KTI INC
8-K, 1996-12-03
COGENERATION SERVICES & SMALL POWER PRODUCERS
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<PAGE>   1
                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

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

                                    FORM 8-K

                                 CURRENT REPORT

                     Pursuant to Section 13 or 15(d) of the
                         Securities Exchange Act of 1934

                Date of Report (Date of earliest event reported):
                                November 25, 1996

                                    KTI, INC.
               (Exact name of Registrant as specified in Charter)

 New Jersey                        33-85234                          22-2665282
- --------------------------------------------------------------------------------
(State or other juris-           (Commission                      (IRS Employer
diction of incorporation)        File Number)                     Identification
                                                                     Number)


7000 Boulevard East, Guttenberg, New Jersey                          07093
- --------------------------------------------------------------------------------
(Address of principal executive office)                            (Zip Code)

Registrant's telephone number including area code-         (201) 854-7777
                                                  ------------------------------


                                 Not Applicable
- --------------------------------------------------------------------------------
         (Former name and former address, as changed since last report)
<PAGE>   2
ITEM 5.  OTHER EVENTS

On November 25, 1996, KTI, Inc. executed an agreement to purchase all of the
common stock of Manner, Inc. ("Manner"), a Maryland corporation. Manner is a
broker of recycled plastics nation-wide. KTI acquired Manner for 65,000 shares
of KTI stock.


ITEM 7.  FINANCIAL STATEMENTS AND EXHIBITS

         Exhibits.

Exhibit Number            Description
- --------------            -----------

4.1                       Securities Purchase Agreement by and among
                          KTI Plastic Recycling, Inc. and Diane
                          Goodman and Seth Lehner dated as of November
                          25, 1996. The schedules to this Exhibit do
                          not contain information which is material to
                          an investment decision and which is not
                          otherwise disclosed in the Securities
                          Purchase Agreement. The schedules include a
                          Registration Rights Agreement, covenants not
                          to compete and Employment Agreements. The
                          Company hereby agrees to furnish a copy of
                          any omitted schedule to the Commission upon
                          request.
<PAGE>   3
                                   SIGNATURES


         Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.

                                                             KTI, Inc.
                                                     -------------------------
                                                           (Registrant)

Dated:            November 25, 1996              By: /s/Martin J. Sergi
                                                     -------------------------
                                                     Name:  Martin J. Sergi
                                                     Title: President
<PAGE>   4
                                EXHIBIT INDEX
                                -------------

Exhibit 
Number                             Description
- -------                            -----------
           
 4.1        Securities Purchase Agreement by and among KTI Plastic Recycling, 
            Inc. and Diane Goodman and Seth Lehner dated as of November 25,
            1996. The schedules to this Exhibit do not contain information
            which is material to an investment decision and which is not
            otherwise disclosed in the Securities Purchase Agreement. The
            schedules include a Registration Rights Agreement, covenants not to
            compete and Employment Agreements. The Company hereby agrees to
            furnish a copy of any omitted schedule to the Commission upon
            request.
        

<PAGE>   1
                          SECURITIES PURCHASE AGREEMENT
                                  by and among
                              MANNER, INCORPORATED
                                       and
                      KTI PLASTIC RECYCLING, INC. ("Buyer")
                                       and
                            DIANE GOODMAN ("Seller")
                                       and
                             SETH LEHNER ("Seller")

                          Dated as of November 25, 1996
<PAGE>   2
                                TABLE OF CONTENTS
                                       OF
                            ASSET PURCHASE AGREEMENT

<TABLE>
<CAPTION>
         SECTION AND HEADING                                                      PAGE
         -------------------                                                      ----
                                    
<S>             <C>                                                               <C> 
         1      Purchase and Sale                                                 1
         1.1    Purchase and Sale of Assets                                       1
         1.2    Method of Conveyance                                              1
         1.3    No Assumed Obligations                                            2
         2      Purchase Price and Closing                                        2
         2.1    Purchase Price                                                    2
         3      Representations and Warranties of the Sellers                     2
         3.1    Authorization                                                     2
         3.2    No Intention to Sell                                              2
         3.3    No Violation                                                      2
         3.4    Documentation                                                     2
         3.5    Leases                                                            3
         3.6    Taxes                                                             3
         3.7    Insurance                                                         4
         3.8    Employee Benefit Plans: Pension Plans                             4
         3.9    Brokers and Finders                                               5
         3.10   Accuracy of representations and Documents                         5
         3.11   Projected Earnings                                                6
         4      Representations and Warranties of Buyer                           6
         4.1    Corporate Organization, Etc.                                      6
         4.2    Authorization, Etc.                                               6
         4.3    No Violation                                                      6
         5      Certain Covenants and Agreements                                  6
         5.1    Full Access                                                       6
         5.2    Notice of Claims and Investigations                               6
         5.3    Deposit for No Solicitation or Negotiation of Other Offers        7
         5.4    Press Releases                                                    7
         5.5    Consummation of Transactions                                      7
         5.6    Post-Closing Cooperation                                          7
         5.7    Risk of Loss                                                      7
         5.8    Post-Closing Authority                                            7
         6      (Intentionally Omitted)                                           8
         7      Conditions to the Obligations of Sellers                          8
         7.1    Representations and Warranties True                               8
         7.2    No Proceeding, Litigation; Injunction                             8
         7.3    Organizational Documents                                          8
         7.4    Employment Agreements                                             8
         7.5    Covenants Not to Compete                                          8
         7.6    Registration Rights Agreement                                     8
</TABLE>
<PAGE>   3

