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FIRST AMENDMENT TO
LOAN AND SECURITY AGREEMENT
THIS FIRST AMENDMENT TO LOAN AND SECURITY AGREEMENT is made as of this
15th day of August, 1997, by and between KTI, INC., a New Jersey corporation
with its principal office and place of business at 7000 Boulevard East,
Guttenberg, New Jersey 07093 ("KTI"), KTI ENVIRONMENTAL GROUP, INC., a New
Jersey corporation with its principal office and place of business at 7000
Boulevard East, Guttenberg, New Jersey 07093 ("KTI Environmental"), KUHR
TECHNOLOGIES, INC., a New Jersey corporation with its principal office and
place of business at 7000 Boulevard East, Guttenberg, New Jersey 07093 ("Kuhr"),
KTI LIMITED PARTNERS, INC., a Delaware corporation with its principal office and
place of business at 7000 Boulevard East, Guttenberg, New Jersey 07093 ("KTI
Limited"), KTI OPERATIONS, INC., a Delaware corporation with its principal
office and place of business at 7000 Boulevard East, Guttenberg, New Jersey
07093 ("KTI Operations"), PERC, INC. a Delaware corporation with its principal
office and place of business at 7000 Boulevard East, Guttenberg, New Jersey
07093 ("PERC") (all of the above are referred to collectively herein as the
"Original Borrower"), KTI ASH RECYCLING, INC., a Delaware corporation with its
principal office and place of business at 7000 Boulevard East, Guttenberg, New
Jersey 07093 ("KTI Recycling"), MANNER RESINS, INC., a Maryland corporation with
its principal office and place of business at 7040 Bembe Beach Road, Annapolis,
Maryland 21403 ("Manner Resins"), TIMBER ENERGY RESOURCES, INC., a Texas
corporation with its principal office and place of business at Florida Highway
65, South, P.O. Box 199, Telogia, Florida 32360 ("Timber Energy"), KTI SPECIALTY
WASTE SERVICES, a Maine corporation with its principal office and place of
business at 7000 Boulevard East, Guttenberg, New Jersey 07093 ("KTI Specialty
Waste') (all of the above after the Original Borrowers are collectively referred
to as the "New Borrower", the New Borrower together with the Original Borrower
shall be referred to herein as the "Borrower") and KEY BANK NATIONAL
ASSOCIATION, a national banking association with an office and place of business
at 66 South Pearl Street, Albany, New York 12207 (the "Lender").
W I T N E S S E T H:
WHEREAS, the Original Borrower and Lender entered into that certain
Loan and Security Agreement, dated as of October 29, 1996 (the "Agreement")
pursuant to which the Lender agreed to make loans to the Borrower from time to
time upon the terms and conditions set forth in the Agreement (the "Loan"); and
WHEREAS, the Original Borrower has requested, and the lender has
consented, to make certain modifications to the Agreement.
NOW THEREFORE, in consideration of the mutual promises of the parties
hereto and other good an valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto hereby agree as follows:
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1. Borrowers. The introductory paragraph to the Agreement is hereby
amended to include the New Borrowers as Borrowers under the Agreement.
2. A new Section 1.11 shall be added which shall provide as follows:
"1.11. "Debt Service Coverage Ratio" shall mean, for
any fiscal period of KTI, the ratio of (i) net income from
continuing operations before minority interest, income taxes,
discontinued operations and extraordinary items minus one time
gains (such as from the sale of capacity resulting from a
restructuring) minus the recognized portion of deferred
revenue plus interest expense, plus operating lease expense
plus depreciation and amortization minus cash taxes minus
capital expenditures minus distributions to (ii) scheduled
principal payments of long term debt and capital leases plus
interest expense plus operating lease expense plus preferred
stock dividends. This ratio shall be measured on a quarterly
basis."
3. Section 1.18 is hereby amended to provide as follows:
"1.18 "Leverage Ratio. Leverage Ratio shall mean the
ratio of Borrower (i) total "debt" (as defined by GAAP)
excluding any minority interest) to (ii) "net worth") (also
defined by GAAP).
4. Section 1.34 is hereby deleted in its entirety.
5. Sections 1.11 through 1.36 are hereby renumbered to account for the
addition of Section 1.11 as described in Section 2 above.
6. Section 1.23 is hereby amended in its entirety to provide as
follows:
"1.23. Maximum Amount of the Revolving Facility shall mean Six
Million Dollars ($6,000,000.00).
