As filed with the Securities and Exchange Commission on July 28, 1997
Registration No. 333-30813
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
______________
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
_______________
KTI, INC.
(Exact name of registrant as specified in its charter)
NEW JERSEY 22-2665282
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
7000 BOULEVARD EAST
GUTTENBERG, NEW JERSEY 07093
(201) 854-7777
(Address, including zip code, and telephone including area code, of registrant s
principal executive offices)
ROBERT E. WETZEL, ESQ.
C/O KTI, INC.
7000 BOULEVARD EAST
GUTTENBERG, NEW JERSEY 07093
(201) 854-7777
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copies to:
BRIAN HOFFMANN, ESQ.
MCDERMOTT, WILL & EMERY
50 ROCKEFELLER PLAZA
NEW YORK, NEW YORK 10020
(212) 547-5400
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, check the following box. //
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Section 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
<TABLE>
CALCULATION OF REGISTRATION FEE
<CAPTION>
Title of each class Number of Shares Proposed maximum Proposed maximum Amount of
of securities to be to be offering price per aggregate offering registration
registered registered share <F1> price fee
<S> <C> <C> <C> <C>
Common Stock, no 1,455,250 $8.875 $12,915,334 $3,914 <F2>
par value
<FN>
<F1> Estimated solely for the purpose of calculating the registration fee in accordance with rule
457(c) under the Securities Act of 1933, as amended, based upon the average of the high and low
prices reported on the NASDAQ National Market on July 1, 1997.
<F2> Fee previously paid.
</TABLE>
_______________
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this
registration statement shall thereafter become effective in accordance with
section 8(a) of the Securities Act of 1933 or until the registration
statement shall become effective on such date as the Commission, acting
pursuant to section 8(a), may determine.
KTI, INC.
1,455,250 SHARES OF COMMON STOCK
_______________
This prospectus relates to the resale of an aggregate of 1,455,250 shares
(the "Shares") of common stock, no par value (the "Common Stock"), of KTI,
Inc., a New Jersey corporation (the "Company"), consisting of (a) up to
630,000 Shares of Common Stock to be issued upon conversion of $5,000,000 par
value 8% Convertible Notes due on October 31, 2002 (the "8% Convertible
Notes"); (b) 487,500 Shares of Common Stock to be issued upon conversion of
487,500 shares of Series A Convertible Preferred Stock ("Series A Convertible
Preferred") by shareholders holding such preferred stock; and (c) 337,750
Shares issuable upon the exercise of warrants to purchase Common Stock (the
"Warrants") in each case, by the selling shareholders named herein (the
"Selling Shareholders"). The Shares may be offered for sale from time to
time by the Selling Shareholders or their respective pledgees, donees,
transferees or other successors in interest in the open market, on the NASDAQ
National Market, in the over-the-counter market, in privately negotiated
transactions, or a combination of such methods, at market prices prevailing
at the time of sale, at prices related to such prevailing market prices or at
negotiated prices. The Shares are intended to be sold through one or more
broker-dealers or directly to purchasers. Such broker-dealers may receive
compensation in the form of commissions, discounts or concessions from the
Selling Shareholders or purchasers of the Shares for whom such broker-dealers
may act as agent, or to whom the Selling Shareholders may sell as principal,
or both (which compensation as to a particular broker-dealer may be in excess
of customary concessions). The Selling Shareholders and any broker-dealers
who act in connection with the sale of Shares hereunder may be deemed to be
"underwriters" within the meaning of the Securities Act of 1933, as amended
(the "Securities Act"), and any commissions received by them and proceeds of
any resale of the Shares may be deemed to be underwriting discounts and
commissions under the Act. See "Selling Security Holders" and "Plan of
Distribution."
None of the up to 1,455,250 Shares of Common Stock offered hereby are
presently issued and outstanding. Up to 630,000 Shares of Common Stock are
issuable upon conversion of the 8% Convertible Notes, 487,500 Shares of
Common Stock are issuable upon the conversion of Series A Convertible
Preferred and 337,750 Shares of Common Stock are issuable upon the exercise
of the Warrants, 31,500 of which are exercisable at a price of $8.095 per
share and have an expiration date of April 30, 2002, 30,000 of which are
exercisable at a price of $8.50 per share and have an expiration date of
April 30, 2002, 243,750 of which are exercisable at a price of $9.00 per
share and 32,500 of which are exercisable at a price of $10.00 per share and
have an expiration date of June 4, 2003. The exercise price and the number
of shares issuable upon conversion of the 8% Convertible Notes and the Series
A Convertible Preferred and upon exercise of the Warrants are subject to
adjustment in the event of stock splits, stock combinations, mergers,
reorganizations, and certain other transactions involving the Company. If
all of the Warrants are exercised, the Company will receive proceeds of
approximately $3,028,742.51. The proceeds from the sale of the Shares of
Common Stock hereunder will be received solely by the Selling Shareholders.
The Common Stock is listed on the NASDAQ National Market System under
the symbol "KTIE." On July __, 1997, the last reported sale price of the
Common Stock, as reported on the NASDAQ National Market System, was $___ per
share.
AN INVESTMENT IN THE SECURITIES OFFERED PURSUANT TO THIS
PROSPECTUS IS SPECULATIVE AND INVOLVES A HIGH DEGREE
OF RISK. SEE "RISK FACTORS" AT PAGES 6 TO 12.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is July __, 1997.
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-3 (referred to herein,
together with all other amendments and exhibits, as the "Registration
Statement") under the Securities Act for the registration of the Common Stock
offered hereby. This Prospectus, which constitutes a part of the
Registration Statement, does not contain all of the information set forth in
the Registration Statement, certain items of which are omitted from this
Prospectus in accordance with the rules and regulations of the Commission.
For further information with respect to the Company and the Shares of Common
Stock offered hereby, reference is made to the Registration Statement,
exhibits, schedules thereto, and the financial statement and notes thereto
filed or incorporated by reference as a part thereof. Statements made in
this Prospectus concerning the contents of any document referred to herein
are not necessarily complete. With respect to each such document filed with
the Commission as an exhibit to the Registration Statement, reference is made
to the exhibit for a more complete description of the matter involved, and
each such statement shall be deemed qualified in its entirety by such
reference.
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements, and other information
with the Commission. Such reports, proxy statements, and other information
filed by the Company can be inspected and copied at the public reference
facilities maintained by the Commission at its office at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549 and at the Commission s regional offices
located at Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661 and 7 World Trade Center, Suite 1300, New York, New
York 10048. Copies of such material can be obtained from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549 at prescribed rates. The Commission maintains a web site that
contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission at
http://www.sec.gov.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents have been filed with the Commission and are
incorporated herein by reference and made a part of this Prospectus:
(i) Annual Report on Form 10-K for the fiscal year ended December 31,
1996;
(ii) Quarterly Report on Form 10-Q for the quarter ended March 31,
1997;
(iii) Report on Form 8-K dated as of May 28, 1997; and
(i) Report on Form 8-K dated as of June 4, 1997; and
(ii) Report on Form 8-K dated as of June 19, 1997
All documents filed by the Company pursuant to Section 13(a), 13(c), 14
or 15(d) of the Exchange Act subsequent to the date of this Prospectus and
prior to the termination of this offering shall be deemed to be incorporated
by reference herein and to be a part hereof from the date of filing of such
documents. Any statement incorporated or deemed to be incorporated by
reference herein shall be deemed to be modified, replaced or superseded for
purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document that also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom a copy of
this Prospectus is delivered, upon the written or oral request of such
person, a copy of any or all of the documents incorporated by reference
herein (other than exhibits to such documents, unless such exhibits are
specifically incorporated by reference into the information that this
Prospectus incorporates). Requests should be directed to:
KTI, Inc.
