AGREEMENT
OF
REORGANIZATION AND MERGER
among
KTI, Inc.,
a New Jersey corporation,
K-C Industries, Inc.,
an Oregon corporation,
and
KES, Inc.,
a Delaware corporation.
September 19, 1997
AGREEMENT
OF
REORGANIZATION AND MERGER
THIS AGREEMENT OF REORGANIZATION AND MERGER (this "Agreement") is entered
into as of September 19, 1997 among KTI, Inc., a New Jersey corporation ("KTI"),
K-C Industries, Inc., an Oregon corporation ("K-C"), and KES, Inc., a Delaware
corporation ("Merger Corp.").
RECITALS
A. The Boards of Directors of KTI and K-C have determined that it is in the
best interests of their respective shareholders for KTI to acquire K-C upon the
terms and subject to the conditions set forth in this Agreement.
B. It is intended that the Merger (as defined below) qualify as a
reorganization under the provisions of Section 368(a) of the United States
Internal Revenue Code of 1986, as amended (the "Code").
AGREEMENT
In consideration of the representations, warranties, covenants, agreements
and conditions contained herein, the parties agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. Pursuant to the laws of the State of Delaware and Oregon,
and subject to and in accordance with the terms and conditions of this Agreement
and the Plan of
Merger in the form attached hereto as Exhibit A (the "Plan of Merger"), K-C will
be merged with and into Merger Corp., and all shares of Common Stock of K-C,
$1.00 per share par value (the "K-C Common Stock"), outstanding immediately
before the Effective Time (as defined below), will be converted into the right
to receive shares of Common Stock of KTI, without par value (the "KTI Common
Stock"), and cash, as provided in Section 1.3. K-C and Merger Corp. will execute
a Certificate of Merger to be filed with the Secretary of States of each of the
States of Delaware and Oregon on the Closing Date (as defined in Section 1.7) or
as soon thereafter as practicable. The merger of K-C with and into Merger Corp.
(the "Merger") will take effect (the "Effective Time") at the time when the
Certificate of Merger is duly filed by the Secretary of State of the State of
Delaware and a copy thereof filed with the Secretary of State of Oregon, or at
such other time as the parties may agree upon in writing pursuant to applicable
law.
1.2 Effect of Merger. At the Effective Time, K-C will be merged with and
into Merger Corp. in the manner and with the effect provided by the Delaware
Business Corporation Law (the "DBCL") and the Oregon Business Corporation Law
(the "OBCL"), the separate corporate existence of K-C will cease, and Merger
Corp. will be the surviving corporation. From and after the Effective Time, the
Certificate of Incorporation, Bylaws, Board of Directors, and officers of Merger
Corp. in effect or in office, as the case may be, immediately before the
Effective Time will be the Certificate of Incorporation, Bylaws, Board of
Directors, and officers of the surviving corporation; provided, however, that
the name of the surviving corporation will be K-C Industries International, Inc.
The outstanding
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shares of K-C Common Stock will be converted into the right to receive shares of
KTI Common Stock and cash on the basis, terms and conditions described in
Section 1.3.
1.3 Merger Consideration. Each share of K-C Common Stock outstanding
immediately before the Effective Time will be converted into the right to
receive:
(a) (i) shares of KTI Common Stock (or cash in lieu of certain fractional
shares as provided in Section 1.4.3) that equals the sum of $4,800,000
divided by the per-share price for KTI Common Stock equal to the higher of
$10.00 per share or the average of the closing sales prices for KTI Common
Stock on each of the ten trading days immediately preceding the day before
the Closing Date as reported in The Wall Street Journal (such price, the
"Average Sale Price"), divided by
(ii) the number of shares of K-C Common Stock outstanding immediately
before the Effective Time; and
(b) cash in an amount equal to $1,200,000 divided by the number of shares
of K-C Common Stock outstanding immediately before the Effective Time (such
KTI Common Stock and cash, the "Merger Consideration").
1.3.1 K-C Stock. Each share of K-C Common Stock that is outstanding
immediately before the Effective Time will, by virtue of the Merger and without
any action on the part of the holder thereof, cease to exist and be converted
into the right to receive the Merger Consideration.
1.3.2 Merger Corp. Stock. Each share of Common Stock of Merger Corp.
issued and outstanding immediately before the Effective Time will remain
outstanding without change by virtue of the Merger.
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1.4 Surrender and Cancellation of Certificates.
1.4.1 Surrender of Certificates. After the Effective Time, each holder
of shares of K-C Common Stock outstanding immediately before the Effective Time
(other than Dissenting Shares), upon surrender to KTI or its agent designated
for such purpose of a certificate or certificates formerly representing such
shares will be entitled to receive a certificate representing the number of
shares of KTI Common Stock into which such shares of K-C Common Stock have been
converted pursuant to the provisions of Section 1.3. If any certificate for
shares of KTI Common Stock is to be issued in a name other than that in which
the certificate surrendered in exchange therefor is registered, it will be a
condition of the issuance thereof that the certificate so surrendered be
properly endorsed and otherwise in proper form for transfer and that the person
requesting such exchange pay to KTI or its agent designated for such purpose any
transfer or other taxes required or establish to the reasonable satisfaction of
KTI or its agent that such tax has been paid or is not payable. If any holder of
shares of K-C Common Stock canceled and retired in accordance with this
Agreement is unable to deliver a certificate or certificates representing such
shares, KTI, in the absence of actual notice that any shares theretofore
represented by any such certificate have been acquired by a bona fide purchaser,
will deliver to such holder the number of shares of KTI Common Stock to which
such holder is entitled in accordance with the provisions of this Agreement upon
the presentation of the following: (i) evidence reasonably satisfactory to KTI
(1) that such person is the owner of the shares theretofore represented by each
certificate claimed by him or her to be lost, wrongfully taken, or destroyed and
(2) that he or she is the person who would be entitled to present such
certificate for exchange pursuant to this
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Agreement; and (ii) such security or indemnity as may be reasonably requested by
KTI to indemnify and hold KTI and its transfer agent harmless with respect to
such exchange.
1.4.2 No Fractional Shares. No certificates or scrip evidencing
fractional shares of KTI Common Stock will be issued in the Merger, and such
fractional share interests will not entitle the owner thereof to any rights as a
shareholder of KTI. In lieu of a fractional share, KTI will pay any holder of
shares of K-C Common Stock who would otherwise have been entitled to a fraction
of a share of KTI Common Stock upon surrender of the certificates therefor an
amount of cash (without interest) determined by multiplying (a) the Average Sale
Price by (b) the fractional share interest in KTI Common Stock to which such
holder would otherwise be entitled. The provisions of this Section 1.4.3 will
apply to the aggregate number of shares of K-C Common Stock held by each holder
thereof and each such holder will be required to simultaneously surrender all
certificates relating to shares of K-C Common Stock held by such holder in
accordance with the provisions of Section 1.4 in order to surrender any such
certificate.
1.4.3 Cancellation. At the Effective Time all shares of K-C Common
Stock will no longer be outstanding and will automatically be canceled and
retired and will cease to exist, and each certificate previously evidencing any
such shares of K-C Common Stock will thereafter represent only the right to
receive the Merger Consideration in accordance with the terms of this Agreement.
The holders of such certificates previously evidencing such shares of K-C Common
Stock outstanding immediately before the Effective Time will cease to have any
rights with respect to such shares of K-C Common Stock, except as provided in
this Agreement.
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1.4.4 Treasury Shares. At the Effective Time, each share of K-C Common
Stock or other K-C capital stock held in the treasury of K-C immediately before
the Effective Time will be canceled and extinguished without any conversion
thereof and no payment will be made with respect thereto.
1.4.5 Escheat. Neither KTI nor Merger Corp. will be liable to any
holder of shares of K-C Common Stock for any shares of KTI Common Stock (or
dividends or distributions with respect thereto) or cash delivered to a public
official pursuant to any applicable abandoned property, escheat, or similar law.
1.4.6 Withholding Rights. KTI will be entitled to deduct and withhold
from the aggregate Merger Consideration deliverable to any K-C shareholder such
amounts as KTI may be required to deduct and withhold with respect to the making
of such delivery under the Code or any applicable provision of state, local, or
foreign tax law. To the extent that amounts are so withheld by KTI, such
withheld amounts will be treated for all purposes of this Agreement as having
been delivered to the holder of the shares of K-C Common Stock in respect of
which such deduction and withholding was made by KTI.
1.5 [Intentionally not used]
1.6 Stock Transfer Books. At the Effective Time, the stock transfer books
of K-C will be closed and there will be no further registration of transfers of
K-C capital stock or other securities thereafter on the records of K-C. At or
after the Effective Time, any certificates for K-C Common Stock presented to KTI
or its agent for any reason will be converted into the right to receive the
Merger Consideration in accordance with the provisions of this Agreement.
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1.7 Closing. The closing of the Merger (the "Closing") will take place at
the offices of Stoel Rives LLP, ▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇
▇▇▇▇▇ on the Condition Completion Date (as hereinafter defined), or on such
other date and/or at such other place and time as K-C, KTI and Merger Corp. may
agree (the "Closing Date"). The "Condition Completion Date" will be the day on
which the last of the conditions set forth in Article V of this Agreement has
been fulfilled or waived (other than those conditions that, by their terms, are
to be satisfied at the Closing). The parties agree that upon receipt of the
consent of KeyBank of New York that the Closing Date and the Condition
Completion Date shall be deemed to be September 22, 1997 for purposes of
calculating the Merger Consideration and that K-C met all conditions to Closing
on September 19, 1997.
