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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event
reported):
December 31, 1998
KTI, INC.
(Exact name of Registrant as specified in Charter)
New Jersey 33-85234 22-2665282
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(State or other juris- (Commission (IRS Employer
diction of incorporation) File Number) Identification
Number)
7000 Boulevard East, Guttenberg, New Jersey 07093
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(Address of principal executive office) (Zip Code)
Registrant's telephone number including area code- (201) 854-7777
Not Applicable
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(Former name and former address, as changed since last report)
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ITEM 5. OTHER ITEMS.
On December 31, 1998, KTI, Inc., a New Jersey corporation (the
"Company" or the "Registrant") announced that it had purchased 1,730,056 shares
of common stock (the "Shares") in Oakhurst Company, Inc., a Delaware corporation
("OCI"). In consideration for the Shares, the Company paid approximately
$865,000 to OCI and transferred to Oakhurst Technology, Inc., a newly formed
subsidiary of OCI ("OTI"), certain of its rights and obligations under various
agreements with New Heights Recovery & Power, LLC., a Delaware limited liability
company ("New Heights"), including the Company's right to receive 50% of the
membership interests in New Heights. OTI assumed the Company's obligations to
invest up to $17 million in New Heights as equity. The Company agreed to loan up
to $1.8 million to New Heights to repay certain secured debts of New Heights and
contribute the paper recycling business and physical assets, other than real
estate, of the Company's Franklin Park, Illinois facility to New Heights.
Pending the actual transfer of the business and physical assets to the New
Heights facility, the Company has assigned the cash flow of its Franklin Park,
Illinois to New Heights, effective as of January 1, 1999. KTI Recycling, Inc., a
subsidiary of the Company, entered into a License to Use Technology Agreement
with OTI whereby OTI is obligated to pay KTI Recycling, Inc. a fee of $0.007 per
pound of tire processed by OTI, using KTI Recycling, Inc.'s cryogenic
technology.
The Company remains liable to New Heights to the extent that OCI and
OTI fail to meet OTI's obligations to New Heights. The Company also retained its
obligation to provide a $700,000 letter of credit to Browning Ferris Industries
to secure New Heights' obligation to remove a specified quantity of shredded
tires from the New Heights facility.
In connection with the acquisition of the Shares, the Company also
agreed to loan up to $11.5 million to OCI, which may be increased to $17 million
under certain circumstances specified in the agreements with New Heights. Such
funds, together with the proceeds of the sale of the shares to the Company, must
be invested in OTI in the form of equity. The loan to OCI is secured by the
pledge of the stock of OTI and of the membership interest of OTI in New Heights.
Under the terms of the loan, OCI and OTI may not enter into any new lines of
business without the Company's prior written consent, which consent may not be
unreasonably withheld.
OCI has a loan with Finova Capital Corporation ("Finova"), a finance
company, for approximately $4.5 million. The Company has entered into an
intercreditor agreement with Finova whereby Finova recognizes the priority of
the Company's liens on OTI and the membership interests in New Heights and the
Company recognizes the priority of Finova's liens on OCI's other business units
(which have annual sales of $30 million.) Finova and the Company will have
access to the cash flow of the other party's collateral if no default exists
under the other party's loan documents.
The shares of OCI purchased by the Company, which are unregistered,
represent approximately 35% of the total shares outstanding after such issuance.
OCI has given the Company demand registration rights.
KTI will be entitled to elect three of nine directors of OCI and two of
five directors of OTI.
New Heights has entered into an Operating and Maintenance Agreement
(the "Operating Agreement") with KTI Operations, Inc., a subsidiary of the
Company. Under the Operating Agreement, KTI Operations, Inc. will receive a
management fee of $400,000 per annum plus reimbursement of expenses incurred in
the operation of the New Heights Facility.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
KTI, Inc.
(the Registrant)
Dated: January 15, 1999 By: /s/ Martin J. Sergi
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Name: Martin J. Sergi
Title: President
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Exhibits.
Exhibit Number Description
4.1 Investment Agreement dated as of December 29, 1998 between and
among KTI, Inc., Oakhurst Company, Inc. and Oakhurst
Technology, Inc.
4.2 Letter Loan Agreement between KTI, Inc. and CNA Realty Corp,
Inc. dated as of December 29, 1998 between and among KTI,
Inc., Oakhurst Company, Inc. and Oakhurst Technology, Inc..
The exhibits to this Exhibit do not contain information which
is material to an investment decision. The Company hereby
agrees to furnish a copy of any omitted exhibit to the
Commission upon request.
4.3 Pledge Agreement dated as of December 29, 1998 between and
among KTI, Inc., Oakhurst Company, Inc. and Oakhurst
Technology, Inc.
4.4 Intercreditor Agreement between KTI, Inc. and Finova Capital
Corporation
4.5 Non-Exclusive License to Use Technology
10.1 Operating and Maintenance Agreement, dated as of December 29,
1998 by and between New Heights Recovery & Power, LLC and KTI
Operations, Inc.
99.1 News release dated December 31, 1998.
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INVESTMENT AGREEMENT
This INVESTMENT AGREEMENT (this "Agreement"), dated as of December 29,
1998, is made and entered into between and among KTI, Inc., a New Jersey
corporation, ("KTI"), Oakhurst Company, Inc, a Delaware corporation ("OCI"), and
Oakhurst Technology, Inc., a Delaware corporation that is a wholly-owned
subsidiary of OCI ("OTI").
RECITALS
A. New Heights Recovery & Power, LLC ("New Heights") is a reorganized
entity under an amended plan of reorganization dated November 17, 1998 (the
"Plan") under Chapter 11 of the federal Bankruptcy Code. The Plan was confirmed
by order of the United States Bankruptcy Code in the United States Bankruptcy
Court, District of Delaware (the "Court") (Bky. No. 96-442 (HSB)) entered on
December 28, 1998 (the "Confirmation Order").
B. Following entry of the Confirmation Order, pursuant to the terms of
the Plan and by agreement with KTI, (i) OTI will enter into an Investment
Agreement, to be dated December 29, 1998 and in the form attached to the Plan as
Exhibit C, between OTI and New Heights (the "Investment Agreement"), (ii) OTI
will become the owner of 50% of the equity interests in New Heights and a member
of New Heights under the terms of the New Heights Limited Liability Company
Agreement (the "LLC Agreement"), and (iii) OTI will receive and incur certain
rights and obligations under the Investment Agreement and the LLC Agreement.
C. It is the intention of the parties hereto that OTI will receive the
full benefits accruing to its interest as a party to the Investment Agreement
and the LLC agreement, and will assume and incur substantially all of the
obligations related there to, the performance of which obligations will be
guaranteed by KTI.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth in this Agreement, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
ARTICLE I
SALE OF SHARES AND CLOSING
1.01 Purchase and Sale. OCI agrees to sell to KTI, and KTI agrees to
subscribe for and purchase from OCI, 1,730,056 shares of the common stock, par
value $.01, of OCI (the "Shares") at the Closing (as defined in Section 1.03) on
the terms and subject to the conditions set forth in this Agreement.
1.02 Purchase Price. The aggregate purchase price for the Shares is
$865,028.00(the "Purchase Price"), payable in the manner provided in
Section 1.03.
1.03 The Closing.
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(a) The closing of the transactions contemplated by this Agreement (the
"Closing") will take place at the offices of Dorsey & Whitney at 250 Park
Avenue, New York, New York, at 9:00 a.m. on December 29, 1998, or at such other
place and on such other date as is mutually agreeable to KTI, OCI and OTI (the
date of the Closing being hereinafter referred to as the "Closing Date"). The
Closing will be effective as of the close of business on the Closing Date.
(b) Subject to the conditions set forth in this Agreement, the parties
agree to consummate the following "Closing Transactions" on the Closing Date:
(i) KTI will subscribe for the Shares, and OCI will, upon
receipt of the Purchase Price, issue the Shares and deliver to deliver
to KTI a stock certificate or certificates representing the Shares.
(ii) KTI shall deliver to OCI the Purchase Price by wire
transfer of immediately available funds to the account designated by
OCI to KTI prior to the Closing; and
(iii) Each of the parties shall deliver to the other the
documents required to be delivered pursuant to Article VI hereof.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF OCI
OCI hereby represents and warrants to KTI that, except as set forth in
the Disclosure Schedule delivered by OCI to KTI on the date hereof (the
"Disclosure Schedule") (which Disclosure Schedule sets forth the exceptions to
the representations and warranties contained in this Article II under captions
referencing the Sections to which such exceptions apply):
2.01 Incorporation and Corporate Power. Each of OCI and OTI is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware, has the requisite corporate power and authority to
execute and deliver this Agreement and to perform its obligations hereunder,
including, without limitation, (i) in the case of OCI, the corporate power and
authority to issue the Shares and to enter into the Loan Agreement (as defined
in Section 6.01(m)(vi)), and (ii) in the case OTI, to enter into the Investment
Agreement and the LLC Agreement (the Loan Agreement, the Investment Agreement
and the LLC Agreement, and any other agreements to be executed by the parties as
contemplated by this Agreement being referred to herein as the "Ancillary
Agreements"), and has the corporate power and authority and all authorizations,
licenses, permits and certifications necessary to own and operate its properties
and to carry on its business as now conducted and presently proposed to be
conducted. The copies of OCI's and OTI's Certificates of Incorporation and
Bylaws which have been furnished by them to KTI prior to the date hereof reflect
all amendments made thereto and are correct and complete as of the date hereof.
OTI is qualified to do business as a foreign corporation in the State of
Illinois, and OCI and OTI each is qualified to do business as a foreign
corporation in every other jurisdiction in which the nature of its business or
its ownership of property requires it to be so qualified except for those
jurisdictions in which the failure to be so qualified would not,
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individually or in the aggregate, have a material adverse effect on OCI's or
OTI's business or results of operations.
2.02 Execution, Delivery; Valid and Binding Agreements. The execution,
delivery and performance of this Agreement and the Ancillary Agreements by each
of OCI and OTI and the consummation of the transactions contemplated hereby and
thereby have been duly and validly authorized by all requisite corporate action,
and no other corporate proceedings on its part are necessary to authorize the
execution, delivery and performance of this Agreement or any of the Ancillary
agreements. This Agreement has been, and the Ancillary Agreements will be, duly
executed and delivered by OCI and OTI and, when so executed and delivered, will
constitute the valid and binding obligations of OCI and OTI, as the case may be,
enforceable in accordance with their respective terms, except as such
enforcement may be subject to (a) bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect relating to
creditors' rights generally and (b) general principles of equity (whether
considered in a proceeding in equity or at law).
2.03 No Breach. The execution, delivery and performance of this
Agreement and the Ancillary Agreements by OCI and OTI and the consummation by
OCI and OTI of the transactions contemplated hereby and thereby do not and will
not conflict with or result in any breach of any of the provisions of,
constitute a default, result in a violation, result in the creation of a right
of termination or acceleration or any lien, security interest, charge or
encumbrance upon any of the Shares or any assets of OCI or OTI, or require any
authorization, consent, approval, exemption or other action by or notice to any
court or other governmental body, under, the provisions of the Certificate of
Incorporation or Bylaws of OCI or OTI or any material indenture, mortgage,
lease, loan agreement or other agreement or instrument by which OCI or OTI is
bound or affected, or any material law, statute, rule or regulation or order,
judgment or decree to which OCI or OTI is subject.
2.04 Governmental Authorities; Consents. Neither OCI nor OTI is
required to submit any notice, report or other filing with any governmental
authority in connection with the execution or delivery by it of this Agreement
or any Ancillary Agreement or the consummation of the transactions contemplated
hereby or thereby. No consent, approval or authorization of any governmental or
regulatory authority or any other party or person is required to be obtained by
OCI or by OTI in connection with its execution, delivery and performance of this
Agreement or any Ancillary Agreement or the transactions contemplated hereby or
thereby.
2.05 Capital Stock; Rated Debt Securities. The authorized capital stock
of OCI consists of 14,000,000 shares of common stock, par value $.01 per share
(the "OCI Common Stock"), of which, as of the date hereof, 3,212,926 shares are
issued and outstanding, and all of which shares of OCI Common Stock have been
duly authorized and are validly issued, fully paid and nonassessable, and
1,000,000 shares of preferred stock, none of which are issued or outstanding.
The authorized capital stock of OTI consists of 7,500,000 shares of common
stock, par value $.01 per share (the "OTI Common Stock"), of which, as of the
date hereof, one share is issued and outstanding, which share of OTI Common
Stock has been duly authorized, is validly issued, fully paid and nonassessable,
and is owned by OCI. Neither OCI nor OTI has any other equity securities or
securities containing any equity features authorized, issued or outstanding.
Except as set forth on the Disclosure Schedule, there are no agreements or other
rights or
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arrangements existing which provide for the sale or issuance of capital stock by
OCI or OTI, and there are no rights, subscriptions, warrants, options,
conversion rights or agreements of any kind outstanding to purchase or otherwise
acquire from OCI or OTI any shares of capital stock or other securities of OCI
or OTI of any kind. There are no agreements or other obligations (contingent or
otherwise) which may require OCI or OTI to repurchase or otherwise acquire any
shares of its capital stock. OCI has not issued any debt securities that are
rated by any rating agency.
2.06 The Shares. The delivery by OCI of a certificate or certificates
in the manner set forth in Section 1.04(b) will invest in KTI good and valid
title to the Shares, free and clear of any security interests, claims, liens,
pledges, options, encumbrances, charges, agreements, voting trusts, proxies or
other arrangements or restrictions other than those contemplated by this
Agreement or the Ancillary Agreements or imposed under any state or federal
securities laws.
2.07 Financial Statements. OCI has delivered to KTI copies of (a) its
report on Form 10-Q for the six-month period ended August 31, 1998 (the "Form
10-Q"), including the unaudited balance sheet, as of August 31, 1998, of OCI
(the "Latest Balance Sheet") and the unaudited statements of earnings,
shareholders' equity and cash flows of OCI for such period (such statements and
the Latest Balance Sheet being herein referred to as the "Latest Financial
Statements") and (b)its report on Form 10-K the for the year ended February 28,
1998 (the "Form 10-K" and, together with the Form 10-Q and any amendments
thereto and any report on Form 8-K filed since the date of filing of the Form
10-K, the "SEC Documents"), including the audited balance sheets, as of February
28, 1998 and 1997, of OCI and the audited statements of earnings, shareholders'
equity and cash flows of OCI for each of the years ended February 28, 1998 and
1997 and February 29, 1996 (collectively, the "Annual Financial Statements").
The Latest Financial Statements and the Annual Financial Statements are based
upon the information contained in the books and records of OCI and fairly
present the financial condition of OCI as of the dates thereof and results of
operations for the periods referred to therein. The Annual Financial Statements
have been prepared in accordance with generally accepted accounting principles,
consistently applied throughout the periods indicated. The Latest Financial
Statements have been prepared in accordance with generally accepted accounting
principles applicable to unaudited interim financial statements (and thus may
not contain all notes and may not contain prior period comparative data which
are required to be prepared in accordance with generally accepted accounting
principles) consistently with the Annual Financial Statements and reflect all
adjustments necessary to a fair statement of the results for the interim
period(s) presented.
2.08 Absence of Undisclosed Liabilities. Except as reflected in the
Latest Balance Sheet and any SEC Document, neither OCI nor OTI has any
liabilities (whether accrued, absolute, contingent, unliquidated or otherwise,
whether due or to become due, whether known or unknown, and regardless of when
asserted) arising out of transactions or events heretofore entered into, or any
action or inaction, or any state of facts existing, with respect to or based
upon transactions or events heretofore occurring, except liabilities which have
arisen after the date of the Latest Balance Sheet in the ordinary course of
business (none of which is a material uninsured liability for breach of
contract, breach of warranty, tort, infringement, claim or lawsuit).
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2.09 No Material Adverse Changes. Since the date of the Latest Balance
Sheet, there has been no material adverse change in the assets, financial
condition, operating results, customer, employee or supplier relations, business
condition or prospects of OCI.
2.10 Employment Agreements. OCI does not have employment agreements
with any of its employees other than Robert M. Davies and Maarten D. Hemsley.
2.10 Brokerage. No third party shall be entitled to receive any
brokerage commissions, finder's fees, fees for financial advisory services or
similar compensation in connection with the transactions contemplated by this
Agreement based on any arrangement or agreement made by or on behalf of OCI or
OTI.
2.11 Disclosure. Neither the representations and warranties of OCI set
forth in this Agreement nor the Disclosure Schedule nor any of the financial
statements referred to in Section 2.07 hereof, taken as a whole, contain any
untrue statement of a material fact regarding OCI or its business or any of the
other matters dealt with in this Article II relating to OCI or OTI. Neither the
representations and warranties of OCI set forth in this Agreement, the
Disclosure Schedule nor the financial statements referred to in Section 2.07
hereof, contain any untrue statement of a material fact or omits any material
fact necessary to make the statements contained herein or therein, in light of
the circumstances in which they were made, not misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF KTI
KTI hereby represents and warrants to OCI and OTI that:
3.01 Incorporation and Corporate Power. KTI is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of New Jersey,with the requisite corporate power and authority to enter into
this Agreement and the Ancillary Agreements and perform its obligations
hereunder and thereunder.
3.02 Execution, Delivery; Valid and Binding Agreements. The execution,
delivery and performance of this Agreement and the Ancillary Agreements by KTI
and the consummation of the transactions contemplated hereby and thereby have
been duly and validly authorized by all requisite corporate action, and no other
corporate proceedings on its part are necessary to authorize the execution,
delivery or performance of this Agreement or any of the Ancillary Agreements.
This Agreement has been, and the Ancillary Agreements will be, duly executed and
delivered by KTI and, when so executed and delivered, will constitute the valid
and binding obligations of KTI, enforceable in accordance with their respective
terms.
3.03 No Breach. The execution, delivery and performance of this
Agreement and the Ancillary Agreements by KTI and the consummation by KTI of the
transactions contemplated hereby and thereby do not conflict with or result in
any breach of any of the provisions of, constitute a default under, result in a
violation of, result in the creation of a right of termination or acceleration
or any lien, security interest, charge or encumbrance upon any assets of KTI, or
require any authorization, consent, approval, exemption or other action by or
notice to any court
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or other governmental body, under the provisions of the Articles of
Incorporation or Bylaws of KTI or any indenture, mortgage, lease, loan agreement
or other agreement or instrument by which KTI is bound or affected, or any law,
statute, rule or regulation or order, judgment or decree to which KTI is
subject.
3.04 Governmental Authorities; Consents. KTI is not required to submit
any notice, report or other filing with any governmental authority in connection
with the execution or delivery by it of this Agreement and the Ancillary
Agreements or the consummation of the transactions contemplated hereby or
thereby. No consent, approval or authorization of any governmental or regulatory
authority or any other party or person is required to be obtained by KTI in
connection with its execution, delivery and performance of this Agreement or any
Ancillary Agreement or the transactions contemplated hereby or thereby.
3.05 Brokerage. No third party shall be entitled to receive any
brokerage commissions, finder's fees, fees for financial advisory services or
similar compensation in connection with the transactions contemplated by this
Agreement based on any arrangement or agreement made by or on behalf of KTI .
3.06 Investment Intent. KTI is purchasing the Shares for its own
account with the present intention of holding the Shares for investment purposes
and not with a view to or for sale in connection with any distribution of the
Shares in violation of any applicable securities law. KTI will refrain from
transferring or otherwise disposing of any of the Shares, or any interest
therein, in such manner as to cause OCI to be in violation of the registration
requirements of the Securities Act of 1933, as amended, or applicable state
securities or blue sky laws.
3.07 Ownership of OCI Common Stock. KTI does not own any shares of OCI
Common Stock.
ARTICLE IV
COVENANTS OF OCI
4.01 Conduct of the Business. OCI agrees that, from the date hereof
until the Closing Date, unless otherwise consented to by KTI in writing:
(a) The business of OCI shall be conducted only in, and OCI shall not
take any action except in the ordinary course of OCI's business, on an
arm's-length basis and in accordance in all material respects with all
applicable laws, rules and regulations and OCI's past custom and practice,
except that OCI may enter into an agreement with ACF Imports, Inc. on
substantially the terms set forth in the letter of intent attached hereto as
Exhibit A, provided that the proceeds resulting to OCI as a result of such
transaction are used to pay down senior indebtedness other than indebtedness
under the Loan Agreement (as hereinafter defined);
(b) OCI shall not, except as contemplated by this Agreement, directly
or indirectly, do or permit to occur any of the following: (i)issue or sell any
additional shares of, or any options, warrants, conversion privileges or rights
of any kind to acquire any shares of, any of its capital stock, (ii)sell,
pledge, dispose of or encumber any of its assets, except in the ordinary course
of
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business; (iii) amend or propose to amend its Certificate of Incorporation or
Bylaws; (iv)split, combine or reclassify any outstanding shares of OCI Common
Stock, or declare, set aside or pay any dividend or other distribution payable
in cash, stock, property or otherwise with respect to shares of OCI Common
Stock; (v)redeem, purchase or acquire or offer to acquire any shares of OCI
Common Stock or other securities of OCI; (vi)acquire (by merger, exchange,
consolidation, acquisition of stock or assets or otherwise) any corporation,
partnership, joint venture or other business organization or division or
material assets thereof; (vii)incur any indebtedness for borrowed money or issue
any debt securities except the borrowing of working capital in the ordinary
course of business and consistent with past practice; or (viii)enter into or
propose to enter into, or modify or propose to modify, any agreement,
arrangement or understanding with respect to any of the matters set forth in
this Section 4.01(b); and
(c) OCI shall not adopt or amend any bonus, profit sharing,
compensation, stock option, pension, retirement, deferred compensation,
employment or other employee benefit plan, trust, fund or group arrangement for
the benefit or welfare of any employees or any bonus, profit sharing,
compensation, stock option, pension, retirement, deferred compensation,
employment or other employee benefit plan, agreement, trust, fund or
arrangements for the benefit or welfare of any director.
4.02 Access to Books and Records. Between the date hereof and the
Closing Date, OCI shall afford to KTI and its authorized representatives full
access at all reasonable times and upon reasonable notice to the offices,
properties, books, records, officers, employees and other items of OCI and OTI,
and otherwise provide such assistance as is reasonably requested by KTI in order
that KTI may have a full opportunity to make such investigation and evaluation
as it shall reasonably desire to make of the business and affairs of OCI and
OTI.
4.03 Regulatory Filings. As promptly as practicable after the execution
of this Agreement, OCI shall, and shall cause OTI to, make or cause to be made
all filings and submissions under any laws or regulations applicable to OCI or
OTI for the consummation of the transactions contemplated herein. OCI will
coordinate and cooperate with KTI in exchanging such information, will not make
any such filing without providing to KTI a final copy thereof for its review and
consent at least two full business days in advance of the proposed filing and
will provide such reasonable assistance as KTI may request in connection with
all of the foregoing.