7000 Boulevard East
Guttenberg, New Jersey 07093
Attention: Robert E. Wetzel
Telephone Number: (201) 854-7777
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
All statements contained herein or incorporated by reference herein that
are not historical facts, including but not limited to statements regarding
the Company s current business strategy, prospective joint ventures, and
plans for future development and operations, are based upon current
expectations. These statements are forward-looking in nature and involve a
number of risks and uncertainties. Actual results may differ materially.
Among the factors in addition to the foregoing that could cause actual
results to differ materially are the following: (i) the availability of
sufficient capital to finance the Company s business plan on terms
satisfactory to the Company; (ii) competitive factors such as availability of
less expensive waste disposal outlets or expanded recycling programs that may
significantly reduce the amount of waste products available to the Company s
facilities; (iii) any further restructuring of the Company s power purchase
agreement with Central Maine or any restructuring of the Company s power
purchase agreements with Bangor-Hydro and Florida Power (iv) changes in
labor, equipment and capital costs; (v) the ability of the Company to
consummate any contemplated joint ventures and/or restructuring on terms
satisfactory to the Company; (vi) changes in regulations affecting the waste
disposal and recycling industries; (vii) the ability of the Company to comply
with the restrictions imposed upon it in connection with its outstanding
indebtedness; (viii) future acquisitions or strategic partnerships;
(ix) general business and economic conditions; and (x) other factors
described from time to time in the Company s reports filed with the
Commission and in the "Risk Factors" section of this Prospectus. The Company
wishes to caution readers not to place undue reliance on any such
forward-looking statements, which statements are made pursuant to the Private
Securities Litigation Reform Act of 1995 and, as such, speak only as of the
date made.
SUMMARY
The following summary is qualified in its entirety by, and should be
read in conjunction with the more detailed information and financial
statements, including the notes thereto, appearing elsewhere or incorporated
by reference herein. All share numbers have been adjusted to give effect to
a 5% stock dividend paid on March 28, 1997.
THE COMPANY
KTI, Inc. (individually and collectively with its subsidiaries and an
affiliate, the "Company"), incorporated in New Jersey in 1985, has developed
an integrated waste management business providing waste handling and disposal
services for ordinary, non-hazardous solid waste from residential commercial
and industrial sources ("MSW"). The Company is a holding company, and
substantially all of its operating assets are owned by corporate and
partnership subsidiaries and an affiliate. The principal executive offices
of the Company are located at 7000 Boulevard East, Guttenberg, New Jersey
07093. Its telephone number is (201) 854-7777.
The Company s current business plan for its integrated waste handling
business includes the following elements: (i) to maximize the refuse derived
fuel ("RDF") production and operating efficiencies at the Company s
waste-to-energy facilities, (ii) to continue to focus on lowering expenses of
its waste-to-energy facilities, including identifying less costly means of
disposal or by utilizing recycling opportunities for MSW process and ash
combustion residues, (iii) to utilize its expanded specialty waste disposal
capabilities to offset the effects of the seasonal nature of the traditional
MSW market and the uncertainties of the MSW spot market, which specialty
waste disposal would increase revenue due to the higher tipping fees that the
Company believes its facilities will be able to charge for processing such
waste, (iv) to enhance the value of its wood waste processing business by
expanding the utilization of available capacity through the acquisition of
additional materials and expanding the menu of materials processed, (v) to
recycle ash produced by waste-to-energy facilities, (vi) to expand its waste
brokerage service, and (vii) to utilize its experience gained in
restructuring the power supply contract of one of the Company s waste-to-
energy facilities, in waste handling and processing, in turning around
troubled facilities and in operating waste facilities by acquiring an
interest in or assuming operational responsibility for other waste disposal
or recycling facilities in financial or operational distress.
The implementation of parts of the foregoing business plan has only
recently commenced and there can be no assurance that such plan will be
successful.
RECENT DEVELOPMENTS
One of the Company s indirect subsidiaries, Kuhr Technologies, Inc.
("Kuhr") is the 10% general partner of Maine Energy Company, Limited
Partnership, a Maine limited partnership ("Maine Energy"), one of the
Company s waste-to-energy facilities. Another subsidiary of the Company
holds a 64.15% limited partner interest in Maine Energy.
As of June 30, 1997, the Company indirectly owns 4,916,891 shares of
Kuhr common stock, approximately 98% of the 5,000,000 shares currently
outstanding. The remaining 83,109 shares are owned by 25 minority
shareholders. Kuhr presently owes the Company $6.4 million, representing
loans advanced by the Company on behalf of Kuhr in connection with Kuhr s
investment in Maine Energy. Kuhr has no source of funds available to service
such debt. The Company has accepted additional shares of common stock of
Kuhr in lieu of interest on the $6.4 million debt. Such offer was approved
by the Kuhr shareholders at an Annual Meeting of Shareholders of Kuhr held on
June 10, 1997. The Company offered to buy Kuhr common stock owned by minority
shareholders at a price of 10 cents per share prior to June 10, 1997, and for
a price of 5 per share cents thereafter. As of June 30, 1997, shares
representing approximately 2% of Kuhr s common stock presently outstanding
have been purchased from 30 minority shareholders. Kuhr shareholders also
approved a 15,000 for 1 reverse stock split which, when completed, will
increase the Company s ownership in Kuhr to 100%. No Kuhr shareholder
exercised any rights to dissent or to request an appraisal of the value of
their Kuhr shares.
The Company is currently discussing with Bangor Hydro-Electric Power
Company ("Bangor Hydro") a proposed restructuring of the Power Purchase
Agreement (the "Bangor Hydro PPA") between Bangor Hydro and an affiliate of
the Company, Penobscot Energy Recovery Company, a Maine limited partnership
("PERC"), to reduce the costs to Bangor Hydro's ratepayers. PERC owns and
operates a waste-to-energy facility in the Town of Orrington, Maine (the
"Town"). The Town has issued Floating Rate Demand Resource Recovery Revenue
Bonds, which bonds are tax-exempt, in the aggregate principal amount of $81
million (the "Bonds"). The proceeds of the bond issuance were loaned to PERC
to finance the acquisition and construction of the waste-to-energy facility.
The parties to the restructuring discussions include PERC Management Company,
a subsidiary of the Company and the managing general partner of PERC, Energy
National, Inc., the other general partner of PERC, Prudential Insurance
Company of America, a limited partner of PERC ("Prudential"), Bangor Hydro,
the approximately 250 communities served by PERC, the Finance Authority of
Maine ("FAME") and the State of Maine.
Pursuant to the terms of the proposed restructuring, Bangor Hydro will
make a lump sum payment of $8 million and Bangor Hydro will be entitled to
receive rebates from PERC, which amounts would have otherwise been
distributed to the partners of PERC. If Bangor Hydro receives the projected
annual rebate during any of 1997, 1998, 1999, or 2000, then Bangor Hydro will
pay PERC $500,000 each such year. To the extent that the actual rebate is
less than the projected amount, the $500,000 payment by Bangor Hydro will be
reduced dollar for dollar, but in no event will PERC or its partners be
obligated to make any payments to Bangor Hydro. In connection with the
proposed restructuring of the Bangor Hydro PPA, the Bonds will be
restructured to extend the maturity of the Bonds and reduce the mandatory
sinking fund payments. In addition, FAME will credit enhance the Bonds.
The State of Maine has enacted certain legislation permitting the
transactions contemplated by the restructuring.
