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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):
August 12, 1997
KTI, INC.
(Exact name of Registrant as specified in Charter)
New Jersey 33-85234 22-2665282
(State or other juris- (Commission (IRS Employer
diction of incorporation) File Number) Identification
Number)
7000 Boulevard East, Guttenberg, New Jersey 07093
(Address of principal executive office) (Zip Code)
Registrant's telephone number including area code- (201) 854-7777
Not Applicable
(Former name and former address, as changed since last report)
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ITEM 5. OTHER EVENTS
On August 15, 1997, KTI, Inc. (the "Company" or the "Registrant")
amended its revolving line of credit with KeyBank of New York, increasing the
amount of the line from $1 million to $6 million and extending its maturity to
April 30, 1997. The line of credit may be used for general working capital
purposes, issuance of letters of credit and bridge financings for acquisitions.
Bridge financings may not exceed six months or exceed $1.5 million without (a)
approved takeout financing in place or (b) prior approval from KeyBank of New
York. Loan proceeds may not be used for permanent capital investments in
subsidiaries or related parties. The line of credit has an unused facility fee
of 1/8%. The interest rate on borrowed funds is the base rate of KeyBank of New
York plus 3/4% per annum. The line of credit is secured by the assets of the
Company and its subsidiaries, other than assets of subsidiaries pledged under
project financing.
On August 12, 1997, the Company sold Timber Energy Plastic Recycling,
Inc., a Delaware corporation ("TEPRI"), to the management of TEPRI for $30,000
in cash and a $250,000 8% promissory note due on November 10, 1997. In the first
six months of 1997, TEPRI had revenue of $1,118,000 and losses of $392,000.
TEPRI was acquired by the Company as part of the acquisition of Timber Energy
Resources, Inc. which owns and operates a wood waste burning power plant in
Telogia, Florida and a wood chip mill in Cairo, Georgia.
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ITEM 7. EXHIBITS
Exhibit Number Description
- -------------- -----------
4.1 First amendment, dated as of August 14,
1997, to the LOAN AND SECURITY AGREEMENT
between KTI, INC., KTI ENVIRONMENTAL GROUP,
INC., KUHR TECHNOLOGIES, INC. KTI LIMITED
PARTNERS, INC., KTI OPERATIONS, INC. and
PERC, INC. The schedules to this Exhibit do
not contain information which is material to
an investment decision and which is not
otherwise disclosed in the Securities
Purchase Agreement. The Company hereby
agrees to furnish a copy of any omitted
schedule to the Commission upon request.
4.2 SECURITIES PURCHASE AGREEMENT, dated as of
August 12, 1997, by and among KTI, Inc.,
(the "Seller") and Wenoha Corporation, John
G. Mills, L. Don Norton, Glen Wade Stewart,
Bruce D. Wentworth and Donald E. Wentworth
(the "Buyers"). The schedules to this
Exhibit do not contain information which is
material to an investment decision and which
is not otherwise disclosed in the Securities
Purchase Agreement. The Company hereby
agrees to furnish a copy of any omitted
schedule to the Commission upon request.
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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: August 15, 1997 By: /s/ Nicholas Menonna, Jr.
-------------------------
Name: Nicholas Menonna, Jr.
Title: Chairman of the Board of Directors
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EXHIBIT INDEX
Exhibit Number Description
- -------------- -----------
4.1 First amendment, dated as of August 14,
1997, to the LOAN AND SECURITY AGREEMENT
between KTI, INC., KTI ENVIRONMENTAL GROUP,
INC., KUHR TECHNOLOGIES, INC. KTI LIMITED
PARTNERS, INC., KTI OPERATIONS, INC. and
PERC, INC. The schedules to this Exhibit do
not contain information which is material to
an investment decision and which is not
otherwise disclosed in the Securities
Purchase Agreement. The Company hereby
agrees to furnish a copy of any omitted
schedule to the Commission upon request.
4.2 SECURITIES PURCHASE AGREEMENT, dated as of
August 12, 1997, by and among KTI, Inc.,
(the "Seller") and Wenoha Corporation, John
G. Mills, L. Don Norton, Glen Wade Stewart,
Bruce D. Wentworth and Donald E. Wentworth
(the "Buyers"). The schedules to this
Exhibit do not contain information which is
material to an investment decision and which
is not otherwise disclosed in the Securities
Purchase Agreement. The Company hereby
agrees to furnish a copy of any omitted
schedule to the Commission upon request.
<PAGE> 1
FIRST AMENDMENT TO
LOAN AND SECURITY AGREEMENT
THIS FIRST AMENDMENT TO LOAN AND SECURITY AGREEMENT is made as of this
15th day of August, 1997, by and between KTI, INC., a New Jersey corporation
with its principal office and place of business at 7000 Boulevard East,
Guttenberg, New Jersey 07093 ("KTI"), KTI ENVIRONMENTAL GROUP, INC., a New
Jersey corporation with its principal office and place of business at 7000
Boulevard East, Guttenberg, New Jersey 07093 ("KTI Environmental"), KUHR
TECHNOLOGIES, INC., a New Jersey corporation with its principal office and
place of business at 7000 Boulevard East, Guttenberg, New Jersey 07093 ("Kuhr"),
KTI LIMITED PARTNERS, INC., a Delaware corporation with its principal office and
place of business at 7000 Boulevard East, Guttenberg, New Jersey 07093 ("KTI
Limited"), KTI OPERATIONS, INC., a Delaware corporation with its principal
office and place of business at 7000 Boulevard East, Guttenberg, New Jersey
07093 ("KTI Operations"), PERC, INC. a Delaware corporation with its principal
office and place of business at 7000 Boulevard East, Guttenberg, New Jersey
07093 ("PERC") (all of the above are referred to collectively herein as the
"Original Borrower"), KTI ASH RECYCLING, INC., a Delaware corporation with its
principal office and place of business at 7000 Boulevard East, Guttenberg, New
Jersey 07093 ("KTI Recycling"), MANNER RESINS, INC., a Maryland corporation with
its principal office and place of business at 7040 Bembe Beach Road, Annapolis,
Maryland 21403 ("Manner Resins"), TIMBER ENERGY RESOURCES, INC., a Texas
corporation with its principal office and place of business at Florida Highway
65, South, P.O. Box 199, Telogia, Florida 32360 ("Timber Energy"), KTI SPECIALTY
WASTE SERVICES, a Maine corporation with its principal office and place of
business at 7000 Boulevard East, Guttenberg, New Jersey 07093 ("KTI Specialty
Waste') (all of the above after the Original Borrowers are collectively referred
to as the "New Borrower", the New Borrower together with the Original Borrower
shall be referred to herein as the "Borrower") and KEY BANK NATIONAL
ASSOCIATION, a national banking association with an office and place of business
at 66 South Pearl Street, Albany, New York 12207 (the "Lender").
