<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):
September 30, 1997
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 2. Acquisition or Disposition of Assets.
On September 30, 1997, KTI, Inc., a New Jersey corporation (the Company or
the Registrant) purchased a 49.5% limited partnership interest in Penobscot
Energy Recovery Company, Limited Partnership, a Maine limited partnership
("PERC") from The Prudential Insurance Company of America ("Prudential") for
approximately $11.7 million in cash. In addition the Company assumed certain
liabilities of Prudential by the payment of cash in the amount of $200,000 to
Prudential and the issuance of Letters of Credit to Morgan Guaranty Trust
Company of New York ("Morgan Guaranty") for approximately $3.9 million,
replacing obligations of Prudential to Morgan Guaranty. At the same time, the
Company purchased an option for $300,000 to buy the remaining 15.2% interest of
Prudential in PERC for a price of $2.1 million. The option to purchase
Prudential's remaining limited partnership interest terminates on October 31,
1998.
With this purchase, the Company's interest in PERC has increased to 56.5%.
Prudential owns a 15.2% limited partnership interest. A subsidiary of Pacificorp
holds the remaining 28.3% interest in PERC, 3% as a general partner and 25.3% as
a limited partner.
PERC is located in Orrington, Maine and owns a 25 megawatt waste to energy
power generating plant. Power is produced by processing approximately 250,000
tons of municipal solid waste received from 230 communities in Maine. The power
is sold to Bangor Hydro-Electric Company under a long term power supply
contract. PERC had $30.3 million of revenue and $6.1 million of net income in
1996. For the six months ended on June 30, 1997, PERC had revenue of $15.1
million and net income of $3.4 million.
Item 5. Other Events.
In early October 1997, WEXFORD KTI LLC converted all of its $5 million
principal amount Convertible Subordinated Promissory Note dated as of October
23, 1996 into 618,609 shares of the Company's common stock.
Item 6. Resignation of Registrant's Director.
Kenneth A. Rubin, an Officer of WEXFORD KTI LLC, resigned as a director of
the Company. No disagreement exists, to the knowledge of the Company, between
Mr. Rubin and the Company as to the Company's operations, policies or practices.
<PAGE> 3
Item 7. Financial Statements and Exhibits
(a) Financial Statements of the business acquired.
The audited balance sheet of Penobscot Energy Recovery Company, Limited
Partnership, as of December 31, 1996 and 1995 and the related statements of
income, changes in partners' capital and cash flow for each of the three years
in the period ended December 31, 1996 were included in the Registrant's Form
10-K for the fiscal year ended December 31, 1996.
(b) Pro Forma Financial information.
It is impractical to provide the required pro forma financial information at
this time. The results of the Registrant's investment in Penobscot Energy
Recovery Company, Limited Partnership have previously been reported on an equity
basis. The required consolidated financial information will be reported in the
Form 10-Q for the period ended September 30, 1997.
(c) Exhibits.
Exhibit Number Description
-------------- -----------
4.1 PURCHASE AND OPTION AGREEMENT by and between PERC
Management Company Limited Partnership and The
Prudential Insurance Company of America dated September
30, 1997. The exhibits to the PURCHASE AND OPTION
AGREEMENT do not contain information which is material
to an investment decision.
4.2 SECOND AMENDMENT TO THE SECOND AMENDED AND RESTATED
AGREEMENT AND CERTIFICATE OF LIMITED PARTNERSHIP OF
PENOBSCOT ENERGY RECOVERY COMPANY, LIMITED PARTNERSHIP
dated as of September 29, 1997.
4.3 ASSIGNMENT AND ASSUMPTION AGREEMENT between The
Prudential Insurance Company of America and PERC
Management Company Limited Partnership dated as of
September 29, 1997 re Penobscot Energy Recovery Company,
Limited Partnership.
4.4 AMENDMENT NO. 1 TO REIMBURSEMENT AGREEMENT AND RELEASE
OF ASSIGNMENT DATED as of September 29, 1997 to the
Reimbursement Agreement dated as of May 28, 1991 of
Penobscot Energy Recovery Company, Limited Partnership
in favor of Morgan Guaranty Trust Company of New York re
Penobscot Energy Recovery Company, Limited Partnership.
<PAGE> 4
4.5 ASSIGNMENT AND ASSUMPTION AGREEMENT between The
Prudential Insurance Company of America and PERC
Management Company Limited Partnership dated as of
September 29, 1997 re Orrington Waste Ltd., Limited
Partnership.
4.6 AMENDMENT NO. 1 TO REIMBURSEMENT AGREEMENT AND RELEASE
OF ASSIGNMENT DATED as of September 29, 1997 to the
Reimbursement Agreement dated as of May 28, 1991 of
Penobscot Energy Recovery Company, Limited Partnership
in favor of Morgan Guaranty Trust Company of New York re
Orrington Waste Ltd., Limited Partnership.
4.7 News release dated October 1, 1997.
4.8 Letter of Kenneth A. Rubin dated September 22, 1997.
<PAGE> 5
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.
(the Registrant)
Dated: October 15, 1997 By: /s/ Martin J. Sergi
-----------------------------
Name: Martin J. Sergi
Title: President
<PAGE> 6
EXHIBIT INDEX
Exhibit Number Description
-------------- -----------
4.1 PURCHASE AND OPTION AGREEMENT by and between PERC
Management Company Limited Partnership and The
Prudential Insurance Company of America dated September
30, 1997. The exhibits to the PURCHASE AND OPTION
AGREEMENT do not contain information which is material
to an investment decision.
4.2 SECOND AMENDMENT TO THE SECOND AMENDED AND RESTATED
AGREEMENT AND CERTIFICATE OF LIMITED PARTNERSHIP OF
PENOBSCOT ENERGY RECOVERY COMPANY, LIMITED PARTNERSHIP
dated as of September 29, 1997.
4.3 ASSIGNMENT AND ASSUMPTION AGREEMENT between The
Prudential Insurance Company of America and PERC
Management Company Limited Partnership dated as of
September 29, 1997 re Penobscot Energy Recovery Company,
Limited Partnership.
4.4 AMENDMENT NO. 1 TO REIMBURSEMENT AGREEMENT AND RELEASE
OF ASSIGNMENT DATED as of September 29, 1997 to the
Reimbursement Agreement dated as of May 28, 1991 of
Penobscot Energy Recovery Company, Limited Partnership
in favor of Morgan Guaranty Trust Company of New York re
Penobscot Energy Recovery Company, Limited Partnership.
<PAGE> 7
4.5 ASSIGNMENT AND ASSUMPTION AGREEMENT between The
Prudential Insurance Company of America and PERC
Management Company Limited Partnership dated as of
September 29, 1997 re Orrington Waste Ltd., Limited
Partnership.
4.6 AMENDMENT NO. 1 TO REIMBURSEMENT AGREEMENT AND RELEASE
OF ASSIGNMENT DATED as of September 29, 1997 to the
Reimbursement Agreement dated as of May 28, 1991 of
Penobscot Energy Recovery Company, Limited Partnership
in favor of Morgan Guaranty Trust Company of New York re
Orrington Waste Ltd., Limited Partnership.
4.7 News release dated October 1, 1997.
4.8 Letter of Kenneth A. Rubin dated September 22, 1997.
<PAGE> 1
==============================================================================
PURCHASE AND OPTION AGREEMENT
by and between
PERC Management Company Limited Partnership
and
The Prudential Insurance Company of America
September 1997
==============================================================================
<PAGE> 2
PURCHASE AND OPTION AGREEMENT
This PURCHASE AND OPTION AGREEMENT (the "Agreement"), dated as of September __,
1997, is made and entered into by and between PERC Management Company Limited
Partnership, a Maine limited partnership ("Buyer"), and The Prudential Insurance
Company of America, a New Jersey mutual insurance company ("Seller").
WHEREAS, Seller desires to sell to Buyer, and Buyer desires to purchase from
Seller, on the terms and subject to the conditions set forth in this Agreement,
77% of Seller's right, title and interest as a limited partner in and to
Penobscot Energy Recovery Company, Limited Partnership, a Maine limited
partnership (the "PERC Partnership") and of its right, title and interest in, to
and under the Second Amended and Restated Agreement and Certificate of Limited
Partnership, dated as of May 15, 1986, among Buyer, Energy National, Inc., a
Utah corporation ("ENI"), and Seller, as amended by the First Amendment, dated
as of June 14, 1991 (as so amended, the "PERC Partnership Agreement"), which 77%
interest in the PERC Partnership and PERC Partnership Agreement is hereinafter
referred to as the "PERC Assigned Interest."