In connection with the proposed restructuring, the Company and
Prudential entered into a letter agreement pursuant to which the Company, or
its designee, may acquire an additional limited partner interest in PERC, of
approximately 43%, for $9.5 million. The acquisition of the limited partner
interest from Prudential is conditioned upon, among other things, the
consummation of the proposed restructuring.
There can be no assurance that the proposed restructuring of the Bangor
Hydro PPA or the acquisition of the limited partner interest in PERC will be
consummated, or, if consummated, on terms that are not materially or
adversely different from those described above.
In April, 1996, the Company entered into agreements with American Ash
Recycling Corp., a Florida corporation ("AAR"), pursuant to which the Company
acquired a 60% limited partnership interest in a limited partnership formed
to operate a municipal waste combuster ("MWC") ash recycling facility in the
State of Maine (the "Maine Partnership"). The Maine Partnership is in the
process of obtaining its federal, state and local permit. The Company agreed
to become a 60% limited partner, if appropriate, in up to eight (8) more ash
recycling facilities that may be developed by AAR through December, 1999.
The Company believes that the Company s efforts to obtain operating
permits for the Maine Partnership s ash recycling facility were instrumental
in Maine Energy s ability to negotiate a reduced disposal fee with a third-
party ash landfill owner. Under the renegotiated contract, Maine Energy s
ash disposal fee was reduced to $46 per ton from $76 per ton. Maine Energy
contractually agreed to pay 30% of the ash disposal fee savings to the Maine
Partnership.
In June, 1997, the Company withdrew from the Maine Partnership. In
exchange, KTI Ash Recycling, Inc., a subsidiary of the Company ("KTI Ash
Recycling"), will receive a portion of the ash disposal savings otherwise
payable to the Maine Partnership. Maine Energy will distribute 24% of the
ash disposal savings, beginning with ash disposal savings accruing after
April 1, 1997, directly to KTI Ash Recycling until such time as KTI Ash
Recycling has received $1,408,172 in cumulative distributions. KTI Ash
Recycling will be entitled to receive 18% of all ash disposal savings
thereafter. The Maine Partnership will be entitled to receive 6% of the ash
disposal savings until such time as KTI Ash Recycling has received $1,408,172
in cumulative distributions and 12% of the ash disposal savings thereafter.
THE OFFERING
This prospectus relates to the resale of (a) up to 630,000 Shares of
Common Stock to be issued upon conversion of the 8% Convertible Note, (b)
487,500 Shares of Common Stock to be issued upon conversion of 487,500 shares
of Series A Convertible Preferred Stock by shareholders holding such
preferred stock presently and (c) 337,750 of Common Stock to be issued to
certain warrant holders upon exercise of Warrants.
RISK FACTORS
Investors should consider very carefully each of the following risk
factors and all other information contained in this prospectus.
LOSSES AND ACCUMULATED DEFICIT OF THE COMPANY AND UNCERTAINTY OF FUTURE
FINANCIAL RESULTS
Prior to 1996, the Company has historically not operated at a profit and
has historically lacked cash resources. As of December 31, 1996, the Company
had an accumulated deficit of $12,939,642. During the fiscal year ended
December 31, 1995, the Company had a net loss of $1,331,494, and during the
fiscal year December 31, 1996, the Company had net income of $13,366,352. In
the first quarter of 1997, the Company had net income of $1,358,794. There
can be no assurance that the Company will be able to operate profitably in
the future. Continued operating losses could impact the long-term viability
of the Company.
HOLDING COMPANY STATUS OF THE COMPANY; RESTRICTIONS ON UTILIZATION OF ASSETS
The Company is a legal entity separate and distinct from its
subsidiaries and an affiliate, which operate substantially all of the
Company s businesses. Accordingly, the right of the Company to utilize any
assets or earnings or cash flow of any one subsidiary or the affiliate to
finance the growth of any other of its subsidiaries or the affiliate is
necessarily subject to the prior claims of creditors of the subsidiaries and
the affiliate. In addition, the payment of management fees and the
distribution of the cash flow of the Company generated by certain
subsidiaries and the affiliate of the Company are subject to substantial
restrictions as a result of agreements with their respective lenders.
Certain financing agreements and the long-term waste handling agreements of
Maine Energy, the owner and operator of a waste-to-energy facility in which
the Company has an approximately 74.15% ownership interest, require that all
available cash flow be applied to the redemption of indebtedness in full
before any distribution to partners. The Company is pursuing the
modification or restructuring of such agreements, including the refinancing
of the subordinated debt at Maine Energy. Currently, the Company s ability
to utilize internally generated cash flow as a means of financing expansion
is limited to distributions from its operating subsidiaries or the affiliate.
As a result, the liquidity of the Company is adversely affected, which could
result in the need to raise additional cash through the sale of securities of
the Company, some of which may include sales of Common Stock at less than the
then prevailing market prices which may dilute existing shareholders and make
less likely the payment of cash dividends on Common Stock.
RELIANCE ON ELECTRIC UTILITIES AND POWER PURCHASE AGREEMENTS
Pursuant to power purchase agreements between Maine Energy and Central
Maine Power Company with a term through 2012, between PERC and Bangor Hydro
with a term through 2018, and between Timber Energy Resources, Inc. plant in
Telogia, Florida (the "Telogia Facility") and Florida Power Corporation with
a term through 2002, these utilities have agreed to purchase electricity
generated by the Company's waste-to-energy facilities at contractually agreed
rates. Sales of electricity to these utilities accounted for approximately
86%, 61% and 100% of revenues of Maine Energy, PERC and the Telogia Facility,
respectively, in 1996. Of the 86% of revenues Maine Energy obtained from the
sale of electricity, 55% (or $35.6 million) was derived from a one-time
payment brought about from a restructuring of the power purchase agreement
between Maine Energy and Central Maine. Excluding this restructuring sale of
electrical capacity, Central Maine accounted for $20.3 million or 69% of
revenues to Maine Energy. In the event of the deregulation of electric
utilities, certain electric companies may no longer be financially viable.
To the extent that any of the electric utilities with whom the Company
contracts is adversely impacted by deregulation, such utilities may not be
able to perform their obligations under such purchase power agreements. The
State of Maine has recently enacted deregulation legislation which will
require the local utilities to transfer their respective contracts with Maine
Energy and PERC to newly formed regulated transmission and distribution
companies. The costs of such contracts will be passed through to the rate-
payers beginning in the year 2000 through these transmissions and
distribution companies.
GOVERNMENTAL REGULATION AND ENVIRONMENTAL RISKS
Federal, state, and local environmental laws govern discharges of
pollutants and the generation, transportation, storage, treatment and
disposal of solid waste. These laws (i) establish standards governing most
aspects of the operation of the waste-to-energy facilities, wood waste
processing facilities and ash recycling facility and the Telogia Facility and
(ii) generally require multiple governmental permits in order to continue the
operation of these facilities. The Company believes it has all permits
necessary to operate its facilities in the manner that each of them is
currently operating. However, there can be no assurance that all required
permits will be renewed following their expiration. In some cases the
renewal process may entail public hearings.
The standards established pursuant to environmental statutes and
regulations, the interpretation of statutes and regulations and the policies
governing their enforcement may change, requiring new pollution control
technology or stricter standards for the control of discharge of air or water
pollutants or for solid waste or ash handling and disposal. For example, the
United States Supreme Court, in a 1994 decision interpreting the Resource
Conservation and Recovery Act, held that ash from the combustion of
non-hazardous household and commercial waste, if tested and found to have
hazardous characteristics, will be treated as a hazardous waste. In
addition, new statutory and regulatory provisions may be implemented which
could have retroactive application. Both Maine Energy and PERC have been
testing their ash since initial start-up and the ash has generally tested as
non-hazardous. If any hazardous waste is detected, is would be disposed of
appropriately. There can be no assurance, however, that disposing of
hazardous waste, if ever detected, would not entail substantial costs.