W I T N E S S E T H:
WHEREAS, the Original Borrower and Lender entered into that certain
Loan and Security Agreement, dated as of October 29, 1996 (the "Agreement")
pursuant to which the Lender agreed to make loans to the Borrower from time to
time upon the terms and conditions set forth in the Agreement (the "Loan"); and
WHEREAS, the Original Borrower has requested, and the lender has
consented, to make certain modifications to the Agreement.
NOW THEREFORE, in consideration of the mutual promises of the parties
hereto and other good an valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto hereby agree as follows:
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1. Borrowers. The introductory paragraph to the Agreement is hereby
amended to include the New Borrowers as Borrowers under the Agreement.
2. A new Section 1.11 shall be added which shall provide as follows:
"1.11. "Debt Service Coverage Ratio" shall mean, for
any fiscal period of KTI, the ratio of (i) net income from
continuing operations before minority interest, income taxes,
discontinued operations and extraordinary items minus one time
gains (such as from the sale of capacity resulting from a
restructuring) minus the recognized portion of deferred
revenue plus interest expense, plus operating lease expense
plus depreciation and amortization minus cash taxes minus
capital expenditures minus distributions to (ii) scheduled
principal payments of long term debt and capital leases plus
interest expense plus operating lease expense plus preferred
stock dividends. This ratio shall be measured on a quarterly
basis."
3. Section 1.18 is hereby amended to provide as follows:
"1.18 "Leverage Ratio. Leverage Ratio shall mean the
ratio of Borrower (i) total "debt" (as defined by GAAP)
excluding any minority interest) to (ii) "net worth") (also
defined by GAAP).
4. Section 1.34 is hereby deleted in its entirety.
5. Sections 1.11 through 1.36 are hereby renumbered to account for the
addition of Section 1.11 as described in Section 2 above.
6. Section 1.23 is hereby amended in its entirety to provide as
follows:
"1.23. Maximum Amount of the Revolving Facility shall mean Six
Million Dollars ($6,000,000.00).
7. Inducing Representations. Borrower represents and warrants to Lender
that all of the inducing representations and warranties set forth in Article
Seven of the Loan Agreement are true and correct as of the date hereof, and
hereby reaffirms each of such representations and warranties with the same legal
force and effect as if such representations and warranties were made on the date
hereof.
8. Section 3.1 of the Agreement is hereby amended in its entirety to
provide as follows:
"3.1 Interest. Borrower shall pay interest monthly on the
first day of each month for the preceding month, commencing September
1, 1997, on the average daily unpaid principal amount of the Revolving
Loan, at a fluctuating rate which is equal to the Base Rate plus
three-quarters of one percent (3/4%). On and after the occurrence of an
Event of Default hereunder, Borrowers shall pay interest on all
Obligations due to Lender at a fluctuating rate which is equal to the
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Base Rate plus three and three-quarters percent (3 -3/4%). In no event
shall any interest hereunder, or under any Loan Document, exceed the
maximum rate permitted by law."
9. Unused Facility Fee. Section 3.3 is hereby amended in its entirety
to provide as follows:
"3.3 Unused Facility Fee. Commencing on the calendar
quarter on October 1, 1997, Borrower shall pay Lender
quarterly in arrears, a fee on the unused amount of the
Revolving Loan in an amount equal to the unused facility
amount multiplied by one-eighth of one percent (1/8%) per
annum. Such amount shall be payable quarterly in arrears."
10. Section 4 is hereby amended in its entirety to provide as follows:
"4. Application of Proceeds. The proceeds of the Loan
shall be used solely by Borrowers for working capital needed
in the normal operation of Borrowers' businesses, the issuance
of letters of credit and for bridge financing for acquisitions
by Borrowers. Advances of loan proceeds by any Borrower to any
Affiliate (other than a Borrower), or any bridge financing for
acquisitions by any Borrower which exceeds six (6) months, or
any bridge financing exceeding one and one-half million
dollars ($1,500,000.00) without approved takeout financing in
place which has not been approved by Lender shall each be
deemed an Event of Default hereunder."
11. Section 5 is hereby amended to include a new subsection (B) which
shall provide as follows:
"(B) All Property;"
Subsections (B) through (E) of Section 5 are hereby amended to
provide consecutive lettering from (C) through (F).
12. Organization and Qualifications. Section 7.1 is hereby amended in
its entirety to provide as follows:
"7.1 Organization and Qualifications. Each of KTI,
KTI Environmental, and Kuhr is a corporation duly organized
and existing under the laws of the State of New Jersey. Each
of KTI Limited, KTI Operations, KTI Ash Recycling, and KTI
Recycling is a corporation duly organized and existing under
the laws of the Sate of Delaware. Timber Energy, KTI Specialty
Waste and Manner Resins are corporations duly organized and
existing under the laws of the State of Texas, Maine and
Maryland, respectively. Each Borrower is qualified to do
business in every jurisdiction where the nature of its
business requires it to be so qualified and where failure to
do so qualify might materially affect its business or assets."
