<PAGE> 1
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
SYNAGRO TECHNOLOGIES, INC.
(Name of Registrant as Specified In Its Charter)
---------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(I)(4) and 0-11.
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
----------------
2) Form, Schedule or Registration Statement No.:
-----------------
3) Filing Party:
--------------
4) Date Filed:
---------------------
<PAGE> 2
SYNAGRO TECHNOLOGIES, INC.
5850 SAN FELIPE, SUITE 500
HOUSTON, TEXAS 77057
July 6, 1998
Dear Stockholder:
You are cordially invited to attend the annual meeting of stockholders of
Synagro Technologies, Inc. to be held at 5850 San Felipe, Suite 500, Houston,
Texas 77057, at 2:00 p.m. on Monday, August 3, 1998.
Matters to be considered and acted upon by the stockholders include (i) the
election of seven directors and (ii) a proposal to amend the Company's Amended
and Restated 1993 Stock Option Plan (the "Plan") to increase the number of
shares authorized for issuance under the Plan. These matters and the
procedures for voting your shares are discussed in the accompanying Notice of
Annual Meeting and Proxy Statement.
The adoption of the amendment to the Plan requires the affirmative vote of
a majority of the outstanding shares of Common Stock. The failure to vote in
person or by proxy, or to abstain from voting, will have the same effect as a
vote against the amendment. Therefore, the Directors urge each stockholder,
whether or not intending to attend the meeting in person, to execute the
enclosed proxy and return it promptly in the enclosed envelope. Returning a
proxy will not prevent a stockholder from voting in person at the meeting.
Sincerely,
/s/ Daniel L. Shook
Daniel L. Shook
Secretary
<PAGE> 3
SYNAGRO TECHNOLOGIES, INC.
5850 SAN FELIPE, SUITE 500
HOUSTON, TEXAS 77057
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD AUGUST 3, 1998
--------------------
Notice is hereby given that the annual meeting (the "Annual Meeting") of
the stockholders of Synagro Technologies, Inc. (the "Company") will be held at
the Company's offices at 5850 San Felipe, Suite 500, Houston, Texas 77057 on
August 3, 1998, at 2:00 p.m., Houston, Texas time, for the following purposes:
1. To elect a board of seven directors to serve until the next annual
meeting of stockholders or until their successors are elected and
qualified;
2. To consider and act upon the proposed amendment to the Company's
Amended and Restated 1993 Stock Option Plan; and
3. To transact such other business as may properly be presented at
the Annual Meeting.
A record of the stockholders has been taken as of the close of business on
Thursday, July 2, 1998, and only those stockholders of record on that date will
be entitled to notice of and to vote at the Annual Meeting. A list of
stockholders will be available commencing July 20, 1998, and may be inspected
before the Annual Meeting during normal business hours prior to the Annual
Meeting at the offices of the Company, 5850 San Felipe, Suite 500, Houston,
Texas 77057.
Your participation in the Company's affairs is important. To ensure your
representation, if you do not expect to be present at the Annual Meeting in
person, PLEASE SIGN AND DATE THE ENCLOSED PROXY AND RETURN IT PROMPTLY in the
enclosed postage-prepaid envelope which has been provided for your convenience.
By Order of the Board of Directors,
/s/ Daniel L. Shook
Daniel L. Shook
Secretary
Houston, Texas
July 6, 1998
IMPORTANT
WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING, PLEASE COMPLETE,
DATE AND SIGN THE ENCLOSED PROXY CARD AND PROMPTLY MAIL THE PROXY CARD IN THE
ENCLOSED ENVELOPE IN ORDER TO ASSURE REPRESENTATION OF YOUR SHARES AT THE
ANNUAL MEETING. NO POSTAGE NEED BE AFFIXED IF THE PROXY CARD IS MAILED WITHIN
THE UNITED STATES. A STOCKHOLDER MAY, IF SO DESIRED, REVOKE HIS PROXY AND VOTE
HIS SHARES IN PERSON AT THE MEETING.
<PAGE> 4
SYNAGRO TECHNOLOGIES, INC.
5850 SAN FELIPE, SUITE 500
HOUSTON, TEXAS 77057
PROXY STATEMENT
FOR
ANNUAL STOCKHOLDERS MEETING
TO BE HELD AUGUST 3, 1998
This Proxy Statement is being mailed to stockholders commencing on or about
July 6, 1998, in connection with the solicitation by the board of directors of
Synagro Technologies, Inc., a Delaware corporation (the "Company") of proxies
to be voted at the annual meeting (the "Annual Meeting") of stockholders to be
held in Houston, Texas on August 3, 1998, and upon any adjournment thereof, for
the purposes set forth in the accompanying Notice. Proxies will be voted in
accordance with the directions specified thereon and otherwise in accordance
with the judgment of the persons designated as the holders of the proxies.