WHEREAS, Seller desires to grant to Buyer, and Buyer desires to purchase from
Seller, on the terms set forth in this Agreement, an option to purchase the
remaining 23% of the Seller's right, title and interest as a limited partner in
and to the PERC Partnership and the PERC Partnership Agreement (including any
distributions of, or resulting from, warrants currently held or that may be
acquired by the PERC Partnership that entitle the holder to acquire securities
of Bangor Hydro-electric Company, a Maine corporation, but excluding the next
annual distribution of "Net Cash Flow" (as defined in the PERC Partnership
Agreement) to be made in respect of such 23% limited partnership interest
pursuant to Section 5 of the PERC Partnership Agreement (expected to be made in
or about April 1998), any other distributions of Net Cash Flow made in respect
of such 23% limited partnership interest for the period commencing on the
Closing Date (as hereinafter defined) and ending on the Exercise Date (as
hereinafter defined) and any distributions made as a result of a Refunding
(defined below) (provided such Refunding occurs during the Option Term (defined
below)), which 23% interest (after giving effect to the foregoing adjustments)
in the PERC Partnership is hereafter referred to as the "Option Interest."
WHEREAS, Seller desires to sell, and Buyer desires to purchase from Seller, on
the terms and subject to the conditions set forth in this Agreement, all of
Seller's right, title and interest as a limited partner (comprising an 83.333%
limited partnership interest) in and to Orrington Waste, Ltd. Limited
Partnership, an Oregon limited partnership (the "OWL Partnership"), and all of
Seller's right, title and interest in, to and under the Agreement of Limited
Partnership, dated January 8, 1993, between Pacific Orrington Energy, Inc., an
Oregon corporation ("OEI"), and Seller (the "OWL Partnership Agreement"), which
interest in and to the OWL Partnership and in, to and under the OWL Partnership
Agreement is hereinafter referred to as the "OWL Assigned Interest."
-2-
<PAGE> 3
NOW, THEREFORE, in consideration of the mutual covenants,
representations, warranties and agreements and the conditions set forth in this
Agreement, Buyer and Seller hereby agree as follows:
ARTICLE I - TRANSFER OF INTERESTS AND PURCHASE PLAN
1.01 Transfer of PERC Assigned Interest and OWL Assigned Interest.
On the terms and subject to all of the conditions set forth in this Agreement,
at the Closing (as hereinafter defined), Seller shall sell, transfer and assign
to Buyer, and Buyer shall purchase and acquire from Seller, all of Seller's
right, title and interest, as of the date hereof, in and to the PERC Assigned
Interest and all of Seller's right, title and interest in and to the OWL
Assigned Interest.
1.02 Amount. The purchase price for the PERC Assigned Interest shall
be Eleven Million Seven Hundred Thirty-Six Thousand Nine Hundred and Five
Dollars ($11,736,905) (the "PERC Purchase Price") and the purchase price for the
OWL Assigned Interest shall be Two Hundred Thousand Dollars ($200,000) (the "OWL
Purchase Price").
1.03 Manner of Payment. On the terms and subject to all of the
conditions set forth in this Agreement, Buyer shall pay to Seller the PERC
Purchase Price and the OWL Purchase Price by wire transfer of such amounts (in
immediately available funds) on the Closing Date to Bank of New York, New York,
New York, ABA No.021u000u018, Account No.89003-05290, PIC Misc. Pooled Asset
Account, Penobscot LP, or to such other account as Seller may notify Buyer of in
writing.
ARTICLE II - OPTION AND OPTION PRICE
2.01 Grant of Option. On the terms and subject to all of the
conditions set forth in this Agreement, Seller hereby grants to Buyer, effective
as of the Closing Date, the option to purchase the Option Interest (the
"Option").
2.02 Option and Exercise Price. The purchase price of the Option
shall be Three Hundred Thousand Dollars ($300,000) (the "Option Price"). The
exercise price of the Option shall be Two Million One Hundred Thousand Dollars
($2,100,000) (the "Exercise Price"). If the Option is exercised, the Option
Price shall not be applied to the Exercise Price.
2.03 Option Term. Buyer may exercise the Option at any time from the
Closing Date until the later of (i) the thirteenth (13th) month following the
Closing Date, and (ii) seven months following the closing date of the refunding
of the Floating Rate Demand Resource Recovery Revenue Bonds (Penobscot Energy
Recovery Company Project -- Series 1986 A and B (the "Refunding")), issued by
the Town of Orrington, Maine, pursuant to that certain Trust Indenture, dated
April 1, 1986 between the Town of Orrington and Mellon Bank, N.A., as trustee,
as supplemented, but in no event shall the Option expire later than December 31,
1998 (the "Option Term").
-3-
<PAGE> 4
2.04 Manner of Payment of Option Price. On the terms and subject to
all of the conditions set forth in this Agreement, Buyer shall pay to Seller the
Option Price by wire transfer of such amount (in immediately available funds) on
the Closing Date to the account named in Section 1.03 or to such other account
as Seller may notify Buyer of in writing.
2.05 Method of Exercise and Payment of Exercise Price. The Option
may be exercised by delivery, within the Option Term, of written notice to the
Seller at least 30 days prior to the intended date of exercise (the "Exercise
Date") of the Option. On the Exercise Date, Buyer and Seller shall follow the
same closing and payment procedures as are described in Articles III and VI of
this Agreement.
ARTICLE III - CLOSING
3.01 Closing. The closing of the transactions contemplated by
Article I (the "Closing") and Article II of this Agreement shall take place at
the offices of Buyer. The Closing shall take place on the date hereof or at such
other location, time or date as may be agreed to in writing between Seller and
Buyer (such date of the Closing being herein called the "Closing Date").
3.02 General Procedure. At the Closing, each party shall deliver to
the party entitled to receipt thereof the documents required to be delivered
pursuant to Articles VI and VII hereof and such other documents, instruments and
materials (or complete and accurate copies thereof, where appropriate) as may be
reasonably required in order to effectuate the intent and provisions of this
Agreement, and all such documents, instruments and materials shall be reasonably
satisfactory in form and substance to counsel for the receiving party. The
conveyance, transfer, assignment and delivery of the PERC Assigned Interest, the
OWL Assigned Interest, or the Option Interest, as the case may be, shall be
effected by Seller's execution and delivery to Buyer of an assignment
substantially in the form attached hereto as Exhibit A (the "PERC Assignment"),
Exhibit B hereto (the "OWL Assignment") or Exhibit C hereto (the "PERC Option
Assignment"), respectively, and such other instruments of conveyance, transfer,
assignment and delivery as Buyer shall reasonably request to cause Seller to
transfer, convey, assign and deliver the PERC Assigned Interest, the OWL
Assigned Interest or the Option Interest, as the case may be, to Buyer.
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Buyer that:
4.01 Execution, Delivery; Valid and Binding Agreement. The
execution, delivery and performance of this Agreement by Seller and the
consummation of the transactions contemplated hereby have been duly and validly
authorized by Seller and no other proceedings on its part are necessary to
authorize the execution, delivery and performance of this Agreement. This
Agreement has been duly executed and delivered by Seller and, assuming that this
Agreement is the valid and binding agreement of Buyer, constitutes the valid and
binding obligation of Seller, enforceable in accordance with its terms, except
as such enforcement may be limited by applicable
-4-
<PAGE> 5
bankruptcy, insolvency, reorganization, moratorium or other laws of general
application affecting enforcement of creditors' rights or by general principles
of equity.
4.02 No Breach. The execution, delivery and performance of this
Agreement by Seller and the consummation of the transactions contemplated hereby
do not conflict with or result in any breach of any of the provisions of, or
constitute a default under, result in a violation of, result in the creation of
a right of termination or acceleration or any lien, security interest, charge or
authorization, consent, approval, exemption or other action by or notice to any
court or other governmental body, under the provisions of any indenture,
mortgage, lease, loan agreement or other agreement or instrument by which
Seller, the PERC Assigned Interest, the OWL Assigned Interest or the Option
Interest are bound or affected or any law, statute, rule or regulation or order,
judgment or decree to which Seller, the PERC Assigned Interest or the Option
Interest are subject.
