaware corporation. The Company's business,
financial position and capitalization were altered substantially on May 26, 1988
with the acquisition by the Company of all of the outstanding capital stock of
RRT Empire Returns Corp. ("RRT Empire"). Through RRT Empire, the Company entered
the waste materials management business.
Bottle Bill Business - RRT Empire was organized in 1983 for the
principal purpose of collecting, processing and recycling beverage containers
pursuant to Title 10 of the New York State Environmental Conservation Law. In
1987, given certain inherent limitations in expanding the deposit legislation
business and given the potential risk that new mandatory recycling legislation
could replace or eliminate the need for deposit legislation, the Company
actively pursued expansion into the municipal recycling and waste materials
management business.
MRF Operations - MRF Operations commenced in 1988 when RRT Empire began
processing and brokering materials collected under curbside recycling programs.
These programs were created as a result of various legislative requirements that
a percentage of the solid waste stream be recycled as opposed to landfilled or
incinerated.
Design and Construction Business - In 1989 after the acquisition of RRT
Empire, the Company formed a wholly owned subsidiary, RRT Design & Construction
Corp. ("RRT D&C"), in order to enhance the Company's in-house capability of
responding to municipal requests for proposals to turnkey the design,
construction and operation of MRFs. Design and construction activities have
become a significant business for the Company with respect to both MRFs and
other waste material handling equipment systems.
Discontinued Operations - In May 1990 the Company acquired
substantially all of the operating assets of the Ricard Group, a group of
companies engaged at that time in the trading and compounding of off-grade and
scrap industrial plastic resins (primarily polystyrene). In November 1992, the
Company completed and began commercial operation of a new $4.3 million
Polyethylene Terephthalate Polymer (PET) processing facility in Trenton, New
Jersey. The Company discontinued the business in 1992 and has completed the
liquidation of the assets of that business. In addition, the Company sold the
assets of the PET processing facility to Pure Tech International, Inc. on
February 2, 1993 for a purchase price of $4.3 million. The purchase price was
paid by the assumption of term debt in the amount of $2.5 million and issuance
of $1.8 million of registered Pure Tech International, Inc. common stock, valued
at $11.25 per share. The stock has been sold and the Company has realized a gain
of $334,000. Although the Company is no longer in the plastics manufacturing
business, it is still in the plastics brokerage business.
In July 1992 the Company installed equipment in its Syracuse facility
which was capable of processing large quantities of color sorted glass cullet
into furnace ready cullet for primarily one customer, Owens-Illinois, Inc.,
pursuant to a 3 year supply agreement. In 1994 sales from this activity were
$4,594,000. On February 1, 1995 the Company sold these assets and the business
associated with it to Continental Recycling, Inc. ("Continental") for a cash
purchase price of $1.75 million. The Company realized a gain on the sale of
$690,000 on the sale of those assets. In addition, the Company entered into an
operations and management agreement with Continental, which provides for the
Company to operate the equipment for the period of time the equipment remains in
the Company's facility. Payments under this agreement will continue for two
years, even if the equipment is moved from the site, and could be in excess of
$1 million, depending upon performance. (A description of the sale of this
business is contained in the Company's current Report on Form 8-K filed February
14, 1995 and incorporated by reference herein).
Change in Control - After purchasing 914,806 shares or 34.7% of the
then-outstanding common stock of the Company in October 1991 and thereafter, in
1992, abandoning an attempt to merge with the Company, JWP Inc. sold its entire
position in the Company to the investment banking firm of Allen & Company
Incorporated ("Allen & Co.") and Paul A. Gould on December 30, 1993 (see the
Company's Current Report on Form 8-K dated December 30, 1993 incorporated by
reference herein). On February 22, 1994, Allen & Co. sold 100,000 shares of the
Company's common stock that it had purchased to Andrew Dwyer, Chairman of the
Company and the former Chairman of JWP Inc.
Material Developments
On March 17, 1995, the Company, Waste Management, Inc. ("WMI"), and WMI
Acquisition Sub, Inc. ("WMI Subsidiary"), executed an Agreement and Plan of
Merger (the "Merger Agreement") pursuant to which the Company is expected to be
acquired by WMI through a cash tender offer by WMI Subsidiary for 100% of the
outstanding common stock, $1.00 par value (the "Common Stock"), of the Company
for $11.50 per share. Following completion of the tender offer, WMI Subsidiary
will be merged (the "Merger") with and into the Company, with the Company
surviving as an indirect wholly owned subsidiary of WMI. Stockholders of the
Company who do not tender their Common Stock to WMI Subsidiary pursuant to the
tender offer will receive the same consideration pursuant to the Merger that
they would have received if they had tendered their Common Stock in response to
the tender offer. Upon consummation of the Merger, the Common Stock will not
trade publicly and WMI will be the sole holder of the capital stock of the
Company.
The tender offer is expected to be completed on or before May 1, 1995.
The principal conditions to the consummation of the tender offer are (i)
termination or expiration of the waiting period under the Hart-Scott-Rodino
Antitrust Improvements Act of 1986, as amended, and (ii) the valid tender of at
least 50.1% of the outstanding Common Stock (on a fully diluted basis), and such
shares not being withdrawn prior to the expiration date of the offer.
If WMI Subsidiary acquires 90% or more of the outstanding Common Stock
pursuant to the tender offer, the Merger Agreement provides that, as soon as
practicable following consummation of the offer, a certificate of merger will be
filed with the Delaware Secretary of State and other actions necessary to
accomplish the Merger of WMI Subsidiary into the Company pursuant to Section 253
of the Delaware General Corporation Law. If WMI Subsidiary does not acquire 90%
or more of the outstanding Common Stock pursuant to the tender offer, it is
expected that a special meeting of the Company's stockholders will be held as
soon as practicable after the consummation of the tender offer to approve and
adopt the Merger Agreement and consummation of the Merger.
The Company's Schedule 14D-9 and Information/Solicitation Statement
related to the tender offer were filed with the Securities and Exchange
Commission on March 23, 1995 and mailed to the Company's stockholders of record
shortly thereafter, and are incorporated by reference herein. Although the
Company believes at the present time that the WMI tender offer and Merger will
be consummated, there can be no assurances that these events will occur.
On December 30, 1994, the Company and one of its subsidiaries invested
as a limited and a general partner, respectively, in American RRT Fiber Supply,
L.P., a newly formed Pennsylvania limited partnership ("American RRT"). American
RRT was formed by the Company and two companies affiliated with American Power
Corp., a developer of paper mills that use recycled materials, to design, build
and operate a mixed office waste paper processing facility (the "American RRT
Project") in Philadelphia, Pennsylvania. The American RRT Project is being
financed through the issuance in December 1994 of $15,900,000 of Philadelphia
Authority for Industrial Development Solid Waste Disposal Facility Revenue
Bonds, and capital contributions of $300,000 from the Company and its subsidiary
and an additional $300,000 from the American Power Corp. affiliates. Another
subsidiary of the Company, RRT D&C, has entered into a $10,000,000 turnkey
engineering, procurement and construction contract with American RRT to build
the facility in Philadelphia. Construction of the American RRT Project began in
early February 1995 and is expected to be completed by the end of 1995.
Principal Products and Services
The Company divides the products and services it provides primarily
into two divisions: the Material Recycling Division and the Design &
Construction Division. These divisions are supported by a corporate
administrative staff performing activities such as business development,
finance, information systems and general management. In 1994 the Company formed
a third division for marketing its commodities, however, in 1995 it has
abandoned this structure. Instead, commodity sales and transportation from the
MRD Division now are reported in that division and commodity brokerage sales are
reported as a business development activity in corporate administration.
Material Recycling Division
The Material Recycling Division is further divided into two operating
segments: Bottle Bill Operations (formerly called Deposit Legislation) and MRF
Operations.
Each operation produces salable scrap commodities in the form of
aluminum beverage containers, clear, amber, green and mixed glass cullet, PET
and high-density polyethylene ("HDPE") plastic containers, various grades of
waste paper (including news and corrugated) and tin cans. In 1994, the Company
sold nearly 420,000 tons of commodities and expects to sell more than 470,000
tons in 1995. The Company has entered into long-term direct-supply agreements
for certain quantities of news, corrugated, glass and PET containers with
various mills. The Company estimates that approximately 54% of its commodities
available for sale in 1994 and 1995 were, and will be, subject to long-term
contracts. In 1994 this represented approximately 38% of total revenue from the
sale of scrap. Nearly all long-term contracts contain pricing adjustment
mechanisms tied to certain published indices. The Company intends to maintain a
balance between long-term contracts and spot-market sales in order to minimize
its exposure to fluctuations in the markets. In 1994 commodity pricing increased
dramatically in the second half of the year. As of the first quarter of 1995,
pricing has remained high, although aluminum has begun to decline.
In 1994, one glass recycler, Owens-Illinois, accounted for 10% of total
consolidated revenue. No other single customer accounted for more than 10% of
the Company's total consolidated revenue in 1994.
The approximate percentages of the Company's sales of its principal
services by dollar volume for the years ended December 31, 1994, 1993, and 1992,
are as follows:
<TABLE>
<CAPTION>
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Year Ending Dec. 31
1994 1993 1992
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<S> <C> <C> <C>
Material Recycling Division
MRF Operations
Service Fees ............................ -5 6 9
Scrap Sales ............................. 53 39 16
Materials Brokerage .......................... 8 4 2
Bottle Bill Operations
Collection & Accounting.................. 11 15 13
Scrap Sales ............................. 14 14 12
Design and Construction Division
Internal Projects ............................ 5 2 15
External Projects ............................ 14 20 24
Plastics Division
(Discontinued 1992) .......................... - - 9
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100 100 100
</TABLE>
Bottle Bill Operations
Bottle Bill Operations provide transportation arrangements, scrap
processing, data collection and accounting services to certain regional
retailers and beverage wholesalers subject to the New York State Bottle Bill.
Bottle Bill Operations have processed more than four and one half billion
containers totaling more than 750 million pounds of aluminum, glass and plastic
since the inception in 1983. Services are provided to over 125 beverage
distributors and 2000 retail grocery stores and redemption centers in a
geographic area encompassing metropolitan and suburban Rochester and Syracuse.
Bottle Bill Operations offer customers a proprietary "Supermarket System," and
an "AccuSort" in-store statistical sampling system, both of which are
incorporated into computerized cash registers and scanners to identify deposit
container brand, type, size and quantity information at the point of redemption.
The transportation and accounting services provided by the Company
consist of arranging for the pick-up and transportation of used beverage
containers for which a deposit has been paid, and the enumeration of these
containers by type and by distributor. The Company provides an accounting of
these containers to distributors and retailers, which facilitates the clearing
of deposit and handling fees.
Sales of beverages in the consumer marketplace and corresponding
redemption of used beverage containers are seasonal, with volume usually
increasing in the warmer months. Sixty-four percent of the Bottle Bill dollar
volume of business occurred between June and November of 1994.
MRF Operations
MRF Operations receive, separate, process and market recyclable
materials collected under a local community's overall recycling program. MRF
Operations commenced in 1987. There are currently seven locations which the
Company operates as MRFs and three additional locations from which it
exclusively brokers recyclables for other operators. The volume of recyclables
processed in each plant is generally dependent upon how aggressively the local
municipal recycling program is communicated and enforced by the applicable
governmental agency, as well as seasonality and general economic conditions.
Except for its Syracuse, New York MRF, the Company does not charge a "tipping
fee" for the disposal of recyclables and thus does not have any pricing control
over volume. With the significant rise in commodity prices in the second half of
1994, at some locations the Company has had to pay for various recyclable
commodities. However, the Company has generally been able to maintain profitable
operating margins under these circumstances.
MRF Operations produce and purchase significant amounts of PET which
are generally resold to Pure Tech International, Inc. (the purchaser of the
Company's former PET facility), pursuant to a long-term supply agreement.
Availability of raw materials is based on competitive pricing, as well as
seasonality and general economic conditions.
Six of the seven MRFs operated by the Company are the result of the
award of turnkey contracts for the design, construction and operation of MRFs
for municipalities or agencies thereof. The terms of the operating contracts for
these facilities range from five to ten years, with some containing a customer
option to extend the terms for an additional five years.
In 1994 the Company was awarded design and construction contracts, and
in 1995 the Company entered into two additional turnkey MRF Operations
contracts, in Massachusetts and Illinois for which it must finance all or a part
of the physical assets. In addition, in December 1994 the Company entered into a
limited partnership with affiliates of American Power Corporation, which
completed the non-recourse financing of a $15.9 million paper sorting facility
in Philadelphia, Pennsylvania. (See "Recent Developments").
Although contractual arrangements vary widely depending upon the needs
and interests of each municipal client, where municipalities finance and own the
facility, contracts generally range from five to ten years. After the completion
of construction and acceptance testing (which requires 9 to 12 months on
average), the municipality typically agrees to pay a minimum annual service fee
(which is generally tonnage-sensitive) during the term of the contract.
The construction price of a turnkey MRF has generally ranged from $2.5
to $15 million, depending upon the tonnage processed and whether a new building
is required. When the municipal customer owns the facility, the Company shares
the revenue from the sale of commodities with the municipal customer. The
municipalities' share of revenue ranges from 50% to 100%. In 1994 annual revenue
from the sale of commodities for each municipally owned facility ranged from
$119,000 to $4,247,000.
The Company's primary marketing technique to increase the number of its
turnkey contracts had been through the process of responding to municipal
requests for proposals to provide the turnkey services described above. Because
of fewer projects being let by public agencies, the Company has sought to
increase its activities in brokering recycled commodities, manage recycling
facilities that it does not build, and attempt to develop merchant facilities
based on a long-term supply of recyclables from municipalities, such as the one
the Company owns and operates in Syracuse, New York. In addition the Company
believes that the rapid and substantial increase in commodity prices in 1994 has
led to increased competition for recyclables from existing and new recyclers.
The Company does not believe that federal, state or local laws or
regulations regarding the discharge of materials into the environment or those
otherwise relating to the protection of the environment will have a material
effect on the earnings, capital expenditures or competitive position of the
Company. Although the Company is subject to standards relating to the protection
of the environment, due to the nature of its operations, it has not been
required to incur material expenditures for environmental control projects. Some
of the Company's facilities maintain pollution control equipment, such as dust
collectors, but the Company's operations do not cause or allow significant
discharges of hazardous materials into the environment. The Company's facilities
do not emit hazardous air pollutants, and do not discharge industrial
wastewater. The Company does not accept hazardous waste at its MRFs, and the
quantities of hazardous wastes generated by its facilities are minimal. It has
not been identified as a "potentially responsible party" at any "Superfund"
sites and, based on the Company's historic waste disposal practices, management
does not believe that the Company's exposure for remediation of waste disposal
sites is significant.
The operation of the Company's facilities may be affected by federal,
state, and local laws and regulations relating to the ownership and disposal of
solid waste, in particular those that (i) have the effect of requiring the
disposal of or treatment of solid waste at a facility designated by the local
government (usually referred to as "flow control"); (ii) attempt to restrict the
flow of solid waste or recyclable materials into a jurisdiction; and (iii)
mandating waste reduction and recycling.
Flow control laws may be used by local governments to restrict the
exportation of solid waste and recyclable materials so as to guarantee the flow
of such materials to a facility sponsored by the municipality. For facilities
operated by the Company under contract with a municipality, flow control
provisions may help to ensure the delivery of an adequate volume of materials to
provide revenues to the Company as required by the municipality's contract with
the Company. With respect to facilities for which some or all of the capacity is
supplied other than through contracts with the local government, flow control
may adversely affect the ability of the Company to secure materials by enabling
municipalities in which the waste originates to divert that waste to other
facilities.
A recent U.S. Supreme Court decision made clear that flow control
provisions that adversely affect interstate commerce may be unenforceable
because they violate the Interstate Commerce Clause of the U.S. Constitution;
however, legislation has been introduced in the U.S. Congress that would enable
municipalities to implement flow control under certain circumstances even if it
adversely affects interstate commerce. In addition, flow control provisions
affecting recyclable materials may be subject to challenge under the takings
clause of the U.S. and applicable state constitutions. The imposition of flow
control and challenges to its implementation should not have a material adverse
effect on the Company's operations because (i) most of the Company's municipal
contracts do not depend on flow control to assure a flow of materials, and those
contracts that rely on flow control do not appear to affect interstate commerce;
(ii) other means may be available to municipalities to assure a flow of
materials to the Company's facilities or to make damage payments if materials
are not delivered; and (iii) with respect to capacity that is not subject to
municipal contracts, the invalidity of flow control provisions would favorably
affect the Company's ability to obtain materials.
Laws and regulations restricting the importation of solid waste into
states and localities are not likely to have a material effect on the Company's
operations. Few of the Company's facilities receive significant amounts of
materials that have originated in another state. In general, laws restricting
the importation of waste into a jurisdiction have been invalidated by the courts
as violative of the Interstate Commerce Clause of the U.S. Constitution.
Although legislation has been introduced in the U.S. Congress in the recent past
that would allow states and localities to impose such restrictions under certain
circumstances, such restrictions are more likely to affect the interstate flow
of non-recyclable waste than recyclable materials.
Laws and regulations mandating waste reduction and recycling would have
the effect of increasing demand for MRFs in general, and, because such laws
often impose requirements that local governments achieve certain recycling
goals, are likely to spur municipal governments to procure MRFs and enter into
contracts for their operation. Such laws also might have the effect of reducing
market prices for recyclable materials, which could affect the price the Company
receives for such materials. Laws and regulations that attempt to reduce the
amount of waste generated by outlawing or taxing packaging materials could
ultimately reduce the amount of recyclable materials available to the Company,
although such approaches currently appear less likely to be implemented than
mandated recycling programs.
Design and Construction Division
RRT Design & Construction Corp. (RRT D&C) was formed in 1989 as a full-service
design/build company to develop and market leading technologies for the recovery
of recyclables. Since 1989, RRT D&C has designed and built over thirty such
facilities utilizing advanced technology for the processing of solid waste and
materials recovery. Total RRT D&C revenue for 1994 was $7,946,000.
RRT D&C has expanded its technology expertise to include glass
beneficiation, automated paper sorting, ferrous processing, compost feedstock
preparation and fiber fuel. Additionally, RRT D&C created in 1993 a Field
Service Division for the installation and customer service of all its equipment
systems. The Field Service Division successfully completed its first
international installation in 1994.
RRT D&C maintains a flexible staff of professional engineers,
designers, drafters, project engineers and project managers in Melville, New
York. RRT D&C also provides engineering support services to the Company for
significant repair and maintenance projects, retrofits and plant inspection. RRT
D&C has a full computer network service for CAD as well as accounting for
management and other software products.
Facilities Completed - In 1994 RRT D&C completed the construction of
$5,700,000 of various projects. These projects included a $1,100,000 compost
pre-processing system in East Hampton, NY, a Company retrofit of a MRF for
$1,300,000, a trashline system in West Palm Beach, FL, and a MRF in Arkansas.
Facilities Under Construction - RRT D&C was selected in 1994 to
construct several projects utilizing RRT's technologies. Current projects under
design and construction include: MRFs, paper processing, and an incendiary ash
management system. Additionally, RRT D&C was awarded a contract to design and
build a $10,000,000 MRF (paper processing) in Philadelphia, Pennsylvania.
Collectively all contracts in progress at the end of 1994 exceed $17,000,000 in
remaining contract value.
RRT D&C also performs maintenance engineering and technology upgrades
for all Company operated facilities.
Facilities Under Development - RRT D&C has been selected to design and
build a $10,000,000 MRF for a customer in Lake County, Illinois.
Additionally, RRT D&C in association with the Company has been selected
to design and build significant expansions to the Company's operating facility
in Syracuse, NY. This project will increase the capacity of the facility.
Construction will commence in May 1995, and is scheduled to be completed in the
first quarter of 1996.
Principal Markets
The Company markets its Bottle Bill services predominantly in upstate
New York (between Albany and Rochester, and north to the Canadian border); these
services center around plants or transfer stations in Rochester, Syracuse, and
Utica. The Company markets the balance of its products and material services
throughout the United States and Canada.
Competition
Bottle Bill Operations: Competition in this area falls into three
categories: (1) distributors and bottlers electing to collect and process their
own containers; (2) other third-party services; and (3) individual retailers
processing the containers of all their distributors. The Company believes that
it provides economies of scale which have enabled it to remain the dominant
service provider within its market area. The Company believes that other third-
party services have not been effective in penetrating the area served by the
Company due to the high capital costs necessary to enter the market.
Recently, the Company has experienced a threat from a technology used
in other market places in which some of the company's customers have expressed
an interest. This technology, known as "Reverse Vending", can reduce the
operating costs of both a large supermarket and a beverage distributor. In
response to this threat the Company has entered into an agreement with a leading
provider of reverse vending technology, TOMRA of North America, whereby the
Company will subsidize the placement of these machines in its marketplace in
consideration of having the exclusive right to receive, manage and process the
collection data and containers which flow through the machines. The reverse
vending machines allow consumers to redeem deposit containers without the
assistance of retail store personnel by feeding the containers to be redeemed
into a machine approximately the size of a soft drink vending machine. The
machine scans the bar code imprinted on the can, determines that the container
is valid for deposit redemption, records the brand for later use by the
retailer, crushes the can for easier disposal, and issues a receipt to the
consumer that can be exchanged for cash. The reverse vending machine may
potentially reduce costs by crushing the cans for easier transportation for
disposal as well as reducing the requirement of store personnel needed in the
redemption process.
MRF Operations: Competition for providing MRF Operations may be divided
as follows:
National. Competition from national enterprises can be divided into two
types. Certain companies that are recycling specialists -- such as New England
Container Recovery, Inc., a subsidiary of Wellman, Inc., Resource Recovery
Systems, Inc. FCR Corporation, and Prins Recycling, Inc. -- are in direct
competition with the Company for recycling projects. Other competition comes
from companies that offer collection and processing of recyclables including
multi-national waste companies such as Waste Management, Inc., Browning-Ferris
Industries, Inc. and Laidlaw. The Company also encounters other large,
international companies from time to time (for instance, Anheuser-Busch,
Commercial Metals Corporation and Weyerhaeuser Company.) Several of the national
waste-hauling concerns which have entered the MRF market have significantly
greater resources than the Company.
Local. Almost every bid will be responded to by one or more local scrap
processors or waste haulers. The Company believes that such entities represent
significant competition in instances where a site must be provided by the
vendor. The Company will usually choose not to bid projects in which it has to
provide a site unless arrangements with a local entity regarding provision of a
site can be attained.
High commodity prices, the lack of enforceability of flow control
legislation and a trend toward privately owned and financed facilities have
increased the growth of the number of participants involved in the business of
responding to the municipal bids for collection, processing and marketing of
recyclables. Management believes certain major waste haulers will at times
propose exceptionally low fees for recycling services in order to either enter
or defend a market. Accordingly, there can be no assurance that the Company will
continue to be a successful bidder in the procurement of new facilities. In
addition, the Company is generally at a disadvantage in bidding against waste
haulers when the bid requires the full service of collection, processing and
marketing of recyclables.
Design and Construction. Competition for the design and construction of
MRFs and other waste recycling facilities depends upon whether or not operations
are included. Where operations are included, the competition is the same as
experienced by MRF Operations. Where operations are not included, competition
comes from a broad array of local and national engineering firms, as well as
equipment suppliers and local construction companies. The Company believes that
its application of technologies, hands on experience in operations and its
ability to offer marketing services to prospective customers gives RRT D&C a
competitive advantage from time-to-time.
Performance Guarantees, Bonding and Letters of Credit
In general, construction and operations bonding is required to guaranty
the performance of the Company to its municipal customers under existing and new
MRF operating contracts. Over the past several years, the Company has been able
to bond all construction activities. In addition, in those circumstances where
the Company could not post an operations bond, it was able to post letters of
credit. The Company has an informal arrangement with a nationally recognized
general contractor (who has built many projects for the Company), to provide
construction bonding for an additional fee. The Company has established a
bonding line with a new surety for both construction and operating bond
requirements.
