UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. 1)
RECOVERY ENGINEERING, INC.
--------------------------------------------------------------
(Name of Issuer)
COMMON STOCK, PAR VALUE $0.01 PER SHARE
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(Title of Class of Securities)
756269106
------------------------------------
(CUSIP Number)
DAVID J. GREENWALD, ESQ.
GOLDMAN, SACHS & CO.
85 BROAD STREET
NEW YORK, NY 10004
(212) 902-1000
- ---------------------------------------------------------------
(Name, Address and Telephone Number of Person Authorized to
Receive Notices and Communications)
MARCH 31, 1997
----------------------------------
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on
Schedule 13G to report the acquisition which is the subject of
this Schedule 13D, and is filing this schedule because of Rule
13d-1(b)(3) or (4), check the following box [ ].
SCHEDULE 13D
CUSIP No. 756269106 Page 2 of 52
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Goldman, Sachs & Co.
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a)[ ]
(b)[ ]
3 SEC USE ONLY
4 SOURCE OF FUNDS
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS [X]
REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e)
6 CITIZENSHIP OR PLACE OF ORGANIZATION
New York
NUMBER OF 7 SOLE VOTING POWER
SHARES 0
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY 1,010,101
EACH 9 SOLE DISPOSITIVE POWER
REPORTING 0
PERSON
WITH 10 SHARED DISPOSITIVE POWER
1,010,101
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,010,101
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES [ ]
CERTAIN SHARES
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
18.9%
14 TYPE OF REPORTING PERSON
BD-PN-IA
SCHEDULE 13D
CUSIP No. 756269106 Page 3 of 52
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
The Goldman Sachs Group, L.P.
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a)[ ]
(b)[ ]
3 SEC USE ONLY
4 SOURCE OF FUNDS
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS [ ]
REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e)
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
NUMBER OF 7 SOLE VOTING POWER
SHARES 1,000
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY 1,010,101
EACH 9 SOLE DISPOSITIVE POWER
REPORTING 1,000
PERSON
WITH 10 SHARED DISPOSITIVE POWER
1,010,101
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,011,101
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES [ ]
CERTAIN SHARES
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
18.9%
14 TYPE OF REPORTING PERSON
HC-PN
SCHEDULE 13D
CUSIP No. 756269106 Page 4 of 52
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
GS Capital Partners II, L.P.
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a)[ ]
(b)[ ]
3 SEC USE ONLY
4 SOURCE OF FUNDS
WC
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS [ ]
REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e)
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
NUMBER OF 7 SOLE VOTING POWER
SHARES 0
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY 633,767
EACH 9 SOLE DISPOSITIVE POWER
REPORTING 0
PERSON
WITH 10 SHARED DISPOSITIVE POWER
633,767
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
633,767
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES [ ]
CERTAIN SHARES
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
12.8%
14 TYPE OF REPORTING PERSON
PN
SCHEDULE 13D
CUSIP No. 756269106 Page 5 of 52
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
GS Capital Partners II Offshore, L.P.
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a)[ ]
(b)[ ]
3 SEC USE ONLY
4 SOURCE OF FUNDS
WC
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS [ ]
REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e)
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Cayman Islands
NUMBER OF 7 SOLE VOTING POWER
SHARES 0
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY 251,948
EACH 9 SOLE DISPOSITIVE POWER
REPORTING 0
PERSON
WITH 10 SHARED DISPOSITIVE POWER
251,948
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON
251,948
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES [ ]
CERTAIN SHARES
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
5.5%
14 TYPE OF REPORTING PERSON
PN
SCHEDULE 13D
CUSIP No. 756269106 Page 6 of 52
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
GS Capital Partners II (Germany) Civil Law Partnership
(within limitation of liability)
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a)[ ]
(b)[ ]
3 SEC USE ONLY
4 SOURCE OF FUNDS
WC
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS [ ]
REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e)
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Germany
NUMBER OF 7 SOLE VOTING POWER
SHARES 0
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY 23,376
EACH 9 SOLE DISPOSITIVE POWER
REPORTING 0
PERSON
WITH 10 SHARED DISPOSITIVE POWER
23,376
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
23,376
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES [ ]
CERTAIN SHARES
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
0.5%
14 TYPE OF REPORTING PERSON
PN
SCHEDULE 13D
CUSIP No. 756269106 Page 7 of 52
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
GS Advisors, L.P.
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a)[ ]
(b)[ ]
3 SEC USE ONLY
4 SOURCE OF FUNDS
AF
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS [ ]
REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e)
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
NUMBER OF 7 SOLE VOTING POWER
SHARES 0
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY 633,767
EACH 9 SOLE DISPOSITIVE POWER
REPORTING 0
PERSON
WITH 10 SHARED DISPOSITIVE POWER
633,767
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON
633,767
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES [ ]
CERTAIN SHARES
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
12.8%
14 TYPE OF REPORTING PERSON
PN
SCHEDULE 13D
CUSIP No. 756269106 Page 8 of 52
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
GS Advisors II (Cayman), L.P.
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a)[ ]
(b)[ ]
3 SEC USE ONLY
4 SOURCE OF FUNDS
AF
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS [ ]
REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e)
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Cayman Islands
NUMBER OF 7 SOLE VOTING POWER
SHARES 0
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY 251,948
EACH 9 SOLE DISPOSITIVE POWER
REPORTING 0
PERSON
WITH 10 SHARED DISPOSITIVE POWER
251,948
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON
251,948
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES [ ]
CERTAIN SHARES
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
5.5%
14 TYPE OF REPORTING PERSON
PN
SCHEDULE 13D
CUSIP No. 756269106 Page 9 of 52
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Goldman, Sachs & Co. oHG
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a)[ ]
(b)[ ]
3 SEC USE ONLY
4 SOURCE OF FUNDS
AF
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS [ ]
REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e)
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Germany
NUMBER OF 7 SOLE VOTING POWER
SHARES 0
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY 23,376
EACH 9 SOLE DISPOSITIVE POWER
REPORTING 0
PERSON
WITH 10 SHARED DISPOSITIVE POWER
23,376
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON
23,376
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES [ ]
CERTAIN SHARES
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
0.5%
14 TYPE OF REPORTING PERSON
PN
SCHEDULE 13D
CUSIP No. 756269106 Page 10 of 52
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Stone Street Fund 1996, L.P.
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a)[ ]
(b)[ ]
3 SEC USE ONLY
4 SOURCE OF FUNDS
WC
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS [ ]
REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e)
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
NUMBER OF 7 SOLE VOTING POWER
SHARES 0
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY 60,191
EACH 9 SOLE DISPOSITIVE POWER
REPORTING 0
PERSON
WITH 10 SHARED DISPOSITIVE POWER
60,191
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON
60,191
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES [ ]
CERTAIN SHARES
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
1.4%
14 TYPE OF REPORTING PERSON
PN
SCHEDULE 13D
CUSIP No. 756269106 Page 11 of 52
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Bridge Street Fund 1996, L.P.
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a)[ ]
(b)[ ]
3 SEC USE ONLY
4 SOURCE OF FUNDS
WC
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS [ ]
REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e)
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
NUMBER OF 7 SOLE VOTING POWER
SHARES 0
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY 40,819
EACH 9 SOLE DISPOSITIVE POWER
REPORTING 0
PERSON
WITH 10 SHARED DISPOSITIVE POWER
40,819
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON
40,819
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES [ ]
CERTAIN SHARES
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
0.9%
14 TYPE OF REPORTING PERSON
PN
SCHEDULE 13D
CUSIP No. 756269106 Page 12 of 52
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Stone Street Empire Corp.
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a)[ ]
(b)[ ]
3 SEC USE ONLY
4 SOURCE OF FUNDS
AF
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS [ ]
REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e)
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
NUMBER OF 7 SOLE VOTING POWER
SHARES 0
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY 101,010
EACH 9 SOLE DISPOSITIVE POWER
REPORTING 0
PERSON
WITH 10 SHARED DISPOSITIVE POWER
101,010
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON
101,010
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES [ ]
CERTAIN SHARES
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
2.3%
14 TYPE OF REPORTING PERSON
CO
This Amendment No. 1 (this "Amendment No. 1") is being
filed by GS Capital Partners II, L.P. ("GSCP"), GS Capital
Partners II Offshore, L.P. ("GSCP II Offshore"), GS Capital
Partners II (Germany) Civil Law Partnership (with limitation
of liability) ("GSCP II Germany," and together with GSCP and
GSCP II Offshore, "GSCP II"), GS Advisors, L.P. ("GS Advisors"),
GS Advisors II (Cayman), L.P. ("GS Advisors Cayman"), Goldman,
Sachs & Co. oHG ("GS oHG"), Stone Street Fund 1996, L.P. ("Stone
Street"), Bridge Street Fund 1996, L.P. ("Bridge Street," and
together with Stone Street, the "Stone/Bridge Funds"), Stone
Street Empire Corp. ("Empire Corp."), Goldman, Sachs & Co.
("Goldman Sachs") and The Goldman Sachs Group, L.P. ("GS Group,"
and together with GSCP, GSCP II Offshore, GSCP II Germany, GS
Advisors, GS Advisors Cayman, GS oHG, Stone Street, Bridge Street,
Empire Corp. and Goldman Sachs, the "Filing Persons")<FN1> to
amend and supplement the Statement on Schedule 13D (the "Original
Schedule 13D") filed by the Filing Persons on July 29, 1996 in
respect of the Common Stock, par value $0.01 per share (the "Common
Stock"), of Recovery Engineering, Inc., a Minnesota corporation
(the "Company"). This Amendment No. 1 is being filed primarily to
report certin amendments to the Purchase Agreement. Capitalized
terms used but not defined herein shall have the respective
meanings given to them in the Original Schedule 13D.