<TABLE>
<CAPTION>
         SECTION AND HEADING                                                      PAGE
         -------------------                                                      ----

<S>               <C>                                                             <C>
         8.       Conditions to the Obligations of Buyer                          8
         8.1.     Representations and Warranties True                             9
         8.2.     Performance                                                     9
         8.3.     No Proceeding, Litigation, Injunction                           9
         8.4.     Additional Documents                                            9
         8.5.     Board of Directors Approval                                     9
         8.6.     Hart Scott Rodino                                               9
         9.       Survival of Representations and Warranties; Indemnification     9
         9.1.     Survival of Representations                                     9
         9.2.     Statements as Representations and Warranties                    9
         9.3.     Remedies Cumulative                                             10
         9.4.     Buyer's Indemnity                                               10
         9.5.     Sellers' Indemnity                                              10
         9.6.     Indemnity Procedure                                             11
 .        10.      (Intentionally Omitted)                                         11
         11.      Operations-Post Closing                                         11
         11.1.    Stock Options                                                   11
         11.2.    Banking Relationships                                           12
         11.3.    Board Composition                                               12
         12.      Miscellaneous Provisions                                        12
         12.1.    Amendment and Modification                                      12
         12.2.    Waiver of Compliance                                            12
         12.3.    Expenses                                                        12
         12.4.    Notices                                                         13
         12.5.    Binding Effect; Assignment                                      13
         12.6.    Governing Law                                                   14
         12.7.    Counterparts                                                    14
         12.8.    Headings                                                        14
         12.9.    Entire Agreement                                                14
         12.10.   Third Parties                                                   14
         12.11.   Severability                                                    14
</TABLE>
<PAGE>   4
                          SECURITIES PURCHASE AGREEMENT

THIS AGREEMENT dated as of November 25, 1996, by and among Manner Incorporated,
a Maryland corporation ("MRI"), doing business as Manner Resins, Diane Goodman
("Goodman") and Seth Lehner ("Lehner" and together with Goodman referred to
herein as the "Sellers" and each is individually referred to herein as a
"Seller") and KTI Plastic Recycling, Inc., a Delaware corporation (the "Buyer").

The Buyer desires to purchase from Goodman and Lehner, and Sellers desire to
sell, assign and transfer to the Buyer, all of Sellers' stock in MRI (the
"Securities") as more specifically described in Section 1.1 of the disclosure
schedule attached hereto (the "Disclosure Schedule"), all on the terms and
subject to the conditions hereinafter set forth.

1.       Purchase and Sale.

         1.1      Purchase and Sale of Assets. On the terms and subject to the
                  conditions herein set forth, the Buyer shall purchase from the
                  Sellers all of the Securities, as of the Closing Date (as such
                  term is heretofore defined), owned by the Sellers or in which
                  any Seller has an interest.

         1.2.     Method of Conveyance.

                  (a)   The sale, transfer, conveyance, assignment and delivery
                        by Sellers of the Securities to the Buyer in accordance
                        with Section 1.1 hereof shall be effected on the Closing
                        Date by Sellers' execution and delivery of the
                        Securities and the customary stock powers, duly
                        guaranteed (collectively, the "Instruments of
                        Conveyance") to the Buyer.

                  (b)   At the Closing, good and valid title to all of the
                        Securities shall be transferred, conveyed, assigned and
                        delivered by the Sellers to the Buyer pursuant to this
                        Agreement and the Instruments of Conveyance, free and
                        clear of any and all Liens (as defined below). For the
                        purposes of this Agreement, the term "Lien" shall mean
                        any mortgage, pledge, security interest, encumbrance,
                        lien or charge of any kind whatsoever.

                  (c)   At the Closing, the Sellers shall cause MRI to provide
                        to the Buyer a estoppel certificate signed by each
                        creditor (excluding trade creditors) of MRI (the "Third
                        Party Funded Debt"), each certificate indicating the
                        balance due on the Third Party Funded Debt, including
                        any accrued and unpaid interest thereon, as of the end
                        of the preceding month, together with a per diem
                        interest rate during the month in which the Closing
                        occurs.

                  (d)   At the Closing the Sellers shall cause MRI to provide to
                        the Buyer a certificate signed by MRI indicating the
                        balance of trade accounts payable ("Trade Accounts
                        Payable") due to third parties, including any accrued
                        and


                                       1
<PAGE>   5

  
                        unpaid interest thereon, as of the end of the preceding
                        month, together with a per diem interest rate during the
                        month in which the Closing occurs.

         1.3.     No Assumed Obligations. Pursuant to this Agreement, the Buyer
                  does not assume any of the liabilities or obligations of MRI,
                  whether absolute, accrued, contingent or otherwise, whenever
                  incurred.

2.       Purchase Price and Closing.

         2.1.     Purchase Price. The consideration for the Securities to be
                  sold, transferred and conveyed by the Sellers to the Buyer
                  pursuant to this Agreement shall be Sixty Five Thousand
                  (65,000) shares of KTI, Inc. common stock to be delivered at
                  the Closing. The stock shall be registered in the names of
                  Diane Goodman and Seth Lehner as tenants by the entirety and
                  not as tenants in common. The stock certificate evidencing
                  such shares shall bear a customary restrictive legend
                  indicating that such shares are unregistered. The
                  consideration set forth in this Section 2.1 is hereinafter
                  collectively referred to as the "Purchase Price". The parties
                  intend that the transaction contemplated shall be treated as a
                  tax free reorganization under Section 368 (a)(1)(B) under the
                  Internal Revenue Code of 1986, as amended.