4.04 Conditions. OCI shall take all commercially reasonable actions
necessary or desirable to cause the conditions set forth in Section 6.01 to be
satisfied and to consummate the transactions contemplated herein as soon as
reasonably possible after the satisfaction thereof (but in any event within
three business days of such date).
ARTICLE V
COVENANTS OF KTI
KTI covenants and agrees with OCI as follows:
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5.01 Regulatory Filings. As promptly as practicable after the execution
of the Agreement, KTI shall make or cause to be made all filings and submissions
under any laws or regulations applicable to KTI for the consummation of the
transactions contemplated herein.
5.02 Conditions. KTI shall take all commercially reasonable actions
necessary or desirable to cause the conditions set forth in Section 6.02 to be
satisfied and to consummate the transactions contemplated herein as soon as
reasonably possible after the satisfaction thereof (but in any event within
three business days of such date).
ARTICLE VI
CONDITIONS TO CLOSING
6.01 Conditions to KTI's Obligations. The obligation of KTI to
consummate the transactions contemplated by this Agreement is subject to the
satisfaction of the following conditions on or before the Closing Date:
(a) The representations and warranties set forth in Article II hereof
shall be true and correct in all material respects at and as of the Closing Date
as though then made and as though the Closing Date had been substituted for the
date of this Agreement throughout such representations and warranties (without
taking into account any disclosures by OCI or OTI of discoveries, events or
occurrences arising on or after the date hereof), except that any such
representation or warranty made as of a specified date (other than the date
hereof) shall only need to have been true on and as of such date;
(b) OCI shall have performed in all material respects all of the
covenants and agreements required to be performed and complied with by it under
this Agreement prior to the Closing;
(c) OCI shall have obtained, or caused to be obtained, each consent and
approval necessary in order that the transactions contemplated herein not
constitute a breach or violation of, or result in a right of termination or
acceleration of, or creation of any encumbrance on any of OCI's or OTI's assets
pursuant to the provisions of, any material agreement, arrangement or
undertaking of or affecting OCI or OTI or any license, franchise or permit of or
affecting OCI or OTI;
(d) All material governmental filings, authorizations and approvals
that are required for the consummation of the transactions contemplated hereby
will have been duly made and obtained;
(e) There shall not be threatened, instituted or pending any action or
proceeding, before any court or governmental authority or agency, domestic or
foreign, (i)challenging or seeking to make illegal, or to delay or otherwise
directly or indirectly restrain or prohibit, the consummation of the
transactions contemplated hereby or seeking to obtain material damages in
connection with such transactions, (ii)seeking to prohibit direct or indirect
ownership by KTI of all or a material portion of Shares, or to compel KTI or any
of its subsidiaries to dispose of or to hold separately all or a material
portion of the business or assets of KTI and its subsidiaries, as a
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result of the transactions contemplated hereby, (iii)seeking to require direct
or indirect transfer or sale by KTI of any of the Shares, (iv)seeking to
invalidate or render unenforceable any material provision of this Agreement or
any of the Ancillary Agreements, or (v)otherwise relating to and materially
adversely affecting the transactions contemplated hereby or thereby;
(f) There shall not be any action taken, or any statute, rule,
regulation, judgment, order or injunction enacted, entered, enforced,
promulgated, issued or deemed applicable to the transactions contemplated hereby
by any federal, state or foreign court, government or governmental authority or
agency, which would reasonably be expected to result, directly or indirectly, in
any of the consequences referred to in Section 6.01(e) hereof;
(g) KTI shall not have discovered any fact or circumstance existing as
of the date of this Agreement which has not been disclosed to KTI as of the date
of this Agreement regarding the business, assets, properties, condition
(financial or otherwise), results of operations or prospects of OCI or OTI which
is, individually or in the aggregate with other such facts and circumstances,
materially adverse to OCI or OTI or to the value of the Shares;
(h) KTI shall have received from counsel for OCI and OTI a written
opinion, dated as of the Closing Date, addressed to KTI and in form and
substance satisfactory to KTI's counsel, with respect to the matters set forth
in Sections 2.01 through 2.06;
(i) The Board of Directors of OCI shall have authorized the redemption
of all outstanding rights under OCI's existing shareholder rights plan, and
shall have adopted, effective immediately following issuance of the Shares, a
new shareholder rights plan which shall not apply to KTI and for which the
threshold for a triggering event shall be 4.5% ownership of OCI Common Stock;
(j) The Operation and Maintenance Agreement (as defined in Section
8.04) shall have been executed by New Heights;
(k) On the Closing Date, OCI shall have delivered to KTI all of the
following:
(i) certificates of appropriate officers of OCI and OTI, dated the
Closing Date, stating that the conditions precedent set forth in
subsections (a) and (b) above have been satisfied;
(ii) copies of the third party and governmental consents and
approvals referred to in subsections (c) and (d) above;
(iii) the stock certificate or certificates issued to OCI
representing the Shares;
(iv) a copy of the Certificate of Incorporation of OTI, certified
by the Secretary of State of the State of Delaware, and Certificates of
Good Standing from the Secretary of State of Delaware evidencing the
good standing of OCI and OTI in such jurisdiction;
(v) copies of each of (X) the text of the resolutions adopted by
the boards of directors of OCI and OTI authorizing the execution,
delivery and performance of this
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<PAGE> 10
Agreement and the Ancillary Agreements and the consummation of all of
the transactions contemplated by this Agreement and the Ancillary
Agreements and (Y) Certificate of Incorporation of OCI and the bylaws
of OCI and OTI, along with certificates executed on behalf of each of
OCI and OTI, respectively, by its corporate secretary certifying to KTI
that such copies are true, correct and complete copies of such
resolutions and bylaws, respectively, and that such resolutions and
bylaws were duly adopted and have not been amended or rescinded;
(vi) an executed copy of each of the Ancillary Agreements,
including, without limitation, a Loan Agreement, Pledge Agreement and
Promissory Note, each dated the Closing Date, between KTI and OCI in
the forms attached hereto as Exhibit B (together, the "Loan
Agreement"); and
(vii) such other certificates, documents and instruments as KTI
reasonably requests related to the transactions contemplated hereby and
by the Ancillary Agreements; and
(l) KTI shall have received a letter from Deloitte & Touche,
accountants for OCI, to the effect that the issuance of the Shares to KTI will
not have the effect of reducing the dollar amount of net operating loss
carryforwards ("NOLs") available to be used by OCI in any tax year.
6.02 Conditions to OCI's and OTI's Obligations. The obligations of OCI
and OTI to consummate the transactions contemplated by this Agreement are
subject to the satisfaction of the following conditions on or before the Closing
Date:
(a) The representations and warranties set forth in Article III hereof
will be true and correct in all material respects at and as of the Closing as
though then made and as though the Closing Date had been substituted for the
date of this Agreement throughout such representations and warranties, except
that any such representation or warranty made as of a specified date (other than
the date hereof) shall only need to have been true on and as of such date;
(b) KTI shall have performed in all material respects all the
covenants and agreements required to be performed by it under this Agreement
prior to the Closing;
(c) All material governmental filings, authorizations and approvals
that are required for the consummation of the transactions contemplated hereby
will have been duly made and obtained;
(d) There shall not be threatened, instituted or pending any action or
proceeding, before any court or governmental authority or agency, domestic or
foreign, (i)challenging or seeking to make illegal, or to delay or otherwise
directly or indirectly restrain or prohibit, the consummation of the
transactions contemplated hereby or seeking to obtain material damages in
connection with such transactions, (ii)seeking to invalidate or render
unenforceable any material provision of this Agreement or any of the Ancillary
Agreements, or (iii)otherwise relating to and materially adversely affecting the
transactions contemplated hereby or thereby;
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<PAGE> 11
(e) There shall not be any action taken, or any statute, rule,
regulation, judgment, order or injunction, enacted, entered, enforced,
promulgated, issued or deemed applicable to the transactions contemplated hereby
by any federal, state or foreign court, government or governmental authority or
agency, which would reasonably be expected to result, directly or indirectly, in
any of the consequences referred to in Section 6.02(d) hereof;
(f) On the Closing Date, KTI shall have delivered to OCI (i)a
certificate of an appropriate officer of KTI, dated the Closing Date, stating
that the conditions precedent set forth in subsections (a) and (b) above have
been satisfied, (ii) an executed copy of each of the Ancillary Agreements
including, without limitation, the Loan Agreement, (iii) the Purchase Price, and
(iv) a copy of each of (X) the text of the resolutions adopted by the board of
directors of KTI authorizing the execution, delivery and performance of this
Agreement and the Ancillary Agreements and the consummation of all of the
transactions contemplated by this Agreement and the Ancillary Agreements and (Y)
the bylaws of KTI, along with certificates executed on behalf of KTI by its
corporate secretary certifying to OCI that such copies are true, correct and
complete copies of such resolutions and bylaws, respectively, and that such
resolutions and bylaws were duly adopted and have not been amended or rescinded.
ARTICLE VII
TERMINATION
7.01 Termination. This Agreement may be terminated at any time prior to
the Closing:
(a) by the mutual consent of KTI and OCI;
(b) by either KTI or OCI if there has been a material
misrepresentation, breach of warranty or breach of covenant on the part of the
other in the representations, warranties and covenants set forth in this
Agreement;
(c) by either KTI or OCI if the transactions contemplated hereby have
not been consummated by December 31, 1998; provided that, neither KTI nor OCI
shall be entitled to terminate this Agreement pursuant to this Section 7.01(c)
if such party's willful breach of this Agreement has prevented the consummation
of the transactions contemplated hereby; or
(d) by KTI if, after the date hereof, there shall have been a material
adverse change in the financial condition or business of OCI or if, after the
date hereof, an event shall have occurred which, so far as reasonably can be
foreseen, would result in any such change, except to the extent such change is
directly caused by KTI.
7.02 Effect of Termination. In the event of termination of this
Agreement by either KTI or OCI as provided in Section 7.01, this Agreement shall
become void and there shall be no liability on the part of either KTI or OCI, or
their respective stockholders, officers, or directors, except that Sections
10.01 and 10.02 hereof shall survive indefinitely, and except with respect to
willful breaches of this Agreement prior to the time of such termination.
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ARTICLE VIII
ADDITIONAL COVENANTS AND AGREEMENTS
8.01 Businesses of OCI and OTI. From and after the Closing Date, and so
long as KTI owns any of the Shares, (i) OCI and its subsidiaries shall not
engage in any business other than the businesses conducted by them on the
Closing Date, and (ii) OTI shall not engage in any business other than the
business conducted by New Heights or other crumb rubber facilities and related
businesses.
8.02 Agreements of OTI Regarding Crumb Rubber Facilities. OTI agrees to
enter into a license agreement with KTI Recycling, Inc. pursuant to which it
will pay to KTI Recycling, Inc. a royalty of $.007 per pound of tires processed
into crumb rubber by OTI or any of its affiliates, including New Heights. OTI
further agrees that it will not purchase crumb rubber processing equipment from
any party other than KTI Recycling of Canada, Inc. and the Village of Ford
Heights, Illinois.
8.03 Agreements Relating to NOLs. KTI agrees that it will not, after
the Closing Date, acquire or dispose of any shares of the capital stock of OCI
without the prior written consent of OCI, which consent shall be given upon the
furnishing to OCI of an opinion of tax counsel reasonably satisfactory to OCI
that such acquisition or disposition will not have the effect of reducing the
dollar amount of NOLs available to be used by OCI in any tax year.
8.04 New Heights Operation and Maintenance Agreement. OTI agrees that
New Heights shall enter into an Operation and Maintenance Agreement (the
"Operation and Maintenance Agreement") with KTI Operations, Inc. ("KTI
Operations"), a subsidiary of KTI, substantially in the form attached to the
Plan and pursuant to which KTI Operations, as Operating Manager shall have
responsibility for day-to-day operations of New Heights and implementation of
the New Heights Business Plan, subject to the direction of the Board of
Directors of New Heights, and that New Heights shall pay KTI Operations the
Operator Fees, the procedures for payment or accrual of which shall be as
provided in the Operation and Maintenance Agreement.
8.05 Boards of Directors; Certain Decisions. OCI agrees that, from and
after the Closing date:
(a) The Board of Directors of OTI shall be comprised of five
directors, two of which shall be nominated by KTI and three of which shall be
nominated by OCI, and KTI and OCI shall have the absolute right to replace or
fill vacancies of directors selected by them. OCI agrees to vote all shares of
OTI owned by it in favor of the election of the nominees selected by KTI.
(b) To the extent permitted by applicable law, commencing at the first
meeting of its Board of directors following the Closing Date, OCI will use its
best efforts to cause the number of directors to be set at nine, and will use
its best efforts to cause three individuals to be selected by KTI to be
appointed to its Board of Directors, and thereafter, for so long as KTI
continues to hold not less than 50% of the Shares, at each meeting of the
shareholders of OCI at which
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<PAGE> 13
directors are to be elected, to use its best efforts to cause such individuals
to be nominated, and to use its best efforts to cause such individuals to be
elected, to such Board of Directors.
8.06 Use of Proceeds. OCI agrees that the proceeds of the sale of the
Shares shall be contributed to the capital of OTI, and that the proceeds of any
loans under the Loan Agreement shall be contributed to the capital of OTI.
8.07 Registration Rights. Promptly following a request by KTI or by any
KTI lending institution having a pledge of the Shares (a "Lending Institution"),
Buyer shall (i) file with the Securities and Exchange Commission (the
"Commission") a registration statement under the Securities Act of 1933 (the
"Act") covering resale of the Shares by KTI and/or any Lending Institution, to
the extent that any such Lending Institution has gained title to any of the
Shares or any other OCI Common Stock by virtue of a pledge made or security
interest granted by KTI, and (ii) use its best efforts to cause such
registration statement to be declared or ordered effective by the Commission not
later than 90 days following the date of such request, which efforts shall
include, without limitation, the execution of an undertaking to file
post-effective amendments, appropriate qualification under applicable blue sky
or other state securities laws, and appropriate compliance with applicable
regulations issued under the Act and any other governmental requirements or
regulations.
8.08 SEC Reports; News Releases. So long as KTI continues to own any of
the Shares, OCI shall deliver to KTI copies of all reports filed by OCI with the
Commission promptly after they are filed with the Commission and all news
releases promptly upon their release for publication.
8.09 Amendment of Certificate of Incorporation. At the first meeting of
its stockholders following the Closing Date, OCI will propose an amendment to
its Certificate of Incorporation deleting Section (c) Article Third thereof, and
use its best efforts to cause such amendment to be to be adopted by its
stockholders.
8.10 Within 30 days following the Closing Date, OCI shall enter into
written agreements satisfactory in form and substance to KTI with (i) from
Robert M. Davies and Maarten D. Hemsley that they will not exercise any options
to purchase shares of OCI Common Stock prior to the thirty-first day following
the third anniversary of the Closing Date, and (ii) Anthony N. Puma that he will
not sell any shares of OCI Common Stock prior to the thirty-first day following
the third anniversary of the Closing Date.
ARTICLE IX
SURVIVAL; INDEMNIFICATION
9.01 Survival of Representations and Warranties. Notwithstanding any
investigation made by or on behalf of any of the parties hereto or the results
of any such investigation and notwithstanding the participation of such party in
the Closing, the representations and warranties contained in Article II and
Article III hereof shall survive the Closing for a period of three years
following the Closing Date.
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<PAGE> 14
9.02 Indemnification by OCI. (a) Subject to the limitations set forth
in Section 9.02(b), OCI agrees to indemnify in full KTI and its officers,
directors, employees, agents and stockholders (collectively, the "KTI
Indemnified Parties") and hold them harmless against any loss, liability,
deficiency, damage, expense or cost (including reasonable legal expenses),
whether or not actually incurred or paid prior to the second anniversary of the
Closing Date (collectively, "Losses"), which KTI Indemnified Parties may suffer,
sustain or become subject to, as a result of (i) any misrepresentation in any of
the representations and warranties of OCI contained in this Agreement or in any
exhibits, schedules, certificates or other documents delivered or to be
delivered by or on behalf of OCI pursuant to the terms of this Agreement or any
of the Ancillary Agreements, (ii) any breach of, or failure to perform, any
agreement of OCI or OTI contained in this Agreement or any of the Ancillary
Agreements, or (iii) any "Claims" (as defined in Section 9.04(a)) or threatened
Claims against KTI arising out of the actions or inactions of OCI or OTI prior
to the Closing (collectively, "KTI Losses").
(b) OCI shall be liable to the KTI Indemnified Parties for any KTI
Losses (i) only if KTI or another KTI Indemnified Party delivers to OCI written
notice, setting forth in reasonable detail the identity, nature and amount of
KTI Losses related to such claim or claims prior to the second anniversary of
the Closing Date and (ii) only if the aggregate amount of all KTI Losses exceeds
$10,000 (the "Basket Amount"), in which case OCI shall be obligated to indemnify
the KTI Indemnified Parties only for the excess of the aggregate amount of all
such KTI Losses over the Basket Amount. The KTI Indemnified Party's failure to
provide the detail required by clause (i) in the preceding sentence shall not
constitute either a breach of this Agreement by the KTI Indemnified Party or any
basis for OCI to assert that the KTI Indemnified Party did not comply with the
terms of this Section 9.02 sufficient to cause the KTI Indemnified Party to have
waived its rights under this Section 9.02.
9.03 Indemnification by KTI. (a) Subject to the limitations set forth
in Section 9.03(b), KTI agrees to indemnify in full the OCI, and its officers,
directors, employees, agents and stockholders (collectively, the "OCI
Indemnified Parties") and hold them harmless against any Losses which any of the
OCI Indemnified Parties may suffer, sustain or become subject to as a result of
(i) any misrepresentation in any of the representations and warranties of KTI
contained in this Agreement or in any of the Ancillary Agreements, (ii) any
breach of, or failure to perform, any agreement of KTI contained in this
Agreement or any of the Ancillary Agreements, or (iii) any Claims or threatened
Claims against OCI arising out of the actions or inactions of KTI prior to the
Closing (collectively, "OCI Losses").
(b) KTI shall be liable to the OCI Indemnified Parties for any
OCI Losses (i) only if OCI or another OCI Indemnified Party delivers to KTI
written notice, setting forth in reasonable detail the identity, nature and
amount of OCI Losses related to such claim or claims prior to the second
anniversary of the Closing Date and (ii) only if the aggregate amount of all OCI
Losses exceeds the Basket Amount, in which case KTI shall be obligated to
indemnify the OCI Indemnified Parties only for the excess of the aggregate
amount of all such OCI Losses over the Basket Amount. The OCI Indemnified
Party's failure to provide the detail required by clause (i) in the preceding
sentence shall not constitute either a breach of this Agreement by the OCI
Indemnified Party or any basis for KTI to assert that the OCI Indemnified Party
did not comply with the terms of this Section 9.03 sufficient to cause the OCI
Indemnified Party to have waived its rights under this Section 9.03.
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<PAGE> 15
9.04 Method of Asserting Claims. As used herein, an "Indemnified Party"
shall refer to a "KTI Indemnified Party" or "OCI Indemnified Party," as
applicable, the "Notifying Party" shall refer to the party hereto whose
Indemnified Parties are entitled to indemnification hereunder, and the
"Indemnifying Party" shall refer to the party hereto obligated to indemnify such
Notifying Party's Indemnified Parties.
(a) In the event that any of the Indemnified Parties is made a
defendant in or party to any action or proceeding, judicial or administrative,
instituted by any third party for the liability or the costs or expenses of
which are Losses (any such third party action or proceeding being referred to as
a "Claim"), the Notifying Party shall give the Indemnifying Party prompt notice
thereof. The failure to give such notice shall not affect any Indemnified
Party's ability to seek reimbursement unless such failure has materially and
adversely affected the Indemnifying Party's ability to defend successfully a
Claim. The Indemnifying Party shall be entitled to contest and defend such
Claim; provided, that the Indemnifying Party (i) has a reasonable basis for
concluding that such defense may be successful and (ii) diligently contests and
defends such Claim. Notice of the intention so to contest and defend shall be
given by the Indemnifying Party to the Notifying Party within 20 business days
after the Notifying Party's notice of such Claim (but, in all events, at least
five business days prior to the date that an answer to such Claim is due to be
filed). Such contest and defense shall be conducted by reputable attorneys
employed by the Indemnifying Party. The Notifying Party shall be entitled at any
time, at its own cost and expense (which expense shall not constitute a Loss
unless the Notifying Party reasonably determines that the Indemnifying Party is
not adequately representing or, because of a conflict of interest, may not
adequately represent, any interests of the Indemnified Parties, and only to the
extent that such expenses are reasonable), to participate in such contest and
defense and to be represented by attorneys of its or their own choosing. If the
Notifying Party elects to participate in such defense, the Notifying Party will
cooperate with the Indemnifying Party in the conduct of such defense. Neither
the Notifying Party nor the Indemnifying Party may concede, settle or compromise
any Claim without the consent of the other party, which consents will not be
unreasonably withheld. Notwithstanding the foregoing, (i) if a Claim seeks
equitable relief or (ii) if the subject matter of a Claim relates to the ongoing
business of any of the Indemnified Parties, which Claim, if decided against any
of the Indemnified Parties, would materially adversely affect the ongoing
business or reputation of any of the Indemnified Parties, then, in each such
case, the Indemnified Parties alone shall be entitled to contest, defend and
settle such Claim in the first instance and, if the Indemnified Parties do not
contest, defend or settle such Claim, the Indemnifying Party shall then have the
right to contest and defend (but not settle) such Claim.
(b) In the event any Indemnified Party should have a claim against any
Indemnifying Party that does not involve a Claim, the Notifying Party shall
deliver a notice of such claim with reasonable promptness to the Indemnifying
Party. If the Indemnifying Party notifies the Notifying Party that it does not
dispute the claim described in such notice or fails to notify the Notifying
Party within 30 days after delivery of such notice by the Notifying Party
whether the Indemnifying Party disputes the claim described in such notice, the
Loss in the amount specified in the Notifying Party's notice will be
conclusively deemed a liability of the Indemnifying Party and the Indemnifying
Party shall pay the amount of such Loss to the Indemnified Party on demand. If
the Indemnifying Party has timely disputed its Liability with respect to such
claim, the Presidents of each of the Indemnifying Party and the Notifying Party
will proceed in good faith to negotiate a
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<PAGE> 16
resolution of such dispute, and if not resolved through the negotiations of such
Presidents within 60 days after the delivery of the Notifying Party's notice of
such claim, such dispute shall be resolved fully and finally in New York City by
an arbitrator selected pursuant to, and an arbitration governed by, the
Commercial Arbitration Rules of the American Arbitration Association. The
arbitrator shall resolve the dispute within 30 days after selection and judgment
upon the award rendered by such arbitrator may be entered in any court of
competent jurisdiction.