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13. Section 12 is hereby amended to provide as follows:
"12. Financial Covenants. KTI covenants that it
shall, at all times:"
14. Section 12.2 is hereby amended to provide as follows:
"12.2 Maximum Leverage Ratio. Maintain a Leverage
Ratio not greater than 3.0 to 1.0."
15. A new Section 12.3 shall be added to provide as follows:
"12.3 Minimum Debt Service Coverage Ratio. Maintain a
Debt Service Coverage Ratio of not less than 1.5 to 1.0."
16. Section 15 is hereby amended in its entirety to provide as follows:
"15. Term. This Agreement shall terminate on April
30, 1998."
17. Section 16.1 (j) is hereby amended to provide as follows:
"(j) upon the occurrence and continuance of any conditions,
(including, but not limited to, any change in the management of KTI
which is the result of the departure of any two of Nicholas Menonna,
Jr., Martin J. Sergi or Ross Pirasteh) which in Lender's reasonable
opinion, has or may have a material adverse effect on the business,
prospects or financial conditions of any Borrower."
18. Section 16.1 shall be amended to include new subsections (k) and
(l) which shall provide as follows:
"(k) if any Borrower shall be in default under any obligation
to Lender,"
"(l) if any Borrower shall breach any term or fail to satisfy
any condition of the commitment letter entered into between the Lender
and the Borrower dated July 14, 1997,"
19. Amended Exhibits. Exhibits "C", "D", "E", "I", "J", "K" and "L" to
the Agreement are hereby amended in their entirety and are attached hereto.
20. Correction. Section 5 is hereby amended to correct the introductory
paragraph to include Exhibit "L", which described Liens, as well as Exhibit "E".
Further, Section 5 is hereby amended to exclude from Collateral the Property
which is the subject of those specific Liens described on Exhibit "L" which
cannot be subjected to junior liens.
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21. Additional Terms and Conditions. The terms and conditions of the
commitment letter entered into between Lender and Borrowers dated July 14, 1997
are hereby incorporated by referenced, including, but not limited to, the
requirements of Borrowers to close on the term loan referenced in such letter
not later than December 1, 1997, as a condition to Lender's commitment to make
the term loan. A breach of any of the terms or conditions of the commitment
letter shall be deemed an Event of Default hereunder. In the event of any
conflict between the terms of the commitment letter and this Agreement, such
conflict shall be resolved in favor of this Agreement.
22. Amended and Restated Promissory Note. The Borrowers agree to
deliver an amended and restated promissory note in the form of Exhibit "C".
23. No Other Amendments. Other than as expressly set forth above, no
provision of the Loan Agreement shall be deemed to be amended or modified
hereby.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their officers thereunto duly authorized on the day and year first
above written.
KTI, INC.
By: /s/ Robert E. Wetzel
---------------------------------------
Robert E. Wetzel, Senior Vice President
KTI ENVIRONMENTAL GROUP, INC.
By: /s/ Robert E. Wetzel
---------------------------------------
Robert E. Wetzel, Senior Vice President
KUHR TECHNOLOGIES, INC.
By: /s/ Robert E. Wetzel
---------------------------------------
Robert E. Wetzel, Senior Vice President
KTI LIMITED PARTNERS, INC.
By: /s/ Robert E. Wetzel
---------------------------------------
Robert E. Wetzel, Senior Vice President
5
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KTI OPERATIONS, INC.
By: /s/ Robert E. Wetzel
---------------------------------------
Robert E. Wetzel, Senior Vice President
PERC, INC.
By: /s/ Robert E. Wetzel
---------------------------------------
Robert E. Wetzel, Senior Vice President
KTI ASH RECYCLING, INC.
By: /s/ Robert E. Wetzel
---------------------------------------
Robert E. Wetzel, Senior Vice President
KTI RECYCLING, INC.
By: /s/ Robert E. Wetzel
---------------------------------------
Robert E. Wetzel, Senior Vice President
MANNER RESINS, INC.
By: /s/ Robert E. Wetzel
---------------------------------------
Robert E. Wetzel, Senior Vice President
TIMBER ENERGY RESOURCES, INC.
By: /s/ Robert E. Wetzel
---------------------------------------
Robert E. Wetzel, Senior Vice President
KTI SPECIALTY WASTE SERVICES, INC.
By: /s/ Robert E. Wetzel
---------------------------------------
Robert E. Wetzel, Senior Vice President
KEY BANK NATIONAL ASSOCIATION
By: /s/ Richard C. VanAuken
---------------------------------------
Richard C. VanAuken
6
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STATE OF NEW JERSEY )ss.:
COUNTY OF HUDSON )
On this 15th day of August, 1997, before me personally came
Robert E. Wetzel, to me known, who being by me duly sworn, did depose and say
that he resides at 7000 Boulevard East, Guttenberg, NJ, that he is the Senior
Vice President of KTI, Inc., the corporation described in, and which executed
the above instrument; and that he signed his name thereto by like order of the
Board of Directors of said corporation.
/s/ Ana M. Rodriguez
-----------------------
Notary Public
STATE OF NEW JERSEY )ss.:
COUNTY OF HUDSON )
On this 15th day of August, 1997, before me personally came
Robert E. Wetzel, to me known, who being by me duly sworn, did depose and say
that he resides at 7000 Boulevard East, Guttenberg, NJ 07093, that he is the
Senior Vice President of KTI Environmental Group, Inc., the corporation
described in, and which executed the above instrument; and that he signed his
name thereto by like order of the Board of Directors of said corporation.