ITEM 2. IDENTITY AND BACKGROUND
Item 2 of the Original Schedule 13D is hereby amended
and restated to read in its entirety as follows:
As of April 7, 1997, (a) Goldman Sachs may be deemed to
own beneficially 1,010,101 shares of Common Stock, in the
aggregate, by reason of the ownership by GSCP II and the
Stone/Bridge Funds (collectively, the "Limited Partnerships") of
the Notes, which are convertible into 1,010,101 shares of Common
Stock, in the aggregate, and (b) GS Group may be deemed to own
beneficially 1,011,101 shares of Common Stock, in the aggregate,
by reason of the ownership by the Limited Partnerships of the
Notes and by reason of Mr. Sanjay H. Patel, a Managing Director
of Goldman Sachs, holding for the benefit of GS Group an option
(received by him in his capacity as a director of the Company) to
purchase 1,000 shares of Common Stock (the "Director Option").
Goldman Sachs and GS Group each disclaim beneficial ownership of
shares of Common Stock beneficially owned by the Limited
Partnerships to the extent of partnership interests in the
Limited Partnerships held by persons other than Goldman Sachs, GS
Group or their affiliates.
<FN1> Neither the Original Schedule 13D, this Amendment No. 1
nor anything contained therein or herein shall be
construed as an admission that any Filing Person
constitutes a "person" for any purpose other than
Section 13(d) of the Securities Exchange Act of 1934,
as amended.
Each of GSCP, a Delaware limited partnership, GSCP II
Offshore, a Cayman Islands exempted limited partnership, and GSCP
II Germany, a German civil law partnership, was formed for the
purpose of investing in equity and equity-related securities
primarily acquired or issued in leveraged acquisitions,
reorganizations and other private equity transactions. Stone
Street and Bridge Street, each a Delaware limited partnership,
were formed for the purpose of investing in equity and equity-
related securities primarily acquired or issued in leveraged
acquisitions, reorganizations and other private equity
transactions and in other financial instruments. GS Advisors, a
Delaware limited partnership, is the sole general partner of
GSCP. GS Advisors Cayman, a Cayman Islands exempted limited
partnership, is the sole general partner of GSCP II Offshore.
GS oHG is the sole managing partner of GSCP II Germany. Empire
Corp., a Delaware corporation and a wholly owned subsidiary of
GS Group, is the sole general partner of Stone Street and
the sole managing general partner of Bridge Street. Goldman
Sachs, a New York limited partnership, is an investment banking
firm and a member of the New York Stock Exchange, Inc. and other
national exchanges. Goldman Sachs also serves as the investment
manager for GSCP II. GS Group, one of the general partners of
Goldman Sachs, owns a 99% interest in Goldman Sachs. GS Group
is a Delaware limited partnership and a holding partnership that
engages (directly or indirectly through subsidiaries or
affiliated companies or both) in the business of buying and
selling securities, both foreign and domestic, and in making
investments on behalf of its partners. The other general partner
of Goldman Sachs is the Goldman, Sachs & Co. L.L.C., a Delaware
limited liability company ("GS L.L.C."), which is a wholly owned
subsidiary of GS Group and The Goldman Sachs Corporation, a
Delaware corporation ("GS Corp."). GS Corp. is the sole general
partner of the GS Group.
The principal business address of each of Goldman
Sachs, GS Group, GS Corp., GS L.L.C., GSCP, Stone Street, Bridge
Street, Empire Corp. and GS Advisors is 85 Broad Street, New
York, New York 10004. The principal business address of each of
GSCP II Offshore and GS Advisors Cayman is c/o Maples and Calder,
P.O. Box 309, Grand Cayman, Cayman Islands. The principal
business address of each of GSCP II Germany and GS oHG is
Messeturm Friedrich-Ebert-Anlage 49, 60308 Frankfurt am Main,
Germany.
The name, business address, present principal
occupation or employment and citizenship of each director and of
each member of the executive committee of GS Corp. and GS L.L.C.
and of each member of the executive committee of GS Group and
Goldman Sachs are set forth in Schedule I hereto and are
incorporated herein by reference. The name, business address,
present principal occupation or employment and citizenship of
each director and executive officer of GS Advisors, Inc. and GS
Advisors II, Inc., each a Delaware corporation that serves as the
sole general partner of GS Advisors and GS Advisors Cayman,
respectively, are set forth in Schedules II-A-i and II-A-ii
hereto and are incorporated herein by reference. The name,
business address, present principal occupation or employment and
citizenship of each director and each executive officer of Empire
Corp., which is the managing general partner of Bridge Street and
the sole general partner of Stone Street are set forth on
Schedule II-A-iii and incorporated herein by reference. The
name, business address, present principal occupation or
employment and citizenship of each executive officer and director
of Goldman, Sachs & Co. Finanz GmbH, which is the sole managing
general partner of GS oHG, are set forth in Schedule II-B herein
and are incorporated herein by reference.
During the last five years, neither the Filing Persons
nor, to the knowledge of each of the Filing Persons, any of the
persons listed on Schedules I, II-A-i, II-A-ii, II-A-iii or II-B
hereto (i) has been convicted in a criminal proceeding (excluding
traffic violations or similar misdemeanors) or, (ii) except as
set forth in Schedule III hereto, has been a party to a civil
proceeding of a judicial or administrative body of competent
jurisdiction and as a result of such proceeding was or is subject
to a judgment, decree or final order enjoining future violations
of, or prohibiting or mandating activities subject to, federal or
state securities laws, or finding any violation with respect to
such laws.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
Item 3 of the Original Schedule 13D is hereby amended
as follows:
(a) by deleting in its entirety the last paragraph
thereof and substituting therefor the following paragraph:
None of the persons listed on Schedules I, II-A-i,
II-A-ii, II-A-iii or II-B hereto has contributed any funds or
other consideration towards the purchase of the Notes, except
insofar as they may be partners of any of Goldman Sachs, GS
Group or the Limited Partnerships and have made capital
contributions to any of Goldman Sachs, GS Group or the
Limited Partnerships, as the case may be.
; and
(b) by adding the following paragraphs immediately
following the last paragraph thereof:
By reason of the issuance by the Company on March 31,
1997 of a warrant to purchase 80,000 shares of Common
Stock and pursuant to the anti-dilution provisions of the
Purchase Agreement, the conversion rate applicable to the
Notes held by the Limited Partnerships was adjusted (such
adjustment, the "Anti-dilution Adjustment") such that the
Notes are convertible into 1,010,101 shares of Common
Stock, in the aggregate.
As of April 7, 1997, Mr. Sanjay H. Patel, a Managing
Director of Goldman Sachs, in his capacity as a director
of the Company, had received, pursuant to the Company's
1993 Director Stock Option Plan and pursuant to a
Directors' Nonqualified Stock Option Agreement entered
into between Mr. Patel and the Company (the "Option
Agreement") (a copy of which is filed as Exhibit (1)
hereto and incorporated herein by reference), the
Director Option. The Director Option, which is currently
exercisable, entitles Mr. Patel to purchase 1,000 shares
of Common Stock, in the aggregate. Mr. Patel has entered
into an agreement (the "Patel/GS Group Agreement") with
GS Group pursuant to which Mr. Patel has agreed, among
other things, that he holds the Director Option, and each
share of Common Stock issuable upon the exercise thereof,
in trust for the benefit of GS Group. The Patel/GS Group
Agreement, a copy of which is filed as Exhibit (2)
hereto, is incorporated herein by reference.
ITEM 4. PURPOSE OF TRANSACTION
Item 4 of the Original Schedule 13D is hereby amended
as follows:
(a) by adding the following paragraphs after the first
paragraph thereof:
On March 31, 1997, the Limited Partnerships and the
Company entered into an agreement (the "Amendment") which
provides, among other things, that in addition to
customary anti-dilution provisions, the conversion rate
applicable to the conversion of the Notes into Common
Stock shall be adjusted if, at the time of a conversion,
the average trading price of the Common Stock is below
certain levels set forth in the Amendment. The
Amendment, a copy of which is filed as Exhibit (3)
hereto, is incorporated herein by reference.
In addition, by reason of the Anti-dilution Adjustment
described in Item 3 above, the Notes are currently
convertible into 1,010,101 shares of Common Stock, in the
aggregate.
