As filed with the Securities and Exchange Commission on January 19, 1998
Registration No. 333-44507
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 (I.R.S.
of incorporation or organization) Employer 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. / /
_______________
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.
2,272,777 SHARES OF COMMON STOCK
_______________
This prospectus relates to the resale of an aggregate of 2,453,237 shares
of common stock, no par value (the "Common Stock"), of KTI, Inc., a New Jersey
corporation (the "Company"), consisting of (a) 893,263 shares of Common Stock
previously issued by the Company, (b) up to 1,251,264 shares of Common Stock
issuable upon conversion of the Company's Series B Convertible Exchangeable
Preferred Stock (the "Series B Preferred"), and (c) 128,250 shares of Common
Stock issuable upon the exercise of warrants (the "Warrants"), in each case, by
the selling shareholders named herein (the "Selling Shareholders"). The shares
of Common Stock offered hereby (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."
Of the Shares offered hereby, 893,263 shares of Common Stock are presently
issued and outstanding. Up to 1,251,264 shares of Common Stock are issuable
upon conversion of the Series B Preferred, based on a conversion price of
$11.75, and 128,250 shares of Common Stock are issuable upon the exercise of the
Warrants, 95,750 of which are exercisable at a price of $9.875 per share and
have an expiration date of August 15, 2002, 15,000 of which are exercisable at a
price of $9.25 and have an expiration date of June 16, 2002, 5,000 of which are
exercisable at a price of $9.00 per share and have an expiration date of
June 30, 2002 and 12,500 of which are exercisable at $10.00 per share and have
an expiration date of October 22, 2002. The exercise price and the number of
shares issuable upon conversion of the Series B 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 $1,254,281.25. 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 February 3, 1998, the last reported sale price of the Common
Stock, as reported on the NASDAQ National Market System, was $15.50 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 13.
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 February __, 1998.
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 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 year ended December 31, 1996;
(ii) Quarterly Report on Form 10-Q for the quarter ended March 31, 1997;
(iii) Quarterly Report on Form 10-Q for the quarter ended June 30,
1997, as amended on Form 10-Q/A;
(iv) Quarterly Report on Form 10-Q for the quarter ended September 30,
1997;
(v) Report on Form 8-K dated May 28, 1997;
(vi) Report on Form 8-K dated June 4, 1997;
(vii) Report on Form 8-K dated June 19, 1997;
(viii) Report on Form 8-K dated July 29, 1997;
(ix) Report on Form 8-K dated August 12, 1997;
(x) Report on Form 8-K dated August 15, 1997;
(xi) Report on Form 8-K dated September 16, 1997;
(xii) Report on Form 8-K dated September 30, 1997, as amended on Form
8-K/A;
(xiii) Report on Form 8-K dated November 12, 1997, as amended on Form
8-K/A;
(xiv) Report on Form 8-K dated November 14, 1997; and
(xv) Report on Form 8-K dated February 4, 1998.
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 Power Company or
any restructuring of the Company's power purchase agreements with Bangor-Hydro
Electric Company and Florida Power Corporation; (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, 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. 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 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, by identifying less costly means of disposal and
recycling of MSW process and ash combustion residues produced by its waste-to-
energy facilities, (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
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"). Until recently, the Maine Partnership was
in the process of obtaining its federal, state and local permits. The Company
had originally 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.
On October 31, 1997, KTI Specialty Waste Services, Inc. acquired AAR's 40%
general partner interest in the Maine Partnership for $560,000, and the Maine
Partnership has been renamed KTI Ash Recycling of New England, L.P. Since the
Company now owns all of the interests in such partnership, the Company has
received all of the ash disposal fee savings payable to the partnership since
November 1, 1997. After the consummation of the acquisition of AAR's general
partner interest, the Company's agreement to become a limited partner in up to
eight additional cash recycling facilities was terminated. In addition, the
partnership is attempting to establish an ash recycling operation at one of the
Company's waste-to-energy facilities.