Financing and Working Capital
The Company refinanced certain existing loans with its primary lender
and issued a consolidated and restated note payable in July 1994. In November
1994 the Company's primary lender also agreed to increase a revolving line of
credit to $3,000,000. In February 1995 the Company sold its glass processing
assets and reduced its long-term debt approximately $640,000 with a part of the
$1,750,000 proceeds. The disposition of certain assets, a new line of credit and
better cash management resulted in the Company achieving all of its cash flow
objectives for 1994. The Company continues to try to improve cash flow by
aggressively collecting receivables and limiting its new investments.
Employee Relations
As of December 31, 1994, the Company had approximately 350 persons in
its employ, of which 70 were members of a collective bargaining unit. The
Company's agreement with the bargaining unit, which represents production
employees of the Monroe County MRF, will expire on August 5, 1996. The Company
believes its relations with its employees are satisfactory.
Item 2: Properties.
Material Recycling Division Facilities
Bottle Bill Operations: Bottle Bill Operations are conducted in
facilities located in Syracuse and Rochester, New York. In Syracuse,
approximately 34,000 square feet of a total of 70,000 square feet are used for
Bottle Bill operations. The facility is owned by a subsidiary of the Company and
is financed with a mortgage held by the Binghamton Savings Bank. The remainder
of the facility is used by Materials Recycling Division ("MRD") Operations. In
Rochester, Bottle Bill Operations use approximately 12,000 square feet of a
45,000 square-foot facility. This facility is owned by the Monroe County Solid
Waste Authority and is made available to Bottle Bill Operations under a ten-year
agreement terminating December 31, 2001 with a subsidiary of the Company for its
operation of a MRF, which uses the remaining square footage. Comparable space
for Bottle Bill Operations is available should the ten-year contract not be
renewed.
MRF Operations
New York:
Syracuse: MRF Operations use approximately 36,000 square feet of this
facility. In accordance with a 3-year licensing agreement terminating December
31, 1995 with the Onondaga County Resource Recovery Agency, a subsidiary of the
Company is one of two designated MRF operators in the county. Under this
agreement MRF Operations receives approximately 30,000 tons per year of mixed
paper and mixed containers from various waste haulers within the County, based
upon a monthly competitive tipping fee bid. The Company believes it processes
approximately 75% of the available recyclables in the county. Recyclables from
other municipalities are also received and processed at the facility from time
to time. In addition, MRF Operations also receive and process grades of
commercial paper other than news, which it must purchase from waste generators
and haulers in the community.
The Company's glass processing system receives color sorted glass from
its own operations and from other processors of recyclables and further cleans
and pulverizes the material for sale, primarily to a glass bottle manufacturing
facility near Syracuse. The facility processed 95,000 tons of glass in 1994. The
assets used for glass processing were sold in 1995. (See Item 1.
Business-Material Developments).
Monroe County: MRF Operations began in this facility in January 1992
under a 10-year service agreement with the county. The facility is capable of
processing 2,100 tons of mixed recyclables per week and currently operates at
approximately 1,700 tons per week. The Company receives a variable service fee
plus a percentage of scrap revenue for managing the operations. In order to
further improve the operating capability of the facility, the Company financed a
number of improvements to the facility, totaling approximately $300,000, in
return for an increased service fee and the elimination of a $900,000 letter of
credit previously required to guaranty the Company's performance.
New Jersey:
Cape May County: Originally constructed in 1989, this
34,000-square-foot, 30,000-tons-per-year county-owned facility was the Company's
first turnkey MRF operation and the first of its kind in New Jersey. The
original operating agreement was for five years; however, in 1992 the Company
entered into a new 10-year agreement with the Cape May County Municipal
Utilities Authority, in return for the Company financing a $2.6 million
improvement to the facility, which was completed in July 1992. These
improvements allow the Company to more efficiently process the mixed recyclables
in the county, which are subject to extreme seasonal fluctuation and which
contain a mixed commercial and residential paper stream not generally collected
in other communities. The Company used internal funds to finance this expansion.
The Company receives a fixed monthly service fee, plus a percentage of scrap
revenues in excess of an agreed upon base amount.
Ocean County: This 38,000-square-foot, 65,000- ton-per-year
county-owned facility is operated by the Company pursuant to a contract that was
originally scheduled to expire on January 1, 1996. The Company receives a base
operating fee and a percentage of scrap revenues, which under a 1992 contract
change can increase based upon out-of-county materials that are processed at the
facility. The Company expects to process about 21,000 out-of-county tons in 1995
in the facility. The Company and the County have recently entered into an
amendment to the contract which provides for an extension of the contract until
January 1, 2001 in return for the Company financing 20% of a $1.2 million
capital improvement. The improvements were completed in mid-1994 and are
expected to result in a substantial increase in the plant's throughput.
Connecticut:
Hartford: In 1992 the Company completed the construction and started
operations of a 20,000-ton-per-year, agency-owned, commingled-container-only MRF
for the Connecticut Resource Recovery Agency in an existing facility. The
contract is for an initial term of 5 years, with agency options to renew for up
to 20 years. The Company receives a fixed service fee, plus a percentage of
scrap revenues. At the agency's request, the Company has proposed improvements
to the facility, which the Company may be willing to finance in part, in return
for a contract extension and an increased service fee. The Company is awaiting
the response of the agency.
Florida:
West Palm Beach: This 39,000-square-foot, 90,000-tons-per-year,
municipally-owned facility is operated by the Company pursuant to a contract
that expires in October 1996. The Company receives a fixed and variable tonnage
service fee, plus a percentage of scrap revenue. In 1993 the Company entered
into an agreement to expand the facility and increase its revenue share.
Improvements of which 80% were financed by the customer were completed in the
spring of 1994.
Vermont:
Brattleboro: This 20,000-square-foot, 10,000-tons-per-year,
municipally-owned facility is operated by the Company pursuant to a contract
that expires in July, 1997. The Company receives a fixed and variable tonnage
service fee, plus a percentage of scrap revenue.
Design and Construction Division - Design and construction activities
are operated out of approximately 7,300 square feet of office space in Melville,
New York (Long Island); this space has been leased until March 31, 2000. The
facility is occupied by the Company's design and engineering department,
consisting of approximately twenty-nine professional and administrative staff.
Corporate Offices - The Company's administrative and executive offices
are located in Vestal, New York in two offices (comprising approximately 10,000
square feet), one of which is leased from affiliates of a director and former
controlling stockholder of the Company. Both leases expire in 1999.
Item 3. Legal Proceedings
The Company is one of seven defendants in a lawsuit entitled Myrtha Hernandez
d/b/a Upstate Returns vs. RRT Empire Returns Corporation et al., filed in the
Western district of the United States District Court on August 19, 1992. The
suit alleges violations of the Sherman Anti-Trust Act. The other defendants are
six beverage distributors in Monroe County, New York. The suit alleges that the
Company conspired with defendant beverage distributors to prohibit the plaintiff
from entering the bottle redemption business; the suit is seeking compensatory
damages of $1 million and punitive damages of $15 million against all
Defendants. Based upon the advice of the Company's counsel, Harter, Secrest &
Emery, the Company believes the complaint is without merit, is vigorously
defending itself, and has moved for summary judgment dismissing the suit.
RRT Design & Construction Corp. ("RRT D&C"), a subsidiary of the
Company, has filed a proof of claim in the U.S. Bankruptcy Court for the Eastern
District of New York (the "Bankruptcy Court") against Babylon Recycling Center,
Inc. ("BRCI") for payment of $263,000 plus interest of $107,000. The BRCI
obligation arose out of a note payable to RRT D&C for engineering, design,
construction and testing services provided to BRCI at its commercial mixed waste
processing facility pursuant to a contract between RRT D&C and BRCI (the "BRCI
Contract"). BRCI is a debtor-in-possession operating pursuant to Chapter 11 of
the U.S. Bankruptcy Code. In 1994, the Company wrote-off the receivable based on
management's determination that recovery is doubtful and further action is not
expected to be taken with respect to this matter.
Item 4. Submission of Matters to a Vote of Security Holders.
Item 4 is inapplicable.
<PAGE>
PART II
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters.
The Company's common stock, par value $1.00 ("Common Stock"), is listed
and principally traded on the American Stock Exchange ("AMEX"). The high and low
sales prices of the Common Stock on the AMEX, by calendar quarter from January
1, 1993, as reported in published financial sources, are as follows:
<TABLE>
<CAPTION>
High Low
---- ---
<S> <C> <C>
1993:
First Quarter 3-1/8 2-1/16
Second Quarter 2-7/8 2
Third Quarter 2-3/4 2-1/2
Fourth Quarter 4 2-1/4
1994:
First Quarter 3-3/16 2-1/4
Second Quarter 3-1/4 2-3/4
Third Quarter 3-7/8 2-3/4
Fourth Quarter 5-7/8 3-3/4
1995:
First Quarter
(through March 24, 11-3/8 4-3/4
1995)
</TABLE>
As of March 24 ,1995, the approximate number of record holders of the Company's
Common Stock was 406.
Dividend Policy: No dividends were paid on the Common Stock in 1994 or 1993. The
Company currently anticipates that earnings will be retained for use in the
operation and expansion of its business.
SELECTED FINANCIAL DATA
Item 6.
The Selected Financial Information set forth below reflects the recycling
operations as "continuing operations" and the Plastics Division as "discontinued
operations."
<TABLE>
<CAPTION>
Year ended December 31,
---------------------------------------------------------------------
Operations: 1994 1993 1992 1991 1990
---------------------------------------------------------------------
(Dollars in Thousands except per share data)
<S> <C> <C> <C> <C> <C>
Revenues from continuing
operations ................ $ 41,794 $ 33,040 $ 39,210 $ 35,985 $ 28,357
Income (loss) from
continuing operations ..... 1,209 27 (3,697) 490 (692)
Income (loss)from
discontinued operations ... -- (923) (445) 66
Loss on disposal ........... -- (1,778) -- --
Extraordinary credit ....... -- -- 29 --
--------- --------- --------- --------- ---------
Net income (loss) .......... $ 1,209 $ 27 $ (6,398) $ 74 $ (626)
========= ========= ========= ========= =========
Data Per Share (1):
Earnings(loss) per common
and common equivalent
share:
From continuing operations . $ 0.45 $ 0.01 $ (1.41) $ .18 $ (.29)
From discontinued operations -- (.35) .17 .02
Loss on disposal ........... -- (.67) -- --
From extraordinary credit .. -- -- .01 --
--------- --------- --------- --------- ---------
Net income (loss) .......... $ 0.45 $ 0.01 $ (2.43) $ .02 $ (.27)
========= ========= ========= ========= =========
Book value per common
share ..................... $ 3.85 $ 3.43 $ 3.42 $ 5.86 $ 5.83
Cash dividend per share .... -- -- -- -- --
</TABLE>
<TABLE>
<CAPTION>
Financial Position: December 31,
-------------------------------------------------------
1994 1993 1992 1991 1990
-------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Working capital ........... $ 2,105 $ 1,293 $ 1,992 $ 9,061 $ 9,938
Total assets .............. $20,300 $16,807 $20,480 $25,335 $23,775
Total long term obligations
and redeemable preferred
stock .................... $ 1,818 $ 1,784 $ 2,513 $ 2,842 $ 1,615
Shareholders' equity ...... $10,232 $ 9,032 $ 9,018 $15,432 $15,492
</TABLE>
(1) Based on 2,658,000, 2,633,000, 2,637,000, 2,684,000, and 2,432,000 weighted
average common and common equivalent shares for the years ended December 31,
1994, 1993, 1992, 1991, and 1990, respectively.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Dollars in thousands, except per share data)
Results of Operations
Results of operations reflect the Company's two principal operating
divisions: the Design and Construction Division (RRT-D&C)and the Material
Recycling Division (MRD). Included in the MRD are Material Recycling Facilities
(MRF Operations), Bottle Bill Operations and Materials Brokerage Operations.
Given state legislative developments in recent years, and given the potential
risk that new mandatory recycling legislation could replace or eliminate the
need for deposit legislation, the Company has actively pursued expansion into
the municipal recycling and waste materials management business. The Company
commenced commercial operations at its first material recycling facility March
of 1988 and currently operates seven facilities.
The Company's revenues from its two operating divisions for the past
three years were:
<TABLE>
<CAPTION>
Years Ended December 31,
-------------------------------
1994 1993 1992
-------------------------------
<S> <C> <C> <C>
Design & Construction Division $ 7,946 $ 7,177 $16,949
Material Recycling Division
MRF Operations ............... 20,089 15,228 10,982
Bottle Bill Operations ....... 10,462 9,629 10,621
Materials Brokerage Operations 3,297 1,006 658
------- ------- -------
Total Revenues ................ $41,794 $33,040 $39,210
======= ======= =======
</TABLE>
1994 Compared to 1993:
Revenues. Revenues for the year ended December 31, 1994 increased $8,754 (or
26.5%) compared with the year ended December 31, 1993. The increase resulted
from a $7,985 or 30.9% increase in revenues from the MRD, and a $769 or 10.7%
increase in revenues from construction projects in RRT D&C. The $7,985 increased
revenues from the MRD includes $4,861 of increased revenues from the MRFs,
$2,291 increased material brokerage revenues, and an $833 increase in Bottle
Bill Operations revenues. The majority of the $4,861 increased revenues from the
MRFs was attributable to the Syracuse, NY plant while the other six MRFs
experienced modest increases.
Nearly 67% of the increase in revenues in the Syracuse, NY plant is due to price
increases, while approximately 33% of the increase in revenues is due to volume
increases. The glass beneficiation system at the Syracuse plant contributed
nearly 6% of the price-related increases and nearly 55% of the volume-related
increase. In February 1995, the Company sold its glass processing assets as
further discussed under "Material Developments." The revenue increases at the
other MRFs as well as revenue increases in Bottle Bill Operations are
principally attributable to price increases. The $2,291 increase in material
brokerage revenues is due principally to increased volume.
The $769 increase in revenues from RRT D&C is due principally to $1,772 of new
construction projects for the Company related to the West Palm Beach, FL, Ocean
County, NJ, and Syracuse, NY MRFs, offset by reductions of $1,003 in new
construction projects due to the decline in the number and value of projects in
process.
Cost of Sales. Cost of Sales from the Company's operating divisions for the past
three years were:
<TABLE>
<CAPTION>
Years Ended December 31,
-------------------------------
1994 1993 1992
-------------------------------
<S> <C> <C> <C>
Design & Construction Division $ 6,878 $ 6,101 $14,484
Material Recycling Division
MRF Operations ............... 15,559 14,532 12,559
Bottle Bill Operations ....... 9,202 7,345 8,584
Materials Brokerage Operations 3,293 815 577
------- ------- -------
Total Cost of Sales ........... $34,932 $28,793 $36,204
======= ======= =======
</TABLE>
Cost of Sales. Cost of sales for the year ended December 31, 1994 increased
$6,139 or 21.3% when compared with the year ended December 31, 1993. A
significant portion of the increase totaling $5,362, relates to the MRD which
experienced higher volumes of processing and service volumes at existing
facilities as well as increased materials brokerage activities. RRT D&C
experienced a $777 or 12.7% increase in cost of sales due to increases in the
number and value of new construction projects for the Company at its existing
MRFs. The gross profit margin for the year ended December 31, 1994 increased to
16.4% from 12.9% in 1993. The RRT D&C gross profit margin declined based on the
overall mix of construction contracts from 15.0% to 13.4% in 1994, while the MRD
experienced an increase in the gross profit margin from 12.3% in 1993 to 17.1%
in 1994. The MRD 1994 margins increased principally due to improved commodity
prices as well as higher processing volumes in the Syracuse, NY plant.
Selling, General and Administrative Expenses. Selling, general and
administrative costs increased $768 or 17.1% as compared to 1993. There was a
$36 decrease in RRT D&C related to support staff reductions, which was offset by
an $804 increase in corporate expenses at the Vestal, NY headquarters. Corporate
expenses showed the following increases: $151 for professional fees related to
legal, financial and marketing services and $350 in variable compensation
related to the Company's improved operating performance, with the balance of
$303 due primarily to costs related to centralized services (i.e. human
resources and marketing) to support the Company's expanded business development
and marketing activities.
Interest and Other Income, Net. The Company provided $263 in 1994 to write-off a
note receivable and recorded a $334 gain in 1993 on the sale of Pure Tech
International, Inc. common stock received in conjunction with the sale of
certain assets of the Plastics Division. Interest expense net of interest income
increased by $38 caused by higher interest rates on term debt due to increases
in the prime rate.
Provision for Income Taxes. The Company provided $100 for income taxes in 1994
as compared to $70 in 1993. The low effective rate in 1994 is principally due to
the availability of previously unrecognized Federal net operating loss
carryforwards.
1993 Compared to 1992:
Revenues. Revenues for the year ended December 31, 1993 decreased $6,170 (or
16%) compared with the year ended December 31, 1992. The decrease resulted from
a $9,772 decline in revenues from RRT D&C that was only partially offset by a
$3,602 increase in revenues from the MRD. The $3,602 increased revenues from the
MRD includes $4,246 of increased revenues from the MRFs and $348 increased
material brokerage revenues, offset by a $992 decline in Bottle Bill Operations
revenues. The majority of the $4,246 increased revenues from the MRFs was
attributable to the Syracuse, NY plant while the other six MRFs experienced
modest increases.
Nearly 68% of the increase in revenues in the Syracuse, NY plant is due to price
increases, while approximately 32% of the increase in revenues is due to volume
increases. The glass beneficiation system at the Syracuse plant contributed
nearly 58% of the price-related increases and nearly 96% of the volume-related
increase. The revenue increases at the other MRFs as well as revenue increases
in material brokerage revenues are principally attributable to volume increases.
The $992 decrease in Bottle Bill Operations revenues is due principally to
decreased volume.
The $9,772 decline in revenues from RRT D&C is due to the completion of a $6,330
construction project in 1992 that was not replaced with a comparable project in
1993; however a number of lesser projects partially offset the decline from
1992. Additionally, RRT D&C completed approximately $6,000 of construction
projects for the Company in 1992 at the Cape May, NJ, Hartford, CT, and Monroe
County, NY MRFs, which projects were replaced with projects of approximately 10%
of the revenue value of the 1992 projects.
In order to increase revenues in future years, RRT D&C has expanded its
technology expertise to include glass beneficiation, automated paper sorting,
ferrous processing, compost feedstock preparation and fiber fuel. Additionally,
RRT D&C created in 1993 a Field Services Division for the installation and
customer service of all its equipment systems.
Cost of Sales. Cost of sales for the year ended December 31, 1993 decreased
$7,411 or 20.5% when compared with the year ended December 31, 1992. The
significant portion of the decrease ($8,383) relates to RRT D&C, which
experienced a decline in the number and value of projects. RRT D&C completed a
$6,330 construction project in 1992 that was not replaced with a comparable
project in 1993 and RRT D&C also completed approximately $6,000 of construction
projects for the Company in 1992 at the Cape May County, NJ, Hartford, CT, and
Monroe County, NY MRFs, which essentially completed the expansion projects of
the existing MRFs and these projects were not replaced with comparable projects
in 1993. Partially offsetting these decreases was a net increase in the MRD of
$972 due to higher volumes of processing and service costs at existing
facilities, the fully operational glass processing system in the Syracuse plant
and the increased material brokerage activities. The gross profit margin for the
year ended December 31, 1993 increased to 12.9% from 7.7% in 1992. The RRT D&C
gross profit margin increased from 14.5% to 15.0% in 1993, while the MRD
experienced an increase in the gross profit margin from 2.4% in 1992 to 12.3% in
1993. The RRT D&C gross profit margin improved although revenues decreased
significantly in 1993. During 1993, RRT D&C increased subcontract services for
various construction projects, which essentially reduced costs and improved the
gross profit margin. The MRD 1993 margins improved as experience was gained and
equipment was adjusted for the three new operating MRFs that were added in 1992.
By improving the equipment throughput of material, the Company has been able to
reduce the labor required to support the equipment, which reduces operating
costs and increases gross profit margins.
Selling, General and Administrative Expenses. Selling, general and
administrative costs decreased $1,128 or 20% as compared to 1992. There was a
$524 decrease related to 1993 staff reductions at headquarters as part of the
Company's overall cost reduction program and a $116 reduction for professional
fees related to legal, accounting and financial management associated with the
Company's restructuring in 1992. There was an additional $349 reduction in
overhead expenses related to benefits and centralized services at Corporate
headquarters associated with the cost reduction program. RRT-D&C's expenses
decreased approximately $139 due to decreases in general business activity.
Interest and Other Income, Net. Interest and other income, net of interest
expense, decreased $70 from l992. The net decrease was due to an $86 decrease in
consulting and royalty income and a $35 increase in interest income. Interest
expense increased $19 primarily due to capitalizing approximately $82 in 1992
relating to construction of certain plant and equipment while no comparable
capitalization occurred in 1993. Interest income increased due to increased
earnings on a contract receivable related to a plant renovation project that was
completed in 1992, which was partially offset by decreased earnings on lower
average cash and short-term investments in 1993.
Loss (Gain) on Investments. The gain on investments increased $621 as compared
to 1992. The increase is due to a $334 gain on the sale of Pure Tech
International, Inc. common stock received in conjunction with the sale of
certain assets of the Plastics Division. Additionally, a $287 provision for
losses on marketable securities was charged in 1992, while there were no
comparable charges for the same period in 1993.
Liquidity and Capital Resources
Working capital amounted to $2,105 at December 31, 1994, compared to $1,293 at
December 31, 1993. Cash and cash equivalents totaled $1,969, which was up $952
from $1,017 at December 31, 1993.
In July 1994, the Company refinanced certain existing loans with its primary
lender and issued a consolidated and restated note payable in the amount of
$1,943 which included $1,657 of balances due under previous loans and $286 of
additional funds. The new note bears interest at prime plus 1.5% (10.5% at
December 31, 1994) and is payable in 60 monthly installments of $19 plus
interest with the balance due in July 1999. The note may be prepaid without
penalty. The refinanced consolidated and restated note with the primary lender
is secured by property, plant and equipment and carries covenants which require
the Company to maintain certain minimum financial ratios and to obtain lender's
approval for issuances of new debt.
In February 1995, the Company paid $400 additional principal on the consolidated
and restated note and paid off the $253 JDA loan balance in connection with the
sale of its equipment used in its glass processing activities. The equipment was
sold for $1,750 and resulted in a $690 gain which will be recognized in the
first quarter of 1995.
In November 1994, the Company's primary lender agreed to a revolving line of
credit of up to $3,000 of borrowings which are secured by accounts receivable
and inventories. Under this arrangement, the Company may borrow up to 80% of
non-RRT D&C accounts receivable and 50% of inventories, as defined. The interest
rate is prime plus 1%. No line of credit borrowings were outstanding as of
December 31, 1994 or 1993; however a $500 letter of credit was drawn against the
line for a plant operating guaranty and a $150 letter was drawn to guarantee
construction bonding as of December 31, 1994.
The Company's primary lender has committed to loan the Company $2,500 to finance
the design and construction of a materials recycling facility for the
Commonwealth of Massachusetts Department of Environmental Protection in
Springfield, Massachusetts. The loan will bear interest at prime plus 1.5% with
interest only payable during construction (maximum six months) and thereafter
payments of $21 per month plus interest over a ten-year period.
Construction is scheduled to commence in the spring of 1995.
The Company has approved 1995 capital expenditures which aggregate $975. These
capital expenditures principally relate to various processing system upgrades
and expansions in its MRF operations.