3.       Representations, Warranties and Agreements of the Sellers.

         Sellers hereby represent, warrant and agree that:

         3.1.     Authorization. Each Seller has all requisite power and
                  authority to sell the Securities which he or she owns. This
                  Agreement is, and when executed and delivered, the Instruments
                  of Conveyance will be, the legal, valid and binding obligation
                  of Sellers, enforceable in accordance with their respective
                  terms.

         3.2.     No Intention to Sell. Neither Seller has any present intention
                  to sell any of the shares of KTI common stock to be received
                  under this Agreement.

         3.3.     No Violation. The execution and delivery of this Agreement by
                  the Sellers and the consummation of the transactions
                  contemplated hereby will not violate any statute or law or any
                  judgment, decree, order, regulation or rule of any domestic or
                  foreign court or governmental authority.

         3.4.     Documentation.

                  (a)   The Sellers shall cause MRI to deliver a certificate
                        stating whether Section 3.4 (a) of the Disclosure
                        Schedule contains an accurate and complete list of all
                        Equity Securities, all Third Party Funded Debt and all
                        Trade Accounts Payable, indicating the balance due,
                        including accrued and unpaid interest thereon, as of the
                        close of the preceding month and a per diem interest
                        factor for the month of Closing. Estoppel or payoff
                        letters from each third party lender (excluding trade
                        creditors) shall be attached to such schedule.


                                       2
<PAGE>   6

                        The Sellers shall cause MRI to deliver a list of all
                        accounts payable as of the close of the monthly
                        financial statement of MRI and its subsidiaries.

                  (b)   Each Seller has and will have at the Closing, good and
                        valid title to the Securities being conveyed by him or
                        her hereunder.

         3.5.     Leases.

                  (a)   Section 3.5 (a) of the Disclosure Schedule constitutes a
                        complete and accurate list of all real and personal
                        property leases, subleases, conditional sales agreements
                        or other title retention agreements (collectively the
                        "Leases" and individually a "Lease") to which MRI is a
                        party, as lessee.

                  (b)   All Leases are valid and binding on all parties thereto
                        and enforceable against such parties in accordance with
                        their terms, and are in full force and effect; and with
                        respect to each such Lease, there are no existing
                        defaults thereunder (whether or not waived by lessor)
                        and no event has occurred which (whether with or without
                        notice, lapse of time or both, or the happening of any
                        other event) would constitute default thereunder.

                  (c)   Each lessor shall provide an estoppel certificate or
                        payoff letter satisfactory in form and substance to the
                        Buyer.

         3.6.     Taxes. Except as set forth in Section 3.6 of the Disclosure
                  Schedule:

                  (a)   The Sellers shall cause MRI to deliver a certificate
                        stating whether MRI has duly and accurately filed or
                        caused to be filed all tax reports and returns
                        (including information returns) required to be filed in
                        connection with its business for all periods ending on
                        the date hereof and will make all such filings required
                        to be made prior to the Closing Date. The certificate
                        shall further state whether MRI has duly paid, or
                        provided for in accordance with generally accepted
                        accounting principles, consistently applied, all taxes
                        and other charges due or claimed to be due from it to
                        any federal, state, local or foreign taxing authority
                        (including, without limitation, those due in respect of
                        properties, income, franchises, licenses, sales or
                        payrolls), except for taxes being contested in good
                        faith.

                  (b)   The Sellers shall cause MRI to deliver complete copies
                        of all of its tax returns, both income tax and
                        otherwise, for all tax years.

                  (c)   The Sellers shall cause MRI to advise the Buyer whether
                        there are any


                                       3
<PAGE>   7
         3.7.     Insurance.

                  (a)   Section 3.7 of the Disclosure Schedule. The Sellers
                        shall cause MRI to deliver a certificate containing an
                        accurate and complete list of all policies of fire,
                        disability, workers' compensation, products liability,
                        and other forms of insurance owned or held by or
                        beneficially for MRI which relate to or provide coverage
                        for the business of MRI. The Sellers will cause MRI to
                        deliver a copy of each such policy to the Buyer not less
                        than 5 business days prior to the Closing.

                  (b)   The Sellers shall cause MRI to deliver a certificate
                        stating whether all such policies are in full force and
                        effect, all premiums with respect thereto covering all
                        periods through the Closing have been or will be paid by
                        MRI, and no notice of cancellation or termination has
                        been received with respect to any such policy.

                  (c)   The Sellers shall cause MRI to deliver a certificate
                        stating whether such policies are sufficient for
                        compliance with all requirements of law and of all
                        agreements to which MRI is a party; are valid,
                        outstanding and enforceable policies; provide adequate
                        insurance coverage for the assets and operations of
                        MRI's business; and, with respect to periods prior to
                        the Closing will not in any way be affected by, or
                        terminate or lapse by reason of, the transactions
                        contemplated by this Agreement.