(c) After the Closing, the rights set forth in this Article IX shall
be each party's sole and exclusive remedies against the other party hereto for
misrepresentations or breaches of covenants contained in this Agreement and the
Ancillary Documents. Notwithstanding the foregoing, nothing herein shall prevent
any of the Indemnified Parties from bringing an action based upon allegations of
fraud or other intentional breach of an obligation of or with respect to either
party in connection with this Agreement and the Ancillary Agreements. In the
event such action is brought, the prevailing party's attorneys' fees and costs
shall be paid by the non-prevailing party.
(d) Any indemnification payable under this Article IX shall be, to
the extent permitted by law, an adjustment to Purchase Price.
ARTICLE X
MISCELLANEOUS
10.01 Press Releases and Announcements. Prior to the Closing Date,
neither party hereto shall issue any press release (or make any other public
announcement) related to this Agreement or the transactions contemplated hereby
without prior written approval of the other party hereto, except as may be
necessary, in the opinion of counsel to the party seeking to make disclosure, to
comply with the requirements of this Agreement or applicable law. If any such
press release or public announcement is so required, the party making such
disclosure shall consult with the other party prior to making such disclosure,
and the parties shall use all reasonable efforts, acting in good faith, to agree
upon a text for such disclosure which is satisfactory to both parties.
10.02 Expenses. Except as otherwise expressly provided for herein, OTI
and KTI will pay all of their own expenses (including attorneys' and
accountants' fees (and, in the case of OTI, the expenses of OTI and OCI)) in
connection with the negotiation of this Agreement, the performance of their
respective obligations hereunder and the consummation of the transactions
contemplated by this Agreement (whether consummated or not).
10.03 Further Assurances. KTI and OCI agree that, on and after the
Closing Date, they shall take all appropriate action and execute any documents,
instruments or conveyances of any kind which may be reasonably necessary or
advisable to carry out any of the provisions hereof or of the Ancillary
Agreements.
10.04 Amendment and Waiver. This Agreement may not be amended or waived
except in a writing executed by the party against which such amendment or waiver
is sought to be enforced. No course of dealing between or among any persons
having any interest in this Agreement will be deemed effective to modify or
amend any part of this Agreement or any rights or obligations of any person
under or by reason of this Agreement.
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<PAGE> 17
10.05 Notices. All notices, demands and other communications to be
given or delivered under or by reason of the provisions of this Agreement will
be in writing and will be deemed to have been given when personally delivered or
mailed by first class mail, return receipt requested, or when receipt is
acknowledged, if sent by facsimile, telecopy or other electronic transmission
device. Notices, demands and communications to KTI and OCI will, unless another
address is specified in writing, be sent to the address indicated below:
Notices to KTI: with a copy to:
KTI, Inc. Dorsey & Whitney
7000 Boulevard East 220 South Sixth Street
Guttenberg, NJ 07093 Minneapolis, Minnesota 55402-1498
Attention: General Counsel Attention: Diane Malfeld
Telecopy: (201) 854-1771 Telecopy: (612) 340-2643
Notices to OCI and OTI: with a copy to:
Oakhurst Company, Inc. Roger M. Barzun
3365 Spruce Lane 60 Hubbard Street
Grapevine, TX 76501 Concord, MA 01742
Attention: Telecopy: (978) 287-4276
Telecopy: (817) 416-0914
10.06 Assignment. This Agreement and all of the provisions hereof will
be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns, except that neither this Agreement
nor any of the rights, interests or obligations hereunder may be assigned by
either party hereto without the prior written consent of the other party hereto.
10.07 Severability. Whenever possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be prohibited by or
invalid under applicable law, such provision will be ineffective only to the
extent of such prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions of this Agreement.
10.08 Complete Agreement. This Agreement and the Related Agreements and
other exhibits hereto, the Disclosure Schedule and the other documents referred
to herein contain the complete agreement between the parties and supersede any
prior understandings, agreements or representations by or between the parties,
written or oral, which may have related to the subject matter hereof in any way.
10.9 Counterparts. This Agreement may be executed in one or more
counterparts, any one of which need not contain the signatures of more than one
party, but all such counterparts taken together will constitute one and the same
instrument.
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<PAGE> 18
10.10 Governing Law. The internal law, without regard to conflicts of
laws principles, of the State of New York will govern all questions concerning
the construction, validity and
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<PAGE> 19
interpretation of this Agreement and the performance of the obligations imposed
by this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
KTI, Inc.
By /s/ Robert E. Wetzel
Its Senior Vice President
Oakhurst Company, Inc.
By /s/ Robert M. Davies
Its Chairman and CEO
Oakhurst Technology, Inc.
By /s/ Robert M. Davies
Its Chairman and CEO
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<PAGE> 20
EXHIBIT A TO
INVESTMENT AGREEMENT
[ACF Imports, Inc. Letter of Intent]
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<PAGE> 21
EXHIBIT B TO
INVESTMENT AGREEMENT
[Loan Agreement, Pledge Agreement, Promissory Note]
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<PAGE> 1
Oakhurst Company, Inc.
December 29, 1998
Page 1
SUBJECT TO THAT CERTAIN INTERCREDITOR AGREEMENT, DATED AS OF DECEMBER 29, 1998,
AMONG KTI, INC., A NEW JERSEY CORPORATION, FINOVA CAPITAL CORPORATION, A
DELAWARE CORPORATION AND OAKHURST COMPANY, INC., A DELAWARE CORPORATION
LETTER LOAN AGREEMENT
December 29, 1998
Oakhurst Company, Inc.
3365 Spruce Lane
Grapevine, Texas 76501
RE: $11,500,000 Multiple Advance Term Loan Facility
Gentlemen:
KTI, Inc. ("KTI") agrees to make advances to Oakhurst Company, Inc., a
Delaware corporation (the "Borrower" or "OCI"), for the benefit of Oakhurst
Technology, Inc., a Delaware corporation ("OTI") in an aggregate amount of up to
$11,500,000 (the "Facility Limit"), subject to adjustment as hereinafter set
forth, from now until April 30, 2001 under a promissory note dated the date of
this agreement (the "Note") upon the following terms and conditions:
1. Making and Repaying the Advances; Interest Rate; Use of Proceeds.
The proceeds of each advance will be the used by the Borrower as an equity
investment in OTI, which is the designated "KTI Affiliate" under that certain
Investment Agreement dated as of December 29, 1998, between KTI and New Heights
Recovery & Power, LLC, a Delaware limited liability company ("New Heights") and
that certain Amended Plan of Reorganization for New Heights as confirmed and
modified by an order dated December 15, 1998 of the United States Bankruptcy
Court for the District of Delaware (the "Amended Plan"). The proceeds of each
advance shall be used by the Borrower only for equity contributions to OTI in
order to enable OTI (a) to satisfy its (or KTI's) obligations as the KTI
Affiliate and member of New Heights under the Amended Plan and Investment
Agreement, (b) to invest in businesses having the potential of expanding or
enhancing the recycling of rubber or tires, and (c) to reimburse (or to
contribute capital to New Heights to enable New Heights to reimburse or pay) KTI
for any drawings on or costs related to the BFI Letter of Credit (as defined
below), or the Acknowledgment (as defined below) including, without limitation,
loans made by KTI, Inc. to New Heights. Any equipment purchased (or moving costs
related to the moving of equipment) under the "Business Plan" described in the
Amended Plan shall
<PAGE> 2
be deemed advances under clause(a) of this paragraph 1, the amount thereof being
the cost or fair market value of such equipment; provided that the equipment
contributed from the "Franklin Park" facility (as described in the Business
Plan) shall be at the value designated in the Investment Agreement.
KTI does not have to make any advance if an Event of Default (as
defined below) has occurred, if KTI has terminated its commitment under this
Agreement pursuant to paragraph 8 below or if any of the representations and
warranties of OCI or OTI in this Agreement would not be true if made on the date
of that advance. Also, KTI does not have to make any advance to the Borrower
until KTI has received (w) a duly executed Pledge Agreement dated as of the date
hereof, in the form of Exhibit A hereto (the "Pledge Agreement") pursuant to
which the Borrower pledges and grants a security interest in all of the issued
and outstanding capital stock of OTI to KTI to secure its obligations hereunder,
together with stock certificates and executed but undated stock powers or
assignments related thereto, and any other security agreements, other security
documents, financing statements, lien searches, opinions, certified resolutions,
opinions of counsel, or other documents or collateral that KTI may require, all
satisfactory to KTI, (x) a Non-exclusive License to Use Technology dated as of
the date hereof duly executed by OTI and KTI Recycling, Inc. (the "Royalty
Agreement"), (y)the Investment Agreement dated the date hereof (the "OCI
Investment Agreement") between KTI, OCI and OTI, and (z) an intercreditor
agreement with FINOVA Capital Corporation, in form and substance reasonably
acceptable to KTI (the "Intercreditor Agreement"). This Agreement, the Note, the
Pledge Agreement, the Royalty Agreement, the OCI Investment Agreement and the
Intercreditor Agreement are collectively referred to herein as the "Loan
Documents."
The Borrower may prepay all or a portion of the Note at any time,
without premium or penalty. Amounts prepaid may not be reborrowed. All amounts
outstanding under the Note shall be due and payable in full on the earlier of
April 30, 2001 or the date KTI terminates its commitment under this Agreement
pursuant to paragraph 8 below.
All amounts outstanding under the Note shall bear interest at the rate
of fourteen percent (14%) per annum, calculated on the basis of actual days
elapsed and a year of 360 days (the "Note Rate"). Interest shall be payable
quarterly in arrears, commencing with the calendar quarter ended March 31, 1999.
To the extent any interest is not paid in full when due, then the unpaid portion
shall be added to principal and bear interest at the Note Rate.
2. Adjustments to Principal Amount. The Facility Limit will be
increased to an amount not to exceed $17,000,000 in the event (a)automatic
advances made under paragraph 7 cause the then-current Facility Limit to be
exceeded by the amount of such excess, and (b)the amount required by OTI to fund
the Business Plan under the Investment Agreement and the Amended Plan exceed the
sum of proceeds from the sale of common stock under the OCI Investment Agreement
plus all advances made under the then-current Facility Limit by the amount of
such excess. In such case, the Borrower shall execute and deliver a promissory
note to KTI in the principal amount of such increase, and otherwise having the
same terms as the
<PAGE> 3
Note, and deliver to KTI such authorizing resolutions, certificates of good
standing, opinions, reaffirmations and other documents related to the increase
requested by KTI.
The Facility Limit will be decreased (x)by $7,500,000, in the event that
the Phase Two Business Plan (as defined in the Investment Agreement) is not
implemented by the time set forth in the Amended Plan, (y)by $3,500,000, in the
event that the Phase Three Business Plan (as defined in the Investment
Agreement) is not implemented by the time set forth in the Amended Plan, and
(z)by the cost of the acquisition of additional common stock of the Borrower in
the event the holders of certain stock options to purchase common stock of the
Borrower breach their agreement regarding the exercise of such options.
3. Representations. The Borrower and OTI each represents and warrants
to KTI as follows:
a) It is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware.
b) The execution, delivery and performance of this Agreement,
the Note, the Pledge Agreement and all other instruments and agreements
executed by it in connection with this Agreement, and the other Loan
Documents have been properly authorized by all necessary corporate
action and do not require governmental approval.
c) The Loan Documents to which it is a party have been
properly executed and constitute its legal, valid and binding
obligations, enforceable against it in accordance with their terms.
d) The financial statements that the Borrower has furnished to
KTI fairly represent the Borrower's financial condition on the date of
those statements and the results of the Borrower's operations for the
periods referred to in those statements. Those statements were prepared
in accordance with generally accepted accounting principles. There have
been no material adverse changes in the Borrower's properties or
financial condition since the date of the latest statements.
e) There are no actions, suits or proceedings pending or
threatened against or affecting the Borrower or the Borrower's
properties before any court or governmental agency.
4. Reporting The Borrower will not change its fiscal year end from
February 28, and will deliver to KTI the following financial statements in a
form acceptable to KTI:
a) The Borrower's annual financial statements within 120 days
after the end of each fiscal year, audited by Deloitte& Touche or any
other independent certified public accountant of nationally recognized
standing, reasonably satisfactory to KTI.
<PAGE> 4
b) The Borrower's quarterly internally-prepared financial
statements and a covenant compliance certificate within 60 days after
the end of each quarter, each certified as accurate by an officer of
the Borrower.
The financial statements described in clauses (a) and (b) above shall
be prepared in accordance with generally accepted accounting principles,
consistently applied. The Borrower will also notify KTI within 30 days after any
lawsuit or other legal proceeding in which the damages sought exceed $10,000 has
been begun against the Borrower or any of its subsidiaries, including OTI.
5. Other Affirmative Covenants Unless KTI shall otherwise consent in
writing, the Borrower will:
a) Pay the Borrower's taxes (including payroll and withholding
taxes) when due.
b) Keep adequate and proper financial records, and permit KTI
to examine those records and inspect the Borrower's property, and
discuss the Borrower's affairs and finances with the Borrower's
officers, at any reasonable time.
c) Keep the Borrower's business adequately insured, and
maintain the insurance required under any security agreement or
mortgage.
d) Maintain the Borrower's and OTI's corporate existence in
good standing under the laws of the state of Delaware.
e) Maintain the Borrower's properties in good condition,
repair and working order.
f) Comply in all material respects with all laws, rules and
regulations to which the Borrower and its subsidiaries, including OTI,
may be subject.
6. Negative Covenants Unless KTI shall otherwise consent in writing,
the Borrower will not:
a) Grant any mortgage, security interest or any other lien on
any of the Borrower's assets (including capitalized leases), or permit
any such lien to exist or continue except for: (i) liens in KTI's
favor, (ii) liens in favor of FINOVA Capital Corporation pursuant
to the Loan and Security Agreement (the "FINOVA Agreement") between
FINOVA Capital Corporation ("FINOVA") and "Borrowers" (as the term
is defined in the FINOVA Agreement: Oakhurst Company, Inc., Steel
City Products, Inc., Puma Products, Inc., H&H Distributors, Inc.,
Dowling's Fleet Service Co., Inc., Oakhurst Management Corporation,
Oakhurst Holdings, Inc., and G&O Sales Company) (the "FINOVA
Borrowers"), dated as of March 28, 1996, as in effect on the
<PAGE> 5
date hereof; and (iii) deposits or pledges to secure payment of
workers' compensation, unemployment insurance, old age pensions or
other social security obligations and liens of carriers, warehousemen,
mechanics and materialmen for sums not due, in each case arising in the
ordinary course of business of the Borrower, liens for taxes, fees,
assessments and governmental charges not delinquent, liens incurred or
deposits or pledges made or given in connection with, or to secure
payment of, indemnity, performance or other similar bonds, encumbrances
in the nature of zoning restrictions, easements and rights or
restrictions of record on the use of real property and landlord's liens
under leases on the premises rented, which do not materially detract
from the value of such property or impair the use thereof in the
business of the Borrower, and capitalized leases provided that the
aggregate annual payments owed by the Borrower under such capitalized
leases do not exceed $100,000.
b) Borrow any money, or sign any promissory note, except for:
(i) loans from KTI and notes to KTI, (ii) indebtedness secured by liens
permitted under a) above, (iii) indebtedness of the Borrower pursuant
to the FINOVA Agreement (iv)trade payables and other contractual
obligations to suppliers and customers incurred in the ordinary course
of business, (v)existing indebtedness as reflected in the financial
statements of Borrower as of August 31, 1998 delivered to KTI and
(vi)"Permitted Intercompany Transactions" as set forth in Section 14 of
the Schedule to the FINOVA Agreement.
c) Guarantee any obligations, except the endorsement of checks
for collection and the indebtedness of the FINOVA Borrowers.
d) Make any investments in "Affiliates" ("Affiliates" means
any person controlling, controlled by or under common control with any
of the Borrowers) other than the acquisition of common stock of OTI or
capital contributions to OTI, or in bank accounts or certificates of
deposit and federal government securities of a maturity of one year or
less.
e) Sell any property subject to liens of KTI, sell any of the
Borrower's assets if such sale will materially and adversely affect the
Borrower's ability to repay advances made to Borrower by KTI or sell
Dowling's Fleet Service Co., Inc., unless substantially all of the cash
portion of the sale proceeds is used to paydown the indebtedness owed
to FINOVA under the FINOVA Agreement or any non-cash consideration may
be pledged to FINOVA to secure such indebtedness.
f) Consolidate or merge with any other business, or acquire
the assets of any other business.
g) Engage in any line of business other than the Borrower's
(and its subsidiaries) current businesses, or permit OTI to engage in
any business other than owning its membership interest in New Heights
or in a business engaged principally in
<PAGE> 6
the production and incineration of crumb rubber or other related
businesses which have the potential to enhance or expand rubber or tire
recycling.
h) Pay any dividends or otherwise make any distributions on,
or redemptions of, any of its outstanding stock.
7. KeyBank Letter of Credit and Acknowledgment; Automatic Advances. As
contemplated by paragraph 6 of Article XIII of the Amended Plan, KTI has caused
KeyBank National Association ("KeyBank") to issue a letter of credit (the "BFI
Letter of Credit") to Browning-Ferris Industries of Illinois, Inc. ("BFI") for
the account of KTI, in order to secure and provide for reimbursement to BFI for
the costs of New Heights' remediation obligations relating to the current
stockpile of tire pieces in the event BFI performs such obligations. KTI has
agreed to reimburse and pay all fees to KeyBank relating to the BFI Letter of
Credit, including reimbursement of any drawings thereunder. KTI has executed and
delivered to New Heights an acknowledgment to fund the obligations of OTI under
the Investment Agreement (the "Acknowledgment"). OTI hereby agrees to make a
capital contribution to New Heights to enable New Heights to pay or reimburse
KTI for any amounts paid by KTI in connection with the BFI Letter of Credit or
the Acknowledgment. KTI is hereby authorized, without request or notice of any
kind, to automatically make advances of the Loan hereunder to itself to
reimburse itself for any payments to KeyBank with respect to the BFI Letter of
Credit or for payment or performance by KTI under the Acknowledgment, including
all reasonable expenses relating thereto, and to the extent the Facility Amount
is then insufficient to fund such advances, the Facility Amount will be
automatically increased to provide for such advances.
8. Events of Default Each of the following shall be an Event of
Default:
a) The Borrower shall fail to pay when due any amount owing on
any Note or any other indebtedness to KTI that the Borrower owes or has
guaranteed.
b) Any event referred to in any Note that permits KTI to
declare that Note due and payable shall occur.
c) The Borrower shall breach any of the Borrower's other
obligations under this Agreement and such breach shall continue for 30
days after KTI gives the Borrower notice thereof.
d) An event of default shall occur under any of the Loan
Documents or any other document securing any Note, or under the FINOVA
Agreement.
e) Any representation or warranty that the Borrower has made
under this Agreement or any other Loan Document shall prove to have
been untrue when made.
<PAGE> 7
f) The Borrower or OTI shall become insolvent, or the subject
of any bankruptcy, reorganization, debt arrangement, dissolution or
liquidity proceeding.
If any Event of Default described in clause f) above occurs, KTI's
commitment under this Agreement shall automatically terminate and the Notes and
all of the Borrower's other obligations to KTI under this Agreement shall
immediately become due and payable. If any other Event of Default occurs, KTI
may, without giving the Borrower notice, declare KTI's commitment to make
advances under this Agreement terminated and/or declare the principal balance of
each Note and all accrued interest to be immediately due, and KTI may exercise
any other rights and remedies available to KTI by law or agreement. The Borrower
hereby irrevocably authorizes KTI to set off all sums owing by the Borrower to
KTI against all deposits and credits the Borrower may have with, and any claims
the Borrower may have against, KTI at any time after an Event of Default occurs.
9. Fees and Expenses The Borrower and OTI agree to pay all of the costs
and expenses incurred by KTI in connection with the negotiation, preparation,
execution, perfection, administration, amendment, or enforcement of this
Agreement and the other Loan Documents, including attorney's fees and expenses
and internal time charges reasonably determined by KTI for lawyers employed by
KTI.
10. Miscellaneous
a) If KTI does not exercise some right KTI has against the
Borrower, or if KTI delays in exercising a right, that does not mean
that KTI gives up that right.
b) No Loan Document can be changed unless KTI signs or
consents in writing to a written amendment.
c) This Agreement is the entire agreement between KTI and the
Borrower with respect to the $11,500,000 line of credit. This Agreement
takes the place of any conversations, oral agreements and commitment
letters or other letters between KTI and the Borrower.
d) This Agreement shall be binding upon the Borrower and OTI,
and their successors and assigns, and shall inure, together with the
rights and remedies of KTI hereunder, to the benefit of, and be
enforceable by, KTI and its successors, transferees and assigns.
Without limiting the generality of the foregoing, KTI may assign or
otherwise transfer all or any portion of its rights and obligations
under the Credit Agreement and the Loan Documents to any other Person.
e) Each of the Borrower and OTI agrees to the provisions
contained in Exhibit B attached hereto, which provisions are fully
incorporated herein.
<PAGE> 8
(REMAINDER OF PAGE INTENTIONALLY LEFT BLANK)
<PAGE> 9
Please indicate the Borrower's acceptance of this Agreement by signing
the enclosed copy of this letter and returning it to the undersigned.
Very truly yours,
KTI, INC.
By /s/ Robert E. Wetzel
---------------------
Name Robert E. Wetzel
Its Senior Vice President
Accepted this 29th day of December, 1998.
BORROWER:
OAKHURST COMPANY, INC.
By /s/ Robert M. Davies
- -------------------------------
Name Robert M. Davies
Its Chairman and CEO
OTI:
OAKHURST TECHNOLOGY, INC.
By /s/ Robert M. Davies
- -------------------------------
Name Robert M. Davies
Its Chairman and CEO
<PAGE> 10
EXHIBIT B
Joint and Several Obligations; Terms with Respect to Obligations.
If it is at any time determined that either OCI or OTI is liable as a
guarantor with respect to such Obligations arising in connection with Loan or
advances made to the other (the "Guaranteed Obligations"), each of OCI and OTI
hereby agrees to the following terms:
(a) Obligations Absolute. No act or thing need occur to
establish the liability of OCI or OTI for the Guaranteed Obligations,
and no act or thing, except full payment and discharge of all such
Guaranteed Obligations, shall in any way exonerate OCI or OTI or
modify, reduce, limit or release the liability of OCI or OTI for its
Guaranteed Obligations. The obligations of OCI or OTI for its
Guaranteed Obligations shall be absolute, unconditional, and
irrevocable, and shall not be subject to any right of setoff or
counterclaim by OCI or OTI.