1.8 Subsequent Actions. If, at any time after the Effective Time, Merger
Corp. considers or is advised that any deeds, bills of sale, assignments,
actions or things are necessary or desirable to vest, perfect, or confirm of
record or otherwise in Merger Corp. its right, title, or interest in, to, or
under any of the rights, properties, or assets of K-C acquired or to be acquired
by Merger Corp. as a result of, or in connection with, the Merger or otherwise
to carry out this Agreement, the officers and directors of Merger Corp. will be
authorized to execute and deliver, in the name and on behalf of K-C, or
otherwise, all such deeds, bills of sale, assignments, and assurances, and to
take and do, in the name and on behalf of K-C, or otherwise, all such other
actions and things as may be necessary or desirable to vest, perfect, or confirm
any and all right, title, and interest in, to, and under such rights,
properties, or assets in Merger Corp. or otherwise to carry out the purposes of
this Agreement.
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ARTICLE II
EMPLOYMENT AGREEMENTS
2.1 Key Employee Agreements. At or before the Closing, K-C will use all
reasonable efforts to cause each of ▇▇▇ ▇. ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇,
▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ("Key Employees") to sign an employment
agreement attached as Exhibits B1-B5 (the "Employment Agreements").
2.3 Voting Agreement. Each of the Key Shareholders will execute and
deliver, concurrently with the execution of this Agreement, a consent to the
merger in the form attached as Exhibit C (the "Shareholders Consent").
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of K-C. K-C hereby represents and
warrants to KTI and Merger Corp as follows:
3.1.1 Organization and Status. K-C is a corporation duly organized,
validly existing, and in good standing under the laws of its jurisdiction of
incorporation and is duly qualified and in good standing as a foreign
corporation in each jurisdiction where its properties (whether owned, leased, or
operated) or its business conducted require such qualification, except where the
failure to so qualify or be in good standing, when taken together with all such
failures, would not have a material adverse effect on K-C. K-C has all requisite
corporate power and authority to own, operate, and lease its property and to
carry on its businesses as they are now being conducted. K-C has delivered to
KTI complete and
8
accurate copies of the Certificate of Incorporation ("Certificate of
Incorporation") and the Bylaws of K-C ("Bylaws"), each as amended to the date
hereof.
3.1.2 Capitalization.
3.1.2.1 Capital Structure. The issues and outstanding capital
stock of K-C is as set forth on Schedule 3.1.2.1 (the "Outstanding Securities").
All of the K-C Outstanding Securities have been duly authorized and are validly
issued, fully paid, and nonassessable, and no such securities were issued in
violation of preemptive or similar rights of any shareholder or in violation of
any applicable securities laws. There are no shares of capital stock of K-C
authorized, issued, or outstanding, and there are no preemptive rights or any
outstanding subscriptions, options, warrants, phantom stock, stock appreciation
or similar rights, convertible securities, or any other rights, agreements, or
commitments of K-C of any character relating to the issued or unissued capital
stock or other securities of K-C. There are no outstanding obligations of K-C to
repurchase, redeem, or otherwise acquire any K-C Outstanding Securities.
3.1.2.2 K-C Outstanding Securities Holders. Schedule 3.1.2.2 sets
forth a complete and accurate list of each shareholder of record of K-C.
3.1.3 Corporate Authority. K-C has the corporate power and authority
and has taken all corporate action necessary to execute and deliver this
Agreement and to consummate the transactions contemplated hereby. This Agreement
has been duly and validly authorized by the K-C Board of Directors and the
shareholders of K-C and validly executed and delivered by K-C. This Agreement
constitutes the valid and binding obligation of K-C, enforceable in accordance
with its terms, except as enforcement may be limited by
9
applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws
affecting the enforcement of creditors' rights generally and except that the
availability of the equitable remedy of specific performance or injunctive
relief is subject to the discretion of the court before which any proceeding may
be brought.
3.1.4 Section 368(a)(2)(D) Asset Requirement. Merger Corp. will
acquire at least 90 percent of the fair market value of the net assets and at
least 70 percent of the fair market value of the gross assets held by K-C
immediately before the Merger. For purposes of this representation, amounts paid
by K-C to shareholders who receive cash or other property, K-C assets used to
pay its reorganization expenses, and all redemptions and distributions (except
for regular, normal dividends) made by K-C immediately preceding the Effective
Time will be included as assets of K-C held immediately before the Merger.
3.1.5 Governmental Filings and Consents. Other than the filing of the
Certificate of Merger contemplated by Article I of this Agreement, no notices,
reports or other filings are required to be made by K-C with, nor, except as set
forth on Schedule 3.1.5, are any consents, registrations, approvals, permits, or
authorizations required to be obtained by K-C from, any domestic or foreign
governmental or regulatory authority, agency, court, commission or other
governmental entity ("Governmental Entity") in connection with the execution and
delivery of this Agreement by K-C and the consummation by K-C of the
transactions contemplated hereby.
3.1.6 Investments; Subsidiaries. All direct or indirect investments of
K-C in any corporation, partnership, association, joint venture or other entity
are listed in Schedule 3.1.6(a).
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3.1.7 No Adverse Consequences. Neither the execution and delivery of
this Agreement by K-C nor the consummation of the transactions contemplated by
this Agreement will (a) result in the creation or imposition of any lien,
charge, encumbrance or restriction on any of the assets or properties of K-C,
(b) violate any provision of the Certificate of Incorporation or Bylaws of K-C,
(c) violate any statute, judgment, order, injunction, decree, rule, regulation
or ruling of any Governmental Entity applicable to K-C, or (d) except as set
forth on Schedule 3.1.7, either alone or with the giving of notice or the
passage of time or both, conflict with, constitute grounds for termination of,
accelerate the performance required by, accelerate the maturity of any
indebtedness or obligation under, result in the breach of the terms, conditions
or provisions of, or constitute a default under any mortgage, deed of trust,
indenture, note, bond, lease, license, permit, or other agreement, instrument,
or obligation to which K-C is a party or by which it is bound.
3.1.8 Financial Statements. K-C has furnished to KTI an audited
balance sheet of K-C as of December 31, 1996, and the related statements of
operations, shareholders' equity, and cash flows for the period then ended, and
the unaudited balance sheet of K-C as of July 31, 1997 (the "Current Balance
Sheet") and the related statements of operations, shareholders' equity, and cash
flows for the nine months then ended, and the Updated Financial Statements
delivered at or before the Closing pursuant to Section 5.3.5 (all such balance
sheets and statements collectively, the "Financial Statements"). The Financial
Statements are (or will be, in the case of the Updated Financial Statements)
complete and accurate in all material respects and present fairly the financial
position and operating results of K-C as of the dates and for the periods
indicated therein, and have been (or will be, in the
11
case of the Updated Financial Statements) prepared in accordance with generally
accepted accounting principles. The Financial Statements (including notes and
schedules) are (or will be, in the case of the Updated Financial Statements) in
accordance with the books and records of the Company.
3.1.9 Undisclosed Liabilities. Except for current liabilities incurred
after July 31, 1997 in the ordinary course of business and of a type and in an
amount consistent with past practices and not more in the aggregate than
$100,000, K-C has no liability or obligation (whether absolute, accrued,
contingent or otherwise, and whether due or to become due) that is not accrued,
reserved against, or identified on the Current Balance Sheet. Except as set
forth on Schedule 3.1.9, there are no rights of return or other agreements
between K-C and any customer that would cause any sales reflected in the
Financial Statements to fail to qualify as sales in accordance with generally
accepted accounting principles and K-C's revenue recognition policy as reflected
in the Financial Statements. Notwithstanding the foregoing, as to any subject
matter covered by a specific representation and warranty of K-C elsewhere in
this Agreement, no fact or occurrence that would not breach K-C's specific
representation and warranty covering that subject matter will be deemed to be a
breach of the representation and warranty contained in this Section 3.1.9.
3.1.10 Absence of Certain Changes or Events.
3.1.10.1 Absence of Changes or Events Since December 31, 1996.
Since December 31, 1996, except as set forth on Schedule 3.1.10.1, there has not
been:
(a) Any direct or indirect declaration, setting aside or
payment of any dividend or other distribution (whether in cash, stock, property
or any
12
combination thereof) in respect of any K-C Outstanding Securities, or any direct
or indirect repurchase, redemption or other acquisition by K-C of any of its
securities; or
(b) Any change by K-C in accounting methods, principles or
practices.