In December 1994, the Company invested $300 in exchange for a 50% interest in a
partnership with an unaffiliated party formed for the purpose of developing,
owning, constructing and operating a paper recycling facility located in
Philadelphia, Pennsylvania. RRT of Pennsylvania, Inc., a wholly-owned subsidiary
of the Company, is one of two general partners each having a 1% interest in the
Partnership while the Company is a 49% limited partner. American RRT Fiber
Supply, L.P. (the "Partnership") is expected to commence operations in 1995. RRT
D&C has been awarded the contract for design and construction of the facility in
the amount of $10,000.
A combination of funds available through line of credit sources, anticipated
cash flows from operations and existing cash balances is expected to provide
adequate funds to meet planned requirements for the coming year; however the
Company's ability to provide equity contribution for unplanned privatized
projects will be limited.
Net cash provided by operating activities was $3,089 in 1994 compared to cash
used of $61 in 1993. The change was due principally to higher net income and
increases in accrued expenses and payables offset by larger increases in
accounts receivable, inventories, and other assets. Net cash used in investing
activities was $1,667 in 1994 as compared to net cash provided of $2,090 in
1993. The change was primarily due to proceeds from the sale of an investment in
1993 and higher payments on notes receivable in 1993 offset by higher 1994
additions to property, plant and equipment, and an investment in a partnership
in 1994. Cash used in financing activities was $470 in 1994 which were used
primarily for the payment of long-term debt and preferred stock redemptions,
offset by cash provided from the proceeds of refinancing long-term debt. For
1993, net cash used in financing activities was $2,872, which was used primarily
for the payment of demand notes, long-term debt and preferred stock redemptions.
Item 8. Financial Statements and Supplementary Data
The Company's 1994 Financial Statements, together with the report thereon of
Price Waterhouse LLP dated March 10,1995, are included elsewhere herein. See
Item 14 for a list of Financial Statements and Financial Statement Schedules.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
Item 9 is inapplicable.
<PAGE>
PART III
The Company intends to file with the Securities and Exchange Commission within
120 days of the close of its year ended December 31, 1994 a definitive Proxy
Statement pursuant to Regulation 14A of the Securities Exchange Act of 1934 for
its Annual Meeting of Shareholders, or an amendment to this Form 10-K that
contains the information required in Part III.
Item 10. Directors and Executive Officers of the Registrant.
Information required by this Item will be included in the Company's Proxy
Statement or an amendment to this Form 10-K and is incorporated by reference
herein.
Item 11. Executive Compensation.
Information required by this Item will be included in the Company's Proxy
Statement or an amendment to this Form 10-K and is incorporated by reference
herein.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
Information required by this Item will be included in the Company's Proxy
Statement or an amendment to this Form 10-K and is incorporated by reference
herein.
Item 13. Certain Relationships and Related Transactions.
Information required by this Item will be included in the Company's Proxy
Statement or an amendment to this Form 10-K and is incorporated by reference
herein.
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
Index to Financial Statements:
(a)(1) List of Financial Statements
Report of Independent Accountants
Consolidated Balance Sheet at December 31, 1994 and 1993
Consolidated Statement of Operations for the three years ended December
31, 1994
Consolidated Statement of Cash Flows for the three years ended December
31, 1994
Consolidated Statement of Changes in Common Shareholders' Equity for the
three years ended December 31, 1994
Notes to Consolidated Financial Statements
(2) List of Financial Statement Schedules
Valuation and Qualifying Accounts (Schedule II)
All other schedules have been omitted because they are not applicable, or
the required information is shown in the financial statements or notes
thereto.
(3) List of Exhibits
The exhibits listed on the accompanying Exhibit Index are filed as part
of this Form 10-K. Exhibits constituting management contracts or
compensatory plans or arrangements are denoted by a "+" on the Exhibit
Index.
The financial statements and schedules referred to above are included on
pages F-1 through F-18 in this Form 10-K.
(b) Reports on Form 8-K
On February 14, 1995, the Company filed a Current Report on Form 8-K
dated February 2, 1995, to report the sale of the Company's assets used
in the glass processing business. Financial statements filed with the
Form 8-K consisted of an Unaudited Pro Forma Consolidated Balance Sheet
at September 30, 1994, Unaudited Pro Forma Consolidated Statements of
Income for the Nine Months Ended September 30,1994 and the Year Ended
December 31, 1993 and accompanying notes to Unaudited Pro Forma
Consolidated Financial Information.
(c) Exhibits
3(a) Certificate of Incorporation of the Company(filed as Exhibit 3(a) to the
Company's Form 8-B filed July 25, 1989, File No. 1-6774).*
3(b) By Laws of the Company(filed as Exhibit 3(b) to the Company's Form 8-B
filed July 25, 1989, File No. 1-6774).*
4(a) Certificate of Incorporation of the Company (filed as Exhibit 3(a) to the
Company's Form 8-B filed July 25, 1989, File No. 1-6774).*
4(b) Certificate of Designations, Preferences and Rights of the Company's
8.25% cumulative Convertible Preferred Stock (filed as Exhibit 3(a) to
the Company's Form 8-B filed July 25, 1989, File No. 1-6774).*
4(c) Agreement and Plan of Merger dated May 15, 1989 between Resource
Recycling Technologies, Inc., an Ohio corporation, and Resource Recycling
Technologies, Inc., a Delaware corporation (filed as Exhibit 1 to the
Company's Form 8-B filed July 25, 1989, File No. 1-6774).*
4(d) Agreement and Plan of Merger dated March 17, 1995 among Waste Management,
Inc., WMI Acquisition Sub, Inc. and the Company (filed as Exhibit 1 to
the Company's Schedule 14D-1 filed March 23, 1995).*
10(a) Employment Agreement dated as of October 3, 1988 between the Company and
Lawrence J. Schorr (filed as Exhibit 10(c) to Annual Report on Form 10-K
for year ended December 31, 1988, File No. 1-6774).* +
10(b) Employment Agreement dated as of November 28, 1988 between the Company
and David C. Jones (filed as Exhibit 10(e)to Annual Report on Form 10-K
for year ended December 31, 1988, File No. 1-6774).* +
10(c) Amended and Restated Incentive Stock Option Plan as of June 8, 1990
(filed as Exhibit B to the Company's Proxy Statement dated May 14, 1990
for its Annual Meeting of Shareholders held June 8, 1990).* +
10(d) Amendment No. 1 dated May 6, 1991 to Employment Agreement dated November
28, 1988 between the Company and David Jones (filed as Exhibit 10(b) to
Quarterly Report on Form 10-Q for the period ended June 30, 1991, File
No. 1-6774).* +
10(e) Employment Agreement dated January 2, 1991 between the Company and
Richard E. Koffman (filed as Exhibit 10(c)to Quarterly Report on Form
10-Q for the period ended June 30, 1991, File No. 1-6774).* +
10(f) Employment Agreement dated January 2, 1991 between the Company and Burton
I. Koffman (filed as Exhibit 10(d) to Quarterly Report on Form 10-Q for
the period ended June 30, 1991, File No. 1-6774).* +
10(g) Amendment No. 1 dated May 6, 1991 to Employment Agreement dated October
3, 1988 between the Company and Lawrence Schorr (filed as Exhibit 10(h)
to Quarterly Report on Form 10-Q for the period ended June 30, 1991, File
No. 1-6774).* +
10(h) Purchase Agreement dated October 1, 1991 by and between the Company and
Milbar Consultants Corp. (filed as Exhibit 10(g) to Current Report on
Form 8-K filed September 13, 1991, File No. 1-6774).*
10(i) Lease Agreement dated as of March 1, 1991 among Elizabeth M. Koffman,
Deborah E. Koffman and the Company (filed as Exhibit 10(h) to Current
Report on Form 8-K filed September 13, 1991, File No. 1-6774).*
10(j) Non-Qualified Stock Option Plan dated as of December 21, 1991 (filed as
Exhibit A to the Company's Proxy Statement dated May 22, 1991 for its
Annual Meeting of Shareholders held June 17, 1991, File No. 1-6774).* +
10(k) Directors and Officers Insurance Policy dated January 1, 1994, with
National Union Fire Insurance Company Policy No. 442-31-11 (filed as
Exhibit 10(k) to Annual Report on Form 10-K for the year ended December
31, 1993, File No. 1-6774.*
10(l) Employment Agreement dated July 31, l991 between the Company and David H.
Weitzman (filed as Exhibit 10(c) to Quarterly Report on Form 10-Q for the
period ended June 30, l992, File No. 1-6774).* +
10(m) Employment Agreement dated July 31, l991, between the Company and Jeffrey
M. Young (filed as Exhibit 10(d) to Quarterly Report on Form 10-Q for the
period ended June 30, l992, File No. 1-6774).* +
10(n) Employment Agreement dated June 1, l992, among the Company, RRT Design &
Construction Corp. and Nathiel G. Egosi (filed as Exhibit 10(e) to
Quarterly Report on Form 10-Q for the period ended June 30, l992, File
No. 1-6774).* +
10(o) Stock Option Agreement dated August 26, l992 between the Company and Neil
Norry (filed as Exhibit 10(b) to Quarterly Report on Form 10-Q for the
period ended September 30, l992, File No. 1-6774).* +
10(p) Promissory Note dated September 16, l992 between RRT Empire Returns Corp.
and Neil Norry, (filed as Exhibit 10(c) to Quarterly Report on Form 10-Q
for the period ended September 30, l992, File No. 1-6774).*
10(q) Amended and Restated PET Supply Agreement dated October 18, 1994 between
the Company and Pure Tech International, Inc. (filed as Exhibit 10(kk) to
Quarterly Report on Form 10-Q for the period ended September 30, 1994,
File No. 1-6774).*
10(r) Employment Agreement dated May 15, 1990 between RRT Plastics Corp. and
Steve Edelson (filed as Exhibit 10(d) to Current Report on Form 8-K filed
on June 1, 1990, File No. 1-6774).* +
10(s) First Amendment to Mortgage dated as of June 7, 1993 between State Street
Bank and Trust Company and RRT Land Corp. (filed as Exhibit 10(f) to
Quarterly Report on Form 10-Q for the period ended June 30, 1993, File
No. 1-6774).*
10(t) Business Loan Agreement dated June 7, 1993 between the Company and
Binghamton Savings Bank ("BSB") (filed as Exhibit 10(g) to Quarterly
Report on Form 10-Q for the period ended June 30, 1993, File No.
1-6774).*
10(u) Commercial Security Agreement dated June 7, 1993 between the Company and
BSB (filed as Exhibit 10(h) to Quarterly Report on Form 10-Q for the
period ended June 30, 1993, File No. 1-6774).*
10(v) Commercial Guaranty dated June 7, 1993 from various subsidiaries of the
Company to BSB (filed as Exhibit 10(i) to Quarterly Report on Form 10-Q
for the period ended June 30, 1993, File No. 1-6774).*
10(w) Amendment No. 1 to Employment Agreement dated as of June 14, 1993 between
RRT Plastics Corp. and Steve Edelson (filed as Exhibit 10(j) to Quarterly
Report on Form 10-Q for the period ended June 30, 1993, File No.
1-6774).* +
10(x) Promissory Note dated as of June 7, 1993 by and between the Company and
BSB (filed as Exhibit 10(a) to Quarterly Report on Form 10-Q for the
period ended September 30, 1993, File No. 1-6774).*
10(y) Agreement dated December 30, 1993 among JWP Inc., the Company, and
certain purchasers (filed as Exhibit 10(a)to Current Report on Form 8-K
filed January 14, 1994, File No. 1-6774).*
10(z) Consulting Agreement dated January 31, 1994 between Andrew T. Dwyer and
the Company (filed as Exhibit 10(dd)to Annual Report on Form 10-K for
year ended December 31, 1993, File No. 1-6774).* +
10(aa) Amendment No 2 dated November 8, 1993 to Employment Agreement dated
November 28, 1988 between the Company and David C. Jones (filed as
Exhibit 10(ee) to Quarterly Report on Form 10-Q for the period ended
March 31, 1994, File No. 1-6774).* +
10(bb) Amendment No. 1 dated January 1, 1994 to Lease Agreement dated March 1,
1991 among Elizabeth M. Koffman, Deborah E. Koffman and the Company
(filed as Exhibit 10(ff) to Annual Report on Form 10-K for year ended
December 31, 1993, File No. 1-6774).*
10(cc) Agreement of Limited Partnership of American RRT Fiber Supply, L.P. dated
as of December 5, 1994 by and among a Subsidiary, the Company, American
Fiber Supply of Philadelphia, Inc. and American Power Investors, Inc.
10(dd) Asset Purchase Agreement dated as of February 1, 1995 between RRT Empire
Returns Corporation and Continental Recycling, Inc. (filed as Exhibit
10(a) to Current Report on Form 8-K filed February 14, 1995, File No. 1-
6774).*
10(ee) Operating and Management Agreement dated as of February 1, 1995 between
RRT Empire Returns Corporation and Continental Recycling, Inc. (filed as
exhibit 10(c) to Current Report on Form 8-K filed February 14, 1995, File
No. 1-6774).*
10(ff) Assignment of Mortgage dated July 29, 1994 from State Street to BSB.
10(gg) Consolidated and Restated Note dated as of July 29, 1994 by and between
the Company and Binghamton Savings Bank ("BSB")(filed as Exhibit 10(gg)
to Quarterly Report on Form 10-Q for the period ended June 30, 1994).*
10(hh) Business Loan Agreement dated as of July 29, 1994 by and between the
Company and BSB (filed as Exhibit 10(hh) to Quarterly Report on Form 10-Q
for the period ended June 30, 1994).*
10(ii) Promissory Note dated as of July 29, 1994 by and between the Company and
BSB (filed as Exhibit 10(ii) to Quarterly Report on Form 10-Q for the
period ended June 30, 1994).*
10(jj) Business Loan Agreement dated as of July 29, 1994 by and between the
Company and BSB (filed as Exhibit 10(jj) to Quarterly Report on Form 10-Q
for the period ended June 30, 1994).*
10(kk) Collateral Mortgage and Modification and Consolidation Agreement dated
July 29, 1994 between RRT Land Corp. and BSB.
10(ll) Stock Tender Agreement dated March 17, 1995 among Allen & Company
Incorporated, Waste Management, Inc. and WMI Acquisition Sub, Inc. (filed
as Exhibit 2 to Company's Schedule 14D-9 dated March 23, 1995).*
10(mm) Stock Tender Agreement dated March 17, 1995 among Paul A. Gould, Waste
Management, Inc. and WMI Acquisition Sub, Inc. (filed as Exhibit 3 to
Company's Schedule 14D-9 dated March 23, 1995.).*
10(nn) Stock Tender Agreement dated March 17, 1995 among Andrew T. Dwyer, Waste
Management, Inc. and WMI Acquisition Sub, Inc. (filed as Exhibit 4 to
Company's Schedule 14D-9 dated March 23, 1995).*
10(oo) Employment Agreement dated March 17, 1995 between the Company and
Lawrence J. Schorr (filed as Exhibit 5 to Company's Schedule 14D-9 dated
March 23, 1995).* +
10(pp) Letter Agreement dated December 14, 1994 between the Company and
Ladenburg, Thalman & Co. Inc.
11 Statement re computation of earnings per share.
21 Proxy Statement for 1995 Meeting of Shareholders (to be filed in second
quarter of 1995, Commission File No. 1-6774).*
22 List of Subsidiaries of the Company.
24 Consent of Independent Accountants.
* Incorporated by reference.
+ Management contract or compensatory plan or arrangement.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
act of 1934, the Registrant has duly caused this Annual Report and any
subsequent amendments thereto to be signed on its behalf by the undersigned,
thereunto duly authorized.
RESOURCE RECYCLING TECHNOLOGIES, INC.
Dated: March 24, 1995 By:_____________________________
Lawrence J. Schorr
President and Director
Pursuant to the requirements of the Securities Act of 1934, this Report
has been signed below by the following persons in their respective capacities
with the registrant and on the dates indicated.
Dated: March 24, 1995 ______________________________
Andrew T. Dwyer,
Chairman of the Board
Dated: March 24, 1995 ______________________________
Lawrence J. Schorr,
President and Director
Dated: March 24, 1995 ______________________________
Paul A. Gould, Director
Dated: March 24, 1995 ______________________________
Dean H. Cannon, Director
Dated: March 24, 1995 ______________________________
Burton I. Koffman, Director
Dated: March 24, 1995 ______________________________
Jay R. Petschek, Director
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
act of 1934, the Registrant has duly caused this Annual Report and any
subsequent amendments thereto to be signed on its behalf by the undersigned,
thereunto duly authorized.
RESOURCE RECYCLING TECHNOLOGIES, INC.
Dated: March 24, 1995 By: /s/Lawrence J. Schorr
----------------------------------
Lawrence J. Schorr
President and Director
Pursuant to the requirements of the Securities Act of 1934, this Report
has been signed below by the following persons in their respective capacities
with the registrant and on the dates indicated.
Dated: March 24, 1995 /s/Andrew T. Dwyer
------------------------------
Andrew T. Dwyer,
Chairman of the Board
Dated: March 24, 1995 /s/Lawrence J. Schorr
------------------------------
Lawrence J. Schorr,
President and Director
Dated: March 24, 1995 /s/Paul A. Gould
------------------------------
Paul A. Gould, Director
Dated: March 24, 1995 /s/Dean H. Cannon
------------------------------
Dean H. Cannon, Director
Dated: March 24, 1995 /s/Burton I. Koffman
------------------------------
Burton I. Koffman, Director
Dated: March 24, 1995 /s/Jay R. Petschek
------------------------------
Jay R. Petschek, Director
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders
of Resource Recycling Technologies, Inc.
In our opinion, the consolidated financial statements listed in the index
appearing under Item 14(a)(1) and (2) present fairly, in all material respects,
the financial position of Resource Recycling Technologies, Inc. and its
subsidiaries at December 31, 1994 and 1993, and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1994, in conformity with generally accepted accounting principles. These
financial statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
As discussed in Note 1 to the consolidated financial statements, the Company
adopted Statement of Financial Accounting Standards No. 109, "Accounting for
Income Taxes", in January 1993.
PRICE WATERHOUSE LLP
March 10, 1995
Syracuse, New York
<PAGE>
Resource Recycling Technologies, Inc.
Consolidated Financial Statements
(In thousands, except share data)
--------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
December 31,
1994 1993
---- ----
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents (Note 1) .................. $ 1,969 $ 1,017
Accounts receivable, less allowance for
doubtful accounts of $96 in 1994 and 1993 .......... 6,566 5,203
Costs and earnings in excess of billings
on uncompleted contracts ........................... 125 264
Note and contract receivable (Note 4) ............... 213 195
Inventories ......................................... 479 277
Deposits and prepaid expenses ....................... 1,003 328
-------- --------
Total current assets ............................. 10,355 7,284
Note and contract receivable (Note 4) ................ 1,962 2,438
Investment in partnership (Note 2) ................... 300
Property, plant and equipment, net (Notes 3 and 5) ... 7,683 7,085
-------- --------
$ 20,300 $ 16,807
======== ========
Liabilities and Shareholders' Equity
Current liabilities:
Notes payable and current portion of
long-term debt (Note 5) ............................ $ 410 $ 830
Accounts payable .................................... 5,064 3,777
Billings in excess of costs and earnings
on uncompleted contracts ........................... 688 338
Accrued expenses and other liabilities (Note 1) ..... 2,088 1,046
-------- --------
Total current liabilities ........................ 8,250 5,991
Long-term debt (Note 5) .............................. 1,818 1,721
-------- --------
10,068 7,712
-------- --------
Redeemable preferred stock (Note 9) .................. -- 63
-------- --------
Commitments and contingencies (Note 6)
Common shareholders' equity (Note 10):
Common stock, $1 par value; 5,000,000
shares authorized; 2,794,750 shares issued ......... 2,795 2,795
Paid-in capital ..................................... 13,315 13,315
Accumulated deficit ................................. (4,899) (6,099)
Less cost of 161,677 common shares in treasury ...... (979) (979)
-------- --------
Common shareholders' equity ...................... 10,232 9,032
-------- --------
$ 20,300 $ 16,807
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE>
Resource Recycling Technologies, Inc.
Consolidated Financial Statements
(In thousands, except per share data)
--------------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Year Ended December 31,
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Revenues .............................................. $ 41,794 $ 33,040 $ 39,210
Cost of sales ......................................... 34,932 28,793 36,204
-------- -------- --------
Cross profit ..................................... 6,862 4,247 3,006
-------- -------- --------
Selling, general and administrative expenses .......... 5,253 4,485 5,613
Interest expense ...................................... 311 278 259
Interest and other income, net ........................ (274) (279) (330)
Loss (gain) on investments ............................ -- (334) 287
Provision for loss on note receivable (Note 4) ........ 263 -- --
Nonrecurring charges (Notes 1 and 8) .................. -- -- 838
Total costs and expenses ......................... 5,553 4,150 6,667
Income (loss) before income taxes ..................... 1,309 97 (3,661)
Provision for income taxes (Note 7) ................... 100 70 36
Income (loss) from continuing operations .............. 1,209 27 (3,697)
Discontinued operations (Note 14):
Loss from discontinued operations of
Plastics Division to measurement date ............... -- -- (923)
Loss on disposal of Plastics Division, including
provision of $601 for operating losses
during the phase-out period ......................... -- -- (1,778)
-------- -------- --------
Net income (loss) ..................................... $ 1,209 $ 27 $ (6,398)
======== ======== ========
Earnings (loss) per common and common equivalent share:
Income (loss) from continuing operations ............. $ .45 $ .01 $ (1.41)
Discontinued operations:
Loss from discontinued operations ................ -- -- (.35)
Loss on disposal of Plastics Division ............ -- -- (.67)
-------- -------- --------
Net income (loss) .................................... $ .45 $ .01 $ (2.43)
======== ======== ========
Weighted average common and common
equivalent shares ................................... 2,658 2,633 2,637
===== ===== =====
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE>
Resource Recycling Technologies, Inc.
Consolidated Financial Statements
(In thousands)
--------------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31,
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) ................................. $ 1,209 $ 27 $(6,398)
Adjustments to reconcile net income (loss)to net
cash provided (used) by operating activities:
Loss from discontinued operations ............... -- -- 2,701
Depreciation and amortization ................... 1,039 840 700
Provision for loss on note receivable ........... 263
Loss on disposal of equipment ................... -- 6 48
Loss (gain) on investment transactions .......... -- (334) 287
Changes in current assets and liabilities net of
effects of discontinued operations (Note 11) .... 578 (600) 2,174
------- ------- -------
Net cash provided (used) by operating activities .. 3,089 (61) (488)
------- ------- -------
Cash flows from investing activities:
Issuance of notes receivable ...................... -- -- (3,270)
Payments on notes receivable ...................... 195 866 271
Investment in partnership ......................... (300) --
Proceeds from sale of investments .................. -- 2,177 --
Proceeds from sale of fixed assets ................ 55 403
Capital expenditures .............................. (1,562) (1,008) (1,895)
Cash flow from discontinued operations ............ -- -- (2,655)
------- ------- -------
Net cash provided (used) by investing activities .. (1,667) 2,090 (7,146)
------- ------- -------
Cash flows from financing activities:
Proceeds from issuance of notes payable ........... 286 294 1,111
Payments on notes ................................. (684) (3,028) (140)
Proceeds from issuance of short-term demand notes . -- -- 2,950
Preferred stock dividends paid .................... (9) (13) (16)
Redemption of preferred stock ..................... (63) (125) (63)
------- ------- -------
Net cash provided (used) by financing activities .. (470) (2,872) 3,842
------- ------- -------
Net increase (decrease) in cash and cash equivalents 952 (843) (3,792)
Cash and cash equivalents at beginning of year ..... 1,017 1,860 5,652
------- ------- -------
Cash and cash equivalents at end of year ........... $ 1,969 $ 1,017 $ 1,860
======= ======= =======
Cash paid during the year for:
Interest .......................................... $ 337 $ 278 $ 315
Taxes ............................................. $ 52 $ 80 $ 123
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE>
Resource Recycling Technologies, Inc.