         3.8.     Employee Benefit Plans: Pension Plans.

                  (a)   The Sellers shall cause MRI to deliver a certificate
                        stating whether, except as set forth on Section 3.8 of
                        the Disclosure Schedule, MRI has any bonus, deferred
                        compensation, pension, profit-sharing, retirement, stock
                        purchase, stock option, phantom stock, medical,
                        post-retirement medical or any other employee benefit
                        plan, arrangement or practice, whether written or
                        unwritten (an "Employee Benefit Plan"). The Sellers
                        shall cause MRI to deliver true copies of each written
                        Employee Benefit Plan and an accurate and complete
                        written description of each oral Employee Benefit Plan
                        to Buyer. The Sellers shall cause MRI to deliver a
                        certificate stating whether Section 3.8 of the
                        Disclosure Schedule sets forth the annual amounts paid
                        or accrued in connection with each Employee Benefit Plan
                        as of December 31, 1995, and an estimate of the amounts
                        payable or accruable in connection therewith through
                        September 30, 1996, to the extent such amounts are
                        presently fixed or determinable.

                  (b)   The Sellers shall cause MRI to deliver a certificate
                        stating whether Section 3.8 of the Disclosure Schedule
                        is a list of each "employee pension benefit plan" in the
                        meaning of the Employee Retirement Income Security Act
                        of 1974 and the regulations thereunder ("ERISA"),
                        maintained or contributed to by either Seller (the
                        "Pension Plans") and, except as noted thereon, no


                                       4
<PAGE>   8
                        Pension Plan is a "multi-employer plan" within the
                        meaning of ERISA. The Sellers shall cause MRI to deliver
                        a certificate stating whether there have been any
                        "prohibited transaction," to which MRI has been a party,
                        within the meaning of Section 4975 of the Internal
                        Revenue Code of 1986 (the "Code"), or Section 406 of
                        ERISA, with respect to any Pension Plan which might
                        subject any such plan or related trust, or any trustee
                        or administrator thereof, or Seller to the tax or
                        penalty imposed by Section 4975 of the Code or to a
                        civil penalty imposed by Section 502 of ERISA. Except as
                        set forth in Section 3.8(b) of the Disclosure Schedule,
                        each of the Pension Plans is and has been in material
                        compliance with the applicable provisions of ERISA and
                        the Code.

                        The present value of all accrued benefits, whether
                        vested or not, under the Pension Plans subject to Title
                        IV of ERISA do not exceed the value of the assets of
                        such plans allocable to such accrued benefits. Except as
                        set forth in Section 3.8(c) of the Disclosure Schedule,
                        none of the Pension Plans subject to Title IV of ERISA
                        has, since December 31, 1995, been completely or
                        partially terminated, nor has there been any "reportable
                        event," as such term is defined in Section 4043(b) of
                        ERISA, with respect to any such plan since the effective
                        date of said Section 4043(b). None of the Pension Plans
                        or trusts have incurred any "accumulated funding
                        deficiency," as such term is defined in Section 412 of
                        the Code, whether or not waived, since the effective
                        date of said Section 412.

                  (c)   The Sellers shall cause MRI to deliver a certificate
                        stating whether Section 3.8 (c) of the Disclosure
                        Schedule is a list of all "employee welfare benefit
                        plans," within the meaning of ERISA, whether or not
                        insured, maintained by MRI ("Welfare Plans"). Except as
                        set forth in Section 3.8 (c) of the Disclosure Schedule,
                        each Welfare Plan is and has been in material compliance
                        with the applicable provisions of ERISA and the Code.
                        The Sellers shall cause MRI to deliver a certificate
                        stating whether MRI has complied in all material
                        respects with all of its obligations, if any, including
                        the making of all required contributions, under each of
                        the Welfare Plans.

         3.9.     Brokers and Finders. No person has been authorized by the
                  Sellers, or by anyone acting on their behalf, to act as a
                  broker, finder or in any other similar capacity in connection
                  with the transactions contemplated by this Agreement.

         3.10     Accuracy of Representations and Documents. No representation
                  or warranty made by Sellers in this Agreement or in the
                  Disclosure Schedule hereto (which is an integral part hereof)
                  nor any statement, certificate or other document furnished as
                  an exhibit hereto, or any other document furnished by Sellers
                  to Buyer or any of their representatives in connection with
                  this Agreement is, or will be when so furnished, false or
                  misleading in any material respect or contains any material
                  misstatement of fact or omits to state any fact necessary to
                  be stated make the statements made in any such representation
                  or warranty false or misleading in any material respect.


                                       5
<PAGE>   9
        3.11     Projected Earnings Before Taxes. The Projected Earnings before
                  Taxes were prepared in good faith and, subject to the
                  limitations and uncertainties inherit in trying to project
                  future economic and business trends or results, represent the
                  good faith opinion of MRI and its senior management and have a
                  reasonably basis.

4.       Representations and Warranties of Buyer.

         Buyer represents and warrants to Sellers as follows:

         4.1.     Corporate Organization. Etc. Buyer is a corporation duly
                  formed, validly existing and in good standing under the laws
                  of the State of Delaware and has all requisite power and
                  authority to carry on its business as it is now being
                  conducted and to own, lease and operate its properties and
                  assets as and in the places where such business is now
                  conducted and where such properties and assets are now owned,
                  leased or operated.

         4.2.     Authorization Etc. Buyer has all requisite power and authority
                  to execute, deliver and perform its obligations under this
                  Agreement. This Agreement is valid and binding upon Buyer,
                  enforceable in accordance with its terms.

