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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):
February 13, 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
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Not Applicable
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(Former name and former address, as changed since last report)
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Item 5. Other Events.
On February 13, 1998, the Finance Authority of Maine ("FAME")
executed and delivered a commitment (the "FAME Commitment") to KTI, Inc., a New
Jersey corporation (the "Company" or the "Registrant") to refinance existing
tax-exempt bonds issued by the Town of Orrington, Maine to finance the
construction of the facility owned by Penobscot Energy Recovery Company, Limited
Partnership ("PERC"). The current tax-exempt bonds mature in 2004. The FAME
commitment provides for an extension of the maturity to approximately 20 years
from the date of reissuance. The FAME bonds would be backed by the moral
obligation of the State of Maine and would be secured by substantially all of
the assets of PERC, a guaranty of $3 million from the Company and a guaranty of
annual debt service from Bangor Hydro-Electric Company ("Bangor Hydro"),
subject to a maximum annual amount of $4.2 million. The guaranty is subject to
receipt of all necessary orders and consents from the Maine Public Utility
Commission and Bangor Hydro's lenders.
The partners in PERC, Bangor Hydro and the Municipal Review
Committee, Inc., a Maine not-for-profit corporation (the "MRC"), which
represents 130 municipalities serviced by PERC executed an agreement, dated as
of December 31, 1997 (the "Restructuring Agreement"), outlining the principal
terms of a restructuring of the Purchase Power Agreement (the "PPA") between
PERC and Bangor Hydro and certain amendments to the Waste Disposal Agreements
between PERC and the 130 municipalities. Both the Restructuring Agreement and
the FAME Commitment contain significant conditions, which are not entirely in
the control of the parties to such agreements. The Company, accordingly, can
give no assurances that it will be able to complete the transactions
contemplated in these agreements.
The Restructuring Agreement provides that Bangor Hydro will make a
one time payment of $6 million to PERC at the time of the refinancing of the tax
exempt debt, will make additional quarterly payments of $250,000 per quarter for
four years, for an additional total of $4 million, and issue warrants to
purchase 2 million shares of Bangor Hydro common stock. The warrants will be
divided equally between the partners in PERC and the MRC on behalf of its member
municipalities. The exercise price of such warrants will be $7.00 per share and
the warrants will expire 10 years after issuance. The right to exercise such
warrants will vest over a four-year period. In exchange for such consideration,
Bangor Hydro will be entitled, assuming performance of all of its obligations
under the PPA, to receive a rebate of a portion of its purchase price of
electric power from PERC, equal to one third of the cash available for
distribution from PERC. This transaction is contingent upon, among other things,
the closing of the reissuance of the tax-exempt bonds pursuant to the FAME
Commitment.
The proposed amendments to the Waste Disposal Agreements will be
effective upon receipt of acceptance of not less than 50% of the municipalities,
as determined by delivered tonnage, having long term waste disposal agreements
with PERC. PERC may terminate the transaction if 25% or more of such
municipalities reject or otherwise object to the transactions. The proposed
amendments permit such municipalities to: (a) make equity contributions to PERC,
only to the extent of the MRC's share of distributable cash from PERC and
one-half of the Bangor Hydro quarterly distribution, of up to $31 million, which
will be used to prepay the FAME tax-exempt bonds (If the entire $31 million is
contributed, such municipalities will own a
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50% partnership interest in PERC.); purchase all of the remaining PERC interests
in 2018 at their then fair market value, in lieu of the existing right to
purchase PERC at its then book value in 2004; (c) extend the term of the Waste
Disposal Agreements to 2018 and (d) reduce cash available for distribution to
such municipalities from one half to one third.
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Item 7. Financial Statements and Exhibits
(c) Exhibits.
Exhibit Number Description
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4.1 Commitment Letter from the Finance Authority of Maine
dated February 13,1998 re Electric Rate Stabilization
for Penobscot Energy Recovery Company, Limited
Partnership
4.2 News Release dated February 23, 1998
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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: February 23, 1998 By: /s/ Martin J. Sergi
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Name: Martin J. Sergi
Title: President