/s/ Ana M. Rodriguez
-----------------------
Notary Public
STATE OF NEW JERSEY )ss.:
COUNTY OF HUDSON )
On this 15th day of August, 1997, before me personally came
Robert E. Wetzel, to me known, who being by me duly sworn, did depose and say
that he resides at 7000 Boulevard East, Guttenberg, NJ 07093, that he is the
Senior Vice President of Kuhr Technologies, Inc., the corporation described in,
and which executed the above instrument; and that he signed his name thereto by
like order of the Board of Directors of said corporation.
/s/ Ana M. Rodriguez
-----------------------
Notary Public
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STATE OF NEW JERSEY )ss.:
COUNTY OF HUDSON )
On this 15th day of August, 1997, before me personally came Robert E.
Wetzel, to me known, who being by me duly sworn, did depose and say that he
resides at 7000 Boulevard East, Guttenberg, NJ 07093, that he is the Senior Vice
President of KTI Limited Partnership, Inc., the corporation described in, and
which executed the above instrument; and that he signed his name thereto by like
order of the Board of Directors of said corporation.
/s/ Ana M. Rodriguez
-----------------------
Notary Public
STATE OF NEW JERSEY )ss.:
COUNTY OF HUDSON )
On this 15th day of August, 1997, before me personally came Robert E.
Wetzel, to me known, who being by me duly sworn, did depose and say that he
resides at 7000 Boulevard East, Guttenberg, NJ 07093, that he is the Senior Vice
President of KTI Operations, Inc., the corporation described in, and which
executed the above instrument; and that he signed his name thereto by like order
of the Board of Directors of said corporation.
/s/ Ana M. Rodriguez
-----------------------
Notary Public
STATE OF NEW JERSEY )ss.:
COUNTY OF HUDS ON )
On this 15th day of August, 1997, before me personally came Robert E.
Wetzel, to me known, who being by me duly sworn, did depose and say that he
resides at 7000 Boulevard East, Guttenberg, NJ 07093, that he is the Senior Vice
President of PERC, Inc., the corporation described in, and which executed the
above instrument; and that he signed his name thereto by like order of the Board
of Directors of said corporation.
/s/ Ana M. Rodriguez
-----------------------
Notary Public
8
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STATE OF NEW JERSEY )ss.:
COUNTY OF HUDSON )
On this 15th day of August, 1997, before me personally came Robert E.
Wetzel, to me known, who being by me duly sworn, did depose and say that he
resides at 7000 Boulevard East, Guttenberg, NJ 07093, that he is the Senior Vice
President of KTI Ash Recycling, Inc., the corporation described in, and which
executed the above instrument; and that he signed his name thereto by like order
of the Board of Directors of said corporation.
/s/ Ana M. Rodriguez
-----------------------
Notary Public
STATE OF NEW JERSEY )ss.:
COUNTY OF HUDSON )
On this 15th day of August, 1997, before me personally came Robert E.
Wetzel, to me known, who being by me duly sworn, did depose and say that he
resides at 7000 Boulevard East, Guttenberg, NJ 07093, that he is the Senior Vice
President of KTI Recycling, Inc., the corporation described in, and which
executed the above instrument; and that he signed his name thereto by like order
of the Board of Directors of said corporation.
/s/ Ana M. Rodriguez
-----------------------
Notary Public
STATE OF NEW JERSEY )ss.:
COUNTY OF HUDSON )
On this 15th day of August, 1997, before me personally came Robert E.
Wetzel, to me known, who being by me duly sworn, did depose and say that he
resides at 7000 Boulevard East, Guttenberg, NJ 07093, that he is the Senior Vice
President of Manner Resins, Inc., the corporation described in, and which
executed the above instrument; and that he signed his name thereto by like order
of the Board of Directors of said corporation.
/s/ Ana M. Rodriguez
-----------------------
Notary Public
9
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STATE OF NEW JERSEY )ss.:
COUNTY OF HUDSON )
On this 15th day of August, 1997, before me personally came Robert E.
Wetzel, to me known, who being by me duly sworn, did depose and say that he
resides at 7000 Boulevard East, Guttenberg, NJ 07093, that he is the Senior Vice
President of Timber Energy Resources, Inc., the corporation described in, and
which executed the above instrument; and that he signed his name thereto by like
order of the Board of Directors of said corporation.
/s/ Ana M. Rodriguez
-----------------------
Notary Public
STATE OF NEW JERSEY )ss.:
COUNTY OF HUDSON )
On this 15th day of August, 1997, before me personally came Robert E.
Wetzel, to me known, who being by me duly sworn, did depose and say that he
resides at 7000 Boulevard East, Guttenberg, NJ 07093, that he is the Senior Vice
President of KTI Specialty Waste Services, Inc., the corporation described in,
and which executed the above instrument; and that he signed his name thereto by
like order of the Board of Directors of said corporation.
/s/ Ana M. Rodriguez
-----------------------
Notary Public
STATE OF NEW JERSEY )ss.:
COUNTY OF HUDSON )
On this 15th day of August, 1997, before me personally came Richard C.
VanAuken, to me known, who being by me duly sworn, did depose and say that he
resides at Brunswick, NY, that he is the Senior Banker of Key Bank National
Association, the corporation described in, and which executed the above
instrument; and that he signed his name thereto by like order of the Board of
Directors of said corporation.