The waste-to-energy facilities in which the Company has an interest are
also subject to the provisions of various federal and state laws and
regulations including the Public Utility Regulatory Policies Act of 1978
("PURPA), as amended. PURPA requires that electric utilities purchase
electricity generated by qualifying power producers at a price equal to the
purchasing utility's full "avoided cost". Avoided costs are defined by PURPA
as the incremental costs to the electric utility of electric energy or
capability, or both. The Company's facilities could be materially and
adversely affected if the various benefits of PURPA were repealed or
substantially reduced. Changes in laws, regulations or policies or new
interpretations of existing laws, regulations or policies, could have a
material impact on the profitability, level of capital expenditures or
continued operation of the waste-to-energy facilities, wood processing and
ash recycling operations in which the Company has an interest.
COMPETITION
The Company experiences significant competition in each of its waste
handling markets. Maine Energy and PERC compete with landfills and several
waste-to-energy facilities and municipal incinerators in Maine and the New
England region. However, the volume of MSW produced in the New England
region has historically increased and the Company believes that it is likely
to continue to increase while the availability of landfills for waste
disposal is likely to continue to decline. There can be no assurance,
however, that this trend will continue. Even though the implementation of
recycling programs to reduce MSW has increased, the Company believes that
there are limits on the percentage of MSW that ultimately can be recycled and
that alternatives for disposal of MSW will continue to be needed. There can
be no assurance, however, that new recycling technologies will not be
developed. In addition, the Company has begun to focus on the industrial
waste market as an ancillary source of waste for the Maine Energy and PERC
facilities and as a means of reducing its reliance upon the MSW market.
Specifically, KTI Specialty Waste Services, Inc. and Specialty Environmental
Management Company, LLC have been formed to acquire specialty waste products
for these facilities.
The Company believes that the RDF technology employed by the Maine
Energy and PERC facilities compares favorably with the mass-burn technology
utilized by many other waste-to-energy facilities. In the Company s RDF
systems, MSW is preprocessed to remove various non-combustible items which
are recycled or used in other beneficial manners. This results in a
significantly reduced volume of ash residue, thereby lowering ultimate
disposal costs. The Company's RDF system is also complementary to current
recycling programs.
The wood waste processing facility operated by KTI Bio Fuels, Inc., a
subsidiary of the Company ("KTI Bio Fuels"), in Lewiston, Maine competes with
landfills and operators of portable wood chipping equipment. KTI Bio Fuels
is, however, with Maine Energy and PERC, part of an integrated waste handling
operation which both processes wood waste into wood chips and also eliminates
it through combustion. The Company believes that this integrated process,
which handles both treated and untreated wood, will become increasingly
attractive to wood waste generators such as electric and telephone utilities
who are seeking a means of eliminating many potential environmental
liabilities associated with traditional means of landfill disposal.
The Telogia Facility competes for biomass fuel supply with paper
companies which employ on-site power generation. As the Company increasingly
utilizes tipping fee based waste fuels, this facility s dependence on the
current fuel supply is expected to decrease. The Telogia Facility is
permitted to combust 100% of such tipping fee based fuels. Competition for
tipping fee based material will principally come from landfills whose cost
structure is higher than that of the Telogia Facility. Local landfill costs
for biomass waste products range from $15 to $25 per ton, while the cost of
processing the material ranges from $5 to $8 per ton at the Telogia Facility.
There can be no assurance, however, that such cost structure will not change
in a manner adverse to the Company.
Competition for the Company s ash recycling subsidiary is primarily from
ash landfills. The Company believes its ash recycling facilities will be
able to compete favorably based on historical prices charged by these
landfill operators, although there can be no assurance that they will do so.
Manner Resins, Inc., acquired by the Company in November, 1996,
("Manner"), competes with several other recycled plastic brokers and direct
marketing from plastic recycling plans for the post-industrial plastic scrap
and with materials recovery facilities for post-consumer plastics. The
Company believes that Manner will continue to be competitive and will be able
to increase revenues and maintain its operating margin as a result of its
knowledge of the plastic recycling market and its reputation and relationship
with its customer base, although there can be no assurance that Manner will
continue to compete effectively.
DEPENDENCE ON SOURCES OF SUPPLY OF FUEL
The waste-to-energy facilities operated by Maine Energy, PERC and the
Telogia Facility are dependent spot market waste material in order to run at
high capacity. In 1996, approximately 70% of the total MSW processed by
Maine Energy was received from sources other than parties with whom Maine
Energy has long-term waste disposal agreements. Competition within the waste
handling and disposal industry for spot market MSW may impede a steady,
reliable supply of MSW. The Telogia Facility is in the process of changing
its fuel mix from purchased residual material to tipping fee-driven bio-mass
waste which has reduced net fuel costs. As the fuel mix continues to change
over time, the Telogia Facility expects to have net positive tipping revenue
for its boiler fuel. There can be no assurance, however, that it will have
net positive tipping revenue. The Telogia Facility may be subject to
competition from other waste disposal companies as it continues to penetrate
the bio-mass waste market.
TIMBER ENERGY RESOURCES, INC.'S RELIANCE ON ONE CHIP MILL CUSTOMER
Timber Energy Resources, Inc.'s Chip Mill (the "Timber Chip Mill")
relies on one customer, Stone Container Corporation ("Stone Container") for
all of its business. The chip mill was constructed as a result of
establishing a 15 year "process-or-pay" contract with Stone Container,
whereby the Timber Chip Mill receives a tolling fee upon receipt of raw wood.
The contract expires on December 1, 2004 and includes an option to extend it
for an additional five years. Loss of this contract would require the
Company to obtain an additional source of supply or possibly shut down the
facility. Additionally, Stone Container has the right to purchase the Timber
Chip Mill at a specified price which decreases each year. Management deems
it unlikely that Stone will exercise its right to purchase.
FLOW CONTROL
The availability of reliable and continuous sources of MSW or other
combustible waste is critical to the operations of the waste-to-energy
facilities in which the Company has an interest. MSW availability has been
assured, to some extent, by the enactment by municipalities in the service
territories of Maine Energy and PERC of ordinances requiring that waste
generated within their respective jurisdictions be brought exclusively to the
Maine Energy or PERC facilities. Such ordinances are referred to as legal
"flow control". A 1994 decision of the United States Supreme Court
overturned a flow control ordinance of a New York municipality on the basis
that it was an improper regulation of interstate commerce. Accordingly, the
present questionable validity of all flow control ordinances introduces some
degree of uncertainty in the waste handling business.
The Company does not believe that its operations will be materially
impacted by the loss of flow control for several reasons, including the fact
that the Maine Energy and PERC long-term waste disposal agreements with
municipalities require the delivery of stated quantities of MSW on a "put-or-
pay" basis and the tipping fees of Maine Energy and PERC are, at present,
less than the tipping fees at alternate disposal sites.
NEED FOR ADDITIONAL FINANCING; LIQUIDITY
The Company s strategy to foster expansion of its business includes, in
part, the development of new businesses or the acquisition of the ownership
of, or operational responsibility for, additional businesses in the waste
handling industry. This strategy may require the Company to raise additional
cash through offerings of either equity or non-recourse and recourse debt, or
both. The success of the Company s planned expansion will depend upon a
number of factors not entirely within the Company s control, including, among
others, the terms and availability of additional financing, the regulatory
climate in which the Company operates, and other general economic and
business conditions. There can be no assurance that additional funding,
through bank borrowings, debt or equity financings or otherwise, will be
available to the Company on acceptable terms. Further, the Company s 8%
Convertible Notes contain restrictions on the Company incurring additional
debt.