         4.3.     No Violation. Neither the execution and delivery of this
                  Agreement by Buyer nor the consummation of the transactions
                  contemplated hereby by Buyer will violate any provisions of
                  the Certificate of Incorporation of Buyer, or be in conflict
                  with, or constitute a default (or an event which, with or
                  without notice, lapse of time or both, would constitute a
                  default) under, or result in the termination or invalidity of,
                  or accelerate the performance required by, or cause the
                  acceleration of the maturity of any debt or obligation
                  pursuant to, any agreement or commitment to which Buyer is a
                  party or by which Buyer is bound, or violate any statute or
                  law or any judgment, decree, order, regulation or rule of any
                  court or governmental authority.

5.       Certain Covenants and Agreements.

         5.1.     Full Access. The Sellers agree to cause MRI, without in any
                  way detracting from their representations, warranties and
                  agreements set forth in this Agreement, to afford Buyer and
                  its counsel, accountants and other representatives, after the
                  date hereof, full access during normal business hours to MRI's
                  plants, offices, warehouses, properties, employees, counsel,
                  accountants and other representatives, books and records,
                  including accountant's workpapers, in order that Buyer may
                  have full opportunity to make such investigations as it shall
                  desire to make of the affairs of MRI.

         5.2.     Notice of Claims and Investigations. Each party will
                  immediately give notice to the other of, and confer with the
                  other with respect to, any claims, investigations by
                  governmental authorities or threatened litigation relating to
                  the transactions contemplated by this Agreement.


                                       6
<PAGE>   10
         5.3.     No Solicitation or Negotiation of Other Offers. Each Seller
                  agrees that from the date hereof through the Closing Date he
                  and she will not pursue, encourage or solicit any inquiries or
                  proposals by, or engage in any discussions or negotiations
                  with, any person, any sale of the Securities by any of the
                  Sellers, or any other exchange, or disposition involving the
                  Securities.

         5.4.     Press Releases. Without the written consent of the other
                  parties, which shall not be unreasonably withheld, each of the
                  parties hereto agrees not to make any public announcements or
                  press releases regarding the transactions contemplated hereby
                  until such transactions are consummated, unless otherwise
                  required by law.

         5.5.     Consummation of Transactions. Each of the parties agrees to
                  use its best efforts to bring about the satisfaction of the
                  conditions required to be performed, fulfilled or complied
                  with by it hereunder and to take or cause to be taken, all
                  action, and to do, or cause to be done, all things necessary,
                  proper or advisable under applicable laws and regulations to
                  consummate and make effective the transactions contemplated by
                  this Agreement as expeditiously as practicable. In case at any
                  time after the Closing any further action is necessary or
                  desirable to carry out the purposes of this Agreement, the
                  appropriate party will take all such necessary action,
                  including without limitation, the execution and delivery of
                  such further instruments and documents as may be reasonably
                  requested by the other party or parties for such purposes or
                  otherwise to complete or perfect the transactions contemplated
                  hereby.

         5.6.     Post-Closing Cooperation. After the Closing, Buyer and Sellers
                  shall cooperate fully with each other and shall make available
                  to each other all information, records or documents reasonably
                  requested in connection with matters involved in the sale of
                  the Securities.

         5.7.     Risk of Loss. Prior to the Closing, the risk of loss on the
                  Securities shall remain with the Sellers.

         5.8.     Post-Closing Authority.

                  (a)   Each Seller agrees that, unless duly authorized in
                        writing by Buyer, or required by law, he or she will not
                        at any time reveal, divulge or make known to any person
                        (other than Buyer or any affiliate of Buyer) any
                        confidential or proprietary data or information relating
                        to MRI's business.

                  (b)   If any of the covenants contained in this Section is
                        held to be invalid or unenforceable because of the
                        duration of such provision or the area covered thereby,
                        the parties agree that the court making such
                        determination shall have the power to reduce the
                        duration or area of such provision to the extent
                        necessary to render such provision valid and enforceable
                        and, in its reduced form, said provision shall then be
                        valid and enforceable.


                                       7
<PAGE>   11
6.       (Intentionally Omitted.)

7.       Conditions to the Obligations of Sellers.

         Each and every obligation of Buyer under this Agreement to be performed
         on or before the Closing shall be subject to the satisfaction, on or
         before the Closing, of each of the following conditions, unless waived
         in writing by Sellers.

         7.1.     Representations and Warranties True. The representations and
                  warranties of Buyer contained in this Agreement shall be true,
                  complete and accurate in all material respects as of the date
                  when made and at and as of the Closing as though such
                  representations and warranties were being made at and as of
                  the Closing Date, and except for changes expressly permitted
                  or contemplated by the terms of this Agreement.

         7.2.     No Proceeding. Litigation: Injunction. No suit, action,
                  investigation, inquiry or other proceeding by any governmental
                  body or other person shall have been instituted which arises
                  out of or relates to this Agreement or the transactions
                  contemplated hereby or seeks to obtain substantial damages in
                  respect thereof, and, on the Closing Date, there shall be no
                  effective permanent or preliminary injunction, writ, temporary
                  restraining order or any order of any nature issued by a court
                  of competent jurisdiction directing that the transactions
                  provided for herein not be consummated as so provided.

         7.3      Organizational Documents. Buyer shall have furnished Sellers
                  with (i) a copy of its Certificate of Incorporation, certified
                  by the Secretary of State of Delaware, (ii) certified copies
                  of minutes of action taken by the Board of Directors of Buyer
                  approving the execution and delivery of this Agreement and
                  related documents and the consummation of the transaction
                  contemplated hereunder; and (iii) a Certificate of Incumbency
                  setting forth the officers of the Buyer.