4.03 Good Title; No Liens. Seller owns good title to the PERC
Assigned Interest, the Option Interest and the OWL Assigned Interest, free and
clear of all liens and encumbrances. Seller has not previously sold, transferred
or assigned any of its interest in the PERC Partnership (other than previous
partial sales of such interest to Buyer, if any) or the OWL Partnership, nor has
it acquired any of its interest in the PERC Partnership during the past twelve
months. Seller agrees not to sell, assign, transfer or in any way encumber the
Option Interest during the Option Term.
ARTICLE V - REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Seller that:
5.01 Execution, Delivery; Valid and Binding Agreement. The
execution, delivery and performance of this Agreement by Buyer and the
consummation of the transactions contemplated hereby have been duly and validly
authorized by Buyer, and no other corporate proceedings on its part are
necessary to authorize the execution, delivery or performance of this Agreement.
This Agreement has been duly executed and delivered by Buyer and, assuming that
this Agreement is the valid and binding agreement of Seller, constitutes the
valid and binding obligation of Buyer, enforceable in accordance with its terms,
except as such enforcement may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application affecting
enforcement of creditors' rights or by general principles of equity.
5.02 No Breach. The execution, delivery and performance of this
Agreement by Buyer and the consummation by Buyer of the transactions
contemplated hereby do not conflict with or result in any breach of any of the
provisions of, constitute a default under, result in a violation of, result in
the creation of a right of termination or acceleration or any lien, security
interest, charge or encumbrance upon any assets of Buyer, or require any
authorization, consent, approval, exemption or other action by or notice to any
bank, trustee or other person (however constituted) or any court or other
governmental body, under the provisions of any indenture, mortgage, lease, loan
agreement or other agreement or instrument by which Buyer is bound or affected
(other than those obtained and in full force and effect as of the Closing Date
or closing
-5-
<PAGE> 6
date for the exercise of the Option, as applicable), or any law, statute, rule
or regulation or order, judgment or decree to which Buyer is subject. The
execution of the Agreement and the Assignment Agreement is authorized by the
PERC Partnership Agreement and no further consent or approval of the partners of
the PERC Partnership, other than those expressly contemplated in Section VII
hereof, is required.
5.03 Accredited Investor; Investment Purposes. Buyer is an
"accredited investor" as defined under Regulation D promulgated under the
Securities Act of 1933, as amended. Buyer is acquiring the PERC Assigned
Interest, the OWL Assigned Interest, and the Option, and, upon exercise of the
Option will acquire the Option Interest, for its own account for investment and
not with a view to, or for sale or resale in connection with, any public
distribution thereof or with any present intention of selling, distributing or
otherwise disposing of the PERC Assigned Interest, the OWL Assigned Interest,
the Option or the Option Interest, except such sales thereof as are made not in
violation of the Securities Act of 1933, as amended, the applicable securities
or "blue sky" laws of any State and any other applicable law. Buyer possesses
sufficient knowledge and experience in financial and business matters so that it
is capable of evaluating the merits and risks of purchasing the PERC Assigned
Interest, the OWL Assigned Interest, the Option and the Option Interest, as the
case may be.
5.04 Investigation. Buyer has performed such investigations and
undertaken such due diligence in respect of the PERC Partnership, the OWL
Partnership, the assets of each such partnership, the PERC Partnership
Agreement, the OWL Partnership Agreement and the documents and agreements
related thereto as it in the exercise of its independent judgment deemed
necessary under the circumstances. Buyer is entering into this Agreement and the
transactions contemplated hereby without reliance upon any representation or
warranty from Seller other than such representations and warranties as are
expressly set forth in this Agreement and the agreements, certificates and other
documents executed and delivered by Seller as of the Closing Date.
5.05 Access to Information. Buyer has provided to Seller full access
to all of the books and records of the PERC Partnership and has caused OEI to
provide to Seller full access to all of the books and records of the OWL
Partnership and has provided to Seller all agreements (including the most recent
drafts of documents proposed to be entered into in connection with the
Refunding) material to an appraisal by Seller of the value of the PERC Assigned
Interest, the OWL Assigned Interest, the Option and the Option Interest. Buyer
hereby represents that, other than the Refunding, the restructuring of the power
purchase agreement with Bangor Hydro-electric Company and the related waste
disposal agreements, there are no pending or proposed transactions, and neither
the Buyer nor PERC Partnership are currently involved in any negotiations, that
are or could be material to an appraisal by Seller of the value of the PERC
Assigned Interest, the OWL Assigned Interest, the Option and the Option
Interest.
ARTICLE VI - THE CLOSING
6.01 Seller's Closing Obligations. On the Closing Date (or the closing date of
the Option Interest, if the Option is exercised), Seller shall have (a)delivered
to Buyer the PERC Assignment
-6-
<PAGE> 7
and the OWL Assignment (on the Closing Date) or the PERC Option Assignment (on
the Exercise Date) and such other instruments of conveyance, transfer,
assignment and delivery as Buyer shall have reasonably requested pursuant to
Section 3.02 hereof; and (b)satisfied (or Buyer has waived in writing) each of
the conditions to Buyer's obligations as set forth in Article VI.
6.02 Buyer's Closing Obligations. On the Closing Date (or the closing date of
the Option Interest, if the Option is exercised), Buyer shall have (a)delivered
to Seller a wire transfer in immediately available funds in the amount of
$12,236,905 (or $2,100,000, upon exercise of the Option) and a duly executed
counterpart of each of the PERC Assignment and the OWL Assignment; and
(b)satisfied (or Seller has waived in writing) each of the conditions to
Seller's obligations set forth in Article VII.
ARTICLE VII - CONDITIONS TO CLOSING
7.01 Conditions to Seller's Obligations. The obligations of Seller hereunder are
subject to the satisfaction, or waiver in writing by Buyer, as of the Closing
Date, of the following conditions:
(a) Amendment of PERC Partnership Agreement. The PERC Partnership
Agreement shall have been amended as of the Closing Date, (i) to adjust the
percentage interests of partners to reflect the sale of the PERC Assigned
Interest, (ii) to relieve Seller of all obligations under the PERC Partnership
Agreement to make capital contributions or other payments to the PERC
Partnership, (iii) to provide for the transfer of the Option Interest upon
exercise of the Option without further amendment of the PERC Partnership
Agreement or consent of the other partners, (iv) to provide that the indemnity
contained in Section 8.1(b) shall survive the transfer of the PERC Partnership
Agreement and the Option Interest with respect to any claims Seller may have
arising out of actions or events occurring prior to the transfer of the Option
Interest, and (v) to make such other amendments thereof as are necessary to
reflect the transactions contemplated hereby, all by a Second Amendment in
substantially the form attached hereto as Exhibit D.
(b) PERC Capital Contribution Agreement. Buyer shall have caused
Seller to be released from all of its remaining obligations under that certain
Capital Contribution Agreement, dated May 15, 1986, as amended, between Seller
and the PERC Partnership, and shall have obtained the consent of Morgan Guaranty
Trust Company ("Morgan") to such release, and shall have obtained the consents
of the Required Banks (as defined in the Credit Agreement) to such release and
the transfers which are the subject matter of this Agreement, such release and
consents each to be in form and substance satisfactory to Seller.
(c) OEI Consent. Buyer shall have obtained for the benefit of Seller
the consent of OEI to the transfer of the OWL Partnership Interest.
(d) OWL Capital Contribution Agreement. Buyer shall have caused
Seller to be released from all of its remaining obligations under that certain
Capital Contribution Agreement, dated January 15, 1993, between Seller and the
OWL Partnership, and shall have
-7-
<PAGE> 8
obtained for the benefit of Seller the consent of Morgan to such release, such
release and consent each to be in form and substance satisfactory to Seller.
(e) Opinions; Certificates. Buyer shall have delivered to Seller an
opinion of counsel in form and substance satisfactory to Seller.
ARTICLE VIII - MISCELLANEOUS
8.01 Expenses. Except as otherwise expressly provided for herein,
Seller and Buyer will pay all of their own expenses in connection with the
negotiation of this Agreement, the performance of their respective obligations
hereunder and the consummation of the transactions contemplated by this
Agreement (whether consummated or not); provided that Buyer shall pay, when
invoiced, Seller's attorney's fees incurred in connection with the transactions
contemplated by the Agreement.