(b) Continuing Guaranty . OCI and OTI shall each be liable for
its Guaranteed Obligations, plus accrued interest thereon and all
attorneys' fees, collection costs and enforcement expenses referable
thereto. Guaranteed Obligations may be created and continued in any
amount without affecting or impairing the liability of OCI or OTI
therefor. No notice of such Guaranteed Obligations already or hereafter
contracted or acquired by KTI, or any renewal or extension of any
thereof need be given to OCI or OTI and none of the foregoing acts
shall release OCI or OTI from liability hereunder. The agreement of OCI
or OTI pursuant to the Credit Agreement with respect to its Guaranteed
Obligations is an absolute, unconditional and continuing guaranty of
payment of such Guaranteed Obligations and shall continue to be in
force and be binding upon OCI or OTI until such Guaranteed Obligations
are paid in full and the Credit Agreement is terminated, and KTI may
continue, at any time and without notice to such Borrower, to extend
credit or other financial accommodations and loan monies to or for the
benefit of the other on the faith thereof. Each of OCI and OTI hereby
waives, to the fullest extent permitted by law, any right they may have
to revoke or terminate its guaranty of the Guaranteed Obligations
before the Guaranteed Obligations are paid in full and the Credit
Agreement is terminated. In the event either OCI or OTI shall have any
right under applicable law to otherwise terminate or revoke its
guaranty of the Guaranteed Obligations which cannot be waived, such
termination or revocation shall not be effective until written notice
of such termination or revocation, signed by person, is actually
received by KTI's officer responsible for such matters. Any notice of
termination or revocation described above shall not affect OCI's or
OTI's guaranty of the Guaranteed Obligations in relation to (i) any of
the Guaranteed Obligations that arose prior to receipt thereof or (ii)
any of the Guaranteed Obligations created after receipt thereof, if
such Guaranteed Obligations were incurred through loans by KTI , and/or
for the purpose of protecting any collateral, including, but not
limited, to all protective advances, costs, expenses, and attorneys'
and paralegals' fees, whensoever made, advanced or incurred by KTI in
connection with the Guaranteed Obligations. If, in reliance on either
OCI or OTI's guaranty of its
<PAGE> 11
Guaranteed Obligations, KTI makes loans or other advances to or for the
benefit of the other or takes other action under this Agreement after
such aforesaid termination or revocation by the undersigned but prior
to the receipt by KTI of said written notice as set forth above, the
rights of KTI shall be the same as if such termination or revocation
had not occurred.
(c) Other Transactions. Whether or not any existing
relationship between OCI and OTI has been changed or ended, KTI may,
but shall not be obligated to, enter into transactions resulting in the
creation or continuance of other obligations of the other to KTI,
without consent or approval by the other and without notice to the
other, and all such obligations shall be guaranteed by virtue of the
Credit Agreement. The liability of OCI and OTI under the Credit
Agreement with respect to the Guaranteed Obligations shall not be
affected or impaired by any of the following acts or things (which KTI
is expressly authorized to do, omit or suffer from time to time,
without notice to or approval by OCI or OTI): (i) any acceptance of
collateral security, other guarantors, accommodation parties or
sureties for any or all Guaranteed Obligations; (ii) any one or more
extensions or renewals of Guaranteed Obligations (whether or not for
longer than the original period) or any modification of the interest
rates, maturities or other contractual terms applicable to any
Guaranteed Obligations; (iii) any waiver or indulgence granted to the
other Borrowers, any delay or lack of diligence in the enforcement of
Guaranteed Obligations, or any failure to institute proceedings, file a
claim, give any required notices or otherwise protect any Guaranteed
Obligations; (iv) any full or partial release of, settlement with, or
agreement not to sue,OCI or OTI or any other guarantor or other person
liable in respect of any Guaranteed Obligations; (v) any discharge of
any evidence of Guaranteed Obligations or the acceptance of any
instrument in renewal thereof or substitution therefor; (vi) any
failure to obtain collateral security for Guaranteed Obligations, or to
see to the proper or sufficient creation and perfection thereof, or to
establish the priority thereof, or to protect, ensure, or enforce any
collateral security, or any modification, substitution, discharge,
impairment or loss of any collateral security; (vii) any foreclosure or
enforcement of any collateral security; (viii) any transfer of any
Guaranteed Obligations or any evidence thereof; (ix) any order of
application of any payments or credits upon Guaranteed Obligations; (x)
any release of any collateral security for Guaranteed Obligations; (xi)
any amendment to or modification of, any agreement between KTI and
either OCI or OTI, or any waiver of compliance by OCI or OTI with the
terms thereof; and (xii) any election by KTI under Section 1111(b) of
the United States Bankruptcy Code.
(d) Waivers of Defenses and Rights. Each of OCI and OTI waives
any and all defenses, claims and discharges of the other, or any other
obligor, pertaining to the Guaranteed Obligations, except the defense
of discharge by payment in full. Without limiting the generality of the
foregoing, neither OCI nor OTI will assert, plead or enforce against
KTI any defense of waiver, release, discharge in bankruptcy, statute of
limitations, res judicata, statute of frauds, anti-deficiency statute,
fraud, usury, illegality or unenforceability which may be available to
OCI or OTI or any other person liable in respect of any Guaranteed
Obligations, or any setoff available against KTI to OCI or
<PAGE> 12
OTI or any such other person, whether or not on account of a related
transaction. Each of OCI and OTI expressly agrees that it shall be and
remain liable for any deficiency remaining after foreclosure of any
security interest securing Guaranteed Obligations, whether or not the
liability of or any other obligor for such deficiency is discharged
pursuant to statute, judicial decision or contract. Each of OCI and OTI
waives presentment, demand for payment, notice of dishonor or
nonpayment, and protest of any instrument evidencing Guaranteed
Obligations. Each of OCI and OTI agrees that its liability under the
Credit Agreement for the Guaranteed Obligations shall be primary and
direct, and that KTI shall not be required first to resort for payment
of the Guaranteed Obligations to the other or other persons or their
properties, or first to enforce, realize upon or exhaust any collateral
security for the Guaranteed Obligations, or to commence any action or
obtain any judgment against any other or against any such collateral
security or to pursue any other right or remedy KTI may have against
any other before enforcing the liability of such Person for the
Guaranteed Obligations under the Credit Agreement.
(e) Approval of Credit. Each of OCI and OTI has, independently
and without reliance upon KTI or the directors, officers, agents or
employees of KTI, and instead in reliance upon information furnished by
the other Borrowers and upon such other information as OCI or OTI
deemed appropriate, made its own independent credit analysis and
decision to guaranty the obligations of the other Borrowers pursuant to
the Credit Agreement.
(f) Waiver of Subrogation. Each of OCI and OTI expressly
waives any and all rights of subrogation, reimbursement, indemnity,
exoneration, contribution or any other claim which it may now or
hereafter have against the other, any endorser or any other guarantor
of all or any part of the Guaranteed Obligations, and each hereby
waives any benefit of, and any right to participate in, any security or
collateral given to KTI to secure payment of the Guaranteed Obligations
or any other liability of the other to KTI. Each of OCI and OTI further
agrees that any and all claims it may have against the other, any
endorser or any other guarantor of all or any part of the Guaranteed
Obligations or against any of their respective properties, whether
arising by reason of any payment by such Person to KTI pursuant to the
provisions hereof or otherwise, is hereby waived.
<PAGE> 1
SUBJECT TO THAT CERTAIN INTERCREDITOR AGREEMENT, DATED AS OF DECEMBER 29, 1998,
AMONG KTI, INC., A NEW JERSEY CORPORATION, FINOVA CAPITAL CORPORATION, A
DELAWARE CORPORATION AND OAKHURST COMPANY, INC., A DELAWARE CORPORATION
EXHIBIT A
PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT, dated as of December 29, 1998, is made and given
by OAKHURST COMPANY, INC., a Delaware corporation ("OCI") and Oakhurst
Technology, Inc., a Delaware corporation ("OTI" and, together with OCI, the
"Pledgors"), to KTI, INC., a New Jersey corporation (the "Lender").
RECITALS
A. The Pledgors and the Lender have entered into a Letter Loan
Agreement dated as of the date hereof (as the same may hereafter be amended,
restated, or otherwise modified from time to time, the "Credit Agreement")
pursuant to which the Lender has agreed to extend to OCI for the benefit of OTI
that certain credit accommodation consisting of a multiple advance term loan of
up to $11,500,000, subject to further adjustment.
B. OCI is the owner of the shares (the "Pledged Shares") of all of the
issued and outstanding shares of stock of OTI described in Part I of Schedule I
hereto issued by OTI, and OTI is the owner of membership interests (the "Pledged
LLC Interests") of New Heights Recovery & Power, LLC, a Delaware limited
liability company ("New Heights") described in Part II of Schedule I and issued
by New Heights.
C. It is a condition precedent to the obligation of the Lender to
extend credit accommodations pursuant to the terms of the Credit Agreement that
this Agreement be executed and delivered by the Pledgors.
D. Each Pledgor finds it advantageous, desirable and in the best
interests of such Pledgor to comply with the requirement that this Agreement be
executed and delivered to the Lender.
NOW, THEREFORE, in consideration of the premises and in order to induce
the Lender to enter into the Credit Agreement and to extend credit
accommodations to OCI thereunder, the Pledgors hereby agree with the Lender for
the Lender's benefit as follows:
Section 1. Defined Terms.
-1-
<PAGE> 2
1(a) As used in this Agreement, the following terms shall have
the meanings indicated:
"Collateral" shall have the meaning given to such
term in Section 2.
"Event of Default" shall have the meaning given to
such term in Section 11.
"Lien" shall mean any security interest, mortgage,
pledge, lien, charge, encumbrance, title retention agreement
or analogous instrument or device (including the interest of
the lessors under capitalized leases), in, of or on any assets
or properties of the Person referred to.
"Obligations" shall mean (a) all indebtedness,
liabilities and obligations of the Pledgors to the Lender of
every kind, nature or description under the Credit Agreement,
including either Pledgor's obligation on any promissory note
or notes under the Credit Agreement and any note or notes
hereafter issued in substitution or replacement thereof, (b)
all liabilities of the Pledgors under this Agreement, (c) any
and all other liabilities and obligations of the Pledgors or
either of them to the Lender of every kind, nature and
description, whether direct or indirect or hereafter acquired
by the Lender from any Person, absolute or contingent,
regardless of how such liabilities arise or by what agreement
or instrument they may be evidenced, and in all of the
foregoing cases whether due or to become due, and whether now
existing or hereafter arising or incurred.
"Person" shall mean any individual, corporation,
partnership, limited partnership, joint venture, firm,
association, trust, unincorporated organization, government or
governmental agency or political subdivision or any other
entity, whether acting in an individual, fiduciary or other
capacity.
"Pledged LLC Interests" shall have the meaning given
to such term in Recital B above.
"Pledged Shares" shall have the meaning given to such
term in Recital B above.
"Security Interest" shall have the meaning given to
such term in Section 2.
1(b) Terms Defined in Uniform Commercial Code. All other terms
used in this Agreement that are not specifically defined herein or the
definitions of
-2-
<PAGE> 3
which are not incorporated herein by reference shall have the meaning
assigned to such terms in the Uniform Commercial Code in effect in the
State of New York as of the date first above written to the extent such
other terms are defined therein.
1(c) Singular/Plural, Etc. Unless the context of this
Agreement otherwise clearly requires, references to the plural include
the singular, the singular, the plural and "or" has the inclusive
meaning represented by the phrase "and/or." The words "include",
"includes" and "including" shall be deemed to be followed by the phrase
"without limitation." The words "hereof," "herein," "hereunder," and
similar terms in this Agreement refer to this Agreement as a whole and
not to any particular provision of this Agreement. References to
Section s are references to Section s in this Pledge Agreement unless
otherwise provided.
Section 2. Pledge. As security for the payment and performance of all
of the Obligations, the Pledgors hereby pledge to the Lender and grant to the
Lender a security interest (the "Security Interest") in the following (the
"Collateral"):
2(a) The Pledged Shares and the certificates representing the
Pledged Shares, and all dividends, cash, instruments and other property
from time to time received, receivable or otherwise distributed in
respect of or in exchange for any or all of the Pledged Shares.
2(b) All additional shares of stock of the issuer of the
Pledged Shares from time to time acquired by the Pledgors in any
manner, and the certificates representing such additional shares, and
all dividends, cash, instruments and other property from time to time
received, receivable or otherwise distributed in respect of or in
exchange for any or all of such shares.
2(c) The Pledged LLC Interests and the certificates, units or
subscription agreements evidencing the Pledged LLC Interests, if any,
and all interest, cash, instruments and other property from time to
time received, receivable or otherwise distributed in respect of or in
exchange for any or all of the Pledged LLC Interests.
2(d) All additional membership interests of New Heights from
time to time acquired by the Pledgors in any manner, and the units,
certificates or subscription agreements, if any, representing such
additional interests, and all dividends, cash, instruments and other
property from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of such
membership interests.
-3-
<PAGE> 4
2(e) All proceeds of any and all of the foregoing (including
proceeds that constitute property of types described above).
Section 3. Delivery of Collateral. All certificates and instruments
representing or evidencing the Pledged Shares and the Pledged LLC Interests
shall be delivered to the Lender contemporaneously with the execution of this
Agreement. All certificates and instruments representing or evidencing
Collateral received by the Pledgors after the execution of this Agreement shall
be delivered to the Lender promptly upon a Pledgor's receipt thereof. All such
certificates and instruments shall be held by or on behalf of the Lender
pursuant hereto and shall be in suitable form for transfer by delivery, or shall
be accompanied by duly executed instruments of transfer or assignment in blank,
all in form and substance satisfactory to the Lender. The Lender shall have the
right at any time, whether before or after an Event of Default, to cause any or
all of the Collateral to be transferred of record into the name of the Lender or
its nominee (but subject to the rights of the Pledgors under Section 6) and to
exchange certificates or evidence of membership interests representing or
evidencing Collateral for certificates of smaller or larger denominations.
Notwithstanding any of the foregoing, as to any Collateral consisting of
book-entry or uncertificated securities or securities which are held by a third
Person, the Pledgors shall deliver to the Lender evidence satisfactory to the
Lender that such Collateral has been registered in the name of, or as pledged
to, the Lender. Such evidence shall include the acknowledgment of the issuer or
Person holding such Collateral that such issuer or Person holds such Collateral
as agent for the Lender and that such Collateral is identified on the books of
such issuer or third Person as belonging to or pledged to the Lender.
Section 4. Certain Warranties and Covenants. Each Pledgor makes the
following warranties and covenants:
4(a) OCI has title to the Pledged Shares and OTI has title to
the Pledged LLC Interests and each respective Pledgor will have title
to each other item of Collateral hereafter acquired, free of all Liens
except the Security Interest.
4(b) The Pledgor has full power and authority to execute this
Pledge Agreement, to perform such Pledgor's obligations hereunder and
to subject the Collateral to the Security Interest created hereby.
4(c) No financing statement covering all or any part of the
Collateral is on file in any public office (except for any financing
statements filed by the Lender, and any financing statements or other
documents filed).
4(d) The Pledged Shares have been duly authorized and validly
issued by the issuer thereof and are fully paid and non-assessable. The
Pledged LLC Interests have been duly authorized, issued and delivered
and are fully paid and non-assessable. The certificates representing
the Pledged Shares and the units,
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<PAGE> 5
certificates or subscription agreements, if any, evidencing the Pledged
LLC Interests are genuine. A true and correct copy of the Agreement of
Limited Liability Company of New Heights (the "New Heights LLC
Agreement") has been provided to the Lender. Neither the Pledged Shares
nor the Pledged LLC Interests are subject to any offset or similar
right or claim of the issuers thereof.
4(e) The Pledged Shares constitute 100% of the issued and
outstanding shares of stock of OTI. The Pledged LLC Interests
constitute the percentage of interests in New Heights as indicated on
Schedule I hereto.
4(f) OTI will not execute or consent to any amendment to the
New Heights LLC Agreement or any related operating agreement without
the prior written consent of the Lender.
4(g) OCI has one or more places of business and its chief
executive office is located in the State of Delaware. OTI has one or
more places of business and its chief executive office is located in
the State of Delaware.
Section 5. Further Assurances. The Pledgors agree that at any time and
from time to time, at the expense of the respective Pledgor, each Pledgor will
promptly execute and deliver all further instruments and documents, and take all
further action that may be necessary or that the Lender may reasonably request,
in order to perfect and protect the Security Interest or to enable the Lender to
exercise and enforce its rights and remedies hereunder with respect to any
Collateral (but any failure to request or assure that the applicable Pledgor
execute and deliver such instruments or documents or to take such action shall
not affect or impair the validity, sufficiency or enforceability of this
Agreement and the Security Interest, regardless of whether any such item was or
was not executed and delivered or action taken in a similar context or on a
prior occasion).
Section 6. Voting Rights; Dividends; Etc.
6(a) Subject to paragraph (d) of this Section 6, the Pledgors
shall be entitled to exercise or refrain from exercising any and all
voting and other consensual rights pertaining to the Pledged Shares,
the Pledged LLC Interests or any other stock or interest that becomes
part of the Collateral or any part thereof for any purpose not
inconsistent with the terms of this Agreement or the Credit Agreement;
provided, however, that the Pledgors shall not exercise or refrain from
exercising any such right if such action could reasonably be expected
to have a material adverse effect on the value of the Collateral or any
material part thereof.
6(b) Subject to paragraph (e) of this Section 6, the Pledgors
shall be entitled to receive, retain, and use in any manner not
prohibited by the Credit
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<PAGE> 6
Agreement any and all interest and dividends paid in respect of the
Collateral; provided, however, that any and all
(i) dividends paid or payable other than in cash in
respect of, and instruments and other property received,
receivable or otherwise distributed in respect of, or in
exchange for, any Collateral,
(ii) dividends and other distributions paid or
payable in cash in respect of any Collateral in connection
with a partial or total liquidation or dissolution or in
connection with a reduction of capital, capital surplus or
paid-in-surplus, and
(iii) cash paid, payable or otherwise distributed in
respect of principal of, or in redemption of, or in exchange
for, any Collateral,
shall be, and shall be forthwith delivered to the Lender to hold as,
Collateral and shall, if received by the Pledgors, be received in trust
for the benefit of the Lender, be segregated from the other property or
funds of the Pledgor, and be forthwith delivered to the Lender as
Collateral in the same form as so received (with any necessary
indorsement or assignment). The Pledgors shall, upon request by the
Lender, promptly execute all such documents and do all such acts as may
be necessary or desirable to give effect to the provisions of this
Section 6 (b).
6(c) The Lender shall execute and deliver (or cause to be
executed and delivered) to the Pledgors all such proxies and other
instruments as the applicable Pledgor may reasonably request for the
purpose of enabling the applicable Pledgor to exercise the voting and
other rights that it is entitled to exercise pursuant to Section 6 (a)
hereof and to receive the dividends and interest that it is authorized
to receive and retain pursuant to Section 6 (b) hereof.
6(d) Upon the occurrence and during the continuance of any
Event of Default, the Lender shall have the right in its sole
discretion, and the Pledgors shall execute and deliver all such proxies
and other instruments as may be necessary or appropriate to give effect
to such right, to terminate all rights of the Pledgors to exercise or
refrain from exercising the voting and other consensual rights that it
would otherwise be entitled to exercise pursuant to Section 6 (a)
hereof, and all such rights shall thereupon become vested in the Lender
who shall thereupon have the sole right to exercise or refrain from
exercising such voting and other consensual rights; provided, however,
that the Lender shall not be deemed to possess or have control over any
voting rights with respect to any Collateral unless and until the
Lender has given written notice to the applicable Pledgor that any
further exercise of such voting rights by the applicable Pledgor is
prohibited and that the Lender and/or its assigns will henceforth
exercise such
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<PAGE> 7
voting rights; and provided, further, that neither the registration of
any item of Collateral in the Lender's name nor the exercise of any
voting rights with respect thereto shall be deemed to constitute a
retention by the Lender of any such Collateral in satisfaction of the
Obligations or any part thereof.
6(e) Upon the occurrence and during the continuance of any
Event of Default:
(i) all rights of the Pledgors to receive the
dividends and interest that it would otherwise be authorized
to receive and retain pursuant to Section 6(b) hereof shall
cease, and all such rights shall thereupon become vested in
the Lender who shall thereupon have the sole right to receive
and hold such dividends as Collateral, and
(ii) all payments of interest and dividends that are
received by the Pledgors contrary to the provisions of
paragraph (i) of this Section 6 (e) shall be received in trust
for the benefit of the Lender, shall be segregated from other
funds of the Pledgors and shall be forthwith paid over to the
Lender as Collateral in the same form as so received (with any
necessary indorsement).
Section 7. Transfers and Other Liens; Additional Shares and Membership
Interests.
7(a) Except as may be permitted by the Credit Agreement, each
Pledgor agrees that it will not (i) sell, assign (by operation of law
or otherwise) or otherwise dispose of, or grant any option with respect
to, any of the Collateral, or (ii) create or permit to exist any Lien,
upon or with respect to any of the Collateral.
7(b) OCI and OTI, as the case may be, each agrees that it will
(i) cause each issuer of the Pledged Shares that it controls not to
issue any stock, membership interests or other securities in addition
to or in substitution for the Pledged Shares or Pledged LLC Interests
issued by such issuer, except to the applicable Pledgor, and (ii)
pledge hereunder, immediately upon its acquisition (directly or
indirectly) thereof, any and all additional shares of stock, membership
interests or other securities of each issuer of the Pledged Shares or
Pledged LLC Interests.
Section 8. Lender Appointed Attorney-in-Fact. Each Pledgor hereby
appoints the Lender such Pledgor's attorney-in-fact, with full authority in the
place and stead of such Pledgor and in the name of such Pledgor or otherwise,
from time to time in the Lender's good-faith discretion, to take any action and
to execute any instrument that the Lender may reasonably believe necessary or
advisable to accomplish the purposes
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<PAGE> 8
of this Agreement (subject to the rights of the Pledgor under Section 6 hereof),
in a manner consistent with the terms hereof, including, without limitation, to
receive, indorse and collect all instruments made payable to such Pledgor
representing any dividend or other distribution in respect of the Collateral or
any part thereof and to give full discharge for the same.
Section 9. Lender May Perform. If a Pledgor fails to perform any
agreement contained herein, the Lender may itself perform, or cause performance
of, such agreement, and the reasonable expenses of the Lender incurred in
connection therewith shall be payable by the applicable Pledgor under Section 14
hereof.
Section 10. The Lender's Duties. The powers conferred on the Lender
hereunder are solely to protect its interest in the Collateral and shall not
impose any duty upon it to exercise any such powers. The Lender shall be deemed
to have exercised reasonable care in the safekeeping of any Collateral in its
possession if such Collateral is accorded treatment substantially equal to the
safekeeping which the Lender accords its own property of like kind. Except for
the safekeeping of any Collateral in its possession and the accounting for
monies and for other properties actually received by it hereunder, the Lender
shall have no duty, as to any Collateral, as to ascertaining or taking action
with respect to calls, conversions, exchanges, maturities, tenders or other
matters relative to any Collateral, whether or not the Lender has or is deemed
to have knowledge of such matters, or as to the taking of any necessary steps to
preserve rights against any Persons or any other rights pertaining to any
Collateral. The Lender will take action in the nature of exchanges, conversions,
redemption, tenders and the like requested in writing by a Pledgor with respect
to any of the Collateral in the Lender's possession if the Lender in its
reasonable judgment determines that such action will not impair the Security
Interest or the value of the Collateral, but a failure of the Lender to comply
with any such request shall not of itself be deemed a failure to exercise
reasonable care.