Consolidated Financial Statements (In thousands)
--------------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF CHANGES
IN COMMON SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
<TABLE>
<CAPTION>
Retained
Common Stock Paid-In Earnings Treasury Stock
Shares Amount Capital (Deficit) Shares Amount Total
------ ------ ------- --------- ------ ------ -----
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at
December 31,1991 .............................. 2,795 $ 2,795 $ 13,315 $ 301 162 $ 979 $ 15,432
Net loss .................................... -- -- -- (6,398) -- -- (6,398)
Preferred stock dividends ................... -- -- -- (16) -- -- (16)
----- -------- -------- -------- --- -------- --------
Balance at
December 31, 1992 ............................. 2,795 2,795 13,315 (6,113) 162 979 9,018
Net income .................................. -- -- -- 27 -- -- 27
Preferred stock dividends ................... -- -- -- (13) -- -- (13)
----- -------- -------- -------- --- -------- --------
Balance at
December 31, 1993 ............................. 2,795 2,795 13,315 (6,099) 162 979 9,032
Net income .................................. -- -- -- 1,209 -- -- 1,209
Preferred stock dividends ................... -- -- -- (9) -- -- (9)
----- -------- -------- -------- --- -------- --------
Balance at
December 31, 1994 ............................. 2,795 $ 2,795 $ 13,315 $ (4,899) 162 $ 979 $ 10,232
===== ======== ======== ======== === ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE>
Resource Recycling Technologies, Inc.
Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------
1. Business and Significant Accounting Policies
Resource Recycling Technologies, Inc. (the "Company"), through its
subsidiaries, is a diversified waste materials management enterprise engaged
in recycling and related businesses. The Company is currently organized into
three operating divisions. The Material Recycling Division is engaged in
providing transportation arrangements, scrap processing and accounting
services for retailers and wholesalers operating under beverage container
redemption legislation in New York ("Bottle Bill Operations") and in the
receipt, separation, processing and marketing of recyclable materials
collected under several municipalities' overall recycling programs (Material
Recycling Facilities, "MRF Operations"). The Material Recycling Division
currently operates seven facilities and brokers recyclables for two other
facilities. RRT Design & Construction Corp. ("RRT D&C") was formed in 1989
and performs design and construction services for recycling facilities both
for Company-owned MRFs and other facilities not owned or operated by the
Company. The Company's Materials Marketing Division acts as a broker for
recycled materials.
The significant accounting policies and practices followed by the Company
are as follows:
Principles of consolidation
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries. All significant intercompany accounts and
transactions have been eliminated.
Revenue recognition
Revenue is recognized as services are rendered with respect to accounting,
transportation and scrap processing. Revenues from deposit legislation and
material recycling scrap sales are recognized upon shipment to the customer.
Revenues from fixed price construction contracts are recognized ml the
percentage-of-completion method as measured by the percentage of costs
incurred to date compared to the estimated total cost to complete each
contract (cost-to-cost method). This method is used because management
considers incurred cost to be the best available measure of progress on such
contracts. Revenues from cost plus fixed fee contracts are recognized on the
basis of costs incurred during the period plus the fee earned, measured on
the service hours expended.
Contract costs include all direct material and labor costs and those
indirect costs related to contract performance such as indirect labor and
supplies. Selling, general and administrative costs are charged to expense
as incurred. Provisions for estimated losses on uncompleted contracts are
made in the period in which such losses are determined. Changes in job
performance, job condition and estimated profitability, including those
arising from contract penalty provisions, and final contract settlements may
result in revisions to costs and income and are recognized in the period in
which the revisions are determined. Profit incentives are included in
revenues when their realization is assured.
Inventories
Inventories, consisting primarily of sorted and baled newsprint, cardboard,
glass, plastic and aluminum materials to be shipped to recyclers, are
recorded at market prices.
Property, plant and equipment
Property, plant and equipment are recorded at cost. Depreciation is computed
using the straight-line method over the shorter of the estimated lives of
the various asset groups or the term of the related material recycling
contract. The ranges of estimated lives are as follows:
Building and improvements 10-31 years
Leasehold improvements Lease term
Machinery and equipment 3-10 years
Office furniture and fixtures 3-5 years
Maintenance and repair costs are expensed as incurred while renewals and
betterments are capitalized.
Income taxes
In January 1993, the Company adopted Statement of Financial Accounting
Standards No. 109 ("SFAS 109"), Accounting for Income Taxes, and has applied
the provisions prospectively. The adoption of SFAS 109 changes the Company's
method of accounting for income taxes from the deferred method (APB 11) to
an asset and liability approach. The asset and liability approach requires
the recognition of deferred tax liabilities and assets for the expected
future tax consequences of temporary differences between the carrying
amounts and the tax bases of all other assets and liabilities. The adoption
of SFAS 109 did not have a material affect on the Company's financial
position or results of operations.
Earnings per share
Earnings per common and common equivalent share are based upon the weighted
average number of shares of common stock and common stock equivalents
outstanding during the year. Common stock equivalents consist of stock
options and warrants as described in Note 10.
Restricted cash
Pursuant to the Company's MRF revenue share agreement with a municipality,
the Company has recorded both an asset and a corresponding liability for the
municipality's share of the revenue collected by the Company but not yet
drawn by the municipality. Such amounts, which are included in cash and
accrued expenses in the accompanying consolidated balance sheet, were
$1,230,000 and $426,000 at December 31, 1994 and 1993, respectively.
Statement of cash flows
The Company considers any investments purchased with an initial maturity of
three months or less to be cash equivalents.
Nonrecurring charges
Nonrecurring charges in 1992 included the following amounts: $186,000 in
expenses incurred in relation to the terminated JWP Merger Agreement (Note
8); $437,000 representing principally professional and consulting fees
incurred in the development and implementation of a plan to restructure
corporate debt, centralize certain administrative functions and improve
corporate performance; and $215,000 for severance payments and expenses
associated with the reorganization and relocation of the accounting
department into the corporate headquarters. In addition, 1992 cost of sales
includes $678,000 in charges relating to preoperating costs incurred in
connection with four newly established MRFs.
Reclassifications
Certain reclassifications have been made to prior year amounts to conform to
current year presentation.
2. Investment in Partnership
In December 1994, the Company invested $300,000 in exchange for a 50%
interest in a partnership with an unaffiliated party formed for the purpose
of developing, owning, constructing and operating a paper recycling facility
located in Philadelphia, Pennsylvania. RRT of Pennsylvania, Inc., a
wholly-owned subsidiary of the Company, is one of two general partners each
having a 1% interest in the Partnership while the Company is a 49% limited
partner. American RRT Fiber Supply, L.P. (the "Partnership") is expected to
commence operations in 1995. RRT D&C has been awarded the contract for
design and construction of the facility in the amount of approximately $10.0
million. The Partnership operations will be accounted for under the equity
method.
3. Property, Plant and Equipment
Property, plant and equipment are summarized as follows (in thousands):
<TABLE>
<CAPTION>
December 31,
1994 1993
------- -------
<S> <C> <C>
Land and improvements $ 179 $ 162
Building and improvements 2,581 2,573
Leasehold improvements 53 13
Office furniture and fixtures 1,233 1,157
Machinery and equipment 7,207 4,021
Construction in progress 568 2,263
------- -------
11,821 10,189
Less-accumulated depreciation and
amortization (4,138) (3,104)
------- -------
$ 7,683 $ 7,085
======= =======
</TABLE>
The Company currently leases certain office space and equipment under
noncancellable operating leases. Aggregate future minimum rental payments
required under operating leases that have initial or remaining
noncancellable lease terms in excess of one year as of December 31, 1994 are
as follows (in thousands):
1995 $ 634
1996 585
1997 283
1998 238
1999 236
Thereafter 184
Rental expense relating to the Company's operating leases amounted to
$324.000, $198,000 and $528,000 for the years ended December 31, 1994, 1993
and 1992, respectively.
The Company has entered into certain capital leases for equipment to be used
in connection with a contract to operate the Monroe County Landfill Transfer
Station effective January 1, 1995. The present value of the minimum lease
payments is approximately $560,000 and will be recorded as of January 1,
1995.
4. Note and Contract Receivable
Note and contract receivable consisted of the following (in thousands):
<TABLE>
<CAPTION>
December 31,
1994 1993
------ ------
<S> <C> <C>
From Cape May, New Jersey:
9% contract receivable, payable in
monthly instalments of $33
commencing July 1, 1992 $2,175 $2,370
From Babylon Recycling Center, Inc:
10% note receivable - 263
------ ------
2,175 2,633
Less-current portion (213) (195)
------ ------
$1,962 $2,438
====== ======
</TABLE>
During 1992, the Company renegotiated its operating agreement with the
County of Cape May, New Jersey (the "County") for the operation of its MRF.
This renegotiation included substantial facility renovations at the cost of
the Company, which cost totaled $2,630,000. In return for these renovations,
the revised monthly service fee includes a principal and interest payment
against the cost of the renovations. In the event of termination of the
agreement for certain reasons, the County is obligated to pay the Company
the then outstanding principal balance.
The Company completed the engineering, design, construction and testing of
equipment for a commercial mixed waste processing facility in accordance
with a contract with Babylon Recycling Center, Inc. ("BRCI") in 1992. BRCI
was in debt to the Company for $640,000 at December 31, 1992, which amount
included retainage and overdue contract billings. Under an agreement dated
March 12, 1993, BRCI agreed to make minimum payments of $10,000 per week in
accordance with a graduated payment schedule, with any remaining outstanding
balance payable in December 1993. The note was not paid on the due date and
BRCI filed for bankruptcy protection in December 1993. The Company wrote off
the note receivable balance in the amount of $263,000 in 1994 based on
management's determination that realization of the receivable is doubtful.
5. Notes Payable and Long-Term Debt
Notes payable and long-term debt consisted of the following (in thousands):
<TABLE>
<CAPTION>
December 31,
1994 1993
------ ------
<S> <C> <C>
Consolidated and restated note payable to a bank,
prime plus 1.5% $ 1,846 $ 2,010
Instalment loan, 6.90%, payable in monthly
instalments of $2.5 through January 1, 1997 58 --
Secured time note, 8%, payable in monthly instalments
of $5 through September 1, 1995 48 107
New York Job Development Authority (JDA) Loan,
4.75%, payable in monthly instalments of $8
through October 1, 1997 253 344
Other instalment loans 23 90
-------- --------
2,228 2,551
Less-current portion (410) (830)
-------- --------
$ 1,818 $ 1,721
======== ========
</TABLE>
In July 1994, the Company refinanced certain existing loans with its primary
lender and issued a consolidated and restated note payable in the amount of
$1,943,000 which included $1,657,000 of balances due under previous loans
and $286,000 of additional funds. The new note bears interest at prime plus
1.5% (10.5% at December 31, 1994) and is payable in 60 monthly instalments
of $19,430 plus interest with the balance due in July 1999. The note may be
prepaid without penalty. The refinanced consolidated and restated note with
the primary lender is secured by property, plant and equipment and carries
covenants which require the Company to maintain certain minimum financial
ratios and to obtain the lender's approval for issuances of new debt.
In February 1995, the Company paid $400,000 additional principal on the
consolidated and restated note and paid off the JDA loan in connection with
the sale of certain assets (see Note 15).
In November 1994, the Company's primary lender agreed to a revolving line of
credit of up to $3,000,000, borrowings under which are secured by accounts
receivable and inventories. Under this arrangement, the Company may borrow
up to 80% of non-RRT D&C accounts receivable and 50% of inventories, as
defined. The interest rate is prime plus 1%. No line of credit borrowings
were outstanding as of December 31, 1994 or 1993; however, a $500,000 letter
of credit has been drawn against the line for a plant operating guaranty and
a $150,000 letter of credit has been drawn to guarantee construction
bonding.
The other instalment loans referred to above are generally secured by
equipment. The primary lender's prime interest rate was 9% and 6% at
December 31, 1994 and 1993, respectively.
Aggregate maturities of the long-term debt are as follows (in thousands):
1995 $ 410
1996 354
1997 316
1998 233
1999 915
------
$2,228
======
The Company's primary lender has committed to loan the Company $2.5 million
to finance the design and construction of a materials recycling facility for
the Commonwealth of Massachusetts Department of Environmental Protection in
Springfield, Massachusetts. The loan will bear interest at prime plus 1.5%
with interest only payable during construction (maximum six months) and
thereafter payments of $20,833 per month plus interest over a ten-year
period. Construction is scheduled to commence in the spring of 1995.
6. Commitments and Contingencies
The Company has been awarded contracts to design, build and operate a number
of public MRFs. Each project typically involves a fixed fee to design/build
the facility, as well as a contract to operate the facility for a fee which
is escalated annually by a predetermined formula. Each project also requires
certain construction and operating performance bonds to be posted during
various phases of the contract. The Company utilizes a national surety for
the majority of its bonding requirements supplementing the balance with
letters of credit through its credit facility.
7. Income Taxes
The Company files a consolidated federal income tax return with its
subsidiaries. As of December 31, 1994, the Company had federal net operating
loss carryforwards of approximately $6.3 million available to offset future
taxable income. The net operating loss carryforwards expire in varying
amounts from 1999 through 2008.
The total income tax provision (benefit) has been allocated as follows (in
thousands):
1994 1993 1992
------ ------ ------
Current $ 100 $ 70 $ 36
Deferred -- -- --
----- ---- ----
Total income tax provision $ 100 $ 70 $ 36
====== ====== ======
The Company's deferred tax assets (liabilities) were comprised of the
following (in thousands):
<TABLE>
<CAPTION>
December 31,
1994 1993
------- -------
<S> <C> <C>
Assets
NOL carryforwards $ 2,142 $ 2,618
Reserves and accrued expenses 474 98
Allowance for doubtful accounts 32 33
------- -------
2,648 2,749
------- -------
Liabilities
Depreciation (644) (568)
------- -------
Valuation allowance (2,004) (2,181)
------- -------
Net deferred tax asset $ -- $ --
======= =======
</TABLE>
A reconciliation of the provision for income taxes on income at the
statutory Federal rate to the total tax provision is as follows (in
thousands):
<TABLE>
<CAPTION>
1994 1993 199Z
----- ----- -----
<S> <C> <C> <C>
Provision at Federal statutory rate $ 445 $ 33 $ --
Federal alternative minimum tax
and state taxes 100 70 36
Benefit of NOL carryforwards (445) (33)
----- ----- -----
$ 100 $ 70 $ 36
===== ===== =====
</TABLE>
8. Majority Shareholders and Related Party Transactions
On March 4, 1992, JWP Inc. (then owner of approximately 34% of the Company's
common stock) tendered an offer to acquire the balance of the Company's
outstanding shares not already owned by JWP. On June 3, 1992, the Company
and JWP executed an Agreement and Plan of Merger (the "Merger Agreement"),
whereby the Company would have been acquired by JWP in a stock for stock
merger. On July 2, 1992, the Company and JWP mutually agreed to terminate
the Merger Agreement without liability to either party. The parties
subsequently discontinued discussion with respect to acquisition by JWP of
any additional interest in the Company and JWP sold its 34% to Allen and
Company Incorporated in 1993. Costs incurred by the Company in conjunction
with the proposed JWP transaction were $186,000, which are included as
nonrecurring charges in the 1992 statement of operations.
9. Redeemable Preferred Stock
The Company paid $63,000 for the scheduled redemption of outstanding 8.25%
cumulative convertible preferred stock in 1994 and accrued the redemption of
the remaining amount at December 31, 1994 which will be paid in 1995. The
remaining balance of $62,000 is included in accrued expenses and other
liabilities in the accompanying consolidated balance sheet.
10. Stock Options
In accordance with the Incentive Stock Option Plan adopted June 1982, as
restated and amended June 1990, options to purchase 350,000 common shares
can be granted to officers and key employees. Options are granted at market
value on the date of the grant and become exercisable in part one year from
the date of grant and terminate ten years from grant date. Incentive stock
options available for grant total approximately 113,000 at December 31,
1994.
Non-qualified stock options for 34,376 common shares previously granted to
an officer of the Company in connection with a contract agreement at or
above market price were forfeited in 1994.
On December 21, 1990, the Board adopted a Non-Qualified Stock Option Plan
for directors and senior executives. Options to purchase up to 400,000
shares may be granted under the Plan. Options may be granted at market price
on the date of grant and are exercisable beginning one year from date of
grant and terminate ten years from date of grant. Non-Qualified Stock
Options available for grant total approximately 149,000 at December 31,
1994.
In connection with the 1990 public offering, the Company issued warrants to
purchase 100,000 shares of common stock to the underwriter. The warrants
became exercisable one year from the date of the offering at an initial
price of $10.35 per share (120% of the public offering price). Pursuant to
the warrant agreement and as a result of stock options granted subsequent to
the warrant, the warrant shares and per share price have been adjusted to
113,362 and $9.13, respectively, as of December 31, 1994. Such warrants
expire in April 1995.
In August 1992, the Company settled with the landlord of a facility
previously utilized in the Rochester, New York Bottle Bill Operations for
damages allegedly incurred during the Company's operation of the facility.
Such settlement included the issuance of options to purchase 25,000 shares
of the Company's common stock at an exercise price of $3 per share
exercisable during the period September 3, 1994 through September 3, 1997.
The following is a summary of incentive and non-qualified stock option
activity (shares in thousands):
<TABLE>
<CAPTION>
Shares Price Per Share
------ ---------------
<S> <C> <C> <C>
Outstanding at December 31, 1991 232 $4.38 - $8.50
Granted 25 $6.88
Exercised
Forfeited (28)
---
Outstanding at December 31, 1992 229 $4.38 - $8.50
Granted
Exercised
Forfeited (42)
---
Outstanding at December 31, 1993 187 $4.38 - $8.50
Granted 346 $3.42 - $5.25
Exercised
Forfeited (44)
---
Outstanding at December 31, 1994 489 $3.42 - $8.50
===
Exercisable at December 31, 1994 268 $3.42 - $8.50
===
</TABLE>
11. Statement of Cash Flows (Supplemental Disclosures)
Presented below is a schedule of supplemental cash flow information
including noncash investing and financing activities for the periods ended
December 31 (in thousands):
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Changes in current assets and
liabilities, net of effects of
discontinued operations:
Accounts receivable $ (1,363) $ 236 $ 3,104
Inventories (202) 43 (62)
Deposits and prepaid expenses (675) (86) 530
Accounts payable 1,287 539 (408)
Billings in excess of costs and
estimated earnings on
uncompleted contracts, net 489 (28) (1,822)
Accrued expenses and
other liabilities 1,042 (1,578) 832
Other -- 274 --
-------- -------- --------
$ 578 $ (600) $ 2,174
======== ======== ========
</TABLE>
During 1994, the Company acquired certain equipment through issuance of a
$75,000 instalment note payable.
12. Defined Contribution Retirement Plan
The Company maintains a 401 (k) plan for all eligible full-time employees.
Employees can make tax deferred contributions to the plan which the Company
matches, at a rate of 25%, up to a total of 6% of the employees' earnings.
The Company also makes a discretionary contribution equivalent to l/z% of
employee earnings for all active employees at year-end. The Company's
contributions vest ratably over a five-year period. The Company's matching
contributions were $58,000 and discretionary contributions were $34,000 for
1994. Company contributions were $68,000 and $78,000 for 1993 and 1992,
respectively.
13. Major Customers and Industry Segment Information
The Company views itself as operating within a single industry segment --
waste materials management engaged in recycling and related businesses.
Sales to the Company's largest customers, as a percentage of consolidated
revenues, are as follows (* Less than 10% of consolidated revenues):
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Commercial Construction Customer A * * 13%
Commercial Construction Customer B * 13% *
Aluminum Recycler * 13% 11%
Glass Recycler 10% 10% *
</TABLE>
14. Plastics Division (Discontinued Operations)
During 1992, the Company decided to close its Roosevelt, New York facility
and discontinue its post industrial plastic compounding and extrusion
operations. Additionally, the Company entered into a sale of its
Polyethylene Terephthalate Polymer Resin ("PET") business which it operated
in its Trenton, New Jersey facility. These facilities had combined to form
the Company's Plastics Division. As a result of this decision, a reserve of
$1,778,000 was established against which $841,000 was charged through
December 31, 1992. The remaining amount was paid in 1993.
15. Subsequent Event - Sale of Class Processing Assets
In February 1995, the Company sold certain equipment used in its glass
processing activities for $1,750,000. This transaction resulted in a gain of
approximately $690,000 which will be recorded in the first quarter of 1995.
In connection with the sale, the Company entered into an Operating and
Management Agreement with the buyer pursuant to which the Company will
continue operating the assets on behalf of the buyer in exchange for certain
fixed and variable fees. The agreement has an initial term of one year,
subject to early termination and renewal provisions. Revenues from the glass
processing activities for 1994 and 1993 were approximately $4.6 million and
$3.7 million, respectively.
16. Subsequent Event - Tender Offer to Purchase the Company's Shares (Unaudited)
On March 23, 1995, a tender offer was made by a subsidiary of Waste
Management, Inc. (the "Purchaser") for the purchase of all of the Company's
outstanding shares at a price of $11.50 per share to be paid in cash. The
offer was made pursuant to an Agreement and Plan of Merger, dated March 17,
1995, under which the Purchaser is expected to be merged with and into the
Company. The accompanying financial statements do not reflect any
adjustments that would be required in the event the proposed merger is
consummated.
<PAGE>
Resource Recycling Technologies, Inc
Financial Statement Schedules
(Amounts in thousands)
--------------------------------------------------------------------------------
<TABLE>
SCHEDULE 11 - VALUATION AND QUALIFYlNG ACCOUNTS AND RESERVES
<CAPTION>
Column A Column B Column C Column D Column E
---------------------- ---------- ------------------------------- ------------- --------
Balance at Charged to Charged to Balance
Beginning Costs and Other at end of
Description of Period Expenses Accounts Deductions (a) Period
----------------------- ---------- ---------- ---------- -------------- ---------
<S> <C> <C> <C> <C> <C>
Allowance for Doubtful
Account-deducted from
Accounts Receivable
1994 $ 96 $ 51 $ - $ 51 $ 96
1993 119 96 - 119 96
1992 114 34 - 29 119
(a) UN collectible accounts written off net of recoveries of $7, $2 and $93 in 1994, 1993 and 1992
respectively
Reserve for Loss
on Investment -
deducted from
Investments
1994 395 - - - 395
1993 395 - - - 395
1992 262 133 - - 395
Reserve for Loss
on the disposal
of Plastics
Division
1994 - - - - -
1993 937 - - 937 -
1992 - 1,778 - 841 937
</TABLE>
EXHIBIT 11
Resource Recycling Technologies, Inc.
(In thousands except per share data)
--------------------------------------------------------------------------------
Statement Re Computation of Earnings per Share
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Income (loss) from continuing operations ..... $ 1,209 $ 27 $(3,697)
Discontinued operations ...................... -- -- (2,701)
------- ------- -------
Income (loss) before Preferred dividends ..... 1,209 27 (6,398)
Less: Preferred dividends paid ............... 9 13 16
------- ------- -------
Net income (loss) available
for common shareholders ..................... $ 1,200 $ 14 $(6,414)
======= ======= =======
Weighted average common shares
outstanding ................................. 2,633 2,633 2,637
Incremental effect of stock options
and warrants ................................ 25 -- --
------- ------- -------
Weighted average common and common
equivalent shares outstanding ............... 2,658 2,633 2,637
===== ===== =====
Net income (loss) per common and
common equivalent share:
Continuing operations ...................... $ .45 $ .01 $ (1.41)
Discontinued operations .................... -- -- (1.02)
------- ------- -------
Total ...................................... $ .45 $ .01 $ (2.43)
======= ======= =======
</TABLE>
EXHIBIT 22
Resource Recycling Technologies, Inc.