8.02 Amendment and Waiver. This Agreement may not be amended or
waived except in a writing executed by the party against which such amendment or
waiver is sought to be enforced. No course of dealing between any persons having
any interest in this Agreement will be deemed effective to modify or amend any
part of this Agreement or any rights or obligations of any person under or by
reason of this Agreement.
8.03 Complete Agreement. This Agreement contains the complete
agreement between the parties and supersedes any prior understandings,
agreements or representations by or between the parties, written or oral, which
may have related to the transfer of the PERC Assigned Interest, the Option , the
Option Interest or the OWL Assigned Interest.
8.04 Counterparts. This Agreement may be executed in one or more
counterparts, any one of which need not contain the signatures of more than one
party, but all such counterparts taken together will constitute one and the same
instrument.
8.05 Governing Law. The internal law, without regard to conflicts of
laws principles, of the State of New York will govern all questions concerning
the construction, validity and interpretation of this Agreement and the
performance of the obligations imposed by this Agreement.
8.06 Survival. The covenants, representations and warranties
contained in this Agreement shall survive the Closing.
-8-
<PAGE> 9
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the day and year first above written.
PERC MANAGEMENT COMPANY LIMITED
PARTNERSHIP
BY: PERC, INC., General Partner
By /s/ Martin J. Sergi
----------------------------------
Its: President
THE PRUDENTIAL INSURANCE COMPANY
OF AMERICA
By /s/ John Wand
----------------------------------
Its: Vice President
-9-
<PAGE> 10
EXHIBIT A - ASSIGNMENT OF PERC PARTNERSHIP INTEREST
THIS AGREEMENT, made and entered into as of the ____ day of ________, 199__, by
and between PERC Management Company Limited Partnership ("Buyer") and The
Prudential Insurance Company of America (the "Seller").
WITNESSETH:
WHEREAS, Seller owns a limited partnership interest in Penobscot Energy Recovery
Company, Limited Partnership (the "Partnership"); and
WHEREAS, Seller desires to sell to Buyer 77% of Seller's right, title and
interest in and to such partnership interest (the "PERC Assigned Interest"); and
WHEREAS, the Buyer desires to purchase the PERC Assigned Interest in
consideration of the cash payment to Seller of Eleven Million Seven Hundred
Thirty-Six Thousand Nine Hundred Five Dollars ($11,736,905).
NOW THEREFORE, Seller hereby transfers to Buyer all of Seller's right, title and
interest in and to the PERC Assigned Interest from and after the date hereof.
1. Buyer hereby, and by these presents, accepts the Sellers tender of the PERC
Assigned Interest and assumes Seller's obligations in respect thereof.
2. Seller and Buyer each warrants and represents that it is not in default
under any provision of the PERC Partnership Agreement.
3. This Agreement shall bind the parties hereto, their heirs, successors,
legal representatives and assigns.
IN WITNESS WHEREOF, the parties hereto have set their hands as of the day
and year first above written.
BUYER: SELLER:
PERC MANAGEMENT COMPANY THE PRUDENTIAL INSURANCE
LIMITED PARTNERSHIP COMPANY OF AMERICA
BY: PERC, INC., General Partner
By___________________________ By_______________________________
Its__________________________ Its______________________________
A-10
<PAGE> 11
EXHIBIT B - ASSIGNMENT OF OWL PARTNERSHIP INTEREST
THIS AGREEMENT, made and entered into as of the ____ day of ___________, 199__,
by and between PERC Management Company Limited Partnership ("Buyer") and The
Prudential Insurance Company of America (the "Seller").
WITNESSETH:
WHEREAS, Seller owns a limited partnership interest in Orrington Waste, Ltd.
Limited Partnership, an Oregon limited partnership (the "Partnership"); and
WHEREAS, Seller desires to sell to Buyer all of Seller's right, title and
interest in and to such partnership interest (the "Assigned Interest"); and
WHEREAS, the Buyer desires to purchase the Assigned Interest in
consideration of the cash payment to Seller of Two Hundred Thousand Dollars
($200,000).
NOW THEREFORE, Seller hereby transfers to Buyer all of Seller's right, title and
interest in and to the Assigned Interest from and after the date hereof.
1. Buyer hereby, and by these presents, accepts the Seller's tender of the
Assigned Interest and assumes Seller's obligations in respect thereof.
2. Seller and Buyer each warrants and represents that it is not in default
under any provision of the Agreement of Limited Partnership, dated January 8,
1993, as amended.
3. This Agreement shall bind the parties hereto, their heirs, successors,
legal representatives and assigns.
IN WITNESS WHEREOF, the parties hereto have set their hands as of the day
and year first above written.
BUYER: SELLER:
PERC MANAGEMENT COMPANY THE PRUDENTIAL INSURANCE
LIMITED PARTNERSHIP COMPANY OF AMERICA
By: PERC, INC., General Partner
By___________________________ By_______________________________
Its__________________________ Its______________________________
B-11
<PAGE> 12
EXHIBIT C - ASSIGNMENT OF REMAINING PERC PARTNERSHIP INTEREST
THIS AGREEMENT, made and entered into as of the ____ day of ___________, 199__,
by and between PERC Management Company Limited Partnership ("Buyer") and The
Prudential Insurance Company of America (the "Seller").
WITNESSETH:
WHEREAS, Seller originally owned a limited partnership interest in Penobscot
Energy Recovery Company, Limited Partnership (the "Partnership"); and
WHEREAS, on _________, 1997, Buyer purchased from Seller 77% of Seller's right,
title and interest in and to such partnership interest (the "Initial
Assignment"); and
WHEREAS, in conjunction with the Initial Assignment, Seller granted to Buyer an
option (the "Option") to purchase all of Seller's remaining right, title and
interest in and to the Partnership that was not transferred at the time of the
Initial Assignment (the "Option Interest"); and
WHEREAS, the Buyer desires to exercise the Option in consideration of the
cash payment to Seller of Two Million One Hundred Thousand Dollars ($2,100,000).
NOW THEREFORE, Seller hereby transfers to Buyer all of Seller's right, title and
interest in and to the Option Interest from and after the date hereof.
1. Buyer hereby, and by these presents, accepts the Seller's tender of the
Option Interest and assumes Seller's obligations in respect thereof.
2. Seller and Buyer each warrants and represents that it is not in default
under any provision of the PERC Partnership Agreement.
3. This Agreement shall bind the parties hereto, their heirs, successors,
legal representatives and assigns.
IN WITNESS WHEREOF, the parties hereto have set their hands as of the day
and year first above written.
BUYER: SELLER:
PERC MANAGEMENT COMPANY THE PRUDENTIAL INSURANCE
LIMITED PARTNERSHIP COMPANY OF AMERICA
BY: PERC, INC., General Partner
By___________________________ By_______________________________
Its__________________________ Its______________________________
C-12
<PAGE> 1
SECOND AMENDMENT
TO THE
SECOND AMENDED AND RESTATED AGREEMENT
AND CERTIFICATE OF LIMITED PARTNERSHIP OF
PENOBSCOT ENERGY RECOVERY COMPANY, LIMITED PARTNERSHIP
This Second Amendment dated as of September 29, 1997 amends the Second Amended
and Restated Agreement and Certificate of Limited Partnership of Penobscot
Energy Recovery Company, Limited Partnership originally entered into as of May
15, 1986 and amended by First Amendment dated June 14, 1991 (the "Partnership
Agreement"). The purpose of this Second Amendment is to provide for the partial
transfer of the limited partnership interest held by The Prudential Insurance
Company of America ("PRU") to PERC Management Company Limited Partnership
("PERC") pursuant to a Purchase and Option Agreement between PRU and PERC dated
September, 1997 (the "Purchase Agreement") and to make certain conforming
changes to the Partnership Agreement.
The Partners hereby agree as follows:
1. The Partners confirm that effective May 18, 1994 the Partnership name
was changed to Penobscot Energy Recovery Company, Limited Partnership.
2. The Partners consent to the transfer by PRU to PERC of a Seventy-Seven
Percent (77%) interest in PRU's right, title and interest as a Limited Partner
in the Partnership and under the Partnership Agreement, which constitutes a
49.50002% interest in the entire Partnership in accordance with the Purchase
Agreement and in granting such consent the Partners hereby (a) waive the
provisions of subsections 10.2 (a) (ii), (a) (iv) and (b) (i) to the extent such
provisions may still be applicable to, or binding upon, PRU and (b) consent to
the admission of PERC as a new Limited Partner under Section 10.4. PERC
represents that the transfer of all of PRU's interests to PERC shall not prevent
the Project from being owned and operated as a Qualifying Facility.