Section 11. Default. Each of the following occurrences shall constitute
an Event of Default under this Agreement: (a) a Pledgor shall fail to observe or
perform any covenant or agreement applicable to such Pledgor under this
Agreement; or (b) any representation or warranty made by a Pledgor in this
Agreement or in any financial statements, reports or certificates heretofore or
at any time hereafter submitted by or on behalf of a Pledgor to the Lender shall
prove to have been false or materially misleading when made; or (c) any Event of
Default shall occur under the Credit Agreement.
Section 12. Remedies upon Default. If any Event of Default shall have
occurred and be continuing:
12(a) The Lender may exercise in respect of the Collateral, in
addition to other rights and remedies provided for herein or otherwise
available to it, all the rights and remedies of a secured party on
default under the Uniform
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<PAGE> 9
Commercial Code of the State of New York (the "Code") in effect at that
time (whether or not the Code then applies to the affected Collateral),
and may, without notice except as specified below, sell the Collateral
or any part thereof in one or more parcels at public or private sale,
at any exchange, broker's board or at any of the Lender's offices or
elsewhere, for cash, on credit or for future delivery, and upon such
other terms as the Lender may reasonably believe are commercially
reasonable. Each Pledgor agrees that, to the extent notice of sale
shall be required by law, at least ten days' prior notice to such
Pledgor of the time and place of any public sale or the time after
which any private sale is to be made shall constitute reasonable
notification. The Lender shall not be obligated to make any sale of
Collateral regardless of notice of sale having been given. The Lender
may adjourn any public or private sale from time to time by
announcement at the time and place fixed therefor, and such sale may,
without further notice, be made at the time and place to which it was
so adjourned. Each Pledgor hereby waives all requirements of law, if
any, relating to the marshalling of assets which would be applicable in
connection with the enforcement by the Lender of its remedies
hereunder, absent this waiver.
12(b) The Lender may notify any Person obligated on any of the
Collateral that the same has been assigned or transferred to the Lender
and that the same should be performed as requested by, or paid directly
to, the Lender, as the case may be. The applicable Pledgor shall join
in giving such notice, if the Lender so requests. The Lender may, in
the Lender's name or in such Pledgor's name, demand, sue for, collect
or receive any money or property at any time payable or receivable on
account of, or securing, any such Collateral or grant any extension to,
make any compromise or settlement with or otherwise agree to waive,
modify, amend or change the obligation of any such Person.
12(c) Any cash held by the Lender as Collateral and all cash
proceeds received by the Lender in respect of any sale of, collection
from, or other realization upon all or any part of the Collateral may,
in the discretion of the Lender, be held by the Lender as collateral
for, or then or at any time thereafter be applied in whole or in part
by the Lender against, all or any part of the Obligations (including
any expenses of the Lender payable pursuant to Section 14 hereof).
Section 13. Waiver of Certain Claims. Each Pledgor acknowledges that
because of present or future circumstances, a question may arise under the
Securities Act of 1933, as from time to time amended (the "Securities Act"),
with respect to any disposition of the Collateral permitted hereunder. Each
Pledgor understands that compliance with the Securities Act may very strictly
limit the course of conduct of the Lender if the Lender were to attempt to
dispose of all or any portion of the Collateral and may also limit the extent to
which or the manner in which any subsequent transferee of the Collateral or any
portion thereof may dispose of the same. There may
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<PAGE> 10
be other legal restrictions or limitations affecting the Lender in any attempt
to dispose of all or any portion of the Collateral under the applicable Blue Sky
or other securities laws or similar laws analogous in purpose or effect. The
Lender may be compelled to resort to one or more private sales to a restricted
group of purchasers who will be obliged to agree, among other things, to acquire
such Collateral for their own account for investment only and not to engage in a
distribution or resale thereof. Each Pledgor agrees that the Lender shall not
incur any liability, and any liability of such Pledgor for any deficiency shall
not be impaired, as a result of the sale of the Collateral or any portion
thereof at any such private sale in a manner that the Lender reasonably believes
is commercially reasonable (within the meaning of Section 9-504(3) of the
Uniform Commercial Code). Each Pledgor hereby waives any claims against the
Lender arising by reason of the fact that the price at which the Collateral may
have been sold at such sale was less than the price that might have been
obtained at a public sale or was less than the aggregate amount of the
Obligations, even if the Lender shall accept the first offer received and does
not offer any portion of the Collateral to more than one possible purchaser.
Each Pledgor further agrees that the Lender has no obligation to delay sale of
any Collateral for the period of time necessary to permit the issuer of such
Collateral to qualify or register such Collateral for public sale under the
Securities Act, applicable Blue Sky laws and other applicable state and federal
securities laws, even if said issuer would agree to do so. Without limiting the
generality of the foregoing, the provisions of this Section would apply if, for
example, the Lender were to place all or any portion of the Collateral for
private placement by an investment banking firm, or if such investment banking
firm purchased all or any portion of the Collateral for its own account, or if
the Lender placed all or any portion of the Collateral privately with a
purchaser or purchasers.
Section 14. Costs and Expenses; Indemnity. The Pledgors will pay or
reimburse the Lender on demand for all out-of-pocket expenses (including in each
case all filing and recording fees and taxes and all reasonable fees and
expenses of counsel and of any experts and agents) incurred by the Lender in
connection with the creation, perfection, protection, satisfaction, foreclosure
or enforcement of the Security Interest and the preparation, administration,
continuance, amendment or enforcement of this Agreement, and all such costs and
expenses shall be part of the Obligations secured by the Security Interest. The
Pledgors shall indemnify and hold the Lender harmless from and against any and
all claims, losses and liabilities (including reasonable attorneys' fees)
growing out of or resulting from this Agreement (including enforcement of this
Agreement) or the Lender's actions pursuant hereto, except claims, losses or
liabilities resulting from the Lender's gross negligence or willful misconduct
as determined by a final judgment of a court of competent jurisdiction. Any
liability of the Pledgors to indemnify and hold the Lender harmless pursuant to
the preceding sentence shall be part of the Obligations secured by the Security
Interest. The obligations of the Pledgors under this Section shall survive any
termination of this Agreement.
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<PAGE> 11
Section 15. Waivers and Amendments; Remedies. This Agreement can be
waived, modified, amended, terminated or discharged, and the Security Interest
can be released, only explicitly in a writing signed by the Lender. A waiver so
signed shall be effective only in the specific instance and for the specific
purpose given. Mere delay or failure to act shall not preclude the exercise or
enforcement of any rights and remedies available to the Lender. All rights and
remedies of the Lender shall be cumulative and may be exercised singly in any
order or sequence, or concurrently, at the Lender's option, and the exercise or
enforcement of any such right or remedy shall neither be a condition to nor bar
the exercise or enforcement of any other.
Section 16. Notices. Any notice or other communication to any party in
connection with this Agreement shall be in writing and shall be sent by manual
delivery, telegram, telex, facsimile transmission, overnight courier or United
States mail (postage prepaid) addressed to such party at the address specified
on the signature page hereof, or at such other address as such party shall have
specified to the other party hereto in writing. All periods of notice shall be
measured from the date of delivery thereof if manually delivered, from the date
of sending thereof if sent by telegram, telex or facsimile transmission, from
the first business day after the date of sending if sent by overnight courier,
or from four days after the date of mailing if mailed.
Section 17. Pledgors Acknowledgements. Each Pledgor hereby acknowledges
that (a) such Pledgor has been advised by counsel in the negotiation, execution
and delivery of this Agreement, (b) the Lender has no fiduciary relationship to
such Pledgor, the relationship being solely that of debtor and creditor, and (c)
no joint venture exists between the Pledgors and the Lender.
Section 18. Continuing Security Interest; Assignments under Credit
Agreement. This Agreement shall create a continuing security interest in the
Collateral and shall (a) remain in full force and effect until the payment in
full of the Obligations and the expiration of the obligation, if any, of the
Lender to extend credit accommodations to the Pledgors, (b) be binding upon the
Pledgors, and their successors and assigns, and (c) inure, together with the
rights and remedies of the Lender hereunder, to the benefit of, and be
enforceable by, the Lender and its successors, transferees and assigns. Without
limiting the generality of the foregoing clause (c), the Lender may assign or
otherwise transfer all or any portion of its rights and obligations under the
Credit Agreement and the Loan Documents to any other Person to the extent and in
the manner provided in the Credit Agreement, and may similarly transfer all or
any portion of its rights under this Pledge Agreement to such Persons.
Section 19. Termination of Security Interest. Upon payment in full of
the Obligations and the expiration of any obligation of the Lender to extend
credit accommodations to the Borrower, the security interest granted hereby
shall terminate and all rights to the Collateral shall revert to the applicable
Pledgor. Upon any such
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<PAGE> 12
termination, the Lender will return to the applicable Pledgor such of the
Collateral as shall not have been sold or otherwise applied pursuant to the
terms hereof and execute and deliver to such Pledgor such documents as such
Pledgor shall reasonably request to evidence such termination. Any reversion or
return of the Collateral upon termination of this Agreement and any instruments
of transfer or termination shall be at the expense of the applicable Pledgor and
shall be without warranty by, or recourse on, the Lender. As used in this
Section , "Pledgors" includes any assigns of a Pledgor, any Person holding a
subordinate security interest in any part of the Collateral or whoever else may
be lawfully entitled to any part of the Collateral.
SECTION 20. GOVERNING LAW AND CONSTRUCTION. THE VALIDITY, CONSTRUCTION
AND ENFORCEABILITY OF THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE
OF NEW YORK; PROVIDED, HOWEVER, THAT NO EFFECT SHALL BE GIVEN TO CONFLICT OF
LAWS PRINCIPLES OF THE STATE OF NEW YORK, EXCEPT TO THE EXTENT THAT THE VALIDITY
OR PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN
RESPECT OF ANY PARTICULAR COLLATERAL ARE MANDATORILY GOVERNED BY THE LAWS OF A
JURISDICTION OTHER THAN THE STATE OF NEW YORK. Whenever possible, each provision
of this Agreement and any other statement, instrument or transaction
contemplated hereby or relating hereto shall be interpreted in such manner as to
be effective and valid under such applicable law, but, if any provision of this
Agreement or any other statement, instrument or transaction contemplated hereby
or relating hereto shall be held to be prohibited or invalid under such
applicable law, such provision shall be ineffective only to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of this Agreement or any other statement, instrument
or transaction contemplated hereby or relating hereto.
SECTION 21. CONSENT TO JURISDICTION. AT THE OPTION OF THE LENDER, THIS
AGREEMENT MAY BE ENFORCED IN ANY FEDERAL COURT OR NEW YORK STATE COURT SITTING
IN THE CITY OF NEW YORK; AND THE PLEDGORS CONSENT TO THE JURISDICTION AND VENUE
OF ANY SUCH COURT AND WAIVE ANY ARGUMENT THAT VENUE IN SUCH FORUMS IS NOT
CONVENIENT. IN THE EVENT A PLEDGOR COMMENCES ANY ACTION IN ANOTHER JURISDICTION
OR VENUE UNDER ANY TORT OR CONTRACT THEORY ARISING DIRECTLY OR INDIRECTLY FROM
THE RELATIONSHIP CREATED BY THIS AGREEMENT, THE LENDER AT ITS OPTION SHALL BE
ENTITLED TO HAVE THE CASE TRANSFERRED TO ONE OF THE JURISDICTIONS AND VENUES
ABOVE-DESCRIBED, OR IF SUCH TRANSFER CANNOT BE ACCOMPLISHED UNDER APPLICABLE
LAW, TO HAVE SUCH CASE DISMISSED WITHOUT PREJUDICE.
SECTION 22. WAIVER OF JURY TRIAL. EACH OF THE PLEDGORS AND THE LENDER,
BY ITS ACCEPTANCE OF THIS AGREEMENT, IRREVOCABLY WAIVES ANY AND ALL RIGHT TO
TRIAL BY JURY IN ANY LEGAL PROCEEDING
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<PAGE> 13
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
Section 23. Counterparts. This Agreement may be executed in any number
of counterparts, each of which when so executed and delivered shall be deemed an
original, but all such counterparts together shall constitute but one and the
same instrument.
Section 24. General. All representations and warranties contained in
this Agreement or in any other agreement between a Pledgor and the Lender shall
survive the execution, delivery and performance of this Agreement and the
creation and payment of the Obligations. Each Pledgor waives notice of the
acceptance of this Agreement by the Lender. Captions in this Agreement are for
reference and convenience only and shall not affect the interpretation or
meaning of any provision of this Agreement.
(REMAINDER OF PAGE INTENTIONALLY LEFT BLANK)
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<PAGE> 14
IN WITNESS WHEREOF, each Pledgor has caused this Pledge Agreement to be
duly executed and delivered by its officer thereunto duly authorized as of the
date first above written.
OAKHURST COMPANY, INC.
By /s/ Robert M. Davies
Its Chairman and CEO
Address for OCI:
3365 Spruce Lane
Grapevine, Texas 76501
Attn: President
Fax: (817) 416-0914
OAKHURST TECHNOLOGY, INC.
By /s/ Robert M. Davies
Its Chairman and CEO
Address for OTI:
3365 Spruce Lane
Grapevine, Texas 76501
Attn: President
Fax: (817) 416-0914
Address for Lender:
KTI, Inc.
7000 Boulevard East
Guttenberg, NJ 07093
Attn: President
Fax: (201) 854-1771
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<PAGE> 15
SCHEDULE I
Part I
PLEDGED STOCK
Stock Issuer: Oakhurst Technology, Inc.
Percentage Ownership: 100%
Class of Stock:
Certificate No(s).:
Par Value:
Number of Shares:
Part II
PLEDGED LLC INTERESTS:
Issuer: New Heights Recovery & Power, LLC
Percentage Ownership: 50%
Number of Units: 7,963,500
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<PAGE> 1
INTERCREDITOR AGREEMENT
between
KTI, INC.
and
FINOVA CAPITAL CORPORATION
December 29, 1998
<PAGE> 2
INTERCREDITOR AGREEMENT
THIS INTERCREDITOR AGREEMENT (this "Agreement"), dated as of December
29, 1998, is entered into by and among KTI, Inc., a New Jersey corporation
("KTI"), FINOVA CAPITAL CORPORATION, a Delaware corporation ("FINOVA"), and
OAKHURST COMPANY, INC., a Delaware corporation ("Oakhurst"), with reference to
the following facts:
RECITALS
A. Oakhurst intends to enter into the KTI Loan Documents (as defined below)
with KTI, pursuant to which KTI will extend certain financing to Oakhurst for
the benefit of Oakhurst Technology, Inc., a Delaware corporation ("OTI") on the
terms and conditions set forth in such KTI Loan Documents.
B. Oakhurst, together with Steel City Products, Inc., a Delaware
corporation, Dowling's Fleet Service Co., Inc., a New York corporation, Oakhurst
Management Corporation, a Texas corporation, Oakhurst Holdings, Inc., a Delaware
corporation, and G&O Sales Company, a Pennsylvania corporation (collectively,
"Borrowers"), have entered into various agreements with FINOVA, including that
certain Loan and Security Agreement, dated as of March 28, 1996 (as it may be
amended from time to time, the "FINOVA Loan Agreement"), pursuant to which
FINOVA provides certain loans and financial accommodations to Borrowers.
C. Pursuant to the FINOVA Loan Agreement, Oakhurst must obtain FINOVA's
written consent prior to entering into the KTI Loan Documents and FINOVA is
unwilling to give such consent unless KTI enters into this Agreement.
D. Accordingly, to induce FINOVA to consent to Oakhurst entering into the
KTI Loan Documents and to continue to extend to Oakhurst the loans contemplated
under the FINOVA Loan Agreement, KTI is willing to enter into this Agreement
with FINOVA.
AGREEMENT
NOW, THEREFORE, the parties agree as follows:
1. Certain Defined Terms.
(a) General: When used in this Agreement, the following terms
have the following respective meanings:
"Agreement" has the meaning set forth in the introduction
hereto.
"Borrowers" has the meaning set forth in the recitals of this
Agreement.
"FINOVA" has the meaning set forth in the introduction of this
Agreement.
2
<PAGE> 3
"FINOVA Collateral" means the collateral set forth in Exhibit
A attached hereto and incorporated by this reference.
"FINOVA Debt" means all present and future indebtedness and
other obligations (direct or indirect) owing by Oakhurst to FINOVA. FINOVA Debt
includes (without limitation) the Obligations, all present and future
representations, warranties, covenants, agreements, indemnities, and other
obligations which Oakhurst or its successors and assigns may incur to FINOVA,
including (without limitation) those incurred after the filing of a bankruptcy
petition by or against Oakhurst.
"FINOVA Loan Agreement" has the meaning set forth in the
recitals of this Agreement.
"KTI" has the meaning set forth in the introduction of this
Agreement.
"KTI Collateral" means the collateral as set forth in Exhibit
B attached hereto and incorporated herein by this reference.
"KTI Debt" means all present and future indebtedness and other
obligations (direct or indirect) owing by Oakhurst to KTI. KTI Debt includes
(without limitation) indebtedness owed under the KTI Loan Documents, together
with any other debts, demands, monies, indebtedness, liabilities, and
obligations now or hereafter owed by Oakhurst to KTI, including interest,
principal, costs, and other charges, together with all claims, rights, causes of
action, judgments, decrees and other obligations, including (without limitation)
those incurred after the filing of a bankruptcy petition by or against Oakhurst.
"KTI Loan Documents" means all instruments and agreements
evidencing the KTI Debt, including, without limitation, that certain Letter Loan
Agreement of even date herewith among Oakhurst, OTI and KTI and that certain
Promissory Note, of even date herewith in the original principal amount of
Eleven Million Five Hundred Thousand Dollars ($11,500,000), subject to increase
in accordance with the Letter Loan Agreement, executed by Oakhurst to the order
of KTI and any other notes which may hereafter be executed by Oakhurst to the
order of KTI (collectively, the "KTI Note"), and that certain Pledge Agreement
of even date herewith among Oakhurst, OTI and KTI, copies of which are attached
hereto as Exhibit C and incorporated herein by this reference and as each may be
amended, modified, supplemented or restated from time to time.
"Lender" means either FINOVA or KTI.
"Oakhurst" has the meaning set forth in the recitals to this
Agreement.
"OTI" has the meaning set forth in the recitals to this
Agreement.
(b) Other Terms. Unless otherwise defined in this Agreement,
any and all initially capitalized terms set forth in this Agreement shall have
the meaning ascribed thereto in the FINOVA Loan Agreement.
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2. Representations, Warranties, and Covenants.
(a) KTI and Oakhurst represent, warrant, and covenant (jointly and
severally) to FINOVA that:
(i) Amount of KTI Debt. As of the date of this Agreement, the
maximum commitment amount for the KTI Debt is Eleven Million Five Hundred
Thousand Dollars ($11,500,000), subject to increase to an amount up to but not
exceeding Seventeen Million Dollars ($17,000,000), in accordance with the
provisions of the KTI Loan Documents.
(ii) KTI Loan Documents. All KTI Loan Documents shall be
conspicuously marked with substantially the following legend:
"Subject to that certain Intercreditor Agreement, dated as of
December 29, 1998, among KTI, Inc., a New Jersey corporation,
FINOVA Capital Corporation, a Delaware corporation, and
Oakhurst Company, Inc., a Delaware corporation."
and after being so marked the originals of the KTI Loan Documents shall be
exhibited to FINOVA and a copy of the marked KTI Loan Documents shall be
delivered to FINOVA.
(iii) No Default. Oakhurst is not in default under any KTI
Debt Document.
(iv) Notice of Default. KTI and Oakhurst shall each promptly
notify FINOVA of all defaults, events of default, and events which with the
giving of notice or the passage of time, or both, would become events of default
("unmatured events of default") under any KTI Debt Document.
(v) Further Action. Upon FINOVA's request, KTI and Oakhurst
will promptly take all actions which FINOVA believes appropriate to carry out
the purposes of this Agreement.
(b) FINOVA and Oakhurst represent, warrant, and covenant (jointly and
severally) to KTI that:
(i) No Default. To the best of FINOVA's knowledge, Oakhurst is
not in default under the FINOVA Loan Agreement.
(ii) Further Action. Upon KTI's request, FINOVA and Oakhurst
will promptly take all actions which KTI believes appropriate to carry out the
purposes of this Agreement.
3. Priorities.
(a) General. As more fully provided in the remainder of this Section 3,
the KTI Debt is hereby subordinated and made junior to the FINOVA Debt, except
with respect to payments made from any revenues or dividends generated by OTI
and the assets of OTI, and
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except with respect to proceeds of the KTI Collateral, as to which the KTI Debt
is senior and as to which the FINOVA Debt is subordinated.
(b) Payments to KTI. Notwithstanding any terms or provisions set forth
in the KTI Loan Documents, Oakhurst may make payments of interest and principal
under the terms of the KTI Loan Documents; provided, however, such payments of
principal and interest shall only be made (i) from the proceeds of dividends
received from OTI, (ii) from the proceeds of the sale or disposition of the KTI
Collateral and (iii) from the proceeds of Oakhurst's cash flow or other assets,
including, without limitation, FINOVA Collateral; provided, that (A) Oakhurst
has received FINOVA's prior written consent, which shall not be unreasonably
withheld, (B) no such payment shall be made from the proceeds of Oakhurst's cash
flow or other assets, including, without limitation, FINOVA Collateral prior to
March 28, 1999 and (C) no Event of Default (as defined in the FINOVA Loan
Agreement), or event which with notice or the passage of time would constitute
an Event of Default, exists or has occurred and is continuing. Oakhurst and KTI
agree (and KTI acknowledges such agreement) that Oakhurst shall in no event: (i)
make any payments to KTI in respect of the KTI Debt except as provided in this
Section 3(b) or (ii) without FINOVA's prior written consent, execute or deliver
any negotiable instruments as evidence of the KTI Debt.
(c) Priority of Interests in FINOVA Collateral. KTI currently holds no
security interest or lien in the FINOVA Collateral, or in any other assets of
Oakhurst (other than its security interest in the KTI Collateral), as security
for Oakhurst's payment and performance of its obligations to KTI under the KTI
Loan Documents, and no such security interest or lien is currently contemplated
to be granted by Oakhurst to KTI. In the event KTI hereafter acquires any
security interest, lien, or other right or interest in the FINOVA Collateral,
such security interest, lien, or other right or interest shall at all times be,
prior to the indefeasible payment in full of the FINOVA Debt be junior,
subordinate and subject to any security interest, lien or other right or
interest FINOVA now has or may hereafter acquire in the FINOVA Collateral. The
subordination provided in this Section 3(c) shall apply irrespective of the time
or order of attachment or perfection of any security interest, irrespective of
the time or order of filing of any financing statement or other document, and
irrespective of any statute, rule, law, or court decision to the contrary.