List of Subsidiaries
The following is a list of the active subsidiaries of Resource Recycling
Technologies, Inc.:
* RRT Empire Returns Corporation
* RRT Design & Construction Corp.
* RRT Land Corp.
* RRT of New Jersey, Inc.
* RRT Empire of Mid-Connecticut, Inc.
* RRT Empire of Monroe County, Inc.
* RRT of Syracuse, New York, Inc.
* RRT of Pennsylvania, Inc.
* RRT of Lake County, Illinois, Inc.
* RRT of Springfield Massachusetts, Inc.
EXHIBIT 24
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (No. 33-89626) of Resource Recycling Technologies, Inc. of
our report dated March 10, 1995 appearing on page F-1 of the 1994 Annual Report
on Form 10-K.
/s/Price Waterhouse LLP
PRICE WATERHOUSE LLP
Syracuse, New York
March 24, 1995
AGREEMENT OF LIMITED PARTNERSHIP
OF
AMERICAN RRT FIBER SUPPLY, L.P.
<PAGE>
TABLE OF CONTENTS
1. PARTIES
1.1 RRT of Pennsylvania, Inc.,
1.2 Resource Recycling Technologies
1.3 American Fiber Supply of Philadelphia, Inc.
1.4 American Power Investors, Inc.
2. DEFINITIONS.
2.1 Affiliate
2.2 Alternate
2.3 APC Partner or APC Partners
2.4 Bonds
2.5 Capital Account
2.6 Certified Public Accountants
2.7 Code
2.8 Commercial Operation Date
2.9 Contribution Ratio
2.10 Deficit Balance
2.11 Development Expenses
2.12 EPC Contract
2.13 Formation Date
2.14 Funding Date
2.15 General Partner or General Partners
2.16 Internal Costs
2.17 Lender
2.18 Limited Partner or Limited Partners
2.19 Management Committee
2.20 Partner or Partners
2.21 Partnership Assets
2.22 Partnership Percentage
2.23 Party or Parties
2.24 Person
2.25 Philadelphia Facility
2.26 Project
2.27 Project Contract
2.28 Representative
2.29 RRT Partner or RRT Partners
2.30 Site
2.31 Tax Matters Partner
3. FORMATION AND PURPOSE; REPRESENTATIONS AND WARRANTIES
3.1 Formation
3.2 Name
3.3 Purpose
3.4 General Representations, Warranties and Covenants
3.5 Offices
4. CAPITAL CONTRIBUTIONS
4.1 Initial Capital Contributions
4.2 Subsequent Capital Contributions
5. RESPONSIBILITY FOR AND REIMBURSEMENT OF DEVELOPMENT EFFORTS AND
EXPENSES; DEVELOPMENT FEE; OPERATIONS AND MAINTENANCE
5.1 Development Efforts
5.2 Development Expenses
5.3 Priority of Payment
5.4 Early Termination
5.5 Operations and Maintenance
5.6 EPC Contract
6. ALLOCATION OF PROFITS AND LOSSES
6.1 Allocation of Net Profits and Losses
6.2 Compliance with Code and Treasury Regulations
7. DISTRIBUTIONS
7.1 Timing and Amount
7.2 Section 754 Election
7.3 Deficit Capital Accounts
8. ACCOUNTING AND TAXATION
8.1 Fiscal Year
8.2 Location of Partnership's Books
8.3 Accounting Principles
8.4 Annual Financial Statements
8.5 Quarterly Financial Statements
8.6 Tax Treatment as Partnership
8.7 Preparation of Tax Returns
8.8 Allocations Among Periods
8.9 Preparation of Reports
8.10 Access to Partnership's Books
8.11 Placement of Partnership Funds
9. MANAGEMENT OF THE PARTNERSHIP.
9.1 Authority of the Management Committee.
9.2 Action by the Management Committee.
9.3 Constitution of Management Committee.
9.4 Meetings of the Management Committee.
9.5 Management Fee.
10. LIMITATION OF LIABILITIES.
10.1 Contract Provision to Limit Claims.
10.2 Liability Among General Partners.
10.3 Limited Liability of Limited Partners.
11. TRANSFER OR PLEDGE OF PARTNERSHIP INTERESTS.
11.1 Permitted Transfers.
11.2 Sale of Controlling Interest.
11.3 Transfer of Partnership Interest.
11.4 Evidences of Ownership.
11.5 Registration Under Securities Laws.
11.6 Opinion of Legal Counsel.
11.7 Third Party Offers
12. TERMINATION.
12.1 General.
12.2 Term.
12.3 Winding Up.
12.4 Dissolutions Constituting Breach of Partnership Agreement.
13. INDEMNITY.
13.1 Indemnification by Partnership.
13.2 Indemnification by Partners
14. RESOLUTION OF DISPUTES.
14.1 Dispute Defined.
14.2 Dispute Resolution.
14.3 Consent to Jurisdiction; Venue.
14.4 Cost.
14.5 Continuation of Performance
15. GENERAL.
15.1 Notices.
15.2 Additional Documents.
15.3 Non-Competition; Independent Activities; Confidentiality.
15.4 Section References.
15.6 Modifications.
15.7 Successors and Assigns.
15.8 Press Releases.
15.9 Severability.
15.10 Counterparts
<PAGE>
AMERICAN RRT FIBER SUPPLY, L.P.
AGREEMENT OF LIMITED PARTNERSHIP
THIS AGREEMENT OF LIMITED PARTNERSHIP, made and entered into as of the
5th day of December, 1994, by and among RRT OF PENNSYLVANIA, INC., RESOURCE
RECYCLING TECHNOLOGIES, INC., AMERICAN FIBER SUPPLY OF PHILADELPHIA, INC. and
AMERICAN POWER INVESTORS, INC.
WITNESSETH:
WHEREAS, the parties desire to form a limited partnership in the
Commonwealth of Pennsylvania to be known as American RRT Fiber Supply, L.P.,
pursuant to the laws of the Commonwealth of Pennsylvania, 15 Pa.C.S. ch. 85, for
the purposes hereinafter set forth;
NOW THEREFORE, in consideration of the mutual covenants herein
contained, the parties hereto agree as follows:
1. PARTIES. The following are the initial parties to this Agreement:
1.1 RRT of Pennsylvania, Inc., a corporation organized under the
laws of the State of Pennsylvania with its executive offices
at 300 Plaza Drive, Vestal, New York 13850 ("RRT-PA"), as a
General Partner.
1.2 Resource Recycling Technologies, Inc., a corporation organized
under the laws of the State of Delaware, with its executive
offices at 300 Plaza Drive, Vestal, New York 13850 ("RRT"), as
a Limited Partner.
1.3 American Fiber Supply of Philadelphia, Inc., a corporation
organized under the laws of the State of Pennsylvania with its
principal offices at 33 Rock Hill Road, Bala Cynwyd,
Pennsylvania 19004 ("AFS"), as a General Partner.
1.4 American Power Investors, Inc., a corporation organized under
the laws of the State of Delaware with its principal offices
at 33 Rock Hill Road, Bala Cynwyd, Pennsylvania 19004
("APII"), as a Limited Partner.
2. DEFINITIONS.
2.1 Affiliate. Any corporation, partnership or other entity which
directly or indirectly controls, is controlled by, or is under
common control with another Person.
2.2 Alternate. A substitute Representative appointed in accordance
with Section 9.3.
2.3 APC Partner or APC Partners. AFS and APII, individually or
collectively.
2.4 Bonds. The Solid Waste Disposal Facility Revenue Bonds to be
issued by the Philadelphia Authority for Industrial
Development to provide funds to construct the Project.
2.5 Capital Account. A Capital Account to be established for each
Partner consisting of the total capital contributions credited
to the account of a Partner in accordance with Section 4,
adjusted to reflect allocations of income, gain or loss as
provided in this Agreement, that will be maintained in
accordance with Treasury Regulation 1.704-1(b)(2)(iv),
notwithstanding any provision contained herein to the
contrary.
2.6 Certified Public Accountants. A firm of nationally recognized
independent certified public accountants as may be selected
from time-to-time by the Management Committee.
2.7 Code. Internal Revenue Code of 1986, as amended, and the
regulations promulgated thereunder.
2.8 Commercial Operation Date. The date on which the Philadelphia
Facility is substantially physically complete and has
completed acceptance testing, or such other date as the
Management Committee determines.
2.9 Contribution Ratio. The amount of each Partner's respective
obligation to make capital contributions expressed as a
percentage of the total capital contributions required in
accordance with Section 4.
2.10 Deficit Balance. A deficit balance in a Partner's Capital
Account, as determined after taking into account all
adjustments required under this Agreement for the taxable year
in question.
2.11 Development Expenses. All reasonable costs and expenses
incurred on behalf of the Partnership by each Partner and its
Affiliates prior to the Funding Date that are (1) directly
related to the Project or the Partnership, (2) in conformance
with the Memorandum of October 6, 1994, attached as Schedule
2.11 to this Agreement, and (3) approved by the Management
Committee; including, without being limited to, all costs of
obtaining regulatory approvals, site purchase option or rental
costs, legal and consultant costs, environmental reports, and
other out-of-pocket expenses, in each case incurred with
respect to the business of the Partnership ("Third Party
Expenses"), and direct and indirect Internal Costs.
2.12 EPC Contract. The Turnkey Contract for the Construction and
Installation of a Paper Processing Facility between the
Partnership and RRT Design & Construction Corp.
2.13 Formation Date. The date the Partnership is formed as provided
in Section 3.
2.14 Funding Date. The date the Bonds are issued.
2.15 General Partner or General Partners. RRT-PA and AFS and any
person admitted to the Partnership as a General Partner
pursuant to the terms of this Agreement, individually or
collectively.
2.16 Internal Costs. Each Party's respective costs for its own
management and other professional personnel (including
associated home office overheads, travel and out-of-pocket
expenses) associated with development of the Project,
including but not limited to the following: (1) direct costs -
salaries, travel expenses, and temporary employee expenses;
and (2) indirect costs -- payroll and general taxes (state,
local, property, FICA and Medicare), insurance (life, health,
disability, workers' compensation, general liability),
employee benefits (pension plan, savings plan, educational
assistance, college matching funds, employee recognitions),
communications (telephone, mail, facsimile, express mail),
rent and lease on office space, equipment and furniture,
recruitment/relocation, dues, memberships and training, office
expenses, insurance and depreciation on owned equipment.
2.17 Lender. A Person(s), not an Affiliate of any Party, which has
committed to purchase the Bonds or otherwise to loan
sufficient funds to the Partnership to reimburse Development
Expenses and to construct the Philadelphia Facility.
2.18 Limited Partner or Limited Partners. RRT and APII, and any
person admitted to the Partnership as a Limited Partner
pursuant to the terms of this Agreement, individually or
collectively.
2.19 Management Committee. The Management Committee formed and
appointed pursuant to Section 9.
2.20 Partner or Partners. Any General Partner or Limited Partner,
individually or collectively.
2.21 Partnership Assets. All right, title and interest presently in
existence and subsequently created by RRT Partners and/or APC
Partners in or pertaining to the development, ownership or
operation of the Philadelphia Facility, including, without
limitation, (1) any and all rights with respect to the Site;
(2) any and all assets pertaining to permitting and technical
work relating to the Philadelphia Facility performed to date;
(3) all right, title and interest in all plans, studies,
drawings, permits, contracts, and licenses relating to the
Philadelphia Facility, except as provided in the EPC Contract
and the Technology License Agreement referred to therein; and
(4) other assets of APC Partners or RRT Partners, if any, that
pertain to the purposes of and are intended by the Parties to
be transferred to the Partnership.
2.22 Partnership Percentage. As to RRT as Limited Partner - 49%, as
to RRT-PA as General Partner - 1%, as to APII as Limited
Partner - 49% and as to AFS as General Partner - 1%, unless
such percentages shall be changed pursuant to Section 11.
2.23 Party or Parties. The entities named as parties in Section 1
of this Agreement.
2.24 Person. An individual, a corporation, voluntary association,
joint stock company, business trust or partnership.
2.25 Philadelphia Facility. The office waste paper recovery
facility to be located in the greater metropolitan area of
Philadelphia, Pennsylvania.
2.26 Project. The undertaking to develop, construct, finance, own
and operate the Philadelphia Facility.
2.27 Project Contract. A Partnership Asset which is a contract.
2.28 Representative. A member of the Management Committee as
provided in Section 9.3.
2.29 RRT Partner or RRT Partners. RRT-PA and RRT, individually or
collectively.
2.30 Site. The building and tract of land located in Philadelphia,
Pennsylvania on which the Philadelphia Facility is to be
constructed, as more specifically identified on Schedule 2.30
hereto.
2.31 Tax Matters Partner. AFS unless and until the Management
Committee elects a successor or AFS resigns. The term as used
herein shall be as defined in the Code.
3. FORMATION AND PURPOSE; REPRESENTATIONS AND WARRANTIES.
3.1 Formation. The parties enter into a limited partnership (the
"Partnership") pursuant to the laws of the Commonwealth of
Pennsylvania, 15 Pa.C.S. ch. 85, on and as of December 5,
1994, the date the Certificate of Limited Partnership was
filed with the Commonwealth of Pennsylvania.
3.2 Name. The name of the Partnership shall be American RRT Fiber
Supply, L.P.
3.3 Purpose. The purposes of the Partnership shall be:
(a) to acquire the Site and to develop, construct, own,
operate, maintain and repair the Philadelphia
Facility and supply recovered paper from office waste
to deinking mills.
(b) to do any and all other acts and things which may be
necessary, incidental or convenient in connection
with the Project.
3.4 General Representations, Warranties and Covenants. Each
Partner represents, warrants and covenants, jointly and
severally in the case of AFS and APII, and in the case of
RRT-PA and RRT, but severally as between the RRT Partners and
the APC Partners, that:
3.4.1 It is validly organized, existing and in
good standing according to the laws of the
state of its organization and it is
qualified to do business in every
jurisdiction in which the failure to so
qualify would have a material adverse effect
on such Partner's ability to perform its
obligations hereunder.
3.4.2 The execution and delivery of this
Agreement, the formation of the Partnership
and the performance hereof will not
contravene any provision of, or constitute a
default under, any indenture, mortgage or
other agreement of such Party or any order
of any court, commission or governmental
agency having jurisdiction.
3.4.3 It has all requisite power and authority to
execute this Agreement and to perform its
obligations hereunder.
3.4.4 This Agreement, when duly executed and
delivered, will constitute the legal, valid
and binding obligation of each Partner
enforceable against it in accordance with
its terms subject, however, to laws of
general application affecting creditors'
rights.
3.4.5 Except as otherwise permitted herein, it
will not borrow money in the Partnership's
name or use the Partnership Assets as
collateral.
3.4.6 It will not enter into any contract
obligating the Partnership without prior
written approval of the Management
Committee.
3.4.7 It will not willfully or knowingly violate
any law or regulation regarding the
Partnership or its business.
3.4.8 To the best of their knowledge, there is no
litigation, action, suit, arbitration,
legal, administrative or other proceeding or
investigation, pending or threatened against
or affecting such Partner or its businesses,
operations, properties, profits or condition
or the Partnership Assets before or by any
governmental agency, court, arbitrator or
grand jury, which is reasonably likely to
result in any material adverse change in its
business, operation, property, profits or
condition or its ability to perform any of
its obligations under this Agreement; nor is
such Partner subject to, or in default with
respect to any judgment, order, writ,
injunction, decree or demand before or by
any governmental agency, court, arbitrator,
or grand jury, which might have consequences
which would adversely affect its businesses,
operations, properties, prospects, profits
or condition; and no one has asserted and,
no one has grounds to assert, any material
claims against the Partnership that would
affect the transaction contemplated by this
Agreement.
3.4.9 No creditor or third party holds or will
acquire, as a result of the execution,
delivery and performance of this Agreement,
any claim, lien, right, title or interest of
any nature whatsoever in, on or to the
Partnership, any Partnership distributions,
the Project, or any Partnership Asset.
3.4.10 No third party consent, authorization,
waiver, approval or other action is
necessary to validly assign to the
Partnership any Partnership Asset currently
in existence (including without limitation
any which is a contract or permit) and upon
execution and delivery of an assignment in
favor of the Partnership, all right, title
and interest in such Partnership Asset will
vest in the Partnership and the Partnership
Asset will remain in full force and effect;
and there have been no indications by a
governmental authority that any Partnership
Asset which is a permit may be adversely
modified, supplemented or withdrawn or that
the Project may not comply with the terms of
a permit.
3.4.11 To the best of their knowledge, each party
to the Project Contracts currently in
existence (if any) has performed in all
material respects all obligations required
to be performed by it, and no Partner or any
other party to any Project Contract has
breached or improperly terminated any
Project Contract, or is in default under any
Project Contract by which it is bound, and
there exists no condition or event that,
after notice or lapse of time or both, would
constitute any such breach, termination or
default or give rise to a right in any party
to such contracts to rescind, terminate or
cancel such contracts. Each of the Project
Contracts (if any) is in full force and
effect, and is a legal, binding and
enforceable obligation of the parties
thereto.
3.4.12 To the best of their knowledge, no document,
certificate, or other writing furnished to
the RRT Partners or to the APC Partners or
their Affiliates by or on behalf of the APC
Partners, or their Affiliates, or to the APC
Partners or their Affiliates, by or on
behalf of the RRT Partners or their
Affiliates, in each case in connection with
the transactions contemplated hereby, which,
when taken as a whole together with all of
the other materials and information provided
to the RRT Partners or the APC Partners (or
their Affiliates), respectively, by or on
behalf of APC Partners or RRT Partners,
respectively, contains any untrue statement
of a material fact or omits to state a
material fact which is: (1) necessary to
make the statements therein, in light of the
circumstances under which they were made,
not misleading, or (2) necessary to provide
a prospective purchaser of the Partnership
interests with all material information as
to the Project and the condition (financial
and otherwise), properties, assets,
liabilities, business and prospects of the
Partnership and the Partnership Assets. The
APC Partners and the RRT Partners have each
disclosed to the other or the others'
Affiliates all material adverse facts known
to them relating to the same. There is no
fact known to the APC Partners or the RRT
Partners, respectively, that has not been
disclosed to the RRT Partners or the APC
Partners, respectively, or their Affiliates,
which might reasonably be expected to have a
material adverse effect on the business,
assets, properties or operations (financial
or otherwise) of the Project or the
Partnership Assets.
3.4.13 Cumulative Effect. Notwithstanding anything
herein to the contrary, if the cumulative
effect of more than one breach of the
representations and warranties in this
Section 3.4 (without giving effect to any
qualifications that such representations are
given only as to material facts or
conditions) is materially adverse to the
Project, the Partnership Assets, the
Partnership or the transactions contemplated
hereby, even if any one or more breaches are
not themselves materially adverse, all such
breaches shall be considered to have a
material adverse effect.
3.5 Offices. The principal offices and official mailing address of
the Partnership shall be at 33 Rock Hill Road, Bala Cynwyd,
Pennsylvania 19044, or at such other place as the Management
Committee may determine.
4. CAPITAL CONTRIBUTIONS.
4.1 Initial Capital Contributions.
4.1.1 On the Formation Date, each General Partner made an
initial capital contribution of One Dollar ($1.00).
4.1.2 On the Formation Date, each Limited Partner made an
initial capital contribution of Forty-nine Dollars
($49.00).
4.1.3 On the Funding Date, the APC Partners and
the RRT Partners each shall make further
initial contributions of three hundred
thousand dollars ($300,000) each, for an
aggregate contribution of six hundred
thousand dollars ($600,000).
4.2 Subsequent Capital Contributions.
4.2.1 The Parties to this Agreement mutually
desire to obtain one hundred percent (100%)
debt financing to the extent it will
maximize the economic benefit to the
Parties; however, if one hundred percent
(100%) debt financing is not economically
practical or is unavailable, at such time as
any Lender to the Partnership shall require
and the Management Committee shall agree,
the General Partners shall contribute
additional equity capital to the Partnership
as follows:
4.2.1.1 Not later than the date or
dates additional equity
capital is required, such
additional cash shall be
contributed by the General
Partners in proportion to
their Partnership
Percentages.
4.2.1.2 Notwithstanding the
provisions of Section
4.2.1.1 above, the General
Partners may elect to
obtain all or a portion of
their share of additional
equity capital from the
Limited Partners, if the
Limited Partners agree, or
from third parties who
shall become additional
Limited Partners if
approved in accordance with
Section 11, provided, that
the Partnership Percentage
of a General Partner shall
at no time be less than one
percent (1%).
5. RESPONSIBILITY FOR AND REIMBURSEMENT OF DEVELOPMENT EFFORTS AND
EXPENSES; DEVELOPMENT FEE; OPERATIONS AND MAINTENANCE
5.1 Development Efforts.
5.1.1 The RRT Partners and the APC Partners shall
each allocate persons with development and
management abilities to work toward
successful development of the Project.
5.1.2 Up to and including the Commercial Operation
Date, the RRT Partners and the APC Partners
shall have joint responsibility for all
matters pertaining to setting up and
mobilizing the operations and maintenance
("O&M") of the Philadelphia Facility,
including without limitation: selection of
contractors, selection and training of
operators, punch list/check out of the plant
against as-built drawings, and establishing
operations, maintenance, safety and other
procedures in accordance with prudent
industry standards.
5.1.3 Up to and including the Commercial Operation
Date, the RRT Partners and the APC Partners
shall have joint prime responsibility for
operation and maintenance of the
Philadelphia Facility.
5.2 Development Expenses
5.2.1 Internal Costs. The RRT Partners and the APC
Partners shall pay their own Internal Costs
as incurred, which Payments shall be deemed
to be Loans to the Partnership. As of the
Funding Date, the parties stipulate to the
following amounts of Internal Costs: RRT
Partners: Three hundred thousand Dollars
($300,000); and APC Partners: Three hundred
thousand Dollars ($300,000).
5.2.2 Third Party Expenses. Prior to the Funding
Date, the RRT Partners and the APC Partners
agree to pay all Third Party Expenses
(Development Expenses other than Internal
Costs) that the Management Committee
determines, in accordance with Section 9.2,
are required to develop the Project, which
payments shall be deemed to be Loans by the
respective Partners to the Partnership. The
RRT Partners shall pay fifty percent (50%)
and the APC Partners shall pay fifty percent
(50%) (the "Third Party Expense
Percentages") of all such Third Party
Expenses that are approved by the Management
Committee. At the end of each calendar
quarter, the Management Committee shall
ascertain, based upon the reports produced
in accordance with Section 5.2.4, whether
expenditures conform to the Third Party
Expense Percentages. If expenditures do not
so conform, the RRT Partners or the APC
Partners, as appropriate, shall reimburse
the Partners who expended in excess of their
Third Party Expense Percentages. The RRT
Partners and the APC Partners shall each
allocate Development Expenses amongst
themselves as they deem appropriate.
5.2.3 Repayment of Development Expenses. On the
Funding Date, to the extent that the
Partnership has funds available, the
Partners shall be entitled to repayment of
their loans for Development Expenses
(including Internal Costs).
5.2.4 Access to Books and Records. Each Partner
shall have reasonable access to the books
and records of the other Partners to the
extent necessary to verify the accuracy of
the expenditures upon which the Development
Expenses are based. Each Partner will
provide a quarterly estimate of its expected
Development Expenses to the Management
Committee for its approval and provide a
monthly accounting of such expenses to the
Management Committee.
5.3 Priority of Payment. The following method of allocation and
order of priority shall be used for repayment of Development
Expenses loans:
(1) First, repayment of the Third Party Expenses loans;
funds available for reimbursement shall be allocated
fifty percent (50%) for the RRT Partners and fifty
percent (50%) for the APC Partners until one set of
Partners is paid in full, and thereafter allocated to
the other Partners until they are paid in full.