On September 19, 1997, the Company entered into an Agreement of
Reorganization and Merger with K-C Industries, Inc., an Oregon corporation and
KES, Inc. a Delaware corporation, and a subsidiary of the Company. Pursuant to
such agreement, the Company acquired K-C Industries, Inc. for $6.1 million,
consisting of 425,013 shares of Common Stock and cash in the amount of $1.2
million, and subject to its existing indebtedness in the amount of $5.1 million.
The merged entity operates under the name K-C International, Ltd. ("KC"). KC
purchases pulp, paper and secondary fiber products from recycling operators
throughout the United States and sells such products worldwide.
On September 30, 1997, the Company purchased a 49.5% limited partner
interest in Penobscot Energy Recovery Company, Limited Partnership, a Maine
limited partnership ("PERC"), one of the Company's waste-to-energy facilities,
from the Prudential Insurance Company of America ("Prudential") for $11.7
million in cash. In addition, the Company assumed certain liabilities of
Prudential and, in connection with the purchase, issued letters of credit to
Morgan Guaranty Trust Company of New York ("Morgan Guaranty") for approximately
$3.9 million replacing obligations of Prudential to Morgan Guaranty. Also on
September 30, 1997, the Company paid Prudential an additional $300,000 for an
option to purchase Prudential's remaining 15.2% limited partner interest in PERC
for $2.1 million. The Company exercised its option on November 12, 1997. As a
result, the Company's interest in PERC has increased to 71.3%. The remaining
interests in PERC are held by Energy National, Inc., a subsidiary of NRG Energy,
Inc.
On November 14, 1997, the Company completed the acquisition of three
recycling facilities located in Franklin Park, Illinois, a suburb of Chicago,
Charleston, Massachusetts, a suburb of Boston, and in Newark, New Jersey. The
facilities are operated by wholly-owned subsidiaries of the Company under the
name of KTI Recycling Inc. The three facilities are capable of processing
approximately 50,000 tons of post-consumer and commercial recyclables per month.
The facilities were purchased as part of an asset purchase from Prins Recycling
Corp. and its subsidiaries ("Prins") pursuant to an order of the Bankruptcy
Court for the District of New Jersey entered on November 6, 1997. In addition
to the facilities, the Company purchased substantially all of the remaining
assets of Prins, including cash, accounts receivable and certain causes of
action. Certain causes of action arising under the Bankruptcy Code were not
purchased. The purchase price was approximately $13.6 million. The purchase
was financed in part by a term loan of $7.5 million provided by KeyBank,
National Association ("KeyBank"), bearing interest at KeyBank's base rate plus
1.25% per annum, with level monthly principal payments amortized over 60 months.
The term loan is secured by a mortgage on the Franklin Park, Illinois facility,
all property and equipment at the three facilities not pledged to third parties
and the accounts receivable generated by the three facilities. The balance of
the purchase price was paid by cash on hand and by borrowings of approximately
$4.0 million against the Company's revolving $11.0 million line of credit with
KeyBank, which borrowings were subsequently repaid.
A subsidiary of the Company operated Prins from May 1, 1997 until the
closing of the purchase. pursuant to an Operations and Management Agreement
with PNC Bank, National Association ("PNC"). Pursuant to such agreement, the
Company received a one-time management fee of $700,000, paid by PNC.
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 the result of the consummation of a reverse stock split on December 22,
1997, the Company now indirectly owns 100% of the shares of Kuhr common stock.
Prior to the consummation of the reverse stock split, the Company indirectly
held 98% of the 5 million outstanding shares of common stock of Kuhr, and the
remaining shares were acquired by the Company at five cents per share.
On September 30, 1997, the Company purchased approximately one-sixth, or
approximately $2.5 million, of Maine Energy's subordinated debt. Such debt
bears interest at a rate of 12% per annum. Pursuant to the terms of such
subordinated debt, all of Maine Energy's free cash is to be applied to the
payment of principal and interest.