3.1.10.2 Absence of Changes or Events Since July 31, 1997. Since
July 31, 1997, except as set forth on Schedule 3.1.10.2, there has not been:
(a) Any material adverse change in the business, results of
operations, financial condition, properties, or assets of K-C;
(b) Any material damage, destruction, requisition, taking or
casualty loss, whether or not covered by insurance, of or to any of the assets
or properties of K-C;
(c) Any increase in the rate or terms of compensation
payable or to become payable by K-C to its directors, officers, or employees;
any change in the rate or terms of any bonus, insurance, pension, or other
employee benefit plan, payment or arrangement made to, for, or with any
employees of K-C; any special bonus or remuneration paid; any written employment
contract executed or amended; or any change in personnel policies;
(d) Any entry into any agreement, commitment, or transaction
(including, without limitation, any license of intellectual property, any
borrowing, capital expenditure or capital financing, any purchase, acquisition,
sale, or other disposition of assets (other than inventory in the ordinary
course of business), any lease or sublease, any guaranty, assumption, or
endorsement of payment or performance of any loan or obligation
13
of another, or any amendment, modification or termination of any existing
agreement, commitment or transaction) by K-C except as contemplated in this
Agreement and except for such agreements, commitments, and transactions as do
not exceed $100,000 singly;
(e) K-C has not issued or sold any stock of K-C or issued,
granted, or created any option, warrant, phantom stock, stock appreciation or
similar rights, or any other right to purchase any stock of K-C or any
commitment to do any of the foregoing;
(f) Any amendment to the Certificate of Incorporation or
Bylaws of K-C;
(g) Any pending or, to the actual knowledge of K-C,
threatened labor disputes, organizational activities or disturbances;
(h) Any communication to K-C from any customer of K- C that
purchased $100,000 or more of products or services from K-C in the year ended
December 31, 1996 that such customer intends to, is desirous of, or is actively
considering terminating or materially reducing its purchases from K-C for any
reason; or
(i) Any change not described above in the assets,
liabilities, licenses, permits, or franchises of K-C, or in any agreement to
which K-C is a party or by which it is bound, that, either individually or in
the aggregate, has had or is reasonably likely to have a material adverse effect
on the business, results of operations, financial condition, properties, or
assets of K-C.
3.1.11 Litigation. Except as listed on Schedule 3.1.11, no litigation,
proceeding, or governmental investigation is pending or, to the Knowledge of
K-C,
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threatened against or relating to K-C, its officers, or directors in their
capacities as such, or any of K-C's properties or businesses. No pending
litigation or proceeding listed on Schedule 3.1.11 seeks injunctive relief
against K-C. For the purposes of this Section 3.1.11, the term "Litigation
Reserves" means the amounts specified on Schedule 3.1.11 as such. The pending
litigation and proceedings listed on Schedule 3.1.11 will not, if settled,
decided, or otherwise resolved in favor of the opposing party or parties, result
in any payment obligations of K-C (including without limitation damages and
attorneys' fees) greater, in the aggregate, than the Litigation Reserves.
3.1.12 Compliance with Laws; Judgments. K-C has at all relevant times
conducted its business in compliance with (a) the provisions of its Certificate
or Articles of Incorporation, Bylaws, and (b) all applicable laws, regulations,
and standards, other than violations that individually or in the aggregate do
not, and, with the passage of time will not, have a material adverse effect on
its business, financial condition, results of operations, properties, or assets.
K-C is not subject to any outstanding judgment, order, writ, injunction, or
decree and has not been charged with, or, to the Knowledge of K-C, threatened
with a charge of, a violation of any provision of any applicable law or
regulation.
3.1.13 Employment Matters.
3.1.13.1 Labor Matters. K-C is not a party or otherwise subject
to any collective bargaining agreement governing the wages, hours, or terms of
employment of its employees. K-C is, and K-C and each Previous Subsidiary has
been, in compliance with all applicable laws regarding employment and employment
practices, terms and conditions of employment, wages, and hours and is not and
has not been engaged in any
15
unfair labor practice, other than violations that individually or in the
aggregate do not, and, with the passage of time will not, have a material
adverse effect on its business, financial condition, results of operations,
properties, or assets. There is no (a) unfair labor practice complaint against
K-C pending before the National Labor Relations Board or any other Governmental
Entity; (b) labor strike, slowdown or work stoppage actually occurring or, to
the Knowledge of K-C, threatened against K-C; (c) representation petition
respecting the employees of K-C pending before the National Labor Relations
Board or similar agency; or (d) grievance or any arbitration proceeding pending
arising out of or under collective bargaining agreements applicable to K-C.
3.1.13.2 Employee Benefits. Schedule 3.1.13.2 lists all pension,
retirement, profit sharing, deferred compensation, bonus, commission, incentive
compensation (including cash, stock, and option plans or arrangements), life
insurance, health and disability insurance, hospitalization, and all other
employee benefit plans or arrangements (including, without limitation, any
contracts or agreements with trustees, insurance companies or others relating to
any such employee benefit plans or arrangements) established or maintained by
K-C, and K-C has provided KTI with complete and accurate copies of: (a) all such
plans or arrangements; (b) K-C's annual reports for the calendar years 1992 to
1996 inclusive (Form 5500 series) filed with the Internal Revenue Service; and
(c) all governmental rulings, determinations, and opinions (and pending requests
for governmental rulings, determinations, and opinions). The employee welfare
benefit plans (within the meaning of Section 3(1) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")) and the employee pension
benefit plans (within the meaning
16
of Section 3(2) of the ERISA) established and maintained by K-C (the "ERISA
Plans") are listed separately as ERISA Plans on Schedule 3.1.13.4. The ERISA
Plans comply in all material respects with the applicable requirements of ERISA.
K-C has received from the Internal Revenue Service a favorable determination for
each of the ERISA Plans and their related trusts that each of the ERISA Plans
that is an employee pension benefit plan is qualified under Section 401(a) of
the Code and the related trust is tax-exempt under Section 501(a) of the Code.
There has been no event subsequent to that determination that has adversely
affected the tax qualified status of the ERISA Plans or the exemption of the
related trusts other than changes in the Code that are not effective as of the
Closing Date. None of the ERISA Plans, its related trusts or any trustee,
investment manager or administrator thereof has engaged in a nonexempt
"prohibited transaction," as such term is defined in Section 406 of ERISA and
Section 4975 of the Code. There are not and have not been any excess deferrals
or excess contributions under any ERISA Plan. Each ERISA Plan is and has been
operated and administered in conformity with the requirements of all applicable
laws and regulations, whether or not the ERISA Plan documents have been amended
to reflect such requirements. A deposit to the K-C profit sharing plan through
August 31, 1997, shall be made contemporaneously with closing. Notice will be
given to all K-C employees that contributions to the K-C profit sharing trust
will cease on the date of closing and participation in the KTI 401(k) plan will
commence on October 1, 1997 for employees with one year of service (with tacking
for K-C employment), and eligibility for the KTI plan shall be as set forth in
the 401(k) plan documents. Except as set forth on Schedule 3.1.13.2, K-C has no
obligation of any kind (whether under the terms of the ERISA Plans or under any
17
understanding with employees) to make payments under, or to pay contributions
to, any plan, agreement or other arrangement for deferred compensation of
employees, whether or not tax qualified, including, without limitation, a single
employer tax qualified plan, a tax qualified plan of a controlled group of
corporations, a multiemployer pension plan, a "defined benefit" plan, a
nonqualified deferred compensation plan, an individual employment or
compensation agreement or a commitment to provide medical benefits to retirees.
K-C has never adopted, maintained, or contributed to any plan or arrangement
that is or was subject to Section 412 of the Code or Title IV of ERISA (a "DB
Plan"), nor has K-C ever been a member of a controlled group of corporations,
group of trades or businesses, or affiliated service group (within the meaning
of Sections 414(b), (c), and (m) of the Code) that has adopted, maintained, or
contributed to a DB Plan.
3.1.13.3 Employment Agreements. There are no employment or other
agreements or understandings of any kind between K-C and any of its employees,
including without limitation any agreements or understandings regarding
compensation or commissions of any nature, severance payments, or retirement
benefits, except as reflected in the items listed in Schedules 3.1.13.2,
3.1.13.3, and 3.1.13.4.
3.1.14 Title to and Condition of Real Property. Neither K-C nor any
Previous Subsidiary has ever owned any real property, and K-C does not now own
any real property. Schedule 3.1.14 contains a list of all real property
currently leased, occupied, or used by K-C (the "Leased Real Property"),
including the dates of and parties to all leases and any amendments thereof. K-C
has exercised its option to extend the lease for The Lakewood, New Jersey real
property for a two year period commencing on October 1, 1997
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and ending on September 30, 1999. The Leased Real Property includes all such
property necessary to conduct the business of K-C. None of the Leased Real
Property has been condemned or otherwise taken by public authority and no such
condemnation or taking is, to the Knowledge of K-C, threatened or contemplated.
3.1.15 Title to and Condition of Fixed Assets. Except as noted on
Schedule 3.1.15, K-C has good and marketable title to all of the tangible
personal property (excluding inventory) owned or leased by K-C (the "Tangible
Personal Property"), free and clear of all material liens, mortgages, pledges,
leases, restrictions and other claims and encumbrances of any nature whatsoever.
3.1.16 Certain Contracts and Arrangements. Schedule 3.1.16, which is
organized by type of agreement, contains a complete and accurate list of each
contract, agreement, purchase order, or acknowledgment form for the purchase,
sale, lease or other disposition of equipment, products, materials or capital
assets, or for the performance of services (including without limitation
consulting services), with respect to which the annual aggregate dollar amount
either due to or payable by K-C exceeds $100,000.