/s/ Georgia Melas
-----------------------
Notary Public
10
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SECURITIES PURCHASE AGREEMENT FOR
Timber Energy Plastic Recycling, Inc.
by and among
Wenoha Corporation,
John G. Mills,
L. Don Norton,
Glen Wade Stewart,
Bruce D. Wentworth and
Donald E. Wentworth
("Buyers")
and
KTI, Inc. ("Seller")
Dated as of August 12, 1997
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TABLE OF CONTENTS
OF
SECURITIES PURCHASE AGREEMENT
<TABLE>
<CAPTION>
Section and Heading Page
------------------- ----
<S> <C> <C>
1. Purchase and Sale 1
1.1 Purchase and Sale of Assets 1
1.2 Pensacola Office, Employee 1
1.3 Donald E. Wentworth 1
1.4 Date of Conveyance, Retained Asset 1
1.5 Method of Conveyance 2
1.6 No Assumed Obligations 2
2. Purchase Price and Closing 2
2.1 Purchase Price 2
2.2 Liability, limitation on Liability 2
2.3 Credit Enhancement 3
3. Representations and Warranties of the Seller 3
3.1 Authorization 3
3.2 No Violation 3
3.3 Title 3
3.4 Employee Benefit Plans, Pension Plans of TEPRI 3
3.5 Brokers and Finders 3
3.6. Authorization, Etc. 4
3.7 No Violations 4
4. Representations and Warranties of Buyers 4
4.1 Corporate Organization, Etc. 4
4.2 Authorization, Etc. 4
4.3 No Violation 4
5. Certain Covenants and Agreements 4
5.1 Press Releases 4
5.2 Post-Closing Cooperation 5
5.3 Risk of Loss 5
6 Conditions to the Obligations of Seller 5
6.1 Representations and Warranties True 5
6.2 No Proceeding, Litigation; Injunction 5
6.3 Board of Directors Approval 5
7. Conditions to the Obligations of Buyers 5
7.1 Representations and Warranties True 5
7.2. Performance 5
7.3. No Proceedings, Litigation, Injunction 6
7.4 Board of Directors Approval 6
8. Survival of Representations and Warranties; Indemnification 6
</TABLE>
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<TABLE>
<CAPTION>
Section and Heading Page
------------------- ----
<S> <C> <C>
8.1 Survival of Representations 6
8.2 Statements as Representations and Warranties 6
8.3 Remedies Cumulative 6
8.4 Buyers' Indemnity 6
8.5 Seller's Indemnity 6
8.6 Indemnity Procedure 7
. 9. Miscellaneous Provisions 8
9.1 Amendment and Modification 8
9.2 Waiver of Compliance 8
9.3 Expenses 8
9.4 Notices 8
9.5 Binding Effect; Assignment 9
9.6 Governing Law 9
9.7 Counterparts 9
9.8 Headings 9
9.9 Entire Agreement 9
9.10 Third Parties 9
9.11 Severability 10
</TABLE>
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SECURITIES PURCHASE AGREEMENT
THIS AGREEMENT dated as of August 12, 1997, by and among KTI, Inc., a New Jersey
corporation ("KTI" or the "Seller") and Wenoha Corporation, an Alabama
corporation ("Wenoha"), John G. Mills ("Mills"), L. Don Norton ("Norton"), Glen
Wade Stewart ("Stewart"), Bruce D. Wentworth ("Bruce Wentworth") and Donald E.
Wentworth ("Donald Wentworth" and, collectively with Wenoha, Mills, Norton,
Stewart and Bruce Wentworth, the "Buyers").
The Buyers desires to purchase from the Seller, and Seller desire to sell,
assign and transfer to the Buyers all of Seller' stock in (the "Stock") and debt
owed to KTI by (the "Debt" and collectively, with the Stock, the "Securities")
Timber Energy Plastic Recycling, Inc., a Delaware corporation ("TEPRI"), as more
specifically described in Exhibit I attached hereto, all on the terms and
subject to the conditions hereinafter set forth.
1. Purchase and Sale.
1.1 Purchase and Sale of Assets. On the terms and subject to the
conditions herein set forth, the Buyers shall purchase from
the Seller all of the Securities, as of the Closing Date (as
such term is heretofore defined), owned by the Seller or in
which the Seller has an interest.
1.2 Pensacola Office, Employee. Effective as of the close of
business on July 31, 1997, the Pensacola office of Timber
Energy Investment, Inc. shall cease to be an office of KTI or
any of KTI's subsidiaries other than TEPRI. Effective as of
the close of business on July 31, 1997, Edith Wentworth shall
cease to be an employee of KTI or any of KTI's subsidiaries.
1.3 Donald E. Wentworth. Donald E. Wentworth will continue as an
employee at will of KTI under the present terms of his
employment. He shall be entitled to devote as much time as he
deems appropriate to the management of TEPRI provided that he
is able to meet the requirements of his position with KTI.
1.4 Date of Conveyance, Retained Asset. The sale is effective as
of July 1, 1997. Accordingly, all revenues and expenses of
TEPRI after that date, other than any allocation of corporate
overhead to TEPRI by KTI, shall be for the account of Buyers,
with one exception. Any recovery in excess of $12,000 received
as a refund of premiums for workmen's compensation insurance
for a period prior to July 1, 1997 is retained by the Seller.
Such refund, if received by TEPRI shall be forwarded promptly
to the Seller.
1.5 Method of Conveyance.
(a) The sale, transfer, conveyance and assignment by
Seller of the Securities to the Buyers in accordance
with Section 1.1 hereof shall be effected on the
Closing Date by Seller's execution and deposit of the
Securities and the
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customary stock powers, duly guaranteed and other
appropriate documents (collectively, the "Instruments
of Conveyance") in an informal escrow. The Securities
shall be retained in a safe deposit box, under the
control of the Seller, until the Note described in
Section 2.1 (the "Note") is paid in full.
(b) At the Closing, good and valid title to all of the
Securities shall be transferred, conveyed and
assigned by the Seller to the Buyers, or their
assignees, pursuant to this Agreement and the
Instruments of Conveyance, subject only to the Lien
of the Seller on such Securities as collateral for
the Note. For the purposes of this Agreement, the
term "Lien" shall mean any pledge, security interest,
encumbrance, lien or charge of any kind whatsoever.
Upon payment of the Note, the Securities shall be
delivered to the Buyers promptly.
1.6 No Assumed Obligations. Pursuant to this Agreement, the Buyers
do not assume any of the liabilities or obligations of TEPRI
whether absolute, accrued, contingent or otherwise, whenever
incurred.