(2) Thereafter, repayment of the loans for Internal
Costs, allocated fifty percent (50%) to RRT Partners
and fifty percent (50%) to APC Partners until one set
of Partners is paid in full, and thereafter allocated
to the other Partners until they are paid in full.
Any amounts remaining unpaid on the Funding Date shall be paid
from the first funds determined to be distributable by the
Management Committee and before any distribution to the
Partners pursuant to Section 7.
5.4 Early Termination. Either the RRT Partners or the APC Partners
may withdraw in full from the Partnership and terminate this
Agreement prior to the Funding Date. A withdrawal of one of
the RRT Partners or one of the APC Partners shall require the
withdrawal of both RRT Partners or APC Partners. In the event
of a withdrawal, the withdrawing Partners shall: (a) give
written notice thereof to the remaining Partners; (b) cease
funding the Project no less than thirty (30) days after such
notice is received by the remaining Partners; provided, that
the withdrawing Partners shall fulfill any outstanding
obligations to fund the Project, and any other outstanding
obligations incurred by the Partnership, which have already
been approved by the Management Committee; and (c) assign all
of their interests in the Partnership, the Partnership Assets
and the Philadelphia Facility to the remaining Partners. In
the event the RRT Partners or the APC Partners terminate this
Agreement prior to the Funding Date, the remaining Partners
agree to reimburse the withdrawing Partners on the Funding
Date to the extent Partnership funds are available for all of
their Development Expenses and capital contributions to the
Partnership. Upon termination pursuant to this Section, the
remaining Partners shall grant a security interest to the
withdrawing Partners in the Partnership (subject to Lender
approval), the Philadelphia Facility and all Partnership
Assets to secure the repayment obligation and shall execute
such further documents as the withdrawing Partners reasonably
require to perfect such security interest.
5.5 Operations and Maintenance.
5.5.1 The Partnership shall operate and maintain
the Philadelphia Facility after the
Commercial Operation Date.
5.5.2 The Management Committee shall develop
annually an itemized operating budget which
shall include payments for operations and
maintenance services rendered by the
Partners and their respective Affiliates
pursuant to this Section 5.6, for
reimbursement of the Tax Matters Partner's
expenses and Internal Costs, including
preparation of unaudited Partnership
financial statements, informational tax
returns and other in-house accounting, and
for reimbursement of each Partner's
Development Expenses and Internal Costs
incurred after the Funding Date.
5.6 EPC Contract. The Partnership shall enter into the EPC
Contract for the Philadelphia Facility. Certain provisions of
the EPC Contract shall be guaranteed by RRT on the Funding
Date, provided that such guarantee shall not cause RRT to
become a General Partner of the Partnership.
6. ALLOCATION OF PROFITS AND LOSSES
6.1 Allocation of Net Profits and Losses. All items of income,
gain, deduction, loss or credit, for tax purposes, from normal
operations including from the disposition of assets of the
Partnership shall be allocated among the Partners and credited
or debited to the Partner's respective Capital Accounts, as
appropriate, as of the last day of each month in proportion to
their respective Partnership Percentages.
6.2 Compliance with Code and Treasury Regulations. The provisions
of this Agreement that relate to the allocations for federal
income tax purposes of items of Partnership income, gain,
loss, deduction, and credit, that relate to the determination
and maintenance of Capital Accounts, and that relate to the
distribution of Partnership property upon the liquidation of
the Partnership or a Partner's interest therein, are intended
to comply with Code Sections 704(b) and 704(c), and the
Treasury Regulations promulgated thereunder, and shall be
interpreted and applied in a manner consistent with such
statutory and regulatory provisions, which provisions are
incorporated herein by reference.
7. DISTRIBUTIONS.
7.1 Timing and Amount. Distributions to the Partners, other than
distributions in the event of termination pursuant to Section
12 hereof, shall be made in proportion of the Partners'
respective Partnership Percentages in such amounts and at such
times as determined by the Management Committee, but not less
frequently than quarterly; provided that such distributions
shall not violate the terms of any mortgage, bond or
debenture, indenture or any other agreement of the
Partnership, including without limitation the Bonds and the
documents pursuant to which they are issued.
7.2 Section 754 Election. In the event of a transfer of a
Partnership interest by a sale, assignment or exchange
permitted hereunder, or the distribution of property to a
Partner, the Management Committee may, in its discretion,
cause the Partnership to make a timely election under Code
Section 754 (and a corresponding election under applicable
state and local law).
7.3 Deficit Capital Accounts. Subject to the provisions of Section
12, if a General Partner has a Deficit Balance in its General
Partner Capital Account following the liquidation of the
Partnership or of its interest in the Partnership, as
determined after taking into account all adjustments to its
Capital Account for the Partnership taxable year during which
such liquidation occurs (other than those made pursuant to
this Section 7.3), that General Partner shall be
unconditionally obligated to restore the amount of such
Deficit Balance by payment of cash to the Partnership by the
end of such taxable year (or, if later, within 90 days after
the date of such liquidation), which amount shall, upon
liquidation of the Partnership, be paid to creditors of the
Partnership or distributed to the Partners in accordance with
their positive Capital Account balances in accordance with
Section 12.4. No Limited Partner shall have any obligation to
contribute capital to the Partnership except as provided in
Article 4.
8. ACCOUNTING AND TAXATION.
8.1 Fiscal Year. The fiscal year of the Partnership shall be the
calendar year.
8.2 Location of Partnership's Books. The Partnership's books shall
be kept and maintained at the principal office of the
Partnership or at such other place as the Management Committee
shall determine.
8.3 Accounting Principles. For financial reporting purposes, the
Partnership's books shall be maintained on an accrual basis in
accordance with generally accepted accounting principles and
audited by the Certified Public Accountants as of the end of
each fiscal year.
8.4 Annual Financial Statements. As soon as practicable following
the end of each fiscal year, and, in any event, within one
hundred twenty (120) days thereafter, the Tax Matters Partner
shall prepare and deliver to each Partner a statement of
income, retained earnings and statement of cash flows for such
fiscal year, a statement of financial position and a statement
of each partner's Capital Account as of the end of such fiscal
year, together with a certified opinion thereon of the
Certified Public Accountants.
8.5 Quarterly Financial Statements. As soon as practicable but not
later than 45 days after the end of each calendar quarter of
the fiscal year, the Tax Matters Partner shall prepare and
deliver to each Partner:
8.5.1 A profit and loss statement and a statement
of cash flows for such quarter (including
sufficient information to permit the
Partners to calculate their tax accruals and
estimated tax payments), for the portion of
the fiscal year then ended;
8.5.2 A balance sheet and a statement of each
Partner's Capital Account as of the end of
such quarter; 8.5.3 A statement (variance
report) comparing the actual financial
status and results of operations of the
Partnership as of the end of such quarter
and the portion of the fiscal year then
ended with the budgeted or forecasted
status, if any, and results of operations as
of the end of or for such respective
periods; and
8.6 Tax Treatment as Partnership. The Parties intend that the
Partnership shall be treated as a partnership for Federal and
state tax purposes and the Partners agree to take all action,
including the amendment of this Agreement and the execution of
other documents, as may be required to qualify for and receive
such treatment. All of the Partnership's elections for Federal
and state tax purposes shall be determined by the Management
Committee. The Partnership's Federal and state tax returns
shall be approved by the Management Committee prior to filing.
8.7 Preparation of Tax Returns. The Tax Matters Partner shall
prepare or cause to be prepared and file the Federal and state
partnership tax returns (and all other tax returns required by
law) on behalf of the Partnership, at the Partnership's
expense. The other Partners agree to furnish the Tax Matters
Partner, on a timely basis, all information they have which is
required for the proper preparation of such returns. The Tax
Matters Partner shall use its best efforts in preparing and
filing such returns, on a timely basis, using the accrual
method of accounting but shall incur no liability to the other
Partners with respect to such returns. The Tax Matters Partner
shall provide the Management Committee copies of the complete
Federal and state partnership returns in sufficient time for
the Management Committee to review and approve such returns
before filing.
8.8 Allocations Among Periods. For purposes of determining the
income, gains, expenses, losses, deductions and credits
allocable to any period, such items shall be determined on a
daily, monthly or other basis, as determined by the Management
Committee, using any method permissible under Code Section
706, except that any gain or loss on the sale or other
disposition of a Partnership Asset shall be deemed earned or
incurred as of the date of such sale or other disposition.
8.9 Preparation of Reports. The Management Committee shall cause
to be prepared and filed all reports prescribed by any
commission or governmental agency having jurisdiction or
otherwise required by the Bonds or the documents pursuant to
which the Bonds are issued or by any mortgage, indenture or
the like.
8.10 Access to Partnership's Books. Each Partner shall have the
right at all reasonable times during usual business hours and
at such Partner's sole expense to examine and make copies of
the Partnership's books. Such right may be exercised through
any agent or employee of such Partner designated in writing by
it or by an independent public accountant so designated.
8.11 Placement of Partnership Funds. The funds of the Partnership
(except to the extent cash may be required for day to day
expenses) shall be deposited in such bank or banks as shall be
designated by the Management Committee.
9. MANAGEMENT OF THE PARTNERSHIP.
9.1 Authority of the Management Committee. Matters of fundamental
importance to the Partnership shall be within the exclusive
authority of the Management Committee. Matters of fundamental
importance include:
9.1.1 The establishment and approval of the
initial Project budget and all other
operating and capital budgets;
9.1.2 Approval of any expenditure in excess of ten
thousand dollars ($10,000) not included in a
budget that has been approved by the
Management Committee;
9.1.3 Approval and execution of contracts for sale
of recovered paper;
9.1.4 Negotiation, approval and execution of the
EPC Contract for the Philadelphia Facility
(subject to Section 9.2 below);
9.1.5 Establishment of the timing and amount of
any distributions to the Partners and the
establishment of reserves for contingencies;
9.1.6 Approval of any contract to operate and
maintain the Philadelphia Facility or any
other material contract or major Project
commitment of the Partnership;
9.1.7 Approval of any loan agreements or
instruments evidencing the Bonds or any
other debt incurred by the Partnership, or
any other commitments to borrow funds, for
the construction or long-term permanent
financing of the Philadelphia Facility,
including any refinancing or material
modification of the previously approved
financing;
9.1.8 Selection of a bank in which Partnership
funds shall be deposited;
9.1.9 Selection of legal counsel and auditors;
9.1.10 Selection and compensation of a project
manager and other Partnership employees who
will serve at the request and direction of
the Management Committee (subject to Section
9.2 below);
9.1.11 Selection and compensation of a project
manager and other Partnership employees who
will serve at the request and direction of
the Management Committee;
9.1.12 Approval of Partnership tax returns;
9.1.13 Approval and execution of any contracts to
purchase or lease the real property upon
which the Philadelphia Facility will be
constructed;
9.1.14 Abandonment of the Project;
9.1.15 Approval of the sale, lease, transfer or
disposition of real estate or other assets
owned by the Partnership; and
9.1.16 Any other matter which the Management
Committee shall deem in writing or by
resolution to be of fundamental importance
to the Partnership.
9.2 Action by the Management Committee. The presence of at least
one Representative or Alternate of each General Partner is
required to constitute a quorum of the Management Committee.
The Management Committee may act in writing without a meeting
by the unanimous written consent of at least one
Representative of each General Partner. All decisions of the
Management Committee shall require the unanimous approval of
the Management Committee, provided, that the negotiation,
approval and execution of the EPC Contract on behalf of the
Partnership shall be the responsibility of the Representative
or Alternate of AFS and shall not require the approval of the
Representative of RRT-PA, and provided further, that the
selection of the general manager of the Philadelphia Facility
shall be the responsibility of the Representative or Alternate
of RRT-PA and shall not require the approval of the
Representative of AFS.
9.3 Constitution of Management Committee. The Management Committee
shall be comprised of one or more Representatives of each
General Partner as designated in Schedule 9.3 and amended from
time to time by the Management Committee; provided, that each
General Partner shall have only one vote. Any General Partner
may remove and replace its Representatives at any time
effective upon receipt of written notice thereof by the other
General Partner. Each General Partner may designate by written
notice to the other General Partner an Alternate to act in the
stead of its Representatives. Each Alternate shall have full
power to bind the General Partner he or she represents and the
other Partners shall have no obligation to inquire into the
authority of any Alternate to vote on behalf of any Partner.
Copies of the notices described herein shall also be provided
to each Limited Partner.
9.4 Meetings of the Management Committee. The Management Committee
shall hold regular meetings no less than monthly at such times
and places as it shall prescribe. Any Representative may call
a special meeting of the Management Committee on not less than
five (5) business days' notice to all Representatives. Any
meeting may be held by conference telephone call. The notice
requirement may be waived by the consent of at least one of
the Representatives of each General Partner.
9.5 Management Fee. The Management Committee may, in its
discretion, establish an annual management fee ("Management
Fee") to be paid to the General Partners, each of which shall
be entitled to receive fifty percent (50%) of the Management
Fee. The Management Fee shall be compensation for the
following:
9.5.1 Salaries of personnel of each General
Partner who serve on the Management
Committee.
9.5.2 General Partners' home office, secretarial
and clerical support and home office
overheads associated with Partnership
management, and required legal and technical
support. After the Funding Date, no Partner
may charge the time of any of its personnel
to the Partnership without the consent of
the Management Committee. However, General
Partners' travel and out-of-pocket expenses
and all third party expenses required in the
management and operations of the
Partnership's business shall be reimbursed
by the Partnership.
10. LIMITATION OF LIABILITIES.
10.1 Contract Provision to Limit Claims. Unless approved by the
Management Committee, the Partnership shall not enter into any
contract, lease, sublease, note, deed of trust or other
obligation unless there is contained therein an appropriate
provision limiting the claims of all parties to such
instruments to the assets of the Partnership and expressly
waiving any rights of such persons to proceed against the
Partners or their assets except to the extent of their
interest in the Partnership. Without limiting the foregoing in
any way, the obligations of the Partnership, and the Partners
pursuant to the Bonds shall be limited to the assets of the
Partnership.
10.2 Liability Among General Partners. Among the General Partners,
each General Partner shall be liable to all the General
Partners for Partnership liabilities in the proportion of such
General Partner's Partnership Percentage to the sum of the
Partnership Percentages of all General Partners.
10.3 Limited Liability of Limited Partners.
10.3.1 The Limited Partners shall have no personal
liability whatsoever, whether to the
Partnership, to any of the Partners or to
the creditors of the Partnership, for the
debts and obligations of the Partnership or
any of its losses beyond the amounts
contributed or committed to be contributed
by that Limited Partner to the capital of
the Partnership pursuant to this Agreement.
10.3.2 The Limited Partners shall not participate
in the conduct, management or control of the
Partnership's business nor shall they
transact any business for the Partnership or
have the power to act for or bind the
Partnership, those powers being vested
solely and exclusively in the General
Partners.
10.3.3 The Limited Partners shall not have any
voting rights in the Partnership, except on
such matters for which voting rights are
mandated by law.
11. TRANSFER OR PLEDGE OF PARTNERSHIP INTERESTS.
11.1 Permitted Transfers. Subject to Sections 11.4 through 11.7,
nothing herein shall prevent:
11.1.1 A sale, assignment, pledge or other transfer
to a third party of a Partner's interest in
the profits and losses of the Partnership;
provided, that such third party shall not
become a General Partner or a Limited
Partner and shall in no event have a
Representative on the Management Committee
or any other voice in the management of the
Partnership; or
11.1.2 A sale, assignment, pledge or other transfer
creating a security interest in all or any
portion of a Limited Partner's interest in
the Partnership under any mortgage,
indenture or deed of trust created by any
Partner; provided that the assignee,
pledgee, mortgagee or trustee shall hold the
same subject to all of the terms of this
Agreement.
11.2 Sale of Controlling Interest. Sale or transfer of more than a
controlling interest in the stock of either RRT-PA or AFS
shall be deemed a transfer of its Partnership interest.
11.3 Transfer of Partnership Interest. Notwithstanding anything in
this Section 11 to the contrary, except with the prior written
consent of all General Partners (which consent may be granted
or denied in such General Partner's sole discretion), no
Partner may directly or indirectly sell, assign, pledge,
hypothecate or otherwise transfer in any manner, all or any
part of its interest in, or any evidence of ownership of, the
Partnership or in this Agreement.
11.4 Evidences of Ownership. Any evidence of ownership of the
Partnership authorized by the Management Committee and issued
to any of the Partners or their Affiliates shall bear an
appropriate legend to indicate that it is held subject to, and
may be assigned or transferred only in accordance with, the
terms and conditions of this Agreement.
11.5 Registration Under Securities Laws. The Partners acknowledge
that the Partnership interests of each of them have not been
registered under the securities laws of any jurisdiction and
covenant that such interests may not be transferred, pledged
or hypothecated, notwithstanding anything to the contrary
herein, unless registered under all appropriate securities
laws or unless the prospective transferor shall have obtained
an opinion of qualified counsel, addressed to the Partnership
and every Partner that registration is not required under any
such law.
11.6 Opinion of Legal Counsel. In no event, whether or not
permitted pursuant to Section 11.1, shall any Partner transfer
any interest in the Partnership, unless it shall first have
provided the Partnership and the other Partners with an
opinion in form and substance satisfactory to all the
Management Committee of qualified counsel reasonably
acceptable to the Management Committee that the transfer
contemplated will not: (1) cause dissolution of the
Partnership or termination of the Partnership for Federal
income tax purposes; or (2) create adverse tax consequences
for the Partnership or the other Partners; or (3) cause a
Determination of Taxability (as defined in the Indenture
pursuant to which the Bonds were issued). In the event that a
transfer would create adverse tax consequences for the
Partnership or the other Partners, the transferring Partner
shall have the option to proceed with the transfer upon
compensating the Partnership and the other Partners by payment
of an amount jointly determined to be adequate to offset the
adverse tax consequences of the transfer. The transferring
Partner shall also indemnify the Partnership and the other
Partners against any tax liability in excess of such amounts
paid.
11.7 Third Party Offers.
11.7.1 If at any time any Partner wishes to sell,
assign, transfer or otherwise dispose of all
or a portion of its Partnership interest
pursuant to the terms of a bona fide offer
received from a third party (a "Third Party
Buyer"), if the Partner is an RRT Partner,
it shall submit a written offer to sell its
interest to the APC Partners, and if the
Partner is an APC Partner, it shall submit a
written offer to sell its interest to the
RRT Partners, in each case on terms and
conditions, including price, that are no
less favorable to such Partners than those
on which it proposes to sell its Partnership
interest (the "Offered Interest") to such
Third Party Buyer (the "Offer").
11.7.2 The Offer shall disclose the identity of the
Third Party Buyer, the Partnership interest
(or portion thereof) proposed to be sold or
transferred, the agreed terms of the sale or
transfer and any other material facts
relating to the sale or transfer.
11.7.3 In the event the Offered Interest is
proposed to be sold or transferred for
consideration other than cash, the
Management Committee shall make a good faith
determination of the cash value of such
consideration, and the Partners to which the
Offer was made shall be entitled to exercise
their respective rights hereunder through
payment of such cash-equivalent value.
11.7.4 The Partners to which the Offer was made
shall have the right to purchase all or a
portion of the Offered Interest by written
notice delivered to the Partner making the
Offer on the terms set forth in the Offer
and shall act upon the Offer as soon as
practicable, and in all events within forty
five (45) days after receipt of the Offer.
11.7.5 In the event that the Partners to which the
Offer is made do not purchase the Offered
Interest pursuant to and within forty-five
(45) days after the Offer, the right to
purchase the Offered Interest shall be
deemed null and void, and such shares may be
sold by the offering Partner to the Third
Party Buyer at any time within ninety (90)
days after the expiration of the Offer, but
subject to the provisions of Section 11.7.7
below. Any such sale shall be at not less
than the price and upon other terms and
conditions, if any, that are no more
favorable to the Third Party Buyer than
those specified in the Offer.
11.7.6 Any Offered Interest not sold within such
ninety (90) day period shall continue to be
subject to the requirements of a prior offer
and sale pursuant to this Section. In the
event that all or a portion of any
Partnership Interest is sold to any Third
Party Buyer pursuant to this Section, said
Partnership interest shall continue to be
entitled to the benefits conferred by, and
subject to the restrictions imposed by, this
Agreement, and the Third Party Buyer of said
interest shall agree in writing to abide by
the provisions hereof.
11.7.7 Subject to the other provisions of this
Section 11.7, if at any time any General
Partner wishes to sell or otherwise dispose
of all or any portion of its General
Partnership interest to any Third Party
Buyer, each other General Partner shall have
the right to require, as a condition to such
sale or disposition, that the Third Party
Buyer purchase from said other General
Partner, at the same price (on a pro rata
basis) and on the same terms and conditions
as involved in such sale or disposition by
the General Partner who wishes to sell, such
other General Partner's entire General
Partnership interest. Each General Partner
wishing so to participate in any such sale
or disposition shall notify the selling
General Partner of such intention as soon as
practicable after receipt of the Offer
referenced in Section 11.7.1, and in all
events within thirty (30) days after receipt
thereof. In the event that a General Partner
shall elect to participate in such sale or
disposition, said General Partner shall
communicate in writing such election to the
selling General Partner. If the Third Party
Buyer refuses to purchase the other General
Partner's General Partnership interest after
the General Partner makes such election, the
selling General Partner shall not sell its
General Partnership interest to the Third
Party Buyer without the prior written
consent of the General Partner whose
interest was refused by the Third Party
Buyer.
12. TERMINATION.
12.1 General. The Partnership shall continue from the Formation
Date until dissolved pursuant to the terms of this Agreement.
The Partnership shall be dissolved upon the first to occur of
any of the following events:
12.1.1 The withdrawal, dissolution or adjudication
of bankruptcy or insolvency of a General
Partner, unless the remaining General
Partner determines to continue the
Partnership and so notifies the other
remaining Partners within thirty (30) days
of such an event;
12.1.2 The withdrawal, dissolution or adjudication
of bankruptcy of the last General Partner;
or 12.1.3 The expiration of the term of the
Partnership.
12.1.4 A decision by the Management Committee to
dissolve the Partnership.
12.2 Term. Unless otherwise terminated sooner in accordance with
the terms of this Agreement, this Partnership and this
Agreement shall continue in existence until December 31, 2034
and, thereafter, from year to year until December 31, 2054;
provided that any General Partner may elect to terminate the
Partnership and this Agreement as of December 31st of any year
after 2033 by giving the other Partners written notice of such
election not less than one (1) year prior to the date such
termination is to take place.
12.3 Winding Up. After this Agreement expires or is terminated,
except for termination pursuant to Section 12.4, or if the
Partnership is dissolved or terminated pursuant to Section
12.1, the Management Committee shall continue to exercise the
powers vested in it by this Agreement and continue to operate
in the normal course to the extent appropriate for the purpose
of winding up the business of the Partnership and liquidating
the assets thereof in an orderly manner and distributing the
net assets of the Partnership to the Partners to the extent of
their positive Capital Accounts, but the Partnership shall
engage in no new business during the period of such winding
up.
12.4 Dissolutions Constituting Breach of Partnership Agreement. The
dissolution of the Partnership by a Partner prior to
expiration of this Agreement pursuant to Section 12.2, except
with the consent of the other Partners, shall be a breach of
this Agreement. In such event, the nonbreaching General
Partners may elect to pay the breaching Partner an amount
equal to the balance of the breaching Partner's Capital
Account. Upon such payment, the breaching Partner, by this
Agreement grants and conveys to the nonbreaching Partners, all
of the breaching Partner's right, title and interest in the
assets of the Partnership and the Partnership shall be
dissolved. The nonbreaching Partners may thereupon continue
the business of the Partnership as a new partnership or
otherwise. The remedy provided in this Section 12.4 shall be
cumulative of and not in lieu of any remedies the nonbreaching
Partners may have at law or equity.