Proxies marked as abstaining on any matter to be acted on by the stockholders
will be treated as present at the Annual Meeting for purposes of determining a
quorum but will not be counted as votes cast on such matters. Any proxy on
which no direction is specified will be voted for the election of each of the
nominees for director named herein. A stockholder may revoke a proxy by: (i)
delivering to the Company written notice of revocation, (ii) delivering to the
Company a proxy signed on a later date or (iii) voting in person at the Annual
Meeting.
As of July 2, 1998, the record date for the determination of stockholders
entitled to vote at the Annual Meeting, there were outstanding and entitled to
vote 10,895,171 shares of the Company's common stock, par value $.002 per share
(the "Common Stock"). Each share of Common Stock entitles the holder to one
vote on each matter presented to the stockholders.
ELECTION OF DIRECTORS
At the Annual Meeting, seven nominees are to be elected, each director to
hold office until the next annual meeting of stockholders or until his
successor is elected and qualified. The persons named in the accompanying
proxy have been designated by the board of directors and, unless authority is
withheld, they intend to vote for the election of the nominees named below to
the board of directors. Each of the nominees, except Messrs. Patten and Leung
each of whom were elected by the board following an increase in the number of
directors constituting the entire board, and Mr. Tyler, who is hereby
nominated for election by the current board members, have previously been
elected by the stockholders. The board of directors has approved an increase
in the board, effective upon the election of Mr. Tyler to the board by the
stockholders. If any nominee should become unavailable for election, the proxy
may be voted for a substitute nominee selected by the persons named in the
proxy, or the board may be reduced accordingly; however, the board of directors
is not aware of any circumstances likely to render any nominee unavailable.
<PAGE> 5
NOMINEES
Certain information concerning the nominees is set forth below:
<TABLE>
<CAPTION>
Common Stock Beneficially
Owned(1)
July 3, 1998
---------------------------
Director Percent
Name Position Age Since Shares(2) of Class
- ------------------------ ---------------------------------------- ----- -------- ------------ ----------
<S> <C> <C> <C> <C> <C>
Donald L. Thone . . . . Director and Chairman of the Board 51 1993 967,622 8.9%
Ross M. Patten . . . . Director, Chief Executive Officer, and 54 1998 161,667 1.5%
President
Daniel L. Shook . . . . Director, Vice President of Finance, 45 1996 459,807 4.2%
Chief Financial Officer, Secretary and
Treasurer
Irwin I. Gelbart(3)(4). Director 60 1991 51,666 *
J. Mark Myers(3)(4) . . Director 50 1996 33,126 *
Kenneth Ch'uan-k'ai
Leung(4). . . . . . . . Director 54 1998 1,278,167(5) 11.7%
Alfred Tyler 2nd . . . Director Nominee 55 ---- 34,030 *
</TABLE>
- --------------
* Less than 1% of outstanding shares.
(1) Each person has sole voting and investment power with respect to the
shares listed.
(2) Includes shares underlying stock options, as follows: Mr.
Thone--650,622; Mr. Patten--161,667; Mr. Shook--450,807; Mr.
Gelbart--51,666; Mr. Myers--3,333; and Mr. Leung--16,667.
(3) Member, audit committee of the board of directors.
(4) Member, compensation committee of the board of directors.
(5) Includes 137,875 shares and 1,112,125 shares owned by Environmental
Opportunities Fund (Cayman), L.P. and Environmental Opportunities
Fund, L.P., respectively. Mr. Leung is the chief investment officer
of these investment funds.
Donald L. Thone has been chairman of the board of directors since 1993.
From January 1994 to February 1998, Mr. Thone served as Chief Executive
Officer and President of the Company. Mr. Thone was co-owner and president of
Thone Brothers Trucking Inc., a transporter of biosolids and poultry waste
primarily in the State of Arkansas, from 1984 until its acquisition by the
Company and merger into CDR Environmental, Inc. ("CDR") in 1993. In addition,
from 1983 to 1986 he was the owner and manager of River Valley Propane, Inc.
Ross M. Patten was appointed by the board of directors to the position of
President and Chief Executive Officer in February 1998. Prior to joining the
Company, Mr. Patten enjoyed a seventeen year career at Browning-Ferris
Industries, where he last served as divisional vice president -- corporate
development. He also served as executive vice president for development of
Wheelabrator Technologies, a Waste Management, Inc. subsidiary, and director
and vice president -- business development at Resource NE, Inc,
2
<PAGE> 6
prior to its acquisition by Waste Management, Inc. Mr. Patten was a founder,
principal and managing director of Bedford Capital, an investment firm
specializing in environmental companies, and of Bedford Management, which
provides consulting services to publicly held waste management and environment
related companies in the areas of growth and acquisition strategy, formation
and implementation.