7. Inducing Representations. Borrower represents and warrants to Lender
that all of the inducing representations and warranties set forth in Article
Seven of the Loan Agreement are true and correct as of the date hereof, and
hereby reaffirms each of such representations and warranties with the same legal
force and effect as if such representations and warranties were made on the date
hereof.
8. Section 3.1 of the Agreement is hereby amended in its entirety to
provide as follows:
"3.1 Interest. Borrower shall pay interest monthly on the
first day of each month for the preceding month, commencing September
1, 1997, on the average daily unpaid principal amount of the Revolving
Loan, at a fluctuating rate which is equal to the Base Rate plus
three-quarters of one percent (3/4%). On and after the occurrence of an
Event of Default hereunder, Borrowers shall pay interest on all
Obligations due to Lender at a fluctuating rate which is equal to the
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Base Rate plus three and three-quarters percent (3 -3/4%). In no event
shall any interest hereunder, or under any Loan Document, exceed the
maximum rate permitted by law."
9. Unused Facility Fee. Section 3.3 is hereby amended in its entirety
to provide as follows:
"3.3 Unused Facility Fee. Commencing on the calendar
quarter on October 1, 1997, Borrower shall pay Lender
quarterly in arrears, a fee on the unused amount of the
Revolving Loan in an amount equal to the unused facility
amount multiplied by one-eighth of one percent (1/8%) per
annum. Such amount shall be payable quarterly in arrears."
10. Section 4 is hereby amended in its entirety to provide as follows:
"4. Application of Proceeds. The proceeds of the Loan
shall be used solely by Borrowers for working capital needed
in the normal operation of Borrowers' businesses, the issuance
of letters of credit and for bridge financing for acquisitions
by Borrowers. Advances of loan proceeds by any Borrower to any
Affiliate (other than a Borrower), or any bridge financing for
acquisitions by any Borrower which exceeds six (6) months, or
any bridge financing exceeding one and one-half million
dollars ($1,500,000.00) without approved takeout financing in
place which has not been approved by Lender shall each be
deemed an Event of Default hereunder."
11. Section 5 is hereby amended to include a new subsection (B) which
shall provide as follows:
"(B) All Property;"
Subsections (B) through (E) of Section 5 are hereby amended to
provide consecutive lettering from (C) through (F).
12. Organization and Qualifications. Section 7.1 is hereby amended in
its entirety to provide as follows:
"7.1 Organization and Qualifications. Each of KTI,
KTI Environmental, and Kuhr is a corporation duly organized
and existing under the laws of the State of New Jersey. Each
of KTI Limited, KTI Operations, KTI Ash Recycling, and KTI
Recycling is a corporation duly organized and existing under
the laws of the Sate of Delaware. Timber Energy, KTI Specialty
Waste and Manner Resins are corporations duly organized and
existing under the laws of the State of Texas, Maine and
Maryland, respectively. Each Borrower is qualified to do
business in every jurisdiction where the nature of its
business requires it to be so qualified and where failure to
do so qualify might materially affect its business or assets."
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13. Section 12 is hereby amended to provide as follows:
"12. Financial Covenants. KTI covenants that it
shall, at all times:"
14. Section 12.2 is hereby amended to provide as follows:
"12.2 Maximum Leverage Ratio. Maintain a Leverage
Ratio not greater than 3.0 to 1.0."
15. A new Section 12.3 shall be added to provide as follows:
"12.3 Minimum Debt Service Coverage Ratio. Maintain a
Debt Service Coverage Ratio of not less than 1.5 to 1.0."
16. Section 15 is hereby amended in its entirety to provide as follows:
"15. Term. This Agreement shall terminate on April
30, 1998."
17. Section 16.1 (j) is hereby amended to provide as follows:
"(j) upon the occurrence and continuance of any conditions,
(including, but not limited to, any change in the management of KTI
which is the result of the departure of any two of Nicholas Menonna,
Jr., Martin J. Sergi or Ross Pirasteh) which in Lender's reasonable
opinion, has or may have a material adverse effect on the business,
prospects or financial conditions of any Borrower."
18. Section 16.1 shall be amended to include new subsections (k) and
(l) which shall provide as follows:
"(k) if any Borrower shall be in default under any obligation
to Lender,"
"(l) if any Borrower shall breach any term or fail to satisfy
any condition of the commitment letter entered into between the Lender
and the Borrower dated July 14, 1997,"
19. Amended Exhibits. Exhibits "C", "D", "E", "I", "J", "K" and "L" to
the Agreement are hereby amended in their entirety and are attached hereto.