AVAILABILITY OF ACQUISITION TARGETS; INTEGRATION OF FUTURE ACQUISITIONS.
The Company's ongoing acquisition program is a key element of the growth
strategy for expanding its integrated waste management operations.
Consequently, the future growth of the Company depends in a large part upon
the successful continuation of this acquisition program. The Company may en-
counter substantial competition in its efforts to acquire waste-to-energy
facilities, ash recycling facilities or any other facilities relating to
integrated waste management business. There can be no assurance that the
Company will succeed in locating or acquiring appropriate acquisition
candidates at price levels and on terms and conditions that the Company
considers appropriate. In addition, if in the future the Company is
successful in acquiring targeted companies, it will need to integrate those
acquired companies into the Company's operations. There can be no assurance
that the Company will successfully integrate future acquisitions into its
operations.
DEPENDENCE ON KEY PERSONNEL
The Company believes that its success depends, to a significant extent,
on the efforts and abilities of its senior management. In particular, the
loss of any one of Nicholas Menonna, Jr., Chairman of the Board of Directors
and Chief Executive Officer, Martin J. Sergi, the Company's Vice Chairman,
President and Chief Financial Officer or Ross Pirasteh, Chairman of the
Executive Committee, could have a material adverse affect on the Company. In
addition, the Company believes that its success will depend in large part
upon its ability to attract, retain and motivate skilled employees and other
senior management personnel. Although the Company expects to continue to
attract sufficient numbers of such persons for the foreseeable future, there
can be no assurance that the Company will be able to do so. In addition,
because the Company may acquire one or more businesses in the future, the
Company's success will depend, in part, upon its ability to retain and
integrate its own operations personnel with personnel from acquired entities
who are necessary to the continued success or successful integration of the
acquired business.
SEASONALITY
The Company's wood waste and MSW revenues for BioFuels, Maine Energy and
PERC tend to be lower in the winter months. This is primarily attributable
in the case of BioFuels to the volume of waste relating to construction and
demolition activities which increases in the spring and summer months; and in
the case of Maine Energy and PERC to the summer population in Maine which is
roughly 30% higher than any other season of the year.
NO CASH DIVIDENDS
The Company has not paid any cash dividends on its Common Stock or the
Series A Convertible Preferred to date and the Company does not anticipate
paying any cash dividends on its Common Stock or the Series A Convertible
Preferred in the foreseeable future. Additionally, the Company's bank credit
facility, the 8% Convertible Note and the Series A Convertible Preferred
contain restrictions on the payment of cash dividends on the Common Stock.
POTENTIAL ANTI-TAKEOVER EFFECTS OF STATE LAW; PREFERRED STOCK
Certain provisions of New Jersey law and the Company s Restated
Certificate of Incorporation could delay or impede the removal of incumbent
directors and could make it more difficult for a third party to acquire, or
discourage a third party from attempting to acquire, control of the Company.
Such provisions could limit the price that certain investors might be willing
to pay in the future for the Company s securities.
Shares of preferred stock may be issued by the Board of Directors of the
Company without shareholder approval on such terms and conditions, and having
such rights, privileges and preferences, as the Board of Directors may
determine. The issuance of preferred stock could make the possible takeover
of the Company or the removal of management of the Company more difficult,
discourage hostile bids for control of the Company in which shareholders may
receive premiums for their shares of Common Stock, or otherwise dilute the
rights of holders of the Common Stock and depress the market price of the
Company s securities.
In addition, the Restated Certificate of Incorporation of the Company
provides for "supermajority" and "fair price" anti-takeover measures which
could affect the price shareholders could receive for shares of Common Stock.
The supermajority provision requires that in the event of a merger or
consolidation of the Company with another corporation or the sale, lease,
exchange or other disposition of all or substantially all the assets of the
Company, an affirmative vote of at least 80% of all outstanding shares of
voting stock shall be required to approve such transaction unless it is
approved by at least the greater of three fourths of the directors or two
directors who are not affiliated with said transaction.
The fair price provision as set forth in the Restated Certificate of
Incorporation requires a potential acquiring entity to obtain the approval of
at least 80% of all outstanding shares of voting stock of the Company, obtain
the approval of at least three fourths of the directors on the Board who are
not affiliated with the transaction, or satisfy several conditions that
include, among other things, holders of capital stock of the Company
receiving fair market value for their shares, the payment of all outstanding
dividends on capital stock of the Company, the receipt of a proxy or
information statement by all holders of Common Stock describing the proposed
transaction and complying with the requirements of the Exchange Act and the
approval of not less than the majority of the directors not affiliated with
said transaction. See "Description of Common Stock."
LIMITATION ON USE OF TAX LOSS CARRYFORWARDS
As of December 31, 1996, the Company had net operating loss
carryforwards ("NOLs") for federal income tax purposes of approximately
$47,587,000 that expire in the years 2002 through 2010. As a result of an
"ownership change" which occurred during 1994, the Company s ability to
utilize its pre-ownership change NOLs is limited under Section 382 of the
Internal Revenue Code of 1986, as amended (the "Code"), to an amount equal to
approximately $1,100,000 of taxable income per year. If the value of the
Company s capital stock immediately before the 1994 ownership change were
determined to be lower than that calculated by management of the Company, the
annual allowable NOL deduction of $1,100,000 per year for the Company, other
than Timber Energy Investment Inc., a subsidiary of the Company ("TEII"),
would be reduced proportionately. The net operating loss carryforward of
TEII is limited to approximately $874,000 per year. This limitation may be
increased if the Company or TEII recognizes a gain on the disposition of an
asset which had a fair market value greater than its tax basis on the date of
the ownership change.
USE OF PROCEEDS
Certain statements under this caption "Use of Proceeds" constitute
"forward-looking statements" within the meaning of the Securities Act and
Exchange Act. Such forward-looking statements involve known and unknown
risks and uncertainties. See "Risk Factors" and "Special Note Regarding
Forward-Looking Statements."
The Company will not receive proceeds from the sale of any of the Shares
offered by the Selling Shareholders pursuant to this prospectus. However,
the Company will receive $3,028,742.51 upon the exercise of the Warrants
which the Company currently plans to use as working capital for general
corporate purposes. No assurance can be given that any or all of the
Warrants will be exercised.
The use of proceeds set forth above represents the Company s present
intention on the basis of circumstances at the date of this prospectus.
Changes in circumstances may result in the reallocation of the net proceeds
to other unexpected uses. Pending such uses, the proceeds will be invested
in short term certificates of deposit or other interest bearing instruments.
SELLING SHAREHOLDERS
The following sets forth certain information with respect to the Selling
Shareholders which has been provided to the Company by each such Selling
Shareholder. The Company has no knowledge of the intentions of any of the
Selling Shareholders to actually sell any of the shares listed under the
column "Shares Available for Sale." Each of the Selling Shareholders has the
contractual right to sell shares. No Selling Shareholder has a material
relationship with the Company other than as a result of ownership of the
Shares and the Warrants, except as described below.