Daniel L. Shook has been Chief Financial Officer and Vice
President-Finance of the Company since January 1996 and Secretary and Treasurer
since October 1996. Mr. Shook was vice president-finance and chief financial
officer of U.S. Zinc Corp., a multi-state manufacturer, from December 1994
until January 1996, and vice president-finance, chief financial officer and
treasurer of Gundle Environmental Systems, Inc., a public company that
manufactures and installs liners at sanitary and hazardous landfills, from
September 1986 to December 1994.
Irwin I. Gelbart has been vice president of Fed Met Stainless & Alloys
Corporation, a distributor of flat rolled stainless steel products and a
subsidiary of Federal Industries, a publicly traded company based in
Mississauga, Canada, since November 1994. From April 1991 to November 1994,
Mr. Gelbart was vice president and general manager of the Samuel Stainless
Rolled Products Division of Samuel Whittar, Inc., a distributor and service
center for flat rolled steel products. From 1987 to 1991, he served as general
manager of ELG Haniel Trading Corporation, a distributer of flat rolled steel
products in Inwood, New York. Mr. Gelbart founded and was president of GSI
Trading Corporation (New York) and Stainless International, Inc. (Pennsylvania)
from 1966 to 1987. He also founded, and is presently a director of, Dai Ichi
Metal Co., Ltd., Hong Kong, which distributes flat rolled steel products to the
People's Republic of China.
J. Mark Myers, M.D., F.A.C.S., has been associated with Millard-Henry
Clinic, P.A. in Russellville, Arkansas in the private practice of general
surgery since 1981 and has been president of that clinic since 1995. From 1978
to 1981, Dr. Myers was associated with McPheeter's Clinic in Poplar Bluff,
Missouri in the private practice of general surgery. Dr. Myers was chief of
staff of St. Mary's Hospital in Russellville, Arkansas from 1990 to 1992.
Kenneth Ch'uan-k'ai Leung is a managing director of Investment Banking at
Sanders Morris Mundy and is the chief investment officer of both the
Environmental Opportunities Fund, L.P. and the Environmental Opportunity Fund
II. Additionally, he is the Editor of Environmental Review. Previously, Mr.
Leung was associated with Smith Barney for seventeen years, and before that
with F. Eberstadt & Co Inc., Chemical Bank and Chase Manhattan Bank. Mr. Leung
serves on the boards of Eastern Environmental Services Inc., Zahren Alternative
Power Corp., Capital Environmental Resources Inc. and Azista Resources, Inc.
Alfred Tyler 2nd is a nominee for election to the board of directors. Mr.
Tyler has over twenty years experience in the environmental services industry,
most recently as the President and Chief Executive Officer of Enviro-Gro
Technologies, a provider of sludge management services. In late 1992,
Enviro-Gro was sold to Wheelabrator Technologies and Mr. Tyler resigned his
positions to manage his other investments. From 1989 to the present, Mr. Tyler
has been the president and the sole stockholder of Weston Investments, Inc., a
private investment company. Mr. Tyler is also the president of Days Cove
Reclamation Company, a landfill operation and construction company, a partner
and managing director of Bedford Capital Corporation, a New York consulting
firm, and serves on the board of directors of U S Liquids, Inc.
3
<PAGE> 7
BOARD ACTIVITY, STRUCTURE AND COMPENSATION
The Company's operations are managed under the broad supervision and
direction of the board of directors, which has the ultimate responsibility for
the establishment and implementation of the Company's general operating
philosophy, objectives, goals and policies. During 1997, the board of
directors convened on nine regularly or specially scheduled occasions. The
board has standing audit and compensation committees, whose members are Messrs.
Gelbart and Meyers. Mr. Leung also became a member of the compensation
committee when he joined the board of directors in April 1998. Mr. Tony D.
Childers, who was a director of the Company prior to his resignation in
February 1997, and who was the President of Organi-Gro, Inc. ("Organi-Gro"), a
subsidiary of the Company the assets of which were sold April 1, 1997, was also
a member of the compensation committee until his resignation. For information
regarding the audit committee, see "Auditors". The compensation committee
administers the Company's compensation plans and recommends officers'
compensation for board approval. During 1997, the compensation committee
convened on one occasion. Stockholders who may wish to suggest individuals for
possible future consideration for board positions should direct recommendations
to the board of directors at the Company's principal offices. Each director
attended at least 75% of all meetings of the board during the year.
Each director who is not otherwise compensated by the Company for service
as an officer of the Company is paid for travel expenses, if any. Directors
are not compensated for service on committees of the board. The Company has no
formal plan or arrangement pursuant to which directors receive compensation for
service as such; however, the board in its discretion grants options to
directors, generally upon their initial appointment or election. In 1997, the
board granted 5,000 options to each of Messrs. Myers and Gelbart.