2. Purchase Price.
2.1 Purchase Price. The consideration for the Securities to be
sold, transferred and conveyed by the Seller to the Buyers
pursuant to this Agreement shall be cash in the amount of
$30,000, paid by wire transfer of immediately available funds
and a Note in the amount of $250,000.00, dated August 12, 1997
and due on November 10, 1997, bearing interest at the rate of
8% per annum, calculated on actual days and a year of 365
days. Principal and interest shall be due at maturity.
Prepayments may be made in whole or in part, without penalty.
The Note is a joint and several obligation of the Buyers,
except as modified in Section 2.2 hereof and is secured by the
Securities and therefore is indirectly secured by the assets
of TEPRI. A copy of the Note is attached hereto as Exhibit II.
A copy of the form of Pledge Agreement is attached as Exhibit
III. The consideration set forth in this Section 2.1 is
hereinafter collectively referred to as the "Purchase Price."
2.2 Liability, Limitation on Liability. If the Buyers default on
the payment of the Note, KTI may foreclose on the Securities
of TEPRI or, alternately, proceed to collect the sums due on
such Note. In such event, the Buyers shall be liable to KTI
for an amount equal to the sum of (1) the losses, if any, of
TEPRI for the period beginning on July 1, 1997 and ending on
the day prior to the date of execution of the Sales Agreement,
determined in accordance with generally accepted accounting
principles, other than any allocation of KTI corporate
overhead and (2) the then unpaid principal balance on the
Note, any accrued and unpaid interest thereon until finally
paid in full, any and all legal or other expenses incurred in
collecting on the Note or preserving, insuring, administering,
managing or selling any collateral or assets received pursuant
to such collection efforts. The liability of each Buyer, other
than Wenoha and Donald Wentworth, shall be limited to 150% of
his prorata share of the ownership of TEPRI.
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2.3 Credit Enhancement. Any credit enhancement provided by any
source other than TEPRI, including, without limitation, a
letter of issued by the C & L Bank of Bristol, Florida, shall
be released and returned to the credit enhancer not later than
April 15, 1998. The Buyers shall be personally liable to any
credit enhancer if any such credit enhancement is drawn upon,
for all funds actually drawn as well as any interest, fees or
expenses incurred in relation to such draws until repaid.
3. Representations, Warranties and Agreements of the Seller.
Seller hereby represent, warrant and agree that:
3.1 Authorization. The Seller has all requisite power and
authority to sell the Securities which it owns. This Agreement
is, and when executed and delivered, the Instruments of
Conveyance will be, the legal, valid and binding obligation of
the Seller, enforceable in accordance with their respective
terms.
3.2 No Violation. The execution and delivery of this Agreement by
the Seller and the consummation of the transactions
contemplated hereby will not violate any statute or law or any
judgment, decree, order, regulation or rule of any domestic or
foreign court or governmental authority.
3.3 Title. The Seller has and will have at the Closing, good and
valid title to the Securities being conveyed by it hereunder.
3.4 Employee Benefit Plans, Pension Plans of TEPRI.
(a) The Seller has delivered notices to the employees of
TEPRI terminating medical, dental and life insurance
coverage and will bear any expenses relating to
required notice periods under such policies after the
date of closing. Such notices were delivered at the
request of the Buyers.
(b) The Seller has delivered notices to the employees of
TEPRI terminating their participation in the Timber
Energy Investment, Inc. 401 (k) savings plan and will
bear any expenses relating to required notice periods
under such plan after the date of closing. Such
notices were delivered at the request of the Buyers.
3.5 Brokers and Finders. No person has been authorized by the
Seller or by anyone acting on its behalf, to act as a broker,
finder or in any other similar capacity in connection with the
transactions contemplated by this Agreement.
3.6 Authorization, Etc. The Seller has all requisite power and
authority to execute, deliver and perform their obligations
under this Agreement. This Agreement is valid and binding upon
the Seller, enforceable in accordance with its terms.
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3.7 No Violation. Neither the execution and delivery of this
Agreement by the Seller nor the consummation of the
transactions contemplated hereby by the Seller will violate
any provisions of the Certificate of Incorporation of the
Seller, or be in conflict with, or constitute a default (or an
event which, with or without notice, lapse of time or both,
would constitute a default) under, or result in the
termination or invalidity of, or accelerate the performance
required by, or cause the acceleration of the maturity of any
debt or obligation pursuant to, any agreement or commitment to
which the Seller is a party or by which of the Seller is
bound, or violate any statute or law or any judgment, decree,
order, regulation or rule of any court or governmental
authority. .
4. Representations and Warranties of Buyers.
The Buyers represents and warrants to Seller as follows:
4.1 Corporate Organization. Etc. Wenoha is a corporation duly
formed, validly existing and in good standing under the laws
of the State of Alabama and has all requisite power and
authority to carry on its business as it is now being
conducted and to own, and operate its properties and assets as
and in the places where such business is now conducted and
where such properties and assets are now owned or operated.
4.2 Authorization Etc. Buyers have all requisite power and
authority to execute, deliver and perform their obligations
under this Agreement. This Agreement is valid and binding upon
Buyers, enforceable in accordance with its terms.
4.3 No Violation. Neither the execution and delivery of this
Agreement by Buyers nor the consummation of the transactions
contemplated hereby by Buyers will violate any provisions of
the Certificate of Incorporation of Wenoha, or be in conflict
with, or constitute a default (or an event which, with or
without notice, lapse of time or both, would constitute a
default) under, or result in the termination or invalidity of,
or accelerate the performance required by, or cause the
acceleration of the maturity of any debt or obligation
pursuant to, any agreement or commitment to which Buyers are
parties or by which Buyers are bound, or violate any statute
or law or any judgment, decree, order, regulation or rule of
any court or governmental authority.
