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):
June 19, 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 No.)
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)
ITEM 5. OTHER EVENTS
On April 21, 1997, KTI Recycling, Inc. ("Recycling"), a wholly owned
subsidiary of KTI, Inc., a New Jersey corporation (the "Company"), executed a
term sheet with Prins Recycling Corp. and certain of its subsidiaries
(collectively "Prins"). Prins is currently operating as debtors in possession
in bankruptcy reorganization proceedings under Title 11 of the U.S. Code that
are pending in the United States Bankruptcy Court for the District of New
Jersey. Prins currently operates three recycling facilities in Franklin Park,
Illinois (the "Franklin Park Facility"), Charlestown, Massachusetts (the "Boston
Facility") and Newark, New Jersey (the "Newark Facility") (collectively, "All
Facilities"). Pursuant to negotiations with the Committee for Unsecured
Creditors (the "Committee") in the Prins bankruptcy proceedings, the term sheet
was modified on May 22, 1997. The term sheet, as modified, contains the
following principal features:
A. Recycling will purchase all of the assets of Prins, other than certain
assets specifically excluded by Recycling, for cash and notes in the amount of
$13.1 million and the assumption of $500,000 in trade payables. The notes will
be accepted by PNC Bank, National Association ("PNC"), Prins' principal secured
creditor at par. In the event that any assets of Prins, other than inventory,
are sold after April 21, 1997, but before the closing date, such sales, if
accepted by Recycling, will reduce the purchase price dollar for dollar.
Recycling's purchase will be effected pursuant to a plan of reorganization.
B. Recycling has the right to ask Prins to accept or reject any contract
of Prins, currently in effect, subject to approval by the Bankruptcy Court.
C. The Company will contribute $1 million in working capital to
Recycling.
D. If the sale of All Facilities to Recycling is not completed for any
reason, the Bankruptcy Court will hold a hearing to authorize the sale of the
Franklin Park Facility to Recycling for $2 million net to Prins, subject to
higher and better offers. The Company has given a letter of credit to PNC
for $1 million to secure this obligation and has promised to deliver a note
for $1 million, supported by a guaranty by the Company.
E. If any of the facilities of Prins, other than the Franklin Park
Facility, are sold to a third party purchaser, Recycling will be entitled to a
breakup fee payable from the proceeds of such sale equal to the lesser of
$250,000 or 150% of Recycling's out of pocket costs. Recycling's right to
receive such fee is contingent upon Recycling executing a definitive agreement
to purchase such assets, subject only to Bankruptcy Court approval, due
diligence with respect to environmental matters, certain representations,
warranties and covenants and no material adverse changes that would frustrate
the essential purpose of the Company in purchasing the Prins assets.
F. Prins must agree not to solicit any offers to purchase the facilities
from any third party, but may respond to inquiries. Prins has requested the
Bankruptcy Court to provide that any higher offer, other than an offer for only
the Franklin Park Facility, must exceed Recycling's offer by not less than
$300,000.
G. The Bankruptcy Court must approve an Operations and Maintenance
Agreement (the "Management Agreement") in the form executed by Prins and KTI
Operations, Inc., a wholly owned subsidiary of the Company on April 21, 1997.
H. Recycling has until 45 days after the entry of a court order approving
the breakup fee, the topping amount and the backup sale of the Franklin Park
Facility to complete due diligence with respect to environmental matters.
On April 21, 1997, Recycling entered into an agreement with PNC (the "PNC
Agreement"). Pursuant to negotiations with the Committee, said agreement was
modified. The agreement, as modified on May 22, 1997, has the following
principal provisions:
A. PNC agreed to advance additional funds of approximately $1 million to
Prins, increasing the total debt of Prins to PNC up to a maximum of $9.5
million. The Company has agreed to guarantee up to 40% of such additional
advances, subject to a maximum guaranty of $400,000.
B. Recycling agreed to purchase the Franklin Park Facility of Prins for a
purchase price of $2 million, with no prorations, if such facility is not sold
to a third party prior to July 31, 1997, subject to Bankruptcy Court approval.
Recycling's obligation to purchase the Franklin Park Facility is secured by a $1
million letter of credit arranged by the Company.
C. In the event that Recycling purchases all of the assets of Prins, or
the Franklin Park Facility, PNC has agreed to accept a portion of such purchase
price in the form of notes with maturities of four to thirty months.
D. The Company has agreed to issue a warrant to PNC to purchase 30,000
shares of its Common Stock at an exercise price of $8.50 per share. The warrant
will expire on April 30, 2002. The shares of Common Stock covered by the
warrant are subject to a Registration Rights Agreement which requires the
Company to register such shares.
E. If PNC receives payment in full of its loans to Prins, less only such
discount as PNC voluntarily accepts, the Company will receive a management fee
of $500,000 at the time of such repayment.
On May 22, 1997, the Company, Prins, PNC and the Committee modified the
term sheet and the PNC Agreement by reading certain modifications into the
record of the hearing held with respect to the aforementioned motions. The
record of the hearing contained the following additional terms:
A. Prins shall give notice to parties who have expressed an interest in
the Prins facilities within ten days of the entry by the Bankruptcy Court of the
District of New Jersey of an order approving the breakup fee, the topping
provision, the no solicitation provision, the backup sale provision with respect
to the Franklin Park Facility and the Management Agreement (the "Approval
Order");
B. Any third party wishing to buy one or both of the Boston Facility or
the Newark Facility must submit a written bid on or before 5:00 EDT on July 7,
1997 (an "Alternate Bid");
C. If an Alternate Bid is submitted in a timely fashion, a hearing will
be held in the Bankruptcy Court on July 10, 1997. If an Alternate Bid is
accepted, such third party bidder must immediately execute a form Asset Purchase
Agreement and make a down payment of $1 million by certified check or deposit of
a letter of credit from a bank, previous approved by Prins, PNC and the
Committee.
D. Any third party wishing to buy only the Franklin Park Facility must
submit a written bid at least ten days in advance of any scheduled hearing for
such sale. A hearing on the sale of the Franklin Park Facility would be held on
the later of September 16, 1997 at 10:00 A.M. or following a decision of the
Bankruptcy Court to deny confirmation of the plan of reorganization pursuant to
which all facilities are to be sold to Recycling.
A successful offeror for the Franklin Park Facility must execute the form
Asset Purchase Agreement and deposit a down payment equal to $1 million in cash
or cash equivalent and close the sale within five business days.
E. For Plan purposes, PNC is an impaired creditor.
On June 19, 1997, the Bankruptcy Court of the District of New Jersey
entered the Approval Order. On June 24, 1997, Prins and Recycling delivered the
definitive Asset Purchase Agreement relating to the purchase of the assets of
Prins.
ITEM 7. EXHIBITS
Exhibit Number Description
4.1 Term sheet (Purchase of assets of Prins Recycling Corp. And
subsidiaries)
4.2 Agreement, dated as of April 21, 1997 between KTI Recycling,
Inc. and its subsidiaries and PNC Bank
4.3 Operations and Maintenance Agreement, dated as of April 21,
1997, by and between Prins Recycling Corp. and its
subsidiaries and KTI Operations, Inc.
4.4 Order of the Bankruptcy Court for the District of New
Jersey dated June 19, 1997.
4.5 Asset Purchase Agreement, dated as of June 24, 1997, between
Prins Recycling Corp. and its subsidiaries and KTI
Recycling, Inc. and its subsidiaries.
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: June 25, 1997 By: /s/ Martin J. Sergi
Name: Martin J. Sergi
Title: President
EXHIBIT 4.1
TERM SHEET
(PURCHASE OF ASSETS OF PRINS RECYCLING CORP. AND SUBSIDIARIES)
1. Buyer. KTI Recycling, Inc. (the "Buyer") is a Delaware corporation
that will acquire, own and operate certain assets to be purchased from Prins
Recycling Corp. and from such subsidiaries of Prins Recycling Corp.
(collectively, the "Seller") as may own any of such assets. KTI, Inc., a NASDAQ
National Market listed corporation ("KTI"), owns the Buyer. The term "Buyer"
shall include subsidiaries of KTI Recycling, Inc. that will own and operate the
purchased assets. The Buyer has organized three (3) new subsidiaries that will
own the assets and assume certain liabilities of each of the Facilities (as
hereinafter defined).
2. Assets to Be Purchased. All waste processing and recycling facilities
and related assets, tangible and intangible (including, without limitation,
intellectual property rights and accounts receivable, employee notes, security
deposits and other rights to payment (exclusive of claims of the bankruptcy
estates of the Seller based on preference claims or voidable transfer claims
under the provisions of the United States Bankruptcy Code), owned and operated
by Seller in Boston, Massachusetts (the "Boston Facility"), Franklin Park,
Illinois (the "Chicago Facility") and Newark, New Jersey (the "Newark Facility")
and any and all office furniture, office decorations, office equipment and
supplies, wherever located or stored (collectively, the "Facilities") excluding
such assets as may be specified herein or as otherwise specified in definitive
documentation governing the purchase contemplated hereby executed by the Seller
and the Buyer. The purchase proposed hereby shall be consummated in connection
with and pursuant to a confirmed plan of reorganization (the "Plan") of the
Seller and the purchase price shall be allocated to creditors thereunder. The
allocation of the consideration described herein shall not be construed to be,
and is not, an offer to assume the obligations to which such allocations are to
be made, unless expressly assumed by the Buyer in definitive documentation
governing the purchase contemplated hereby executed by the Seller and the Buyer.
The purchase price shall be paid no sooner than the closing of the purchase.
3. Consideration to Creditors under Plan of Reorganization. The net
purchase price to be paid by the Buyer for the purchase of the Facilities will
equal: (i) $9,500,000 in cash and promissory notes payable to PNC Bank, National
Association ("PNC"); (ii) $3,600,000 cash payable to the Seller, and (iii)
assumption of certain post-petition trade payables of the Seller in an amount
not to exceed $500,000. For purposes of this Term Sheet, the term "Total
Purchase Price" shall mean $13,600,000. The various allocations and manner of
payment are more particularly described below.
(a) Claim of PNC. The secured claim of PNC shall be satisfied as
follows:
(i) Cash in the amount of $2,000,000 shall be paid by the Buyer
to PNC on the closing date of acquisition of the Facilities. The foregoing
assumes an increase in the amount owed to PNC by the Seller from the approximate
amount of $8,500,000 that was outstanding on March 13, 1997 to $9,500,000. The
cash payment specified herein shall be reduced on the closing date of the
acquisition by an amount equal to the difference between (x) $1,000,000 and (y)
the lesser of $1,000,000 and the actual amount owed to PNC at closing of the
purchase in excess of $8,500,000 (the "PNC Reduction Amount"). For the
avoidance of doubt, the actual amount owed to PNC includes interest accrued at a
rate of interest equal to prime plus 3.5 percent and all other amounts PNC is
entitled to charge under the relevant credit documents. The increase from
$8,500,000 to $9,500,000 is conditioned, among other things, on such additional
amounts being advanced to the Seller and used to pay administrative obligations
of the Seller (including cure amounts under assumed executory contracts).
(ii) A promissory note in the principal amount equal to the
greater of $2,000,000 and a principal amount equal to 75% of Eligible Accounts
Receivable (as such term is defined under the existing PNC loan documents)
having an age of 90 days or less as of the closing date shall be executed and
delivered by the Buyer to PNC. This note shall bear interest at a per annum
rate that is equal to the prime rate of PNC plus 1/4%, which interest shall be
payable monthly and at maturity. Principal shall be payable in full on the date
that is six (6) months after the closing. The note shall be secured in part by
a first priority security interest in all accounts receivable purchased by the
Buyer, other than the accounts receivable of the Chicago Facility.
(iii) A promissory note in the principal amount of
$2,700,000, dated the closing date, shall be executed and delivered by the Buyer
to PNC. This note shall bear interest at a per annum rate that is at the then
prevailing commercial mortgage rate of PNC, which interest shall be payable
monthly and at maturity. Principal shall be payable in full on the date that is
one hundred twenty (120) days after the closing. The note shall be secured in
part by a first priority security interest in the Chicago Facility (including
its accounts receivable) and an irrevocable letter of credit satisfactory to PNC
in the face amount of $1 million, and KTI shall guarantee an additional $1
million of the principal amount thereof.
(iv) A promissory note for the balance of the Total Purchase
Price, not to exceed the principal amount of $2,800,000, dated the date of
closing, shall be executed and delivered by the Buyer to PNC. This note shall
bear interest at a rate that is equal to the prime rate of PNC plus one percent
per annum, which interest shall be payable monthly and on maturity. Principal
shall be payable in full on the date that is thirty (30) months after the date
of closing and prior to such date shall be payable in the following percentages
of the original principal amount of this note during the months set forth below.
Principal Months After
Percentage Effective Date
4% each month Thirteen to Twenty-fourth inclusive
5% Twenty-fifth to Twenty-ninth inclusive
27% Maturity
This note shall be secured in part by a first priority security interest in all
assets of the Newark Facility and the Boston Facility, exclusive of accounts
receivable, and shall have a maximum guarantee of $700,000 from KTI, Inc. The
amount of such guarantee shall decline in an amount equal to 25% of any
principal payments made on this note.
(v) It is the intention of the Buyer that, in connection with
purchase by the Buyer of the Facilities, PNC shall receive payment of its loans
in full, including accrued and unpaid interest, but no more than such sum.
(vi) The promissory notes referred to in Subsections 3(a)(ii),
3(a)(iii) and 3(a)(iv) shall each be cross-collateralized by collateral referred
to in the other subsections and secured by a first priority pledge of the stock
of the Buyer's subsidiaries that own the Facilities. Upon the payment in full
of the promissory note referred to in Subsection 3(ii), the collateral referred
to in such Subsection shall be released. Upon the payment in full of the
promissory note referred to in Subsection 3(iii), the collateral referred to in
such Subsection shall be released. If the promissory note referred to in
Subsection 3(a)(iv) is paid in full, the collateral referred to in such
Subsection shall be released.
(vii) As provided by the terms of a separate letter agreement
with PNC, if the Buyer does not purchase the Facilities for any reason, the
Buyer shall (and hereby irrevocably and unconditionally agrees to) immediately
purchase the Chicago Facility in an amount sufficient to result in net proceeds
payable to PNC equal to $2 million. This obligation of the Buyer shall be
secured by an irrevocable letter of credit satisfactory to PNC in the face
amount of $1 million. If the Buyer shall be required to purchase the Chicago
Facility as contemplated hereby, PNC may immediately draw upon the letter of
credit and shall deposit the proceeds thereof in an interest bearing escrow
account at PNC. Upon conveyance of the Chicago Facility to the Buyer, the
purchase price shall be paid to PNC by payment to PNC of the proceeds of such
escrow account and the balance shall be payable by the Buyer to PNC on the date
that is six (6) months after the date of such conveyance. The obligation of the
Buyer to pay the balance of the purchase price for the Chicago Facility shall be
evidenced by a promissory note, dated the closing date, executed and delivered
by the Buyer to PNC. The note shall bear interest at a per annum rate that is
at the then prevailing commercial mortgage rate of PNC, which interest shall be
payable monthly and at maturity. The note shall be secured by a first priority
security interest in the assets of the Chicago Facility and guaranteed by KTI.
(b) Allowed Administrative and "Cure" Claims. The sum of $3,600,000
in cash, plus the PNC Reduction Amount (if any), shall be provided by the Buyer
to the Seller to pay (i) allowed administrative and priority claims against the
Seller, other than post petition trade payables, (ii) amounts necessary to cure
defaults under contracts to be assumed by the Seller and assigned to the Buyer
and (iii) post-petition trade payables to the extent such trade payables exceed
$500,000.
(c) Claims of Unsecured Creditors. Upon confirmation of the Seller's
Plan of Reorganization, the class of unsecured creditors shall receive a cash
payment in an amount equal to the sum of $3,860,000 ($ 260,000 of which amount
shall be paid by PNC) plus the PNC Reduction Amount (if any) minus the amount
necessary to satisfy the obligations described in clauses(i) through (iii) of
Section 3(b).