; and
(b) by deleting in its entirety clause (i) of the fourth
paragraph thereof and substituting therefor the following:
"(i) incur, create, assume or permit to exist any
Indebtedness (as defined in the Purchase Agreement, as
amended) which would cause total Indebtedness to exceed
$10 million; provided that such $10 million limit is
subject to increase or elimination should the Company
achieve certain performance target"; and
(c) by deleting in its entirety the last paragraph thereof
and substituting therefor the following paragraph:
Neither the Filing Persons nor, to the knowledge of the
Filing Persons, any of the persons listed on Schedules I,
II-A-i, II-A-ii, II-A-iii or II-B hereto has any present
plans or intentions other than those disclosed herein
which would result in or relate to any of the
transactions described in subparagraphs (a) through (j)
of Item 4 of Schedule 13D.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER
(a) Section (a) of Item 5 of the Original Schedule 13D is
hereby amended by adding the following paragraphs after the
second paragraph thereof:
As of April 7, 1997, GSCP beneficially owned, and GS
Advisors, by reason of the ownership by GSCP of Notes,
may be deemed to have beneficially owned, 633,767
shares of Common Stock, GSCP II Offshore beneficially
owned, and GS Advisors Cayman, by reason of the
ownership by GSCP II Offshore of Notes, may be deemed
to have beneficially owned, 251,948 shares of Common
Stock, GSCP II Germany beneficially owned, and GS oHG,
by reason of the ownership by GSCP II Germany of Notes,
may be deemed to have beneficially owned, 23,376 shares
of Common Stock, Stone Street beneficially owned 60,191
shares of Common Stock, Bridge Street beneficially
owned 40,819 shares of Common Stock and Empire Corp., by
reason of the ownership of Stone Street and Bridge
Street of Notes, may be deemed to have beneficially
owned 101,010 shares of Common Stock. Based on the
foregoing and based on the number of shares of Common
Stock reported in the Company's Proxy Statement, dated
March 27, 1997, as of April 4, 1997, GSCP beneficially
owned, and GS Advisors may be deemed to have beneficially
owned, approximately 12.8%, GSCP II Offshore beneficially
owned, and GS Advisors Cayman may be deemed to have
beneficially owned, approximately 5.5%, GSCP II Germany
beneficially owned, and GS oHG may be deemed to have
beneficially owned, approximately .5%, Stone Street
beneficially owned approximately 1.4%, Bridge Street
beneficially owned approximately .9% and Empire Corp. may
be deemed to have beneficially owned approximately 2.3%, in
each case of the outstanding shares of Common Stock. Each
of GS Advisors, GS Advisors Cayman, GS oHG and Empire Corp.
disclaim beneficial ownership of shares of Common Stock
beneficially owned by the Limited Partnership to the extent
of partnership interests in the Limited Partnerships held
by persons other than GS Advisors, GS Advisors Cayman, GS
oHG and Empire Corp., as applicable.
As of April 7, 1997, (a) Goldman Sachs may be deemed to
beneficially own 1,010,101 shares of Common Stock, in the
aggregate, by reason of the ownership by the Limited
Partnerships of the Notes, which are convertible into
1,010,101 shares of Common Stock, in the aggregate, and
(b) GS Group may be deemed to own beneficially 1,011,101
shares of Common Stock, in the aggregate, by reason of
the ownership by the Limited Partnerships of the Notes
and by reason of Mr. Sanjay H. Patel, a director of the
Company and a Managing Director of Goldman Sachs, holding
for the benefit of GS Group the Director Option, which is
currently exercisable and which entitles Mr. Patel to
purchase 1,000 shares of Common Stock. Accordingly,
Goldman Sachs may be deemed to beneficially own
approximately 18.9% of the outstanding shares of Common
Stock, and GS Group may be deemed to beneficially own
18.9% of the outstanding shares of Common Stock.
Goldman Sachs and GS Group each disclaim beneficial
ownership of shares of Common Stock beneficially owned by
the Limited Partnerships to the extent of partnership
interests in the Limited Partnerships held by persons
other than Goldman Sachs, GS Group or their affiliates.
(b) Section (b) of Item 5 of the Original Schedule 13D is
hereby amended and restated in its entirety as follows:
Each Filing Person shares the power to vote or direct
the vote and to dispose or to direct the disposition of
shares of Common Stock beneficially owned by such Filing
Person or has the sole power to vote or direct the vote
and to dispose or to direct the disposition of shares of
Common Stock beneficially owned by such Filing Person, as
the case may be, in each case as indicated in pages 2
through 12 of this Amendment No. 1.
(c) Section (c) of Item 5 of the Original Schedule 13D is
hereby amended and restated in its entirety as follows:
Except for the Anti-dilution Adjustment, there have
been no changes in the beneficial ownership of shares of
Common Stock held by the Filing Persons. No transactions
in the Common Stock were effected by the Filing Persons
or, to the knowledge of any of the Filing Persons, any of
the persons listed on Schedules I, II-A-1, II-A-ii, II-A-
iii or II-B hereto during the sixty days prior to the
filing of this Amendment No. 1.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS, OR
RELATIONSHIPS WITH RESPECT TO SECURITIES OF THE
ISSUER
Item 6 of the Original Schedule 13D is hereby amended
as follows:
(a) by adding immediately prior to the last paragraph
thereof the following:
Agreements Relating To Director Option. Mr. Sanjay H.
Patel, a Managing Director of Goldman Sachs who serves as
a director of the Company, held as of April 7, 1997 a
currently exercisable Director Option, entitling him to
purchase 1,000 shares of Common Stock at a purchase price
of $11.26 per share, as more fully described in the
Option Agreement. In addition, Mr. Patel has entered
into the Patel/GS Group Agreement with the GS Group
pursuant to which Mr. Patel has agreed (a) that he holds
the Director Option, and each share of Common Stock
issuable upon exercise thereof, in trust for the benefit
of GS Group, and (b) that he will not exercise the
Director Option, or transfer, or vote in respect of, any
shares of Common Stock issuable upon exercise of the
Director Option, in each case except as GS Group may in
its sole discretion direct from time to time.
; and
(b) by deleting in its entirety the last paragraph thereof
and substituting therefor the following:
Except as described herein, neither the Filing Persons
nor, to the knowledge of the Filing Persons, any of the
Persons listed on Schedules I, II-A-i, II-A-ii, II-A-iii
or II-B hereto is a party to any contract, arrangement,
understanding, relationship with respect to any
securities of the Company.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS
Exhibit 1: Director's Nonqualified Stock Option
Agreement, dated July 19, 1996, between
Mr. Sanjay H. Patel and the Company.
Exhibit 2: Agreement, dated as of July 19, 1996, by
and between Mr. Sanjay H. Patel and GS
Group
Exhibit 3: Amendment No. 1, dated as of March 31,
1997, to the Securities Purchase Agreement
between the Company and the Limited
Partnerships
SIGNATURE
---------
After reasonable inquiry and to the best of its
knowledge and belief, the undersigned certifies that the
information set forth in this statement is true, complete and
correct.
Dated: April 9, 1997 GS CAPITAL PARTNERS II, L.P.
By: GS Advisors, L.P.,
its general partner
By: GS Advisors, Inc.,
its general partner
By: \s\ Richard A. Friedman
-------------------------------
Name: Richard A. Friedman
Title: President
GS ADVISORS, L.P.
By: GS Advisors, Inc.,
its general partner
By: \s\ Richard A. Friedman
-------------------------------
Name: Richard A. Friedman
Title: President
GS CAPITAL PARTNERS II OFFSHORE,
L.P.
By: GS Advisors II (Cayman), L.P.
its general partner
By: GS Advisors II, Inc.,
its general partner
By: \s\ Richard A. Friedman
-------------------------------
Name: Richard A. Friedman
Title: President
GS ADVISORS II (CAYMAN), L.P.
By: GS Advisors II, Inc.,
its general partner
By: \s\ Richard A. Friedman
-------------------------------
Name: Richard A. Friedman
Title: President
GS CAPITAL PARTNERS II (Germany) CIVIL
LAW PARTNERSHIP (with limitation of
liability)
By: Goldman, Sachs & Co. oHG,
its managing partner
By: Goldman, Sachs & Co.
Finanz GmbH, its managing
partner
By: \s\ Richard A. Friedman
-----------------------------
Name: Richard A. Friedman
Title: Attorney-in-fact
GOLDMAN, SACHS & CO. oHG
By: Goldman, Sachs & Co.
Finanz GmbH, its managing
partner
By: \s\ Richard A. Friedman
-----------------------------
Name: Richard A. Friedman
Title: Attorney-in-fact
GOLDMAN, SACHS & CO.
By: \s\ Richard A. Friedman
-----------------------------
Name: Richard A. Friedman
Title: Managing Director
THE GOLDMAN SACHS GROUP, L.P.
By: The Goldman Sachs
Corporation,
its general partner
By: \s\ Richard A. Friedman
-----------------------------
Name: Richard A. Friedman
Title: Executive Vice
President
STONE STREET FUND 1996, L.P.
By: Stone Street Empire Corp.,
its general partner
By: \s\ Richard A. Friedman
-----------------------------
Name: Richard A. Friedman
Title: Vice President
BRIDGE STREET FUND 1996, L.P.
By: Stone Street Empire Corp.,
its managing general
partner
By: \s\ Richard A. Friedman
-----------------------------
Name: Richard A. Friedman
Title: Vice President
STONE STREET EMPIRE CORP.
By: \s\ Richard A. Friedman
-----------------------------
Name: Richard A. Friedman
Title: Vice President
SCHEDULE I
-----------
The name of each director and of each member of the
executive committee of The Goldman Sachs Corporation and
The Goldman, Sachs & Co. L.L.C. and of each member of the
executive committee of The Goldman Sachs Group, L.P. and
Goldman, Sachs & Co. is set forth below.
The business address of each person listed below
except John A. Thain and John L. Thornton is 85 Broad Street,
New York, NY 10004. The business address of John A. Thain
and John L. Thornton is 133 Fleet Street, London EC4A 2BB,
England. Each person is a citizen of the United States of
America. The present principal occupation or employment
of each of the listed persons is as a managing director
of Goldman, Sachs & Co. or another Goldman Sachs operating
entity and as a member of the executive committee.
Jon Z. Corzine
Henry M. Paulson, Jr.
Roy J. Zuckerberg
Robert J. Hurst
John A. Thain
John L. Thornton
SCHEDULE II-A-i
---------------
The name, position and present principal occupation of
each director and executive officer of GS Advisors, Inc., the
sole general partner of GS Advisors, L.P., which is the sole
general partner of GS Capital Partners II, L.P., are set forth
below.
The business address for all the executive officers and
directors listed below except Henry Cornell is 85 Broad Street,
New York, New York 10004. The business address of Henry Cornell
is 3 Garden Road, Hong Kong.
All executive officers and directors listed below are United
States citizens.
Present Principal
Name Position Occupation
- ----------------- -------- -----------------
Richard A. Friedman Director/President Managing Director
of Goldman, Sachs
& Co.
Terence M. O'Toole Director/Vice Managing Director
President of Goldman, Sachs
& Co.