         7.4      Employment Agreements. Both of Diane Goodman and Seth Lehner
                  shall have executed and delivered Employment Agreements in the
                  form of Exhibits 7.4 a and 7.4 b hereto.

         7.5      Covenants not to Compete. Each of the other employees of MRI
                  shall have signed covenants not to compete in form acceptable
                  to the Buyer.

         7.6      Registration Rights Agreement. The Seller shall have executed
                  and delivered a Registration Rights Agreement to the Sellers
                  in the form of Exhibit 7.6 hereto.

8.       Conditions to the Obligations of Buyer.

         Each and every obligation of the Sellers under this Agreement to be
         performed on or before the Closing shall be subject to the
         satisfaction, on or before the Closing, of each of the following
         conditions, unless waived in writing by the Buyer.


                                       8
<PAGE>   12
         8.1.     Representations and Warranties True. The representations and
                  warranties of Sellers contained in this Agreement including
                  the Disclosure Schedule attached hereto, shall be true,
                  complete and accurate in all material respects as of the date
                  when made and at and as of the Closing Date as though such
                  representations and warranties were being made at and as of
                  the Closing Date (except that representations and warranties
                  which refer to conditions existing on a specific date, such as
                  representations and warranties regarding the Financial
                  Statements, shall continue to refer to that date) and except
                  for changes expressly permitted or contemplated by the terms
                  of this Agreement.

         8.2.     Performance. Sellers shall have performed, fulfilled and
                  complied in all material respects with all agreements,
                  obligations and conditions required by this Agreement to be
                  performed, fulfilled or complied with by them on or prior to
                  the Closing, including delivery to Buyer of all of the Assets.

         8.3.     No Proceeding. Litigation. Injunction. No suit, action,
                  investigation, inquiry or other proceeding by any governmental
                  body or other person shall have been instituted or threatened
                  which arises out of or relates to this Agreement or the
                  transactions contemplated hereby or seeks to obtain
                  substantial damages in respect thereof, and, on the Closing
                  Date, there shall be no effective permanent or preliminary
                  injunction, writ, temporary restraining order or any order of
                  any nature issued by a court of competent jurisdiction
                  directing that the transactions provided for herein not be
                  consummated as so provided.

         8.4.     Additional Documents. Sellers shall have delivered to Buyer
                  such other documents, instruments and certificates as shall be
                  reasonably requested by Buyer for the purpose of effecting the
                  transactions provided for and contemplated by this Agreement.

         8.5      Board of Directors Approval. Buyer shall have received the
                  approval of its Board of Directors prior to Closing.

         8.6      Hart-Scott-Rodino. Buyer shall have received on or prior to
                  the closing, evidence to its satisfaction that the transaction
                  is exempt from the rules issued by the Federal Trade
                  Commission under the Hart-Scott-Rodino Antitrust Improvements
                  Act of 1976.

9.       Survival of Representations and Warranties; Indemnification.

         9.1.     Survival of Representations. Notwithstanding any investigation
                  at any time made by or on behalf of any party hereto, all
                  representations and warranties contained in this Agreement
                  shall survive the Closing until April 15, 1998.

         9.2.     Statements as Representations and Warranties. All statements
                  contained herein, in the Disclosure Schedule, or in any other
                  schedule, certificate, list or other document delivered or to
                  be delivered pursuant to this Agreement shall be deemed
                  representations and warranties as such terms are used in this
                  Agreement and any


                                        9
<PAGE>   13
                  material misstatement or omission in any thereof shall be
                  deemed a breach of a representation or warranty hereunder.

         9.3.     Remedies Cumulative. The remedies provided herein shall be
                  cumulative and shall not preclude assertion by any party of
                  any other rights or the seeking of any other remedies against
                  any other party .

         9.4.     Buyer's Indemnity. The Buyer agrees to defend, indemnify and
                  hold harmless the Sellers from, against and in respect of any
                  and all demands, claims, actions or causes of action, losses,
                  liabilities, damages, assessments, deficiencies, taxes, costs
                  and expenses, including without limitation, interest,
                  penalties and reasonable attorneys' fees and expenses,
                  asserted against, imposed upon or paid, incurred or suffered
                  by Sellers as a result of, arising from, in connection with or
                  incident to (i) any breach or inaccuracy of any representation
                  or warranty of Buyer contained in this Agreement or (ii) any
                  breach of any covenant or agreement of Buyer contained in this
                  Agreement. Until such time as Diane Goodman is released from
                  her personal guarantee of the lease for the Rental Property,
                  MRI and KTIPR shall indemnify her for any money which Diane
                  Goodman may pay as the result of such guarantee.