(d) Post-Petition Trade Payables. The Buyer will assume allowed
trade payables with respect to the Facilities incurred by the Seller in the
ordinary course of its business operations during the pendency of its
reorganization proceeding in an amount up to $500,000.
(e) Reduction of Purchase Price. In the event that any of the assets
that are the subject of this Term Sheet are sold by the Seller to a third party
and Buyer agrees to proceed with the proposed purchase, the total purchase price
offered by the Buyer shall be reduced by the amount of the net proceeds of the
third party sale.
(f) Ally Capital Corp. Settlement. Notwithstanding anything in the
Term Sheet to the contrary, Buyer shall not acquire and shall not adjust the
Total Purchase Price in respect of any assets of the Debtors to be transferred,
returned, sold or otherwise conveyed to a third party consistent with the
settlement reached by the Debtors, Ally Capital Corp. and American Waste Control
of New York as set forth on the record of the hearing held before the Bankruptcy
Court on March 6, 1997 and embodied in a stipulation executed to date by the
Debtors and Ally Capital Corp. and previously provided to Buyer.
4. Working Capital. KTI will provide working capital to the Buyer in an
amount up to $1,000,000 in the form of a capital contribution.
5. Conditions Precedent.
(a) The order of the Bankruptcy Court confirming the Plan shall
provide for sale of the Facilities to the Buyer free and clear of all liens,
claims and encumbrances.
(b) No material adverse change shall occur prior to the closing of
the acquisition, unrelated to KTI, the Buyer or the Seller, that frustrates the
essential purpose of the Buyer in consummating the transactions contemplated
hereby, and no order of the Bankruptcy Court shall have been entered which
prohibits KTI from consummation of the transactions contemplated hereby.
(c) The Seller shall provide the Buyer with full access to all books
and records pertaining to the facilities to be purchased by the Buyer. The
Buyer shall have the period ending forty-five (45) days after entry of the order
described in Section 10 below to conduct due diligence with respect to
environmental matters and shall have no obligation to proceed with the proposed
acquisition if such environmental due diligence of KTI discloses that the actual
cost of remediation of any environmental conditions required under applicable
law (exclusive of "soft costs", such as consulting and engineering fees) not
indemnified against by any third party (and with respect to which
indemnification no counterclaims or offsets have been asserted) exceeds $50,000;
provided that if the Seller and/or PNC elect to pay the excess of such costs
over $50,000, KTI and the Buyer shall not be entitled to terminate the
transactions contemplated hereby by reason of the results of such environmental
due diligence.
Subject to the provisions of clause (c), KTI and the Buyer shall complete
such environmental due diligence by no later than forty-five (45) days after
entry of the court order described in Section 10 below and advise the Seller
with respect to whether the Buyer is satisfied with the results of such
environmental due diligence and review. In the event that the Buyer does not
advise the Seller of its conclusions with respect to the same by the date
stated, this condition shall be deemed waived.
6. Employees. Neither KTI nor the Buyer shall have any liability for any
pre-petition or post-petition obligations to employees of the Seller. The
Seller shall disclose to the Bankruptcy Court and to the Creditors' Committee
the fact and the terms of any offer of employment made by KTI or the Buyer to
any officer or director of the Seller.
7. Break-up Fee. In the event that any of the assets to be sold to the
Buyer are sold to another purchaser, excluding sale of the Chicago Facility, the
Buyer shall be entitled to a break-up fee payable from the proceeds from such
sale equal to the lesser of $250,000 or 150% of the Buyer's out-of-pocket costs
and expenses, including reasonable attorneys' fees (which fees upon any
objection thereto by any party in interest shall be submitted to the Bankruptcy
Court for approval), reasonably incurred in connection with this transaction;
provided that KTI and the Buyer have not defaulted in any of their respective
obligations. The Buyer's right to such break-up fee is subject to the Buyer and
the Seller having executed and delivered a definitive agreement with respect
thereto under which the Buyer would have been bound to close but for the sale to
such other purchaser, subject to bankruptcy court approval.
8. No Solicitation; Topping Amount. Prior to September 16, 1997, Seller
will not solicit any offer for the Facilities from any other party; provided,
that nothing herein shall preclude the Seller from responding to inquiries from,
providing due diligence information to, or providing notice of the transactions
contemplated hereby and of any related hearings to, any interested party as
required by the Seller's fiduciary obligations as a debtor-in-possession. In
the event that another purchaser offers to buy substantially the same assets as
the Buyer proposes to purchase, the value of the offer of any such purchaser
must exceed the Buyer's offer by the amount of $300,000 before such offer may be
accepted by the Seller. Sale of the Chicago Facility shall not be subject to
this provision.
9. Management Agreement. The Seller and an affiliate of the Buyer shall
enter into a management agreement, on terms acceptable to PNC, pursuant to which
such affiliate of the Buyer will manage the business and operations of the
Seller up to the closing on the sale of the Facilities.
10. Timing. Seller promptly will seek an order of the Bankruptcy Court
approving the break-up fee, no solicitation agreement topping amount and
management agreement, but in no event later than Tuesday, April 22, 1997 for
such matters other than the management agreement and no later than Wednesday,
April 23, 1997 with respect to the management agreement. The Buyer will
commence due diligence upon entry of such order. The parties will proceed on a
basis consistent with execution of a definitive agreement by no later than June
13, 1997 and consummation of the transaction by no later than September 16,
1997. The Buyer does not intend to proceed subsequent to June 13, 1997 in the
absence of a definitive agreement executed by the Seller.
THE FOREGOING TERM SHEET CONTAINS THE PRINCIPAL BUSINESS TERMS OF THE
PROPOSED ACQUISITION OF ASSETS BY THE BUYER FROM THE SELLER AND TERMS ACCEPTABLE
TO PNC AND DOES NOT PURPORT TO SUMMARIZE ALL TERMS, CONDITIONS (INCLUDING
CONDITIONS PRECEDENT), COVENANTS, REPRESENTATIONS AND WARRANTIES AND OTHER
PROVISIONS THAT WILL BE CONTAINED IN DEFINITIVE LEGAL DOCUMENTATION.
IN WITNESS WHEREOF, the undersigned have caused this Term Sheet to be
executed by their duly authorized representatives as of the date and year first
above written.
Prins Recycling Corp.
(f/k/a Ankap, Inc.)
Prins Recycling Corp.
Prins Recycling (Mass) Corp.
Prins of Pennsylvania, Inc.
Prins of Newark, Inc.
d/b/a Recycling Systems, Inc.
Prins Recycling (Maryland) Corp.
Paper Chase Exchange, Inc.
Basic Waste Systems, Inc.
Prins of Newark II, Inc.,
d/b/a P. Pepe & Sons, Inc.
Vic Barick Paper Co., Inc.
By: /s/ Clifford H. Straub, Jr.
KTI, Inc.
KTI Recycling, Inc.
and their respective affiliates
By: /s/ Robert E. Wetzel
PNC Bank, National Association
By: /s/ Daniel W. Zoeller
Shanley & Fisher
Attorneys for Official
Committee of Unsecured Creditors
By: /s/ Robert K. Malone
EXHIBIT 4.2
AGREEMENT
AGREEMENT, dated as of April 21, 1997 between KTI Recycling, Inc., a
Delaware corporation and its subsidiaries("KTIR"), KTI, Inc., a New Jersey
corporation ("KTI") and PNC Bank ("PNC").
WHEREAS, KTIR has executed a Term Sheet with Prins Recycling Corp. and
certain subsidiaries ("Prins) pursuant to which KTIR has indicated its intent,
subject to the conditions stated in the Term Sheet, to purchase all waste
processing and recycling facilities owned and operated by Prins in Boston,
Massachusetts, Newark, New Jersey and Franklin Park, Illinois, (the "Assets")
pursuant to a Plan of Reorganization in the Chapter 11 proceeding commenced by
Prins;
WHEREAS, PNC's approval of the sale of the Assets is required by virtue of
the fact that PNC holds a first priority lien on the Assets;
WHEREAS, Prins has received an offer from a third party to purchase the
Assets located in Franklin Park (the "Chicago Facility") for a purchase price
that would result in PNC receiving net proceeds of $2 million;
WHEREAS, PNC has agreed to forbear from insisting upon and agreeing to the
sale of the Chicago Facility to the third party to permit KTIR to consummate its
purchase of the Assets only on the terms and conditions set forth herein;
WHEREAS, PNC has agreed to increase its credit facility to Prins by an
additional $1 million to permit Prins to continue to operate pending a closing
on the sale of the Assets only on the terms and conditions herein;
WHEREAS, KTI has agreed to guaranty the payment of a portion of the
consideration KTIR is agreeing to pay pursuant hereto, and to guaranty a portion
of any losses sustained by PNC in connection with PNC's loans to Prins;
NOW, THEREFORE, FOR GOOD AND VALUABLE CONSIDERATION, THE RECEIPT AND
ADEQUACY OF WHICH ARE HEREBY ACKNOWLEDGED, it is AGREED as follows:
1. Within two (2) business days of the execution of this Agreement, KTIR
and/or KTI shall cause to be issued an irrevocable Letter of Credit naming PNC
as the beneficiary in the amount of $1 million. The term of the Letter of
Credit shall be six (6) months. The Letter of Credit will provide, inter alia,
that PNC may draw the full amount if:
(a) Either KTIR or Prins terminates the Agreement providing for the
sale of the Assets to KTIR for any reason, or
(b) KTIR has not purchased the assets on or before July 31, 1997, or
(c) the term of the Letter of Credit has not been renewed for an
additional six (6) month period by the 30th day prior to the expiry date.
2. KTIR agrees that if, for any reason, the sale of the Assets to it is
not approved by the Bankruptcy Court by July 31, 1997, if it has not already
done so, it shall submit a bid to purchase the Chicago Facility by the delivery
of the $2 million Promissory Note referenced in paragraph 4 to PNC and
specifying that PNC shall not be responsible for any transactional or other
costs associated with the sale (a "Conforming Bid"). KTIR shall not, however,
be required to submit a Conforming Bid (or may withdraw its Conforming Bid if
previously submitted), if its due diligence with respect to environmental
matters at the Chicago Facility discloses that the actual cost of remediation of
any environmental conditions required under applicable law (exclusive of "soft
costs", such as consulting and engineering fees) not indemnified against by any
third party (and with respect to which indemnification no counterclaims or
offsets have been asserted) exceeds $50,000; provided, however, that if Prins
pays or PNC pays or promises to pay the excess of such costs over $50,000, KTIR
shall still be required to submit (or not withdraw) a Conforming Bid. In the
event that the initial application by Prins to approve the separate sale of the
Chicago Facility does not result in a sale of the Chicago Facility, KTIR shall
similarly submit a Conforming Bid on any and all subsequent applications to the
Bankruptcy Court to sell the Chicago Facility.
3. In the event that PNC draws on the Letter of Credit, it shall retain
the proceeds thereof in an interest-bearing segregated account until either (a)
the Chicago Facility is sold to KTIR or to a higher bidder or (b) KTIR breaches
its obligation to purchase the Chicago Facility. In the event that KTIR
purchases the Chicago Facility, the proceeds of the Letter of Credit plus all
accrued interest shall be applied as a credit against the purchase price. In
the event that the Chicago property is sold to a higher bidder, the proceeds of
the Letter of Credit and all accrued interest shall be returned to KTIR. In the
event that KTIR breaches its obligations to purchase the Chicago Facility, PNC
shall be entitled to retain the proceeds of the Letter of Credit and all accrued
interest as liquidated damages.
4. As soon as practicable after the date of this Agreement, but in no
event more that seven (7) days from said date, KTIR shall give PNC an undated
Promissory Note in the sum of $2 million. In the event that KTIR purchases the
Chicago Facility, other than as part of a purchase of all of the Assets, the
Promissory Note shall be dated as of the date of the closing on such sale. On
the date of closing, PNC shall apply the proceeds of the $1 million Letter of
Credit plus all interest accrued thereon in reduction of the Promissory Note.
The remaining unpaid balance of the Promissory Note shall accrue interest from
the date of closing at the rate of prime plus one-quarter percent per annum and
the total amount of principal and interest shall be payable to PNC 180 days from
the date of closing. The Promissory Note shall be secured by the guaranty of
KTI in the sum of $1 million and a first priority security interest in all of
the assets of the Chicago Facility including a mortgage lien on all real
property. In addition, PNC shall hold a deed in lieu of foreclosure in escrow
which may be recorded if KTIR and/or KTI fail to pay in the full amount of
principal and interest due under the Promissory Note within seven (7) days of
PNC's demand for payment under the terms of the Promissory Note and/or the
guaranty of KTI.
5. In connection with KTIR's offer to purchase the Assets, a subsidiary
of KTI will be entering into a management agreement to manage a business and
operations of Prins through the date of closing on the sale of the Assets, which
is anticipated to be July 31, 1997. In consideration for the agreement to
provide such management services, PNC shall pay to KTI a management fee of
$500,000, payable in full at such time as PNC is paid the full amount of its
outstanding principal and interest due from Prins, either from the sale of the
Assets to KTIR in cash and notes pursuant to the provisions of the Term Sheet
dated April 18, 1997, or from the sale of the Assets to a higher bidder.
However, in the event that PNC is not paid the full amount of the outstanding
principal and interest due from Prins, it shall not be obligated to pay any
management fee.
6. KTI shall, within five (5) business days from the date hereof, issue
to PNC 30,000 warrants to purchase common shares of KTI at $8.50 per share
exercisable at any time within five years from the date of issuance. PNC shall
be granted registration rights with respect to the common stock issuable upon
exercise of such warrants upon substantially the same terms and conditions as
KTI's standard form of registration rights agreement.
7. As soon as practicable after the date of this Agreement, but in no
event more than seven (7) days from such date, KTI shall provide PNC with a
written guaranty of 40% of any new advances to Prins made after April 18, 1997,
subject to a maximum guaranty of $400,000. KTI will share pari passu in any
losses sustained by PNC up to said maximum guaranty. By way of example, if PNC
advances to Prins $1 million after April 18, 1997 and collects 70% of the total
principal and interest due from Prins (i.e., a 30% loss), KTI will pay PNC the
sum of $120,000 (30% of 40% of the assumed advance of $1 million). The
percentage of the loans guaranteed by KTI hereunder shall not be reduced by the
amount of any repayments and collections received by PNC in the ordinary course
of business.
8. KTI and KTIR hereby represent and warrant to PNC as follows:
(a) They are duly incorporated and existing and in good standing
under the laws of New Jersey and Delaware respectively;
(b) They have the corporate power and corporate authority to execute
and deliver this Agreement and to perform their obligations hereunder and
all corporate actions necessary for the making and performance of this
Agreement have been duly taken; and
(c) This Agreement has been duly executed and delivered by them and
constitutes their binding and valid obligation enforceable against them in
accordance with its terms.
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
executed by their duly authorized representatives as of the date and year first
above written.
KTI RECYCLING, INC.
By: /s/ Robert E. Wetzel
Robert E. Wetzel
Senior Vice President
KTI, INC.
By: /s/ Robert E. Wetzel
Robert E. Wetzel
Senior Vice President
PNC BANK, NATIONAL ASSOCIATION
By: /s/ Daniel W. Zoeller
Daniel W. Zoeller
Vice President
EXHIBIT 4.3
OPERATION AND MAINTENANCE AGREEMENT
by and between
PRINS RECYCLING CORP.
and its Subsidiaries
KTI OPERATIONS, INC.
Dated as of April 21, 1997
OPERATION AND MAINTENANCE AGREEMENT
This Operation and Maintenance Agreement (the "Agreement") dated as of
April 21, 1997, by and between KTI Operations, Inc., a Delaware corporation (the
"Operator"), and PRINS RECYCLING CORP., a New York corporation and its
subsidiaries (the "Owner") witnesseth that:
WHEREAS, the Owner owns recycling and paper processing facilities located
in Newark, New Jersey, Boston, Massachusetts and Chicago, Illinois (as
hereinafter defined, the "Facilities") which processes waste paper and
commingled post consumer recyclables;
WHEREAS, the Owner has sought relief under Chapter 11 of the Bankruptcy
Code;
WHEREAS, the Operator has significant experience in the operation of waste
processing facilities;
WHEREAS, the Owner desires to obtain access to the experience of the
Operator by retaining the Operator to provide supervisory services, advice and
recommendations to the Owner concerning the administration, operations and
maintenance of the facilities; and
WHEREAS, the Operator is a wholly-owned subsidiary of KTI, Inc. ("KTI ), a
New Jersey publicly traded company listed in the NASDAQ National Market system,
which has an interest in acquiring the facilities under an Owner sponsored plan
of reorganization.