EXECUTIVE OFFICERS
Executive officers of the Company generally serve at the pleasure of the
board of directors and are subject to annual appointment by the board at its
first meeting following the annual meeting of stockholders. All of the
Company's executive officers are listed in the foregoing table with the
exception of the following:
Mark A. Rome, 32, became Vice President--Mergers and Acquisitions and
General Counsel in March, 1998. Mr. Rome was a director at Sanders Morris
Mundy from 1997 until joining the Company. From 1996 to 1997 Mr. Rome was a
financial consultant at Saloman Smith Barney. From 1992 to 1997 Mr. Rome was
an associate at the law firm of Fulbright & Jaworski, where his main practice
areas included corporate federal income tax, securities and corporate
transactional work. Mr. Rome is a certified public accountant and holds a
B.B.A., an M.P.A. and a J.D. from the University of Texas.
James A. Jalovec, 41, became Chief Operating Officer in June 1998 in
connection with the acquisition by the Company of A&J Cartage, Inc., a
Wisconsin corporation, Michigan Organic Resources, Inc., a Michigan corporation
and A&J Cartage, Inc. Southeast, a Florida corporation, three biosolids
management companies of which Mr. Jalovec was a stockholder and executive
officer. Mr. Jalovec has been president of A&J Cartage, Inc. since 1978 and
owner since 1986, as well as president and owner of A&J Cartage, Inc. Southeast
and Michigan Organic Resources, Inc. since 1997 and 1995, respectively. Mr.
Jalovec was also owner and chairman of the board of Swiss Combi Technology, a
biosolids drying technology firm, until its sale in 1996.
4
<PAGE> 8
MANAGEMENT STOCKHOLDINGS
The following table sets forth certain information regarding the
beneficial ownership of the Company's Common Stock at July 2, 1998, by (i) all
directors, (ii) the chief executive officer and other executive officers at
December 31, 1997 ("Named Executives") and (iii) all directors and all
executive officers as a group.
<TABLE>
<CAPTION>
Number of Percent
Name of Person or Identity of Group Shares(1) of Class
---------------------------------------- ------------ ------------
<S> <C> <C>
Donald L. Thone 967,622 8.9%
Ross M. Patten 161,667 1.5%
Daniel L. Shook 459,807 4.2%
Irwin I. Gelbart 51,666 *
J. Mark Myers 33,126 *
Kenneth Ch'uan-K'ai Leung 1,278,167(2) 11.7%
All directors and executive officers 4,729,197(3) 43.4%
as a group (8 persons)
</TABLE>
- ------------------
* Less than 1% of outstanding shares.
(1) Includes shares underlying outstanding stock options, as follows: Mr.
Thone--650,622; Mr. Patten--161,667; Mr. Shook--450,807; Mr.
Gelbart--51,666; Mr. Myers--3,333; and Mr. Leung--16,667.
(2) Includes 137,875 shares and 1,112,125 shares owned by Environmental
Opportunities Fund (Cayman), L.P. and Environmental Opportunities Fund,
L.P., respectively. Mr. Leung is the chief investment officer of these
investment funds.
(3) Includes (without duplication) all shares referred to above.
VOTE REQUIRED FOR ELECTION
The seven nominees for election as directors at the Annual Meeting who
receive the greatest number of votes cast for election by the holders of Common
Stock of record shall be the duly elected directors upon completion of the vote
tabulation at the Annual Meeting, provided a majority of the outstanding shares
as of the record date are present in person or by proxy at the meeting. Votes
will be tabulated by Georgeson & Company, and the results will be certified by
election inspectors who are required to resolve impartially any interpretive
questions as to the conduct of the vote. Under applicable provisions of the
Company's bylaws, any proxy containing an abstention from voting for any
nominee will be sufficient to represent the shares at the meeting for purposes
of determining whether a quorum is present but will count neither as a vote for
nor against any nominee with respect to whom the holder has abstained from
voting. In tabulating votes, a record will be made of the number of shares
voted for each nominee, the number of shares with respect to which authority to
vote for that nominee has been withheld, and the number of shares held of
record by broker-dealers and present at the meeting but not voting.
The board of directors recommends that the stockholders vote FOR the
election of each of the nominees listed above.
5
<PAGE> 9
PROPOSED APPROVAL OF AMENDMENT TO THE AMENDED
AND RESTATED 1993 STOCK OPTION PLAN
The Company's Amended and Restated 1993 Stock Option Plan (the "Plan") was
approved by the stockholders in June 1996. The Plan entitles officers,
directors, employees, independent contractors and consultants of the Company
and its subsidiaries to receive incentive options (in the case of employees
only) and nonqualified options to purchase up to an aggregate of 540,000 shares
of Common Stock. Effective in July 1998, the Board of Directors approved an
amendment to the Plan that would increase the aggregate number of shares of
Common Stock which may be issued or covered by options pursuant to the Plan.