3. Section 1.56 of the Partnership Agreement is hereby amended and
restated to read in its entirety as follows:
1.56. LP Sharing Ratios. "LP Sharing Ratios" shall mean, with
respect to each Limited Partner, the following percentages:
ENI 28.5714%
PRU 16.4286%
PERC 55.0000%
4. Section 2.1 of the Partnership Agreement is amended by adding thereto
the following sentence:
-1-
<PAGE> 2
In furtherance of the foregoing, the General Partners are authorized
and directed to execute and deliver a Restated Certificate of
Limited Partnership for the Partnership in the form attached at
Exhibit A and to file the Restated Certificate with the Maine
Secretary of State.
5. Section 2.3 of the Partnership Agreement is amended by changing the
Partnerships address to PERC Management Company Limited Partnership, 110 Main
Street, Suite 1308, Saco, Maine 04072.
6. Section 2.8 of the Partnership Agreement is amended by adding the
following name and address of a Limited Partner:
PERC Management Company Limited Partnership
110 Main Street, Suite 1308
Saco, Maine 04072
7. Article 3 of the Partnership Agreement is amended by adding thereto new
Sections 3.16 and 3.17:
3.16 No Capital Contributions Due from PRU. The Partners,
jointly and severally, acknowledge that upon the effective date of
this Second Amendment, PRU shall have no further obligation to make
Capital Contributions, Subordinated Loans or other advances to the
Partnership and shall be, and hereby is, released of any and all
obligations to the Partnership under Sections 3.1, 3.2, 3.3 and 3.4
of the Partnership Agreement. PRU and PERC have each entered into a
separate Assignment and Assumption Agreement (the "Assumption
Agreement") whereby PERC has assumed all of PRU's obligations under
the separate PRU Capital Contribution Agreement as defined in
Section 1.74 of the Partnership Agreement and PRU has been released
from those obligations.
3.17 Assumption of Obligations of PRU. From and after the
effective date of the Assumption Agreement, PERC shall assume and be
responsible for any and all obligations to the Partnership of PRU
under Sections 3.2 and 3.4 of the Partnership Agreement.
8. Article 8 of the Partnership Agreement is amended by adding thereto the
following new Section 8.3:
8.3 Preservation of Indemnification. The rights of PRU to
indemnification under Article 8 are vested and shall survive and
remain binding on the Partnership notwithstanding consummation of
the transfer affected pursuant to this Second Amendment and
notwithstanding consummation of the anticipated complete withdrawal
of PRU as a Limited Partner pursuant the exercise by PERC of the
Option granted to PERC under the Purchase Agreement.
-2-
<PAGE> 3
9. The Partners hereby consent to the further transfer by PRU of up to all
of its remaining limited partnership interest to PERC pursuant to the Option
granted in the Purchase Agreement, and in connection therewith, hereby consent
to the complete withdrawal of PRU as a limited partner and authorize and direct
the General Partners to execute and deliver any and all documents reasonably
deemed necessary or appropriate to give effect to such withdrawal, including
such amendments as are necessary to reflect accurately the LP Sharing Ratios
applicable from and after such withdrawal.
10. PERC, in its capacity a new Limited Partner, agrees to be bound by all
of the terms, provisions and conditions of the Partnership Agreement, as amended
hereby.
11. The terms used herein, unless otherwise specifically defined, shall
have the meanings provided in the Partnership Agreement. Except as amended
hereby, the Partnership Agreement remains in full force and effect.
Dated: , 1997
THE GENERAL PARTNERS:
PERC MANAGEMENT COMPANY LIMITED
PARTNERSHIP
BY: PERC, INC.
General Partner
/s/ Martin J. Sergi
------------------------------
Its: President
ENERGY NATIONAL, INC.
/s/ Franklin D. Wareham
------------------------------
Its: Vice President
THE LIMITED PARTNERS:
THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA
/s/ John Wand
------------------------------
Its: Vice President
-3-
<PAGE> 4
ENERGY NATIONAL, INC.
/s/ Franklin D. Wareham
------------------------------
Its: Vice President
PERC MANAGEMENT COMPANY LIMITED
PARTNERSHIP
BY: PERC, INC.
General Partner
/s/ Martin J. Sergi
------------------------------
Its: Vice President
-4-
<PAGE> 1
ASSIGNMENT AND ASSUMPTION AGREEMENT
The Prudential Insurance Company of America ("Prudential") and PERC Management
Company Limited Partnership, a Maine limited partnership ("PERC Management") are
entering into this Assignment and Assumption Agreement (this "Agreement"), as of
this 29th day of September, 1997.
Section 1. Recitals.
1.1 Prudential and Penobscot Energy Recovery Company, Limited Partnership,
a Maine limited partnership (the "Partnership") have entered into that
certain Capital Contribution Agreement dated as of May 16, 1986, as
amended by Consent Agreement and Amendment No. 1 to Capital Contribution
Agreement dated as of June 30, 1989, Amendment No. 2 to Capital
Contribution Agreement dated as of May 28, 1991, and Consent Agreement and
Amendment No. 3 to Capital Contribution Agreement dated as of June 14,
1991 (collectively, the "Equity Capital Contribution Agreement").
1.2 Morgan Guaranty Trust Company of New York (the "Equity Bank") has
issued Irrevocable Letter of Credit No. S-864556 (the "Equity Letter of
Credit") dated May 30, 1991, in the original stated amount of $6,071,430
(of which $3,571,430 is available as of the date hereof) for the account
of the Partnership in favor of the Agent and Mellon Bank, N.A., as Trustee
(the "Trustee") under the Trust Indenture of dated as of April 1, 1986, as
amended and supplemented (the "Indenture") between the Town of Orrington,
Maine and the Trustee.
1.3 The Partnership has assigned and granted a security interest in its
interests in the Equity Capital Contribution Agreement to the Equity Bank
pursuant to an Assignment of Capital Contribution Agreement dated as of
May 28, 1991 (the "Equity Assignment"), in order to secure its obligations
under the Reimbursement Agreement dated as of May 28, 1991 (the "Equity
Credit Agreement").
1.4 Key Bank of New York ("Key Bank") has issued to the Equity Bank a
letter of credit in the stated amount of $3,571,430 (the "Key Bank LOC")
and, in consideration of its receipt thereof, the Equity Bank has entered
into a First Amendment of Reimbursement Agreement dated the date hereof,
pursuant to which the Equity Bank has consented to this Agreement and
released Prudential from its obligations under the Equity Capital
Contribution Agreement upon the assumption thereof by PERC Management
pursuant to this Agreement.
1.5 The Partnership, PERC Management, Energy National, Inc. ("ENI"),
Bankers Trust Company, as Agent (the "Agent") and each of the financial
institutions parties thereto (the "Banks") have entered into a Credit
Agreement dated as of May 15, 1986, as amended (the "Credit Agreement").
1.6 PERC Management and Prudential have entered into that certain Purchase
and Option Agreement dated as of the date hereof (the "LP Purchase
Agreement"), pursuant
-1-
<PAGE> 2
to which PERC Management has purchased a portion of Prudential's limited
partnership interests in the Partnership (the "LP Purchase") and has
purchased an option to purchase the remainder of Prudential's limited
partnership interests in the Partnership (the "Option") and, in connection
therewith, Prudential agreed to assign to PERC Management, and PERC
Management agreed to assume, the rights and obligations of Prudential
under the Equity Capital Contribution Agreement.
1.7 In connection with the LP Purchase Agreement, the partnership
agreement of the Partnership has been further amended by a Second
Amendment to Second Amended and Restated Partnership Agreement of
Penobscot Energy Recovery Company dated as of the date hereof (the
"Partnership Agreement Amendment").
1.8 Under Sections 6.2(k) and 6.2(n) of the Credit Agreement, the
Partnership has agreed not to change its equity structure or permit the
transfer of a limited partnership interest in the Partnership except as
contemplated by Sections 10.2 or 10.5 of the partnership agreement of the
Partnership, or to amend, modify or assign the partnership agreement of
the Partnership or the Equity Capital Contribution Agreement, unless it
obtains the consent thereto of the Required Banks (as defined in the
Credit Agreement). The Partnership, PERC Management and Prudential have
requested that the Agent and the Banks consent to this Agreement, the
Partnership Agreement Amendment and the transfer of Prudential's limited
partnership interests in the Partnership in accordance with the LP
Purchase Agreement.