5. Certain Covenants and Agreements.
5.1 Press Releases. Without the written consent of the other
parties, which shall not be unreasonably withheld, each of the
parties hereto agrees not to make any public announcements or
press releases regarding the transactions contemplated hereby
until such transactions are consummated, unless otherwise
required by law.
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5.2 Post-Closing Cooperation. After the Closing, Buyers and Seller
shall cooperate fully with each other and shall make available
to each other all information, records or documents reasonably
requested in connection with matters involved in the sale of
the Securities.
5.3 Risk of Loss. Prior to the Closing, the risk of loss on the
Securities shall remain with the Seller.
6. Conditions to the Obligations of Seller.
Each and every obligation of Buyers under this Agreement to be
performed on or before the Closing shall be subject to the
satisfaction, on or before the Closing, of each of the following
conditions, unless waived in writing by Seller.
6.1 Representations and Warranties True. The representations and
warranties of Buyers contained in this Agreement shall be
true, complete and accurate in all material respects as of the
Closing.
6.2 No Proceeding. Litigation: Injunction. No suit, action,
investigation, inquiry or other proceeding by any governmental
body or other person shall have been instituted which arises
out of or relates to this Agreement or the transactions
contemplated hereby or seeks to obtain substantial damages in
respect thereof, and, on the Closing Date, there shall be no
effective permanent or preliminary injunction, writ, temporary
restraining order or any order of any nature issued by a court
of competent jurisdiction directing that the transactions
provided for herein not be consummated as so provided.
6.3 Board of Directors Approval. Wenoha shall have received the
approval of its Board of Directors prior to Closing.
7. Conditions to the Obligations of Buyers.
Each and every obligation of the Seller under this Agreement to be
performed on or before the Closing shall be subject to the
satisfaction, on or before the Closing, of each of the following
conditions, unless waived in writing by the Buyers.
7.1 Representations and Warranties True. The representations and
warranties of Seller contained in this Agreement shall be
true, complete and accurate in all material respects as of the
Closing Date.
7.2 Performance. Seller shall have performed, fulfilled and
complied in all material respects with all agreements,
obligations and conditions required by this Agreement to be
performed, fulfilled or complied with by it on or prior to the
Closing.
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7.3 No Proceeding. Litigation. Injunction. No suit, action,
investigation, inquiry or other proceeding by any governmental
body or other person shall have been instituted or threatened
which arises out of or relates to this Agreement or the
transactions contemplated hereby or seeks to obtain
substantial damages in respect thereof, and, on the Closing
Date, there shall be no effective permanent or preliminary
injunction, writ, temporary restraining order or any order of
any nature issued by a court of competent jurisdiction
directing that the transactions provided for herein not be
consummated as so provided.
7.4 Board of Directors Approval. KTI, Inc. shall have received the
approval of its Board of Directors prior to Closing.
8. Survival of Representations and Warranties; Indemnification.
8.1 Survival of Representations. All representations and
warranties contained in this Agreement shall survive the
Closing until April 15, 1999.
8.2 Statements as Representations and Warranties. All statements
contained herein or in any exhibit, certificate, list or other
document delivered or to be delivered pursuant to this
Agreement shall be deemed representations and warranties as
such terms are used in this Agreement and any material
misstatement or omission in any thereof shall be deemed a
breach of a representation or warranty hereunder.
8.3 Remedies Cumulative. The remedies provided herein shall be
cumulative and shall not preclude assertion by any party of
any other rights or the seeking of any other remedies against
any other party .
8.4 Buyers' Indemnity. The Buyers agrees to defend, indemnify and
hold harmless the Seller from, against and in respect of any
and all demands, claims, actions or causes of action, losses,
liabilities, damages, assessments, deficiencies, taxes, costs
and expenses, including without limitation, interest,
penalties and reasonable attorneys' fees and expenses,
asserted against, imposed upon or paid, incurred or suffered
by Seller as a result of, arising from, in connection with or
incident to (i) any breach or inaccuracy of any representation
or warranty of Buyers contained in this Agreement or (ii) any
breach of any covenant or agreement of Buyers contained in
this Agreement.
8.5 Seller's Indemnity.
(a) Subject to the limitations contained in subparagraph
(b) below, the Seller agree to defend, indemnify and
hold harmless Buyers from, against and in respect of
any and all demands, claims, actions or causes of
action, losses, liabilities, damages, assessments,
deficiencies, taxes, costs and expenses, including
without limitation, interest, penalties and
reasonable attorneys' fees and expenses, asserted
against, imposed upon or paid, incurred or suffered
by Buyers on or before August 1, 1999:
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(i) as a result of, arising from, in connection
with or incident to (A) any material breach
or inaccuracy of any representation or
warranty of any Seller in this Agreement or
in any Instrument of Conveyance, or (B) any
material breach of any covenant or agreement
of any Seller contained in this Agreement or
in any Instrument of Conveyance (For
purposes of this subsection, "material"
shall mean any amount in excess of $10,000
individually or in aggregate.); or
(ii) arising out of any acts, events or
circumstances by the Seller prior to the
Closing Date.
8.6. Indemnity Procedure.
(a) A party agreeing to indemnify against any matter
pursuant to this Agreement is referred to herein as
the "Indemnifying Party" and the other party claiming
indemnity is referred to herein as the "Indemnified
Party."