(d) Priority of Interests in KTI Collateral. FINOVA currently holds no
security interest or lien in the KTI Collateral as security for Oakhurst's
payment and performance of its obligations to FINOVA under the FINOVA Loan
Agreement, and no such security interest or lien is currently contemplated to be
granted by Oakhurst to FINOVA. In the event FINOVA hereafter acquires any
security interest, lien, or other right or interest in the KTI Collateral, such
security interest, lien, or other right or interest shall at all times be, prior
to the indefeasible payment in full of the KTI Debt be junior, subordinate and
subject to any security interest, lien or other right or interest KTI now has or
may hereafter acquire in the KTI Collateral. The subordination provided in this
Section 3(d) shall apply irrespective of the time or order of attachment or
perfection of any security interest, irrespective of the time or order of filing
of any financing statement or other document, and irrespective of any statute,
rule, law, or court decision to the contrary.
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4. Restrictions on Lenders' Actions.
(a) Unless it shall have obtained FINOVA's prior written consent,
until the FINOVA Debt has been paid in full KTI will not:
(i) demand or accept any payment upon the KTI Debt, except as
may be permitted by this Agreement;
(ii) demand or take a security interest in or lien or encumber
any FINOVA Collateral or other asset of Oakhurst other than the KTI Collateral;
or
(iii) commence, prosecute, or participate in any
administrative, legal, or equitable action that in FINOVA's judgment might
adversely affect Oakhurst's business or Oakhurst's ability to pay the FINOVA
Debt, except that KTI may foreclose on the KTI Collateral.
(b) Unless it shall have obtained KTI's prior written consent, until
the KTI Debt has been paid in full FINOVA will not demand or take a security
interest in or lien or encumber any KTI Collateral.
5. Remedies.
(a) If Oakhurst or KTI attempts to violate Section 3(b) or
Section 4(a)(i), or if KTI in any other manner receives any funds which by
virtue of this Agreement it is precluded from receiving, KTI shall be deemed to
hold any payment or distribution it receives in trust for FINOVA's benefit. In
such case, KTI shall immediately remit such payment or distribution to FINOVA.
If KTI attempts to violate Section 4(a)(ii), FINOVA (in FINOVA's or Oakhurst's
name) or Oakhurst may seek injunctive or other equitable relief to prevent or
stop KTI's actions, it being agreed that legal remedies may be inadequate. If
KTI attempts to violate Section 4(a)(iii), Oakhurst may interpose as a defense
or plea the making of this Agreement, and FINOVA may intervene and interpose
such defense or plea in its own or Oakhurst's name. The remedies provided in
this Section 5 are not exclusive; FINOVA shall be entitled to all other remedies
available at law or in equity.
(b) If FINOVA attempts to violate Section 4(b), KTI (in KTI's
or Oakhurst's name) or Oakhurst may seek injunctive or other equitable relief to
prevent or stop FINOVA's actions, it being agreed that legal remedies may be
inadequate.
6. No Action to Violate Lenders' Agreements. KTI shall not take any action
which in FINOVA's judgment might cause Oakhurst to violate either the FINOVA
Loan Agreement or any other agreement between Oakhurst and FINOVA or FINOVA's
position in the FINOVA Collateral. FINOVA shall not take any action which in
KTI's judgment might cause Oakhurst to violate either the KTI Loan Documents or
KTI's position in the KTI Collateral.
7. No Amendment of KTI Loan Documents. Unless FINOVA's prior written
consent shall have been obtained, which consent shall not be unreasonably
withheld, no KTI Debt Document may be amended or modified; provided, that the
maximum amount outstanding
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under the KTI Loan Documents may be increased to an amount not to exceed
Seventeen Million Dollars ($17,000,000).
8. Waiver. Each Lender hereby waives any right it may now or hereafter have
to require the other Lender to marshall assets, to exercise rights or remedies
in a particular manner, or to forbear from exercising such rights and remedies
in any particular manner or order.
9. No Constraint on FINOVA. Nothing contained in this Agreement shall
preclude FINOVA from discontinuing its extension of credit to Oakhurst (whether
under the FINOVA Loan Agreement or otherwise) or from taking (without notice to
KTI, Oakhurst, or any other individual or entity) any other action in respect of
the FINOVA Debt or the FINOVA Collateral which FINOVA is otherwise entitled to
take with respect to the FINOVA Debt or the FINOVA Collateral. Among the actions
which Lender may take in accordance with this Section 9 are: renewing,
extending, and increasing the amount of the FINOVA Debt; otherwise changing the
terms of the FINOVA Debt; settling, releasing, compromising, and collecting on
the FINOVA Debt; making (and refraining from making) other secured and unsecured
loans and advances to Oakhurst; amending any present or future agreement between
FINOVA and Oakhurst; and all other actions which FINOVA deems advisable.
10. Impact of Bankruptcy. If a voluntary or involuntary bankruptcy petition
shall be filed respecting Oakhurst:
(a) this Agreement (including the priority provisions contained in
Section 3 shall continue in full force and effect;
(b) KTI shall take no action in the bankruptcy proceeding which might
(in FINOVA's opinion) adversely affect FINOVA's rights and interests respecting
the FINOVA Debt; and
(c) KTI shall take all actions reasonably requested by FINOVA to
protect FINOVA's interests in the FINOVA Collateral and the FINOVA Debt during
the course of such bankruptcy proceedings.
11. Miscellaneous.
(a) Amendment. No amendment or waiver of this Agreement shall
be effective unless in a writing signed by each party hereto.
(b) Binding Effect; Governing Law; Venue. This Agreement shall
be binding upon and inure to the benefit of the parties and their respective
successors and assigns. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of Arizona. All actions and
proceedings arising in connection with this Agreement shall be tried and
litigated only in state or federal courts located in the County of Maricopa,
State of Arizona, or (at FINOVA's sole option) in any other court in which
FINOVA may initiate legal or equitable proceedings, so long as such court has
subject matter jurisdiction. KTI and Oakhurst each waives any right it may have
to plead forum non-conveniens or otherwise to object to venue, and hereby
consents to any court-ordered relief.
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(c) WAIVER OF RIGHT TO TRIAL BY JURY. EACH LENDER AND OAKHURST EACH
WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION TO ENFORCE OR DEFEND ANY
MATTER ARISING FROM OR RELATED TO THIS AGREEMENT, AND ACKNOWLEDGES THAT EACH
OTHER PARTY ALSO WAIVES SUCH RIGHT.
(d) Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed an original and all of which together shall constitute
one agreement.
(e) Headings. The headings contained in this Agreement are for
convenience only. They shall not affect the interpretation of this Agreement.
(f) Attorneys' Fees; etc. In any suit or action brought to enforce
this Agreement or to obtain an adjudication (declaratory or otherwise) of rights
or obligations hereunder, the losing party shall pay to the prevailing party
reasonable attorneys' fees and other costs and expenses incurred by the
prevailing party.
(g) Severability. Any provision of this Agreement that is prohibited
by law or unenforceable in any jurisdiction shall be ineffective in that
jurisdiction to the extent of such prohibition or unenforceability, without
invalidating the remaining provisions hereof or affecting the validity or
enforceability of such provision in any other jurisdiction. To the extent
permissible, the parties waive any law that renders this Agreement prohibited or
unenforceable.
(h) Entire Agreement. This Agreement constitutes the entire agreement
between and among the parties regarding the subject matter hereof. This
Agreement supersedes all prior and contemporaneous agreements between or among
the parties with respect to the subject matter hereof.
(i) Notice. All notices or demands by any party hereunder must be in
writing and personally delivered or sent by registered or certified mail,
postage prepaid, return receipt requested, or by prepaid telex, facsimile,
telecopy, telegram (with messenger delivery specified), or other method of
electronic communication as follows:
FINOVA: FINOVA CAPITAL CORPORATION
355 South Grand Avenue, Suite 2400
Los Angeles, California 90071
Attention: Dale Abernathy
with a copy to: KELLEY DRYE & WARREN LLP
777 South Figueroa Street, Suite 2700
Los Angeles, California 90017
Attention: Marshall C. Stoddard,
Jr., Esq.
KTI: KTI, INC.
7000 Boulevard East
Guttenberg, New Jersey
Attention: President
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with a copy to: DORSEY & WHITNEY LLP
Pillsbury Center South
220 South Sixth Street
Minneapolis, Minnesota 55402
Attention: Diane D. Malfeld, Esq.
Oakhurst: OAKHURST COMPANY, INC.
3365 Spruce Lane
Grapevine, Texas
Attention: President
with a copy to: Roger M. Barzun, Esq.
P.O. Box 767
Concord, Massachusetts 01742-0767
The parties may change the address at which they receive notice, by giving
notice to each other in the foregoing manner. Notices or demands sent in
accordance with this Section shall be deemed to be received on the earlier of
the date of actual receipt or five (5) calendar days after deposit in the United
States mail.
(j) Termination. This Agreement shall continue in full force and
effect until Oakhurst has satisfied in full the FINOVA Debt or the KTI Debt,
whichever is earlier.
(k) Rules of Construction. As used in this Agreement, the singular
includes the plural; the plural includes the singular. References to one gender
include all genders. Unless otherwise specified, references to Sections,
Exhibits, and parties refer to Sections, Exhibits, and parties of or to this
Agreement. The words "include," "including," and similar words are not intended
to be limiting.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective duly authorized officers, as of the date first
above written.
KTI, INC.,
a New Jersey corporation
By: /s/ Robert E. Wetzel
Name: Robert E. Wetzel
Title: Senior Vice President
FINOVA CAPITAL CORPORATION,
a Delaware corporation
By: /s/ Frank Monzo
Name: Frank Monzo
Title: EVP
OAKHURST COMPANY, INC.,
a Delaware corporation
By: /s/ Robert M. Davies
Name: Robert M. Davies
Title: Chairman and CEO
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EXHIBIT A
(FINOVA Collateral)
All of Oakhurst's now owned and hereafter acquired accounts
(whether or not earned by performance), any letters of credit naming Oakhurst as
beneficiary, proceeds of letters of credit, contract rights, chattel paper,
instruments, documents and all other forms of obligations at any time owing to
Oakhurst, all guaranties and other security therefor, whether secured or
unsecured, all merchandise returned to or repossessed by Oakhurst, and all
rights of stoppage in transit and all other rights or remedies of an unpaid
vendor, lienor or secured party (collectively, "Receivables").
All of Oakhurst's now owned and hereafter acquired goods,
merchandise or other personal property, wherever located, to be furnished under
any contract of service or held for sale or lease, all raw materials, work in
process, finished goods and materials and supplies of any kind, nature or
description which are or might be used or consumed in Oakhurst's business or
used in connection with the manufacture, packing, shipping, advertising, selling
or finishing of such goods, merchandise or other personal property, and all
documents of title or other documents representing them (collectively,
"Inventory").
All of Oakhurst's present and hereafter acquired machinery,
molds, machine tools, motors, furniture, equipment, furnishings, fixtures, trade
fixtures, motor vehicles, tools, parts, dies, jigs, goods and other tangible
personal property (other than Inventory) of every kind and description used in
Oakhurst's operations or owned by Oakhurst and any interest in any of the
foregoing, and all attachments, accessories, accessions, replacements,
substitutions, additions or improvements to any of the foregoing, wherever
located.
All general intangibles of Oakhurst, whether now owned or
hereafter created or acquired by Oakhurst, including, without limitation, all
choses in action, causes of action, corporate or other business records, deposit
accounts, inventions, designs, drawings, blueprints, trademarks, licenses and
patents, names, trade secrets, goodwill, copyrights, registrations, licenses,
franchises, customer lists, security and other deposits, rights in all
litigation presently or hereafter pending for any cause or claim (whether in
contract, tort or otherwise), and all judgments now or hereafter arising
therefrom, all claims of Oakhurst against Secured Party, rights to purchase or
sell real or personal property, rights as a licensor or licensee of any kind,
royalties, telephone numbers, proprietary information, purchase orders, and all
insurance policies and claims (including without limitation credit, liability,
property and other insurance) tax refunds and claims, computer programs, discs,
tapes and tape files, claims under guaranties, security interests or other
security held by or granted to Oakhurst to secure payment of any of the
Receivables by an account Oakhurst, all rights to indemnification and all other
intangible property of every kind and nature (other than Receivables).
All investment property and money of Oakhurst (other than the
KTI Collateral), whether now owned or hereafter acquired by Oakhurst, any and
all property now or at any time hereafter in Secured Party's possession
(including claims and credit balances), and all proceeds (including proceeds of
any insurance policies, proceeds of proceeds and claims against third parties),
all products and all books and records related to any of the foregoing.
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EXHIBIT B
(KTI Collateral)
See attached.
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EXHIBIT C
(Copies of KTI Loan Documents)
See attached.
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NONEXCLUSIVE LICENSE TO USE TECHNOLOGY
This Agreement is entered into by and between KTI Recycling, Inc., a
Delaware corporation ("KTI") and Oakhurst Technology, Inc. ("OTI"), a Delaware
corporation and a wholly-owned subsidiary of Oakhurst Company, Inc. on this
29th day of December, 1998.
Whereas, KTI holds a Canadian patent for treatment of scrap
Registration No. 1,136,594 for all right, title and interest in and to certain
inventions relating to cryogenic tire recycling operations (the "Technology"),
and the equipment in which the Technology is embedded will be referred to herein
as the "KTI Recycling System"; and
Whereas, on even date herewith, KTI has agreed to sell, and OTI has
agreed to purchase, a KTI Recycling System on the terms and conditions set forth
in that certain Equipment Purchase Agreement between the parties hereto (the
"Purchase Agreement"); and
Whereas, in connection with and as an integral part of the Purchase
Agreement, the parties wish to enter into this Nonexclusive License to Use
Technology;
Now therefore in consideration of One Dollar and other good and
valuable considerations, the receipt of which is hereby acknowledged, the
parties agree as follows:
1. Grant of License. Subject to the terms and conditions of this
Agreement, KTI hereby grants to OTI a nonexclusive license to use the Technology
in operation of the KTI Recycling System and to sell the tires processed or
produced thereby at OTI's place of business in Ford Heights, Illinois and at no
other location whatsoever.
2. Royalty Payments. (a) OTI agrees to pay KTI a royalty equal to $.007
for every pound of tires processed by OTI or any other party using the
Technology and/or the KTI Recycling System. The amount of royalties to be paid
by OTI pursuant to this Agreement shall be reported to KTI on a monthly basis
within fifteen (15) days of the end of each calendar month, and shall be
accompanied by a remittance of the royalty amounts shown by the report to be due
and a summary of the total royalties paid to date for that year.
(b) OTI shall use its best efforts to market and sell the tires
processed using the KTI Recycling System, and OTI agrees, for itself and its
affiliates, that it will not engage in the business of tire processing using any
system other than the KTI Recycling System, nor any technology other than the
Technology, with the exception of any modifications or substitutions to the KTI
Recycling System or the Technology that may be made available by KTI from time
to time. Affiliate means, with respect to any specified person, any other person
that directly, or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with such specified person.
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(c) Any payments that are not paid on or before the date such payments
are due under this Section shall bear interest at KeyBank, National
Association's prime rate plus 1%, calculated on the number of days such payment
is delinquent.
3. Term. This Agreement shall continue in full force and effect for the
entire useful life of the KTI Recycling System, unless sooner terminated
pursuant to the terms of this Agreement.
4. Records and Inspection. (a) OTI agrees to keep and maintain suitable
business records, in accordance with generally accepted accounting practices,
with respect to all tires processed, distributed or manufactured by it
including, but not limited to the quantity and date recycled. OTI shall permit,
during regular business hours, upon one (1) day's prior written notice to OTI,
KTI or a firm of certified public accountants selected by KTI to examine and
take abstracts from relevant records of OTI such information as may be necessary
to determine compliance with this Agreement, including the proper amount of
royalties to be paid. OTI shall keep such relevant records for a period of five
years after the date of expiration or earlier termination of this Agreement.
Upon expiration or earlier termination of this Agreement for any reason, KTI
will have the right to a final audit of OTI's records to be conducted, at KTI's
option, by itself or by an independent certified public accountant selected by
it.
5. Disclaimer. Nothing in this Agreement shall be construed as a
warranty or a representation by either party as to the validity and scope of any
patents or the intellectual property embedded in or related to the Technology or
the KTI Recycling System.
6. Secrecy. (a) The Technology furnished by KTI is and will be revealed
to OTI in confidence and none of the Technology (whether or not furnished by
KTI) shall become the property of OTI or any customer or other third party
acting by, through or under it. None of the Technology shall at any time,
whether during the term hereof or thereafter, (i) directly or indirectly be
revealed by OTI to any person, firm, or corporation, or (ii) shall be directly
or indirectly be used by OTI except in the utilization of the KTI Recycling
System for the production of the tires processed during the term hereof, in each
case except with the express written consent of KTI. Nothing contained herein
shall not prevent disclosure of Technology which (1) OTI demonstrates was known
to OTI prior to receipt from KTI from a source other than KTI, Recovery
Technologies, Inc. or an affiliate of either, (2) which is or becomes part of
the public domain without any act or omission by OTI, any customer or any party
acting by, through or under it, or (3) which is acquired by OTI from a source
independent of KTI without violation of any right of KTI. OTI shall require its
employees and agents to hold the Technology in confidence during the term of
this Agreement and at all times thereafter, in all cases in accordance with
secrecy agreements acceptable to and expressly for the benefit of KTI. All
tangible forms of the Technology shall be marked or stamped as being
confidential and the property of KTI.
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<PAGE> 3
(b) OTI recognizes that Technology may be disclosed by an inspection of
the KTI Recycling System or its use or operation. Accordingly, without
limitation of any of the foregoing, except for employees and agents of OTI who
are essential to the operation and servicing of the KTI Recycling System and who
shall have executed secrecy agreements as provided in Section 6(a) above, and
except for authorized representatives of KTI no person shall have access to the
KTI Recycling System.
7. Infringement, Other Rights. (a) OTI agrees to promptly notify KTI if
OTI receives notice of any claim that the use by OTI infringes on any patent or
other right of any person. KTI will have the right to deal with the situation as
it, in its sole discretion, deems best (including the right to direct the
conduct of any litigation). If KTI elects not to defend any action or, after
electing to defend such action, abandons such defense, then OTI shall have the
right to defend such action at its own expense and cost. In any event, and
irrespective of the handling of the defense of any such action, KTI shall have
no liability whatsoever, either during the term of this Agreement or thereafter,
in respect of any question or matter of patent infringement that may arise by
reason of OTI's use thereof, or for any damages, costs, or attorneys' fees
awarded against OTI, or for any costs or expenses incurred by OTI in connection
with any such infringement or alleged infringement or litigation.
(b) If OTI comes to know of any suspected infringement by any third
party of any patent or other right of KTI, OTI shall promptly notify KTI to that
effect. The decision whether to take any action against such suspected
infringement shall rest solely with KTI; if KTI elects to take such action, all
expenses in connection with such action shall be paid by KTI and all recovery
shall belong to KTI. If KTI elects not to take any such action, OTI shall have
no right to do so or to require KTI to do so.
8. New Developments. KTI shall have all right, title and interest in
all inventions and improvements developed by KTI or OTI during the term hereof
with reference to the KTI Recycling System, the Technology and/or the use
thereof, including all patent rights and the right to use and license others to
use the KTI Recycling System and the Technology. OTI from time to time will
deliver to KTI such documentation as KTI may request to evidence the rights
provided for herein, including such assignments and other instruments and
documents as KTI may require in connection with patent applications for
inventions to which such party has such rights.
9. Certain Responsibilities. It is understood that the KTI Recycling
System furnished by KTI hereunder will be in the possession of OTI and that the
use and operation of such equipment will be performed by employees or agents of
OTI. OTI shall be responsible for providing its employees and agents with all
necessary safety instructions and precautions with respect to the KTI Recycling
System and the use and operation thereof. Further, OTI shall protect, indemnify,
defend, and hold harmless KTI, its affiliates and its successors and assigns
from any and all liabilities, claims, losses, damages, costs, and expenses,
including attorneys' fees, arising out of or resulting from the KTI Recycling
System or related equipment furnished by KTI under this Agreement
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or the use or operation thereof, including, without limitation, personal injury
or death to any person and damage to the facilities or OTI or other damage to
property.
10. Termination for Cause. Either party may terminate this Agreement
upon the occurrence of any of the following:
(a) Upon or after the bankruptcy, insolvency, dissolution or winding up
of the other party;
(b) Upon or after the breach of any material provision of this
Agreement by the other party, if the breaching party has not cured such breach
within thirty (30) days after written notice thereof to the defaulting party;
provided however, that there shall be no cure period for a breach by OTI for the
provisions of Section 6 hereof nor shall there be any cure period for a breach
by OTI of its obligation to use the KTI Recycling System and the Technology
licensed pursuant to this Agreement only at OTI's business location in Ford
Heights, Illinois. In addition, KTI may terminate this Agreement upon OTI's
breach, not cured within any applicable cure period, of the Purchase Agreement.
(c) Termination of this Agreement shall not relieve the parties of any
obligation accruing prior to such expiration or termination. The provisions of
Sections 6 and 8 will survive the termination of this Agreement. Because the
award of monetary damages would be an inadequate remedy, in the event of a
breach or threatened breach by OTI of any of the provisions of Section 6 of this
Agreement, the Company shall be entitled to an injunction restraining OTI from
undertaking any such breach or threatened breach. Nothing herein shall be
construed as prohibiting the Company from pursuing any other remedies available
to it for such breach or threatened breach, including the recovery of damages
from OTI.
11. Arbitration. Any controversy or claim arising under or related to
this Agreement shall be settled by arbitration in accordance with the Commercial
Arbitration Rules of the American Arbitration Association before a single
arbitrator selected in accordance with those rules, and judgment upon the award
rendered by the arbitrator may be entered in any court having jurisdiction
thereof.
12. Export. In order to comply with the U.S. Export Administration Act
of 1979, as amended from time to time (the Export Act), each party hereby
certifies that no technology or information licensed from the other, and no
product thereof, will be made available or re-exported, directly or indirectly,
to any areas (a) outside the United States except in compliance with all
applicable laws and regulations of the Bureau of Export Administration in
accordance with the Export Act (the provisions of this clause shall be extended
in accordance with U.S. law or regulation), or (b) outside any country except in
compliance with all applicable laws of such country.
13. No Authority. It is expressly agreed that the parties hereto shall
be that of licensor and licensee and that the relationship between the two
parties shall not constitute a partnership or agency of any kind. Neither party
shall have the authority to make any
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statements, representations or commitments of any kind, or to take any action,
which shall be binding on the other, without the prior written authorization of
the party to do so.
14. Assignment. Neither this Agreement nor the KTI Recycling System may
be assigned or otherwise transferred by OTI without the written consent of KTI,
except that OTI may transfer the KTI Recycling System to a purchaser of
substantially all of its assets, provided (a) that such purchaser uses the KTI
Recycling System at OTI's Ford Heights, Illinois business location, (b) such
assignee shall provide evidence of the financial standing of the assignee that
demonstrates, to KTI's reasonable satisfaction, that OTI has a net worth and
financial condition at least equivalent to that of OTI at the time of
assignment, and (c) that OTI simultaneously assigns to such third party OTI's
obligations under this Agreement and that third party assumes, in writing, all
of OTI's obligations hereunder.