3.1.17 Status of Contracts. Each of the material contracts,
agreements, commitments and instruments listed on Schedule 3.1.16 (collectively,
the "Contracts") is in full force and effect and is valid, binding and
enforceable by K-C in accordance with its terms, except as enforcement may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the enforcement of creditors' rights generally and except
that the availability of the equitable remedy of specific performance or
injunctive relief is subject to the discretion of the court before which any
proceeding may be
19
brought. Except as listed in Schedule 3.1.17, there is no existing material
default or violation by K-C under any Contract and no event has occurred that
(whether with or without notice, lapse of time or both) would constitute a
material default of K-C under any Contract. There is no pending or, to the
Knowledge of K-C, threatened proceeding that would interfere with the quiet
enjoyment of any leasehold of which K-C is lessee or sublessee. Except set forth
on Schedule 3.1.17, no consent of the other parties to the Contracts is
necessary for the consummation of the transactions contemplated by this
Agreement. Complete and accurate copies of all Contracts have been delivered to
KTI. To the Knowledge of K-C, there is no default by any other party to any
Contract or any event that (whether with or without notice, lapse of time or
both) would constitute a material default by any other party with respect to
obligations of that party under any Contract, and, to the Knowledge of K-C,
there are no facts that exist indicating that any of the Contracts may be
totally or partially terminated or suspended by the other parties.
3.1.18 Insurance. Schedule 3.1.18 contains a complete and accurate
list of all current policies of primary, excess, or umbrella comprehensive
general liability, fire, worker's compensation, or any other form of insurance
insuring K-C, its officers or directors, its assets, or its operations (the
"Policies"), setting forth the applicable deductible amounts. All premiums with
respect to the Policies covering all periods up to and including the date as of
which this representation is being made have been paid and no notice of
cancellation or termination has been received by K-C with respect to any Policy.
There have been no claims made for insurance payment under any of the Policies
in the three years preceding the date of this Agreement. Complete and accurate
copies of the Policies and all
20
endorsements thereto have been delivered to KTI. K-C has not been refused any
insurance coverage and no insurance coverage has been canceled during the three
years preceding the date of this Agreement.
3.1.19 Permits and Licenses. Schedule 3.1.19 contains a complete and
accurate list of all material governmental licenses, permits, franchises,
easements, and authorizations (collectively, "Permits") held by K-C, listed by
Governmental Entity. To the actual knowledge of K-C, K-C holds, and at all times
K-C has held, all Permits necessary for the lawful conduct of its business
pursuant to all applicable statutes, laws, ordinances, rules, and regulations of
all Governmental Entities and other authorities having jurisdiction over it or
any part of its operations except for Permits the absence of which would not
materially and adversely affect its business. K-C is in compliance with each of
the material terms of its Permits.
3.1.20 Taxes.
3.1.20.1 Returns. Except as set forth on Schedule 3.1.20.1, each
of K-C and each Previous Subsidiary has filed on a timely basis all federal,
state, foreign and other returns, reports, forms, declarations, and information
returns required to be filed by it with respect to Taxes (as defined below) that
relate to the business, results of operations, financial condition, properties,
or assets of K-C or any Previous Subsidiary (collectively, the "Returns"), and
K-C has delivered copies of all such returns filed for the years of 1992 to 1996
inclusive to KTI, and has paid on a timely basis all Taxes shown to be due on
the Returns. Except as set forth on Schedule 3.1.20.1, K-C is not, and neither
K-C nor any Previous Subsidiary has ever been, part of an affiliated group of
corporations that files or has
21
the privilege of filing consolidated tax returns pursuant to Section 1501 of the
Code or any similar provisions of state, local, or foreign law. Except as set
forth on Schedule 3.1.20.1, K-C is not, and neither K-C nor any Previous
Subsidiary has ever been, a party to any tax- sharing or tax-allocation
agreement. K-C does not have any liability for Taxes of any person (other than
itself), whether arising under federal, state, local, or foreign law, as a
transferee or successor, by contract, or otherwise. No extensions of time have
been requested for Returns that have not been filed and no statute of
limitations has been waived with respect to any Tax except as set forth on
Schedule 3.1.20.1. Except as set forth on Schedule 3.1.20.1, no Returns have
been examined by the applicable taxing authorities for all periods to and
including the fiscal year ended December 31, 1995 and, except as set forth on
Schedule 3.1.20.1, K-C has not received any notice of claim or audit from any
taxing authority with respect to itself or any Previous Subsidiary and there are
no outstanding agreements or waivers extending the applicable statutory periods
of limitation for such Taxes for any period.
3.1.20.2 Taxes Paid or Reserved. The reserves for Taxes reflected
on the Current Balance Sheet are adequate for payment of Taxes in respect of
periods ending on or before the date of the Current Balance Sheet. All reserves
for Taxes have been determined in accordance with generally accepted accounting
principles and applicable accounting rules and regulations of the SEC
consistently applied throughout the periods involved and with prior periods. All
Taxes that K-C has been required to collect or withhold have been withheld or
collected and, to the extent required, have been paid to the proper taxing
authority.
22
3.1.20.3 Definition. The term "Tax" or "Taxes" means all federal,
state, and local net income taxes.
3.1.21 Related Party Interests. Except for a lease on the Portland
office that is with an entity 50% owned by ▇▇▇ ▇▇▇▇ and subordinated loans to
certain Key Shareholders, and except as listed in Schedule 3.1.21, no Holder,
officer, or director of K-C (or any entity owned or controlled by one or more of
such parties) (a) is indebted to K-C or (b) has any other right, arrangement, or
agreement binding upon K-C, including without limitation any registration rights
agreement, stock purchase agreement, or similar arrangement (other than
obligations contained in K-C's Articles of Incorporation or Bylaws).
3.1.22 Environmental Conditions.
3.1.22.1 Compliance. The business, assets, and operations of K-C,
including without limitation the Leased Real Property, are and have been in
material compliance with all Environmental Laws (as defined below) and all
material Permits required for the operations of K-C under any Environmental Law.
There are no pending or, to the Knowledge of K-C, threatened claims, actions or
proceedings against K-C under any Environmental Law or related Permit. All
wastes generated in connection with K-C's business are and have been transported
and disposed of off-site in compliance with all Environmental Laws. No wastes,
including hazardous and solid wastes, have been or are stored on, at, or under
the Leased Real Property in violation of any Environmental Law.
3.1.22.2 Hazardous Substances. Except for ordinary household
cleaners and office supplies or as set forth on Schedule 3.1.22.2, no Hazardous
Substance (as defined below) is present on, at, or under the Leased Real
Property. Except as would not
23
violate any Environmental Law, no Hazardous Substance has been disposed of,
spilled, leaked, discharged, or otherwise released on, in, under or has migrated
off-site from the Leased Real Property or has otherwise come to be located in
the soil or water (including surface and ground water) in, on, under, or
adjacent to the Leased Real Property. Except for ordinary household cleaners and
office supplies or as set forth on Schedule 3.1.22.2, no Hazardous Substance is
or has been generated, manufactured, treated, stored, transported, used, or
otherwise handled on the Leased Real Property or in connection with the business
or operations of K-C. Except as listed on Schedule 3.1.22.2, there are not and
have never been any above-ground or underground storage tanks (whether or not
regulated and whether or not out of service, closed, or decommissioned) on the
Leased Real Property during the period of occupancy or use by K-C.
3.1.22.3 Definitions. As used in this Agreement, (a)
"Environmental Law" means any federal, state, foreign, or local statute,
ordinance, or regulation pertaining to the protection of human health or the
environment and any applicable orders, judgments, decrees, permits, licenses, or
other authorizations or mandates under such statutes, ordinances or regulations,
and (b) "Hazardous Substance" means any hazardous, toxic, radioactive, or
infectious substance, material or waste as defined, listed, or regulated under
any Environmental Law, and includes without limitation radioactive material and
petroleum oil and its fractions.
3.1.23 Records. The books of account are complete and accurate in all
material respects. Complete and accurate copies of such books, records, and
ledgers (except for corporate record documents duly noted as lost) have been
made available to KTI.
24
3.1.24 Brokers and Finders. K-C has not incurred any liability for any
brokerage or investment banking fees, commissions or finders' fees in connection
with the Merger.
3.3 Representations and Warranties of KTI. KTI hereby represents and
warrants to K-C that, except as specifically set forth in Schedule 3.3 (the "KTI
Disclosure Schedule") in a numbered paragraph that corresponds to the section
for which disclosure is made:
3.3.1 Organization and Status. Each of KTI and its operating
subsidiaries is a corporation duly organized and validly existing under the laws
of its jurisdiction of incorporation and is duly qualified and in good standing
as a foreign corporation in each jurisdiction where the properties owned,
leased, or operated, or the business conducted, by it require such
qualification, except where the failure to so qualify or be in good standing,
when taken together with all such failures, would not have a material adverse
effect on KTI. Each of KTI and its operating subsidiaries has all requisite
corporate power and authority to own, operate, and lease its property and to
carry on its businesses as they are now being conducted.
3.3.2 Capitalization. KTI has authorized capital stock consisting of
20,000,000 shares of Common Stock, without par value, of which 6,920,799 shares
were outstanding on August 12, 1997 and 10,000,000 shares of Preferred Stock
authorized, of which 487,500 Series A no par and 856,000 Series B no par shares
of Preferred Stock, were outstanding on September 15, 1997. All of the
outstanding shares of capital stock of KTI have been duly authorized and are
validly issued, fully paid, and nonassessable, and no shares were issued in
violation of preemptive or similar rights of any shareholder. Except
25
under the terms of the various KTI employee or director benefit plans, or as
disclosed in the KTI SEC Reports (defined in Section 3.3.10) there are no
subscriptions, options, warrants, rights, convertible securities or other
agreements or commitments of any character obligating KTI to issue any shares of
capital stock.