1.9 Capitalized terms used herein and not otherwise defined have the
meanings given them in the Credit Agreement.
Section 2. Assignment, Assumption and Release. Prudential hereby assigns
to PERC Management, and PERC Management hereby assumes, each of the rights and
obligations of Prudential in, under and to the Equity Capital Contribution
Agreement, and the Partnership hereby releases Prudential from any and all
obligations under the Equity Capital Contribution Agreement.
Section 3. No Termination of Partnership. PERC Management hereby
represents and warrants to Prudential, the Agent and each of the Banks that the
transaction contemplated or effected by the LP Purchase Agreement and this
Agreement with respect to the LP Purchase will not cause a termination of the
Partnership under Section 708(b) of the Internal Revenue Code of 1986, as
amended.
Section 4. Ratification of Equity Capital Contribution Agreement and
Acknowledgment of Equity Letter of Credit. In all other respects the Equity
Capital Contribution Agreement is hereby ratified and confirmed, and all
references in the Credit Agreement or the Indenture to the Equity Capital
Contribution Agreement shall mean the Equity Capital Contribution Agreement as
assigned and assumed pursuant to this Agreement and the LP Purchase Agreement,
and all references to Prudential with respect thereto contained therein shall
hereafter be to PERC Management, as assignee of Prudential under this Agreement.
The Equity Letter of Credit remains outstanding and unaffected hereby and the
parties hereto acknowledge
-2-
<PAGE> 3
that nothing in this Agreement is intended to or shall be interpreted as
modifying or amending the Equity Letter of Credit.
Section 5. Amendment of LP Purchase Agreement. PERC Management and
Prudential agree that they will not amend, supplement or otherwise modify the LP
Purchase Agreement without the consent of the Required Banks.
Section 6. Additional Representations and Agreements of PERC Management.
PERC Management hereby represents and warrants to the Agent and each of the
Banks that the Agent and the Trustee have been provided true and correct copies
of each of the agreements relating to the subject matter hereof, in the forms of
such agreements as executed and delivered, and that such agreements constitute
the entire understanding and agreement relating to the subject matter hereof and
of the LP Purchase Agreement, other than certain agreements relating to the
purchase by PERC Management of Prudential's limited partnership interests in
Orrington Waste Ltd., Limited Partnership. PERC Management hereby agrees that it
will pay the costs and expenses, including attorney's fees, of the Agent and the
Banks in connection with the preparation, review, consent and enforcement of
this Agreement; provided, however, that nothing herein shall otherwise affect or
cause to be waived the Agent's or Banks' rights, or the Partnership's
obligations under the Credit Agreement.
Section 7. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same instrument.
Section 8. Governing Law. This Agreement shall be governed by the laws of
the State of New York without regard to principles of conflicts of law.
-3-
<PAGE> 4
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first written above.
PERC MANAGEMENT COMPANY LIMITED
PARTNERSHIP
By PERC, Inc.,
Its General Partner
By_______________________________
Its______________________________
THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA
By_______________________________
Its______________________________
-4-
<PAGE> 5
Accepted and agreed to as of the date first set forth above.
PENOBSCOT ENERGY RECOVERY COMPANY,
LIMITED PARTNERSHIP
By PERC Management Company Limited
Partnership, A General Partner
By PERC, Inc.,
Its General Partner
By /s/ Martin J. Sergi
------------------------------
Its: President
By Energy National, Inc.,
A General Partner
By /s/ Franklin D. Wareham
------------------------------
Its: Vice President
-5-
<PAGE> 6
Acknowledged as of the date first set forth above.
MELLON BANK, N.A., as Trustee
By /s/ B. W. Schenler
------------------------------
Title Vice President
------------------------------
Accepted and agreed to as of the date first set forth above.
BANKERS TRUST COMPANY,
Individually and as Agent
By /s/ Allan M. Stewart
------------------------------
Title Managing Director
------------------------------
THE TORONTO-DOMINION BANK
By /s/ Eileen M. Spengler
------------------------------
Title Vice President and Director
------------------------------
CANADIAN IMPERIAL BANK OF COMMERCE
(NEW YORK)
By /s/ Christine M. Galler
------------------------------
Title Vice President and Director
------------------------------
FLEET BANK OF MAINE
By
------------------------------
Title Authorized Signatory
------------------------------
KEYBANK NATIONAL ASSOCIATION
By /s/ Richard A. McNaughton
------------------------------
Title Vice President
------------------------------
THE BANK OF NOVA SCOTIA
By /s/ Stephen Foley
------------------------------
Title Authorized Signatory
------------------------------
-6-
<PAGE> 1
AMENDMENT NO. 1 TO REIMBURSEMENT AGREEMENT
AND RELEASE OF ASSIGNMENT
THIS AMENDMENT NO. 1 TO REIMBURSEMENT AGREEMENT (this "Amendment"), dated as of
the __ day of September, 1997, relates to that certain Reimbursement Agreement
dated as of May 28, 1991 (the "Agreement"), by Penobscot Energy Recovery
Company, Limited Partnership, a Maine limited partnership (the "Company"), in
favor of Morgan Guaranty Trust Company of New York (the "Bank").
WHEREAS, the Bank has issued the Letter of Credit in the original stated
amount of $6,071,430, which amount has been reduced to the current amount of
$3,571,430; and
WHEREAS, The Prudential Insurance Company of America (the "Limited Partner") has
heretofore entered into the Contribution Agreement, which the Company has
assigned to the Bank to secure repayment of amounts due the Bank under the
Agreement pursuant to the Assignment; and
WHEREAS, the Company has asked the Bank to reassign the Contribution Agreement
to the Company and to accept in substitution therefor a letter of credit to be
issued by Key Bank of New York for the account of KTI, Inc. ("KTI") in the
stated amount of $3,571,430, in favor of the Bank, and to amend the Agreement to
so provide, and the Bank has agreed to do so, as set forth herein. Terms used
herein and defined in the Agreement are used herein as therein defined.
NOW, THEREFORE, the parties hereto agree as follows:
Section 1. Amendments. The Agreement is amended as follows:
1.1 Section 1(a)(i) is amended by adding at the end thereof, the
following clause;
provided that, the Company's repayment obligation set forth in this Section 1(a)
shall be satisfied upon the drawing by the Bank of a like amount under an
irrevocable letter of credit issued by Key Bank of New York in the original
stated amount of $3,571,430, for the account of KTI, Inc., in the form of
Exhibit C (the "Key Bank Letter of Credit").
1.2 A new Exhibit C (the form of Key Bank Letter of Credit) is added
to the Agreement in the form attached hereto as Exhibit C.
Section 2. Release, Termination and Reassignment. The Bank hereby releases
and terminates the Assignment and reassigns the Contribution Agreement to the
Company.
Section 3. Deadline Drawing. If a Deadline Drawing has been made, the Bank
shall hold the proceeds of such Deadline Drawing as collateral for any drawings
made on the Letter of Credit from December 1, 1997 until December 31, 1997. The
Bank will deposit such proceeds in an interest-bearing money market savings
account (the "Pledged Account") established with the
-1-
<PAGE> 2
Bank (or its designated affiliate) in the name of KTI which account is hereby
pledged and a security interest granted to the Bank. To the extent a drawing
occurs under the Letter of Credit after December 1, 1997, the Bank shall apply
funds from the proceeds of the Deadline Drawing as reimbursement for such
drawing and all other amounts payable to the Bank under the Reimbursement
Agreement. At such time as the Letter of Credit is returned to the Bank for
cancellation and all Obligations under the Agreement have been paid or provided
for, the Bank shall pay over to KTI all funds and amounts then remaining in the
Pledged Account.
Section 4. Further Assurances. The Bank agrees to execute such releases,
terminations, reassignments, financing statement terminations or amendments or
such other like documents to effect such release, termination and reassignment
as the Company or the Limited Partner may reasonably request.
Section 5. No Consent or Waiver. Except as expressly provided for herein,
this Amendment shall not constitute a consent to any action or transaction or a
waiver or modification of any provision, term or condition of any of the
Agreement.
Section 6. Agreement Continues in Effect. All terms, provisions,
covenants, representations, warranties, agreements and conditions contained in
the Agreement shall remain in full force and effect except as expressly provided
for herein.