         9.5.     Sellers' Indemnity.

                  (a)   The Sellers agree to defend, indemnify and hold harmless
                        Buyer from, against and in respect of any and all
                        demands, claims, actions or causes of action, losses,
                        liabilities, damages, assessments, deficiencies, taxes,
                        costs and expenses, including without limitation,
                        interest, penalties and reasonable attorneys' fees and
                        expenses, asserted against, imposed upon or paid,
                        incurred or suffered by Buyer:

                        (i)      as a result of, arising from, in connection
                                 with or incident to (A) any material breach or
                                 inaccuracy of any representation or warranty of
                                 any Seller in this Agreement or in any
                                 Instrument of Conveyance, or (B) any breach of
                                 any covenant or agreement of any Seller
                                 contained in this Agreement or in any
                                 Instrument of Conveyance; and/or

                        (ii)     as a result of, or with respect to, any and all
                                 material obligations or liabilities of any
                                 Seller, whether known or unknown, asserted or
                                 unasserted, contingent or otherwise (For
                                 purposes of this subsection, "material" shall
                                 mean any amount in excess of $10,000
                                 individually or in aggregate.); and/or

                        (iii)    arising out of any acts, events or
                                 circumstances by any Seller prior to Closing
                                 Date.


                                       10
<PAGE>   14
         9.6.     Indemnity Procedure.

                  (a)   A party agreeing to indemnify against any matter
                        pursuant to this Agreement is referred to herein as the
                        "Indemnifying Party" and the other party claiming
                        indemnity is referred to herein as the "Indemnified
                        Party".

                  (b)   An Indemnified Party under this Agreement shall give
                        prompt written notice to the Indemnifying Party of any
                        liability which might give rise to a claim for indemnity
                        under this Agreement. As to any claim, action, suit or
                        proceeding by a third party, the Indemnifying Party
                        shall have the right, exercisable by notifying the
                        Indemnified Party within twenty days after receipt of
                        such notice from the Indemnified Party, to assume the
                        entire control of the defense, compromise or settlement
                        thereof, all at the Indemnifying Party's expense
                        including employment of counsel, and in connection
                        therewith the Indemnified Party shall cooperate fully to
                        make available to the Indemnifying Party all pertinent
                        information under its control. The Indemnified Party may
                        at its expense, if it so elects, designate its own
                        counsel to participate with counsel designated by the
                        Indemnifying Party in the conduct of any such defense.
                        If the defense of any such matter is tendered to the
                        Indemnifying Party by notice as set forth above and the
                        Indemnified Party is entitled to indemnification
                        pursuant hereto with respect to such matter, and the
                        Indemnifying Party declines or otherwise fails to (1)
                        promptly pay or settle the same, or (2) vigorously
                        investigate and defend the same, the Indemnified Party
                        may investigate and defend the same and the Indemnifying
                        Party will reimburse the Indemnified Party for all
                        judgments, settlement payments and reasonable expenses,
                        including reasonable attorneys' fees, incurred and paid
                        by it in connection therewith.

                  (c)   An Indemnified Party shall not make any settlement of
                        any claim without the written consent of the
                        Indemnifying Party, which consent shall not be
                        unreasonably withheld.

                  (d)   Except as set forth in subsection (b) in the event of
                        any litigation brought by either party hereto to seek
                        indemnity under this Agreement, the prevailing party
                        shall be entitled to recover attorneys' fees upon final
                        judgment on the merits.

10.      (Intentionally Omitted)

11.      Operations - Post Closings.

         11.1     Stock Options - Employees. Stock Options will be granted to
                  the following employees of MRI:

<TABLE>
<S>                                                  <C>       
                  Tim Eubanks                        500 shares
                  Stephanie Harmon                   3,000 shares
</TABLE>

                                       11
<PAGE>   15
<TABLE>
<S>                                                  <C>       
                  Catherine Lange                    500 shares
                  Molly Winans                       1,000 shares
</TABLE>

                  These options will be exercisable at the closing sale price
                  per share on the date of Closing and will vest at the rate of
                  25% on the first and subsequent anniversaries of the date of
                  Closing. These employees will receive bonuses on the first
                  four anniversaries of the date of Closing, equal to the
                  exercise price of the option then vesting, if (a) such
                  individual has continually been in the employment of MRI; (b)
                  such bonus is used to exercise the portion of the option then
                  vesting; and (c) the employee contributes, or otherwise
                  provides, sufficient funds to MRI for any withholding due on
                  such bonuses.

         11.2     Banking Relationships. MRI has a line of credit with Annapolis
                  National Bank (the "Bank") for $50,000.00. Said line is
                  guaranteed by Diane Goodman and Seth Lehner personally. KTIPR
                  will use all reasonable efforts to have such line increased
                  from $50,000 to $125,000 and to replace the guarantee by Diane
                  Goodman and Seth Lehner with a guarantee by KTIPR or KTI. If
                  the Bank is unwilling to comply with such requests, KTIPR
                  shall use all reasonable efforts to find another bank, willing
                  to accede to such requests. MRI will be permitted to maintain
                  separate bank accounts post closing. Until such time as Diane
                  Goodman and Seth Lehner are released from their personal
                  guarantees, MRI and KTIPR shall indemnify them for any money
                  which Diane Goodman and Seth Lehner may pay as the result of
                  such guarantee.

         11.3     Board Composition. The Board of Directors will have five
                  directors postclosing, two of whom shall be Diane Goodman and
                  Seth Lehner. The remaining three directors will be appointed
                  by KTIPR.

12.      Miscellaneous Provisions.

         12.1.    Amendment and Modification. This Agreement may be amended,
                  modified and supplemented by the parties hereto only by
                  written instrument signed by or on behalf of the party to be
                  charged thereunder.

         12.2.    Waiver of Compliance. Any failure of Sellers, on the one hand,
                  or Buyer on the other hand, to comply with any obligation,
                  covenant, agreement or condition herein may be expressly
                  waived in writing by an authorized officer of the other party,
                  but such waiver or failure to insist upon strict compliance
                  with such obligation, covenant, agreement or condition shall
                  not operate as a waiver of, or estoppel with respect to any
                  subsequent or other failure.