Carla H. Skodinski Vice Vice President of
President/Secretary Goldman, Sachs &
Co.
Elizabeth S. Cogan Treasurer Vice President of
Goldman, Sachs &
Co.
Joseph H. Gleberman Director/ Vice Managing Director
President of Goldman, Sachs
& Co.
Henry Cornell Vice President Managing Director
of Goldman Sachs
(Asia) L.L.C.
Barry S. Volpert Director/Vice Managing Director
President of Goldman, Sachs
& Co.
Eve M. Gerriets Vice Vice President of
President/Assistant Goldman, Sachs &
Secretary Co.
David J. Greenwald Assistant Secretary Vice President of
Goldman, Sachs &
Co.
C. Douglas Fuge Assistant Treasurer Vice President of
Goldman, Sachs &
Co.
SCHEDULE II-A-ii
----------------
The name, business address, present principal occupation of
each director and executive officer of GS Advisors II, Inc., the
sole general partner of GS Advisors II (Cayman), L.P., which is
the sole general partner of GS Capital Partners II Offshore,
L.P., are set forth below.
The business address for all the executive officers and
directors listed below except Henry Cornell is 85 Broad Street,
New York, New York 10004. The business address of Henry Cornell
is 3 Garden Road, Hong Kong.
All executive officers and directors listed below are United
States citizens.
Name and Business Present Principal
Address Position Occupation
- ----------------- ---------- -----------------
Richard A. Friedman Director/President Managing Director
of Goldman, Sachs
& Co.
Terence M. O'Toole Director/Vice Managing Director
President of Goldman, Sachs
& Co.
Carla H. Skodinski Vice Vice President of
President/Secretary Goldman, Sachs &
Co.
Elizabeth S. Cogan Treasurer Vice President of
Goldman, Sachs &
Co.
Joseph H. Gleberman Director/ Vice Managing Director
President of Goldman, Sachs
& Co.
Henry Cornell Vice President Managing Director
of Goldman Sachs
(Asia) L.L.C.
Barry S. Volpert Director/Vice Managing Director
President of Goldman, Sachs
& Co.
Eve M. Gerriets Vice Vice President of
President/Assistant Goldman, Sachs &
Secretary Co.
David J. Greenwald Assistant Secretary Vice President of
Goldman, Sachs &
Co.
C. Douglas Fuge Assistant Treasurer Vice President of
Goldman, Sachs &
Co.
SCHEDULE II-A-iii
-----------------
The name, position and present principal occupation of
each director and executive officer of Stone Street Empire Corp.,
the sole general partner of Stone Street Fund 1996, L.P. and the
managing general partner of Bridge Street 1996, L.P., are set
forth below.
The business address for each of the executive officers and
directors listed below is 85 Broad Street, New York, New York
10004.
All executive officers and directors listed below are United
States citizens.
Present Principal
Name Position Occupation
- ----------------- ---------- ------------------
Friedman, Richard A Director/Vice Managing Director
President of Goldman, Sachs &
Co.
Nash, Avi M. Director/Vice Managing Director
President of Goldman, Sachs &
Co.
Goldenberg, Jeffrey Director/Vice Managing Director
President of Goldman, Sachs &
Co.
McMahon, J. William Director/Vice Vice President of
President Goldman, Sachs &
Co.
Singh, Dinakar Director/Vice Vice President of
President Goldman, Sachs &
Co.
Kolatch, Jonathan L. Director/Vice Managing Director
President of Goldman, Sachs &
Co.
Mehra, Sanjeev K. Director/Vice Managing Director
President of Goldman, Sachs &
Co.
Mindich, Eric M. Director/Vice Managing Director
President/Treasurer of Goldman, Sachs &
Co.
Sachs, Peter G. Director/Vice Limited Partner of
President The Goldman Sachs
Group, L.P.
Fuhrman, Glenn R. Director/Vice Vice President of
President Goldman, Sachs &
Co.
Sacerdote, Peter M. Director/Chairman/ Limited Partner of
C.E.O./President The Goldman Sachs
Group, L.P.
Greenwald, David J. Vice President Vice President of
Goldman, Sachs &
Co.
Skodinski, Carla H. Vice Vice President of
President/Secretary Goldman, Sachs &
Co.
Stecher, Esta E. Vice President Managing Director
of Goldman, Sachs &
Co.
Yacenda, Richard A. Vice President Vice President of
Goldman, Sachs &
Co.
SCHEDULE II-B
-------------
The name, position and present principal occupation of each
executive officer and director of Goldman, Sachs & Co. Finanz GmbH
which is the sole managing general partner of Goldman, Sachs &
Co. oHG are set forth below.
The business address for each of the persons listed below is
MesseTurm, 60308 Frankfurt am Main, Germany.
Of the directors and executive officers listed below,
Philip D. Murphy is a United States citizen, Paul M.
Achleitner is a citizen of Austria, and Ernst Tschoeke is a
citizen of Germany.
Present Principal
Name Position Occupation
- -------------------- ------------- ---------------------
Paul M. Achleitner Managing Director Managing Director of
Goldman,
Sachs & Co. oHG
Philip D. Murphy Managing Director Managing Director of
Goldman,
Sachs & Co. oHG
Ernst Tschoeke Managing Director Director of Goldman,
Sachs & Co. oHG
SCHEDULE III
------------
In settlement of Securities and Exchange Commission
Administrative Proceeding File No. 3-7646 In the Matter of the
Distribution of Securities Issued by Certain Government Sponsored
Enterprises, Goldman, Sachs & Co. (the "Firm"), along with
numerous other securities firms, without admitting or denying any
of the findings of the Securities and Exchange Commission (the
"SEC") consented to the entry of an Order, dated January 16,
1992. The SEC found that the Firm, in connection with its
participation in the primary distributions of certain unsecured
debt securities issued by Government Sponsored Enterprises
("GSEs"), made and kept certain records that did not accurately
reflect the Firm's customers' orders for GSEs' securities and/or
offers, purchases or sales by the Firm of the GSEs' securities
effected by the Firm in violation of Section 17(a) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"),
and 17 C.F.R. Sections 240.17a-3 and 240.17a-4.
The Firm was ordered to cease and desist from
committing or causing future violations of the aforementioned
sections of the Exchange Act in connection with any primary
distributions of unsecured debt securities issued by GSEs, pay a
civil money penalty to the United States Treasury in the amount
of $100,000 and maintain policies and procedures reasonably
designed to ensure the Firm's future compliance with the
aforementioned sections of the Exchange Act in connection with
any primary distributions of unsecured debt securities issued by
the GSEs.
In Securities and Exchange Commission Administrative
Proceeding File No.3-8282 In the Matter of Goldman, Sachs & Co.,
the Firm, without admitting or denying any of the SEC's
allegations, settled administrative proceedings involving alleged
books and records and supervisory violations relating to eleven
trades of U.S. Treasury securities in the secondary markets in
1985 and 1986. The SEC alleged that the Firm had failed to
maintain certain records required pursuant to Section 17(a) of
the Exchange Act and had also failed to supervise activities
relating to the aforementioned trades in violation of Section
15(b)(4)(E) of the Exchange Act.
The Firm was ordered to cease and desist from
committing or causing any violation of the aforementioned
sections of the Exchange Act, pay a civil money penalty to the
SEC in the amount of $250,000 and establish policies and
procedures reasonably designed to assure compliance with Section
17(a) of the Exchange Act and Rules 17a-3 and 17a-4 thereunder.
INDEX OF EXHIBITS
Exhibit 1: Director's Nonqualified Stock Option Agreement,
dated July 19, 1996, between Mr. Sanjay H. Patel
and the Company.
Exhibit 2: Amendment, dated July 19, 1996, Mr. Sanjay H. Patel
and GS Group.
Exhibit 3: Amendment No. 1, dated as of March 31, 1997, to the
Securities Purchase Agreement, dated July 19, 1996,
between the Company and the Limited Partnerships.
Exhibit 1
RECOVERY ENGINEERING, INC.
1993 DIRECTOR STOCK OPTION PLAN
DIRECTOR'S NONQUALIFIED STOCK OPTION AGREEMENT
----------------------------------------------
OPTIONEE: Sanjay Patel
GRANT DATE: July 19, 1996
NUMBER OF OPTION SHARES: 1,000 Shares
OPTION PRICE PER SHARE: $11.26 per Share
EXPIRATION DATE: July 19, 2001
THIS AGREEMENT is made as of the Grant Date set forth
above, by and between Recovery Engineering, Inc. (the "Company"),
and the Optionee named above, who is a non-employee director of
the Company (the "Optionee").
The Company desires, by affording the Optionee an
opportunity to purchase shares of its Common Stock, $.01 par
value (the "Common Stock"), as hereinafter provided, to carry out
the purpose of the Recovery Engineering, Inc. 1993 Stock Option
Plan (the "Option Plan").
NOW, THEREFORE, in consideration of the mutual
covenants hereinafter set forth and for other good and valuable
consideration, the parties hereby agree as follows:
1. Grant of Option. The Company hereby grants to the
Optionee the right and option to purchase all or any part of the
aggregate number of shares of Common Stock set forth above (the
"Option Shares") (such number being subject to adjustment as
provided in paragraph 7 hereof) on the terms and conditions set
forth in this Agreement. This option is not intended to be an
"incentive stock option" within the meaning of section 422 of the
Internal Revenue Code of 1986, as amended.
2. Purchase Price. The purchase price of the Option
Shares shall be the Option Price Per Share set forth above (such
Option Price Per Share being subject to adjustment as provided in
paragraph 7 hereof).
