1
INTERCREDITOR AGREEMENT
between
KTI, INC.
and
FINOVA CAPITAL CORPORATION
December 29, 1998
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
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.
3
4
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
4
5
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.
5
6
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
6
7
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.
7
8
(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
8
9
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.
9
10
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
10
11
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.
11
12
EXHIBIT B
(KTI Collateral)
See attached.
12
13
EXHIBIT C
(Copies of KTI Loan Documents)
See attached.
13