<TABLE>
<CAPTION>
SELLING SHAREHOLDER OWNERSHIP SHARES OFFERED PERCENTAGE OF
PRIOR TO PURSUANT TO CLASS OWNED
OFFERING THIS AFTER OFFERING<F3>
PROSPECTUS<F1><F2>
NUMBER
PERCENT
<S> <C> <C> <C>
Steven Bouck 5,483 5,483 *
Riverside Partnership 685,417 685,417 *
Schneur Genack 39,167 39,167 *
Paul Kleinaitis <F4> 10,183 10,183 *
Mark Plaumann 9,792 9,792 *
Kenneth A. Rubin <F4> 13,708 13,708 *
PNC Bank, National Association 30,000 30,000 *
Thomas E. Schulze 20,475 14,175 *
John E. Turner 11,025 7,875 *
Robert E. Wetzel <F4> 84,000 9,450 1%
Wexford KTI LLC 630,000 630,000 *
_______
TOTAL 1,455,250
<FN>
* Less than one percent.
<F1> Assuming the conversion of all Shares of Series A Convertible Preferred into shares of Common Stock and the
exercise of all of the Warrants to acquire shares of Common Stock held by the Selling Shareholders.
<F2> The amounts indicated are as of July 1, 1997.
<F3> Based on the total number of shares of Common Stock outstanding as of the date of this prospectus and assuming
the sale of all the Shares offered hereby, including Shares obtained upon the exercise of all of the Warrants.
<F4> Mr. Wetzel is an officer of the Company. Messrs. Paul Kleinaitis and Kenneth A. Rubin are directors of the
Company
</TABLE>
PLAN OF DISTRIBUTION
The Shares may be offered for sale from time to time by the Selling
Shareholders or their respective pledgees, donees, transferees or other
successors in interest in the open market, on the NASDAQ National Market, in
the over-the-counter market, in privately negotiated transactions, or a
combination of such methods, at market prices prevailing at the time of sale,
at prices related to such prevailing market prices or at negotiated prices.
The Shares are intended to be sold through one or more broker-dealers or
directly to purchasers. Such broker-dealers may receive compensation in the
form of commissions, discounts or concessions from the Selling Shareholders
and/or purchasers of the Shares for whom such broker-dealers may act as
agent, or to whom they may sell as principal, or both (which compensation as
to a particular broker-dealer may be in excess of customary concessions).
The Selling Shareholders and any broker-dealers who act in connection with
the sale of Shares hereunder may be deemed to be "underwriters" within the
meaning of the Act, and any commissions received by them and proceeds of any
resale of the Shares may be deemed to be underwriting discounts and
commissions under the Act.
DESCRIPTION OF COMMON STOCK
AUTHORIZED STOCK
The Company s Restated Certificate of Incorporation, as amended,
authorizes the issuance of 13,333,333 shares of Common Stock and 10,000,000
shares of "blank check" preferred stock, no par value, and, pursuant to a
Certificate of Amendment to the Company's Restated Certificate of
Incorporation filed on May 16, 1997, 20,000,000 shares of Common Stock. As
of June 23, 1997, there were 6,911,428 shares of Common Stock issued and
outstanding and held of record by 178 shareholders of record, and 487,500
shares of the Company s Series A Convertible Preferred outstanding and held
of record by 6 shareholders.
Common Stock. Shareholders are entitled to one vote for each share of
the Common Stock held of record on all matters to be voted by shareholders.
Shareholders are not entitled to cumulate their votes in the election of
directors. Holder Series A Convertible Preferred are entitled to one vote for
each share of the Series A Convertible Preferred held of record on all
matters to be voted by shareholders of Common Stock and vote in the same
class for matters which do not directly affect Series A shareholders. On
matters which relate to the rights of Series A shareholders as a class, such
votes are voted separately and must be carried by a majority of votes of the
Series A Convertible Preferred. Subject to the prior rights of holders of
additional preferred stock of the Company which may be issued, the holders of
Common Stock are entitled to dividends, when and if declared by the Board of
Directors, out of funds legally available therefor. The Credit Facility, the
8% Convertible Notes and the Series A Convertible Preferred, however, contain
restrictions on the payment of cash dividends. See "Risk Factors -- No Cash
Dividends." In the event of the liquidation, dissolution or winding up of
the Company, the holders of Common Stock are entitled to share ratably in all
assets remaining after payment of liabilities and the liquidation preferences
of any outstanding shares of preferred stock. Holders of Common Stock have no
preemptive rights and have no right to convert Common Stock into any other
securities. All outstanding shares of Common Stock are fully paid and
nonassessable.
Preferred Stock. 487,500 shares of Series A Convertible Preferred of
the Company are outstanding. The Board of Directors has the authority
without further shareholder approval, to issue additional authorized but
unissued shares of preferred stock in one or more series and to determine the
preferences, rights, privileges and restrictions of any series, including the
dividend rights, conversion rights, voting rights, rights and terms of
redemption, liquidation preferences, the number of shares constituting any
such series, and the designation of such series. Such issuance of preferred
stock may adversely affect, among other things, the voting rights of existing
shareholders.
OTHER PROVISIONS OF THE COMPANY S RESTATED CERTIFICATE OF INCORPORATION
The Company s Restated Certificate of Incorporation contains certain
provisions known as "supermajority" and "fair price" provisions which are
anti-takeover measures and could affect the price shareholders could receive
for shares of Common Stock.
Supermajority Provision. The "supermajority" provision is intended to
encourage a corporation seeking to enter into a merger or consolidation with
the Company or a sale of all or substantially all of the assets of the
Company to negotiate these transactions with the "Disinterested Directors"
(as defined) to ensure that such transactions have the substantial support of
such directors before submission to the shareholders.
The supermajority provision requires for approval of a merger or
consolidation between the Company and another corporation, or a sale of
substantially all of the assets of the Company, the affirmative vote of at
least 80% of the combined voting power of the then outstanding voting stock
voting together as a single class (an "80% Shareholder Vote") in addition to
any other Shareholder vote required. The 80% Shareholder Vote would not
apply if the proposed transaction is approved by the greater of (i) at least
three-fourths of the Disinterested Directors or (ii) two Disinterested
Directors. A Disinterested Director is any person who is a member of the
Board of Directors, while such person is a member of the Board, who is not an
Affiliate, Associate (as those terms are defined in Rule 12b-2 under the
Exchange Act) or representative of the other party to the transaction with
the Company and who was either a member of the Board at the time the
supermajority provision was approved by the Board, or who was recommended for
election to the Board, or elected to fill a vacancy on the Board, by a
majority of Disinterested Directors.
Fair Price Provision. The "fair price" provision is intended to
(i) override New Jersey s corporation law which provides that a majority in
interest of shareholders voting thereon is required for a merger by a
corporation, unless such corporation s certificate of incorporation specifies
a higher percentage and (ii) prevent a two-tier front-end loaded pricing
method for corporate takeovers. In this type of takeover attempt, the bidder
tenders for that percentage of shares which will give it sufficient votes to
approve a merger providing for the elimination of minority shareholders, as
the method of buying the remaining shares. The consideration given for a
corporation s shares in this type of merger can be, and frequently is, in a
different form than that given in the tender offer. For example, the bidder
may pay cash to purchase a controlling position and thereafter approve a
merger in which the remaining shareholders receive securities of the bidder
(or one of its subsidiaries). Moreover, the value of the securities
exchanged in the second step may be substantially less than the amount of
cash or the value of the other consideration given in the first step.
Accordingly, the shareholders are induced to tender initially.
The fair price provision requires an 80% Shareholder Vote for certain
transactions with an Interested Shareholder (as defined) unless specified
price criteria and procedural requirements are met and a majority of the
entire Board of Directors approves the Business Combination (as defined) or
the approval of not less than three-fourths of the Continuing Directors (as
defined) is given. If the latter occurred, then the proposed Business
Combination would be subject to the normal approval requirements under New
Jersey law.