THE OFFERING
This prospectus relates to the resale of an aggregate of 2,272,777 shares
of Common Stock, consisting of (a) 893,263 shares of Common Stock previously
issued in connection with acquisitions undertaken by the Company, (b) up to
1,251,264 shares of Common Stock issuable upon conversion of the Series B
Preferred, and (c) 128,250 shares of Common Stock issuable upon the exercise of
Warrants.
RISK FACTORS
Investors should consider very carefully each of the following risk factors
and all other information contained in this prospectus.
HOLDING COMPANY STATUS OF THE COMPANY; RESTRICTIONS ON UTILIZATION OF ASSETS
The Company is a legal entity separate and distinct from its subsidiaries,
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 to finance the growth of any other of its subsidiaries is necessarily
subject to the prior claims of creditors of the subsidiaries. In addition, the
payment of management fees and the distribution of the cash flow of the Company
generated by certain subsidiaries 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. In addition, certain financing agreements to
which PERC, in which the Company has a 71.29% ownership interest, Timber Energy
Resources, Inc., a Texas corporation ("TERI") wholly-owned by the Company, K-C
International, Ltd., an Oregon corporation ("K-C") wholly-owned by the Company,
and other subsidiaries of the Company are parties also restrict the ability of
such entities to make distributions to the Company.
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. 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
The Company's waste-to-energy business, which accounted for approximately
77% of the Company's gross revenue during the first three quarters of 1997, is
dependent upon electric utilities that purchase energy produced at the Company's
waste-to-energy plant. Pursuant to power purchase agreements between Maine
Energy and Central Maine with a term through 2012, between PERC and Bangor Hydro
Electric Power Company ("Bangor Hydro") with a term through 2018, and between
the TERI 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 transmission 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, its 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, it 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 these
trends 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.
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 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 plants for the post-industrial plastic scrap and with
materials recovery facilities for post-consumer plastics.
The Company's other recycling subsidiaries which are primarily involved in
the waste paper brokerage business face extensive competition. Such businesses
operate with thin profit margins. In order to be profitable, the waste paper
broker must arrange to simultaneously buy and sell waste paper, while providing
a great enough spread to cover transportation costs and insurance. Generally,
paper mills purchase paper under long-term contracts which provide for purchase
prices that are adjusted in accordance with a relevant paper price index. A
significant portion of the sales made by K-C are to foreign customers, and such
sales are contingent upon the availability of letters of credit for such
customers.
KTI Recycling, which operates recycling plants in Boston, Chicago and
Newark, formerly owned by Prins Recycling Corp., faces significant price
competition in all of its market. The Newark recycling market is burdened with
industry-wide overcapacity and continual price pressure. Combined with high
labor costs, the Newark market currently operates with very low profitability.
In the Chicago market, the Company's recycling plant has relatively low
utilization and price competition is extensive.
DEPENDENCE UPON SOURCES OF SUPPLY OF FUEL
The waste-to-energy facilities operated by Maine Energy, PERC and the
Telogia Facility are dependent upon 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 its fuel mix continues to change over time, the
Telogia Facility expects to have tipping revenue in excess of its cost of
purchased bio-mass material for its boiler fuel. There can be no assurance,
however, that it will have tipping revenue in excess of its cost of purchased
bio-mass material. 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
TERI'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. In New Jersey, flow control laws
also have been overturned and the State of New Jersey is in the process of
appealing such decisions. Accordingly, the present questionable validity of all
flow control ordinances introduces some degree of uncertainty in the waste
handling business.
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.
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 encounter
substantial competition in its efforts to acquire waste-to-energy facilities,
ash recycling facilities, pre and post consumer 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 Ross Pirasteh, Chairman of the Board of Directors, Martin J. Sergi,
the Company's Vice Chairman, President and Chief Financial Officer, or David E.