3. Term and Exercise of Option.
a. The term of this option shall commence on the
Grant Date and shall continue until the Expiration Date set forth
above. Except as otherwise provided herein, this option may not
be exercised prior to six months after the Grant Date, and may
thereafter be exercised for the purchase of all or any part of
the Option Shares at any time, or from time to time, prior to the
Expiration Date set forth above.
b. Neither the Optionee nor the Optionee's legal
representatives, legatees or distributees, as the case may be,
will be, or will be deemed to be, a holder of any Option Shares
for any purpose unless and until certificates for such shares are
issued to the Optionee or the Optionee's legal representatives,
legatees or distributees, under the terms of the Option Plan.
4. Limitations on Exercise of Option.
a. The obligation of the Company to sell and deliver
shares under this option shall be subject to all applicable
federal and state laws, rules, and regulations and to such
approvals by any government or regulatory agency as may be
required. The Company shall not be required to issue or deliver
any certificates for shares of Common Stock prior to the
completion of any registration or qualification for such shares
under any federal or state law, or any ruling or regulation of
any government body which the Company shall, in its sole
discretion, determine to be necessary or advisable.
b. This option shall not be exercisable if at any
date of exercise, it is the opinion of counsel for the Company
that registration of said shares under the Securities Act of
1933, or other applicable statute or regulation, is required and
this option shall again become exercisable only if the Company
elects to and thereafter effects a registration of said shares
under the Securities Act of 1933, or other applicable statute or
regulation, within the period of this option.
c. It is the Company's intent that the provisions of
this option comply in all respects with Section 16 of the
Securities Exchange Act of 1934 and any regulations promulgated
thereunder, including Rule 16b-3. If any provision of this
option is found not to be in compliance with said Rule, the
provision shall be deemed null and void.
d. Payment upon exercise of this option may be made
in cash, by personal check payable to the Company, by delivery of
shares of Common Stock having an aggregate fair market value on
the date of exercise which is not less than the option price, or
by a combination thereof.
5. Nontransferability of Option. This option shall not be
transferable by the Optionee, other than by will or the laws of
descent and distribution. During the lifetime of the Optionee,
this option shall be exercisable only by the Optionee.
6. Termination of Service. This option will not confer
upon the Optionee any right with respect to continuance of
service as a director of the Company or a Subsidiary of the
Company, nor will it interfere in any way with the Company's
right or the Subsidiary's right to terminate his service at any
time. If for any reason the Optionee ceases to be a director of
the Company, this option will remain exercisable until the
Expiration Date set forth above. In the event of the death of
the Optionee, this option shall be exercisable only by the
executors or administrators of the Optionee's estate or by the
person or persons to whom the Optionee's rights under the option
shall pass by the Optionee's Will or the laws of descent and
distribution.
7. Adjustments in Event of Change in Common Stock. In the
event of any change in the Common Stock of the Company by reason
of any stock dividend, recapitalization, reorganization, merger,
consolidation, split-up, combination, or exchange of shares, or
rights offering to purchase Common Stock at a price substantially
below fair market value, or of any similar change affecting the
Common Stock, the number and kind of shares which thereafter are
subject to this option and the purchase price per share thereof
shall be appropriately adjusted consistent with such change in
such manner as the Board of Directors may deem equitable to
prevent substantial dilution or enlargement of the rights granted
to the Optionee.
8. Interpretation. The interpretation and construction of
any provision of the Option Plan and this option shall be made by
the Board of Directors and shall be final, conclusive and binding
on the Optionee and all other persons.
9. Subsidiary. The term "Subsidiary" as used in the
Option Plan and in this Option Agreement means a subsidiary
corporation, at least 50% of the outstanding voting stock or
voting power of which is beneficially owned, directly or
indirectly, by the Company.
10. Option Plan Governs. This option is in all respects
subject to and governed by all of the provision of the Option
Plan.
IN WITNESS WHEREOF, the Company has caused this
Agreement to be executed in its corporate name by its duly
authorized officer, and the Optionee has executed this Agreement
as of the Grant Date set forth above.
COMPANY: RECOVERY ENGINEERING, INC.
By \s\ Brian F. Sullivan
-------------------------------
Brian F. Sullivan
Chief Executive Officer
OPTIONEE: \s\ Sanjay Patel
--------------------------------
Sanjay Patel
Exhibit 2
AGREEMENT RELATING TO
RECOVERY ENGINEERING, INC. OPTIONS
----------------------------------
AGREEMENT, dated as of July 19, 1996, by and
between Sanjay Patel (the "Grantee") and The Goldman Sachs
Group, L.P. ("Goldman Sachs").
WHEREAS, the Grantee is serving as a director of
Recovery Engineering, Inc., (the "Company") at the request
of GS Capital Partners II, L.P. (the "Fund"), of which a
subsidiary of Goldman Sachs is the general partner.
WHEREAS, it is the policy of Goldman Sachs that
if, at the request of the Fund, any employee of Goldman
Sachs or any of its affiliates serves as a director of a
company in which the Fund has an investment and such
company grants options to purchase stock of such company to
such employee, then such employee holds such options for the
benefit of Goldman Sachs;
WHEREAS, pursuant to the Director's Nonqualified
Stock Option Agreement (the "Initial Option Agreement")
under the 1993 Director Stock Option Plan (as amended, the
"Current Plan"), dated as of July 19,1996, between the
Company and the Grantee, the Grantee was granted an option
(the "Initial Option") to purchase up to 1,000 shares of
common stock, par value $.01 per share (the "Stock"), of the
Company at an exercise price of $11.26 per share;
WHEREAS, the Option Agreement provides that the
Initial Option is not transferable except under certain
specified circumstances;
WHEREAS, the Grantee may from time to time in his
capacity as a director of the Company be granted additional
options to purchase Stock (individually and collectively, an
"Additional Option") pursuant to an option agreement
(individually and collectively, an "Additional Option
Agreement") under the Current Plan or under another stock
option plan of the Company (individually and collectively,
an "Additional Plan"; the Additional Plan and the Current
Plan are referred to individually and collectively as the
"Plan"; the Additional Option and the Initial Option are
referred to individually and collectively as an "Option";
the Additional Option Agreement and the Initial Option
Agreement are referred to individually and collectively as
an "Option Agreement"); and
WHEREAS, in accordance with the policy of Goldman
Sachs, the Grantee is required to hold the Initial Option
and any Additional Option which the Grantee may receive from
time to time as nominee for Goldman Sachs.
NOW THEREFORE, in consideration of the terms and
conditions set forth herein and other good and valuable
consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereto agree as follows:
1. Defined Terms. Unless otherwise defined
herein, capitalized terms used herein shall have the
meanings given to them in the Plan.
2. General. The Grantee hereby agree that: (i)
the Grantee shall hold each Option, each share of Stock
issuable upon exercise of any Option, and the proceeds of
any sale of any such shares of Stock in trust for the
benefit of Goldman Sachs; (ii) the Grantee shall not (x)
exercise the Option, in whole or in part, (y) Transfer (as
defined in Section 2.6) any shares of Stock issuable upon
exercise of the Option, or (z) vote any shares of Stock,
except, in each case, as Goldman Sachs may in its sole
discretion direct from time to time; and (iii) the Grantee
shall take all such actions and exercise all such rights and
privileges with respect to any Option or such shares of
Stock as Goldman Sachs may in its sole discretion direct
from time to time, provided that the Grantee shall not be
required to take any action or exercise any such rights or
privileges which the Grantee believes, in good faith, would
violate any applicable law or the Grantee's fiduciary duties
to the Company. The Grantee hereby agrees that Goldman
Sachs shall be entitled to all such rights and privileges
with respect to any Option or such shares of Stock as if
Goldman Sachs had originally been the grantee under each
Option Agreement. Without limiting the generality of the
foregoing, the parties hereto agree as follows:
2.1 Exercise of Options. Subject to the
exercise schedule set forth in the applicable Option
Agreement, at any time and from time to time that Goldman
Sachs determines to exercise any Option, Goldman Sachs shall
provide to the Grantee written instructions (the "Exercise
Instructions") which shall: (i) set forth the number of
shares of Stock in respect of which the Option shall be
exercised (the "Purchased Stock"); (ii) set forth the date
on which the Grantee shall exercise the Option; and (iii)
identify the Option to which the Exercise Instructions
relate (such identification to be made by the date of the
Option Agreement or otherwise). The Exercise Instructions
may also include such other instructions as Goldman Sachs
may in its sole discretion deem appropriate, including,
without limitation, instructions to the Grantee to: (x)
provide to the Company, to the extent permitted by the
applicable Plan and any committee of the Board of Directors
of the Company which administers the Plan (the "Committee"),
irrevocable instructions for a broker to promptly pay to the
Company in full the Option price for the Purchased Stock; or
(y) Transfer (as defined below) the shares of Purchased
Stock to, or instruct the Company to issue such shares of
Purchased Stock in the name of, Goldman Sachs or Goldman
Sachs' designee. Upon receipt of the Exercise Instructions,
the Grantee shall exercise the Option referred to therein in
accordance with the Exercise Instructions by delivering
written notice to the Company in accordance with the
Exercise Instructions, the applicable Option Agreement and
the Plan. Except as provided in this Section 2, the Grantee
shall not exercise any Option.
2.2 Exercise Price and Taxes. (a) Except to
the extent Goldman Sachs instructs the Grantee in accordance
with clause (x) of Section 1.1 hereof, Goldman Sachs shall,
no later than the date of exercise specified in the Exercise
Instructions, deliver or cause to be delivered to the
Company (on behalf of the Grantee) or deliver or cause to be
delivered to the Grantee (who shall in turn deliver or cause
to be delivered to the Company) cash in an amount equal to
the sum of (i) the aggregate purchase price for the
Purchased Stock, and (ii) the amount of any taxes or other
amounts which is imposed by any governmental entity and
which the Grantee is required to satisfy in connection with
such exercise. Such payment may be made by any method
permitted pursuant to the Plan or such other method as the
Committee may approve.