An "Interested Shareholder" is defined as any person, other than the
Company or any subsidiary or any employee benefit plan of the Company or of
any subsidiary or fiduciary of such a plan, or any person who was a director
of the Company on the date the provision was adopted by the Board of
Directors (such persons being Messrs. Nicholas Menonna, Jr., Martin J. Sergi
and Marshall S. Sterman) who (i) is the beneficial owner of voting stock
representing 10% or more of the votes entitled to be cast by the holders of
all then outstanding shares of voting stock, (ii) is an Affiliate (as
defined) or Associate of the Company and within the prior two years was the
beneficial owner of voting stock representing 10% or more of the votes
entitled to be cast by the holders of all then outstanding shares of voting
stock, or (iii) is the assignee of or has otherwise succeeded to the
beneficial ownership of any voting stock beneficially owned by an Interested
Shareholder within such two-year period, if such assignment or succession
occurred pursuant to a transaction or any series of transactions not
involving a public offering within the meaning of the Securities Act. The
term "beneficial owner" includes any person directly or indirectly owning or
having the right to vote or acquire shares.
The terms "Affiliate" and "Associate" have the respective meanings
ascribed to such terms in Rule 12b-2 under the Exchange Act, as in effect on
December 31, 1993.
A "Business Combination" includes the following transactions: (1) a
merger or consolidation of the Company or any of its subsidiaries with an
Interested Shareholder or any other corporation which is or after such
transaction becomes an Affiliate or Associate of an Interested Shareholder;
(2) the sale or other disposition to, with or by any Interested Shareholder
or any Affiliate or Associate of an Interested Shareholder involving any
assets or securities of the Company, any subsidiary or any Interested
Shareholder or any Affiliate or Associate of an Interested Shareholder valued
at $20,000,000 or more; (3) the adoption of any plan or proposal for the
liquidation or dissolution of the Company proposed by or on behalf of an
Interested Shareholder or any Affiliate or Associate of an Interested
Shareholder; (4) any reclassification of securities or recapitalization of
the Company, merger or consolidation of the Company with any subsidiary or
other transaction which has the effect, directly or indirectly, of increasing
the proportionate share of any class or series of the Company s stock, or
securities convertible into stock of any class or series of the Company s
stock or into equity securities of any subsidiary, that is beneficially owned
by an Interested Shareholder or any Affiliate or Associate of an Interested
Shareholder; or (5) any agreement, contract or other arrangement providing
for any one or more of the actions referred to above.
A "Continuing Director" is any member of the Board, while a member of
the Board, who is not an Affiliate or Associate or a representative of the
Interested Shareholder and either was a director at the time the fair price
provision was adopted by the Board or was recommended for election to the
Board, or elected to fill a vacancy on the Board, by a majority of the
Continuing Directors.
An 80% Shareholder Vote would not be required if the proposed Business
Combination is approved by not less than three-fourths of the Continuing
Directors or certain minimum price criteria and procedural requirements are
satisfied and not less than a majority of the entire Board of Directors
approves the transaction.
LEGAL MATTERS
The law firm of McDermott, Will & Emery, 50 Rockefeller Plaza, New York,
New York 10020 acted as counsel for the Company in connection with the
validity of the Common Stock offered hereby.
EXPERTS
The consolidated financial statements and schedule of the Company and
PERC included in the Company s Annual Report (Form 10-K) for the year ended
December 31, 1996, have been audited by Ernst & Young LLP, independent
auditors, as set forth in their reports thereon included therein and
incorporated herein by reference. Such financial statements and schedule are
incorporated herein by reference in reliance upon such reports given upon the
authority of such firm as experts in accounting and auditing.
No dealer, salesman or any other
person has been authorized to give any
information or to make any
representation other than those
contained in this Prospectus and, if
given or made, such information or
representation must not be relied upon
as having been authorized by the
Company, by any Selling Shareholder or 1,455,250
by any other person. This Prospectus
does not constitute an offer to sell or
a solicitation of an offer to buy the Shares of Common Stock
securities offered hereby to any person
or by anyone in any jurisdiction in
which such offer or solicitation may not KTI, INC.
lawfully be made. Neither the delivery
of this Prospectus nor any sale made
hereunder shall, under any
circumstances, create any implication
that there has been no change in the
affairs of the Company since the date
hereof, or that the information herein
contained is correct as of any time PROSPECTUS
subsequent to its date.
TABLE OF CONTENTS
July __, 1997
PAGE
Available Information . . . .
Incorporation of Certain Information
by Reference . . . . . . .
Special Note Regarding Forward Looking
Statements . . . . . . . .
Summary . . . . . . . . . . .
The Offering . . . . . . . .
Risk Factors . . . . . . . .
Use of Proceeds . . . . . . .
Selling Shareholders . . . .
Plan of Distribution . . . .
Description of Common Stock .
Legal Matters . . . . . . . .
Experts . . . . . . . . . . .
PART II
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the expenses in connection with the
offering described in this Registration Statement. The Company has agreed to
pay all of the costs and expenses of this Offering.
<TABLE>
<CAPTION>
<S> <C>
SEC Registration fee $ 3,914
*Blue Sky fees and expenses 0
*Legal fees and expenses 25,000
*Accounting fees and expenses 3,000
*Miscellaneous 500
*TOTAL $ 32,414
*Estimated
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The registrant s Restated Certificate of Incorporation provides that it
shall indemnify its officers, directors, employees and agents to the full
extent permitted by law.
Statutory authority for such indemnification is contained in Title 14A,
New Jersey Business Corporation Act, Revised Statutes of New Jersey, N.J.S.A.
14A:3-5, the material provisions of which may be summarized as follows:
NON-DERIVATIVE PROCEEDINGS (PROCEEDINGS OTHER THAN THOSE BROUGHT BY OR
IN THE RIGHT OF THE CORPORATION). A corporation may indemnify an actual or
prospective party to a proceeding or investigation if he became such because
he is or was a director, officer, employee or agent of the corporation, or of
a constituent corporation absorbed by such corporation in a consolidation or
merger, or is or was serving at the request of the indemnifying or
constituent corporation as a director, officer, trustee, employee or agent of
another enterprise. To be eligible for such indemnity, the party must have
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation and also, in a criminal
proceeding, he must have had no reasonable cause to believe that his conduct
was unlawful. Such indemnity may be against judgments, fines, settlements,
and penalties and reasonable expenses (including counsel fees) incurred in
connection with such proceeding.
DERIVATIVE PROCEEDINGS (PROCEEDINGS BY OR IN THE RIGHT OF THE
CORPORATION). A corporation may indemnify such actual or prospective party
to a proceeding or investigation against his reasonable expenses (including
counsel fees) if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the corporation,
but not against judgments, fines, settlements or penalties in connection with
such proceedings or investigation. However, if such party has been adjudged
to be liable to the corporation, he may be indemnified for expenses only if a
court determines that, despite such adjudication of liability, in the
circumstances of the case indemnity of such party is fair and reasonable.
DETERMINATION REGARDING INDEMNIFICATION. Indemnification of a party
(unless ordered by a court) is dependent upon a determination that such
indemnification is proper because the party has met the above standards
applicable to him, such determination to be made by (a) the Board of
Directors or a committee thereof acting by a majority vote of a quorum
consisting of directors who were not parties to or otherwise involved in the
proceedings or (b) under certain circumstances, by independent legal counsel
in a written opinion or by the shareholders of the corporation. Upon the
making of such determination in the appropriate manner, a corporation may
advance expenses in connection with a proceeding upon receipt of an
undertaking by the party to repay them if it is ultimately determined that he
is not entitled to indemnification.