3.3.3 Corporate Authority. KTI has the corporate power and authority
and has taken all corporate action necessary to execute and deliver this
Agreement and to consummate the transactions contemplated hereby. This Agreement
has been duly and validly authorized by the Board of Directors of KTI and duly
and validly executed and delivered by KTI. This Agreement constitutes the valid
and binding obligation of KTI, enforceable in accordance with its terms, except
as enforcement may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, or similar laws affecting the enforcement of
creditors' rights generally and except that the availability of the equitable
remedy of specific performance or injunctive relief is subject to the discretion
of the court before which any proceeding may be brought.
3.3.4 Control of Merger Corp Before Merger. Before the Effective Time,
KTI will be in control of Merger Corp. within the meaning of Section 368(c) of
the Code.
3.3.5 Control of Merger Corp After Merger. KTI has no plan or intent
to cause Merger Corp. to issue additional shares of its stock following the
Merger that would result in KTI losing control of Merger Corp. within the
meaning of Section 368(c) of the Code.
26
3.3.6 Continuation of K-C's Business. KTI intends to cause Merger
Corp. to continue the historic business of K-C or use a significant portion of
K-C's business assets in a business following the Merger.
3.3.7 No Plan to Reacquire Merger Consideration. KTI has no plan or
intention to reacquire any KTI Common Stock issued as Merger Consideration.
3.3.8 No Plan to Liquidate or Merge Merger Corp. KTI has no plan or
intention to liquidate Merger Corp., to merge Merger Corp. with and into another
corporation, to sell or otherwise dispose of the stock of Merger Corp., or to
cause Merger Corp. to sell or otherwise dispose of any of the assets of K-C
transferred pursuant to the Merger, except for dispositions made in the ordinary
course of business or transfers described in Section 368(a)(2)(C) of the Code.
3.3.9 Governmental Filings. Other than the filing of (a) the
Certificate of Merger contemplated by Article I and (b) the Registration
Statement described in Section 4.3.1, no notices, reports or other filings are
required to be made by KTI with, nor are any consents, registrations, approvals,
permits, or authorizations required to be obtained by KTI from, any Governmental
Entity in connection with the execution and delivery of this Agreement by KTI
and the consummation by KTI of the transactions contemplated hereby.
3.3.10 KTI SEC Reports. KTI has heretofore furnished K-C with complete
copies of all registration statements, reports, and proxy statements, including
amendments thereto, filed with SEC since December 31, 1994 and before the date
of this Agreement (collectively, the "KTI SEC Reports"). KTI has timely filed
with the SEC all registration statements, reports, proxy statements, and other
filings required to be made by it under
27
applicable laws and regulations. Each of the KTI SEC Reports, at the time filed
or at the time of its effectiveness, if later, (a) did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading and (b) complied in
all respects with the applicable requirements of the Securities Exchange Act of
1934, as amended, the Securities Act of 1933, as amended, and the applicable
rules and regulations of the SEC thereunder. Since July 31, 1997, there has been
no material adverse change in the business, results of operations, financial
condition, properties, or assets of KTI.
3.3.11 Litigation. Except as set forth in the KTI SEC Reports, no
material litigation, proceeding, or governmental investigation is pending or, to
the knowledge of KTI, threatened against or relating to KTI, its officers or
directors in their capacities as such or any of its subsidiaries, or their
respective properties or businesses.
3.3.12 No Adverse Consequences. Neither the execution and delivery of
this Agreement by KTI nor the consummation of the transactions contemplated by
this Agreement will (a) result in the creation or imposition of any lien,
charge, encumbrance or restriction on any of the assets or properties of KTI or
any subsidiary of KTI, (b) violate any provision of the Articles of
Incorporation or Bylaws of KTI or any subsidiary of KTI, (c) violate any
statute, judgment, order, injunction, decree, rule, regulation, or ruling of any
Governmental Entity applicable to KTI or any subsidiary of KTI, or (d) either
alone or with the giving of notice or the passage of time or both, conflict
with, constitute grounds for termination of, accelerate the performance required
by, accelerate the maturity of any
28
indebtedness or obligation under, result in the breach of the terms, conditions,
or provisions of, or constitute a default under any mortgage, deed of trust,
indenture, note, bond, lease, license, permit, or other agreement, instrument or
obligation to which either KTI or any subsidiary of KTI is a party or by which
any of them is bound.
3.3.13 Not Investment Companies. Neither KTI nor Merger Corp. is an
investment company as defined in Section 368(a)(2)(F)(iii) and (iv) of the Code
3.3.14 Proxy Statement/Prospectus. The information regarding KTI or
Merger Corp. contained in the Proxy Statement/Prospectus will be correct in all
material respects and will not omit any material fact required to be stated
therein or necessary in order to make the statement therein not misleading;
provided, however, that no representation or warranty is made hereby with
respect to information contained in such Proxy Statement/Prospectus that is
furnished in writing by K-C or any Key Shareholder (or their respective
representatives) expressly for use in such Proxy Statement/Prospectus or
information relating to K-C or any Key Shareholder that is reviewed by K-C with
the knowledge that it will be so used and without objecting to such use. KTI
will promptly inform K-C of the happening of any event before the Effective Time
that would render the information regarding KTI or Merger Corp. incorrect in any
material respect or require the amendment of the Proxy Statement/ Prospectus.
3.3.15 Brokers and Finders. Neither KTI nor any of its subsidiaries
has incurred any liability for any commissions or finders' fees in connection
with the Merger.
3.4 Representations and Warranties Relating to Merger Corp. KTI and Merger
Corp. hereby represent and warrant to K-C that:
29
3.4.1 Organization and Status. Merger Corp. is a corporation duly
organized and validly existing under the laws of the State of Delaware. Merger
Corp. does not own any properties (other than the initial cash subscription for
shares) nor does it own or operate any business or operations. KES has delivered
to K-C a balance sheet certified by its Senior Vice President as of the Closing
Date.
3.4.2 Capitalization. Merger Corp. has an authorized capital stock
consisting of 1000 shares of Common Stock, of which 1000 shares were issued and
outstanding on the date of this Agreement. All of the issued and outstanding
shares of capital stock of Merger Corp. are owned by KTI directly or indirectly.
3.4.3 Corporate Authority. Merger Corp. has the corporate power and
authority and has taken all corporate action necessary to execute and deliver
this Agreement and to consummate the transactions contemplated hereby. The
Agreement has been duly and validly authorized by the Board of Directors and
sole shareholder of Merger Corp., duly and validly executed and delivered by
Merger Corp. and constitutes the valid and binding obligation of Merger Corp.,
enforceable in accordance with its terms, except as enforcement may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium, or similar
laws affecting the enforcement of creditors' rights generally and except that
the availability of the equitable remedy of specific performance or injunctive
relief is subject to the discretion of the court before which any proceeding may
be brought.
3.4.4 Governmental Filings. Other than the filing of the Certificate
of Merger contemplated by Article I of this Agreement, no notices, reports, or
other filings are required to be made by Merger Corp. with, nor are any
consents, registrations, approvals,
30
permits or authorizations required to be obtained by Merger Corp. from, any
Governmental Entity in connection with the execution and delivery of this
Agreement by Merger Corp. and the consummation by Merger Corp. of the
transactions contemplated hereby.
3.4.5 Litigation. No litigation, proceeding or governmental
investigation is pending or, to the knowledge of KTI or Merger Corp., threatened
against or relating to Merger Corp. or its officers or directors in their
capacities as such.
3.4.6 No Operations. Merger Corp. does not conduct active operations
and has no assets or liabilities other than in accordance with this Agreement.
3.4.7 No Change of Control. Merger Corp. has no plan or intent to
issue additional shares of its stock following the Merger that would result in
KTI losing control of Merger Corp. within the meaning of Section 368(c) of the
Code.
3.4.8 Continuation of K-C's Business. Merger Corp. intends to continue
the historic business of K-C or use a significant portion of K-C's business
assets in a business following the Merger.
ARTICLE IV
COVENANTS
4.1 Mutual Covenants.
4.1.1 Consents and Approvals. Each of K-C and KTI will use all
reasonable efforts to secure, and KTI will cause Merger Corp. to use all
reasonable efforts to secure, all consents, approvals, licenses, or permits that
may be required in connection with the Merger, and each will cooperate with the
other to secure all such consents, approvals, licenses, or permits in forms
reasonably satisfactory to K-C and KTI.
31
4.1.2 Reasonable Efforts. Subject to the terms of this Agreement, each
of K-C and KTI will use all reasonable efforts, and KTI will cause Merger Corp.
to use all reasonable efforts, to effectuate the transactions contemplated
hereby and to cause the fulfillment of the conditions to their respective
obligations under this Agreement.
4.1.3 Publicity. Except as required by law or applicable Nasdaq or
stock exchange rules, no party will issue any press releases or otherwise make
any public statements with respect to the transactions contemplated hereby
without the prior written consent of KTI and K-C, in each case not to be
unreasonably withheld.
4.1.4 Confidentiality. The provisions of the Confidentiality Agreement
dated August 25, 1997 between K-C and KTI (the "Confidentiality Agreement") will
apply to all "Confidential Information" (as defined in the Confidentiality
Agreement) obtained by any party pursuant to this Agreement.