Hill, the Company's Chief Operating Officer, could have a material adverse
effect 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 KTI BioFuels, Maine Energy
and PERC tend to be lower in the winter months. This is primarily attributable
in the case of KTI 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. Generally, the supply of
recycled paper is highest in the winter months and decreases during the summer
months. The Company's recycled plastic volume is highest during the fourth
quarter.
NO CASH DIVIDENDS
The Company has not paid any cash dividends on its Common Stock to date and
the Company does not anticipate paying any cash dividends on its Common Stock in
the foreseeable future. The Company is required to pay annual dividends of
$1,872,500 in the aggregate on the Series B Preferred. Additionally, the
Company's bank credit facility, the Series A Convertible Preferred and the
Series B 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 Common Stock 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 TERI, would be reduced
proportionately. The net operating loss carryforward of TERI is limited to
approximately $874,000 per year. This limitation may be increased if the
Company or TERI 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 $1,254,281.25 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>
Percentage of
Selling Shareholder Shares Offered Class Owned
Ownership Prior to Pursuant to this After
Offering Prospectus (1),(2) Offering(3)
<S> <C> <C> <C>
Number Percent
Ken (Kook J.) Choi(4) 216,757 216,757 *
Credit Research & Trading LLC 105,099(5) 105,099 *
Frank Crowley(6) 93,503 93,503 *
George G. Deely(7) 40,000 40,000 *
Philip Epstein(8) 72,252 72,252 *
William F. Kaiser(9) 20,000 20,000 *
Frank Klepetco 12,500(10) 12,500 *
Diane Goodman and Seth Lehrer(11) (Joint 68,250 68,250 *
Tenants)
Thomas E. Schulze 14,450(12) 5,000 *
Martin J. Sergi(13) 1,042,832(14) 200,000 9.4%
Steven G. Suher(15) 40,000 40,000 *
Kyle Trayner(16) 42,501 42,501 *
Eric John Turner 10,000(17) 10,000 *
David Watts-Russell 5,000(18) 5,000 *
Samuel Zaitlin(19) 100,000 100,000 *
Armstrong Fund Equity Account 8,914(20) 8,914 *
Bell South 22,611(21) 22,611 *
Berwyn Income Fund, Inc. 108,710(22) 108,710 *
Cardinal Special Situations 1,739(23) 1,739 *
Fund, L.P.
Cardinal Value Equity Partners 43,266(24) 43,266 *
Catholic Mutual Relief Society 26,525(25) 26,525 *
of America
Catholic Mutual Relief Society 17,393(26) 17,393 *
Retirement Plan and Trust
Century National Insurance Company 34,787(27) 34,787 *
Fidelity Financial Trust: 388,747(28) 388,747 *
Fidelity Convertible Security Fund
Foundation Account No. 1 17,393(29) 17,393 *
HBK Finance L.P. 30,873(30) 30,873 *
HBK Securities Ltd. 50,441(31) 50,441 *
KF Company Limited 1,304(32) 1,304 *
LACERA 22,611(33) 26,111 *
Highbridge International LDC 141,323(34) 141,323 *
Navesink Equity Derivative Fund 32,613(35) 32,613
Paloma Securities LLC 26,090(36) 26,090 *
Remy Capital Partners II L.P. 21,307(37) 21,307
Silverton International Fund Limited 17,393(38) 17,393 *
SoundShore Partners L.P. 285,907(39) 285,907 *
Zazove Convertible Fund, L.P. 95,664(40) 95,664 *
TOTAL 2,453,237
*Less than one percent.
(1) Assuming the conversion of all shares of Series B 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.
(2) The amounts indicated are as of December 31, 1997.
(3) 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 conversion of the shares of Series B
Preferred and upon the exercise of all of the Warrants.
(4) Mr. Choi is the President of KC.
(5) Represents warrants to purchase 95,750 shares of Common Stock at
$9.875 per share and 9,349 shares of Common Stock issuable upon
conversion of 4,300 shares of Series B Preferred.