WHEREAS, the Operator is willing to provide the Owner with supervisory
services, advice and recommendations concerning the administration, operation
and maintenance of the Facilities; and
NOW THEREFORE, in consideration of the mutual covenants contained herein,
and of other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto do hereby agree to enter into
this Agreement:
ARTICLE I.
DEFINITIONS
Affiliate: With respect to any Person, any Person or group of Persons
acting in concert in respect of the Person in question that, directly or
indirectly, controls or is controlled by or is under common control with such
Person. For the purposes of this definition, "control" (including, with
correlative meanings, the terms "controlled by" and "under common control
with"), as used with respect to any Person or group of Persons acting in
concert, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of management and policies of such Person, whether
through the ownership of voting securities or by contract or otherwise.
Approved Capital Budget: The capital equipment repair and replacement
budget as approved by the Owner, as such Capital Budget may be modified in
writing in accordance with the terms of this Agreement.
Approved Operating and Maintenance Budget: The Operating Budget as
approved by the Owner as such Operating and Maintenance Budget may be modified
in writing in accordance with the terms of this Agreement. The Operating Budget
shall include the fully allocated salary costs for William Meckert.
Calendar Month: The period from the first day of any month to the last day
of such month inclusive.
Capital Budget: That budget to be prepared by the Operator pursuant to
Article 2.02 of this Agreement. The proposed Capital Budget shall include items
of capitalized equipment (as treated for accounting purposes) to be replaced or
to be repaired, as well as replacement inventory of spare parts, for the period
from the commencement of the Agreement to July 31, 1997.
Effective Date of this Agreement: This Agreement shall be effective at
12:01 A.M. of the day after the Bankruptcy Court for the District of New Jersey
approves this Agreement.
Equipment: All of the recycling, processing, mechanical and electrical
equipment, instrumentation and control equipment, and Rolling Stock used at or
in connection with the operation of the Facilities, and owned or controlled by
the Owner.
Facilities: Company's recycling and waste paper processing facility and
ancillary facilities located on the Site as presently constituted, in the Cities
of Newark, New Jersey, Boston, Massachusetts and Chicago, Illinois as of the
date of this Agreement, together with any ancillary facilities which may
hereafter be acquired or constructed by Owner and used for or in conjunction
with the processing of commingled post consumer recyclables and waste paper,
whether or not located on the present Site within the Cities of Newark, Boston
and Chicago; provided that any such subsequently acquired or constructed
ancillary facilities, or an allocated portion thereof to be included within the
definition of Facilities for purposes of this Agreement, shall be exclusively
devoted to the replacement or support of the primary activities of the plant
located on the present Sites as contemplated by this Agreement.
Facility Costs: All costs associated with the day to day operations,
maintenance and administration of the Facilities.
Force Majeure: With regard to the performance of any obligation under this
Agreement, except as to payment obligations, events such as an act of God, act
of public enemy, sabotage, wars, blockade, insurrection, riots, explosions,
fires, floods, storm, lightning, earthquake, wind, ice, strikes, lockouts or
other industrial disturbance, drought, appropriation and other causes not
reasonably within the control of any party invoking Article 10.10 hereof for its
benefit. The financial inability of either party hereto pay or perform its
obligations under this Agreement shall not be deemed as events of Force Majeure.
Good Engineering Practices: Those practices, methods and equipment that
are generally observed at the time of reference in prudent engineering practice
for handling, processing and disposal operations, similar in size and function
to the Facility, in order to operate waste processing and other equipment
lawfully, with safety, dependability, efficiency and economy and in compliance
with applicable governmental codes, if any, establishing engineering standards
for such waste handling, processing and disposal operations.
Hazardous Waste: Waste with inherent properties which make such waste
dangerous to manage by ordinary means, including but not limited to chemicals,
explosives, pathological wastes, radioactive wastes, toxic wastes and other
wastes defined as hazardous at any time during the term of this Agreement by the
States of New Jersey, Massachusetts and Illinois or the Resource Conservation
and Recovery Act of 1976, as amended, or other Federal, State or local laws,
regulations, orders, or other actions promulgated or taken at any time and from
time to time, or any material which, if processed at the Facility, would be
deemed hazardous at any time during the term of this Agreement by the States of
New Jersey, Massachusetts or Illinois or under the Resource Conservation and
Recovery Act of 1976, as amended, or other federal, state or local laws,
regulations, orders, or other governmental actions promulgated or taken at any
time and from time to time.
Labor: All natural persons employed by Operator to perform the tasks
necessary to supervise, give advice and make recommendations concerning the
administration, operation and maintenance of the Facilities in accordance with
Good Engineering Practices and as required by this Agreement.
Labor Costs: For any relevant period the sum of all costs, fees and
expenses incurred by Operator for Labor during such period, including without
limitation all (a) salaries, wages and other compensation payable to or for the
account of employees, (b) bonus and incentive compensation payments made to or
for the account of employees, (c) contributions and payments to employee
savings, retirement and other benefit plans for employees, (d) the cost of
providing medical, dental disability and occupational hazard plans or insurance
for employees and their dependents, (e) the cost of providing life insurance
coverage for employees and their dependents, (f) employee training relating to
the administration, operation and maintenance of the Facility, including
tuition, travel, meals and lodging and (g) FICA and other taxes or governmental
charges payable with respect to employees, including unemployment compensation.
Legal Requirements: All laws, statutes, codes, ordinances, orders, awards,
judgments, decrees, injunctions, rules, regulations, authorizations, consents,
approvals, orders, permits, franchises, licenses, directions and requirements of
all governments or governmental units, courts or arbitrators, which now or at
any time hereafter may be applicable to or affect the Facility or any part
thereof or any streets, sidewalks, curbs, or gutters adjoining the Facility or
any part thereof or any use or condition of the Facility or any part thereof or
the acquisition, construction, ownership, use or operation of the Facility or
any part thereof, except those the non-compliance as to which will not have a
material adverse effect on the acquisition, ownership or operation of the
Facility.
Notice of Termination: That notice issued by the Owner or Operator
pursuant to Article VI of this Agreement which shall terminate this Agreement.
Operator Fixed Fee: The Operator Fixed Fee shall be for $166,667 per
month, subject to a maximum of $500,000 payable to the Operator (whether or not
the term of the agreement shall continue for more than three (3) months.
Operating Budget: That budget to be prepared by the Operator pursuant to
Article 2.02 of this Agreement. The proposed Operating Budget shall include
detailed month by month projections of the Facility's operating costs, revenues
and performance assumptions for the period commencement of the Agreement to July
31, 1997.
Operating Costs: For any relevant period, the actual costs directly,
properly and reasonably incurred by the Operator for the account of the Owner in
the ordinary course of business for the supervision, administration, operation
and maintenance of the Facility, including, without limitation, Labor Costs;
provided, however, that no costs incurred or paid by the Operator to any
Affiliate of the Operator shall be treated as an Operating Cost unless incurred
in accordance with Article V.
Operator's Invoice: A written document delivered by the Operator to the
Owner stating the amount due for Operating Costs for bi-weekly periods.
Permits: All of the consents, approvals, authorizations, directions,
licenses and permits issued to the Owner or Operator with respect to the
ownership, construction, and operation of the Facility. A list of all Permits as
in effect on the date of this Agreement are listed in Exhibit A hereto.
Person: Any individual or a corporation, partnership, trust, incorporated
or unincorporated association, joint venture, joint stock company, government
(or any agency or political subdivision thereof) or other entity of any kind.
Sites: The real property and any and all rights or interests in real
property upon which the Facilities are located at the time of reference.
Subcontractor: Any person, firm or corporation which performs work for the
Operator or the Owner at the request and direction of the Operator pursuant to
the terms of this Agreement.
ARTICLE II.
DESIGNATION OF OPERATOR AND WORK SCOPE
2.01 Designation of Operator:
(a) The Operator agrees to supervise, give advice and make recommendations
concerning the administration, operation and maintenance of the Facilities
(including, without limitation, maintenance scheduling and planning) in
accordance with the terms and conditions of this Agreement.
(b) Subject to the terms of this Agreement and so long as it remains in
effect, the Owner hereby gives the Operator the non exclusive right (which shall
not constitute an easement or other restriction on the Facility) to enter on the
premises on which the Facilities are located and to occupy and have free access
to use the same for solely the purpose set forth in this Agreement. The Operator
agrees that in its capacity as the Operator it does not and shall not claim at
any time any interest or estate of any kind or extent whatsoever in the
Facilities by virtue of this Agreement or the Operator's occupancy or use of the
Facilities hereunder.
(c) The Operator covenants that it will comply with Good Engineering
Practices in performing its services for the Facilities. In the event that the
Operator fails to comply with Good Engineering Practices in performing its
services for the Facilities for reasons other than the insufficiency of
available operating revenues, and said failure results in the Owner being
assessed fines or penalties by any governmental entity, said fines and penalties
shall be charged back and set off against the Operator's Fixed Fee.
(d) The Operator shall act as the primary spokesman for the Facilities in
consultation with the Owner.
2.02 General Duties: The Operator shall in consideration for the Operator's
Fixed Fee, supervise, give advice and make recommendations to the Owner
concerning the administration, operations and maintenance of the Facilities in
accordance with Good Engineering Practices and in substantial compliance with
all Legal Requirements. Subject to the foregoing, as well as the satisfaction by
the Owner of its obligations under Article III hereof, the Operator shall
supervise, give advice and make recommendations concerning the following tasks:
(a) All administrative work of the Facilities including:
(i) The Planning, scheduling and conduct of all business incidental
to the ownership, operation and maintenance of the Facilities.
(ii) The administration of all contracts with private haulers,
municipalities, paper mills and others on a day to day basis.
(iii) The review, approval and payment, in accordance with the
Approved Operating Budget, on behalf of Owner, to the extent funds are
made available by Owner, of invoices for Facility Costs and
recordkeeping for the Owner.
(iv) Prompt preparation of invoices for all material deliveries in
accordance with the applicable agreements and collection of payments
on accounts receivable for the Owner's account.
(v) Development and submission of a spare parts inventory program to
the Owner for approval.
(vi) Based on the approved spare parts inventory program, and in
accordance with the Approved Capital Budget or the Approved Operating
Budget, as applicable, the procurement, in Owner's name, of an
inventory of spare parts, materials, and supplies (including
Consumables and items covered by plant office expenses and rolling
stock expenses), and the review, approval and, on behalf of Owner, the
payment of invoices for the same.
(vii) The performance of all accounting services for the Owner
(except as noted below), including but not limited to closing the
books monthly, quarterly and yearly and supplying summary accounting
data to the Owner for any monthly, quarterly, year end or other
reports rendered or to be rendered by Owner. The Operator is not
obligated to prepare tax returns, reports due to the US Trustee or
reports for submission to the Securities and Exchange Commission.
(viii) The preparation of monthly and quarterly detailed financial
and operating reports with Approved Operating Budget and Approved
Capital Budget comparisons (budget to actual including an explanation
of any material variances), an updated annual forecast with actual
year-to-date numbers and updated projections for remaining months, and
such other reports, including reports required by PNC Bank, National
Association, as are reasonably requested by Owner.
(ix) Maintenance of true, complete and accurate cost ledgers and
accounting records in accordance with generally accepted accounting
principles utilized by the Owner regarding the services provided and
expenses paid or incurred by it pursuant to the Agreement.
(x) The preparation of the Operating Budget and Capital Budget to the
Owner for its approval.
(xi) Maintenance of appropriate inventories consistent with the
approved spare parts and inventory plan and the issue, and recording
of issuance, of inventory and spare parts items.
(b) Performance of operation and maintenance services at the Facilities
within budgetary limitations:
(i) Maintenance of an effective and sufficient operating work force
through appropriate hiring, termination, training, administration and
compensation.
(ii) Development and maintenance of safety procedures, a safety
manual, an employee job-site conduct handbook and an effective safety
program, including, without limitation, fire and explosion safety
measures.
(iii) Operation and maintenance of the scale-house and provision
of all related operational services.
(iv) Operation and maintenance of the Facilities in a reasonably
clean, safe and efficient manner in accordance with Good Engineering
Practices and in substantial compliance with all Legal Requirements.
(v) Acceptance, storage and processing of all commingled post
consumer recyclables and waste paper delivered to the Facilities in
accordance with a waste protocol to be agreed upon by the Owner and
Operator provided however, that the Operator shall not be obligated to
accept any waste which it reasonably believes (a) presents a danger to
the health or safety of the public or Facilities personnel, or (b)
would cause the Facilities to be in violation of any Legal
Requirement.
(vi) Maintenance of true, complete and accurate operating logs,
records and reports necessary for proper operation and maintenance of
the Facilities.
(vii) Maintenance at the administrative offices located at the
Facilities of drawings, instruction books, and operating and
maintenance manuals and revision of drawings as modifications are
made.
(viii) Maintenance of Facilities tool room equipment and
instruments.
(ix) Development, implementation and regular updating of a maintenance
program that meets Equipment manufacturers' specifications and
recommendations and the Facilities requirements.
(x) Scheduling and performance of all maintenance necessary to be in
accordance with Good Engineering Practices and manufacturers'
specifications and recommendations and in substantial compliance with
all Legal Requirements.
(xi) Scheduling, performance and recording periodic operational checks
and tests of Equipment which are necessary to be in accordance with
the Equipment manufacturers' specifications and recommendations and in
substantial compliance with all Legal Requirements.
(xii) Evaluation of the nature and impact of any Equipment failure
and if the failure is major or material review the situation with the
Owner and mutually agree on a reasonable remedy of the matter,
provided that in the event of an emergency or other situation where
expediency is required to protect Equipment, property, safety, health,
or the environment, the Operator may take all necessary action to deal
with such situation for the Owner's account without the review and
agreement of Owner.
(xiii) Obtaining and maintaining required Permits in the Owner's
name and on its behalf.
(xiv) Prepare maintenance budget and incorporate the maintenance
items contained therein in the Operating Budget or the Capital Budget,
as appropriate, and operate the Facilities in accordance with the
Approved Operating Budget and Approved Capital Budget for such items.
(xv) Provision of necessary and desirable security services for the
Facilities.
(xvi) Provision of yard maintenance and removal services.
(xvii) Maintenance of adequate inventories or supplies of
consumables.
(xviii) Provision of unrestricted access to the Facility and
cooperation with the Owner in all inspections of the Facilities, which
inspections may occur at any time.
(xix) Operation and maintenance of the Facilities in such a way so as
to be in substantial compliance with all Permit requirements
(including, without limitation, the Environmental Compliance
Standards), taking such samples and performing and reporting such
tests as are required by all Permits, and advising the Owner of any
areas of Permit conflicts or violations or unsatisfactory conditions
or test results, including performing all necessary testing, reporting
and other requirements of Permits.
2.03 The Operator's Authority to Act in an Emergency: Notwithstanding anything
to the contrary contained in this Agreement, the Operator may, without obtaining
the prior written consent of the Company, make any decision or take any action
which otherwise requires the prior written consent of the Company pursuant to
the terms of this Agreement if (i) in the good faith judgment of the Operator,
such decision or action is necessary for the protection of life or health or for
the preservation of the Facilities or to avoid the suspension of any service to
or of the Facilities and there is insufficient time to notify the Owner; and
(ii) expenses incurred by the Operator in advance of notifying the Owner do not
exceed $25,000; provided, that the Operator shall use all reasonable efforts to
notify the Owner and request its consent prior to making any decision or taking
any action and in any event shall notify the Owner and request its consent as
promptly as practicable thereafter. In the event that the consent of the Owner
is denied, the Operator shall use its reasonable efforts to terminate any
contract or agreement entered into on the basis of such emergency, or any work
or services to be performed pursuant thereto.
ARTICLE III.