13. INDEMNITY.
13.1 Indemnification by Partnership. The Partnership shall
indemnify and save harmless the Representatives, Alternates,
Tax Matters Partner, General Partners, and their respective
employees and agents, against all actions, claims, demands,
costs and liabilities arising out of the acts or omissions of
such persons in good faith, reasonably believed by them to be
within the scope of their authority, in the course of the
Partnership's business (regardless of whether an indemnified
party is a Partner at the time such claims arise) and such
persons shall not be liable for any obligations, liabilities
or commitments incurred by or on behalf of the Partnership as
a result of any such acts or omissions.
13.2 Indemnification by Partners. Each Partner will indemnify and
save the other Partners harmless for all loss occasioned by
such first Partner's willful or knowing violation of any law
or regulation. Each General Partner will indemnify each other
General Partner against all losses and liabilities of the
Partnership in the proportion of the General Partners'
Partnership Percentages regardless of whether an indemnified
party is a General Partner at the time such losses or
liabilities are incurred.
13.3 Insurance. Unless determined otherwise by the Management
Committee, the Management Committee shall cause the
Partnership to obtain, at the expense of the Partnership,
directors' and officers' insurance for the members of the
Management Committee in an amount which is customary for
businesses of the same kind and character as the Partnership.
14. RESOLUTION OF DISPUTES.
14.1 Dispute Defined. As used in this Section 14, the term
"Dispute" means a claim, dispute, disagreement or other matter
in question between any two or more Partners that alleges a
breach by the Partners of their respective obligations under
this Agreement.
14.2 Dispute Resolution. The Parties agree to make a diligent, good
faith attempt to resolve all Disputes in accordance with the
provisions of this Section 14 before either Party commences
litigation with respect to the subject matter of any Dispute.
If the representatives of the Parties are unable to resolve a
dispute within fifteen (15) days after notice from one Party
to the other of the existence of the Dispute (the "Dispute
Notice") and after exchange of pertinent information, either
Party may, by a second notice to the other Party, submit the
Dispute to the chief executive officer of RRT, in the case of
a Dispute Notice by one or both of the APC Partners, or the
chief executive officer of American Power Corp., an Affiliate
of the APC Partners, in the case of a Dispute Notice by one or
both of the RRT Partners (collectively, the "CEOs"). A meeting
date and place shall be established by mutual agreement of the
CEOs. However, if the Parties are unable to agree, the meeting
shall take place at the Philadelphia Facility on the tenth
(10th) business day after the date of such second notice. The
CEOs shall meet in person and each shall afford sufficient
time for such meeting (or daily consecutive meetings) as will
provide a good faith, thorough exploration and attempt to
resolve the issues by the CEOs. If the Dispute remains
unresolved five (5) business days following such last meeting,
the CEOs shall meet at least once again within 5 days
thereafter in a further good faith attempt to resolve the
Dispute. For any Dispute which is unresolved at the conclusion
of such meeting, each Party shall submit within 10 days
thereafter a written statement of its position to the
Management Committee. Thereupon, but not earlier than twenty
(20) days after such submission of such statement, either
Party may commence litigation. Nothing herein shall prevent a
Party from commencing litigation to toll a statute of
limitations which might otherwise expire during the time
necessary for performance hereunder.
14.3 Consent to Jurisdiction; Venue. Any legal action, suit or
proceeding arising out of or relating to this Agreement or any
of the transactions contemplated shall be instituted in the
federal court of any District in Pennsylvania, and each party
agrees not to assert, by way of motion, as a defense, or
otherwise, in any such action, suit or proceeding, any claim
that it is not subject personally to the jurisdiction of such
court, that the action, suit or proceeding is brought in an
inconvenient forum, that the venue of the action, suit or
proceeding is improper or that this Agreement or the subject
matter hereof may not be enforced in or by such court. Each
Party further irrevocably submits to the jurisdiction,
personal and otherwise, of such court in any such action, suit
or proceeding. Any and all service of process and any other
notice in any such action, suit or proceeding shall be
effective against any party if given personally or by
registered or certified mail, return receipt requested, or by
any other means of mail that requires a signed receipt,
postage prepaid, mailed to such party as herein provided.
14.4 Cost. Each Party shall bear its own legal fees incurred in
connection with a Dispute.
14.5 Continuation of Performance. Unless otherwise agreed in
writing, each Party shall continue to perform any of its
obligations under this Agreement which are not in dispute
during any proceeding by the Parties in accordance with this
Section 14.
15. GENERAL.
15.1 Notices. Any notice or other communication required or
permitted hereunder shall be in writing and may be sent by
certified mail, return receipt requested, postage prepaid, by
commercial courier service, by messenger, or by facsimile
transmission if also sent by certified mail, return receipt
requested, postage prepaid. Any such notice or other
communication shall be addressed to each of the Partners at
the address set forth in Section 1 of this Agreement or at
such other address as may be designated from time to time by
any Partner by written notice to each other Partner and the
Partnership. The date of the giving of such notices or other
communications shall be deemed to be the date of actual
delivery to the address provided herein.
15.2 Additional Documents. Each of the Partners agrees to execute
and deliver all such other and additional instruments and
documents and to do such other acts and things as may be
necessary more fully to effectuate the Partnership and carry
on the Partnership business in accordance with this Agreement.
15.3 Non-Competition; Independent Activities; Confidentiality.
15.3.1 Except as specifically provided in this
Section 15.3, nothing in this Agreement
shall be construed to prohibit any Partner
or Affiliate of any Partner from engaging in
any other business enterprise and engaging
in another such enterprise shall not be
usurpation of a Partnership opportunity.
15.3.2 Notwithstanding the forgoing, a period of
two years from the Funding Date, neither the
Partners nor any of their respective
Affiliates will participate as owners in any
office waste paper recovery facilities in
the greater metropolitan areas of (a)
Philadelphia, Pennsylvania, (b) Pittsburgh,
Pennsylvania, (c) Baltimore,
Maryland/Washington, D.C., or (d) South
Amboy, New Jersey, except for office waste
paper recovery facilities in which the APC
Partners (or their Affiliates) and the RRT
Partners (or their Affiliates) both have
ownership interests.
15.3.3 Nothing in this Agreement shall prohibit any
office waste paper processing by the RRT
Partners or their Affiliates that is
incidental to and a part of the
multi-material recycling business conducted
by RRT and its Affiliates, even if RRT or
any of its Affiliates conduct the
multi-material recycling business in one or
more of the metropolitan areas identified in
Section 15.3.2.
15.3.4 The Partners each acknowledge and agree that
in the course of, or incident to, their
engagements with one another, the Partners
may provide to each other and each may
otherwise become exposed to information that
is not known by, or generally available to,
the public at large and that concerns: The
business affairs of the respective Partners,
including existing projects and those in
development; the identity of the Partners'
existing or prospective business partners;
the identity, salary, and compensation of
the Partners' employees; the terms,
conditions, and prices of any contract or
proposed contract among the Partners or
their Affiliates; and other information
designated by the Partners as confidential
("Confidential Information"). The Partners
each acknowledge and agree to protect the
Confidential Information from disclosure to
third parties, and to persons within its
organization other than those persons who
have a need to know such information in
performing its obligations under this
Agreement, by exercising at least the same
care with respect to Confidential
Information as it exercises with respect to
its own confidential information of like
kind, except if required by law to disclose
such information.
15.3.5 The Partners each further acknowledge and
agree that the RRT Partners, and RRT Design
& Construction Corp. pursuant to the EPC
Contract, will be providing to the
Partnership technology and other proprietary
information necessary for the operation of
the Philadelphia Facility. The Parties agree
that such technology and other proprietary
information is being provided to the
Partnership on a non-exclusive basis for use
by the Partnership, the APC Partners and
Affiliates of the APC Partners solely in
connection with the operations of the
Facility, and that the RRT Partners and
their Affiliates retain all ownership rights
in such technology and proprietary
information.
15.4 Section References. Unless otherwise indicated, reference to
section numbers are to sections of this Agreement.
15.5 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the Commonwealth of
Pennsylvania.
15.6 Modifications. This Agreement may not be modified,
supplemented, amended or waived except by an agreement in
writing executed by each Partner.
15.7 Successors and Assigns. Except as otherwise expressly provided
herein, all provisions of this Agreement shall be binding upon
and inure to the benefit of and be enforceable by or against
the successors and assigns of each Party.
15.8 Press Releases. Unless approved by the Management Committee or
as required by law or any stock exchange on which any
Securities or Party or Affiliate thereof are listed, no Party
shall issue any press release with respect to the Project.
15.9 Severability. If any provision of this Agreement or the
application thereto to any person or circumstance shall, for
any reason and to any extent, be invalid or unenforceable, the
remainder of this Agreement and the application of such
provision to any other Person or circumstances shall be
affected thereby, but rather shall be enforced to the greatest
extent permitted by law.
15.10 Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed to be an original
instrument, but all of which together shall constitute one
Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed in their respective names by persons authorized to do so on their
behalf, as of the 5th day of December, 1994.
GENERAL PARTNERS:
RRT OF PENNSYLVANIA, INC.
By: /s/ Lawrence J. Schorr
Lawrence J. Schorr
President
AMERICAN FIBER SUPPLY
OF PHILADELPHIA, INC.
By: /s/ Peter A. McGrath
Peter A. McGrath
President
LIMITED PARTNERS:
RESOURCE RECYCLING
TECHNOLOGIES, INC.
By: /s/ Lawrence J. Schorr
Name: Lawrence J. Schorr
Title: President and Chief
Executive Officer
AMERICAN POWER INVESTORS, INC.
By: /s/ Peter A. McGrath
Peter A. McGrath
Vice President
ASSIGNMENT AGREEMENT
FOR VALUABLE CONSIDERATION, receipt of which is acknowledged, STATE STREET BANK
AND TRUST COMPANY, a Massachusetts trust company with its principal place of
business at 225 Franklin Street, Boston, Massachusetts 02110 ("STATE STREET")
hereby assigns, negotiates, transfers and sets over to Binghamton Savings Bank,
56-68 Exchange Street, Binghamton, New York 13902 ("BSB"), pursuant to this
Assignment Agreement ("Assignment") and WITHOUT RECOURSE, all of STATE STREET'S
right, title and interest in and to the following:
1. That certain Time Note-Installment dated as of August 22, 1989 given
by RRT Land Corp. ("RRT Land"), a New York corporation, in the original
principal amount of One Million Five Hundred Thousand Dollars ($1,500,000), as
amended by Amendment to Time Not-Installment dated August 15, 1990 and as
amended and restated by Amended and Restated Time-Note Installment dated as of
June 7, 1993 ("the "Time Note");
2. That certain Term Note dated June 7,1993 in the original amount of
Nine Hundred and Fifty Thousand Dollars ($950,000) and given by RRT Empire
Returns Corporation ("RRT Empire"), a New York corporation (the "Term Note");
3. All documents and instruments evidencing or securing the obligations
and loans evidenced by the Time Note and/or the Term Not described in Exhibit A
attached hereto (said Time Note, Term Note, documents and instruments are
sometimes hereinafter collectively referred to as the "Assigned Documents").
STATE STREET represents and warrants to BSB the following:
(a) STATE STREET and the undersigned signatory on behalf of STATE STREET have
the full power and authority to execute, deliver and effectuate this Assignment.
(b) The unpaid principal and interest due and owing by RRT Land to STATE STREET
under the Time Note and Assigned Documents related thereto as of July 19, 1994
is a follows:
i. Unpaid principal in the amount of $1,050,000;
ii. Unpaid interest in the amount of $12,950.00; and
iii. Interest is accruing at the per diem amount of $269.79.
(c) The unpaid principal and interest due and owing by RRT Empire to STATE
STREET under the Term Note and Assigned Documents related thereto as of July 19,
1994 is as follows:
i. Unpaid principal in the amount of $430,000;
ii. Unpaid interest in the amount of $1,988.73; and
iii. Interest is accruing at the per diem amount of $110.49
Except as set forth above, this Assignment is made without recourse and
without representations or warranties of any kind. Without intending to limit
the foregoing, STATE STREET makes no representations as to the creditworthiness
of any obligators to the Time Note or Term Note or any representation as to the
effectiveness, perfection or enforceability of any of the Assigned Documents.
BSB acknowledges that this transfer may require consent pursuant to the terms of
the Intercreditor Agreement (JDA) dated as of June 7, 1993 by and between STATE
STREET and the New York Job Development Authority, which consent BSB is solely
responsible to obtain. BSB acknowledges this it consents to the transfer
pursuant the the terms of the Intercreditor Agreement (Binghamton Savings Bank)
dated as of June 7, 1993 by and between STATE STREET and BSB.
Upon BSB's acceptance of the terms of this Assignment Agreement and
payment by BSB to State Street or immediately available funds in an aggregate
amount equal to the sum of (a) $1,494,938.73 plus (b) interest from July 19,
1994 to the date hereof accruing in the amount of $380.28 per day plus (c)
$3,500.00 on account of legal fees and expenses incurred by STATE STREET in
connection with this Assignment, STATE STREET shall deliver to BSB (a) the
original Time Note and original Term Note, each with an endorsement in the form
of the allonge attached hereto as Exhibit B, (b) a mortgage assignment and
assignment of a certain Condition Assignment of Leases and Rents in the forms
attached hereto as Exhibits C and D, respectively, (c) originals or copies of
the Assigned Documents, and (d) UCC-3 assignments to the extent requested and
prepared by BSB.
IN WITNESS WHEREOF STATE STREET has made, executed and delivered this Assigned
Agreement this 27th day of July, 1994.
<PAGE>
EXHIBIT A
ASSIGNED DOCUMENTS
(Copies Unless Otherwise Designated)
I. RRT Land Term Loan Restructuring
1. Amended and Restated Time Note-Installment (original)
2. First Amendment to Mortgage
3. Assignment of Lease and Rents
4. Endorsement to Mortgagee's Title Policy (original)
5. Security Agreement (RTT Land Corp.) (original)
6. UCC-1 Financing Statements
a. New York Department of State, Albany NY
b. Clerk of Onondaga County, Syracuse, NY
c. Clerk of Broome County, Binghamton, NY
II. Equipment Term Loan to RTT Empire
1. Credit Agreement (original)
2. Term Note (original)
3. Security Agreement (RRT Empire Returns Corporation)
4. UCC-1 Financing Statements
a. New York Department of State, Albany, NY
b. Clerk of Onondaga County, Syracuse, NY
c. Clerk of Broome County, Binghamton, NY
d. Florida Department of State, Tallahassee, FL
e. Clerk of Palm Beach County Circuit Court,
West Palm Beach, FL
f. New Jersey Secretary of State Trenton, NJ
g. Ocean County Clerk's Office, Toms River, NJ
5. Intercreditor Agreement (JDA) (original)
6. Intercreditor Agreement (Binghamton Savings Bank) (original)
III. Guarantees, etc.
1. Guaranty (RRT Design & Construction Corp.) (original)
2. Security Agreement (RRT Design & Construction Corp.)
(original)
3. UCC-1 Financing Statements
a. New York Department of State, Albany, NY
b. Clerk of Suffolk County, Riverhead, NY
c. Clerk of Broome County, Binghamton, NY
d. Clerk of Onondaga County, Syracuse, NY
4. Guaranty (RRT Plastics Corp.) (original)
5. Security Agreement (RRT Plastics Corp.) (original)
6. UCC-1 Financing Statements
a. New York Department of State, Albany, NY
b. Clerk of Broome County, Binghamton, NY
c. Clerk of Onondaga County, Syracuse, NY
7. Guaranty (RRT Plastics of NJ, Inc.) (original)
8. Security Agreement (RRT Plastics of NJ, Inc.) (original)
9. UCC-1 Financing Statements
a. New York Department of State, Albany, NY
b. Clerk of Broome County, Binghamton, NY
c. Clerk of Onondaga County, Syracuse, NY
10. Guaranty (RRT Land Corp.) (original)
11. Guaranty (RRT Empire of Monroe County, Inc.) (Original)
12. Security Agreement (RRT Empire of Monroe County, Inc.)
(original)
13. UCC-1 Financing Statements
a. New York Department of State, Albany, NY
b. Clerk of Monroe County, Rochester, NY
c. Clerk of Broome County, Binghamton, NY
d. Clerk of Onondaga County, Syracuse, NY
14. Guaranty (RRT Empire of Mid Connecticut, Inc.) (original)
15. Security Agreement (RRT Empire of Mid Connecticut, Inc.)
(original)
16. UCC-1 Financing Statements
a. New York Department of State, Albany, NY
b. Clerk of Broome County, Binghamton, NY
c. Clerk of Onondaga County, Syracuse, NY
d. Connecticut Secretary of State, Hartford, CT
e. City Clerk's Office, Hartford, CT
17. Guaranty (RRT of New Jersey, Inc.) (Original)
18. Security Agreement (RRT of New Jersey, Inc.) (original)
19. UCC-1 Financing Statements
a. New York Department of State, Albany, NY
b. Clerk of Broome County, Binghamton, NY
c. Clerk of Onondaga County, Syracuse, NY
d. New Jersey Secretary of State, Trenton, NJ
e. Cape May County Clerks Office,
Cape May Court House, NJ
20. Guaranty (RRT of Syracuse, New York, Inc.) (Original)
21. Security Agreement (RRT of Syracuse, New York, Inc.)
(Original)
22. UCC-1 Financing Statements
a. New York Department of State, Albany, NY
b. Clerk of Broome County, Binghamton, NY
c. Clerk of Onondaga County, Syracuse, NY
23. Guaranty (RRT Empire Returns Corporation) (Original)
24. Security Agreement (RRT Empire Returns Corporation) (original)
25. Guaranty (Resource Recycling Technologies, Inc.) (original)
26. Security Agreement (Resource Recycling Technologies, Inc.)
(original)
27. UCC-1 Financing Statements
a. New York Department of State, Albany, NY
b. Clerk of Broome County, Binghamton, NY
c. Clerk of Onondaga County, Syracuse, NY
d. Register of Deeds, Camden County, Camden, NJ
e. New Jersey Secretary of State, Trenton, NJ
28. Stock Pledge Agreement
a. Stock Power and Certificate of Capital Stock
(originals)
<PAGE>
EXHIBIT B
ALLONGE
Pay to the order of Binghamton Savings Bank WITHOUT RECOURSE and
WITHOUT ANY REPRESENTATIONS OR WARRANTIES except as set forth in the Assignment
Agreements between State Street Bank and Trust Company and Binghamton Savings
Bank dated this ____ day of July, 1994.
COLLATERAL MORTGAGE AND MODIFICATION AND CONSOLIDATION AGREEMENT
THIS MORTGAGE, made the 29th day of July, 1994, between RRT LAND CORP.,
a New York business corporation, having an office at 300 Plaza Drive, Vestal,
New York, and BINGHAMTON SAVINGS BANK, a banking corporation organized and
existing under the laws of the State of New York, and having its principal place
of business at 58-68 Exchange Street, Binghamton, New York, the MORTGAGEE,
WITNESSETH, that to collaterally secure the guaranty of the payment of
an indebtedness in the principal sum of $893,000.00, in accordance with a
Consolidated and Restated Note of even date herewith made by Resource Recycling
Technologies, Inc. to Mortgagee, and any extension, renewal or modification
thereof, or so much thereof as shall hereafter be advanced by Mortgagee to
Resource Recycling Technologies, Inc., the Mortgagor hereby mortgages to the
Mortgagee:
Consolidated amount $1,943,000.00
All that certain parcel of land with the buildings and improvements
thereon erected in the Town of Salina, County of Onondaga, and State of New
York, bounded and described as follows:
See attached Schedule A.
The obligation secured by this mortgage has an initial interest rate
based upon the prime rate as set by Binghamton Savings Bank. The interest rate
may be adjusted from time to time as of the date of each such change in the
prime rate.
TOGETHER with the appurtenances and all the estate and rights of the
Mortgagor in and to said premises, and together with all fixtures and articles
of personal property now or hereafter attached to, or used in connection with,
the premises.
It is stipulated that the maximum indebtedness secured by this mortgage
at execution, or which under any contingency may be secured hereby at any time
in the future, shall be the principal amount hereof as stated, together with
accrued interest thereon.
And the Mortgagor covenants with the Mortgagee as follows:
FIRST: That the Mortgagor will pay the indebtedness as hereinbefore
provided.
SECOND: (a) In order to more fully protect the security of this
mortgage, together with, and in addition to the monthly payments of principal
and interest under the terms of the bond or note secured hereby, at the demand
of the Mortgagee the Mortgagor will pay to the Mortgagee on the first day of
each month until said bond or note is fully paid, a sum equal to the taxes
special assessments next due on the premises covered by this mortgage, plus the
insurance premiums that will next become due and payable (all as estimated by
the Mortgagee) less all sums already paid therefor divided by the number of
moths to elapse before one month prior to the data when such taxes, insurance
and assessments will become delinquent, such sums to held by Mortgagee in trust
as a general deposit to pay the taxes, insurance and special assessments, before
the same become delinquent.
(b) All payments mentioned in the preceding paragraph and all payments
to be made under the bond or note secured hereby shall be added together and the
aggregate amount thereof shall be paid by the mortgagor each month in a single
payment to be applied by the Mortgagee to the following items in the order set
forth:
(I) Taxes, assessments and insurance premiums
(II) Interest on the bond or note secured hereby;
and
(III) Amortization of the principal of said bond or note.
(c) Any deficiency in the amount of any such aggregate monthly payments
shall, unless made good by the Mortgagor prior to the due date of the next such
payment, constitute a default under this mortgage. In the event that any such
payment shall become overdue the late charge provided in this mortgage or in the
bond or note which it secures may be charged by the holder hereof to the unpaid
amount thereof for the purpose of defraying the expense incident to handling
such delinquent payment. (d) If the total payments made by the Mortgagor under
paragraph 2(a) preceding shall exceed the amount of payments actually made by
the Mortgagee for taxes, special assessments and insurance premiums, as the case
may be, such excess shall be credited by the Mortgagee on subsequent payments to
be made by the mortgagor. If, however, the monthly payments made by the
Mortgagor under paragraph 2(a) preceding shall not be sufficient to pay taxes,
assessments and insurance premiums when the same shall become due and payable,
then the Mortgagor shall pay to the Mortgagee any amount necessary to make up
the deficiency on or before the date when payment of such taxes and assessments
shall be due. If at any time the Mortgagor shall tender to the Mortgagee, in
accordance with the provisions of the bond or note secured hereby, the full
payment of the entire indebtedness represented thereby, the Mortgagee shall, in
computing the amount of such indebtedness, credit to the Mortgagor all payments
made under the provision of paragraph 2 (a) not applied to the payment of taxes,
assessments or insurance premiums. If there be a default under any of the
provisions of this mortgage resulting in a public sale of the premises covered
hereby, or if the Mortgagee acquires the property otherwise after default, the
Mortgagee shall apply, at the time of commencement of such proceedings, or at
the time the property is otherwise acquired, the balance then remaining in the
funds accumulated under paragraph 2(a) preceding, as a credit against the amount
of the principal then remaining unpaid under said bond or note.
THIRD: That the Mortgagor will keep the buildings and other
improvements on the premises insured against loss by fire, windstorm, floor and
other causes for the benefit of the mortgagee; that it will assign and deliver
the policies to the Mortgagee and name the Mortgagee as an additional insured;
and that he will reimburse the Mortgagee for any premiums paid for insurance
made by the mortgagee on the Mortgagor's default in so insuring the buildings
and improvements or in so assigning and delivering the policies. Such insurance
shall be in such amounts and for such hazards as the Mortgagee may from time to
time require. Notwithstanding the provisions of subdivision 4 of Section 254 of
the Real Property Law, as amended by Chapter 830 of the Laws of 1965, in the
event of any loss to the mortgaged premises by fire or other insured casualty,
the Mortgagee shall have the unqualified right to apply any insurance proceeds
payable on account of such loss in reduction of the mortgage debt without any
obligation to readvance the same to the Mortgagor.