15. Notices. All notices given under this Agreement shall be in writing
and delivered personally or sent by registered or certified mail, postage
prepaid, return receipt requested, addressed to the party to whom such notice is
to be given, as follows:
(a) To KTI: KTI Recycling, Inc.
7000 Boulevard East
Guttenberg, NJ 07093
Attn: Robert E. Wetzel, Esq.
Tel: 201-854-1771
With copy to: Diane Malfeld, Esq.
The Pillsbury Center South
220 South Sixth Street
Minneapolis, MN 55402
Tel: 612-340-2643
(b) To OTI: Oakhurst Technology, Inc.
3365 Spruce Lane
Grapevine, TX 76501
Attn: Karen Stempinski
Tel: 817-416-0914
With copy to: Roger M. Barzun, Esq.
60 Hubbard Street
Concord, MA 01742
Tel: 978-287-4276
or to such other address and to the attention of such other person as the party
to whom such notice is given may have theretofore designated by notice to the
other party hereto. Any notice given in accordance with the foregoing shall be
deemed to have been given
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when delivered in person or, if mailed, on the second day next following the
date on which it shall have been deposited in the United States mails.
16. Severability Clause. Should any provision or clause hereof be held
to be invalid, such invalidity shall not affect any other provision or clause
hereof which can be given effect without such invalid provision.
17. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of New Jersey.
18. Captions. The captions to the sections of this Agreement are for
convenience only and shall not affect the meaning or construction of any of the
provisions hereof.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above mentioned.
KTI Recycling, Inc. Oakhurst Technology, Inc.
By: /s/ Robert E. Wetzel By: /s/ Robert M. Davies
-------------------------- ------------------------
Its Senior Vice President Its Chairman and CEO
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OPERATION AND MAINTENANCE AGREEMENT
This Operation and Maintenance Agreement (the "Agreement") dated as of
December 29, 1998 by and between KTI Operations, Inc., a Delaware corporation
(the "Operator"), and New Heights Recovery & Power, LLC, formerly known as CGE
Ford Heights, L.L.C., a Delaware limited liability company (the "Owner"),
witnesseth that:
RECITALS
WHEREAS, the Owner owns a waste tire to energy project located on
thirty-eight acres in the Village of Ford Heights, Illinois (the "Existing
Project");
WHEREAS, the facilities that comprise the Existing Project consist of a
tire shredding facility and a combustion facility owned by the Owner
(collectively, the "Existing Facility");
WHEREAS, the Existing Facility is not in operation;
WHEREAS, the Owner is a reorganized entity under a plan of
reorganization ("Plan of Reorganization") under Chapter 11 of the Bankruptcy
Code that was confirmed by an order of the Bankruptcy Court for the District of
Delaware that was entered December 15, 1998 (the "Confirmation Order");
WHEREAS, as of the date hereof Oakhurst Technology, Inc., a Delaware
corporation ("KTIA"), an affiliate of KTI, Inc. ("KTI"), a New Jersey publicly
traded company listed in the NASDAQ National Market system, has entered into an
Investment Agreement (the "Investment Agreement") with the Owner;
WHEREAS, in accordance with the terms of the Investment Agreement, KTIA
is a member of the Owner and, subject to the terms and conditions of the
Investment Agreement, is obligated to make certain capital contributions to the
Owner to implement the business plan (the "Business Plan") of the Owner;
WHEREAS, the Business Plan contemplates that the operations and
facilities of the Owner will be expanded to include, among other things, the
operation of a crumb rubber recycling facility and paper recycling facility and
improvements to the Existing Facility to expand the Owner's waste acceptance,
handling, processing and combustion capabilities (the Existing Facility and
additional facilities contemplated under the Business Plan being the
"Facility");
WHEREAS, KTIA is the operating manager (the "Operating Manager") of the
Owner;
WHEREAS, the Operator has significant experience in the operation of
waste processing and energy producing facilities;
<PAGE> 2
WHEREAS, the Owner desires to benefit from the experience of the
Operator by retaining the Operator to manage the administration, operations and
maintenance of the Facility, subject to the direction of the Operating Manager
and the Board of Directors of the Owner;
WHEREAS, the Operator is a subsidiary of KTI;
WHEREAS, the Operator is willing to manage the administration,
operations and maintenance of the Facility, including the startup of operations
by the Owner and the construction of improvements to the Existing Facility and
property of the Owner.
NOW THEREFORE, in consideration of the mutual covenants contained
herein, and of other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto do hereby agree
to enter into this Agreement:
ARTICLE I
DEFINITIONS
Affiliate: With respect to any Person, any Person or group of Persons
acting in concert in respect of the Person in question that, directly or
indirectly, controls or is controlled by or is under common control with such
Person. For the purposes of this definition, "control" (including, with
correlative meanings, the terms "controlled by" and "under common control
with"), as used with respect to any person or group of Persons acting in
concert, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of management and policies of such Person, whether
through the ownership of voting securities or by contract or otherwise.
Approved Capital Budget: The Capital Budget as approved by the Owner as
such Capital Budget may be modified in writing in accordance with the terms of
this Agreement.
Approved Operating and Maintenance Budget: For each calendar year,
beginning with the calendar year 1999, the Operating and Maintenance Budget as
approved by the Owner, as such Operating and Maintenance Budget may be modified
in writing in accordance with the terms of this Agreement. Until approval by the
Owner of the Operating and Maintenance Budget applicable to any particular
calendar year, the Approved Operating and Maintenance Budget for the prior year
shall apply.
Business Plan: As such term is defined in the sixth Recital.
Calendar Month: The period from the first day of any month to the last
day of such month inclusive.
Capital Budget: The annual budget to be prepared by the Operator
pursuant to Section 2.02 of this Agreement. Each proposed annual Capital Budget
shall include items of
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capitalized equipment (as treated for accounting purposes) to be replaced or to
be repaired, as well as replacement inventory of spare parts, for the applicable
period.
Confirmation Order: As such term is defined in the fourth Recital.
Effective Date: This Agreement shall be effective as of the effective
date of the Plan of Reorganization.
Equipment: All of the recycling, processing, combustion, mechanical and
electrical equipment, instrumentation and control equipment, and Rolling Stock
used at or in connection with the operation of the Facility, and owned or
controlled by the Owner.
Existing Facility: As such term is defined in the second Recital.
Existing Project: As such term is defined in the first Recital.
Facility: As such term is defined in the seventh Recital, together with
any other ancillary facilities which may hereafter be acquired or constructed by
Owner and used for or in conjunction with the operations contemplated by the
Business Plan, whether or not located on the present Site within the Village of
Ford Heights.
Facility Costs: All costs associated with the day to day operations,
maintenance and administration of the Facility.
Force Majeure: With regard to the performance of any obligation under
this Agreement, except as to payment obligations, events such as an act of God,
act of public enemy, sabotage, wars, blockade, insurrection, riots, explosions,
fires, floods, storm, lightning, earthquake, wind, ice, strikes, lockouts or
other industrial disturbance, drought appropriation and other causes not
reasonably within the control of any party invoking Section 10.10 hereof for its
benefit. The financial inability of either party hereto pay or perform its
obligations under this Agreement shall not be deemed to be events of Force
Majeure.
Good Engineering Practices: Those practices, methods and equipment that
are generally observed at the time of reference in prudent engineering practice
for handling, processing, combustion and disposal operations, similar in size
and function to the Facility, in order to operate waste processing, electricity
generating and other equipment lawfully, with safety, dependability, efficiency
and economy and in compliance with applicable governmental codes, if any,
establishing engineering standards for such waste handling, processing,
combustion and disposal operations.
Hazardous Waste: Waste with inherent properties which make such waste
dangerous to manage by ordinary means, including but not limited to chemicals,
explosives, pathological wastes, radioactive wastes, toxic wastes and other
wastes defined as hazardous at any time during the term of this Agreement by the
State of Illinois or the Resource Conservation and Recovery Act of 1976, as
amended, or other Federal, State or local laws, regulations, orders, or other
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actions promulgated or taken at any time and from time to time, or any material
which, if processed or produced at the Facility, would be deemed hazardous at
any time during the term of this Agreement by the State of Illinois or under the
Resource Conservation and Recovery Act of 1976, as amended, or other federal,
state or local laws, regulations, orders, or other governmental actions
promulgated or taken at any time and from time to time.
Investment Agreement: As such term is defined in the fifth Recital.
Labor: All natural persons employed by Operator who work at the Site
and those performing accounting functions for the Owner, wherever located, to
perform the tasks necessary to supervise, give advise and make recommendations
concerning the administration, operation and maintenance of the Facility in
accordance with Good Engineering Practices and as required by this Agreement.
Labor Costs: For any relevant period the sum of all costs, fees and
expenses incurred by Operator for Labor during such period, including without
limitation all (a) salaries, wages and other compensation payable to or for the
account of employees, (b) bonus and incentive compensation payments made to or
for the account of employees, (c) contributions and payments to employee
savings, retirement and other benefit plans for employees, (d) the cost of
providing medical, dental disability and occupational hazard plans or insurance
for employees and their dependents, (e) the cost of providing life insurance
coverage for employees and their dependents, (f) employee training related to
the administration, operation and maintenance of the Facility, including
tuition, travel, meals and lodging and (g) FICA and other taxes or governmental
charges payable with respect to employees, including unemployment compensation.
Legal Requirements: All laws, statutes, codes, ordinances, orders,
awards, judgments, decrees, injunctions, rules, regulations, authorizations,
consents, approvals, orders, permits, franchises, licenses, directions and
requirements of all governments or governmental units, courts or arbitrators,
which now or at any time hereafter may be applicable to or affect the Facility
or any part thereof or any streets, sidewalks, curbs, or gutters adjoining the
Facility or any part thereof or any use or condition of the Facility or any part
thereof or the acquisition, construction, ownership, use or operation of the
Facility or any part thereof, except those the non-compliance as to which will
not have a material adverse effect on the acquisition, ownership or operation of
the Facility.
Operator Fee: During the first year of this Agreement, the Operator Fee
shall be $33,334 per month, subject to (i) a maximum of $400,000 payable to the
Operator in such year, payable in accordance with Section 3.01 and (ii)
reduction in accordance with Section 3.01. The Operator Fee shall increase each
year that this Agreement is in effect, effective January 1 of each such year,
which increase shall be based on the Consumer Price Index for the Chicago
metropolitan area for the immediately preceding year. In the event of any
decline in the Consumer Price Index, the Operator Fee for the following year
shall be reduced accordingly.
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Operating and Maintenance Budget: For each calendar year, beginning
with the calendar year 1999, the budget to be prepared by the Operator pursuant
to Section 2.02 of this Agreement. The Operating and Maintenance Budget shall
include detailed month by month projections of the Facility's operating costs,
revenues and performance assumptions for the calendar year to which it pertains.
Operating Costs: For any relevant period, the actual costs directly,
properly and reasonably incurred by the Operator for the account of the Owner in
the ordinary course of business for the supervision, administration, operation
and maintenance of the Facility, including, without limitation, Labor Costs,
travel expenses and professional fees, including without limitation, legal,
accounting, audit and engineering fees; provided, however, that no costs
incurred or paid by the Operator to any Affiliate of the Operator shall be
treated as an Operating Cost unless incurred in accordance with Article V.
Operating Manager: KTIA or any successor thereto.
Operator's Invoice: A written document delivered by the Operator to the
Owner stating the amount due for Operating Costs for monthly periods.
Permits: All of the consents, approvals, authorizations, directions,
licenses and permits issued to the Owner or Operator with respect to the
ownership, construction, and operation of the Facility. A list of all Permits as
in effect on the date of this Agreement are listed in Exhibit A hereto.
Person: Any individual or a corporation, partnership, trust,
incorporated or unincorporated association, joint venture, joint stock company,
government (or any agency or political subdivision thereof) or other entity of
any kind.
Plan of Reorganization: As such term is defined in the fourth Recital.
Site: The real property and any and all rights or interests in real
property upon which the Facility is located at the time of reference.
Subcontractor: Any person, firm or corporation which performs work for
the Operator or the Owner at the request and direction of the Operator pursuant
to the terms of this Agreement.
ARTICLE II
DESIGNATION OF OPERATOR AND WORK SCOPE
2.01 Designation of Operator:
(a) The Operator agrees to supervise, give advice and make
recommendations concerning the administration, operation and
maintenance of the Facility (including,
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without limitation, maintenance scheduling and planning) in accordance with the
terms and conditions of this Agreement.
(b) Subject to the terms of this Agreement and so long as it
remains in effect, the Owner hereby gives the Operator the nonexclusive
right (which shall not constitute an easement or other restriction on
the Facility) to enter on the premises on which the Facility is located
and to occupy and have free access to use the same for solely the
purpose set forth in this Agreement. The Operator agrees that in its
capacity as the Operator it does not and shall not claim at any time
any interest or estate of any kind or extent whatsoever in the Facility
by virtue of this Agreement or the Operator's occupancy or use of the
Facility hereunder.
(c) The Operator covenants that it will comply with Good
Engineering Practices in performing its services for the Facility. In
the event that the Operator fails to comply with Good Engineering
Practices in performing its services for the Facility for reasons other
than the insufficiency of available operating revenues, and said
failure results in the Owner being assessed fines or penalties by any
governmental entity, said fines and penalties shall be charged back and
set off against the Operator Fee.
(d) The Operator shall act as the primary spokesman for the
Facility in consultation with the Owner.
2.02 General Duties: The Operator shall in consideration for the
Operator Fee, manage, supervise, give advice and make recommendations to the
Owner concerning the administration, operations and maintenance of the Facility
including the construction of improvements and additions in accordance with Good
Engineering Practices and in substantial compliance with all Legal Requirements.
Subject to the foregoing, as well as to the satisfaction by the Owner of its
obligations under Article III hereof and subject to implementation of the
Business Plan in accordance with the Investment Agreement, the Operator shall
supervise, give advice and make recommendations concerning the following tasks:
(a) All administrative work of the Facility including:
(i) The planning, scheduling and conduct of all
business incidental to the ownership, operation and
maintenance of the Facility in preparation for the startup of
operations.
(ii) The administration of all contracts on a day to
day basis.
(iii) The review, approval and payment, in accordance
with the Approved Operating and Maintenance Budget, on behalf
of Owner, to the extent funds are made available by Owner, of
invoices for Facility Costs and record keeping for the Owner.
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(iv) Prompt preparation of invoices for all material
deliveries in accordance with the applicable agreements.
(v) Development and submission of a spare parts
inventory program to the Owner for approval.
(vi) Based on the approved spare parts inventory
program, and in accordance with the Approved Capital Budget or
the Approved Operating and Maintenance Budget, as applicable,
the procurement, in the Owner's name, of an inventory of spare
parts, materials, and supplies (including consumables and
items covered by plant office expenses and rolling stock
expenses), and the review, approval and, on behalf of Owner,
the payment of invoices for the same.
(vii) The performance of all accounting services for
the Owner (except as noted below), including but not limited
to closing the books monthly, quarterly and yearly and
supplying summary account data to the Owner for any monthly,
quarterly, year end or other reports rendered to be rendered
by Owner. The Operator is not obligated to prepare tax
returns, but shall cooperate with the Owner or its agents in
the preparation of the tax returns.
(viii) The preparation of monthly and quarterly
detailed financial and operating reports, with Approved
Operating and Maintenance Budget and Approved Capital Budget
comparisons (budget to actual including an explanation of any
material variances), an updated annual forecast with actual
year-to-date numbers and updated projections for remaining
months, as are reasonably requested by Owner.
(ix) Maintenance of true, complete and accurate cost
ledgers and accounting records in accordance with generally
accepted accounting principles utilized by the Owner regarding
the services provided and expenses paid or incurred by it
pursuant to the Agreement.
(x) The preparation of the Operating and Maintenance
Budget and Capital Budget to be submitted to the Owner for
approval.
(xi) Maintenance of appropriate inventories
consistent with the approved spare parts and inventory plan
and the issue, and recording of issuance, of inventory and
spare parts items.
(b) Performance of operation and maintenance services at the
Facility within budgetary limitations including:
(i) Maintenance of an effective and sufficient
operating work force through appropriate hiring, termination,
training, administration and compensation.
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(ii) Development and maintenance of safety
procedures, a safety manual, an employee job-site conduct
handbook and an effective safety program, including, without
limitation, fire and explosion safety measures.
(iii) Operation and maintenance of the scale-house
and provision of all related operational services.
(iv) Maintenance of the Facility and preparation for
the startup of operations in a reasonably clean, safe and
efficient manner in accordance with Good Engineering Practices
and in substantial compliance with all Legal Requirements.
(v) Maintenance of true, complete and accurate
operating and environmental logs, records and reports
necessary for proper operation and maintenance of the
Facility.
(vi) Maintenance at the administrative offices
located at the Facility of drawings, instruction books, and
operating and maintenance manuals and revision of drawings as
modifications are made.
(vii) Maintenance of tool room equipment and
instruments.
(viii) Development, implementation and regular
updating of a maintenance program that meets Equipment
manufacturer's specifications and recommendations and the
Facility requirements.
(ix) Scheduling and performance of all maintenance
necessary to be in accordance with Good Engineering Practices
and manufacturers' specifications and recommendations and in
substantial compliance with all Legal Requirements.
(x) Scheduling, performance and recording periodic
operational checks and tests of Equipment which are necessary
to be in accordance with the Equipment manufacturers'
specifications and recommendations and in substantial
compliance with all Legal Requirements.
(xi) Evaluation of the nature and impact of any
Equipment failure and if the failure is major or material
review the situation with the Owner and mutually agree on a
reasonable remedy of the matter, provided that in the event of
an emergency or other situation where expediency is required
to protect Equipment, property, safety, health, or the
environment, the Operator may take all necessary action to
deal with such situation for the Owner's account without the
review and agreement of Owner.
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(xii) Cooperation with the Owner in the obtaining and
maintaining of required Permits in the Owner's name and on its
behalf.
(xiii) Preparation of the maintenance budget and
incorporation of the maintenance items contained therein in
the Operating and Maintenance Budget or the Capital Budget, as
appropriate, and preparation for the startup of operations of
the Facility and continuing operations in accordance with the
Approved Operating and Maintenance Budget and Approved Capital
Budget for such items.
(xiv) Provision of necessary and desirable security
services for the Facility.
(xv) Provision of yard maintenance, materials
management, finished products storage and snow or
debris/residuals removal services.
(xvi) Maintenance of adequate inventories or supplies
of consumables.
(xvii) Provision of unrestricted access to the
Facility and cooperation with the Owner in all inspections of
the Facility, which inspections may occur at any time.
(xviii) Operation and maintenance of the Facility in
such a way so as to be in substantial compliance with all
Permit requirements (including, without limitation, the
Environmental Compliance Standards), taking such samples and
performing and reporting such tests as are required by all
Permits, and advising the Owner of any areas of Permit
conflicts or violations or unsatisfactory conditions or test
results, including performing all necessary testing, reporting
and other requirements of Permits.
2.03 The Operator's Authority to Act in an Emergency: Notwithstanding
anything to the contrary contained in this Agreement, the Operator may, without
obtaining the prior written consent of the Owner, take any action which
otherwise requires the prior written consent of the Owner pursuant to the terms
of this Agreement if (i) in the good faith judgment of the Operator, such
decision or action is necessary for the protection of life or health or for the
preservation of the Facility or to avoid the suspension of any service to or of
the Facility and there is insufficient time to notify the Owner; and (ii)
expenses incurred by the Operator in advance of notifying the Owner do not
exceed $25,000; provided, that the Operator shall use all reasonable efforts to
notify the Owner and request its consent prior to making any decision or taking
any action in any event shall notify the Owner and request its consent as
promptly as practicable thereafter. In the event that the consent of the Owner
is denied, the Operator shall use its reasonable efforts to terminate any
contract or agreement entered into on the basis of such emergency, or any work
or services to be performed pursuant thereto. Permitted expenses incurred under
this Section 2.03 are Operating Costs to be paid by the Owner without being
subject to the limitations of Section 3.01.
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ARTICLE III
RESPONSIBILITIES OF THE OWNER
3.01 The Owner shall be responsible for the following:
(a) Within the limits of the Approved Operating and
Maintenance Budget, Owner shall promptly pay the Operator the Operating
Costs for each monthly period during the term of this Agreement,
beginning on the Effective Date of this Agreement, and payable on the
first business day of each weekly period continuing until such time as
this contract is terminated under Article VI or VII hereof. With
respect to Operating Costs not contemplated by and included within the
applicable Approved Operating and Maintenance Budget, the Operator may
expend up to $25,000 in each individual case and $75,000 on a
cumulative basis during any calendar year without prior approval of the
Owner.
(b) The Operator Fees under this Agreement will accrue each
month and be payable only from Net Positive Cash Flow. Payment of
accrued Operator Fees will commence the first month following the first
fiscal quarter of the Owner in which there is Net Positive Cash Flow.
The Owner will pay to the Operator in such first month the amount that
is the lesser of (i) the sum of (A) accrued Operator Fees and (B) loan
repayments owed KTIA (on whose behalf Operator may collect such loan
repayments) or (ii) the amount of Net Positive Cash Flow. Each month
thereafter Net Positive Cash Flow will be applied first to accrued and
unpaid Operator Fees and loan repayments to the KTIA, on a pro rata
basis, and following payment in full of accrued Operator Fees and loan
repayments to the KTIA, then to current Operator Fees and loan
repayments to the KTIA then due. To the extent that Net Positive Cash
Flow is not sufficient to pay current Operator Fees, such Operator Fees
shall accrue and be payable from future Net Positive Cash Flow. Upon
the Operator's receipt of written notice from the Owner that only the
first phase of the Business Plan will be implemented, the annual
Operator Fees will be reduced to $16,667 per month retroactive to the
Effective Date. For purposes of this Section 3.01(b), "Net Positive
Cash Flow" means, for any period of determination, (i) net income plus
depreciation and amortization, less (ii) capital expenditures and the
Working Capital Reserve Requirement; and "Working Capital Reserve
Requirement" means $2,000,000 or such lesser amount as 80% of the Board
of Directors of the Owner may require from time to time.
(c) Approve on a timely basis the Operating and Maintenance
Budget and Capital Budget providing for the costs and expenses
reasonably necessary for Operator to administer and maintain the
Facility and prepare for the startup of the Facility in accordance with
its obligations under this Agreement.
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(d) Provide and maintain the insurance coverage required to be
maintained for the Facility, including:
(i) All Risk Property Damage, including physical
damage, business interruption, extra expense (wind damage,
flood, electrical damage) up to the full value of the Facility
as determined by the Owner.
(ii) Boiler and Machinery, including physical damage
and business interruption up to the full value of the covered
equipment as determined by the Owner.