RESPONSIBILITIES OF THE OWNER
3.01The Owner shall be responsible for the following:
(a) Owner shall promptly pay the Operator the Operating Costs for each
bi-weekly period during the term of this Agreement, beginning on the
Effective Date of this Agreement, and payable on the first business day of
each bi-weekly period continuing until such time as this contract is
terminated under Article VI or VII hereof.
(b) Owner shall pay the Operator's Fixed Fee to the Operator promptly
after the date of confirmation of the Owner's plan of reorganization
following the sale of the Facilities, provided that the Operator shall not
be entitled to receive the Operator's Fixed Fee unless the Facilities are
sold for a net sales price in an amount sufficient to result in net
proceeds paid or payable to PNC in the full amount of its loan, including
principal and interest.
(c) Approve on a timely basis the Operating and Maintenance Budget and
Capital Budget providing for the costs and expenses reasonably necessary
for Operator to administer, operate and maintain the Facility in accordance
with its obligations under this Agreement.
(d) Provide and maintain the insurance coverage required to be maintained
for the Facilities, including:
(i) All Risk Property Damage, including physical damage, business
interruption, extra expense (wind damage, flood, electrical damage) up
to the full value of the Facilities.
(ii) Boiler and Machinery, including physical damage and business
interruption up to the full value of the covered equipment.
(iii) Comprehensive General Liability with combined property
damage and injury coverage.
The Operator shall be listed as an Additional Insured on general liability
policies, including excess liability umbrella. The Owner shall provide the
Operator with certificates of insurance showing policy provisions and showing
the Operator as an Additional Insured on liability policies. The Operator shall
have the right to review all insurance policies and make recommendations
regarding the same. Such policies shall contain a provision that such insurance
policies are primary with respect to any other insurance. Additionally, the
policy provisions shall provide that the Operator be given at least thirty (30)
days prior written notice from the insurance company of policy cancellation(s).
The Owner shall not modify or terminate any insurance coverages listed in this
Article 3.01(c) without the written consent of the Operator.
The Owner waives its right of recourse against the Operator and the Operator's
Subcontractors and their employees for any loss or damage payable by the
insurance coverage listed in this section.
ARTICLE IV.
CERTAIN REPRESENTATIONS AND WARRANTIES
The Operator represents and warrants to the Owner that:
4.01 (a) Corporate Organization: The Operator is duly organized, validly
existing and in good standing under the laws of the State of Delaware.
(b) Power and Authority: The Operator has the requisite corporate power
and authority to enter into this Agreement and to perform according to the terms
hereof.
(c) Due Authorization: The Operator has taken all actions required to be
taken by it under law, its Articles of Incorporation, its bylaws or otherwise
and has obtained all approvals and consents necessary to authorize the
execution, delivery and performance of this Agreement by it and the consummation
of the transactions contemplated hereby except such approvals and consents the
absence of which would not have a material adverse effect on the Facilities, the
Operator or upon the Operator's ability to perform its obligations hereunder.
(d) Validity: This Agreement constitutes the legal, valid and binding
obligation of the Operator, enforceable in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws or principles of equity
affecting the rights of creditors generally.
(e) No Violation: The execution and delivery of this Agreement does not
contravene any provision of, or constitute a default under, any indenture,
mortgage, or other material agreement binding on the Operator or any valid order
of any court, or any regulatory agency or other body having authority to which
the Operator is subject.
(f) Qualification as Foreign Corporation: The Operator is duly qualified
or licensed to do business and is in good standing in the State of New Jersey,
Massachusetts and Illinois.
(g) Facility Operations: The supervisory services under this Agreement
shall be performed by competent operators, in a competent manner in accordance
with Good Engineering Practices and in substantial compliance with all Legal
Requirements and in accordance with the scope in this Agreement or any other
detailed work scope agreed upon by the parties and will be free from defects in
workmanship.
Provided that Operator has been notified in writing promptly after the
Owner becomes aware of a defect, and whether a claim, however, instituted, is
based on contract, indemnity, warranty, tort (including Operator's own
negligence), strict liability or otherwise, the exclusive remedy for any claim
based on failure of, or defect in, services furnished by Operator hereunder
shall be (a) for deficient services, the retraining or replacement of the
Operator's personnel and the reperformance by the Operator of any defective
portion of the service furnished, and (b) for any damaged part of the equipment
resulting from defective operating, maintenance or repair services performed
under this Agreement, the repair or replacement at the Owner's option of the
damaged part. In any event, however, if damage to any Facility equipment is
caused to any material extent by defective equipment or inadequate or poor
engineering design of the Facilities or equipment therein ("Contributory
Cause"), notwithstanding the neglect or negligence of Operator, such
Contributory Cause, shall bar any claim by Owner against Operator for such
damage.
This warranty is exclusive and in lieu of all other warranties, whether
written, oral, implied or statutory. NO IMPLIED STATUTORY WARRANTY OF
MERCHANTABILITY OR OF FITNESS FOR A PARTICULAR PURPOSE SHALL APPLY. The
Operator does not warrant under this Agreement any product, material or services
of others which the Owner has furnished. Unless expressly stated in the work
scope, the Operator does not warrant under this Agreement the fitness or
suitability of the equipment on which the services are performed, or any
modification thereof, for any specific application, performance, results or use.
Any oral or written representation, warranty, course of dealing or trade usage
not contained or referenced herein will not be binding on any party.
4.02 The Owner represents and warrants to the Operator as follows:
(a) Organization: Prins Recycling Corp. is a New York corporation duly
organized, validly existing and in good standing in both the States of New
York and New Jersey.
(b) Power and Authority: Owner has the requisite power and authority to
enter into this Agreement and to perform according to the terms hereof,
subject to approval by the Bankruptcy Court for the District of New Jersey
(c) Due Authorization: The Owner has taken all actions required to be
taken by law, its Articles of Incorporation, its bylaws or otherwise to
authorize the execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby, subject to approval by the
Bankruptcy Court for the District of New Jersey.
(d) Validity: This Agreement constitutes the legal, valid and binding
obligation of the Owner, enforceable in accordance with its terms, except
as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws or principles of equity
affecting the rights of creditors generally.
(e) No Violation: The execution and delivery of this Agreement does not
contravene any material provision of, or constitute a material default
under, any material indenture. mortgage or other material agreement binding
on Owner or any valid order of any court, or any regulatory agency or other
body having authority to which Owner is subject.
ARTICLE V.
LIMITATION ON AFFILIATED TRANSACTIONS BY
OPERATOR AND EMPLOYMENT OF CERTAIN PERSONS
Affiliated Transactions: In performing its obligations hereunder, the
Operator will not make any payment to or invest in, or acquire, lease, sell,
transfer or provide any assets or services from or to KTI or any of KTI's
subsidiaries or engage in any other transaction with any of them, except that
the Operator shall be permitted (i) to deal with the Owner in strict accordance
with the express written terms of this Agreement; and (ii) to engage in any
other transaction with KTI and its subsidiaries, which (w) is in the ordinary
course of the Operator's business, (x) is upon terms no less favorable to the
Operator than would be obtained in a comparable arms' length transaction with a
Person not an Affiliate and (y) the Owner has given its prior written consent
after receiving a reasonable description in writing of each of the terms
thereof.
ARTICLE VI.
TERM OF THIS AGREEMENT
6.01 (a) Term: This Agreement will be effective on the Effective Date and
remain in effect until July 31, 1997 unless mutually extended by the Operator
and the Owner.
ARTICLE VII.
EVENT OF DEFAULT
7.01 Event of Default:
Owner shall be in default under this Agreement if:
(a) the Owner fails to pay when due any amount payable by Owner to
Operator hereunder, and ten (10) days have elapsed after such due date;
(b) other than the existing proceedings in the Bankruptcy Court for the
District of New Jersey, there is an assignment for the benefit of the
Owner's creditors, or the Owner is adjudged a bankrupt, or a petition is
filed by or against the Owner which is not dismissed within 60 days under
the provisions of any state insolvency law or under the provisions of the
Federal bankruptcy laws, or the business or principal assets of the Owner
are placed in the hands of a receiver, assignee, or trustee;
(c) the Owner is dissolved and there is no reconstitution of the Owner
within thirty (30) days of such dissolution, or the Owner's existence is
terminated or its business is discontinued;
(d) Owner assigns or transfers this Agreement in violation of Article
9.01;
(e) the Owner shall fail to comply in any material respect with its
obligation to provide and maintain insurance under Article 3.01(c); or
(f) the Owner shall fail to comply in a material respect with any of its
other covenants, agreements or obligations hereunder, and such failure
shall continue for thirty (30) days after the Owner receives notice from
the Operator with respect to the same;
7.02 Remedy. If the Owner is in default, the Operator may, at its option and
without further notice, proceed to enforce any or all of the following remedies
by notice in writing to the Owner,
(a) terminate this Agreement as provided in Section 7.03; provided that if
the default arises under Section 7.01(a) above and Owner disputes the amount due
in good faith, Operator may not terminate this Agreement until the dispute is
resolved and payment due is thereafter withheld wrongfully.
(b) Proceed to arbitration in accordance with Article XIII
7.03 Rights Upon Default.
(a) Right of Operator. Upon the occurrence and continuance of an event of
default described in Section 7.01, the Operator may, at its option, terminate
this Agreement by delivering written notice of termination to the Owner, which
notice of termination shall be effective fifteen (15) days after the date it is
received by Owner; provided, however, that if the Owner has cured such default
within such fifteen (15) day period, such Notice of Termination shall be deemed
to have been canceled and shall be null and void. In the event of such
termination, the Owner shall pay all Operator Fixed Fee then due. In such event,
Operator shall take all necessary steps to protect the Facilities, leaving the
same in an orderly and safe condition, prior to leaving the premises.
7.04 Right of Owner to Terminate. Upon a default by Operator of its obligations
hereunder the Owner may, at its option, terminate this Agreement upon ten (10)
days written notice.
ARTICLE VIII.
LIMITATIONS OF LIABILITY
8.01 Limitation of Liability. The Operator's liability to the Owner, on all
claims of any kind (excluding death or bodily injury), whether based on
contract, indemnity, warranty, tort (including as the case may be, a party's own
negligence), strict liability or other, for all losses or damages arising out
of, connected with, or resulting from this Agreement or from the performance or
breach thereof, or from any services covered by or furnished during the term of
this Agreement, shall in no case exceed the fees actually received by the
Operator.
8.02 Waiver of Consequential Damages. In no event, whether based on contract,
indemnity, warranty, tort (including, as the case may be, a party's own
negligence) or otherwise, shall the Operator or its Subcontractors and suppliers
be liable to Owner, or the Owner, its Subcontractors and suppliers be liable to
Operator, for special incidental exemplary, indirect or consequential damages
including, but not limited to, loss of profits or revenue, loss of use of the
equipment or any associated equipment, cost of capital, cost of purchased power,
cost of substitute equipment, facilities or services, downtime costs, or claims
of customers of the Owner or Operator for such damages, and each party shall
indemnify the other, its Subcontractors and suppliers against any such claims
from the other's suppliers or customers. In no event shall the Operator be
liable under this Agreement for any loss or damage whatsoever arising from its
failure to discover mechanical or engineering design problems in the Facility
Equipment, and where Equipment failure results from the combined effects of
neglect in maintenance, poor design or inappropriate equipment application,
Operator shall have no liability with respect to any loss resulting to the
Equipment or Facility, or from its failure to discover latent defects or defects
inherent in the design of the Equipment. If the Operator furnishes the Owner
with advice or assistance without separate compensation therefor, the Operator
will not be subject to any liability whether in contract, indemnity, warranty,
tort (including Operator's own negligence) or otherwise
ARTICLE IX.
ASSIGNMENT
9.01 Assignment by the Owner: The Operator may terminate this Agreement without
penalty upon the giving of 10 days written notice if (a) the assignment of this
Agreement is attempted or (b) a contract to sell the Facilities is executed
between the Owner and a third party.
The Owner may extend employment offers to any employees of the Operator who
work for the Operator in connection with the operation of the Facilities.
9.02 Assignment by the Operator. The Operator shall have the right to assign
this Agreement, provided that the Owner gives its prior written consent to such
assignment, such consent shall not be unreasonably withheld. Notwithstanding the
foregoing, the Operator shall be permitted to assign its right to receive
payment of the Operator's Fixed Fee hereunder without obtaining the consent of
the Owner.
ARTICLE X.
MISCELLANEOUS
10.01 Independent Contractor. The Operator shall at all times be deemed an
independent contractor and not by reason of this Agreement a joint venture,
agent or principal of the Owner and none of the Operator's officers, directors,
partners, employees, agents or representatives or the officers, directors,
partners, employees, agents or representatives of its subcontractors shall be
considered officers, directors, partners, employees, agents or representatives
of the Owner.
10.02 Regulated Party Status. The Operator shall not be construed to be a
general partner of the Owner for any purpose, and the parties shall deal with
each other at arms length.
10.03 Severability. The invalidity, in whole or in part, of any of the
foregoing sections or paragraphs of this Agreement will not affect the validity
of the remainder of such sections or paragraphs.
10.04 Entire Agreement. This Agreement and all amendments thereto contain
the complete agreement between the Owner and the Operator with respect to the
matters contained herein and supersede all other agreements, whether written or
oral, with respect to the matters contained herein between the Owner and the
Operator.
10.05 Amendment. No modification, amendment, or other change to this
Agreement will be effective unless consented to in writing by each of the
parties hereto.
10.06 Waiver. Failure or forbearance by any party to exercise any of its
rights or remedies under this Agreement shall not constitute a waiver of such
rights or remedies. No party shall be deemed to have waived or forborne any
right or remedy resulting from such failure to perform unless it has made such
waiver specifically in writing.
10.07 Counterparts. This Agreement may be executed in one or more
counterparts each of which shall be deemed an original and all of which shall be
deemed one and the same Agreement.
10.08 Choice of Law. This Agreement shall be governed by the laws of the
State of New Jersey without reference to conflict of laws or the principles
thereof.
10.09 Title Passage. Title to all materials and services provided under
this Agreement shall pass to the Owner upon performance of the work or upon the
Owner becoming obligated to make payment therefor. It is expressly understood
and agreed, however, that the passage of title shall not release the Operator
from its responsibility to fully carry out its obligations under this Agreement.
10.10 Force Majeure. The parties hereto shall be excused from performance
under this Agreement to the extent, but only to the extent, that performance
hereunder is prevented by an act or event of Force Majeure. Operator shall use
its best efforts to take all reasonable steps to overcome or mitigate the
effects of such an act or event of Force Majeure, provided that the costs of
such steps shall in all events be considered Operating Costs for the purposes
hereof. Owner shall take all reasonable steps to overcome or mitigate the
effects of an event of Force Majeure. The Operator may not incur expenses in
excess of $25,000 to overcome or mitigate the effects of such force majeure
event without the Owners prior written consent.
ARTICLE XI.
DISPUTES
11.01 Procedure.
Any other controversy, dispute or claim between the Operator and the Owner
may be taken to arbitration pursuant to Section 11.02. Arbitration shall be the
exclusive procedure for resolving disputes under this Agreement.
11.02 Disputes.
The parties agree that time is of the essence in resolving any controversy,
dispute or claim, and they shall proceed as expeditiously as possible to resolve
such dispute among themselves. Absent such resolution, all disputes may be
referred by either party to the Bankruptcy Court for the District of New Jersey
for resolution. For the purpose of this provision, the Operator consents to the
jurisdiction of said Bankruptcy Court.
IN WITNESS WHEREOF the parties have executed this Agreement as of the date
first set forth above.
OWNER:
PRINS RECYCLING CORP.
By: /s/ Clifford H. Straub, Jr.
Title: President & Chief Financial Officer
OPERATOR:
KTI OPERATIONS, INC.
By:/s/ Robert E. Wetzel
Title: Senior Vice President
EXHIBIT 4.4
June 19, 1997
IT IS THE DIRECTION OF THIS COURT THAT THE SUCCESSFUL
PARTY SERVE A FILED COPY OF THIS ORDER UPON ALL PARTIES
TO THIS ACTION.