FORTH: That no building on the premises shall be removed or demolished
without the consent of the Mortgagee and that the Mortgagor will maintain the
premises in a rentable and tenantable condition and state of repair, and will
not suffer or permit any waste, and will promptly comply with all requirements
of the federal, state and municipal governments or any departments or bureaus
thereof.
FIFTH: That the Mortgagor will allow the Mortgagee, its agents or
employees opportunity to inspect the premises at reasonable intervals of time
SIXTH: That the whole said principal sum and interest shall become due
at the option of the Mortgagee: after default in the payment of any installment
of principal or interest for thirty days; or after default in the payment of any
tax, water rate or assessment for thirty days after notice and demand; or after
default after notice and demand either in assigning and delivering the policies
and naming the Mortgagee as additional insured, insuring the buildings and
improvements against loss by fire, windstorm, flood and other causes, or in
reimbursing the Mortgagee for premiums paid on such insurance, as hereinbefore
provided; or after default upon request in furnishing a statement of the amount
due on the mortgage and whether any offsets or defenses exist against the
mortgage debt, as hereinafter provided; or after any sale or transfer of the
mortgaged premises or portion thereof, whether by deed or by contract; or after
breach or default in the performance of any of the other covenants or agreements
herein made by the Mortgagor for thirty days after notice and demand.
SEVENTH: That the holder of this mortgage, in any action to foreclose
it, shall be entitled to the appointment of a receiver without notice, and the
receiver shall be entitled to occupational rent from an owner occupant and may
upon non-payment of said rent evict the owner. In case of sale under
foreclosure, the premises may be sold in one parcel.
EIGHT: That the Mortgagor will pay all taxes, assessments, water rates,
sewer rents and other governmental or municipal charges, fines and impositions,
and in default thereof, the Mortgagee will pay the same.
NINTH: That the Mortgagor within three days upon request in person or
within five days upon request by mail will furnish a written statement duly
acknowledged of the amount due on this mortgage and whether any offsets or
defenses exist against the mortgage debt.
TENTH: That any notice and demand or request may be made in writing and
may be served either in person or by mail.
ELEVENTH: That the Mortgagor warrants the title to premises, and
covenants that he will maintain this mortgage as a first lien on the same.
TWELFTH: That this mortgage is subject to the trust fund provisions of
Section 13 of the Lien Law.
THIRTEENTH: That in the event any payment due hereunder is not made
within 10 days after the due date, Mortgagor shall, at the request of the holder
of this mortgage, pay an addition charge equal to 4% of the payment due.
FOURTEENTH: As further security for the payment of the indebtedness,
Mortgagor hereby assigns to Mortgagee all rent and profits of the premises in
order to effect collection.
FIFTEENTH: Upon any default by the Mortgagor in the compliance with, or
performance or, and of the terms, covenants, or conditions of this mortgage or
of the bond or note secured hereby, the Mortgagee may at its option remedy such
default. The costs of reasonable attorneys fees paid by the mortgagee for the
foreclosure of the mortgage or to collect the indebtedness secured hereby and
all payments made by the Mortgagee to remedy a default by the Mortgagor as
aforesaid (including reasonable attorneys' fees for legal services actually
performed) and the total of any payment or payments due from the Mortgagor to
the Mortgagee and in default, together with interest thereon at the rate
provided for in the principal indebtedness shall be added to the debt secured by
this mortgage and shall be repaid to the Mortgagee upon demand. If any action or
proceeding be commenced other than an action to foreclose this mortgage or
collect the indebtedness, to which the Mortgagee becomes a party, the Mortgagor
shall reimburse the Mortgagee for its expenses in connection therewith. Any such
sums and the interest thereon shall be a lien on the premises, prior to any
other lien attaching or accruing subsequent to the lien of this mortgage.
SIXTEENTH: Nothing in this mortgage contained shall be construed as
depriving the Mortgagee of any right or advantage available under Section 254 of
the Real Property Law of the State of New York; but all covenants herein
differing therefrom shall be construed as conferring additional and not
substitute rights and advantages.
SEVENTEENTH: Release. Upon payment of all sums secured by this
mortgage, Mortgagee shall discharge this mortgage. Mortgagor shall pay
Mortgagee's reasonable costs incurred in discharging this Mortgage.
EIGHTEENTH: Hazardous Materials. Mortgagor represents and warrants
that, to the best of Mortgagor's knowledge, after due inquiry and investigation,
except as disclosed in writing to Mortgagee the premises are not now and have
never been used to generate, manufacture, refine, transport, treat, store,
handle, dispose, transfer, produce, process or in any manner deal with,
Hazardous Materials, and that no Hazardous Materials have ever been install,
placed, or in any manner dealt with on the premises, and that no owner of the
premises or any tenant, subtenant, occupant, prior tenant, prior subtenant,
prior occupant or person(collectively, "Occupant") has received any notice or
advice from any governmental agency or any Occupant with regard to Hazardous
Materials on, from or affecting the premises. Mortgagor covenants that except as
previously disclose in writing to Mortgagee, the premises shall be kept free of
Hazardous Materials, and shall not be used to generate, manufacture, refine,
transport, treat, store, handle, dispose, transfer, produce, process or in any
manner deal with, Hazardous Materials, and the Mortgagor shall not cause or
permit, as a result of any intentional or unintentional act or omission on the
part of Mortgagor or any occupant, the installation of placement of Hazardous
Materials in or on the premises or a release of Hazardous Materials onto the
premises or onto any other property or suffer the presence of Hazardous
Materials on the premises. Mortgagor shall comply with, and ensure compliance by
all Occupants with, all applicable federal, state and local laws, ordinances,
rules or regulations, with respect to Hazardous Materials, and shall keep the
premises free and clear of any liens imposed pursuant to such laws, ordinances,
rules or regulations. In the event that Mortgagor receives any notice or advice
from any governmental agency, or any Occupant with regard to Hazardous Materials
on, from or affecting the premises, Mortgagor shall immediately notify Lender.
Mortgagor shall conduct and complete all investigations, studies, sampling, and
testing, and all remedial, removal, and other actions required to clean up and
remove all Hazardous Materials, on, from or affecting the premises in accordance
with all applicable federal, state and local laws, ordinances, rules,
regulations, and policies. Mortgagor shall defend, indemnify, and hold harmless
Mortgagee, it's employees, agents, officers and directors from and against any
claims, demands, penalties, fines, liabilities, settlements, damages, costs or
expenses of whatever kind or nature known or unknown, contingent or otherwise,
arising out of, or in any way related to hazardous Materials at or affection the
premises or the soil, water, vegetation, buildings, personal property, persons,
animals or otherwise and any personal injury(including wrongful death) or
property damage arising out of or related to such Hazardous Materials. The term
"Hazardous Materials" as used in this mortgage shall include, without
limitation, gasoline, petroleum products, explosives, radioactive materials,
hazardous materials, hazardous wastes, hazardous or toxic substances,
polychlorinated biphenyl's or related or similar materials, asbestos or any
material containing asbestos, or any other substance or material as may be
defined as a hazardous or toxic substance by and Federal, state, or local
environmental law, ordinance, rule, or regulation including, without limitation,
the Comprehensive Environmental Response, Compensation, and Liability Act of
1980, as amended (42 U.S.C. Sections 9601, et seq.), the Hazardous Materials
Transportation Act, as amended (49 U.S.C. Sections 1801, et seq.), the Resource
Conservation and Recovery Act, as amended (42 U.S.C. Sections 6901, et seq.),
the Federal Water Pollution Control Action (33 U.S.C Sections 1251 et set.), the
Clean Air Act (42 U.S.C Sections 7401 et seq.) and in the regulations adopted
and publications promulgated pursuant thereto. The obligations and liabilities
of the Mortgagor under this paragraph shall survive the foreclosure or this
mortgage or delivery of a deed in lieu of foreclosure, and shall continue to be
binding upon Mortgagor notwithstanding and contrary language contained in this
mortgage or any other document, specifically including without limitation any
document which otherwise relieves Mortgagor from liability under the note
secured by this mortgage, this mortgage or any other document.
NINETEENTH: The Mortgagee, in addition to being the holder of the bond or note
accompanying this mortgage conditioned for the payment of the above mentioned
principal sum, is also the holder of a Time Note - Installment conditioned for
the payment of $1,500,000.00, dated the 22nd day of August 1989 made by RRT Land
Corp. to State Street bank and Trust Company which bond or note is secured by a
mortgage recorded August 24, 1989 in Book 5273 of Mortgages at page 348 in the
Onondaga County Clerk's Office, which note was amended by Amendment to Time-Note
Installment dated August 15, 1990, and further amended by the Amended and
Restated Time-Note Installment dated as of June 7, 1993, and which mortgage was
amended by First Amendment to Mortgage dated June 7, 1993 and recorded June 28,
1993 in the Onondaga County Clerk's Office in Book 7018 of Mortgages at page 24.
The notes and Mortgages were assigned to Mortgagee by Assignment of Mortgage
recorded herewith in the Onondaga County Clerk's Office. There is now unpaid the
sum of $1,050,000.00, with interest from July 28, 1994; and
The above described indebtedness was assumed by Resource Recycling
Technologies, Inc. and the indebtedness is guaranteed by Mortgagor;
The parties hereto desire to coordinate and consolidate the liens of
the aforesaid mortgages so that together they shall constitute in law but one
first mortgage and joint lien upon the premises above described;
NOW, THEREFORE, it is hereby agreed that the liens of the aforesaid
mortgages be and the same are hereby combined, consolidated, and made equal and
coordinate in lien on the premises above described without priority of one over
another, so that together they shall constitute in law but one first mortgage
and joint lien upon said premises with the same effect as though they were one
first bond or note and mortgage and as consolidated are given to secure the
guaranty of Mortgagor for the indebtedness or Resource Recycling Technologies,
Inc. in a consolidated amount of $1,943,000.00.
IT IS FURTHER AGREED that all terms and covenants contained in the
aforedescribed mortgages are amended to conform to the terms and covenants
contained herein, and that all of the covenants herein set forth shall apply to
each of the aforedescribed mortgages as though contained therein at the time of
its execution, and in case of conflict between any covenant contained herein
with any covenants in a mortgage consolidated by this agreement, the covenants
herein contained shall prevail.
If more than one person joins in the execution of this mortgage, or if
the Mortgagor be of the feminine sex, or a corporation, the relative words
herein shall be read as if written in the plural number, or in the feminine or
neuter gender, and the case may be.
IN WITNESS WHEREOF, this mortgage has been duly executed by the
Mortgagor.
RRT LAND CORP.
By: /s/Lawrence J. Schorr
---------------------
Lawrence J. Schorr, President
BINGHAMTON SAVINGS BANK
By: /s/John B. Westcott
-----------------------------------
John B. Westcott, Vice President
<PAGE>
STATE OF NEW YORK )
) SS.:
COUNTY OF BROOME )
On this 29th day of July, 1994, before me personally appeared LAWRENCE
J. SCHORR, who, being by me duly swore did depose and say that he resides at
3112 Sally Drive, Vestal, New York, that he is President of RRT LAND CORP., the
corporation described in and which executed the foregoing instrument, and that
he signed his name thereto by authority of the board of directors of said
corporation.
______________________ Notary Public
STATE OF NEW YORK )
) SS.:
COUNTY OF BROOME )
On this 29th day of July, 1994, before me, the subscriber, personally
came JOHN B. WESTCOTT, to me known, who, being by me duly swore, did depose and
say that he resides at West End Avenue, Binghamton, New York; that he is an
officer, to wit, Vice President, of BINGHAMTON SAVINGS BANK, the corporation
described in and which executed the above instrument; that he knows the seal of
said corporation; that the seal affixed to said instrument is such corporate
seal; that it was so affixed by order of the Board of Directors of said
corporation, and that he signed his name thereto by like order.
______________________ Notary Public
<PAGE>
"SCHEDULE A"
All that certain plot, piece or parcel of land, with the buildings and
improvements thereon erected, situate, lying and being in the Town of Salina,
County of Onondaga and State of New York, being part of Military Lot No. 27 in
said Town of Salina, bounded and described as follows:
BEGINNING at a point marked by an iron pipe monument located at the
intersection of the east street line of Cadillac Street and the easterly line of
the N.Y.C and H.R.R.R. (20 foot easement); thence along the said easterly line
of said easement a distance of 249.45 feet measured on a curve having a radius
of 393.06 feet to an iron pipe; thence N 13 Deg 34 Min 50 Sec W, a Distance of
351.91 feet to an Iron Pipe; Thence along the above mentioned easterly line of
the said 20 foot easement a distance of 132.06 feet measured on a curve having a
radius of 373.06 feet to a point; thence N 76 deg 40 min 10 sec E, a distance of
448 feet to the northwesterly line of Kuhn Road; thence S 39 deg 47 min 10 sec
W, and along said northwesterly line of Kuhn Road a distance of 462 feet to the
easterly line of Cadillac Street, a distance of 14.75 feet to the place of
beginning.
Together with a perpetual easement in common with others for the use of
the railroad track lying within the twenty-foot easement adjacent to and
westerly of the above described parcel and extending from Hathaway Street to the
New York Central Railroad lines.
EXHIBIT 10 (pp)
December 14, 1994
Resource Recycling Technologies, Inc.
Corporate Offices
300 Plaza Drive
Vestal, NY 13850
Attention: Lawrence J. Schorr
President and CEO
Gentlemen:
We are writing this letter to confirm our agreement ("Agreement") that
Ladenburg, Thalmann & Co. Inc. ("Ladenburg") has been engaged by Resource
Recycling Technology, Inc. (the "Company") as exclusive financial advisor and
placement agent in connection with the proposed offer and private placement (the
"Sale") by the Company of approximately $10.5 million of debt securities of the
Company relating to the financing of the Company's material handling facility in
Lake County Illinois(collectively, the "Securities").
This Agreement shall become effective upon the execution hereof by the
Company, and the term of this Agreement and the exclusive appointment provided
for herein shall end on the first anniversary of the date of such execution by
the Company (the "Term").
I. Performance of Services
Ladenburg's services shall be to structure and offer the Securities on
a private placement basis to qualified investors and assist in the negotiation
of the sale (the "Sale") of the Securities.
II. Compensation for Services
A. If one or more Sales are consummated during the Term or within eighteen
months after the end of the Term with and investor or lender introduced to the
Company by Ladenburg or contacted by Ladenburg or the Company during the Term,
the Company will pay or cause to be paid to Ladenburg a placement fee (the
"Private Placement Fee") equal to three percent of the purchase price paid by
the purchaser of the Securities issued in connection with each such Sale,
subject to payment of a minimum of a Private Placement Fee of $250,000.
B. A Private Placement Fee shall be payable upon the closing of each Sale, In
addition, if Ladenburg obtains a written commitment from a proposed purchaser
for the Sale of the Securities and the Sale is not consummated (other than by
reason of default by the proposed purchase) by the earlier to occur of the dates
set forth in clauses (i) or (ii) of this paragraph B whereby Ladenburg is paid a
Private Placement Fee and the sale of similar securites occur, then the Company
shall pay Ladenburg an addition performance fee of three percent of the purchase
price of the Securities which shall be payable at the earlier of (I) eighteen
months after the termination of the Agreement or (ii) the date when such a
commitment is no longer in force or effect.
C. The Company agrees to reimburse Ladenburg for all reasonable out-of-pocket
expenses incurred in carrying out the terms of the Agreements, including travel,
telephone, facsimile, courier, computer time charges, attorney's fees and
disbursements and any sales, use or similar taxes. These out-of-pocket expenses
will be payable from time to time promptly upon invoicing by Ladenburg therefor.
The provisions of the Section II shall survive the termination and
expiration of this Agreement.
III. Indemnification
The Company and Ladenburg hereby agree to the terms and conditions of
the Indemnification Agreement attached hereto as Appendix A with the same force
and effect as if such terms and conditions were set forth at length herein.
IV. Coordination of Efforts
In order to coordinate the efforts of both Ladenburg and the Company,
and to maximize the possibility of consummating a Sale during the term of this
Agreements, Ladenburg shall have the sole and exclusive authority to initiate
discussions with potential purchasers of the Securities. In the event the
Company, its directors, officers, employees or shareholders receive any
inquiries or conduct and discussions concerning the availability of the
Securities for purchase, such inquiries and discussions shall be promptly
referred to Ladenburg.
V. Disclosure
Any financial or other advice, descriptive memoranda or other
documentation rendered by Ladenburg pursuant to this Agreement may not be
disclosed, quoted, or otherwise referred to publicity, to any third party or in
any document in any manner without the prior written approval of Ladenburg. All
non-public information provided by the Company to Ladenburg will be considered
as confidential Information and shall be maintained as such by Ladenburg, except
as required by law or as required to enable Ladenburg to perform its services
pursuant to this Agreement, until the same becomes known to third parties or the
public without release thereof by Ladenburg.
The Company agrees to provide to Ladenburg, among other things, all
reasonable information requested or required by Ladenburg or a potential
investor, including, but not limited to, information concerning historical and
projected financial results and possible and known litigious and other
contingent liabilities of the Company. The Company also agrees to make available
to Ladenburg such representatives of the Company, including among others,
directors, officers, employees, outside counsel, and independently certified
public accountants, as Ladenburg may reasonably request. The Company will
promptly advise Ladenburg of any material changes in its business or finances.
The Company represents that all information made available to Ladenburg by the
Company, including, without lining the generality of the foregoing, and private
placement memorandum or other information materials prepared by or approved by
the Company, will be complete and correct in all material respects and will not
contain any untrue statements of a material fact or omit to state a material
fact when necessary in order to make the statement therein not misleading in
light of the circumstances under which such statements are made. In rendering
its services hereunder, Ladenburg will be using and relying primarily on such
information without independent verification thereof or independent appraisal of
any of the Company's assets. Ladenburg does not assume responsibility for the
accuracy or completeness of the information.
VI. Obligations of Ladenburg Solely to the Company
The services herein provided are to be rendered solely to the Company.
They are not being rendered by Ladenburg as an agent for or as a fiduciary or
the shareholders of the Company and Ladenburg shall not have any liability or
obligation with respect to its services hereunder to such shareholders or to any
other person, firm or corporation.
VII. Termination
This engagement may be terminated by the Company or by Ladenburg at any
time after 180 days with or without cause upon written notice to that effect to
the other party, but no such termination shall affect Ladenburg's right to
compensation earned on or prior to such termination (including, without
limitation, the Private Placement Fee described in the third sentence of Section
IIB hereof) and Ladenburg also shall be entitled to the compensation hereinabove
provided in the event that at any time prior to the expiration of eighteen
months after expiration or termination of the Agreement a Sale is consummated
with an investor or lender introduced to the Company by Ladenburg or contracted
by Ladenburg or the Company during the term of this Agreement.
VIII. Entire Agreement, Etc.
This Agreement sets forth the entire understanding of the parties
relating to the subject matter hereof and supersedes and cancels any prior
communications, understandings and agreements between the parties. This
Agreement cannot be terminated or changed, nor can any of its provisions be
waived, except by written agreement signed by all parties hereto. This Agreement
shall be binding upon and inure to the benefit of any successors, assigns, heirs
and person representatives of the Company and Ladenburg. A telecopy of a signed
original of this Agreement shall be sufficient to bind the parties whose
signatures appear hereon.
IX. Governing Laws and Jurisdiction
This Agreement shall be governed by and construed to be in accordance
with the laws of the State of New York applicable to contracts made and to be
performed solely in such state by citizens thereof. Any dispute arising out of
this Agreement shall be Adjudicated in the courts of the State of New York or in
the federal courts sitting in the Southern District of new York, and the Company
hereby agrees that service of process upon it by registered or certified mail at
the address shown in this Agreement shall be deemed adequate and lawful. The
parties hereto shall deliver notices to each other by personal delivery or by
registered mail (return receipt requested) at the addresses set forth above.
X. Acceptance
Please confirm that the foregoing is in accordance with your
understanding by signing on behalf of the Company and returning an executed copy
of this Agreement, whereupon it shall become a binding agreement between the
Company and Ladenburg.
Very truly yours,
LADENBURG, THALMANN & CO. INC.
By: /s/
James P. Sletteland
Managing Director
By: /s/
Commitment Committee
Accepted and agreed to:
RESOURCE RECYCLING TECHNOLOGY, INC.
By: /s/
Larry Schorr, President and CEO
<PAGE>
EXHIBIT A
INDEMNIFICATION AGREEMENT
Exhibit A to Letter Engagement Agreement (the "Agreement"), dated December 14,
1994 by and between Resource Recycling Technologies, Inc. (the "Company") and
Ladenburg, Thalmann & Co. Inc.
The Company agrees to indemnify and hold Ladenburg, Thalmann & Co. Inc.
("Ladenburg") and its affiliates, control persons, directors, officers,
employees, agents, consultants and attorneys (each and "Indemnified Person")
harmless from and against all losses, claims, damages, liabilities, cost or
expenses, including those resulting from any threatened or pending
investigation, action, proceeding or dispute whether or not Ladenburg or any
such other Indemnified Person is a party to such investigation, action,
proceeding or dispute arising out of Ladenburg's entering into or performing
services or engaging others to assist Ladenburg is performing services under
this Agreement, or arising out of any matter referred to in this Agreement. This
indemnity shall also include Ladenburg's and/or any such other Indemnified
Person's reasonable attorneys' and accountants' fees and out-of-pocket expenses
incurred in, such investigations, actions, proceedings, or disputes which fees,
expenses, and costs shall be periodically reimbursed to Ladenburg and/or to any
such other Indemnified Person by the Company as they are incurred; provided,
however, that the indemnity herein set forth shall not apply where that
Ladenburg acted in a grossly negligent manner or engaged in willful misconduct
in the performance of it's services hereunder which gave rise to the loss,
claim, damage, liability, cost or expense sought to be recovered hereunder. The
Company also agrees that neither Ladenburg nor any Indemnified Person shall have
any liability (whether direct or indirect, in contract, or tort or otherwise) to
the Company for or in connection with any act or omission to act by Ladenburg as
a result of its engagement under this Agreement except for any such liability
for losses, claims, damages, liabilities, or expenses incurred by the Company
from Ladenburg's gross negligence or willful misconduct.
If for any reason, the foregoing indemnification is unavailable to Ladenburg or
any such other Indemnified Person or insufficient to hold it harmless, then the
Company shall contribute to the amount paid or payable by Ladenburg or any such
other Indemnified Person as a result of such loss, claim, damage or liability in
such proportion as is appropriate to reflect not only the relative benefits
received by the Company and its shareholders on the one hand and Ladenburg or
any such other Indemnified Person on the other hand, but also the relative fault
of the Company and Ladenburg or any such Indemnified Person, as well as any
relevant equitable considerations; The reimbursement, indemnity and contribution
obligations of the Company hereinabove set forth shall be in addition to any
liability which the Company may otherwise have and these obligations and other
provisions hereinabove set forth shall be binding upon and inure to the benefit
of any successors, assigns, heirs and personal representatives of the Company,
Ladenburg and any other Indemnified Person. The terms and conditions hereinabove
set forth is this Appendix A shall survive the termination and expiration of
this Agreement and shall continue indefinitely thereafter.
RESOURCE RECYCLING TECHNOLOGIES, INC.
By: /s/
LADENBURG, THALMANN & CO. INC.
By: /s/
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 1,969
<SECURITIES> 0
<RECEIVABLES> 8,962
<ALLOWANCES> (96)
<INVENTORY> 479
<CURRENT-ASSETS> 10,355
<PP&E> 11,821
<DEPRECIATION> (4,138)
<TOTAL-ASSETS> 20,300
<CURRENT-LIABILITIES> 8,250
<BONDS> 1,818
<COMMON> 15,131
0
0
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<CHANGES> 0
<NET-INCOME> 1,209
<EPS-PRIMARY> .45
<EPS-DILUTED> 0
</TABLE>