The Board of Directors adopted this amendment as a means to provide those
persons providing significant services to the Company with a continuing
proprietary interest in the Company.
The proposed amendment would increase the number of shares of Common Stock
which may be issued or covered by options pursuant to the Plan to the greater
of (a) 1,100,000 or (b) 10% of the number of shares of Common Stock issued and
outstanding on the last day of each calendar quarter; provided, however, that
any decrease in the number of issued and outstanding shares of Common Stock
from the previous calendar quarter would not result in a decrease in the Common
Stock available for issuance under the Plan. If the proposed amendment is
approved, the aggregate number of shares of Common Stock which may be issued or
covered by options pursuant to the Plan would be 1,100,000, based on 10,895,171
shares of Common Stock outstanding on June 30, 1998.
APPROVAL
The affirmative vote of the holders of a majority of the shares of Common
Stock outstanding and represented at the meeting, in person or by proxy, is
required to approve the proposed amendment to the Plan. The board of directors
recommends a vote FOR the approval of the proposed amendment to the Plan.
OTHER INFORMATION
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the
beneficial ownership of the Company's Common Stock at July 2, 1998, by each
stockholder who is known by the Company to own beneficially more than 5% of the
outstanding Common Stock.
<TABLE>
<CAPTION>
Number of Percent of
Name of Person or Identity of Group Shares Shares(1) Class
------------------------------------------ ---------- ----------
<S> <C> <C>
Donald L. Thone 967,622 8.9%
3811 South Arkansas Avenue
Russellville, Arkansas 72801
James A. Jalovec 1,763,809 16.2%
2841 South 5th Court
Milwaukee, Wisconsin 53207
Kenneth Ch'uan-k'ai Leung 1,278,167(2) 11.7%
126 E. 56th Street
New York, New York 10022
</TABLE>
- ------------------
(1) Includes currently exercisable options.
(2) Includes 137,875 shares and 1,112,125 shares owned by Environmental
Opportunities Fund (Cayman), L.P. and Environmental Opportunities
Fund, L.P., respectively. Mr. Leung is the chief investment officer
of these investment funds.
6
<PAGE> 10
EXECUTIVE COMPENSATION
The following table reflects all forms of compensation for services to
the Company for the periods indicated of each individual who was (i) the chief
executive officer at any time during December 31, 1997 or (ii) a Named
Executive.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
------------------------------ -------------------------
Stock
Restricted Option Awards All other
Name and Principal Position Year Salary Bonus Other Stock (Shares) Compensation
--------------------------- ---- -------- -------- ----- ---------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Donald L. Thone(1) 1997 $150,000 $ 33,125 -- -- 444,326 --
President and Chief 1996 $150,000 $ 55,500 -- -- 246,296 --
Executive Officer 1995 $128,846 -- -- -- -- --
Daniel L. Shook 1997 $125,000 $ 28,437 -- -- 352,474 --
Vice President-Finance, 1996 $115,975 $ 45,000 -- -- 125,000 --
Chief Financial Officer,
Secretary and Treasurer
</TABLE>
(1) Served as President and Chief Executive Officer until February 1998.
OPTION GRANTS
The following table sets forth certain information with respect to
stock options granted to the Named Executives during 1997.
<TABLE>
<CAPTION>
Potential Realizable Value at
Assumed Annual Rates of Stock
Price Appreciation for Option
Individual Grants(2) Term(1)
--------------------------------------- ------------------------------
Percent of Total
Options Granted
Options to Employees in Exercise Expiration
Name Granted Year Price Date 5% 10%
- ------------------------- ------- --------------- -------- ----------- -------- ------------
<S> <C> <C> <C> <C> <C> <C>
Donald L. Thone 120,000 11.8% $2.00 6/16/07 $145,071 $ 373,161
324,326 32.0% $3.38 10/1/07 $689,408 $1,747,095
Daniel L. Shook 80,000 7.9% $2.00 6/16/07 $ 96,714 $ 248,774
272,474 26.9% $3.38 10/1/07 $579,188 $1,467,776
</TABLE>
(1) Potential values stated are the result of using the Securities and
Exchange Commission (the "Commission") method of calculations of 5%
and 10% appreciation in value from the date of grant to the end of the
option term. Such assumed rates of appreciation and potential
realizable values are not necessarily indicative of the appreciation,
if any, which may be realized in future periods.
(2) Unvested options will immediately vest upon a change of control of the
Company, including acquisition by any person or group of persons of at
least 25% of the common stock of the Company, a merger resulting in
the existing stockholders of the Company owning less than 50% of the
outstanding stock of the Company following the merger, termination of
employment without cause and election by the stockholders of a
director not nominated by a majority of the board.