(b) Goldman Sachs shall promptly
deliver to the Grantee or otherwise pay on behalf of the
Grantee, any stock transfer or similar taxes payable by the
Grantee in connection with any Transfer requested by Goldman
Sachs.
2.3 Tax Returns. (a) The Grantee will
request that the Company (if the Company determines that it
is permissible under applicable law) issue a Form 1099 to
Goldman Sachs rather than to the Grantee in connection with
any exercise of any Option.
(b) If the Company issues a Form 1099
to the Grantee in connection with any exercise of any Option
in any year, the Grantee shall promptly notify Goldman Sachs
of his receipt of a Form 1099 and, unless the Grantee and
Goldman Sachs otherwise agree in writing, the Grantee shall
(i) issue a Form 1099 to Goldman Sachs to reflect the amount
reported in the Form 1099 issued by the Company, and (ii)
attach a statement to his federal income tax return to
explain that the amounts reported in the Company's Form 1099
were received by the Grantee solely as an agent for Goldman
Sachs and are not gross income of the Grantee. Goldman
Sachs shall reimburse the Grantee for up to $1,000 of the
reasonable costs incurred by the Grantee for tax return
preparation for such year.
(c) If in any year the Grantee, upon
the written instructions of Goldman Sachs, Transfers any
Option or any shares of Stock issued upon the exercise of
any Option in a taxable transaction, Goldman Sachs shall
reimburse the Grantee for up to $1,000 of the reasonable
costs incurred by the Grantee for tax return preparation for
such year.
(d) In the event the Grantee is
requested to pay an amount of additional income tax as a
result of the exercise of any Option or any Transfer
requested by Goldman Sachs (the "Incremental Taxes"), the
Grantee shall promptly notify Goldman Sachs and cause his
tax accountant or other tax preparer to prepare a
certificate (the "Tax Certificate") setting forth (i) the
amount of Incremental Taxes and (ii) the determination
thereof in reasonable detail. The Tax Certificate shall be
provided within 30 days of the receipt by the Grantee of
correspondence from any tax authority with respect to an
amount that could give rise to an Incremental Tax. Goldman
Sachs shall have 20 days to review the Tax Certificate and
(A) shall undertake to arrange for the Grantee's defense in
any controversy arising with respect to any Incremental Tax
or (B) if the Grantee has fulfilled all of his obligations
hereunder, shall pay to the Grantee the amount of any
Incremental Tax finally determined in accordance with
Section 2.3(e) or (f) below. Grantee will cooperate with
Goldman Sachs and with any tax representative selected by
Goldman Sachs, which representative shall be reasonably
acceptable to the Grantee, and such cooperation shall
include complying with reasonable requests to furnish
information or execute documents necessary to defend the
Grantee in the course of the dispute or to effect a
settlement of the dispute. In the event Goldman Sachs
chooses to exercise alternative (A) above, the costs of
defense shall be borne by Goldman Sachs. Goldman Sachs and
the Grantee shall resolve any dispute between them in good
faith.
(e) If Goldman Sachs chooses to pay the
Incremental Taxes under Section 2.3(d)(B) hereof, Goldman
Sachs shall, within five days after the end of the 20-day
review period if there is no dispute or, if there is a
dispute, within five days after the dispute is resolved, pay
to the Grantee (i) the amount of any Incremental Taxes as
reflected on the Tax Certificate if there is no dispute or
as the parties may agree if there is a dispute resolved by
the parties, and (ii) an amount necessary to compensate the
Grantee for the additional federal, state or local income or
payroll taxes, if any, imposed on the Grantee as a
consequence of Goldman Sachs' payment of the Incremental
Taxes and the payment of any amounts under this subclause
(ii) to the Grantee (the "Gross-up Amount"). The Gross-up
Amount shall be computed by Goldman Sachs using the highest
combined effective rate of federal, state and local income
tax applicable to a resident of The City of New York in the
taxable year in which Goldman Sachs pays the Incremental Tax
to the Grantee.
(f) If Goldman Sachs chooses to defend
the Grantee with respect to an Incremental Tax pursuant to
Section 2.3(d)(A) hereof, and (i) the Grantee is assessed an
income tax after Goldman Sachs has exhausted all
administrative or other legal remedies that, in its sole
discretion, Goldman Sachs chooses to pursue, or (ii) a
settlement is reached, Goldman Sachs shall pay any
additional income tax with respect to such controversy for
which the Grantee ultimately is liable, including a gross-up
amount, such amounts to be determined and paid in accordance
with the procedures for determining an Incremental Tax and
the Gross-up Amount in Section 2.3(e) hereof.
2.4 Notices; Information. The grantee shall
promptly provide to Goldman Sachs a copy of (i) all written
notices delivered to the Grantee as a participant in any
Plan or as a shareholder of the Company, and (ii) any
documents, reports or other materials provided to the
Grantee as a participant in any Plan or as a shareholder of
the Company, including any quarterly and annual reports to
shareholders and any proxy statements. Upon request of
Goldman Sachs, the Grantee shall obtain any information,
reports or other materials available to the Grantee as a
participant in any Plan or as a shareholder of the Company.
2.5 Voting. The Grantee shall not exercise
any voting rights in respect of any shares of Stock issued
to the Grantee upon exercise of any Option, except in
accordance with the written instructions of Goldman Sachs.
The Grantee hereby agrees to exercise such voting rights in
accordance with the written instructions of Goldman Sachs.
2.6 Transfer. The Grantee shall not sell,
transfer, assign, exchange, pledge, encumber or otherwise
dispose of any Option or any shares of Stock issued to the
Grantee upon exercise of any Option, or grant any option to
purchase such Option or shares of Stock or grant any legal
or beneficial interest therein (each, a "Transfer"), except
in accordance with the written instructions of Goldman Sachs
or by will or the laws of descent or distribution. The
Grantee hereby agrees to Transfer any Option or shares of
Stock in accordance with the written instructions of Goldman
Sachs.
3. Termination of Employment or Directorship;
Termination of Options.
3.1 No Right To Continued Employment Or
Directorship. Nothing in this Agreement shall be
interpreted or construed to confer upon the Grantee any
right with respect to continuance of employment by Goldman
Sachs or its affiliates or of serving as a director of the
Company, nor shall this Agreement interfere in any way with
the right of Goldman Sachs or its affiliates to terminate
the Grantee's employment or directorship at any time.
3.2 Effect Of Termination Of Employment Or
Directorship. If the employment of the Grantee by Goldman
Sachs or its affiliates or the directorship of the Grantee
is terminated for any reason, including, without limitation,
death, disability, retirement or cause, this Agreement shall
continue in full force and effect and shall be binding upon
the parties hereto and their respective successors, assigns,
legal and personal representatives, heirs and legatees.
3.3 Termination Of Options. The Grantee
shall not have any liability to Goldman Sachs, or otherwise
be responsible for, the forfeiture, cancellation, lapse or
termination of any Option upon the termination for whatever
reason of the Grantee's position as a director of the
Company or upon the expiration of the term of such Option if
Goldman Sachs failed to provide Exercise Instructions to the
Grantee or to otherwise comply with Section 2 in a timely
manner.
4. Further Assurances. Each party hereto shall
do and perform or cause to be done and performed all further
acts and things and shall execute and deliver all other
agreements, certificates, instruments, and documents as any
other party hereto reasonably may request in order carry out
the intent and accomplish the purposes of this Agreement and
the consummation of the transactions contemplated hereby.
5. Governing Law. This Agreement and the rights
and obligations of the parties hereto shall be governed by,
and construed and enforced in accordance with, the laws of
the State of New York, without giving effect to the
principles of conflicts of law thereof. Each of the parties
hereto hereby irrevocably and unconditionally consents to
submit to the exclusive jurisdiction of the courts of the
State of New York and of the United States of America, in
each case, located in the Borough of Manhattan for any
action or proceeding in any court or before any governmental
authority ("Litigation") arising out of or relating to this
Agreement and the transactions contemplated hereby (and
agrees not to commence any Litigation relating thereto
except in such courts), and further agrees that service of
any process, summons, notice or document by U.S. registered
mail to its respective address in accordance with this
Agreement shall be effective service of process for any
Litigation brought against it in any such court. Each of
the parties hereto hereby irrevocably and unconditionally
waives any objection to the laying of venue of any
Litigation arising out of this Agreement or the transactions
contemplated hereby in the courts of the State of New York
or the United States of America located in the Borough of
Manhattan, and hereby further irrevocably and
unconditionally waives and agrees not to plead or claim in
any such court that any such Litigation brought in any such
court has been brought in an inconvenient forum.
6. Specific Performance. The parties hereto
agree that money damages or other remedy at law would not be
sufficient or adequate remedy for any breach or violation
of, or a default under, this Agreement by them and that in
addition to all other remedies available to them, each of
them shall be entitled to an injunction restraining such
breach, violation or default or threatened breach, violation
or default and to any other equitable relief, including
without limitation specific performance, without bond or
other security being required.
7. Notice. All notices and other communications
hereunder shall be in writing and, unless otherwise provided
herein, shall be deemed to have been given when received by
the party to whom such notice is to be given at its address
set forth below, or such other address for the party as
shall be specified by notice given pursuant hereto:
(i) If to Goldman Sachs to
The Goldman Sachs Group, L.P.
85 Broad Street
New York, NY 10004
Attention: Carla Skodinski
(ii) If to the Grantee to
Sanjay Patel
Goldman, Sachs & Co.
19th Floor
85 Broad Street
New York, NY 10004
8. Binding Effect; Assignment. This Agreement
shall inure to the benefit of and shall be binding upon the
parties hereto and their respective legal and personal
representatives, heirs, legatees, successors, and assigns.