(6) Mr. Crowley is the Senior Vice President of KC.
(7) Mr. Deely is the Controller of KTI Recycling Inc.
(8) Mr. Epstein is the Senior Vice President of KC.
(9) Mr. Kaiser is the Executive Vice President and Treasurer of the
Company.
(10) Represents warrants to purchase 12,500 shares of Common Stock at
$10.00 per share.
(11) Ms. Goodman is the President and Mr. Lehrer is the Chairman of Manner
Resins.
(12) Includes warrants to purchase 5,000 shares of Common Stock at $9.25
per share.
(13) Mr. Sergi is the Vice Chairman and President of the Company.
(14) Includes 119,998 shares of Common Stock issuable to Mr. Sergi upon the
exercise of warrants.
(15) Mr. Suher is the Vice President of I. Zaitlin and Sons, Inc.
(16) Mr. Trayner is the Vice President of KC.
(17) Represents warrants to purchase 10,000 shares of Common Stock at $9.25
per share.
(18) Represents warrant to purchase 5,000 shares of Common Stock at $9.00
per share.
(19) Mr. Zaitlin is the Senior Vice President of the Company.
(20) Represents shares of Common Stock issuable upon conversion of 4,100
shares of Series B Preferred.
(21) Represents shares of Common Stock issuable upon conversion of 10,400
shares of Series B Preferred.
(22) Represents shares of Common Stock issuable upon conversion of 50,000
shares of Series B Preferred.
(23) Represents shares of Common Stock issuable upon conversion of 800
shares of Series B Preferred.
(24) Represents shares of Common Stock issuable upon conversion of 19,900
shares of Series B Preferred.
(25) Represents shares of Common Stock issuable upon conversion of 12,200
shares of Series B Preferred.
(26) Represents shares of Common Stock issuable upon conversion of 800
shares of Series B Preferred.
(27) Represents shares of Common Stock issuable upon conversion of 16,000
shares of Series B Preferred.
(28) Represents shares of Common Stock issuable upon conversion of 178,800
shares of Series B Preferred.
(29) Represents shares of Common Stock issuable upon conversion of 8,000
shares of Series B Preferred.
(30) Represents shares of Common Stock issuable upon conversion of 14,200
shares of Series B Preferred.
(31) Represents shares of Common Stock issuable upon conversion of 23,200
shares of Series B Preferred.
(32) Represents shares of Common Stock issuable upon conversion of 600
shares of Series B Preferred.
(33) Represents shares of Common Stock issuable upon conversion of 10,400
shares of Series B Preferred.
(34) Represents shares of Common Stock issuable upon conversion of 65,000
shares of Series B Preferred.
(35) Represents shares of Common Stock issuable upon conversion of 15,000
shares of Series B Preferred.
(36) Represents shares of Common Stock issuable upon conversion of 12,000
shares of Series B Preferred.
(37) Represents shares of Common Stock issuable upon conversion of 9,800
shares of Series B Preferred.
(38) Represents shares of Common Stock issuable upon conversion of 8,000
shares of Series B Preferred.
(39) Represents shares of Common Stock issuable upon conversion of 131,500
shares of Series B Preferred.
(40) Represents shares of Common Stock issuable upon conversion of 44,000
shares of Series B Preferred.