7
<PAGE> 11
OPTION EXERCISES AND YEAR-END VALUES
The following table sets forth information with respect to the
exercised and unexercised options to purchase shares of Common Stock for each
of the Named Executives held by them at December 31, 1997. Of the Named
Executives, none exercised stock options during 1997.
<TABLE>
<CAPTION>
Shares Acquired Value Number of Unexercised Options Value of Unexercised In-the-Money
on Exercise Realized at December 31, 1997 Options at December 31, 1997(1)
--------------- ----------- ------------------------------ ---------------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- --------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Donald L. Thone -- -- 610,622 80,000 $161,042 $45,000
Daniel L. Shook -- -- 382,474 95,000 $ 61,875 $53,438
</TABLE>
- ----------------
(1) Value of in-the-money options calculated based on the closing price
per share of the common stock on December 31, 1997 ($2.5625 per share)
as reported on the Nasdaq Small-Cap Market on December 31, 1997.
EMPLOYMENT AGREEMENTS WITH EXECUTIVE OFFICERS
Messrs. Thone, Shook, Patten and Jalovec are each employed by the
Company under employment agreements effective April 16, 1998 in the case of
Messrs. Thone, Shook and Patten, and June 24, 1998 in the case of Mr. Jalovec,
for a duration of twenty-four consecutive months. The annual salary under their
respective employment agreements is as follows: Mr. Thone--$160,500; Mr.
Shook--$133,750; Mr. Patten--$150,000; and Mr. Jalovec--$100,000.
Additionally, Messrs. Thone, Shook, Patten and Jalovec may be entitled to such
bonuses as may be approved by the board of directors, and participation in any
applicable profit-sharing, stock option or similar benefit plan. Each
employment agreement automatically renews each month for successive twenty-four
month periods, unless terminated by prior written notice. If employment is
terminated without cause, Messrs. Thone, Shook, Patten and Jalovec are each
entitled to a severance payment equal to 200% of the sum of their annual salary
and bonus for the preceding year. Each agreement contains confidentiality and
non-compete provisions.
COMPENSATION COMMITTEE REPORT
The compensation committee of the board of directors (the "Committee")
has furnished the following report on executive compensation for fiscal 1997:
Under the supervision of the Committee, the Company seeks to relate a
significant portion of potential total executive compensation to the
Company's financial performance. In general, executive financial
rewards may be segregated into the following significant components:
base compensation, bonus and stock-based benefits.
Base compensation and bonuses for the executive officers are intended
to be competitive with that paid in comparably situated industries,
with a reasonable degree of financial security and flexibility to
those individuals who were regarded by the Committee as acceptably
discharging the levels and types of responsibility implicit in the
various executive positions. In the course of considering annual
executive salary increases and bonuses, appropriate consideration is
given to the credentials, age and experience of the individual senior
executives, as viewed in the Committee's collective best judgment,
which necessarily involves subjective as well as objective elements.
Using the criteria set forth above, no general pay increase for
executive officers was authorized during fiscal 1997,
8
<PAGE> 12
inasmuch as their base compensation was covered by employment
agreements, and bonuses of $33,125 and $28,437 were paid to Messrs.
Thone and Shook, respectively.
The board of directors is of the view that the periodic grant of stock
options to employees, including executive officers, is calculated to
align the employees' economic interests with those of stockholders and
to provide a direct and continuing focus upon the goal of increasing
stockholder value. The Company granted options covering an aggregate
of 200,000 shares of the Company's Common Stock to executive officers
during fiscal 1997 at 100% of the market price for the Common Stock on
the date of grant, as follows: Mr. Thone--120,000 shares; and Mr.
Shook--80,000 shares. The Compensation Committee presently
anticipates that such grants to executive officers will be considered
annually.
THE COMPENSATION COMMITTEE
J. Mark Myers
Irwin I. Gelbart
Kenneth Ch'uan-k'ai Leung
CERTAIN TRANSACTIONS
As of April 1998, the Company had a aggregate of $1,245,000 of long
term debt that is personally guaranteed by Mr. Thone, who is a director,
Chairman of the Board and five percent or greater stockholder of the Company.
The Company has agreed to use its best efforts to obtain the release of this
personal guarantee.
In October 1997, Mr. Thone and Mr. Shook agreed to cancel their
preexisting employment agreements. The preexisting employment agreements were
for a five year term of employment. In the event of termination due to a
change of control, the employment agreements provided that the Company would
pay Mr. Thone and Mr. Shook's salaries through the unexpired term of
employment. Furthermore, the agreements required the Company to establish a
cash fund to prepare for the possible severance payments. In connection with
the cancellations of those agreements, Mr. Thone and Mr. Shook were awarded
stock options of 324,326 shares and 272,474 shares, respectively, at an
exercise price of $3.38 per share.
