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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):
June 26, 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 June 26, 1998 Penobscot Energy Recovery Company, Limited
Partnership ("PERC"), a subsidiary of KTI, Inc. (the "Company" or the
"Registrant") completed the refinancing of its tax exempt debt by issuing
$44,995,000 par amount Finance Authority of Maine ("FAME") Electric Rate
Stabilization Revenue Refunding Bonds, Series 1998 A and Series B (Penobscot
Energy Recovery Company, LP) (the "1998 Bonds"). The proceeds of the 1998 Bonds
were used to defease the Town of Orrington, Maine Floating Rate Demand Resource
Recovery Revenue Bonds (Penobscot Energy Recovery Company Project) Series 1986 A
and Series 1986 B Bonds (the "1986 Bonds") which have been called for redemption
on July 16, 1998. The 1998 Bonds are fixed rate bonds with yields ranging from
3.75% for 1-year term bonds to 5.20% for 20-year term bonds. The average yield
on the 1998 Bonds is approximately 5.06%. The 1998 Bonds are insured by
Financial Security Assurance, Inc. and are rated AAA and Aaa by Standard &
Poor's and Moody's, respectively, based on the bond insurance.
As part of the refinancing, the following documents were amended, created
or issued:
A. The Power Purchase Agreement between PERC and Bangor Hydro-Electric
Company ("Bangor Hydro") was amended to require Bangor Hydro to make
a one time payment of $6 million to PERC and to make 16 quarterly
payments of $250,000 each to PERC, commencing on October 1, 1998,
all of which payments are held by the trustee for the 1998 Bonds and
are pledged reserves therefor. (The payment of $6 million was paid
on June 26, 1998 to fund a capital reserve fund for the 1998 Bonds.
In addition, Bangor Hydro agreed to pay 50% of the transaction costs
associated with the issuance of the 1998 Bonds and the defeasance of
the 1986 Bonds.)
B. The Waste Disposal Agreements between certain of the Charter
Municipalities (the "Amending Charter Municipalities") and PERC were
amended to extend the term of such agreements to the year 2018, to
grant the Amending Charter Municipalities the immediate right to
purchase up to a 50% economic interest as limited partners in PERC
for $31 million and to purchase the remaining partnership interests
in 2018 from the then PERC partners at the then fair market value of
such partnership interests. (Any funds received from the Amending
Charter Municipalities to purchase limited partnership interests in
PERC prior to 2018 will be used to retire 1998 Bonds. Funds paid in
2018 will be paid to the then PERC partners.) The Waste Disposal
Agreements were further amended to provide that the Charter
Municipalities, Bangor Hydro and PERC would each receive a one-third
share of Distributable Cash. (Non-amending Charter Municipalities
are entitled to receive a one-half share of Distributable Cash
multiplied by a factor, the numerator of which is equal to the
tonnage delivered by non-amending Charter Municipalities and the
denominator of which is total tonnage delivered by both non-amending
Charter Municipalities and Amending Charter Municipalities. The
balance of the one-third share is distributable to the Amending
Charter Municipalities. As of the Closing Date, 53 Charter
Municipalities had considered and approved the Amended Waste
Disposal
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Agreements. No Charter Municipality, which has considered the
proposed amendments, has declined to approve the amendments.
C. As a part of the re-financing of the tax-exempt debt, PERC entered
into a Loan Agreement with FAME, containing the various agreements
and covenants relative to the 1998 Bonds. FAME assigned certain of
its interests in the Loan Agreement to the 1998 Bond Trustee, as
security for the 1998 Bonds. As a condition to FAME's issuance of
the 1998 Bonds, the Company was required to issue a $3 million
limited guaranty of PERC's payment obligation under the Loan
Agreement, in favor of FAME and the 1998 Bond Trustee. Bangor Hydro
issued its guaranty to FAME and the 1998 Bond Trustee in an amount
equal to the annual payments for principal and interest on the 1998
Bonds. Demands on such guaranties are to be pro-rata. If either
party shall default under such demand, the other guarantor is liable
for the entire demand, up to the limit on such guarantor's guaranty.