Section 7. Counterparts. This Amendment may be executed in any number of
counterparts, each of which counterpart when executed and delivered shall be
deemed an original and all of which counterparts, when taken together, shall
constitute one and the same Amendment.
Section 8. Governing Law. This Amendment shall be construed in accordance
with the laws of the State of New York, without regard to principles of conflict
of laws.
Section 9. References to Agreement. From and after the effectiveness of
this Amendment any reference to the Agreement shall be deemed to be a reference
to the Agreement as amended by this Amendment.
-2-
<PAGE> 3
IN WITNESS WHEREOF, the parties have caused this Amendment to be duly
executed as of the date first written above.
PENOBSCOT ENERGY RECOVERY COMPANY,
LIMITED PARTNERSHIP
By: PERC Management Company Limited
Partnership, A General Partner
thereof
By: PERC, Inc., the General Partner
thereof
By /s/ Martin J. Sergi
--------------------------------
Its: President
By: ENERGY NATIONAL, INC.
A General Partner thereof
By: /s/ Franklin D. Wareham
--------------------------------
Its: Vice President
PERC MANAGEMENT COMPANY LIMITED
PARTNERSHIP
By: PERC, Inc., the General Partner
thereof
By /s/ Martin J. Sergi
--------------------------------
Its: President
-3-
<PAGE> 4
ENERGY NATIONAL, INC.
By /s/ Franklin D. Wareham
-------------------------------
Its: Vice President
-4-
<PAGE> 5
MORGAN GUARANTY TRUST COMPANY OF NEW YORK
By /s/ Maria H. Dell'Aquila
---------------------------------
Title Vice President
-5-
<PAGE> 6
KTI, INC. is entering into this Amendment for purposes of granting the
security interest in the Pledged Account under Section 3 of this Amendment.
Dated: September _________, 1997
KTI, INC.
By /s/ Martin J. Sergi
------------------------------
Its: President
Accepted and acknowledged as of this ____ day of September, 1997.
THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA
By /s/ John Wand
------------------------------
Its: Vice President
-6-
<PAGE> 1
ASSIGNMENT AND ASSUMPTION AGREEMENT
The Prudential Insurance Company of America ("Prudential") and PERC Management
Company Limited Partnership, a Maine limited partnership ("PERC Management") are
entering into this Assignment and Assumption Agreement (this "Agreement"), as of
this ____ day of September, 1997.
Section 1. Recitals.
1.1 Prudential and Orrington Waste Ltd., Limited Partnership, an Oregon
limited partnership (the "Partnership") have entered into that certain
Capital Contribution Agreement dated as of January 15, 1993, as amended
(the "OWL Capital Contribution Agreement").
1.2 Morgan Guaranty Trust Company of New York (the "Bank") has issued
Irrevocable Letter of Credit No. S-866156 (the "Morgan Letter of Credit")
dated January 22, 1993, in the original stated amount of $1,000,000 (of
which $200,000 is available as of the date hereof) for the account of the
Partnership in favor of Jensen, Baird, Gardner & Henry, as trustee (the
"Trustee") under a Trust Agreement dated as of January 15, 1993, between
the Trustee and the City of Ellsworth, and the Towns of Pittsfield,
Newport, Detroit, Winterport, Frankfort, Prospect and Monroe.
1.3 The Partnership has assigned and granted a security interest in its
interests in the OWL Capital Contribution Agreement to the Bank pursuant
to an Assignment of Capital Contribution Agreement dated as of January 15,
1993 (the "Assignment"), in order to secure its obligations under the
Reimbursement Agreement dated as of January 15, 1993 (the "Reimbursement
Agreement").
1.4 Key Bank of New York ("Key Bank") has issued to the Bank a letter of
credit in the stated amount of $200,000 (the "Key Bank LOC") and, in
consideration of its receipt thereof, the Bank has entered into a First
Amendment of Reimbursement Agreement dated the date hereof, pursuant to
which the Bank has consented to this Agreement and released Prudential
from its obligations under the OWL Capital Contribution Agreement upon the
assumption thereof by PERC Management pursuant to this Agreement.
1.5 PERC Management and Prudential have entered into that certain Purchase
and Option Agreement dated as of the date hereof (the "LP Purchase
Agreement"), pursuant to which PERC Management has purchased Prudential's
limited partnership interests in the Partnership and, in connection
therewith, Prudential agreed to assign to PERC Management, and PERC
Management agreed to assume, the rights and obligations of Prudential
under the OWL Capital Contribution Agreement.
1.6 Capitalized terms used herein and not otherwise defined have the
meanings given them in the Reimbursement Agreement.
-1-
<PAGE> 2
Section 2. Assignment, Assumption and Release. Prudential hereby assigns
to PERC Management, and PERC Management hereby assumes, each of the rights and
obligations of Prudential in, under and to the OWL Capital Contribution
Agreement, and the Partnership hereby releases Prudential from any and all
obligations under the OWL Capital Contribution Agreement and acknowledges that
the obligations of PERC Management under the OWL Capital Contribution Agreement
shall be satisfied (to the extent received by the Bank) by the payment of a
drawing or drawings under the Key Bank LOC.
Section 3. Ratification of OWL Capital Contribution Agreement. In all
other respects the OWL Capital Contribution Agreement is hereby ratified and
confirmed, and all references to Prudential with respect thereto contained
therein shall hereafter be to PERC Management, as assignee of Prudential under
this Agreement.
Section 4. Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be an original, but all of which
together shall constitute one and the same instrument.
Section 5. Governing Law. This Agreement shall be governed by the
laws of the State of New York without regard to principles of conflicts of
law.
[Remainder of this page left blank intentionally]
-2-
<PAGE> 3
IN WITNESS WHEREOF, the parties have caused this Amendment to be duly
executed as of the date first written above.
PERC MANAGEMENT COMPANY LIMITED
PARTNERSHIP
By PERC, Inc.,
Its General Partner
By /s/ Martin J. Sergi
------------------------------
Its: President
THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA
By /s/ John Wand
------------------------------
Its: Vice President
-3-
<PAGE> 4
Accepted and agreed to as of the date first set forth above.
ORRINGTON WASTE LTD., LIMITED
PARTNERSHIP
By Pacific Orrington Energy, Inc.,
General Partner
By: /s/ Franklin D. Wareham
--------------------------------
Its: Vice Presdident
-4-
<PAGE> 1
AMENDMENT NO. 1 TO REIMBURSEMENT AGREEMENT
AND RELEASE OF ASSIGNMENT (OWL)
THIS AMENDMENT NO. 1 TO REIMBURSEMENT AGREEMENT (this "Amendment"), dated as of
the __ day of September, 1997, relates to that certain Reimbursement Agreement
dated as of January 15, 1993 (the "Agreement"), by Orrington Waste, Ltd. Limited
Partnership, an Oregon limited partnership (the "Company"), in favor of Morgan
Guaranty Trust Company of New York (the "Bank").
WHEREAS, the Bank has issued the Letter of Credit in the original stated
amount of $1,000,000, which amount has been reduced to the current amount of
$200,000; and
WHEREAS, The Prudential Insurance Company of America (the "Limited Partner") has
heretofore entered into the Contribution Agreement, which the Company has
assigned to the Bank to secure repayment of amounts due the Bank under the
Agreement pursuant to the Assignment; and
WHEREAS, pursuant to a Purchase and Option Agreement dated as of the date hereof
(the "LP Purchase Agreement") between the Limited Partner and PERC Management
Company Limited Partnership, a Maine limited partnership ("PMC"), the Limited
Partner has sold to PMC all of its rights and interests in and to its limited
partnership interest in the Company; and
WHEREAS, the Limited Partner, PMC and the Company have asked the Bank to
reassign the Contribution Agreement to the Company and to accept in substitution
therefor a letter of credit to be issued by Key Bank of New York for the account
of PMC's affiliate, KTI, Inc., a New Jersey corporation ("KTI"), in the stated
amount of $200,000, in favor of the Bank, and to amend the Agreement to so
provide, and the Bank has agreed to do so, as set forth herein. Terms used
herein and defined in the Agreement are used herein as therein defined.