OTHER MATERIAL PROVISION. In all cases, if the party has been
successful in a proceeding on the merits or otherwise, or in defense of any
matter therein, he is entitled to indemnification for his reasonable expenses
(including counsel fees). The indemnification provided by statute is not
exclusive of other rights of indemnification and inures to the benefit of the
party s legal representative. A corporation may purchase and maintain
insurance against expenses incurred by, and liabilities asserted against,
directors, officers, employees or agents whether or not the corporation would
be empowered to provide such indemnity.
ITEM 16. EXHIBITS.
The following exhibits, which are furnished with this Registration
Statement or incorporated herein by reference, are filed as part of this
Registration Statement.
EXHIBIT INDEX
*4.1 Specimen Form of Common Stock Certificate.
#5 Opinion of McDermott, Will & Emery
#23.1 Consent of Ernst & Young LLP.
#23.2 Consent of McDermott, Will & Emery (contained in Exhibit 5).
24 Power of Attorney (on signature page).
________________________
* Filed as an Exhibit to Registrant s Registration Statement on Form S-4
(No. 33-85234) effective January 6, 1995.
# Filed herewith.
ITEM 17. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement;
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission pursuant
to Rule 424(b), if, in the aggregate, the changes in volume and price
represent no more than a 20% change in the maximum aggregate offering price
set forth in the "Calculation of Registration Fee" table in the effective
registration statement; and
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration statement
or any material change to such information in the registration statement;
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply
if the information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed with or furnished to
the Commission by the registrant pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in the
registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination
of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of
the registrant s annual report pursuant to section 13(a) or section 15(d) of
the Securities Exchange Act of 1934 that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers, and controlling persons
of the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of
expenses incurred or paid by a director, officer, or controlling person of
the registrant in the successful defense of any action, suit or proceeding)
is asserted by such director, officer, or controlling person in connection
with the securities being registered, the registrant will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
registration statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Guttenberg in the State of New
Jersey, on July 28, 1997.
KTI, INC.
By:/s/ Nicholas Menonna, Jr.
Nicholas Menonna, Jr., Chairman of
the Board of Directors and Chief
Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each individual whose signature
appears below constitutes and appoints Nicholas Menonna, Jr. and Martin J.
Sergi or any of them, his true and lawful attorney-in-fact and agent with
full power of substitution and resubstitution, for him and in his name, place
and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this registration statement, and to
file the same with all exhibits thereto, and all documents in connection
therewith, with the Securities and Exchange Commission, granting said
attorney-in-fact and agent, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done
in and about the premises, as full to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent or either of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
SIGNATURE TITLE DATED
/s/ Nicholas Menonna, Jr. Chairman and Chief July 28, 1997
Nicholas Menonna, Jr. Executive Officer
(Principal Executive
Officer)
/s/ Martin J. Sergi Vice Chairman, President, July 28, 1997
Martin J. Sergi Chief Operating Officer,
Chief Financial Officer,
Treasurer, and Director
(Principal Financial
Officer and Principal
Accounting Officer)
/s/ Ross Pirasteh Chairman of the Executive July 28, 1997
Ross Pirasteh Committee and Director
/s/ Dibo Attar Director July 28, 1997
Dibo Attar
Director July 28, 1997
Paul Kleinaitis
/s/ Jack Polak Director July 28, 1997
Jack Polak
/s/ Jeffrey R. Power Director July 28, 1997
Jeffrey R. Power
/s/ Kenneth A. Rubin Director July 28, 1997
Kenneth A. Rubin
EXHIBIT 5
MCDERMOTT, WILL & EMERY
50 ROCKEFELLER PLAZA
NEW YORK, NEW YORK 10020
July 28, 1997
KTI, Inc.
7000 Boulevard East
Guttenberg, New Jersey 07093
Re: Resale of an aggregate of up to 1,455,240 shares of common stock, no
par value (the "Common Stock") of KTI, Inc. (the "Company") comprised
of up to 630,000 shares of Common Stock issuable upon conversion of
the 8% Convertible Notes by the holders thereof, 487,500 shares of
Common Stock issuable upon conversion by existing Series A Convertible
Preferred Shareholders (collectively, the "Conversion Shares"), and
337,750 Shares (the "Warrant Shares") issuable upon the Exercise of
Warrants to purchase Common Stock (the "Warrants")
Ladies and Gentlemen:
We have acted as your special counsel in connection with the
preparation and filing of a Registration Statement on Form S-3 (the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"), of the above-captioned securities, which, in the case of the
Conversion Shares, may be issued upon the conversion of 8% Convertible Notes or
Series A Convertible Preferred Stock or, in the case of the Warrant Shares, may
be issued upon the exercise of warrants to purchase Common Stock and, in each
case, then offered for sale from time to time by selling shareholders.
In arriving at the opinions expressed below we have examined the
Registration Statement, the 8% Convertible Notes, the Series A Convertible
Preferred Stock, the Warrants, and such other documents as we have deemed
necessary to enable us to express the opinions hereinafter set forth. We have
also reviewed such questions of law as we considered necessary or appropriate
for the purposes of such opinions. In addition, we have examined and relied, to
the extent we deemed proper, on certificates of officers of the Company as to
factual matters, on the originals or copies certified or otherwise identified to
our satisfaction of all such corporate records of the Company and such other
instruments and certificates of public officials and other persons as we have
deemed appropriate. In our examination, we have assumed the authenticity of all
documents submitted to us as originals, the conformity to the original documents
of all documents submitted to as copies, and the genuineness of all signatures
on documents reviewed by us and the legal capacity of natural persons.
Members of our firm are admitted to the bar of the State of New York.
We express no opinion as to the laws of any jurisdiction other than the laws of
the State of New York and, to the extent specifically referred to herein, the
New Jersey Business Corporation Act (the "NJBCA") and the Federal laws of the
United States of America. While we are not licensed to practice law in the
State of New Jersey, we have reviewed applicable provisions of the NJBCA as we
have deemed appropriate in connection with the opinions expressed herein.
Except as described, we have neither examined nor do we express any opinion with
respect to New Jersey Law.
Based upon and subject to the foregoing, we are of the opinion that,
when all necessary actions to be taken by the holders of the 8% Convertible
Notes, the Series A Convertible Preferred and the Warrants have been completed,
the Conversion Shares when issued in accordance with the terms of the 8%
Convertible Notes or the Series A Convertible Preferred, as appropriate, and the
Warrant Shares when issued in accordance with the Warrants, will be, legally
issued, fully paid and non-assessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to us under the caption "Legal
Matters" in the Prospectus forming a part of the Registration Statement. In
giving this consent, we do not thereby admit that we are within the category of
persons whose consent is required under Section 7 of the Securities Act and the
rules and regulations of the Securities and Exchange Commission thereunder.
Very truly yours,
/s/ McDermott, Will & Emery
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-3) and the related Prospectus of KTI, Inc. for
the registration of up to 1,455,250 shares of its common stock and to the
incorporation by reference therein of our reports dated February 28, 1997 and
February 7, 1997 with respect to the consolidated financial statements and
schedule of KTI, Inc. and the financial statements of Penobscot Energy Recovery
Company (a Limited Partnership), respectively, included in the Annual Report
(Form 10-K) of KTI, Inc. for the year ended December 31, 1996, filed with the
Securities and Exchange Commission.
Ernst & Young LLP
Hackensack, New Jersey
July 28, 1997