ROSENMAN & COLIN LLP
JEFF J. FRIEDMAN (JF-7661)
KEVIN T. FINGERET (KF-3547)
575 Madison Avenue
New York, New York 10022-2585
(212) 940-8800
ROSENMAN & COLIN
JEFF J. FRIEDMAN (JF-7661)
Suite 2600
1 Gateway Center
Newark, New Jersey 07102-5397
(201) 645-0572
Attorneys for Prins Recycling Corp.
(f/k/a Ankap, Inc.)
Prins Recycling Corp.
Prins Recycling (Mass) Corp.
Prins of Pennsylvania, Inc.
Prins of Newark, Inc.
d/b/a Recycling Systems, Inc.
Prins Recycling (Maryland) Corp.
Paper Chase Exchange, Inc.
Basic Waste Systems, Inc.
Prins of Newark II, Inc.,
d/b/a P. Pepe & Sons, Inc.
Vic Barick Paper Co., Inc.
UNITED STATES BANKRUPTCY COURT
DISTRICT OF NEW JERSEY
- ------------------------------------------------------x
:
In re : Chapter 11
:
PRINS RECYCLING CORP., et al. : Case Nos. 96-26125 (WT)
: through 96-26134 (WT)
Debtors. :
: Oral Argument requested
- ------------------------------------------------------x
ORDER APPROVING DEBTOR'S MOTION PURSUANT TO SECTIONS 105, 327 AND 363 OF THE
BANKRUPTCY CODE AUTHORIZING AND APPROVING: (A) A BREAK-UP FEE AND OVERBID
MINIMUM WITH RESPECT TO THE PROSPECTIVE SALE OF THE DEBTORS' BUSINESSES TO KTI
RECYCLING, INC., (B) AN AGREEMENT TO SELL THE ASSETS OF THE DEBTOR PAPER CHASE
EXCHANGE, INC. NO LATER THAN SEPTEMBER 16, 1997 FOR $2 MILLION SUBJECT TO HIGHER
AND BETTER OFFERS IF THE SALE OF SUBSTANTIALLY ALL OF THE DEBTORS' ASSETS IS NOT
CONSUMMATED THROUGH A PLAN OF REORGANIZATION BY SEPTEMBER 16, 1997, AND (C) A
MANAGEMENT AGREEMENT BETWEEN THE DEBTORS AND KTI OPERATIONS, INC.
Upon the Motion of the above-captioned debtors, as debtors and debtors-in-
possession (the "Debtors"), pursuant to sections 105 and 363 of title 11 of the
United States Code (the "Bankruptcy Code") for an order authorizing and
approving: (a) a break-up fee, overbid minimum and no further solicitation
provision with respect to the prospective sale of all or substantially all of
the Debtors' businesses (the "All Facilities Sale") to KTI Recycling, Inc. (the
"Buyer"), a wholly-owned subsidiary of KTI, Inc. ("KTI") pursuant to a plan of
reorganization, (b) an agreement to sell the assets of the Debtor Paper Chase
Exchange, Inc. pursuant to section 363(b) of the Bankruptcy Code no later than
July 31, 1997 for $2 million subject to higher and better offers if the All
Facilities Sale is not consummated through a plan of reorganization prior to
July 25, 1997, (c) an Operation and Maintenance Agreement between the Debtors'
and KTI Operations, Inc. ("Operations") pursuant to which Operations will manage
the Debtors' businesses (the "Management Agreement"), all as more fully set
forth in the certification of Clifford H. Straub, Jr., the Debtors' Chief
Financial Officer, dated April 25, 1997 filed in support of the Motion (the
"Certification"), the Term Sheet between the Debtors and KTI annexed to the
Certification as Exhibit "A" (the "Term Sheet"), and the Management Agreement
annexed to the certification as Exhibit "B"; and upon the affidavit of Nicholas
Menonna, Jr., the Chief Executive Officer of Operations, pursuant to Bankruptcy
Rule 2014(a), sworn to on April 24, 1997; and upon the Memorandum of Law, dated
April 25, 1997 filed in support of the motion; and the Court having fixed May
13, 1997 at 2:00 p.m. as the date and time for a hearing on the Motion pursuant
to its Order Shortening Time dated April 28, 1997 (the "Scheduling Order"); and
notice having been given in accordance with the Scheduling Order which notice is
hereby deemed good and sufficient; and an objection to the Motion having been
interposed by the Creditors' Committee and a Response to the Motion having been
filed by Ally Capital Corporation; and the hearing on the Motion having been
adjourned to May 19, 1997 and thereafter to May 22, 1997; and, in an effort to
resolve the Creditors' Committee's objection, the Creditors' Committee, the
Buyer, PNC Bank, N.A. ("PNC") and the Debtors having negotiated certain
modifications to the Term Sheet, which modifications are set forth in the
Amended Term Sheet attached as Exhibit "A" hereto and executed by the Debtors,
KTI, PNC and the Creditors' Committee (the "Amended Term Sheet") and which
modifications were also set forth on the record and are beneficial to holders of
general unsecured claims; and the Creditors' Committee, in consideration for the
modifications to the Term Sheet having agreed that the treatment of PNC under a
plan as contemplated by the Amended Term Sheet constitutes "impairment" pursuant
to section 1124 of the Bankruptcy Code; and if Rosenman & Colin LLP agrees with
the Creditors' Committee, subject to certain terms and conditions, to cap their
total allowable fees and disbursements, PNC has agreed that in the event that it
exercises its remedies as a secured creditor to sell its collateral securing the
Debtors' obligations to PNC, and without limiting the Debtors' rights under
applicable law, the sale of the Debtors' Facilities in Boston shall be sold by
public auction conducted in a commercially reasonable manner; and upon the
arguments of counsel and evidence adduced at the hearing conducted before the
Court on May 22, 1997; and upon the record of such hearing; and after due
deliberation, sufficient cause appearing therefor,
IT IS ON THIS 12th day of June, 1997,
ORDERED THAT:
1. The Motion be, and it hereby is, granted;
2. The Break-Up Fee as such term is defined and explained in the
Certification and paragraph 7 of the Amended Term Sheet, is hereby approved and
shall be payable solely out the proceeds of a sale of Boston or Newark Facility
assets to a party or parties other than the Buyer or KTI; provided, however,
that in the event Buyer is entitled to a Break-Up Fee hereunder, Buyer shall
submit reasonably detailed time and disbursement records evidencing the actual
and necessary fees, costs and disbursements incurred to the Debtors, the
Creditors' committee and PNC and such Break-Up Fee shall be paid unless an
objection to the reasonableness of such fees and disbursements is filed within
10 days of the receipt of said records, in which event payment of the Break-Up
Fee shall be withheld pending a hearing to be scheduled by the objector(s) or
Buyer and further order of the Court;
3. The Overbid Minimum as such term is defined and explained in the
Certification and in paragraph 8 of the Amended Term Sheet, is hereby approved;
4. The Debtor shall give notice of the opportunity for parties to bid for
the Facilities, subject to the $300,000 Overbid Minimum by mailing within 10
days of the entry hereof a copy of this Order and the Amended Term Sheet to
persons who have expressed interest in acquiring one or more of the Debtors'
Facilities, and by promptly mailing this Order and the Amended Term Sheet to
other interested parties who may express interest hereafter. The Debtors shall
further provide (i) upon request by a party in interest, a form of asset
purchase agreement to be used by a successful offeror, and (ii) upon request by
a bona fide prospective offeror, reasonable access during normal business hours
to conduct due diligence;
5. Any party desiring to submit a proposal (an "Alternate Proposal") to
acquire one or more of the Facilities (other than a proposal to acquire only the
Chicago Facility which proposal shall be subject to Sections 8 - 11 hereof) for
a purchase price at least $300,000 in excess of the $13,600,000 purchase price
being paid by Buyer for the Facilities shall submit such proposal in writing to
the counsel for the Debtors, the Creditors' Committee and PNC on or before 5:00
p.m. EDT on July 10, 1997 (the "July 10 Proposal Deadline"). Such Alternate
Proposal shall include a provision for such party to acquire the Chicago
Facility (as defined below) on the same or better financial terms than KTI, Inc.
(as described in the Certification and below) in the event that a plan based on
such party's Alternate Proposal is not timely confirmed, and, if such Alternate
Proposal is other than entirely for cash and/or if subject to third party
financing or if such party seeks modifications to the proposed form of asset
purchase agreement (the "Form Asset Purchase Agreement") to be provided by the
Debtors' upon the request of a party considering making an Alternate Proposal,
such party shall submit with such Alternate Proposal information to enable the
Debtors, PNC and the Creditors' Committee to evaluate any non-cash consideration
and/or financing contingencies, together with any proposed changes to the Form
Asset Purchase Agreement;
6. If one or more Alternate Proposals are submitted by the July 10
Proposal Deadline, a hearing shall be held before the court on July 17, 1997 at
10:00 a.m. at the United States Bankruptcy Court, King Federal Bldg., 50 Walnut
Street, Newark, NJ to consider such Alternate Proposal(s) and such higher or
better offers as may be made by Buyer or a party making such an Alternate
Proposal; provided that if an Alternate Proposal is accepted by the Court, the
successful party shall be required to sign immediately the Form Asset Purchase
Agreement, subject to only to changes agreed to by the Debtors', Creditors'
Committee and PNC and deposit in escrow with the Debtors' counsel a down payment
of $1,000,000 (by certified check or a letter of credit acceptable to
the,Debtors', the Creditors' Committee and PNC and approved by them in advance
of such hearing) which shall be forfeitable in accordance with the terms of
Asset Purchase Agreement. Such successful party shall thereafter cooperate
fully with the Debtors to negotiate, formulate and confirm a plan of
reorganization based on such Alternate Proposal;
7. Unless and until the Buyer and/or KTI advises the Debtors that they
are no longer interested in acquiring the Debtors' assets (other than the
Chicago Facility pursuant to the Chicago Guarantee (as such term is defined in
the Certification)), or the Buyer and/or KTI breach their obligations and the
Debtors exercise their right not to proceed with the transaction, the Debtors'
shall not actively solicit further offers for their assets; provided, however,
(i) that nothing herein or in the Amended Term Sheet shall prohibit the Debtors'
from responding and providing information, including due diligence information,
to parties expressing interest in the Debtors' assets and from providing notice
of any motions or hearings to such parties relating to the transactions with the
Buyer and KTI, (ii) upon the request of any bona fide prospective offeror, the
Debtors shall have an affirmative duty to provide access and information
necessary for such offeror to perform due diligence, and (iii) that nothing
herein shall prohibit the disposition of unnecessary assets in accordance with
the provisions of the Amended Term Sheet,and the Bankruptcy Code; and
8. In the event that the All Facilities Sale is not approved pursuant to
a confirmed plan of reorganization in these cases by September 16, 1997, the
Court shall hold a hearing on the later of (i) September 16, 1997 at 10:00 a.m.
or (ii) following a decision of the Court to deny confirmation of a plan (the
"Chicago Sale Hearing"), pursuant to which the assets comprising the Chicago
Facility of Debtor Paper Chase Exchange, Inc. shall be sold to KTI, Inc. or its
designee, for $2 million net to the estate with the consideration payable as
provided in paragraph 3(a)(vii) of the Amended Term Sheet, subject to higher and
better offers (but not subject to the $300,000 Overbid Minimum) to be considered
at the Chicago Sale Hearing;
9. The Debtors shall give notice of the Chicago Sale Hearing by mailing,
within 10 days of the entry hereof a copy of this Order and the Amended Term
Sheet to persons who have expressed interest in acquiring assets of the Debtors,
including the Chicago Facility, and by promptly mailing this Order and the Term
Sheet to other interested parties who may express interest hereafter. The
Debtors shall further provide (i) upon request by a party in interest, a form of
asset purchase agreement to be used by a successful offeror for the Chicago
Facility, and (ii) upon request by a bona fide prospective offeror, reasonable
access during normal business hours to conduct due diligence;
10. Parties desiring to make a higher and better offer for the Chicago
Facility (i.e., an offer which yields net proceeds to the estate of more than $2
million, after assumption or payment of all post-petition obligations and
executory contract cure amounts), other than entirely for cash or which is
subject to third party financing or where such party seeks modifications to the
proposed form of asset purchase agreement, shall submit the proposed offer to
the Debtors at least 10 days in advance of the Chicago Sale Hearing and shall
submit therewith information to enable the Debtors and PNC to evaluate any non-
cash consideration and/or financing contingencies, together with any proposed
changes to the form of asset purchase agreement;
11. The successful offeror for the Chicago Facility shall be required to
deposit a down payment equal to $1 million in cash or cash equivalent acceptable
to the Debtors and PNC and to close the sale within five business days, subject
to a provision in the Court order approving the sale of the Chicago Facility
that such offeror is entitled to the protections of section 363(m) of the
Bankruptcy Code;
12. Subject to execution of a definitive asset purchase agreement by Buyer
and the Debtors consistent with the Amended Term Sheet and in form and substance
reasonably acceptable to PNC, the Debtors and the Creditors' Committee, the
Management Agreement is hereby approved in all respects; provided, however, that
any Fixed Fee payable to Operations thereunder shall be payable by PNC if the
All Facilities Sale to the Buyer contemplated by the Amended Term Sheet closes
or a sale to a third party closes whereby the Debtors' obligations to PNC are
paid in full, including principal and interest; and
13. Entry into and performance under the Management Agreement by
Operations shall impose on Operations only the duties, responsibilities and
liabilities specified therein.
14. All notices, proposals and objections provided for herein shall be
served on (i) counsel for the Debtors, Rosenman a Colin LLP, 575 Madison Avenue,
New York, NY 10022-2585 (Attn: Jeff J. Friedman, Esq.), (ii) counsel for the
Creditors' Committee, Shanley & Fisher, P.C., 131 Madison Avenue, Morristown, NJ
07962-1979 (Attn: Robert K. Malone, Esq.), (iii) counsel for PNC, Sills Cummins,
Zuckerman Radin Tischman Epstein & Gross, One Riverfront Plaza, Newark, NJ 07102
(Attn: Jack M. Zackin, Esq.), and (iv) counsel for KTI, Wasserman, Jurista &
Stolz, 225 Millburn Avenue, Millburn, NJ 07041 (Attn: Steven Z. Jurista, Esq.).
/s/ William F. Tuohey
Hon. William F. Tuohey
United States Bankruptcy Judge
EXHIBIT 4.5
ASSET PURCHASE AGREEMENT dated as of June 24, 1997 (this "Agreement"),
among PRINS RECYCLING CORP., a New York corporation and Chapter 11 debtor in
possession ("Seller"), each subsidiary thereof listed on the signature page of
this Agreement (each a "Sub-Seller") (Sub-Sellers and Seller are sometimes
hereinafter collectively referred to as "Seller Parties"), KTI RECYCLING OF NEW
JERSEY, INC., a Delaware corporation, KTI RECYCLING OF NEW ENGLAND, INC., a
Delaware corporation, KTI RECYCLING OF ILLINOIS, INC., a Delaware corporation
(each a "Sub-Buyer"), and KTI RECYCLING, INC., a Delaware corporation ("Buyer"),
(Buyer and Sub-Buyers are sometimes hereinafter collectively referred to as
"Buyer Parties").
WHEREAS, Seller and Sub-Sellers own and operate recycling and paper
processing facilities located in Newark, New Jersey (the "Newark Facility");
Charlestown, Massachusetts (the "Boston Facility"), and Franklin Park, Illinois
(the "Chicago Facility") (collectively, the "Facilities") which are engaged in
the business of processing waste paper and commingled post consumer recyclables
(the "Business"); and
WHEREAS, on July 12, 1996 (the "Filing Date"), Seller Parties
commenced in the United States Bankruptcy Court for the District of New Jersey
(the "Bankruptcy Court") cases under Chapter 11 of the United States Bankruptcy
Code, 11 U.S.C. Section 101, et seq. (the "Bankruptcy Code"), assigned Case Nos.
96-26125 (WT) through 96-26134 (WT) (the "Chapter 11 Case");
WHEREAS, Seller Parties wish to sell to Buyer Parties, and Buyer
Parties wish to purchase from Seller Parties, the Acquired Assets (as defined
below), subject to the entry of an order of the Bankruptcy Court authorizing the
transactions contemplated hereby and subject to the terms and other conditions
hereinafter set forth; and
WHEREAS, in contemplation of the purchase and sale of the Acquired
Assets Seller Parties and Buyer signed a term sheet (the "Term Sheet") on April
21, 1997 (the "Term Sheet Date").