In June 1998, the Company acquired (the "Acquisitions") all of the
issued and outstanding stock of three biosolids management companies of which
Mr. Jalovec, who is the current Chief Operating Officer and a five percent or
greater stockholder of the Company, was a stockholder and executive officer.
The consideration received by Mr. Jalovec in connection with the Acquisitions
consisted of 1,630,476 shares of Common Stock and a combination of cash and
promissory notes in the aggregate principal amount of $5,614,698.
In March 1998, the Company completed a private placement of 1,458,335
shares of its Series B Preferred Stock for which Sanders Morris Mundy, an
investment banking firm in which Mr. Leung who is a director of the Company is
a managing director, acted as placement agent. Of the shares of Series B
Preferred Stock issued, 1,250,000 were sold to investment funds managed by
Sanders Morris Mundy of which Mr. Leung is the chief investment officer. In
June 1998, the holders of the shares of the Series B Preferred Stock over which
Mr. Leung has investment control converted those shares into an aggregate of
1,250,00 shares of Common Stock.
9
<PAGE> 13
Notwithstanding any apparent (or actual) conflict of interest that may
have existed with respect to the above financial arrangement, the board of
directors is of the opinion that these arrangements are as favorable to the
Company as any that could have been negotiated at arm's length with similar
situated third parties under the same circumstances.
COMMON STOCK PERFORMANCE GRAPH
The following graph illustrates the yearly change in the trading price
of the Company's Common Stock against the Nasdaq (U.S. Companies) Stock Index
(the "Nasdaq U.S. Index") and a peer group comprised of twenty-six companies in
the industry (the "Peer Group").
TOTAL RETURN TO SHAREHOLDERS
(DIVIDENDS REINVESTED MONTHLY)
INDEXED RETURNS
<TABLE>
<CAPTION>
MEASUREMENT PERIOD SYNAGRO NASDAQ PEER
(FISCAL YEAR COVERED) TECHNOLOGIES COMPOSITE GROUP
<S> <C> <C> <C>
DEC. 92 100 100 100
DEC. 93 308.71 114.80 74.79
DEC. 94 78.82 112.21 72.54
DEC. 95 7.00 158.70 81.00
DEC. 96 8.75 195.19 86.48
DEC. 97 8.97 239.53 95.02
</TABLE>
* The Peer Group consists of Allied Waste Industries, Inc., American
Disposal Services Inc., American Waste Services, Inc., Browning Ferris
Industries, Inc., Casella Waste Systems, Inc., Eastern Environmental
Services, Inc., ECO2 Inc., ERD Waste Corp., Geowaste Inc., Metal
Recovery Technology, Inc., Mobley Environmental Services, Newpark
Resources, Inc., Rich Coast Inc., Superior Services, Inc., TEI, Inc.,
Thermo Tech Technologies, Inc., Transamerican Waste Industries, Inc.,
Transcor Waste Services, Inc., U S Liquids, Inc., USA Waste Services,
Inc., Waste Industries, Inc., Waste Management Inc., Waste Management
International, Waste Recovery, Inc., Waste Systems, Inc. and
Wastemasters Inc.
AUDITORS
Arthur Andersen LLP (the "Auditor") is the independent auditor of the
Company. While management anticipates that this relationship will continue to
be maintained during 1998, no formal action is proposed to be taken at the
annual meeting with respect to the continued employment of the Auditor inasmuch
as no such action is legally required. Representatives of the Auditor plan to
attend the Annual Meeting and will be available to answer appropriate
questions. Its representatives also will have an opportunity to make a
statement at the meeting if they so desire, although it is not expected that
any statement will be made.
10
<PAGE> 14
Singer, Lewak, Greenbaum & Goldstein ("Singer Lewak") was the
independent auditor of the Company for the fiscal year ended December 31, 1995.
In 1996, the board of directors reviewed this relationship and decided not to
reappoint Singer Lewak as its independent auditor. Following a subsequent
solicitation of proposals from, and interviews with, several prospective
auditing firms, the board of directors approved the appointment of Arthur
Andersen LLP as the Company's independent auditor. Management has not advised
Singer Lewak of any disagreements with that firm as to any material matter of
accounting principles or practices, financial statement disclosure or auditing
scope or procedure. Singer Lewak's report on the financial statements for 1994
and 1995 did not contain an adverse opinion or a disclaimer of opinion, and was
not qualified or modified as to uncertainty, audit scope or accounting
principles.
The audit committee, whose members include Messrs. Gelbart and Myers,
assists the board in assuring that the accounting and reporting practices of
the Company are in accordance with all applicable requirements. The committee
reviews with the auditors the scope of proposed audit work and meets with the
auditors to discuss matters pertaining to the audit and any other matters which
the committee of the auditors may wish to discuss. In addition, the audit
committee would recommend the appointment of new auditors to the board of
directors in the event future circumstances were to indicate that such action
is desirable.