Neither this Agreement nor any of the rights hereunder may
be assigned by any of the parties hereto without the consent
of the other party, except that Goldman Sachs may assign all
or part of its rights under this Agreement without the
consent of the Grantee.
9. Amendment And Modification. This Agreement
may be amended, modified, supplemented or waived only by
written agreement of the party against whom enforcement of
such amendment, modification, supplement or waiver is
sought.
10. Headings; References; Execution In
Counterparts. The headings and captions contained herein
are for convenience only and shall not control or affect the
meaning or construction of any provision hereof. All
article, section, schedule, exhibit and paragraph references
are to this Agreement, unless otherwise expressly provided.
This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an
original and which together shall constitute one and the
same instrument.
11. Interpretation. The use of the word
"including" in this Agreement shall be by way of example
rather than by limitation. There shall be included within
the term "Option" any and all options, securities or other
rights of any kind whatsoever which may be issued in respect
of, or in exchange for, any Option pursuant to a merger,
consolidation, stock split, stock dividend, recapitalization
of the Company or otherwise. There shall be included within
the term "Stock" any and all securities, option or other
rights of any kind whatsoever which may be issued in respect
of, or in exchange for, any shares of Stock pursuant to a
merger, consolidation, stock split, stock dividend,
recapitalization of the Company or otherwise.
12. Entire Agreement. The Agreement constitutes
the entire agreement, and supersedes all prior agreements
and understandings, oral and written, between the parties
hereto with respect to the subject matter hereof.
IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be duly executed as of the date first
above written.
THE GOLDMAN SACHS GROUP, L.P.
By: \s\ Richard A. Friedman
----------------------------------
Richard A. Friedman
General Partner
GRANTEE
\s\ Sanjay Patel
----------------------------------
Sanjay Patel
Recovery Engineering, Inc. acknowledges the
foregoing agreement between The Goldman Sachs Group, L.P., a
Delaware limited partnership, and Sanjay Patel and agrees to
be bound by Sections 2(i) and 2.3(a) of such agreement,
except as the undersigned may otherwise be required to do by
law or judicial process.
RECOVERY ENGINEERING, INC.
By: ----------------------------------
Exhibit 3
AMENDMENT NO. 1 (this "Amendment"), dated as of March
31, 1997, to the Securities Purchase Agreement, dated as of July
19, 1996 (the "Agreement"), between RECOVERY ENGINEERING, INC., a
Minnesota corporation (the "Company"), and GS CAPITAL PARTNERS
II, L.P., a Delaware limited partnership ("GSCP"), GS CAPITAL
PARTNERS II OFFSHORE, L.P., a Cayman Islands limited partnership,
GOLDMAN, SACHS & CO. VERWALTUNGS GmbH, STONE STREET FUND 1996,
L.P., a Delaware limited partnership, and BRIDGE STREET FUND
1996, L.P., a Delaware limited partnership (the foregoing
parties, other than the Company, being referred to herein
collectively as the "Purchasers").
WHEREAS, the Purchasers and the Company wish to amend
the Agreement as set forth herein; and
WHEREAS, Section 11.7 of the Agreement permits
amendment of the Agreement.
NOW, THEREFORE, in consideration of the mutual
covenants and agreements set forth herein, the Purchasers and the
Company hereby agree as follows:
1. Defined Terms. Capitalized terms used but not defined
herein shall have the respective meanings given to them in the
Agreement.
2. Amendment To The Agreement.
--------------------------
2.1. Section 6.1(a) of the Agreement is hereby amended
(A) by adding, after the word "Agreements," in the
first line of paragraph (i), the following:
"incur, create, assume, or permit to exist any
Indebtedness if, as a result thereof or after giving
effect thereto, would cause Indebtedness of the Company
and its Subsidiaries on a consolidated basis";
(B) by deleting from such paragraph (i) all words after
such insertion through and including the phrase "Lease
Obligations and Current Indebtedness, which," on the
ninth line of such paragraph (i); (C) by replacing the
words "exceed $5 million" in the last line of
paragraph (i) with the words "to exceed $10 million";
and (D) by adding the following immediately before the
semicolon at the end of such paragraph (i):
"(the "Cap"), which Cap is subject to increase based on
the following:
(A) If 1997 EBITDA is greater than 1997 Projected
Operating Profit plus Projected 1997
Depreciation/Amortization, and if 1997 Net Sales
is greater than 1997 Projected Net Sales, then the
Cap shall be increased by $2.5 million.
(B) If 1998 EBITDA is greater than 1998 Projected
Operating Profit plus Projected 1998
Depreciation/Amortization, and if 1998 Net Sales
is greater than 1998 Projected Net Sales, then the
Cap shall be increased (not including any increase
pursuant to clause (A)) by $2.5 million."
2.2. Notwithstanding the foregoing, if 1999 EBITDA is
greater than 1999 Projected Operating Profit plus
Projected 1999 Depreciation/Amortization, and if 1999
Net Sales is greater than 1999 Projected Net Sales,
then paragraph (i) of Section 6.1(a) of the Agreement
shall automatically be amended to read in its entirety
as follows:
"[Intentionally omitted];".
2.3. Section 9.6 of the Agreement is hereby amended by
adding to the end thereof the following paragraph:
"(j) Subject to subsection (k) of this Section 9.6, if
and whenever on or after the third anniversary of
the Closing Date, any holder of Notes shall
deliver a Note Holder Conversion Notice, the
Conversion Price applicable to the conversion of
such Notes (or portion of the outstanding
principal amount thereof) which the holder is
electing to convert pursuant to such Note Holder
Conversion Notice (the "Subject Conversion") shall
be adjusted as follows:
(i) If the average Current Market Price of a
share of Common Stock over the ten
consecutive Trading Days immediately prior
to the delivery of such Note Holder
Conversion Notice (the "Average Price") is
greater than $30 multiplied by (1.15)n-3
(for purposes of this paragraph (j), the
variable "n" equals the whole number of
twelve-month periods that have elapsed
from the Closing Date to the date of
delivery of such Note Holder Conversion
Notice), then the Conversion Price
applicable to the Subject Conversion shall
not be adjusted pursuant to this
subsection (j).
(ii) If the Average Price is greater than $25
multiplied by (1.15) n-3 but less than or
equal to $30 multiplied by (1.15) n-3,
then the Conversion Price applicable to
the Subject Conversion shall be adjusted
by multiplying (a) the Conversion Price in
effect immediately prior to the delivery
of such Note Holder Conversion Notice by
(b) 13/15.
(iii) If the Average Price is greater than $20
multiplied by (1.15) n-3 but less than or
equal to $25 multiplied by (1.15) n-3,
then the Conversion Price applicable to
the Subject Conversion shall be adjusted
by multiplying (a) the Conversion Price in
effect immediately prior to the delivery
of such Note Holder Conversion Notice by
(b) 12/15.
(iv) If the Average Price is less than or equal
to $20 multiplied by (1.15) n-3, then the
Conversion Price applicable to the Subject
Conversion shall be adjusted by
multiplying (a) the Conversion Price in
effect immediately prior to the delivery
of such Note Holder Conversion Notice by
(b) 11/15.
(k) Notwithstanding the provisions of subsection (j)
of this Section 9.6, (A) if at any time between
the Closing Date and January 18, 2000 the Current
Market Price of the Common Stock has exceeded $25
for at least 66 consecutive Trading Days, then
after January 18, 2000, the fraction referred to
in clause (b) in paragraph (iii) of subsection (j)
of this Section 9.6 shall be 13/15 instead of
12/15 and the fraction referred to in clause
(b) in paragraph (iv) of subsection (k) of this
Section 9.6 shall be 13/15 instead of 11/15; and
(B) notwithstanding the foregoing, if at any time
between the Closing Date and January 18, 2000 the
Current Market Price of the Common Stock has
exceeded $30 for at least 66 consecutive Trading
Days, then after January 18, 2000, no adjustment
shall be made pursuant to subsection (j) of this
Section 9.6; provided, however, that this
subsection (k) shall not apply if during either of
the 66-day periods referred to above, the Company
or any of its Affiliates purchased any shares of
Common Stock in open market transactions,
privately or otherwise, or less than 17,000 shares
(on average) of Common Stock traded daily
(excluding shares transferred between Affiliates)
as reported by NASDAQ or such other system then in
use; and provided further that this
subsection (k) shall not apply to any conversion
if, at the time of such conversion, an Event of
Default has occurred and is continuing.
(l) If the Company at any time subdivides or combines
(by stock split, stock dividend, stock
distribution or otherwise) one or more classes of
its outstanding shares of Common Stock into a
greater or lesser number of shares, then all
references in this subsection (l) and in
subsections (j) and (k) of this Section 9.6 to
$20, $25, $30 shall be adjusted and such
subsections shall automatically be amended to
instead reference such numbers multiplied by a
fraction, the numerator of which is ten and the
denominator of which is the number of shares a
hypothetical holder of ten shares of Common Stock
would have after such event (the "Adjustment
Fraction"). In addition, all references in this
subsection (l) and in subsection (k) of this
Section 9.6 to 17,000 shall be adjusted and such
subsections shall automatically be amended to
instead reference such number divided by the
Adjustment Fraction."
2.4. Section 10.1 of the Agreement is hereby amended by
deleting the word "and" immediately before clause (x)
in the definition of Indebtedness and by adding the
following clause immediately before the period at the
end of such definition:
", and (xi) all obligations and agreements which are in
form or substance similar to those specified in clauses
(i) through (x) of this paragraph".