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the parties agree as follows:
ARTICLE I
PURCHASE AND SALE OF ACQUIRED ASSETS
SECTION 1.1. PURCHASE AND SALE.
Upon the terms and subject to the conditions of this Agreement, at the
Closing (as hereinafter defined), Seller Parties shall jointly and severally
sell, assign, transfer, convey and deliver to Buyer Parties, and Buyer Parties
shall jointly and severally purchase from Seller Parties, all of Seller Parties'
rights, title and interest in, to and under the Acquired Assets (as hereinafter
defined).
SECTION 1.2. ACQUIRED ASSETS AND EXCLUDED ASSETS.
(a) The term "Acquired Assets" as used herein means the business,
properties, assets, goodwill and rights of all Seller Parties, of every nature,
kind and description, tangible and intangible, wheresoever located and whether
or not carried or referred to on the books and records of any Seller Party,
except the Excluded Assets as set forth in Section 1.2(b). The Acquired Assets
include, without limitation, all of the Seller Parties' right, title and
interest in and to the business, properties, assets, goodwill and rights
described below:
(i) those contracts, leases, agreements, commitments and other
arrangements, whether oral or written, to which any Seller Party is a party
or by which any Seller Party is bound or to which any Seller Party shall
become a party or by which any Seller Party shall be bound prior to the
Closing, and which are listed in Schedule 1.2(a)(i) or which are designated
by Buyer, by written notice given to Seller prior to the Closing Date, as
"Accepted Contracts" for purposes hereof;
(ii) all waste processing and recycling facilities, including without
limitation all of each Seller Party's right, title and interest in and to
the Facilities and any real estate, and all related assets, machinery,
equipment, furniture and fixtures, including without limitation all of such
items as are listed in Schedule 1.2(a)(ii);
(iii) all accounts receivable, including without limitation
accounts receivable from parties to contracts which are not Accepted
Contracts, owed to any Seller Party on the Closing Date;
(iv) all patents (including reissues, divisions, continuations, and
extensions thereof), patent applications, trademarks, trademark
registrations, trademark registration applications, servicemarks, trade
names, all other names and slogans embodying business, product or service
goodwill or copyrights, including without limitation such as are listed in
Schedule 1.2(a)(iv);
(v) all trade secrets, discoveries, inventions, know-how, formulae,
processes, procedures, drawings, plans, designs, features, data, research,
records of inventions, computer software, source code, test information,
market surveys, marketing know-how and the like, including without
limitation such of the foregoing as were produced, developed or prepared,
or as are under production, development or preparation, by any employee,
agent or contractor of any Seller Party;
(vi) all permits, concessions, licenses, franchises, approvals and
authorizations by governmental or regulatory authorities or bodies
("Governmental Entities") held by any Seller Party (all of the foregoing,
"Permits") and which are transferable (with or without approval of any
Governmental Entity), including without limitation the Permits listed in
Schedule 1.2(a)(vi);
(vii) all covenants, conditions, warranties, representations and
guarantees made or given by suppliers, manufacturers and contractors,
subject to any conditions to which such rights are subject;
(viii) all of the goodwill and going concern value of the Business,
and all of each Seller Party's books of account, general, financial,
accounting and personnel records, files, invoices, customers' and
suppliers' lists, technical documents, manuals, management software tools,
databases, computer tapes and other operating data relating to the Acquired
Assets;
(ix) all cash and deposit accounts and all securities, together
with all records of each Seller Party relating thereto; provided that the
capital stock of any Sub-Seller shall be an Acquired Asset only if Buyer
shall so elect at or prior to the Closing; and
(x) all claims, causes of actions, and suits which any Seller Party
has or may have against third parties, and all claims, causes of actions,
suits and rights which any Seller Party may have under the Operation and
Maintenance Agreement dated as of April 21, 1997 (the "O&M Agreement")
between Seller and KTI Operations, Inc ("Manager"):
(b) Notwithstanding anything to the contrary herein, the Acquired Assets
shall not be deemed to include the following "Excluded Assets":
(i) Any claims, causes of actions or suits for a preference or
voidable transfer which any Seller Party may have under the applicable
provisions of the Bankruptcy Code against any person;
(ii) All of each Seller Party's right, title and interest in and to
those contracts, leases, agreements, commitments and other arrangements,
whether oral or written, to which such Seller Party is a party or by which
such Seller Party is bound or to which such Seller Party shall become a
party, other than Accepted Contracts (collectively, "Rejected Contracts");
(iii) the capital stock of all Sub-Sellers, except to the extent
that Buyer elects at or prior to the closing that such capital stock
shall be Acquired Assets;
(iv) all rights of each Seller Party under this Agreement;
(v) all Permits that are not transferable and for which requisite
approval to transfer to a Buyer Party is not obtained as of the Closing
Date; and
(vi) all assets of Seller Parties to be transferred, returned, sold or
otherwise conveyed to a third party consistent with the settlement reached
by Seller Parties, Ally Capital Corp. and American Waste Control of New
York, as set forth on the record of the hearing held before the Bankruptcy
Court on March 6, 1997 and embodied in a stipulation executed to date by
Seller Parties and Ally Capital Corp. and previously provided to Buyer.
SECTION 1.3. ASSUMPTION OF CERTAIN LIABILITIES.
(a) Upon the terms and subject to the conditions of this Agreement,
at the Closing Buyer shall, or shall cause a Sub-Buyer to, assume and agree to
pay, perform and discharge when due, and indemnify Seller from and after the
Closing from, such trade payables which are owing and unpaid by any Seller Party
as of the Closing and which were incurred by Seller Parties (i) in the ordinary
course of business after the Filing Date and (ii) not in material breach of any
provision of O&M Agreement (such trade payables being hereinafter referred to as
the "Post-Petition Trade Payables"); provided, that Buyer shall not assume
hereunder, and each Seller Party shall remain solely responsible for the payment
of, all Post-Petition Trade Payables to the extent that the aggregate amount
thereof exceeds $500,000. To the extent that, in the reasonable determination
of Buyer, the aggregate amount of all Post-Petition Trade Payables outstanding
as of the Closing exceeds $500,000, Buyer shall, on such basis as it deems
reasonable, determine which Post-Petition Trade Payables it (and/or Sub-Buyers)
will assume hereunder.
(b) Buyer agrees to perform and discharge, or to cause a Sub-Buyer to
perform and discharge, all liabilities and obligations incurred after the
Closing under all Accepted Contracts which, (i) upon the approval of the
Bankruptcy Court and at the prior written direction of Buyer, are assumed by
Buyer pursuant to Section 365 of the Bankruptcy Code or (ii) are not assumable
by Seller pursuant to the Bankruptcy Code but the parties to each such Accepted
Contract have, prior to the Closing, consented in writing (on terms at least as
favorable as the pre-default contract terms) to the assignment of such Accepted
Contract to such Buyer Party (each of the foregoing, an "Assumed Contract").
Except pursuant to Section 1.3(a), Buyer Parties shall not assume hereunder, and
each Seller Party shall remain solely responsible for, the payment and
performance of, all obligations incurred prior to the Closing by such Seller
Party under all Assumed Contracts.
(c) Buyer does not hereby agree to perform, discharge or in any other
way be liable for, contingently or otherwise, any liabilities or other
obligations of Seller Parties of whatsoever nature or description and whenever
incurred other than as expressly set forth in Section 1.3(a) and (b) above
(hereinafter, "Excluded Liabilities").
SECTION 1.4. PURCHASE PRICE.
(a) The purchase price for the Acquired Assets shall be $13,100,000,
as such amount may be decreased as provided in this Section 1.4 or pursuant to
Section 6.1(c) (the "Purchase Price"). Subject to the terms and conditions
thereof, the Purchase Price shall be payable as follows:
(i) Cash in the amount of $5,600,000 shall be paid by Buyer on
the Closing Date to such person or persons as Seller shall direct;
(ii) A promissory note dated as of the Closing Date from Buyer in
principal amount equal to the greater of (x) $2,000,000 or (y) the lesser
of (A) $4,800,000 and (B) 75% of the Eligible Accounts Receivables (as such
term is defined under the revolving and term loan and security agreement
dated April 13, 1995 between Seller Parties and PNC Bank, National
Association, successor to Midlantic Bank, N.A., ("PNC") and the documents
executed and delivered pursuant thereto (the "Loan Documents")) having an
age of 90 days or less as of the Closing Date, in the form of Exhibit A;
(iii) A promissory note dated as of the Closing Date from
Buyer in the principal amount of $2,700,000, in the form of Exhibit B (the
"Chicago Purchase Note");
(iv) A promissory note dated as of the Closing Date from Buyer in
principal amount equal to the lesser of (x) $2,800,000 and (y) the
difference between (A) $7,500,000 and (B) the aggregate original principal
amount of the promissory notes referenced in clauses (ii) and (iii) above,
in the form of Exhibit C.
(b) In order to secure payment of the promissory notes referred to in
clauses (ii), (iii) and (iv) of Section 1.4(a) (the "Purchase Notes"), (i) Buyer
shall, on the Closing Date, cause KTI, Inc. ("KTI") to execute and deliver to
Seller a Guarantee Agreement in the form of Exhibit D, (ii) all Buyer Parties
shall, on the Closing Date, enter into a Security Agreement in the form of
Exhibit E, and (iii) Buyer shall pledge to Seller all of the stock of each
Sub-Buyer in the form of Exhibit F.
(c) To the extent that any Acquired Assets, other than inventory sold
in the ordinary course, have been or are sold by Seller or any Sub-Seller during
the period from and including the Term Sheet Date through and including the
Closing Date to any individual, corporation, partnership, joint venture, trust,
business association or other entity (all of the foregoing, "Persons"), the
Purchase Price payable shall be reduced, on a dollar-for-dollar basis, by the
amounts paid or payable by the buyers of such assets. Any grant by Seller or
any Sub-Seller after the Term Sheet Date to anyone other than Buyer of any
right, by lease or otherwise, to use or possess any Acquired Asset after the
Closing shall, unless such right was granted upon the prior written approval of
the Manager (which consent may be withheld by the Manager in its sole
discretion), be deemed to be a "sale" by such Seller Party for purposes hereof.
The provisions of this Section 1.4(c) shall not be deemed in limitation of the
rights and remedies of Buyer hereunder or under applicable law in the event that
any Acquired Assets are sold in breach of Seller Parties' obligations under
Section 4.4. For the avoidance of doubt, the parties agree that no surrender to
or repossession by a secured party of property (other than property subject to
the first priority lien of PNC) securing such party's claims ("Third Party
Lien") that is made with the consent of Buyer nor any repossession of property
subject to a Third Party Lien by the holder thereof following entry of an order
modifying the automatic stay of Section 362 of the Bankruptcy Code shall be
deemed a sale for purposes of this Section 1.4(c); provided, however, that each
Seller Party (consistent with the financial resources available to it and taking
into account the effect on the Business of the Chapter 11 case) shall make all
payments necessary to avoid repossession of property included in the Acquired
Assets unless otherwise consented to by the Manager.
(d) Seller agrees that the Purchase Price shall be reduced by an
amount equal to the sum of (i) any amounts drawn by PNC Bank, National
Association ("PNC") on the Letter of Credit referred to in paragraph 1 of the
agreement between Buyer and PNC dated as of April 21, 1997 (the "Chicago
Agreement"), and (ii) interest accrued thereon through the Closing Date as
provided in paragraph 3 of the Chicago Agreement. Any such reduction shall be
applied first, by deeming the amount thereof as a prepayment made as of the
Closing Date of the principal amount (as reduced if at all, pursuant to Section
6.1(c)) of the Chicago Purchase Note, and thereafter by reducing the amount
payable under Section 1.4(a)(i).
ARTICLE II
THE CLOSING
SECTION 2.1. CLOSING DATE.
The closing of the sale and transfer contemplated hereby (hereinafter
called the "Closing") shall take place at the offices of Dorsey & Whitney LLP
located at 250 Park Avenue, New York, New York 10177, commencing at 10:00 a.m.
on the first business day after the satisfaction or waiver by the appropriate
parties of each of the conditions precedent set forth in Article V hereof (other
than those conditions that by their nature (e.g. execution of documents) will be
satisfied on the Closing Date) unless some other time, date and place is
mutually agreed among the parties hereto (such date of the Closing is
hereinafter referred to as the "Closing Date"). All transactions contemplated
hereunder to take place at Closing shall be deemed to be simultaneous.
SECTION 2.2. TRANSACTIONS TO BE EFFECTED AT THE CLOSING.
At the Closing:
(a) Seller Parties shall deliver to Buyer Parties (i) such duly
executed or endorsed bills of sale, certificates of title, instruments of
assignment and transfer, deeds and other instruments which are required by law
or are customary to sell, assign, transfer, convey or deliver the Acquired
Assets to Buyer Parties. None of the foregoing documents shall contain any
representations, warranties or agreements on the part of any Seller Party
inconsistent with or supplementary to the representations, warranties and
agreements of Selling Parties contained herein. Particular Acquired Assets
shall be transferred at the Closing pursuant to the foregoing documents to such
Buyer Party or Parties as Buyer shall direct.
(b) Buyer shall pay to Seller the cash portion of the Purchase Price
by wire transfer, in immediately available funds, to such account(s) of such
Person or Persons as shall be specified by Seller.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1. REPRESENTATIONS AND WARRANTIES OF SELLER.
Each Seller Party jointly and severally hereby represents and warrants
to Buyer Parties that, except as set forth in Schedule 3.1:
(a) Organization, Standing and Power. Such Seller Party is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction in which it is incorporated and has the requisite power and
authority to own the Acquired Assets owned by it and to carry on the Business
conducted by it except to the extent the failure of such Seller Party to be in
good standing does not have and might reasonably be expected not to have a
material adverse effect on the Acquired Assets or the Business, taken as a
whole, or the consummation of the transactions contemplated by this Agreement (a
"Material Adverse Effect"). Seller has heretofore delivered to Buyer true and
complete copies of such Seller Party's certificate of incorporation and by-laws,
as amended through the date of this Agreement.
(b) Authority. This Agreement has been duly executed and delivered
by such Seller Party and, upon confirmation of the Plan by the Bankruptcy Court,
will constitute a legal, valid and binding obligation of such Seller Party
enforceable in accordance with its terms.
(c) No Violation. Subject to the confirmation of the Plan by the
Bankruptcy Court (and except to the extent that the confirmed Plan removes or
resolves any violation, conflict, default, adverse right, loss or requirement
referred to in (i) or (ii) below), the execution and delivery of this Agreement
do not, and the consummation of the transactions contemplated hereby and the
compliance with the terms hereof will not, (i) violate any law, judgment, order,
decree, statute, ordinance, rule or regulation applicable to such Seller Party
or (ii) conflict with any provision of the certificate of incorporation or
by-laws of such Seller Party.
(d) Power to Transfer; Consents. (i) Upon confirmation of the Plan
by the Bankruptcy Court, such Seller Party will have the authority to enter into
this Agreement and the other agreements, documents and instruments to be
executed and delivered by it pursuant hereto and to carry out the transactions
contemplated hereby.
(ii) Except for the Chapter 11 Case, such Seller Party is not a
party to, subject to or bound by any judgment, order, writ, prohibition,
injunction or decree of any Governmental Entity, and no action or proceeding is
pending against such Seller Party, which if adversely determined against such
Selling Party would prevent the execution, delivery or performance of this
Agreement by such Seller Party.
(e) Location of Tangible Assets. All tangibles assets are located at
the Facilities or at such other location(s) as are set forth in Schedule 3.1(e).