4.2 Covenants of K-C.
4.2.1 Conduct of Business. From the execution of this Agreement until
the Effective Time, K-C will carry on its business in the ordinary and usual
manner and will use all reasonable efforts to maintain its existing
relationships with suppliers, customers, employees, and business associates, and
will not, except as set forth on Schedule 4.2.1 or as specifically permitted by
this Agreement, without the prior written consent of KTI (which consent will not
unreasonably be withheld):
(a) amend its Certificate of Incorporation or Bylaws;
(b) enter into any new agreements with, or amend any plans or
arrangements with respect to an increase in compensation or benefits payable to,
its officers
33
or employees, or declare, contribute, or pay any discretionary amount relating
to compensation, deferred compensation, or benefits payable to its officers or
employees, including without limitation bonus, profit sharing, incentive, or
ERISA Plan contributions;
(c) split, combine, or reclassify any of the outstanding shares
of its capital stock or otherwise change its authorized capitalization;
(d) declare, set aside, or pay any dividends payable in cash,
stock or property with respect to shares of its capital stock;
(e) issue, sell, create, pledge, dispose of, or encumber any
additional shares of its capital stock of any class, or any securities
convertible into or exchangeable for, or any options, warrants, calls, stock
appreciation or similar rights, or other commitments or rights of any kind with
respect to, any shares of its capital stock of any class or any phantom stock;
(f) redeem, purchase, or otherwise acquire any shares of its
capital stock, merge into or consolidate with any other corporation, permit any
other corporation to merge into or consolidate with it, liquidate, sell, or
dispose of any of its assets (other than inventory sold in the ordinary course
of business), or close any plant or business operation;
(g) except for short-term indebtedness and indebtedness incurred
pursuant to K-C's revolving credit agreement and renewals, replacements, and
amendments thereof not in excess of the current maximum credit limit under such
credit agreement incurred in the ordinary course of business, incur, assume, or
guarantee any indebtedness, or modify or repay any existing indebtedness;
33
(h) enter into any transaction, make any commitment (whether or
not subject to the approval of the Board of Directors of K-C) or modify any
Contracts, except as otherwise contemplated or permitted by this Agreement or in
the ordinary course of business not exceeding $100,000 singly, or take or omit
to take any action that is reasonably likely to have a material adverse effect
on the business, properties, financial condition, or results of operations of
K-C;
(i) transfer, lease, license, guarantee, sell, mortgage, pledge,
or dispose of any property or assets (including without limitation any
intellectual property), encumber any property or assets, or incur or modify any
liability, other than the sale of inventory in the ordinary course of business
or liabilities incurred in the ordinary course of business and less than
$100,000 singly;
(j) authorize capital expenditures other than in the ordinary
course of business, form any subsidiary, or make any acquisition of, or
investment in, assets or stock of any other person or entity;
(k) make any tax election except to convert K-C from a subchapter
S corporation to a C corporation in conjunction with the Merger;
(l) permit any insurance policy naming it as a beneficiary or a
loss payable payee to be canceled, terminated, or renewed;
(m) change its method of accounting as in effect at December 31,
1996, except as required by changes in generally accepted accounting principles
as concurred with by K-C's independent auditors, or change its fiscal year; or
34
(n) authorize or enter into an agreement to do any of the actions
referred to in paragraphs (a) through (m) above.
4.2.2 Acquisition Proposals. Unless and until this Agreement has been
terminated pursuant to Section 7.1 or Section 7.2, K-C will not directly, or
indirectly through any officer, director, agent, employee, or representative,
(a) encourage, initiate, or solicit, on or after the date hereof, any inquiries
or the submission of any proposals or offers from any person relating to any
merger, consolidation, sale of all or substantially all of its assets, or
similar business transaction involving K-C (each, an "Acquisition Transaction");
(b) participate in any negotiations regarding, furnish to any other person any
information with respect to, or otherwise assist or participate in, any attempt
by any third party to propose or offer any Acquisition Transaction; (c) enter
into or execute any agreement relating to an Acquisition Transaction; or (d)
make or authorize any public statement, recommendation, or solicitation in
support of any Acquisition Transaction or any proposal or offer relating to an
Acquisition Transaction, in each case other than with respect to the Merger.
Notwithstanding the foregoing, nothing contained herein will prohibit K-C from
taking the actions described above in connection with an unsolicited third-party
proposal or offer of an Acquisition Transaction if and to the extent that (i)
the Board of Directors of K-C determines in good faith, upon advice of legal
counsel, that such action is required for the directors of K-C to fulfill their
fiduciary duties and obligations under Oregon law and (ii) before furnishing
such information to or entering into discussions or negotiations with such third
party, K-C provides prompt written notice to KTI of such proposal or offer and,
to the extent not inconsistent with the fiduciary duties of K-C's officers and
directors, provides
35
material information concerning such proposal or offer (including proposed terms
and the identity of the person or entity making such proposal or offer) and
thereafter continues to cooperate with KTI by informing KTI of additional
material facts as they arise and furnishing to KTI any additional information
furnished in connection with such proposal or offer.
4.2.3 Investigations and Customer Visits. K-C will give KTI and its
representatives and agents reasonable access to all its premises, books,
records, agreements, and files and will cause the officers of K-C to furnish KTI
with such financial and operating data and other information in its possession
with respect to its business, customers, and properties as KTI from time to time
reasonably requests. Without limitation of the foregoing, K-C will permit KTI to
conduct an operations review at the plant level during which KTI will have
access to the plant managers, sales and marketing managers, finance officers,
and technology, environmental, and human resource managers of each K-C operating
facility, and will make all reasonable efforts to arrange for KTI (or its
representatives or agents) to visit such K-C customers as KTI may reasonably
request. Any such investigations (a) will be conducted in such a manner as not
to interfere unreasonably with the operation of K-C's business or the businesses
of K-C's customers; and (b) will not diminish any of the representations and
warranties contained in this Agreement.
4.2.4 K-C Shareholders Consent. K-C will obtain a shareholders'
consent to approve the Merger.
4.2.5 Information for Proxy Statement/Prospectus and Registration
Statement. K-C will promptly provide to KTI for inclusion in the Proxy
Statement/Prospectus and in the Registration Statement described in Section
4.3.1, and for
36
KTI's 8-K filing and documents requested by auditors, in a form reasonably
satisfactory to KTI, such information concerning K-C's operations,
capitalization, technology, and securities ownership and such other information
as KTI may reasonably request.
4.2.6 Consents. K-C will use all reasonable efforts to obtain, on or
before the Closing Date and without modification of the rights or obligations of
K-C, all necessary consents of Governmental Entities with respect to the Permits
listed on Schedule 3.1.19 and all necessary consents with respect to the
Contracts as listed on Schedule 3.1.16.
4.3 Covenants of KTI.
4.3.1 Registration Statement. KTI, with K-C's cooperation, will file
within ninety (90) days with the SEC a Registration Statement on Form S-3
(including the Prospectus) for the purposes of registering the sale of the
shares of KTI Common Stock that the holders of shares of K-C Common Stock will
be entitled to receive pursuant to Section 1.3 of this Agreement and KTI, with
K-C's cooperation, will use all reasonable efforts to cause such Registration
Statement to be declared effective as promptly as practicable.
4.3.2 Listing of KTI Common Stock. KTI will list the shares of KTI
Common Stock that the holders of shares of K-C Common Stock will be entitled to
receive pursuant to the provisions of this Agreement on the Nasdaq National
Market System.
4.3.3 Issuance of Certificates. After the Effective Time, KTI will
issue and deliver, or will cause to be issued and delivered, in accordance with
the provisions of this Agreement, stock certificates representing the number of
shares of KTI Common Stock to be issued in the Merger.
37
4.3.4 Indemnification Provisions of Merger Corp.'s Certificate. KTI
will cause the Certificate of Incorporation of Merger Corp. (the "Merger Corp.
Certificate") to include provisions for the indemnification of K-C's current and
former officers and directors to the fullest extent permitted by the DBCL, and
will not, for a period of five years following the Effective Time, cause the
removal of any such provision in the Merger Corp. Certificate or permit any such
provision to be materially and adversely modified or amended, subject to the
requirements of Delaware law in respect thereto.
4.4 Covenants of Merger Corp. Merger Corp., except as is contemplated by
this Agreement, will not, before the Effective Time, (a) engage in any business
activities, (b) liquidate or merge into, or consolidate with any other
corporation, (c) permit any other corporation to merge into or consolidate with
it, (d) increase its authorized capital stock, or (e) issue options, rights, or
warrants to purchase any of its capital stock. In addition, for a period of five
years following the Effective Time, Merger Corp. will not amend the Merger Corp.
Certificate to remove any provision relating to indemnification of K-C's current
or former officers and directors or materially and adversely modify or amend any
such provision.
ARTICLE V
CONDITIONS
5.1 Conditions to the Obligations of All Parties. The obligations of K-C,
KTI and Merger Corp. to consummate the transactions contemplated by this
Agreement are subject to the fulfillment at or before the Closing of each of the
following conditions:
38
5.1.1 Regulatory Approvals. The parties will have made all filings
with and received all approvals of Governmental Entities of competent
jurisdiction necessary to consummate the Merger, and each of such approvals will
be in full force and effect at the Closing and not subject to any condition that
requires the taking or refraining from taking of any action that would have a
material adverse effect on K-C or on KTI or its subsidiaries.