LIMITATION ON INCORPORATION BY REFERENCE
Notwithstanding any reference in prior or future filings of the
Company with the Commission which purports to incorporate this proxy statement
by reference into another filing, such incorporation does not include any
material included herein under the captions "Other Information--Common Stock
Performance Graph."
BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's executive officers, directors and persons who own more
than 10% of a registered class of the Company's equity securities, to file
reports of ownership and changes of ownership with the Commission. With
respect to the year ended December 31, 1997, the Company believes that all
filing requirements applicable to the Company's executive officers, directors
and 10% shareholders have been met, other than Messrs. Thone, Shook, Myers and
Gelbart, who each filed reports on Form 5 in July 1998 that were due on or
before February 15, 1998.
OTHER MATTERS
The Annual Report to stockholders covering the year ended December 31,
1997 either has been mailed to each stockholder entitled to vote at the Annual
Meeting or accompanies this proxy statement.
The Company expects to hold its 1998 Annual Meeting on or about June ,
1999. Any stockholder who wishes to submit a proposal for action to be
included in the proxy statement and form of proxy relating to the Company's
1998 annual meeting of stockholders is required to submit such proposal to the
Company on or before February 10, 1999.
The cost of soliciting proxies in the accompanying form will be borne
by the Company. In addition to solicitations by mail, several regular
employees of the Company may, if necessary to assure the presence of a quorum,
solicit proxies in person or by telephone.
11
<PAGE> 15
The persons designated as proxies to vote shares at the meeting intend
to exercise their judgment in voting such shares on other matters that may
properly come before the meeting. Management does not expect that any matters
other than those referred to in this proxy statement will be presented for
action at the meeting.
By Order of the Board of Directors
/s/ Daniel L. Shook
Daniel L. Shook,
Secretary
July 6, 1998
<PAGE> 16
SYNAGRO TECHNOLOGIES, INC.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS FOR THE
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON AUGUST 3, 1998
The undersigned hereby appoints Ross M. Patten and Daniel L. Shook,
and each of them, either one of whom may act without joinder of the other, each
with full power of substitution and ratification, attorneys and proxies of the
undersigned to vote all shares of Synagro Technologies, Inc. which the
undersigned is entitled to vote at the annual meeting of stockholders to be
held at Synagro's offices at 5850 San Felipe, Suite 500, Houston, Texas on
Monday, August 3, 1998 at 2:00 p.m., Houston, Texas time, and at any
adjournment thereof.
(TO BE VOTED AND SIGNED ON REVERSE SIDE)
PLEASE DATE, SIGN AND MAIL YOUR
PROXY CARD BACK AS SOON AS POSSIBLE!
ANNUAL MEETING OF STOCKHOLDERS
SYNAGRO TECHNOLOGIES, INC.
AUGUST 3, 1998
-- Please Detach and Mail in the Envelope Provided --
[x] PLEASE MARK YOUR VOTES AS IN THIS EXAMPLE.
1. ELECTION OF DIRECTORS
<TABLE>
<S> <C> <C>
FOR election WITHHOLD authority to vote Donald L. Thone
(except as indicated below) for all nominees J. Mark Myers
[ ] listed at right Ross M. Patten
[ ] Kenneth Ch'uan-k'ai Leung
Daniel L. Shook
Alfred Tyler 2nd
Irwin I. Gelbart
</TABLE>
INSTRUCTION: To withhold authority to vote for any individual nominee, print
that nominee's name on the line below.
- -------------------------------------------------------
2. Approval of the amendment to the Amended and Restated 1993 Stock Option
Plan to increase the number of shares of Common Stock which may be issued or
covered by options pursuant to the Plan to the greater of (a) 1,100,000 or
(b) 10% of the number of shares of Common Stock issued and outstanding on the
last day of each calendar quarter.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. In their discretion, upon such other matters (including procedural and
other matters relating to the conduct of the meeting) which may properly come
before the meeting and any adjournment thereof.
This Proxy will be voted in accordance with the specifications made hereon. If
no contrary specification is made, then this Proxy will be voted FOR the
election of the seven director nominees named in Item 1 and FOR the proposal
identified in Item 2.
The undersigned hereby acknowledges receipt of the Notice of Annual Meeting of
Stockholders and the Proxy Statement furnished herewith. PLEASE DATE, SIGN AND
RETURN THIS PROXY PROMPTLY in the enclosed, pre-addressed stamped envelope.
Signature(s) of Stockholder Dated this day of , 1998.
------------------ --- ---------
Note: Please sign exactly as your name appears on your stock certificate.
When signing as executor, administrator, trustee or other
representative, please give your full title. All joint owners should
sign.