D. Bangor Hydro issued three warrants to purchase shares of Bangor
Hydro common stock at an exercise price of $7.00 per share, having
an expiration date of June 26, 2008. 25% of the shares covered by
such warrants may be purchased after March 26, 1999, 50% of the
shares covered by such warrants may be purchased after March 26,
2000, 75% of the shares covered by such warrants may be purchased
after March 26, 2001 and all of the shares covered by such warrants
may be purchased after March 26, 2002. The warrants permit a
cashless exercise. Bangor Hydro has the election, at the time of
exercise of a warrant, to pay cash in an amount equal to the
difference between the per share market value of its common stock
and the exercise price per share, multiplied by the number of shares
being purchased pursuant to the exercise in lieu of issuing common
stock. The warrants provide for certain registration rights and
other usual and customary terms, including anti-dilution protection.
The Amending Charter Municipalities received a warrant for one
million shares, PERC Management Company Limited Partnership, a
wholly owned subsidiary of the Company and the Managing General
Partner of PERC, received a warrant for 712,857 shares and Energy
National, Inc., a General Partner of PERC, received a warrant for
287,143 shares.
E. The Agreement of Limited Partnership of Penobscot Energy Recovery
Company, Limited Partnership was amended to permit Amending Charter
Municipalities to be admitted as limited partners.
F. PERC, Bangor Hydro and the Municipal Review Committee, Inc., a Maine
not for profit corporation (the "MRC") entered into a Surplus Cash
Agreement, allocating the cash flow of PERC after the satisfaction
of PERC's obligations under the Loan Agreement.
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Item 7. Financial Statements and Exhibits
(c) Exhibits.
Exhibit Number Description
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4.1 Amendment No. 2 to Power Purchase Agreement, entered into as
of the 26th day of June, 1998 by and between PENOBSCOT ENERGY
RECOVERY COMPANY, LIMITED PARTNERSHIP, a Maine limited
partnership, and BANGOR HYDRO-ELECTRIC COMPANY, a Maine
corporation.
4.2 Second Amended and Restated Waste Disposal Agreements
4.3 LOAN AGREEMENT by and between FINANCE AUTHORITY OF MAINE and
PENOBSCOT ENERGY RECOVERY COMPANY, LIMITED PARTNERSHIP
4.4 KTI, Inc. Limited Guaranty
4.5 BANGOR HYDRO-ELECTRIC COMPANY Warrant to Purchase Common
Stock issued to PERC Management Company Limited Partnership
4.6 THIRD AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
OF PENOBSCOT ENERGY RECOVERY COMPANY, LIMITED PARTNERSHIP
4.7 SURPLUS CASH AGREEMENT dated as of June 26, 1998 is among
Penobscot Energy Recovery Company, Limited Partnership,
Bangor Hydro-Electric Company and Municipal Review Committee,
Inc.
4.8 News Release dated June 26, 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: July 7, 1998 By: /s/ Martin J. Sergi
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Name: Martin J. Sergi
Title: President
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EXHIBIT INDEX
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Exhibit Number Description
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4.1 Amendment No. 2 to Power Purchase Agreement, entered into as
of the 26th day of June, 1998 by and between PENOBSCOT ENERGY
RECOVERY COMPANY, LIMITED PARTNERSHIP, a Maine limited
partnership, and BANGOR HYDRO-ELECTRIC COMPANY, a Maine
corporation.
4.2 Second Amended and Restated Waste Disposal Agreements
4.3 LOAN AGREEMENT by and between FINANCE AUTHORITY OF MAINE and
PENOBSCOT ENERGY RECOVERY COMPANY, LIMITED PARTNERSHIP
4.4 KTI, Inc. Limited Guaranty
4.5 BANGOR HYDRO-ELECTRIC COMPANY Warrant to Purchase Common
Stock issued to PERC Management Company Limited Partnership
4.6 THIRD AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
OF PENOBSCOT ENERGY RECOVERY COMPANY, LIMITED PARTNERSHIP
4.7 SURPLUS CASH AGREEMENT dated as of June 26, 1998 is among
Penobscot Energy Recovery Company, Limited Partnership,
Bangor Hydro-Electric Company and Municipal Review Committee,
Inc.
4.8 News Release dated June 26, 1998