(b) An Indemnified Party under this Agreement shall give
prompt written notice to the Indemnifying Party of
any liability which might give rise to a claim for
indemnity under this Agreement. As to any claim,
action, suit or proceeding by a third party, the
Indemnifying Party shall have the right, exercisable
by notifying the Indemnified Party within twenty days
after receipt of such notice from the Indemnified
Party, to assume the entire control of the defense,
compromise or settlement thereof, all at the
Indemnifying Party's expense including employment of
counsel, and in connection therewith the Indemnified
Party shall cooperate fully to make available to the
Indemnifying Party all pertinent information under
its control. The Indemnified Party may at its
expense, if it so elects, designate its own counsel
to participate with counsel designated by the
Indemnifying Party in the conduct of any such
defense. If the defense of any such matter is
tendered to the Indemnifying Party by notice as set
forth above and the Indemnified Party is entitled to
indemnification pursuant hereto with respect to such
matter, and the Indemnifying Party declines or
otherwise fails to (1) promptly pay or settle the
same, or (2) vigorously investigate and defend the
same, the Indemnified Party may investigate and
defend the same and the Indemnifying Party will
reimburse the Indemnified Party for all judgments,
settlement payments and reasonable expenses,
including reasonable attorneys' fees, incurred and
paid by it in connection therewith.
(c) An Indemnified Party shall not make any settlement of
any claim without the written consent of the
Indemnifying Party, which consent shall not be
unreasonably withheld.
(d) Except as set forth in subsection (b) in the event of
any litigation brought by either party hereto to seek
indemnity under this Agreement, the
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prevailing party shall be entitled to recover
attorneys' fees upon final judgment on the merits.
9. Miscellaneous Provisions.
9.1 Amendment and Modification. This Agreement may be amended,
modified and supplemented by the parties hereto only by
written instrument signed by or on behalf of the party to be
charged thereunder.
9.2 Waiver of Compliance. Any failure of Seller, on the one hand,
or Buyers on the other hand, to comply with any obligation,
covenant, agreement or condition herein may be expressly
waived in writing by an authorized officer of the other party,
but such waiver or failure to insist upon strict compliance
with such obligation, covenant, agreement or condition shall
not operate as a waiver of, or estoppel with respect to any
subsequent or other failure.
9.3 Expenses. Each of the parties hereto agrees to pay all of the
respective expenses incurred by it in connection with the
negotiation, preparation, execution, delivery and performance
of this Agreement and the consummation of the transactions
contemplated hereby.
9.4 Notices. All notices, requests, demands and other
communications required or permitted hereunder shall be in
writing and shall be deemed to have been duly given if
delivered by hand or mailed, certified or registered mail,
with postage prepaid as follows:
If to Seller: KTI, Inc.
7000 Boulevard East
Guttenberg, New Jersey 07093
Telephone: (201) 854-7777
Fax: (201) 854-1771
With a copy to: Diane Malfeld, Esq.
Dorsey & Whitney
220 South Sixth Street
Minneapolis, Minnesota 55402
Telephone: (612) 340-5631
Fax: (612) 340-2643
If to the Buyers: Donald E. Wentworth
Timber Energy Plastic Recycling, Inc.
7801 Petersen Point Road
Milton, Florida 52583
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With a copy to: L. Don Norton
Timber Energy Plastic Recycling, Inc.
5402 Reichold Road
Tuscaloosa, Alabama 35404
or to such other person or address as Buyers shall furnish to
Seller in writing.
9.5 Binding Effect: Assignment. This Agreement and all of the
provisions hereof shall be binding upon and inure to the
benefit of the parties hereto and their respective heirs,
administrators, executors, legal representatives, such
successors and assigns, but neither this Agreement nor any of
the rights, interests or obligations hereunder shall be
assigned by any of the parties hereto without the prior
written consent of the other parties.
9.6 Governing Law. All agreements shall be governed by the laws of
the State of New York, without regard to the provisions
relating to the conflicts of laws.
9.7 Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which
together shall constitute the same instrument.
9.8 Headings. The headings of the sections and articles of this
Agreement are inserted for convenience only and shall not
constitute a part hereof or affect in any way the meaning or
interpretation of this Agreement.
9.9 Entire Agreement. This Agreement sets forth the entire
agreement and understanding of the parties hereto in respect
of the subject matter contained herein, and supersedes all
prior-agreements, promises, letters of intent, covenants,
arrangements, communications, representations or warranties,
whether oral or written, by any party hereto or by any Related
Person of any party hereto. All Exhibits attached hereto, the
Disclosure Schedule, any exhibits thereto and all
certificates, documents and other instruments delivered or to
be delivered pursuant to the terms hereof are hereby expressly
made a part of this Agreement as fully as though set forth
herein, and all references herein to the terms "this
Agreement", "hereunder", "herein", "hereby" or "hereto" shall
be deemed to refer to this Agreement and to all such writings.
9.10 Third Parties. Except as specifically set forth or referred to
herein, nothing in this Agreement, expressed or implied, is
intended or shall be construed to confer upon or give to any
person, firm, partnership, corporation or other entity other
than the parties hereto and their successors or permitted
assigns, any rights or remedies under or by reason of this
Agreement.
9.11 Severability. The invalidity of any one or more of the words,
phrases, sentences, clauses, sections or subsections contained
in this Agreement shall not affect the enforceability of the
remaining portions of this Agreement or any part hereof, all
of
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which are inserted conditionally on their being valid in law,
and, in the event that any one or more of the words, phrases,
sentences, clauses, sections or subsections contained in this
Agreement shall be declared invalid by a court of competent
jurisdiction, this Agreement shall be construed as if such
invalid word or words, phrase or phrases, sentence or
sentences, clause or clauses, section or sections, or
subsection or subsections had not been inserted.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the day and year first above written.
KTI, Inc. Wenoha Corporation.
By: /s/ Robert E. Wetzel By: /s/ L. Don Norton
- ------------------------------ --------------------
Title: Senior Vice President Title: President
/s/ John G. Mills /s/ L. Don Norton
- ------------------------------ --------------------------
John G. Mills L. Don Norton
/s/ Glen Wade Stewart /s/ Bruce D. Wentworth
- ------------------------------ --------------------
Glen Wade Stewart Bruce D. Wentworth
/s/ D. E. Wentworth
- ----------------------------
Donald E. Wentworth
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