2.5. Section 10.1 of the Agreement is hereby amended by
adding thereto the following terms and definitions,
inserted in proper alphabetic order:
"EBITDA" shall mean, with respect to any given
fiscal year, (i) Net Income, plus (ii) the amount
deducted, in determining Net Income, representing
amortization of assets, plus (iii) the amount deducted,
in determining Net Income, of all income taxes (whether
paid or deferred), plus (iv) interest expense, plus (v)
the amount deducted, in determining Net Income,
representing depreciation of assets, minus
(vi) interest income; in each case, for the Company and
its Subsidiaries on a consolidated basis in respect of
such fiscal year, determined in accordance with GAAP,
as set forth in the audited consolidated financial
statements of the Company for such fiscal year included
in the Form 10-K filed by the Company with the SEC in
respect of such fiscal year.
"GAAP" shall mean United States generally accepted
accounting principles.
"Net Income" shall mean, with respect to any given
fiscal year, the aggregate of all amounts (exclusive of
(i) all amounts in respect of any extraordinary gains
or losses, (ii) gains and losses arising from the sale
or other disposition of material assets not in the
ordinary course of business and (iii) earnings and
losses from discontinued operations) which in
accordance with GAAP, are included in the net income of
the Company and its Subsidiaries on a consolidated
basis for such fiscal year.
"Net Sales" shall mean, with respect to any given
fiscal year, (x) the aggregate amount of gross revenue
of the Company and its Subsidiaries on a consolidated
basis (exclusive of (i) all amounts in respect of sales
or other dispositions not in the ordinary course of
business and (ii) all amounts resulting from
discontinued operations) during such year from the
operation of the business of the Company and its
Subsidiaries, less (y) the aggregate amount of all
discounts allowed, all allowances allowed for
merchandise not received by customers or received by
customers in damaged condition, all shipping expenses
passed on to customers and all merchandise returned for
credit; in each case determined in accordance with
GAAP.
"Projected Depreciation/Amortization" shall mean,
with respect to any given fiscal year, the projection
for "depreciation/amortization" for such fiscal year as
set forth on the page entitled "Projected Income
Statements 1997 Budget" in the RECOVERY ENGINEERING,
INC. PRELIMINARY ANALYSIS OF 1996 FINANCIAL RESULTS AND
PRESENTATION OF PRELIMINARY 1997 OPERATING PLAN &
FINANCING REQUIREMENTS, dated January 20, 1997, which
the Company delivered to the Purchasers (the "January
20 Presentation").
"Projected Net Sales" shall mean, with respect to
any given fiscal year, the projection for "net sales"
for such fiscal year as set forth on the page entitled
"Projected Income Statements 1997 Budget" in the
January 20 Presentation.
"Projected Operating Profit" shall mean, with
respect to any given fiscal year, the projection for
"operating profit" for such fiscal year as set forth on
the page entitled "Projected Income Statements 1997
Budget" in the January 20 Presentation.
3. Section 6.3 Consent. Pursuant to Section 11.7 of the
Agreement and notwithstanding Section 6.3 of the Agreement, the
Purchasers, being the holders of all of the Securities, are
hereby consenting to the Company's entering into the Financing
Agreement, dated as of the date hereof, by and between the
Company and First Bank National Association (the "Financing
Agreement"). Notwithstanding the foregoing, the Purchaser is not
waiving any rights it may have pursuant to the Agreement
(including, without limitation, rights with respect to interest,
conversion or redemption) or consenting to any action or inaction
other than the entering into the Financing Agreement.
4. Miscellaneous.
-------------
4.1. Severability. If any term, provision, covenant or
restriction of this Amendment is held by a court of competent
jurisdiction to be invalid, void or unenforceable, the remainder
of the terms, provisions, covenants and restrictions of this
Amendment shall remain in full force and effect and shall in no
way be affected, impaired or invalidated. It is hereby
stipulated and declared to be the intention of the parties that
they would have executed the remaining terms, provisions,
covenants and restrictions without including any of such which
may be hereafter declared invalid, void or unenforceable.
4.2. Specific Enforcement. The Purchasers, on the one hand,
and the Company, on the other, acknowledge and agree that
irreparable damage would occur in the event that any of the
provisions of this Amendment were not performed in accordance
with their specific terms or were otherwise breached. It is
accordingly agreed that the holders of the Securities shall be
entitled to an injunction to prevent breaches of the provisions
of this Amendment and to enforce specifically the terms and
provisions hereof in any court of the United States or any state
thereof having jurisdiction, this being in addition to any other
remedy to which they may be entitled at law or equity.
4.3. Counterparts. This Amendment may be executed in one or
more counterparts, all of which shall be considered one and the
same agreement, and shall become effective when one or more of
the counterparts have been signed by each party and delivered to
the other parties, it being understood that all parties need not
sign the same counterpart.
4.4. Notices And Other Communications. All notices,
consents, requests, instructions, approvals, financial
statements, proxy statements, reports and other communications
provided for herein shall be rapidly given, if in writing and
delivered personally, by telecopy or sent by registered mail,
postage prepaid, if to:
THE COMPANY:
Recovery Engineering, Inc.
2229 Edgewood Avenue South
Minneapolis, Minnesota 55426
Telecopy: (612) 797-8334
Attention: Brian F. Sullivan
With a copy to:
Eric O. Madson, Esq.
Winthrop & Weinstine, P.A.
60 South Sixth Street
Minneapolis, Minnesota 55402
Telecopy: (612) 347-0600
PURCHASERS:
GS Capital Partners II, L.P.
c/o Goldman, Sachs & Co.
85 Broad Street
New York, New York 10004
Telecopy: (212) 902-3000
Attention: Mr. Sanjay Patel
With a copy to:
Gail Weinstein, Esq.
Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, New York 10004
Telecopy: (212) 859-4000
or to such other address as any party may, from time to time,
designate in a written notice given in a like manner.
4.5. Governing Law. This Amendment and the Notes shall be
construed and enforced in accordance with, and the rights of the
parties shall be governed by, the law of the state of New York
excluding choice-of-law principles of the law of such state that
would require the application of the laws of a jurisdiction other
than such state.
4.6. Submission To Jurisdiction. If any action, proceeding
or litigation shall be brought by the Purchaser in order to
enforce any right or remedy under this Amendment, the Company
hereby consents and will submit, and will cause each of its
Subsidiaries to submit, to the jurisdiction of any state or
federal court of competent jurisdiction sitting within the area
comprising the Southern District of New York on the date of this
Amendment. The Company hereby irrevocably waives any objection,
including, but not limited to, any objection to the laying of
venue or based on the grounds of FORUM NON CONVENIENS, which it
may now or hereafter have to the bringing of any such action,
proceeding or litigation in such jurisdiction.
4.7. Service Of Process. Nothing herein shall affect the
right of any holder of a Note to serve process in any other
manner permitted by law or to commence legal proceedings or
otherwise proceed against the Company in any other jurisdiction.
4.8. Waiver Of Jury Trial. The Company hereby waives any
right it may have to a trial by jury in respect of any action,
proceeding or litigation directly or indirectly arising out of,
under or in connection with, this Amendment.
4.9. Preparation Of Financial Statements. The Company
agrees that it will cause the amount of net income and net sales
of the Company and its Subsidiaries, on a consolidated basis,
reflected on the audited income statement included in the Form 10-
K filed by the Company with the SEC in respect of each of the
fiscal years of the Company ending on or about December 31, 1997,
1998 and 1999, to be calculated consistently with the manner that
they were calculated for the audited income statement included in
the Form 10-K filed by the Company with the SEC in respect of the
fiscal year ended on December 31, 1996 and in accordance with GAAP.
After the audited income statement is completed for each such
fiscal year, the Company shall deliver to the holders of the
Notes a certificate of the Chief Financial Officer of the Company
certifying as to the amount of Net Income, Net Sales, EBITDA and
Indebtedness for such year and that such numbers (or, in the case
of EBITDA, its components) were calculated consistently with the
manner in which they were calculated for the audited income
statement included in the Form 10-K filed by the Company with the
SEC in respect of the fiscal year ended December 31, 1996 and in
accordance with GAAP (the "CFO Certificate"). No adjustments to
the Cap based on EBITDA, Net Sales or Indebtedness for a given
fiscal year shall be made until the CFO Certificate in respect of
such year is delivered.
4.10. Signatures. This Amendment shall be effective
upon delivery of original signature pages or facsimile copies
thereof executed by each of the parties hereto.
IN WITNESS WHEREOF, the Company and the Purchasers have
caused this Amendment to be executed and delivered by their
respective officers thereunto duly authorized.
RECOVERY ENGINEERING, INC.
By: \s\ Brian F. Sullivan
--------------------------------
Name: Brian F. Sullivan
Title: President and Chief
Executive Officer
GS CAPITAL PARTNERS II, L.P.
By: GS Advisors, L.P., its general
partner
By: GS Advisors, Inc., its general
partner
By: \s\ Richard A. Friedman
----------------------------------
Name: Richard A. Friedman
Title: President
GS CAPITAL PARTNERS II OFFSHORE, L.P.
By: GS Advisors II (Cayman), L.P.,
its general partner
By: GS Advisors II, Inc., its
general partner
By: \s\ Richard A. Friedman
----------------------------------
Name: Richard A. Friedman
Title: President
GOLDMAN, SACHS & CO. VERWALTUNGS GmbH
By: \s\ C. H. Skondinski
----------------------------------
Name: C. H. Skondinski
Title: Registered Agent
By: \s\ Richard A. Friedman
----------------------------------
Name: Richard A. Friedman
Title: Managing Director
STONE STREET FUND 1996, L.P.
By: Stone Street Empire Corp., its
general partner
By: \s\ Richard A. Friedman
----------------------------------
Name: Richard A. Friedman
Title: Vice President
BRIDGE STREET FUND 1996, L.P.
By: Stone Street Empire Corp., its
managing general partner
By: \s\ Richard A. Friedman
----------------------------------
Name: Richard A. Friedman
Title: Vice President