(f) Compliance with Applicable Laws. Such Seller Party is in
compliance in all respects with all laws, statutes, ordinances, regulations,
rules and orders of all Governmental Entities applicable to it, the Business or
to the Acquired Assets ("Applicable Laws") other than those Applicable Laws the
non-compliance with which does not have and might reasonably be expected not to
have a Material Adverse Effect; all real property used by such Seller Party in
connection with the Business is usable for its current purposes without
violating any Applicable Laws other than those Applicable Laws the
non-compliance with which does not have and might reasonably be expected not to
have a Material Adverse Effect; and such Seller Party has not received any
written notification of any asserted violation of any Applicable Law or
commencement of any governmental investigation or review with respect thereto,
except for those written notifications which have been resolved by such Seller
Party to the satisfaction of the Governmental Entity giving such notice. Such
Seller Party has all Permits required for the operation of the Business other
than those Permits the absence of which does not have and might reasonably be
expected not to have a Material Adverse Effect.
(g) Litigation; Decrees. There is no suit, action, investigation or
proceeding which is pending or, to the knowledge of such Seller Party,
threatened against or affecting Seller Party which, if adversely determined
against such Seller Party, might reasonably be expected to have a Material
Adverse Effect. There is no judgment, decree, injunction, rule or order of any
Governmental Entity or body outstanding relating to the Acquired Assets, the
Business or the transactions contemplated hereby which if adversely determined
might reasonably be expected to have a Material Adverse Effect.
(h) Insurance. Schedule 3.1(h) contains a true and complete list and
brief description of all casualty, liability, business interruption and other
insurance policies and fidelity bonds held by such Seller Party in connection
with the Business or any Acquired Assets. Such Seller Party is in material
compliance with the conditions contained in such policies and bonds. Such
Seller Party does not self-insure or has not self-insured any material risks
with respect to or materially affecting the Business or the Acquired Assets,
except to the extent of any deductibles under the policies set forth in Schedule
3.1(h).
(i) Sufficiency of Acquired Assets; Scope of Acquired Assets. Except
for the Excluded Assets, the Acquired Assets to be transferred to Buyer Parties
at the Closing shall comprise all the business, properties, assets and goodwill
used in connection with the Business and that in all material respects are
necessary for the conduct of the Business as the Business was conducted as of
the Term Sheet Date.
(j) Real Properties. The Seller Parties have good and marketable
title to and are the lawful owners of the Acquired Assets. In the case of real
property owned or leased by any Seller Party, all uses thereof by any Seller
Party are legal conforming uses under Applicable Laws except to the extent that
any non-conforming use does not have and might reasonably be expected not to
have a Material Adverse Effect.
(k) Real Property Leases. Schedule 3.1(k) hereto lists all leases
pursuant to which any Seller Party is in possession of or otherwise uses any
real property and includes complete and accurate legal descriptions of such
leased real property (collectively, the "Real Property Leases").
(l) Subsidiaries. Schedule 3.1(l) is a true and complete list and
description of all capital stock held of record or beneficially by any Seller
Party.
(m) Disclosure. All written information furnished by or on behalf of
Seller Party to Buyer in connection with the transactions contemplated by this
Agreement is accurate in all material respects and does not contain any untrue
statement of a material fact or omit to state a material fact which is necessary
to make the information furnished not misleading.
SECTION 3.2. REPRESENTATIONS AND WARRANTIES OF BUYER.
Each Buyer Party hereby jointly and severally represents and warrants
to Seller Parties that:
(a) Organization, Standing and Power. Such Buyer Party is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction in which it is incorporated and has the requisite corporate
power and authority to carry on its business as now being conducted.
(b) Authority. Such Buyer Party has all requisite corporate power
and authority to execute this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on such Buyer Party. This Agreement has been
duly executed and delivered by such Buyer Party and constitutes a legal, valid
and binding obligation of such Buyer Party enforceable in accordance with its
terms except as enforcement thereof may be limited by bankruptcy, insolvency or
other similar laws affecting the enforcement of creditors' rights generally and
except that the availability of equitable remedies, including specific
performance, is subject to the discretion of the court before which any
proceeding therefor may be brought.
(c) No Violation; Consents. The execution and delivery of this
Agreement do not, and the consummation of the transactions contemplated hereby
will not, (i) violate any law, judgment, order, decree, statute, ordinance, rule
or regulation applicable to such Buyer Party, (ii) conflict with any provision
of the certificate of incorporation or by-laws of such Buyer Party or (iii)
require any consent, approval, order, decree authorization of, or the
registration, declaration or filing with, any Governmental Entity; or (iv)
require on the part of Buyer Party or any consent, approval, or order of any
non-Governmental Entity.
ARTICLE IV
COVENANTS
SECTION 4.1. PLAN OF REORGANIZATION.
Seller, following the execution and delivery hereof, will prepare a
plan of reorganization and disclosure statement (the "Plan") which incorporates
(and is not in any way inconsistent with) the sale of assets contemplated
hereunder and will file the Plan with the Bankruptcy Court and shall use
commercially reasonable efforts to cause the Bankruptcy Court to enter an order
confirming the Plan. The Plan shall be consistent with the provisions of this
Agreement, and the Bankruptcy Court order shall include those decretal
paragraphs substantially in the form set forth in Schedule 4.1.
SECTION 4.2. PRELIMINARY ORDER OF BANKRUPTCY APPROVAL OF CERTAIN
PROVISIONS OF THIS AGREEMENT
Seller shall use commercially reasonable efforts to cause the
Bankruptcy Court to enter an order pursuant to the motion filed with the
Bankruptcy Court on April 25, 1997, approving the O&M Agreement, Seller's
Break-Up Fee obligations under Section 4.9 of this Agreement, and Seller's no
solicitation and topping amount obligations under Section 4.8 of this Agreement
(the "Preliminary Order").
SECTION 4.3. INVESTIGATION BY BUYER.
Without in any way limiting the rights of Manager under the O&M
Agreement, Seller shall permit the officers, accountants, attorneys and other
representatives of Buyer to make such investigations of the Business and
Acquired Assets as Buyer deems necessary or advisable in order to familiarize
itself with such business, properties, assets and other matters; Buyer and its
representatives shall at all times have full and complete access to the premises
and to all books and records of all Seller Parties relating to the Business; and
Seller shall furnish to Buyer all financial and operating data and other
information with respect to the Business and the Acquired Assets as Buyer shall
from time to time reasonably request.
Without in any way limiting the foregoing, Buyer shall have a period
of time ending forty-five days (45) days after entry of the Preliminary Order
(the "Environmental Due Diligence Period") during which Buyer may conduct due
diligence of Seller with regard to environmental matters (the "Environmental Due
Diligence"), Seller shall provide to Buyer such assistance in Buyer's conduct of
the Environmental Due Diligence as Buyer may reasonably request, and Seller
shall disclose in writing to Buyer within no more than [ ] days after the
date of entry of the Preliminary Order all environmental conditions at the
Facilities of which Seller is aware and which are or may be required by
applicable law to be remediated (irrespective of the estimated costs of such
remediation).
SECTION 4.4. CONDUCT OF BUSINESS.
Except as may otherwise be authorized, recommended or approved by
Manager under the O&M Agreement or consented to by Buyer or directed by the
Bankruptcy Court, each Seller Party shall use best efforts (consistent with the
financial resources available to it and taking into account the effect on the
Business of the Chapter 11 Case) to: (i) cause the operations of the Business
to be conducted in the same manner and under the same business policies as were
in effect prior to the Term Sheet Date; (ii) not enter into any transactions or
any contracts other than in the ordinary and usual course of business; (iii) not
take any action which may materially adversely affect the normal conduct of the
Business; (iv) maintain and keep the Acquired Assets in good repair, working
order and condition, reasonable wear and tear excepted; (v) keep in full force
and effect insurance comparable in the amount and scope of coverage to that now
maintained by it; (vi) not enter into any employment agreement with any of the
employees of Seller or Sub-Sellers, or grant or pay to any of them any increase
in compensation other than in the ordinary course of business in accordance with
past practice; (vii) perform in all material respects its obligations under all
material contracts and material commitments applicable to the Business; (viii)
not amend any material contract or material commitment applicable to the
Business; (ix) maintain on a basis consistent with past practices all books and
records of such Seller Party relating to the Business conducted by it so as to
reflect in all material respects correctly, accurately and completely the
affairs, assets, income, revenues, costs and expenses of the Business conducted
by it; and (x) maintain and preserve the business organization and material
contracts of the Business. Anything in the O&M Agreement to the contrary
notwithstanding, no Seller Party shall, except upon the prior written consent of
Buyer or, in the case of the consummation of a sale of assets which was not
solicited by Seller, upon the consent of the Bankruptcy Court, sell, lease,
transfer or otherwise dispose of any Acquired Assets, other than sales of
inventory in the ordinary course of business. Seller (or a Sub-Seller, as
appropriate) shall assume for purposes of Section 365 of the Bankruptcy Code
such Accepted Contracts as Buyer directs from time to time, and shall use
commercially reasonable efforts to obtain the Bankruptcy Court's approval
thereof. Buyer shall use commercially reasonable efforts to give Seller
sufficient notice of the Accepted Contracts to be assumed as may be necessary
for such assumption to be approved by the Bankruptcy Court on or about the date
of confirmation of the Plan subject to the occurence of the Closing. To the
extent that any Accepted Contract is not assumable by Seller (or a Sub-Seller)
under Section 365 of the Bankruptcy Code, Seller shall use commercially
reasonable efforts to obtain, prior to the Closing Date, such consents as may be
necessary for the assignment of such Accepted Contracts to Buyer (or a
Sub-Buyer).
SECTION 4.5. COVENANTS OF SELLER RELATING TO CUSTOMERS.
(a) Seller Parties shall, at and/or after the Closing as may be
requested by Buyer, provide written notice, in form and substance reasonably
satisfactory to Buyer, to all parties who owe amounts evidenced by accounts
receivable that are included in the Acquired Assets of the sale, assignment,
transfer, conveyance and delivery contemplated hereby of such accounts
receivable and direct such parties to make any and all payments in respect of
such accounts receivable to Buyer in accordance with procedures and details
specified in such notice. Any such payments received by a Seller Party after
the Closing shall be held by such Seller Party in trust for the benefit of Buyer
and shall immediately be forwarded by such Seller Party in the form received and
without recourse to such Seller Party.
(b) From and after the Closing, Buyer Parties shall have the right
and authority to collect for its own account all accounts receivable and other
items that are included in the Acquired Assets and to endorse with the name of
any Seller Party any checks or drafts received with respect to any such trade
accounts.
SECTION 4.6. LEGAL CONDITIONS TO CLOSING.
Each of Buyer and Seller will take all reasonable actions necessary to
comply promptly with all legal requirements which may be imposed on it with
respect to the Closing and will promptly cooperate with and furnish information
to each other and to other parties in connection with any such legal
requirements. Each of Buyer and Seller will take all reasonable actions
necessary to obtain (and will cooperate with each other in obtaining) any
consent, authorization, order or approval of, or any exemption by, any Person
required to be obtained or made by it in connection with any of the transactions
contemplated by this Agreement.
SECTION 4.7. PURCHASE PRICE ALLOCATION.
On or prior to the Closing Date, Seller and Buyer shall mutually
agree, and shall be bound in all respect thereby, on an allocation of the
Purchase Price among the Acquired Assets according to the relative fair market
values of such assets on the Closing Date. If Seller and Buyer are unable to
agree on such fair market values, Seller and Buyer shall elect an independent
appraisal firm to determine such values. The conclusions of such appraisal firm
shall be conclusive and binding in all respects. The fees and expenses of such
appraisal firm shall be shared equally by Seller and Buyer. Neither party shall
take a position inconsistent with any allocation determined in accordance with
this Section 4.7 in any document or filing, including any Tax return, report or
form.
SECTION 4.8. DEALINGS WITH OTHERS/TOPPING AMOUNT.
Prior to July 31, 1997, Seller may not, directly or indirectly,
through any officer, director, agent or otherwise, solicit, initiate or
knowingly encourage submission of proposals or offers from any person relating
to the Acquired Assets; provided, that nothing herein shall preclude Seller from
responding to inquiries from, providing due diligence information to, or
providing notice of the transactions contemplated hereby and of any related
hearings to, any interested party as required by Seller's fiduciary obligations
under applicable law. In the event that another purchaser offers to buy
substantially the same assets (other than the Chicago Facility) as the Buyer
proposes to purchase, the value of the offer of any such purchaser must exceed
the consideration payable hereunder by the amount of $300,000 before such offer
may be accepted by Seller. Seller shall promptly notify Buyer if any proposal
or offer with respect to the Acquired Assets (other than sales of inventory in
the ordinary course) is made or if Seller sends to any third party any
information in the nature of due diligence materials and shall, in any such
notice to Buyer, indicate in reasonable detail the identify of the offeror or
recipient and the terms and conditions of any proposal or offer.
SECTION 4.9. BREAK-UP FEE
In the event that any of the assets to be sold under this Agreement
(with the exception of the Chicago Facility) are sold to another purchaser,
Buyer shall be entitled to a break-up fee from Seller (the "Break-Up Fee")
payable from the proceeds from such sale equal to the lesser of $250,000 or 150%
of Buyer Parties' out-of-pocket costs and expenses, including reasonable
attorneys' fees, reasonably incurred in connection with this transaction;
provided, that neither KTI nor any Buyer Party have defaulted in any of their
respective obligations under this Agreement. In the event of any objection to
the amount of attorneys' fees payable hereunder after notice thereof to Seller,
the unsecured creditors committee and the United States Trustee, approval of
such fees will sought from the Bankruptcy Court.
SECTION 4.10. POST-CLOSING COVENANT OF BUYER
After the Closing, Buyer shall make available to Seller such employees
of Buyer as may be reasonably appropriate and necessary to assist Seller in its
performance of any post-Closing obligations it may have to Buyer Parties
hereunder or to the Bankruptcy Court; provided, that Seller reimburses Buyer for
all reasonable out-of-pocket costs and expenses incurred by Buyer in making
available to Seller any such employees, and that Seller pays Buyer an amount
equal to Buyer's full overhead costs (including salary and benefits) for the
time such employees are made available to Seller.
SECTION 4.11. COVENANT TO RESOLVE LITIGATION, INJUNCTION OR RESTRAINTS
With the exception of any action brought by a party hereto for breach
of any other party's obligation under this Agreement or any other agreement
between such parties, in the event that any Conflicting Legal Action (as
hereinafter defined) is pending before any Governmental Entity prior to the
Closing, Seller Parties and Buyer Parties covenant to use commercially
reasonable efforts to resolve the same expeditiously in such manner as to permit
the consummation of the transactions contemplated hereunder in accordance with
the provisions hereof.
ARTICLE V
CONDITIONS PRECEDENT
SECTION 5.1. CONDITIONS TO OBLIGATIONS OF SELLER PARTIES.
The obligations of the Seller Parties to sell, assign, convey and
deliver the Acquired Assets to Buyer on and as of the Closing are subject to the
prior satisfaction of the following conditions:
(a) Approvals. All authorizations, consents, orders or approvals of,
or declarations or filings with, any Governmental Entity or any other Person
necessary for the consummation of the transactions contemplated by this
Agreement shall have been obtained or filed or shall have occurred.
(b) No Litigation, Injunctions, or Restraints. There shall be no
suit, action, or other proceeding pending before any Governmental Entity in
which it is sought to directly or indirectly restrain, prohibit, invalidate,
delay or set aside in whole or in part the consummation of the transactions
contemplated by this Agreement or to obtain material damages in connection
therewith, and no temporary restraining order, preliminary or permanent
injunction or other legal restraint or prohibition preventing the consummation
of the transactions contemplated by this Agreement shall be in effect (any of
the foregoing, "Conflicting Legal Action").
(c) Plan. The Bankruptcy Court shall have entered an order
confirming the Plan consistent with Section 4.1, any pre-Closing conditions
required by such confirmation to be performed by Buyer Parties shall have been
satisfied and the confirmation order shall not be subject to any stay on the
first business day after the expiration of the tenth calendar day from the entry
thereof or such other date as may be fixed for the Closing Date in accordance
with Section 2.1.
(d) Performance of Obligations of Buyer Parties. Buyer Parties shall
have performed or complied in all material respects with all obligations and
conditions required to be performed by them under this Agreement prior to or as
of the Closing Date, and Seller shall have received a certificate to such effect
signed on Buyer's behalf by its chief executive officer or other authorized
officer to such effect.