NOW, THEREFORE, the parties hereto agree as follows:
Section 1. Amendments. The Agreement is amended as follows:
1.1 Section 1(a)(i) is amended by adding at the end thereof,
the following clause:
provided that, the Company's repayment obligation set forth in this
Section 1(a) shall be satisfied upon the drawing by the Bank
of a like amount under an irrevocable letter of credit issued
by Key Bank of New York in the original stated amount of
$200,000, for the account of KTI, Inc., in the form of Exhibit
C (the "Key Bank Letter of Credit").
1.2 A new Exhibit C (the form of Key Bank Letter of Credit) is added
to the Agreement in the form attached hereto as Exhibit C.
-1-
<PAGE> 2
Section 2. Release, Termination and Reassignment. The Bank hereby releases
and terminates the Assignment and reassigns the Contribution Agreement to the
Company.
Section 3. Deadline Drawing. If a Deadline Drawing has been made, the Bank
shall hold the proceeds of such Deadline Drawing as collateral for any drawings
made on the Letter of Credit from December 1, 1997 until December 31, 1997. The
Bank will deposit such proceeds in an interest-bearing money market savings
account (the "Pledged Account") established with the Bank (or its designated
affiliate) in the name of KTI, which account is hereby pledged and a security
interest granted to the Bank. To the extent a drawing occurs under the Letter of
Credit after December 1, 1997, the Bank shall apply funds from the proceeds of
the Deadline Drawing as reimbursement for such drawing and all other amounts
payable to the Bank under the Reimbursement Agreement. At such time as the
Letter of Credit is returned to the Bank for cancellation and all Obligations
under the Agreement have been paid or provided for, the Bank shall pay over to
KTI all funds and amounts then remaining in the Pledged Account.
Section 4. Further Assurances. The Bank agrees to execute such releases,
terminations, reassignments, financing statement terminations or amendments or
such other like documents to effect such release, termination and reassignment
as the Company or the Limited Partner may reasonably request.
Section 5. No Consent or Waiver. Except as expressly provided for herein,
this Amendment shall not constitute a consent to any action or transaction or a
waiver or modification of any provision, term or condition of any of the
Agreement.
Section 6. Agreement Continues in Effect. All terms, provisions,
covenants, representations, warranties, agreements and conditions contained in
the Agreement shall remain in full force and effect except as expressly provided
for herein.
Section 7. Counterparts. This Amendment may be executed in any number of
counterparts, each of which counterpart when executed and delivered shall be
deemed an original and all of which counterparts, when taken together, shall
constitute one and the same Amendment.
Section 8. Governing Law. This Amendment shall be construed in accordance
with the laws of the State of New York, without regard to principles of conflict
of laws.
Section 9. References to Agreement. From and after the effectiveness of
this Amendment any reference to the Agreement shall be deemed to be a reference
to the Agreement as amended by this Amendment.
[Remainder of this page left blank intentionally]
-2-
<PAGE> 3
IN WITNESS WHEREOF, the parties have caused this Amendment to be duly
executed as of the date first written above.
ORRINGTON WASTE, LTD. LIMITED PARTNERSHIP
By: Pacific Orrington Energy, Inc.
The General Partner thereof
By: /s/ Franklin D. Wareham
--------------------------------
Its: Vice Presdident
MORGAN GUARANTY TRUST COMPANY OF NEW YORK
By /s/ Maria Dell'Acquila
--------------------------------
Title: Vice President
-3-
<PAGE> 4
KTI, INC. is entering into this Amendment for purposes of granting the
security interest in the Pledged Account under Section 3 of this Amendment.
Dated: September __________, 1997
KTI, INC.
By /s/ Martin J. Sergi
------------------------------
Its: President
-4-
<PAGE> 5
Accepted and acknowledged as of this ___ day of September, 1997.
THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA
By: /s/ John Wand
-----------------------------
Its: Vice President
-5-
<PAGE> 6
Accepted and acknowledged as of this ___ day of September, 1997.
PERC MANAGEMENT COMPANY LIMITED
PARTNERSHIP
By: PERC, Inc., the General Partner
thereof
By /s/ Martin J. Sergi
--------------------------
Its: President
-6-
<PAGE> 1
Exhibit 4.7
[KTI, INC. LETTERHEAD]
NEWS RELEASE
FOR IMMEDIATE RELEASE
KTI ACQUIRES MAJORITY INTEREST IN
PENOBSCOT ENERGY RECOVERY COMPANY
Guttenberg, N. J. (Oct. 1, 1997) -- KTI, Inc. (Nasdaq: KTIE) announced
today that it has increased its ownership in the Penobscot Energy Recovery
Company (PERC) to 56.5% by purchasing a 49.5% limited partner interest from
Prudential Insurance Company of America for $11.7 million. KTI previously owned
a 7% general partnership interest in PERC. Prudential continues to own 15% of
PERC. KTI has an option to purchase this remaining interest within the next 12
months.
The remaining 28.3% of PERC is owned by Energy National, Inc. (ENT), a
subsidiary of PacificCorp., which is also a general partner of PERC.
Located in Orrington, Maine, PERC processes approximately 250,000 tons
of municipal solid waste a year from 230 Maine communities and generates 25
megawatts of electricity which is sold to Bangor Hydro Electric Company. PERC
generated $30.3 million in revenue and net income of $6.1 million in 1996. For
the six months ended June 30, 1997, PERC had revenues of $15.1 million and $3.4
million of net income.
Martin J. Sergi, president of KTI, said, "The completion of this
transaction is part of our ongoing strategy to maximize our ownership of the
waste to energy facilities which we operate. This purchase, which is accretive
to earnings, will make an enhanced contribution to our operating results."
KTI is an award winning environmental company engaged in integrated
waste processing and management in diversified services and markets. The
company processes over one million tons of material a year and is best known
for its expertise in the waste-to-energy sector. KTI was organized in 1983 to
develop and own waste-to-energy facilities with the dual purpose of providing a
means of disposal for non-hazardous municipal solid waste and of generating
electricity from alternative fuel sources. Since then, KTI's operations have
expanded to include the development of an integrated waste management business
providing not only municipal solid waste handling and disposal services, but
also wood waste processing, ash and municipal waste recycling, specialty waste
disposal, transportation facilitation services and transfer station operations.
In addition to PERC, KTI owns and operates another Maine
waste-to-energy facility, Maine Energy Recovery Company, in Biddeford which
converts non-hazardous solid waste from residential, commercial and industrial
sources into electric power. KTI has developed and operates a wood waste
processing and recycling facility in Lewiston, Maine. In Telogia, Fla., KTI
operates a 14-megawatt power plant and in nearby Cairo, Ga. owns a wood
chipping plant.
<PAGE> 2
KTI also holds a majority interest in America's only commercially
operational municipal waste ash recycling facility in Nashville, Tenn., owns a
Maryland company specializing in marketing post-industrial recycled plastics, a
recycling company in Biddeford, a world wide secondary fiber marketing company
based in Portland, Ore. and a Maine-based recycling company.
KTI will host a conference call to discuss this transaction and other
recent company events on Monday, October 6 at 11 a.m. EDT. The call will be
hosted by Marty Sergi and Ross Pirasteh, chairman of KTI. To participate in
this call, please telephone (800) 272-5652 any time after 10:55 a.m. on October
6. The pass code is "5989#." Please avoid using speakerphones.
For further information, contact Marty Sergi at KTI, Inc. (201)
854-7777 or Frank N. Hawkins, Jr., Hawk Associates, Inc. at (305) 852-2383.
Copies of KTI press releases, SEC filings, current price quotes, stock
charts, analysts' comments and other valuable information for investors may be
found on the website http://www.hawkassociates.com.
This release contains various forward looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934 which represent the company's expectations or
beliefs concerning future events of the company's financial performance. These
forward looking statements are qualified by important factors that could cause
actual results to differ materially from those in the forward looking
statements. Results actually activated may differ materially from expected
results included in these statements.
****
<PAGE> 1
EXHIBIT 4.8
WEXFORD MANAGEMENT LLC
411 West Putnam Avenue
Greenwich CT 06830
(203) 862-7000
Direct Dial: 862-7428
Direct Fax: 862-7471
E-Mail: [email protected]
September 22, 1997
Ross Pirasteh
Chairman of the Board
KTI, Inc.
7000 Boulevard East
Guttenberg, NJ 07093
Dear Ross:
I hereby resign effective immediately from my position as a director of KTI,
Inc. and as a member of the KTI Compensation Committee and Audit Committee.
Very Truly Yours,
/s/ Kenneth A. Rubin
- --------------------
Kenneth A. Rubin