</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, through the
writing of options (whether such options are listed on an options exchange or
otherwise), settlement of short sales of the Shares, or a combination of such
methods, at market prices prevailing at the time of sale, at prices related to
such prevailing market prices, at varying prices determined at the time of sale,
or at negotiated or fixed prices, in each case, as determined by the Selling
Shareholders or by agreement between the Selling Shareholders and underwriters,
brokers, dealers or agents, or purchasers. The sale or distribution of the
Shares may be effected directly to purchasers by the Selling Shareholders or
through one or more brokers, dealers or agents, from time to time, in one or
more transactions. If the Selling Shareholders effect such transactions by
selling shares to or through underwriters, brokers, dealers or agents, such
underwriters, brokers, dealers or agents may receive compensation in the form of
commissions, discounts or concessions from the Selling Shareholders and/or
purchasers of the Shares for whom they may act as agent, or to whom they may
sell as principal, or both (which compensation as to a particular underwriter,
broker, dealer or agent may be in excess of those customary in the type of
transaction involved). The Selling Shareholders and any brokers, dealers or
agents 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, discounts
or concessions received by any such brokers, dealers or agents and proceeds of
any resale of the Shares may be deemed to be underwriting discounts and
commissions under the Act.
Under the securities laws of certain states, the Shares may be sold in such
states only through registered or licensed brokers or dealers. In addition, in
certain states the Shares may be not be sold unless the Shares have been
registered or qualified for sale in any such state or an exemption from
registration or qualification is available and complied with.
The Company will pay all of the expenses incident to the registration,
offering and sale of the Shares to the public hereunder other than commissions,
fees and discounts of underwriters, brokers, dealers or agents. The Company
will not receive any of the proceeds of the sale of any of the Shares by the
Selling Shareholders.
DESCRIPTION OF COMMON STOCK
AUTHORIZED STOCK
The Company's Restated Certificate of Incorporation, as amended, authorizes
the issuance of 20,000,000 shares of Common Stock, no par value, and 10,000,000
shares of "blank check" preferred stock. As of December 31, 1997, there were
8,926,881 shares of Common Stock issued and outstanding and held of record by
201 shareholders of record, 447,500 shares of the Company's Series A Convertible
Preferred outstanding and held of record by 3 shareholders and 856,000 shares of
Series B Preferred outstanding and held of record by 18 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 Company's bank credit facility, the
Series A Convertible Preferred and the Series B 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.
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 the
financial statements of PERC appearing 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 2,272,777
Prospectus and, if given or
made, such information or
representation must not be
relied upon as having been Shares of Common Stock
authorized by the Company, by
any Selling Shareholder or by
any other person. This
Prospectus does not constitute
an offer to sell or a
solicitation of an offer to
buy the securities offered
hereby to any person or by
anyone in any jurisdiction in
which such offer or
solicitation may not 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 subsequent to its date.
KTI, INC.
TABLE OF CONTENTS
PROSPECTUS
PAGE
Available Information . . . .
Incorporation of Certain Information
by Reference . . . . . . .
Special Note Regarding Forward Looking
Statements . . . . . . . .
Summary . . . . . . . . . . . February __, 1998
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.
SEC Registration fee $11,669.74
*Blue Sky fees and expenses 0
*Legal fees and expenses 25,000
*Accounting fees and expenses 7,500
*Miscellaneous 500
*TOTAL $44,669.74
*Estimated
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.
** Previously filed.
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) of this section
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 Amendment No. 1
to the 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 February 4, 1998.
KTI, INC.
By:/s/ Martin J. Sergi
Martin J. Sergi
President
By:/s/ Ross Pirasteh
Ross Pirasteh
Chairman of the Board of Directors
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.
SIGNATURE TITLE DATED
/s/ Ross Pirasteh Chairman of the Board of February 4, 1998
Ross Pirasteh Directors, Chairman of the
Executive Committee and
Director
SIGNATURE TITLE DATED
/s/ Martin J. Sergi Vice Chairman, President, February 4, 1998
Martin J. Sergi and Director (Principal Financial
Officer and Principal
Accounting Officer)
Director February 4, 1998
Dibo Attar
* Director February 4, 1998
Paul Kleinaitis
* Director February 4, 1998
Jack Polak
* Director February 4, 1998
Jeffrey R. Power
* Director February 4, 1998
Wilbur Ross
*By: /s/ Ross Pirasteh
Ross Pirasteh
as Attorney-in-Fact