5.1.2 Litigation. There will not be in effect any final order, decree,
or injunction of any Governmental Entity of competent jurisdiction restraining,
enjoining, or prohibiting the consummation of the transactions contemplated by
this Agreement (each party agreeing to use its best efforts, including appeals
to higher courts, to have any non-final, appealable order, decree, or injunction
of such import set aside or lifted), and there will have been no action taken,
and no statute, rule, or regulation enacted, by any state or federal government
or Governmental Entity in the United States that would prevent the consummation
of the Merger.
5.2 Conditions to the Obligations of K-C and the Key Shareholders. The
obligations of K-C and the Key Shareholders to consummate the transactions
contemplated by this Agreement are subject to the fulfillment at or before the
Closing of each of the following conditions:
5.2.1 Representations, Warranties and Covenants. The representations
and warranties of KTI and Merger Corp. contained in this Agreement will be
correct (a) at the date of this Agreement and (b) as of the Closing, with the
same effect as though made on and as of such date, except for (i)
representations and warranties made as of a specific date, which representations
and warranties need only be correct as of such date and (ii) changes
39
specifically contemplated by this Agreement, and KTI and Merger Corp. will have
performed all of their respective covenants and obligations hereunder to be
performed as of the Closing. K-C will have received at the Closing certificates
to the foregoing effect, dated the Closing Date, and executed on behalf of KTI
by an officer of KTI and on behalf of Merger Corp. by an officer of Merger Corp.
For purposes of affirming the accuracy of the representations and warranties of
KTI made as of the Closing, the term "KTI SEC Reports" will be deemed to include
all registration statements, reports and proxy statements, including all
amendments thereto, filed by KTI with the SEC after the date of this Agreement
and before Closing.
5.2.2 No Material Adverse Change. Since July 31, 1997 there will have
been no material adverse change, or discovery of a condition or occurrence of an
event that has resulted or reasonably can be expected to result in a material
adverse change, in the business, properties, financial condition, or results of
operations of KTI and its subsidiaries taken as a whole.
[5.2.3 Intentionally not used.]
5.2.4 K-C Shareholder Approval, Etc. In accordance with the applicable
provisions of the DBCL and the Certificate of Incorporation and Bylaws of K-C,
the requisite percentages of the Voting K-C Securities will have approved this
Agreement, the Plan of Merger, and the transactions contemplated hereby and
thereby; provided, however, that K-C may rely on this condition to avoid its
obligation to consummate the Merger and the other transactions contemplated by
this Agreement only if K-C has used its best efforts to satisfy all of the
conditions contained in this Section 5.2.4.
40
5.2.5 Release of Personal Guaranties. U.S. National Bank of Oregon
("USNB") shall have waived or consented to the Merger or, if USNB has not
released each of the Key Shareholders from personal guaranties delivered by such
Key Shareholders to USNB with respect to the line of credit and indebtedness
incurred by K-C with USNB, KTI shall indemnify and hold the Key Shareholders
harmless from any demand, claim or payment made by Key Shareholders to USNB for
any indebtedness of K-C in respect of such guaranties, and KTI shall, within 30
days of notice from USNB, either purchase the notes for which the guaranties
were given or refinance the notes causing the guaranties to be released if USNB
determines within 60 days hereof that it will not release the guaranties. So
long as any personal guaranty of a Key Shareholder is in effect, Merger Corp.
shall not (a) disburse any funds to KTI for corporate overhead allocations, (b)
loan any funds to KTI or any subsidiary of KTI other than Merger Corp., and (c)
declare dividends. After the Closing, Merger Corp. shall not disburse funds to
KTI or subsidiaries of KTI for allocated corporate overhead expenses, dividends
or loans if such disbursements would impair K-C's ability to meet its
obligations to non-K-C entities in accordance with the terms of such
obligations. The covenants in this subsection shall survive the Closing.
5.2.6 Capitalization for Payment of Shareholder Loans. KTI shall
promptly after receipt of a written consent from KeyBank of New York, make a
capital contribution to Merger Corp. funds sufficient to cause Merger Corp. to
redeem subordinated indebtedness of K-C to certain Key Shareholders in the
amount of $875,000.
5.2.7 Reissuance of Subordinated Shareholder Notes. K-C shall have
issued new subordinated shareholder notes after payment of the loans from KTI
capitalization
41
for such purpose, subordinated to USNB or any lender refinancing the USNB debt,
such new notes to be amortized (principal) over a five year period commencing on
the first anniversary of the closing, in equal annual payments on each
anniversary date thereafter until paid in full, bearing interest during each
month while outstanding at the prime rate of KeyBank of New York as of the first
business day of such month, payable on the first business day of the following
month (calculated on the basis of the actual number of days for the monthly
period using a 360 day year), without prepayment penalty.
5.3 Conditions to the Obligations of KTI and Merger Corp. The obligations
of KTI and Merger Corp. to consummate the transactions contemplated by this
Agreement are subject to the fulfillment at or before the Closing of each of the
following conditions:
5.3.1 Representations, Warranties and Covenants. The representations
and warranties of K-C and the Key Shareholders contained in this Agreement will
be correct (a) at the date of this Agreement and (b) as of the Closing, with the
same effect as though made on and as of such date, except for (i)
representations and warranties made as of a specific date which representations
and warranties need only be correct as of such date and (ii) changes
specifically contemplated by this Agreement, and each of K-C and each Key
Shareholder will have performed in all material respects all of its, his, or her
respective covenants and obligations hereunder to be performed as of the
Closing. KTI will have received at the Closing a certificate to the foregoing
effect, dated the Closing Date and executed on behalf of K-C by an officer of
K-C with respect to K-C's representations, warranties, and covenants, and
certificates dated the Closing Date and executed by or on
42
behalf of each of the Key Shareholders concerning the Key Shareholders'
representations, warranties, and covenants.
5.3.2 Consents and Approvals. All nongovernmental consents and
approvals required to be obtained by K-C for consummation of the Merger will
have been obtained, other than those that, if not obtained, would not, either
singly or in the aggregate, have a material adverse effect on K-C.
5.3.3 No Material Adverse Change. Since July 31, 1997 there will have
been no material adverse change, or discovery of a condition or occurrence of an
event that has resulted or reasonably can be expected to result in a material
adverse change, in the business, properties, financial condition, or results of
operations of K-C.
5.3.4 Other Agreements. K-C will have caused each of the Key
Shareholders to execute an applicable Employment Agreement.
5.3.5 Updated Financial and Other Information. KTI will have received
(a) the unaudited balance sheet of K-C and the related statements of operations,
shareholders' equity, and cash flows for the fiscal year ended July 31, 1997
(together, the "Updated Financial Statements"), and (b) schedules of accounts
and notes receivable (including an aging analysis), liability accounts,
inventories (organized by category), and backlog (by customer and product), in
each case as of immediately before the Closing Date and accompanied by an
officer's certificate as to accuracy and completeness of such statement or
schedule, and the Updated Financial Statements will not indicate that there has
been any material adverse change in the financial condition or operating results
of K-C since December 31, 1997.
43
5.3.6 K-C Shareholder Approval, Etc. In accordance with applicable
provisions of the DBCL, the Articles of Incorporation and Bylaws of K-C, and any
applicable state or federal securities laws, the requisite percentages of the
Voting K-C Securities will have approved this Agreement, the Plan of Merger, and
the transactions contemplated hereby and thereby. KTI and Merger Corp. will have
received a certificate dated the Closing Date and executed by an authorized
officer of K-C stating that this Agreement and the transactions contemplated by
it have been duly and validly approved by the shareholders of K-C.
5.3.7 Absence of K-C Dissenters. All shareholders of Voting K-C
Securities will have signed a written consent to the Merger in a form
satisfactory to K-C.
5.3.8 K-C Revised Schedules. All schedules to this Agreement relating
to K-C's representations and warranties will have been revised as necessary as
of the Closing Date, and such revised schedules are satisfactory to KTI in its
sole discretion.
ARTICLE VI
SURVIVAL AND INDEMNIFICATION
6.1 Survival.
6.1.1 Survival of Representations and Warranties. All representations
and warranties of any party contained in this Agreement or in any agreement,
document, or instrument delivered pursuant to or in connection with this
Agreement will survive the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby, but will be extinguished
and be of no further force or effect from and after April 15, 1999, except that
any claim for which a Claim Notice (as defined in
44
Section 6.5.1) is delivered pursuant to Section 6.5.1 before April 15, 1999 will
survive until the settlement or other final resolution of such claim. No Claim
Notice will be effective if delivered after the time period specified in this
Section 6.1.1.
6.1.2 Survival of Article IV Covenants. All of the covenants of any
party contained in Article IV of this Agreement will be extinguished and be of
no further force or effect after the Effective Time, except that Sections 4.1.4,
4.3.3, 4.3.4, and 4.4 will survive the Effective Time in accordance with their
respective terms.
6.2 Indemnification. (a) From and after the Effective Time and subject to
the limitations of this Article VI, the Key Shareholders will, severally and not
jointly, and only to the extent of 25% of the Merger Consideration received by
such Key Shareholder, indemnify and hold harmless KTI and Merger Corp. and their
respective officers, directors, and shareholders (collectively, the "Indemnified
Parties") from, for, and against any losses, costs, expenses, damages, and
liabilities, including reasonable attorneys' fees (collectively, "Damages"),
incurred by an Indemnified Party by reason of or arising out of any inaccuracy
in any representation or warranty or the breach of any covenant of K-C made in
this Agreement (after taking into account any revised schedule provided pursuant
to Section 5.3.8). (b) From and after the Effective Time and subject to the
limitations of this Article VI, each Key Shareholder will, severally and not
jointly, and only to the extent of 25% of his, her, or its Merger Consideration,
indemnify and hold harmless each Indemnified Party from, for, and against any
Damages incurred by such Indemnified Party by reason of or arising out of any
inaccuracy in any representation or warranty or the breach of any covenant of
such Key Shareholder made in this Agreement.