(e) Representations and Warranties. The representations and
warranties of each Buyer Party set forth in this Agreement shall be true and
correct in all material respects as of the date of this Agreement and as of the
Closing Date as though made on and as of the Closing Date and Seller shall have
received a certificate signed on behalf of each Buyer Party by the chief
executive officer of each such Buyer Party to such effect.
SECTION 5.2. CONDITIONS TO OBLIGATIONS OF BUYER PARTIES.
The obligations of Buyer Parties to purchase the Acquired Assets on
and as of the Closing are subject to the prior satisfaction of each of the
following conditions:
(a) Approvals. All authorizations, consents, orders or approvals of,
or declarations or filings with, any Governmental Entity required by law for the
consummation of the transactions contemplated by this Agreement shall have been
obtained or filed or shall have occurred.
(b) No Litigation, Injunctions, or Restraints. There shall be no
Conflicting Legal Action pending.
(c) Plan. The Bankruptcy Court shall have entered an order
confirming the Plan consistent with Section 4.1, any pre-Closing conditions
required by such confirmation to be performed by Seller Parties shall have been
satisfied and the confirmation order shall not be subject to any stay on the
first business day after the expiration of the tenth calendar day from the entry
thereof or such other date as may be fixed for the Closing Date in accordance
with Section 2.1.
(d) Performance of Obligations of Seller Parties. Seller shall have
paid, or PNC shall have paid or agreed to pay, such amount as may be required
under Section 6.1(b), and Seller Parties shall have performed or complied in all
material respects with all other obligations required to be performed by them
under this Agreement prior to or as of the Closing Date, and Buyer shall have
received a certificate to such effect signed on Seller's behalf by its chief
executive officer or other authorized officer to such effect.
(e) Representations and Warranties. The representations and
warranties of each Seller Party set forth in this Agreement shall be true and
correct in all material respects to the knowledge of all Seller Parties after
due inquiry as of the date of this Agreement and as of June 16, 1997, and Seller
shall have promptly notified Buyer to the extent that it determines after June
16, 1997 that any such representation and warranty is not true and correct in
all material respects; in addition, as of the date of this Agreement and as of
the Closing Date, no such representation or warranty shall be untrue or
incorrect in any respect so as to frustrate the essential purpose of Buyer
Parties in entering into this Agreement; and Buyer shall have received a
certificate signed on behalf of each Seller Party by the chief executive officer
of each such Seller Party to such effect. To the extent that any representation
or warranty in any provision of this Agreement is qualified therein by a
materiality or "Material Adverse Effect" standard, the materiality qualification
set forth in this subsection (e) shall not apply.
(f) Transfer of Key Assets. Seller Parties shall be in possession
and control of those Acquired Assets listed in Schedule 5.2(f) so as to be able
to sell, transfer and assign such Acquired Assets (the "Key Assets") to Buyer
Parties as required pursuant to the provisions hereof, and no Key Assets shall
have either been destroyed or otherwise adversely affected so as to make such
Key Assets no longer fit for the intended use or purpose thereof.
(g) No Material Adverse Change. No material adverse change shall
have occurred prior to the Closing, unrelated to Buyer Parties, KTI or Manager,
that frustrates the essential purpose of Buyer Parties in consummating the
transactions contemplated hereby.
(h) Permits. All transferable Permits shall have been transferred to
Buyer (and/or Sub-Buyers) and all approvals necessary for such transfer
effective as of the Closing Date shall have been obtained, and Buyer (and/or
Sub-Buyers) shall have obtained replacement permits for any non-transferable
Permits; provided, that if the transfer of any Permit has not been so made or
approved and no replacement permit therefor shall have been obtained, the
condition in this paragraph (i) shall nonetheless be deemed to have been
satisfied (x) if Buyer, in its sole discretion, elects to include within the
Acquired Assets all capital stock of the Sub-Seller which holds such Permit,
provided that such capital stock is transferred to Buyer (or a Sub-Buyer) at the
Closing on a basis and pursuant to documentation such that, in the reasonable
determination of Buyer, neither such Sub-Seller nor any Buyer Party may be
directly or indirectly responsible or liable for any liabilities or obligations
other than those expressly required by this Agreement to be assumed or
discharged by Buyer Parties, and/or (y) if Seller with the consent of PNC, in
its sole discretion, elects to extend the Closing Date to a date no sooner than
thirty (30) days after the date of entry of the Confirmation Order, provided
that during such extension period Seller shall have provided all assistance
reasonably required by Buyer (or a Sub-Buyer) to obtain the transfer, approval
for transfer or replacement of such Permit.
(i) Certain Contracts. The aggregate amount of waste tonnage
processed at the Newark Facility, the Chicago Facility and the Boston
Residential Facility (i.e., not including the Boston Commercial Facility) during
the most recent four (4) calendar week period prior to the Closing Date for
which reliable information is available, as adjusted for seasonal factors based
on the historical performance of such Facilities, shall have equaled or exceeded
ninety percent (90%) of the aggregate amount of waste tonnage processed at such
Facilities during the four (4) calendar weeks commencing April 6, 1997, less any
such tonnage relating to contracts which have been terminated at the
recommendation of the Manager, and Seller shall have furnished to Buyer such
evidence thereof as Buyer may have reasonably requested.
ARTICLE VI
TERMINATION, AMENDMENT AND WAIVER
SECTION 6.1. TERMINATION.
(a) This Agreement may be terminated and the transactions
contemplated hereby abandoned at any time prior to the Closing:
(i) by mutual written consent of Seller and Buyer;
(ii) by Buyer on written notice to Seller if any material adverse
change shall have occurred, unrelated to Buyer Parties, KTI or Manager that
frustrates the essential purpose of Buyer Parties in consummating the
transactions contemplated hereby; or
(iii) by Buyer or Seller on written notice given to the other
party if the Plan has not been confirmed, for any reason whatsoever,
on or before September 30, 1997 or if the conditions hereunder to such
party's obligations hereunder have not been satisfied on or before the
fifteenth day after the date to which Closing was extended pursuant to
5.2(h).
(b) If during the Environmental Due Diligence Period, it is
determined that the estimated costs of remediation of any environmental
conditions at any Facilities (other than the Chicago Facility) required under
applicable law (exclusive of "soft costs", such as consulting and engineering
fees) exceeds $50,000, excluding any amounts indemnified against by any third
party reasonably acceptable to Buyer (and with respect to such indemnification
no counterclaims or offsets have been asserted), then Buyer may give notice to
Seller not later than the end of the Environmental Due Diligence Period (or if
such day is not a business day, then the next succeeding business day) of
Buyer's intention to terminate this Agreement. This Agreement may thereafter be
terminated by Buyer unless, at or prior to the Closing Date, Seller has paid to
Buyer or PNC has paid or promises in writing to pay Buyer at Closing the excess
of such costs over $50,000.
(c) In the event that (i) it is determined that the estimated costs
of remediation of any environmental conditions at the Chicago Facility required
under applicable law (exclusive of soft costs) exceeds $50,000, excluding any
amounts indemnified against by any third party reasonably acceptable to Buyer
(and with respect to such indemnification no counterclaims or offsets have been
asserted), and (ii) Seller has not paid to Buyer or PNC has not paid or has not
promised in writing to pay Buyer at Closing the excess of such costs over
$50,000, then Buyer may elect in its sole discretion at Closing not to purchase
the Chicago Facility, and if Buyer so elects, then the Chicago Facility will not
be included in the Acquired Assets at Closing and the Purchase Price shall be
reduced by $2,000,000 (such reduction to be applied against the principal amount
of the Chicago Purchase Note).
SECTION 6.2. AMENDMENTS AND WAIVERS.
This Agreement may not be amended except by an instrument in writing
signed on behalf of each of the parties hereto and consented to by PNC and
except, if the Preliminary Order has been entered, upon approval by the
Bankruptcy Court. By an instrument in writing, Buyer or Seller, as the case may
be, may waive compliance by Seller Parties or Buyer Parties, respectively, with
any term or provision of this Agreement that such other party was or is
obligated to comply with or perform.
ARTICLE VII
GENERAL PROVISIONS
SECTION 7.1. NOTICES.
All notices and other communications hereunder shall be in writing
(including wire, telex, telecopy or similar writing) and shall be sent,
delivered or mailed, addressed, telexed or telecopied:
(a) If to Buyer, to
KTI RECYCLING, INC.
7000 Boulevard East
Guttenberg, New Jersey 07093
Attention: Mr. Martin J. Sergi, President
Facsimile No.: (201) 854-1771
with copies to:
Dorsey & Whitney LLP
220 South Sixth Street
Minneapolis, Minnesota 55402
Attention: Diane D. Malfeld, Esq.
Facsimile No.: (612) 340-2643
(b) If to Seller Parties, to
PRINS RECYCLING CORP.
150 St. Charles Street
Newark, New Jersey 07105
Attn.: Clifford H. Straub
Facsimile No.: (201) 344-2303
with a copies to:
Rosenman & Colin
575 Madison Avenue
New York, New York 10022
Attention: Jeff J. Friedman, Esq.
Facsimile No.: (212) 940-8776
and:
Sills Cummis Zuckerman Radin Tischman Epstein & Gruss, PA
One Riverfront Plaza
Newark, New Jersey 07102
Attention: Ira Rosenberg, Esq.
Facsimile No.: (201) 643-6500
Each such notice, request or other communication shall be given (i) by hand
delivery, (ii) by nationally recognized courier service or (iii) by facsimile
transmission, with a copy by first class mail. Each such notice, request or
communication shall be effective (i) if delivered by hand or by nationally
recognized courier service, when delivered at the address specified in this
Section 7.1 (or in accordance with the latest written direction from such party)
and (ii) if given by facsimile transmission, when such facsimile transmission is
transmitted to the facsimile number specified in this Section 7.1 (or in
accordance with the latest written direction from such party).
SECTION 7.2. INTERPRETATION.
When a reference is made in this Agreement to a Section, Article,
Schedule or Exhibit, such reference shall be to a Section, Article, Schedule or
Exhibit of this Agreement unless otherwise indicated. The table of contents and
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement. Whenever
the words "included," "includes" or "including" are used in this Agreement, they
shall be deemed to be followed by the words "without limitation." References to
a Person are also to its successors and assigns and references to any statute
are also to all rules, regulations and orders promulgated thereunder. All
accounting terms not defined in this Agreement shall have the meanings
determined by U.S. generally accepted accounting principles. "Affiliate" of any
Person means any other Person controlling, controlled by or under common control
with the first Person.
SECTION 7.3. NO SURVIVAL OF REPRESENTATIONS; NO OTHER REPRESENTATIONS.
The representations, warranties, covenants and agreements contained in
this Agreement and in any document delivered in connection herewith shall not
survive the Closing. Buyer Parties acknowledge and agree that no Seller Party
has made any representation or warranty in connection with the transactions
contemplated hereby except as expressly set forth herein, and that except as
expressly set forth herein the Acquired Assets are being purchased by Buyer
Parties on an "AS IS, WHERE IS" basis. Wherever in this Agreement reference is
made to the "actual knowledge" or "awareness" of Seller or any other Seller
Party, such shall be construed to mean the knowledge of all managerial or
supervisory personnel of all Seller Parties.
Notwithstanding anything herein to the contrary, in the event any of
the Seller Parties breaches or violates any of their respective representations
or warranties under this Agreement made or deemed made at or prior to the
Closing or agreements under this Agreement to be performed prior to or by the
Closing, the sole and exclusive remedy of Buyer Parties shall be as provided in
Sections1.4(b), 4.9 and 6.1.
SECTION 7.4. SEVERABILITY.
If any provision of this Agreement (or any portion thereof), or the
application of any such provision (or any portion thereof), to any person, place
or circumstances, shall be held by a court of competent jurisdiction to be
invalid, illegal, unenforceable or void, the remainder of this Agreement and
such provisions as applied to other persons, places and circumstances shall
remain in full force and effect.
SECTION 7.5. COUNTERPARTS.
This Agreement may be executed in one or more counterparts, all of
which shall be considered one and the same agreement and shall become effective
when one or more counterparts have been signed by each of the parties and
delivered to the other parties, it being understood that all parties need not
sign the same counterpart.
SECTION 7.6. ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES.
This Agreement (including the documents and instruments referred to
herein) together with the Chicago Purchase Agreement (i) constitute the entire
agreement and supersede all prior agreements and understandings (including the
Term Sheet), both written and oral, among the parties with respect to the
subject matter hereof and (ii) are not intended (except as expressly provided in
Section 6.2) to confer upon any person other than the parties hereto any rights
or remedies hereunder. The obligations of Buyer under the Chicago Agreement, to
the extent not inconsistent with the obligations of Buyer hereunder, shall not
survive the execution hereof. For avoidance of doubt, the parties hereto
acknowledge that the obligations of the parties thereto under the Chicago
Agreement will not survive the Closing.
The parties hereto acknowledge and agree that this Agreement is being
executed and delivered without the attachments (other than Schedule 4.1 and
Exhibits A through E) referred to in the other provisions hereof. This
Agreement shall be of no force and effect unless all such attachments are
completed and agreed upon to the satisfaction of each of Seller and Buyer by no
later than June 16, 1997.
SECTION 7.7. GOVERNING LAW.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK, REGARDLESS OF THE LAWS THAT MIGHT OTHERWISE
GOVERN UNDER APPLICABLE PRINCIPLES OF CONFLICTS OF LAW. ALL DISPUTES RELATING
TO THIS AGREEMENT SHALL BE RESOLVED IN THE BANKRUPTCY COURT AND THE PARTIES
HERETO EACH SUBMIT TO THE JURISDICTION OF THE BANKRUPTCY COURT FOR SUCH PURPOSE.
SECTION 7.8. PUBLICITY.
Except in connection with seeking the confirmation of the Plan, as
provided for in Section 4.1, and except as may be required by applicable law, so
long as this Agreement is in effect, Seller Parties shall not issue or cause the
publication of any press release or other public announcement with respect to
the transactions contemplated by this Agreement without the consent of Buyer,
which consent will not be unreasonably withheld.
SECTION 7.9. ASSIGNMENT.
Neither this Agreement nor any of the rights, interests or obligations
of the parties hereto hereunder shall be assigned by any party hereto without
the prior written consent of all other parties hereto. Subject to the preceding
sentence, this Agreement will be binding upon, inure to the benefit of and be
enforceable by, the parties and their respective successors and assigns.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed by their respective officers as of the day and year first written
above.
KTI RECYCLING OF ILLINOIS, INC. KTI RECYCLING, INC.
By: /s/ Robert E. Wetzel By: /s/ Robert E. Wetzel
Its: President Its: President
KTI RECYCLING OF NEW JERSEY, INC. KTI RECYCLING OF NEW
ENGLAND, INC.
By: /s/ Robert E. Wetzel By: /s/ Robert E. Wetzel
Its: President Its: President
PRINS RECYCLING CORP., A PRINS RECYCLING CORP., A
NEW YORK CORPORATION DELAWARE CORPORATION
By: /s/ Fred Prins By: /s/ Fred Prins
Its: President and Its: President and
Chief Executive Officer Chief Executive Officer
PRINS RECYCLING (MASS) CORP. PRINS OF PENNSYLVANIA, INC.
By: /s/ Fred Prins By: /s/ Fred Prins
Its: President and Its: President and
Chief Executive Officer Chief Executive Officer
PRINS OF NEWARK, INC. PRINS RECYCLING (MARYLAND) C/B/A RECYCLING
SYSTEMS, INC. CORP.
By: /s/ Fred Prins By: /s/ Fred Prins
Its: President and Its: President and
Chief Executive Officer Chief Executive Officer
PAPER CHASE EXCHANGE, INC. PRINS RECYCLING CORP.
BASIC WASTE SYSTEMS, INC.
By: /s/ Fred Prins By: /s/ Fred Prins
Its: President and Its: President and
Chief Executive Officer Chief Executive Officer
PRINS OF NEWARK II, INC. D/B/A VIC BARICK PAPER CO., INC.
S. PEPE & SONS, INC.
By: /s/ Fred Prins By: /s/ Fred Prins
Its: President and Its: President and
Chief Executive Officer Chief Executive Officer