20. Correction. Section 5 is hereby amended to correct the introductory
paragraph to include Exhibit "L", which described Liens, as well as Exhibit "E".
Further, Section 5 is hereby amended to exclude from Collateral the Property
which is the subject of those specific Liens described on Exhibit "L" which
cannot be subjected to junior liens.
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21. Additional Terms and Conditions. The terms and conditions of the
commitment letter entered into between Lender and Borrowers dated July 14, 1997
are hereby incorporated by referenced, including, but not limited to, the
requirements of Borrowers to close on the term loan referenced in such letter
not later than December 1, 1997, as a condition to Lender's commitment to make
the term loan. A breach of any of the terms or conditions of the commitment
letter shall be deemed an Event of Default hereunder. In the event of any
conflict between the terms of the commitment letter and this Agreement, such
conflict shall be resolved in favor of this Agreement.
22. Amended and Restated Promissory Note. The Borrowers agree to
deliver an amended and restated promissory note in the form of Exhibit "C".
23. No Other Amendments. Other than as expressly set forth above, no
provision of the Loan Agreement shall be deemed to be amended or modified
hereby.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their officers thereunto duly authorized on the day and year first
above written.
KTI, INC.
By: /s/ Robert E. Wetzel
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Robert E. Wetzel, Senior Vice President
KTI ENVIRONMENTAL GROUP, INC.
By: /s/ Robert E. Wetzel
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Robert E. Wetzel, Senior Vice President
KUHR TECHNOLOGIES, INC.
By: /s/ Robert E. Wetzel
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Robert E. Wetzel, Senior Vice President
KTI LIMITED PARTNERS, INC.
By: /s/ Robert E. Wetzel
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Robert E. Wetzel, Senior Vice President
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KTI OPERATIONS, INC.
By: /s/ Robert E. Wetzel
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Robert E. Wetzel, Senior Vice President
PERC, INC.
By: /s/ Robert E. Wetzel
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Robert E. Wetzel, Senior Vice President
KTI ASH RECYCLING, INC.
By: /s/ Robert E. Wetzel
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Robert E. Wetzel, Senior Vice President
KTI RECYCLING, INC.
By: /s/ Robert E. Wetzel
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Robert E. Wetzel, Senior Vice President
MANNER RESINS, INC.
By: /s/ Robert E. Wetzel
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Robert E. Wetzel, Senior Vice President
TIMBER ENERGY RESOURCES, INC.
By: /s/ Robert E. Wetzel
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Robert E. Wetzel, Senior Vice President
KTI SPECIALTY WASTE SERVICES, INC.
By: /s/ Robert E. Wetzel
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Robert E. Wetzel, Senior Vice President
KEY BANK NATIONAL ASSOCIATION
By: /s/ Richard C. VanAuken
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Richard C. VanAuken
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STATE OF NEW JERSEY )ss.:
COUNTY OF HUDSON )
On this 15th day of August, 1997, before me personally came
Robert E. Wetzel, to me known, who being by me duly sworn, did depose and say
that he resides at 7000 Boulevard East, Guttenberg, NJ, that he is the Senior
Vice President of KTI, Inc., the corporation described in, and which executed
the above instrument; and that he signed his name thereto by like order of the
Board of Directors of said corporation.
/s/ Ana M. Rodriguez
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Notary Public
STATE OF NEW JERSEY )ss.:
COUNTY OF HUDSON )
On this 15th day of August, 1997, before me personally came
Robert E. Wetzel, to me known, who being by me duly sworn, did depose and say
that he resides at 7000 Boulevard East, Guttenberg, NJ 07093, that he is the
Senior Vice President of KTI Environmental Group, Inc., the corporation
described in, and which executed the above instrument; and that he signed his
name thereto by like order of the Board of Directors of said corporation.
/s/ Ana M. Rodriguez
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Notary Public
STATE OF NEW JERSEY )ss.:
COUNTY OF HUDSON )
On this 15th day of August, 1997, before me personally came
Robert E. Wetzel, to me known, who being by me duly sworn, did depose and say
that he resides at 7000 Boulevard East, Guttenberg, NJ 07093, that he is the
Senior Vice President of Kuhr Technologies, Inc., the corporation described in,
and which executed the above instrument; and that he signed his name thereto by
like order of the Board of Directors of said corporation.
/s/ Ana M. Rodriguez
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Notary Public
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STATE OF NEW JERSEY )ss.:
COUNTY OF HUDSON )
On this 15th day of August, 1997, before me personally came Robert E.