(iii) Comprehensive General Liability and
environmental legal liability with combined property damage
and injury coverage.
The Operator shall be listed as an Additional Insured on
general liability policies, including excess liability umbrella. The
Owner shall provide the Operator with certificates of insurance showing
policy provisions and showing the Operator as an Additional Insured on
liability policies. The Operator shall have the right to review all
insurance policies and make recommendations regarding the same. Such
policies shall contain a provision that such insurance policies are
primary with respect to any other insurance. Additionally, the policy
provisions shall provide that the Operator be given at least thirty
(30) days prior written notice from the insurance company of policy
cancellation(s). The Owner shall not modify or terminate any insurance
coverages listed in this Section 3.01(c) without prior written notice
to the Operator. Operator shall have no liability for any loss or
damage arising out of any such modification or termination.
The Owner waives its right of recourse against the Operator
and the Operator's Subcontractors and their employees for any loss or
damage payable by the insurance coverage listed in this section.
ARTICLE IV
CERTAIN REPRESENTATIONS AND WARRANTIES
The Operator represents and warrants to the Owner that:
4.01 (a) Corporate Organization: The Operator is duly organized,
validly existing and in good standing under the laws of the State of
Delaware.
(b) Power and Authority: The Operator has the requisite
corporate power and authority to enter into this Agreement and to
perform according to the terms hereof.
(c) Due Authorization: The Operator has taken all actions
required to be taken by it under law, its Certificate of Incorporation
and bylaws or otherwise and has
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obtained all approvals and consents necessary to authorize the
execution, delivery and performance of this Agreement by it and the
consummation of the transactions contemplated hereby except such
approvals and consents the absence of which would not have a material
adverse effect on the Facility, the Operator or upon the Operator's
ability to perform its obligations hereunder.
(d) Validity: This Agreement constitutes the legal, valid and
binding obligation of the Operator, enforceable in accordance with its
terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar
laws or principles of equity affecting the rights of creditors
generally.
(e) No Violation: The execution and delivery of this Agreement
does not contravene any provision of, or constitute a default under,
any indenture, mortgage, or other material agreement binding on the
Operator or any valid order of any court, or any regulatory agency or
other body having authority to which the Operator is subject.
(f) Qualification as Foreign Corporation: The Operator is duly
qualified or licensed to do business and is in good standing in the
State of Illinois.
(g) Facility Operations: The supervisory services under this
Agreement shall be performed by competent operators, in a competent
manner in accordance with Good Engineering Practices and in substantial
compliance with all Legal Requirements and in accordance with the scope
of this Agreement or any other detailed work scope agreed upon by the
parties and will be free from defects in workmanship.
Provided that [Owner] has been notified in writing promptly
after the [Operator] becomes aware of a defect, and whether a claim,
however, instituted, is based on contract, indemnity, warranty, tort
(including Operator's own negligence), strict liability or otherwise,
the exclusive remedy for any claim based on failure of, or defect in,
services furnished by Operator hereunder shall be (a) for deficient
services, the retraining or replacement of the Operator's personnel and
the reperformance by the Operator of any defective portion of the
service furnished, and (b) for any damaged part of the equipment
resulting from defective operating, maintenance or repair services
performed under this Agreement, the repair or replacement at the
Owner's option of the damaged part. In any event, however, if damage to
any Facility equipment is caused to any material extent by defective
equipment or inadequate or poor engineering design of the Facility or
equipment therein ("Contributory Cause"), notwithstanding the neglect
or negligence of Operator, such Contributory Cause, shall bar any claim
by Owner against Operator for such damage. Nothing in this paragraph
shall be construed to limit the Owner's right to terminate this
Agreement in accordance with Article VII.
This warranty is exclusive and in lieu of all other
warranties, whether written, oral, implied or statutory. NO IMPLIED
STATUTORY WARRANTY OF MERCHANTABILITY OR OF FITNESS FOR A PARTICULAR
PURPOSE SHALL APPLY. The Operator does not warrant under this Agreement
any product, material or
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services of others which the Owner has furnished. Unless expressly
stated in the work scope, the Operator does not warrant under this
Agreement the fitness or suitability of the equipment on which the
services are performed, or any modification thereof, for any specific
application, performance, results or use. Any oral or written
representation, warranty, course of dealing or trade usage note
contained or referenced herein will not be binding on any party.
4.02 The Owner represents and warrants to the Operator as follows:
(a) Organization: It is a Delaware limited liability company
duly organized, validly existing and in good standing under the laws of
the State of Delaware and is duly qualified or licensed to do business
and is in good standing in the State of Illinois.
(b) Power of Authority: Pursuant to and as authorized by the
Plan of Reorganization and the Confirmation Order, Owner has the
requisite power and authority to enter into this Agreement and to
perform according to the terms hereof.
(c) Due Authorization: Pursuant to and as authorized by the
Plan of Reorganization and the Confirmation Order, the Owner has taken
all actions required to authorize the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby.
(d) Validity: Pursuant to and as authorized by the Plan of
Reorganization and the Confirmation Order, this Agreement constitutes
the legal, valid and binding obligation of the Owner, enforceable in
accordance with its terms, except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other
similar laws or principles of equity affecting the rights of creditors
generally.
ARTICLE V
LIMITATION ON AFFILIATED TRANSACTIONS BY
OPERATOR AND EMPLOYMENT OF CERTAIN PERSONS
In performing its obligations hereunder, the Operator will not make
any payment to or invest in, or acquire, lease, sell, transfer or provide any
assets or services from or to KTI or any of KTI's subsidiaries or Affiliates or
engage in any other transaction with any of them, except that the Operator shall
be permitted (i) to deal with the Owner in strict accordance with the express
written terms of this Agreement; and (ii) to engage in any other transaction
with KTI and its subsidiaries and Affiliates, which (w) is in the ordinary
course of the Operator's business, (x) is upon terms no less favorable to the
Operator than would be obtained in a comparable arms' length transaction with a
Person not an Affiliate and (y) the Owner has given its prior written consent
after receiving a reasonable description in writing of each of the terms
thereof.
ARTICLE VI
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TERM OF THIS AGREEMENT
6.01 Term. This Agreement will be effective on the Effective Date and
remain in effect for five years following the Effective Date unless earlier
terminated pursuant to Article VII or mutually extended in writing by the
Operator and the Owner. Operator understands and acknowledges that this
Agreement may not be modified, extended or renewed without the affirmative vote
of a majority of the Board of Directors of the Owner.
ARTICLE VII
EVENT OF DEFAULT
7.01 Owner Events of Default. Owner shall be in default under this
Agreement if:
(a) the Owner fails to pay when due any amount payable by
Owner to Operator hereunder, and ten (10) days have elapsed after such
due date;
(b) other than the pending proceedings in the Bankruptcy Court
for the District of Delaware, there is an assignment for the benefit of
the Owner's creditors, or the Owner is adjudged a bankrupt, or a
petition is filed by or against the Owner which is not dismissed within
60 days under the provisions of any state insolvency law or under the
provisions of the Federal bankruptcy laws, or the business or principal
assets of the Owner are placed in the hands of a receiver, assignee, or
trustee;
(c) in the case of the pending proceedings in the Bankruptcy
Court for the District of Delaware, a trustee or an examiner with
expanded powers under the United States Bankruptcy Code is appointed in
the Owner's pending Chapter 11 proceeding or the Owner's Chapter 11
proceeding is converted to a case under Chapter 7 or is dismissed;
(d) the Owner is dissolved and there is no reconstitution of
the Owner within thirty (30) days of such dissolution, or the Owner's
existence is terminated or its business is discontinued;
(e) Owner assigns or transfers this Agreement in violation of
Article 9.01;
(f) the Owner shall fail to comply in any material respect
with its obligation to provide and maintain insurance under Article
3.01(c); or
(g) the Owner shall fail to comply in a material respect with
any of its other covenants, agreements or obligations hereunder, and
such failure shall continue for thirty (30) days after the Owner
receives notice from the Operator with respect to the same.
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7.02 Remedy. If the Owner is in default, the Operator may, at its
option and without further notice, proceed to enforce any or all of the
following remedies by notice to the Owner,
(a) terminate this Agreement as provided in Section 7.03;
provided that if the default arises under Section 7.01(a) above and
Owner disputes the amount due in good faith, Operator may not terminate
this Agreement until the dispute is resolved and payment due is
thereafter withheld wrongfully, or
(b) proceed to arbitration in accordance with Article XI.
7.03 Rights upon Default.
(a) Right of Operator. Upon the occurrence and continuance of
an Event of Default described in Section 7.01, the Operator may, at its
option, terminate this Agreement by delivering written notice of
termination to the Owner, which notice of termination shall be
effective fifteen (15) days after the date it is received by Owner;
provided, however, that if the Owner has cured such default within such
fifteen (15) day period, such notice of termination shall be deemed to
have been canceled and shall be null and void. In the event of such
termination, the Owner shall pay all Operator Fee then due. In such
event, Operator shall take all necessary steps to protect the Facility,
leaving the same in an orderly and safe condition, prior to leaving the
premises.
7.04 Operator Events of Default. Operator shall be in default under
this Agreement if:
(a) there is an assignment for the benefit of the Operator's
creditors, or the Operator is adjudged a bankrupt, or a petition is
filed by or against the Operator which is not dismissed within 60 days
under the provisions of any state insolvency law or under the
provisions of the Federal bankruptcy laws, or the business or principal
assets of the Operator are placed in the hands of a receiver, assignee,
or trustee;
(b) the Operator is dissolved and there is no reconstitution
of the Operator within thirty (30) days of such dissolution, or the
Operator's existence is terminated or its business is discontinued; or
(c) the Operator shall fail to comply in a material respect
with any of its other covenants, agreements or obligations hereunder,
and such failure shall continue for thirty (30) days after the Operator
receives notice from the Owner with respect to the same.
7.05 Remedy. If the Operator is in default, the Owner may, at its
option and without further notice, proceed to enforce any or all of the
following remedies by notice to the Operator,
(a) terminate this Agreement as provided in Section 7.06, or
(b) proceed to arbitration in accordance with Article XI.
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<PAGE> 16
7.06 Rights of Owner upon Operator Default. Upon the occurrence and
continuance of an Event of Default described in Section 7.04, the Owner may, at
its option, terminate this Agreement by delivering written notice of termination
to the Operator, which notice of termination shall be effective fifteen (15)
days after the date it is received by Operator; provided, however, that if the
Operator has cured such default within such fifteen (15) day period, such notice
of termination shall be deemed to have been canceled and shall be null and void.
In the event of any termination, the Owner shall pay all Operator Fees then due.
In such event, Operator, if requested by Owner, shall take all necessary steps
to protect the Facility, leaving the same in an orderly and safe condition,
prior to leaving the premises.
ARTICLE VIII
LIMITATIONS OF LIABILITY
8.01 Limitation of Liability. The Operator's liability to the Owner, on
all claims of any kind (excluding death or bodily injury), whether based on
contract, indemnity, warranty, tort (including as the case may be, a party's own
negligence), strict liability or other, for all losses or damages arising out
of, connected with, or resulting from this Agreement or from the performance or
breach thereof, or from any services covered by or furnished during the term of
this Agreement, shall in no case exceed the fees actually received by the
Operator; provided, that, in the event the Owner remits to the Operator amounts
necessary to pay Operating Costs pursuant to Section 3.01(a) and the Operator
fails to remit to any third party amounts with respect to which the Owner paid
such Operating Costs, the Operator shall be liable to the Owner for any
duplicative payment made by the Owner.
8.02 Waiver of Consequential Damages. In no event, whether based on
contract, indemnity, warranty, tort (including, as the case may be, a party's
own negligence) or otherwise, shall the Operator or its Subcontractors and
suppliers be liable to Owner, or the Owner, its Subcontractors and suppliers be
liable to Operator, for special incidental exemplary, indirect or consequential
damages including, but not limited to, loss of profits or revenue, loss of use
of the equipment or any associated equipment, cost of capital, cost of purchased
power, cost of substitute equipment, facilities or services, downtime costs, or
claims of customers of the Owner or Operator for such damages, and each party
shall indemnify the other, its Subcontractors and suppliers against any such
claims from the other's suppliers or customers. Notwithstanding the foregoing
waiver, no Subcontractor or supplier that has failed to limit its liability for
any of the foregoing types of damages shall have the benefit of the foregoing
waiver. In no event shall the Operator be liable under this Agreement for any
loss or damage whatsoever arising from its failure to discover mechanical or
engineering design problems in the Facility Equipment, and where Equipment
failure results from the combined effects of neglect in maintenance, poor design
or inappropriate equipment application, Operator shall have no liability with
respect to any loss resulting to the Equipment or Facility, or from its failure
to discover latent defects or defects inherent in the design of the Equipment.
If the Operator furnishes the Owner with advice or assistance without separate
compensation therefor, the Operator will not be subject to any liability
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<PAGE> 17
whether in contract, indemnity, warranty, tort (including Operator's own
negligence) or otherwise for such advice or assistance.
ARTICLE IX
ASSIGNMENT
9.01 Assignment by the Owner. The Operator may terminate this Agreement
without penalty upon the giving of 10 days notice if (a) the assignment of this
Agreement is attempted or (b) a contract to sell the Facility is executed
between the Owner and a third party.
9.02 Assignment by the Operator. The Operator shall have the right to
assign this Agreement, provided that the Owner gives its prior written consent
to such assignment (which consent shall not be unreasonably withheld or
delayed). Consent shall not be required in the case of an assignment to an
affiliate of the Operator. Notwithstanding the foregoing, the Operator shall be
permitted to assign its right to receive payments hereunder without obtaining
the consent of the Owner.
ARTICLE X
MISCELLANEOUS
10.01 Independent Contractor. The Operator shall at all times be deemed
an independent contractor and not by reason of this Agreement a joint venture,
agent or principal of the Owner and none of the Operator's officers, directors,
partners, employees, agents or representatives or the officers, directors,
partners, employees, agents or representatives of its subcontractors shall be
considered officers, directors, partners, employees, agents or representatives
of the Owner.
10.02 Regulated Party Status. The Operator shall not be construed to be
a general partner of the Owner for any purpose, and the parties shall deal with
each other at arms length.
10.03 Severability. The invalidity, in whole or in part, of any of the
foregoing sections or paragraphs of this Agreement will not affect the validity
of the remainder of such sections or paragraphs.
10.04 Entire Agreement. This Agreement and all amendments thereto
contain the complete agreement between the Owner and the Operator with respect
to the matters contained herein and supersede all other agreements, whether
written or oral, with respect to the matters contained herein between the Owner
and the Operator.
10.05 Amendment. No modification, amendment, or other change to this
Agreement will be effective unless consented to in writing by each of the
parties hereto. Operator understands and acknowledges that this Agreement may
not be modified or amended without the affirmative vote of a majority of the
Board of Directors of the Owner.
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<PAGE> 18
10.06 Waiver. Failure or forbearance by any party to exercise any of
its rights or remedies under this Agreement shall not constitute a waiver of
such rights or remedies. No party shall be deemed to have waived or forborne any
right or remedy resulting from such failure to perform unless it has made such
waiver specifically in writing.
10.07 Counterparts. This Agreement may be executed in one or more
counterparts each of which shall be deemed an original and all of which shall be
deemed one and the same Agreement.
10.08 Choice of Law. This Agreement shall be governed by the laws of
the State of Illinois without reference to conflict of laws or the principles
thereof.
10.09 Title Passage. Title to all materials and services provided under
this Agreement shall pass to the Owner upon performance of the work or upon the
Owner becoming obligated to make payment therefor. It is expressly understood
and agreed, however, that the passage of title shall not release the Operator
from its responsibility to fully carry out its obligations under this Agreement.
10.10 Force Majeure. The parties hereto shall be excused from
performance under this Agreement to the extent, but only to the extent, that
performance hereunder is prevented by an act or event of Force Majeure. Operator
shall use its best efforts to take all reasonable steps to overcome or mitigate
the effects of such an act or event of Force Majeure, provided that the costs of
such steps shall in all events be considered Operating Costs for the purposes
hereof. Owner shall take all reasonable steps to overcome or mitigate the
effects of an event of Force Majeure. The Operator may not incur expenses in
excess of $25,000 to overcome or mitigate the effects of such Force Majeure
event without the Owners prior written consent.
ARTICLE XI
DISPUTES
11.01 Disputes. The parties agree that time is of the essence in
resolving any controversy, dispute or claim, and they shall proceed as
expeditiously as possible to resolve such dispute among themselves. Any
controversy, dispute or claim between the Operator and the Owner that they are
unable to resolve shall be taken to arbitration, which shall be the procedure
for resolving disputes under this Agreement.
11.02 Procedure. All arbitration proceedings shall be pursuant to the
Commercial Arbitration Rules of the American Arbitration Association (the
"AAA"). To initiate the arbitration, the initiating party (the "Initiating
Party") shall notify the other party in writing (the "Arbitration Demand"),
which demand shall (i) describe in reasonable detail the nature of the dispute
submitted to arbitration (the "Dispute"), (ii) include a single, comprehensive
proposal for the resolution of Dispute submitted to arbitration, and (iii) name
an arbitrator who (A) has been
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licensed to practice law in the U.S. for at least ten years, (B) is not an
employee or former employee of either party or any of their Affiliates, (C) is
not affiliated with any law firm that ever represented either party, and (D) is
experienced in representing clients in connection with commercial agreements
(the "Basic Qualifications") and the Initiating Party shall file three copies of
the Arbitration Demand and of the arbitration provisions of this Agreement with
the AAA. The AAA shall promptly give notice of the filing of the Arbitration
Demand on the other party and within thirty (30) days thereafter such other
party shall file with the AAA and serve on the Initiating Party, a written
statement (i) responding to the Arbitration Demand (ii) submitting a single,
comprehensive proposal for the resolution of Dispute submitted to arbitration,
and (iii) naming a second arbitrator satisfying the Basic Qualifications.
Promptly, but in any event within fifteen (15) days thereafter, the two
arbitrators will attempt to select a mutually agreeable third neutral
arbitrator. In the event they are unable to do so, the two arbitrators will
promptly request a list from the AAA of potential arbitrators who satisfy the
Basic Qualifications and who have no past or present relationships with the
parties or their counsel, except as otherwise disclosed in writing to and
approved by the parties. Within fifteen (15) days of receipt of the list of
potential arbitrators, the two named arbitrators shall select a third arbitrator
from the list. Should the two named arbitrators be unable to agree on a third
arbitrator, the AAA shall appoint the third arbitrator from the list it
provided. The arbitration will be heard by a panel of the three arbitrators so
chosen (the "Arbitration Panel"), with the third arbitrator so chosen serving as
the chairperson of the Arbitration Panel. Decisions of a majority of the members
of the Arbitration Panel shall be determinative. The arbitration hearing shall
be held in a neutral location not less than sixty (60) days after the other
party has filed an answering statement to the Arbitration Demand filed by the
Initiating Party. Notwithstanding the requirement to submit all controversies,
disputes and claims to mandatory and binding arbitration, pending arbitration
and resolution of the Dispute, a party may seek temporary injunctive relief from
a court of competent jurisdiction.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF the parties have executed this Agreement as of the
date first set forth above.
OWNER:
NEW HEIGHTS RECOVERY & POWER, LLC
By:/s/ Brian Brookover
------------------------------
Title: Authorized Agent
OPERATOR:
KTI OPERATIONS, INC.
By: /s/ Robert E. Wetzel
------------------------------
Title: Senior Vice President
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EXHIBIT A
PERMITS
<PAGE> 1
[KTI LETTERHEAD]
7000 BOULEVARD EAST
GUTTENBERG, NJ 07093
TEL. (201) 854-7777
FAX (201) 854-1771
NEWS RELEASE
FOR IMMEDIATE RELEASE
KTI ANNOUNCES COOPERATIVE VENTURE TO DEVELOP
FORD HEIGHTS RECYCLING AND TIRE-RELATED BUSINESSES
GUTTENBERG, N.J. (DEC. 31, 1998) KTI, Inc. (NASDAQ: KTIE) and Oakhurst
Company, Inc., (OTC Bulletin Board: OAKC) today announced the formation of a
cooperative venture to develop tire processing and recycling businesses.
As part of the transaction, KTI acquired, in a private placement,
1,730,000 shares in Oakhurst (representing a 35% stake) at a cost of $865,000,
and has also entered into a secured loan agreement to lend Oakhurst up to $17
million. The funds will be invested in Oakhurst's wholly-owned subsidiary,
Oakhurst Technology, Inc. ("OTI"), which has been designated by KTI to develop
both the environmental facility in Fords Heights, IL, and other tire-recycling
and related businesses.
In addition, a subsidiary of KTI has agreed to license to OTI a
proprietary cryogenic crumb rubber technology for use in other projects in the
United States. The agreement provides for the purchase of crumb rubber systems
by OTI from the subsidiary, together with a royalty agreement between them
relating to tires processed by such equipment. Another KTI subsidiary will be
the operating manager of New Heights, and will also operate any related
facilities to be acquired by OTI in the future. Oakhurst has agreed to appoint
three KTI nominees to its Board, and two KTI nominees to the Board of OTI.
In return for its investment in upgrading and retrofitting the Ford
Heights operation, OTI will acquire a 50% equity interest in the entity that
owns the facility, New Heights Recovery and Power, LLC ("New Heights"). OTI
expects that over time, subject to the receipt of the necessary permits, New
Heights will be developed as an environmental campus for the processing and
recycling of paper and other non-hazardous wastes in addition to the manufacture
of crumb rubber. New Heights may employ up to 350 people from the Ford Heights
community.
Commenting on the transaction, KTI President, Martin Sergi said, "The
venture with Oakhurst provides both companies with strategic benefits. In
addition to the equity investment in Oakhurst, the arrangement provides KTI with
royalty income, management fees, profits on the
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<PAGE> 2
sale of crumb rubber equipment and interest income. Oakhurst's management team
will bring invaluable experience to the development of OTI's business, involving
acquisitions and restructurings in the tire-recycling business and the emerging
crumb rubber industry, while KTI's management expertise will help ensure
superior operating results of the acquired businesses".
Oakhurst, a holding company, owns two businesses which are distributors
in the automotive aftermarket.
KTI is an integrated solid waste management operating 51 facilities in
21 states and Canada in four operating divisions, Waste to Energy, Finished
Products, Commercial Recycling and Residential Recycling.
For further information, contact Marty Sergi of KTI at (201) 854-7777
or Frank N. Hawkins, Jr./Julie Marshall at Hawk Associates, Inc. (305) 852-2383.
Copies of KTI press releases, SEC filings, current price quotes, stock charts,
analysts' comments and other valuable information for investors may be found on
the website http://www.hawkassociates.com.
This release contains various forward looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934 which represent the company's expectations or beliefs
concerning future events of the company's financial performance. These
forward-looking statements are qualified by important factors that could cause
actual results to differ materially from those in the forward-looking
statements. Results actually achieved may differ materially from expected
results included in these statements.