         12.3.    Expenses. Each of the parties hereto agrees to pay all of the
                  respective expenses incurred by it in connection with the
                  negotiation, preparation, execution, delivery and performance
                  of this Agreement and the consummation of the transactions
                  contemplated hereby, except that, if the transactions
                  contemplated hereby close, the Buyer shall reimburse the
                  Sellers for up to $5,000.00 in legal fees and expenses.


                                       12
<PAGE>   16

         12.4.    Notices. All notices, requests, demands and other
                  communications required or permitted hereunder shall be in
                  writing and shall be deemed to have been duly given if
                  delivered by hand or mailed, certified or registered mail,
                  with postage prepaid as follows:

                  If to Sellers:        Diane Goodman
                                        7040 Bembe Beach Road
                                        Annapolis, Maryland 21403
                                        Telephone:(410) 263-1710
                                        Fax:      (410) 263-1701

                                        Seth Lehner
                                        7040 Bembe Beach Road
                                        Annapolis, Maryland 21403
                                        Telephone:(410) 263-1710
                                        Fax:      (410) 263-1701

                  with a copy to:       West & Feinberg, P.C.
                                        Suite 775N
                                        4550 Montgomery Avenue
                                        Bethesda, Maryland 20814
                                        Telephone:(301) 951-1500
                                        Fax:      (301) 951-1525

                  If to Buyer:          KTI Plastic Recycling, Inc.
                                        7000 Boulevard East
                                        Guttenberg, New Jersey 07093
                                        Telephone:(201) 854-7777
                                        Fax:      (201) 854-1771

                  with a copy to:       Suzanne B. VanDyk, Esq.
                                        Dorsey & Whitney
                                        220 South Sixth Street
                                        Minneapolis, Minnesota 55402
                                        Telephone: (612) 340-5631
                                        Fax:       (612) 340-2643

                  or to such other person or address as Buyer shall furnish to
                  Sellers in writing.

         12.5.    Binding Effect: Assignment. This Agreement and all of the
                  provisions hereof shall be binding upon and inure to the
                  benefit of the parties hereto and their respective heirs,
                  administrators, executors, legal representatives, such
                  successors and assigns, but neither this Agreement nor any of
                  the rights, interests or obligations hereunder shall be
                  assigned by any of the parties hereto without the prior
                  written consent of the other parties; provided, however, that
                  Buyer may freely assign this Agreement


                                       13
<PAGE>   17
                  or all or any rights it may have hereunder to any of its
                  subsidiaries or affiliated companies, but no such assignment
                  shall relieve Buyer of its obligations hereunder.

         12.6.    Governing Law. This Agreement shall be governed by and
                  construed in accordance with the laws of the State of New
                  York.

         12.7.    Counterparts. This Agreement may be executed in counterparts,
                  each of which shall be deemed an original, but all of which
                  together shall constitute the same instrument.

         12.8.    Headings. The headings of the sections and articles of this
                  Agreement are inserted for convenience only and shall not
                  constitute a part hereof or affect in any way the meaning or
                  interpretation of this Agreement.

         12.9.    Entire Agreement. This Agreement sets forth the entire
                  agreement and understanding of the parties hereto in respect
                  of the subject matter contained herein, and supersedes all
                  prior-agreements, promises, letters of intent, covenants,
                  arrangements, communications, representations or warranties,
                  whether oral or written, by any party hereto or by any Related
                  Person of any party hereto. All Exhibits attached hereto, the
                  Disclosure Schedule, any exhibits thereto and all
                  certificates, documents and other instruments delivered or to
                  be delivered pursuant to the terms hereof are hereby expressly
                  made a part of this Agreement as fully as though set forth
                  herein, and all references herein to the terms "this
                  Agreement", "hereunder", "herein", "hereby" or "hereto" shall
                  be deemed to refer to this Agreement and to all such writings.

         12.10.   Third Parties. Except as specifically set forth or referred to
                  herein, nothing in this Agreement, expressed or implied, is
                  intended or shall be construed to confer upon or give to any
                  person, firm, partnership, corporation or other entity other
                  than the parties hereto and their successors or permitted
                  assigns, any rights or remedies under or by reason of this
                  Agreement.

         12.11.   Severability. The invalidity of any one or more of the words,
                  phrases, sentences, clauses, sections or subsections contained
                  in this Agreement shall not affect the enforceability of the
                  remaining portions of this Agreement or any part hereof, all
                  of which are inserted conditionally on their being valid in
                  law, and, in the event that any one or more of the words,
                  phrases, sentences, clauses, sections or subsections contained
                  in this Agreement shall be declared invalid by a court of
                  competent jurisdiction, this Agreement shall be construed as
                  if such invalid word or words, phrase or phrases, sentence or
                  sentences, clause or clauses, section or sections, or
                  subsection or subsections had not been inserted.


                                       14
<PAGE>   18
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the day and year first above written.

/s/ Diane Goodman                                          /s/ Seth Lebner
- -------------------------                                  ---------------------
Diane Goodman                                              Seth Lehner



KTI Plastic Recycling, Inc.                                Manner, Incorporated

By: /s/ Martin J. Sergi                                    By: Diane Goodman
- -------------------------                                  ---------------------
Title: President                                           Title:   President



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