Wetzel, to me known, who being by me duly sworn, did depose and say that he
resides at 7000 Boulevard East, Guttenberg, NJ 07093, that he is the Senior Vice
President of KTI Limited Partnership, Inc., the corporation described in, and
which executed the above instrument; and that he signed his name thereto by like
order of the Board of Directors of said corporation.
/s/ Ana M. Rodriguez
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Notary Public
STATE OF NEW JERSEY )ss.:
COUNTY OF HUDSON )
On this 15th day of August, 1997, before me personally came Robert E.
Wetzel, to me known, who being by me duly sworn, did depose and say that he
resides at 7000 Boulevard East, Guttenberg, NJ 07093, that he is the Senior Vice
President of KTI Operations, Inc., the corporation described in, and which
executed the above instrument; and that he signed his name thereto by like order
of the Board of Directors of said corporation.
/s/ Ana M. Rodriguez
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Notary Public
STATE OF NEW JERSEY )ss.:
COUNTY OF HUDS ON )
On this 15th day of August, 1997, before me personally came Robert E.
Wetzel, to me known, who being by me duly sworn, did depose and say that he
resides at 7000 Boulevard East, Guttenberg, NJ 07093, that he is the Senior Vice
President of PERC, Inc., the corporation described in, and which executed the
above instrument; and that he signed his name thereto by like order of the Board
of Directors of said corporation.
/s/ Ana M. Rodriguez
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Notary Public
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STATE OF NEW JERSEY )ss.:
COUNTY OF HUDSON )
On this 15th day of August, 1997, before me personally came Robert E.
Wetzel, to me known, who being by me duly sworn, did depose and say that he
resides at 7000 Boulevard East, Guttenberg, NJ 07093, that he is the Senior Vice
President of KTI Ash Recycling, Inc., the corporation described in, and which
executed the above instrument; and that he signed his name thereto by like order
of the Board of Directors of said corporation.
/s/ Ana M. Rodriguez
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Notary Public
STATE OF NEW JERSEY )ss.:
COUNTY OF HUDSON )
On this 15th day of August, 1997, before me personally came Robert E.
Wetzel, to me known, who being by me duly sworn, did depose and say that he
resides at 7000 Boulevard East, Guttenberg, NJ 07093, that he is the Senior Vice
President of KTI Recycling, Inc., the corporation described in, and which
executed the above instrument; and that he signed his name thereto by like order
of the Board of Directors of said corporation.
/s/ Ana M. Rodriguez
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Notary Public
STATE OF NEW JERSEY )ss.:
COUNTY OF HUDSON )
On this 15th day of August, 1997, before me personally came Robert E.
Wetzel, to me known, who being by me duly sworn, did depose and say that he
resides at 7000 Boulevard East, Guttenberg, NJ 07093, that he is the Senior Vice
President of Manner Resins, Inc., the corporation described in, and which
executed the above instrument; and that he signed his name thereto by like order
of the Board of Directors of said corporation.
/s/ Ana M. Rodriguez
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Notary Public
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STATE OF NEW JERSEY )ss.:
COUNTY OF HUDSON )
On this 15th day of August, 1997, before me personally came Robert E.
Wetzel, to me known, who being by me duly sworn, did depose and say that he
resides at 7000 Boulevard East, Guttenberg, NJ 07093, that he is the Senior Vice
President of Timber Energy Resources, Inc., the corporation described in, and
which executed the above instrument; and that he signed his name thereto by like
order of the Board of Directors of said corporation.
/s/ Ana M. Rodriguez
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Notary Public
STATE OF NEW JERSEY )ss.:
COUNTY OF HUDSON )
On this 15th day of August, 1997, before me personally came Robert E.
Wetzel, to me known, who being by me duly sworn, did depose and say that he
resides at 7000 Boulevard East, Guttenberg, NJ 07093, that he is the Senior Vice
President of KTI Specialty Waste Services, Inc., the corporation described in,
and which executed the above instrument; and that he signed his name thereto by
like order of the Board of Directors of said corporation.
/s/ Ana M. Rodriguez
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Notary Public
STATE OF NEW JERSEY )ss.:
COUNTY OF HUDSON )
On this 15th day of August, 1997, before me personally came Richard C.
VanAuken, to me known, who being by me duly sworn, did depose and say that he
resides at Brunswick, NY, that he is the Senior Banker of Key Bank National
Association, the corporation described in, and which executed the above
instrument; and that he signed his name thereto by like order of the Board of
Directors of said corporation.
/s/ Georgia Melas
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Notary Public
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