45
6.3 [Intentionally not used]
6.4 Threshold for Indemnity Claims. No indemnification payment obligation
will arise under this Article VI unless and until the aggregate amount of
Damages claimed by all Indemnified Parties under this Article VI exceeds
$100,000 (the "Claim Threshold"); provided, however, that once the Claim
Threshold is exceeded, all Damages of the Indemnified Parties, including the
first $100,000 (in the aggregate) of Damages claimed by the Indemnified Partes,
will be subject to the indemnity provisions of this Article VI.
6.5 Claim Procedure for Indemnification. The obligations and liabilities of
the Key Shareholders in connection with claims for indemnification for Damages
by an Indemnified Party will be subject to the following terms and conditions:
6.5.1 Notice. The Indemnified Party must give written notice (a "Claim
Notice") to the Key Shareholder Representatives of its claim for indemnification
as promptly as practicable whenever the Indemnified Party has determined that
there are facts or circumstances that may entitle the Indemnified Party to
indemnification under this Article VI; provided, however, that the failure to
give a timely Claim Notice (so long as such Claim Notice is within the time
period specified in Section 6.1.1) will not diminish the indemnification
obligations hereunder except to the extent that the delay in giving such Claim
Notice materially adversely affects the ability of the Key Shareholder
Representatives to mitigate Damages with respect to any claim. The Claim Notice
must set forth in reasonable detail the basis for the claim, the nature of the
Damages and the amount thereof, to the extent known.
46
6.5.2 Response to Third Party Claim. If the Claim Notice states that a
claim has been asserted by a third party against the Indemnified Party (a "Third
Party Claim"), KTI will undertake, conduct, and control, through counsel of its
choosing, the good faith settlement or defense of the Third Party Claim and the
Key Shareholder Representatives will provide such assistance as is reasonably
requested by KTI in connection with such settlement or defense.
6.5.3 Diligent Conduct. If, within five days after receipt by KTI from
the Key Shareholder Representatives of written notice that KTI is not diligently
conducting the defense or attempted settlement of any Third Party Claim in good
faith, KTI does not provide reasonably sufficient evidence to the Key
Shareholder Representatives that KTI is diligently conducting such defense or
attempting such settlement in good faith, the Key Shareholder Representatives
will thereafter have the right to contest, settle or compromise such Third Party
Claim.
ARTICLE VII
TERMINATION
7.1 Termination by Mutual Consent. This Agreement may be terminated and the
Merger may be abandoned at any time before the Effective Time by the mutual
consent of K-C and KTI.
7.2 Termination Under Certain Other Conditions.
7.2.1 Automatic Termination. This Agreement will automatically
terminate without any action by KTI, K-C, Merger Corp., or the Key Shareholders
if the Merger has not become effective on or before October 31, 1997, provided,
however, that
47
automatic termination of this Agreement pursuant to this Section
7.2.1 will not limit the liability of any party whose breach of this Agreement
has been the cause of, or resulted in, the failure of the Merger to occur on or
before such date.
7.2.2 Termination by KTI or K-C. This Agreement may be terminated and
the Merger may be abandoned at any time before the Effective Time by KTI or K-C
if any Governmental Entity of competent jurisdiction in the United States or any
state has issued an order, judgment, or decree restraining, enjoining, or
otherwise prohibiting the Merger and such order, judgment, or decree has become
final and nonappealable;
7.3 Effect of Termination and Abandonment. In the event of termination of
this Agreement and abandonment of the Merger pursuant to this Article VII, this
Agreement immediately will become void and of no effect, except that Sections
4.1.4, 8.1, 8.11, and 8.12 will survive the event of termination.
ARTICLE VIII
MISCELLANEOUS AND GENERAL
8.1 Payment of Expenses. Each party will be responsible for the costs and
expenses incurred by it in connection with this Agreement, the Merger, and the
other transactions contemplated by this Agreement, provided that nothing in this
Agreement will limit the right, if any, of a non-breaching party to obtain
damages, including attorneys' fees, incurred as a result of a breach of this
Agreement by another party.
8.2 Entire Agreement. This Agreement, including the schedules and exhibits
hereto, and the Confidentiality Agreement constitute the entire agreement
between the parties
48
hereto and supersede all prior agreements and understandings, oral and written,
among the parties hereto with respect to its subject matter.
8.3 Assignment. This Agreement is not assignable by any of the parties
hereto without the prior written consent of each of KTI and K-C.
8.4 Binding Effect; No Third Party Benefit. This Agreement will inure to
the benefit of and be binding upon the parties hereto and their respective
successors and assigns, subject to the restrictions on assignment contained in
Section 8.3. Nothing express or implied in this Agreement is intended or will be
construed to confer upon or give to a person, firm, or corporation other than
the parties hereto any rights or remedies under or by reason of this Agreement
or any transaction contemplated hereby, except for the provisions of Sections
4.3.4 and 4.4 concerning indemnification of current and former officers and
directors of K-C under the Merger Corp. Certificate.
8.5 Amendment and Modification. Subject to applicable law, this Agreement
may be amended, modified, and supplemented at any time before or at the Closing,
whether before or after the vote of the shareholders of K-C, by written
agreement executed and delivered by each of the Key Shareholders and by the duly
authorized officers of K-C, KTI, and Merger Corp.
8.6 Waiver of Conditions. The conditions to each of the parties'
obligations to consummate the Merger are for the sole benefit of such party and
may be waived by such party in whole or in part to the extent permitted by
applicable law; provided, however, that any waiver by a party must be in
writing.
49
8.7 Counterparts. For the convenience of the parties hereto, this Agreement
may be executed in any number of counterparts, each such counterpart being
deemed to be an original instrument, and all such counterparts will together
constitute the same agreement.
8.8 Captions. The article, section and paragraph captions used in this
Agreement are for convenience of reference only, do not constitute a part of
this Agreement and will not be deemed to limit or otherwise affect any of the
provisions hereof.
8.9 Subsidiary. When a reference is made in this Agreement to a subsidiary
of a party, the term "subsidiary" means any corporation or other organization,
whether incorporated or unincorporated, of which at least a majority of the
securities or interests having by the terms thereof ordinary voting power to
elect a majority of the board of directors or others performing similar
functions with respect to such corporation or other organization is directly or
indirectly owned or controlled by such party or by any one or more of its
subsidiaries, or by such party and one or more of its subsidiaries.
8.10 Notices. All notices, requests, demands, waivers, and other
communications required or permitted to be given under this Agreement must be in
writing and will be deemed to have been duly given if delivered personally or
mailed, certified or registered mail with postage prepaid, return receipt
requested, or sent by telex, telegram, or facsimile (in each case with evidence
of confirmed transmission) as follows:
If to K-C, to it at:
▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Chairman of the Board, President and Chief
Executive Officer
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
50
with copies to:
Stoel Rives LLP
▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
If to KTI or Merger Corp., to it at:
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, President
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with copies to:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, General Counsel
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Key Shareholders, to the "Key Shareholder Representatives," who
are listed on Schedule 8.10, at the address specified for each Key Shareholder
Representative on Schedule 8.10. Each Key Shareholder hereby appoints each of
the Key Shareholder Representatives listed on Schedule 8.10 as his, her, or its
agent for the purpose of receiving notices and other communications relating to
this Agreement and the Escrow Agreement.
Any party may change the person or address for notices under this Agreement
by notifying all other parties in writing of such change. All notices, requests,
demands, waivers, and communications relating to this Agreement will be deemed
to have been received on the date of delivery or on the third business day after
mailing in accordance with this Section 8.10.
51
8.11 Choice of Law. This Agreement will be governed by and construed in
accordance with the laws of the State of New York, exclusive of choice of law
rules, except that the provisions of this Agreement relating to the Merger will
also be governed by the merger provisions of the DBCL, and to the extent of
matters relating to filings in Oregon by K-C showing the Merger has occurred,
will also be governed by merger provisions of the OBCL.
8.12 Attorneys' Fees. If suit or action is filed by any party to enforce
the provisions of this Agreement or otherwise with respect to the subject matter
of this Agreement, the prevailing party will be entitled to recover reasonable
attorneys' fees as fixed by final order of the trial court and, if any appeal is
taken from the decision of the trial court, reasonable attorneys' fees as fixed
by final order of the appellate court.
8.13 Separability. Any term or provision of this Agreement that is invalid
or unenforceable in any jurisdiction will, as to such jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
52
Agreement is so broad as to be unenforceable, such provision will be interpreted
to be only so broad as is enforceable.
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by
the duly authorized officers of the parties hereto as of the date first
hereinabove written.
KTI, INC.,
a New Jersey corporation,
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Senior Vice President, Secretary and General Counsel
K-C INDUSTRIES, INC.,
an Oregon corporation,
By: /s/ ▇▇▇ ▇. ▇▇▇▇
-----------------------------------
Name: ▇▇▇ ▇. ▇▇▇▇
Title: President
KES, Inc.,
a Delaware corporation,
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Senior Vice President, Secretary and General Counsel
53