FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(D)
OF THE
SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended March 31, 1999 Commission File Number 0-21054
SYNAGRO TECHNOLOGIES, INC.
(Exact name of Registrant as specified in its Charter)
DELAWARE 76-0511324
(State or other jurisdiction of (IRS Employer
incorporation or organization ) Identification No.)
1800 BERING, SUITE 1000
HOUSTON, TEXAS 77057
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code) (713) 369-1700
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant is
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
CLASS OUTSTANDING AT MAY 12, 1999
Common stock, par value $.002 17,321,149
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SYNAGRO TECHNOLOGIES, INC.
INDEX
PART I - FINANCIAL INFORMATION
PAGE
Condensed Consolidated Balance Sheets as of
March 31, 1999 (Unaudited) and December 31, 1998 3
Unaudited Condensed Consolidated Statements of
Operations For the Three Months Ended March
31, 1999 and 1998 4
Unaudited Condensed Consolidated Statements of Cash
Flows For the Three Months Ended March 31, 1999 and
1998 5
Notes to Condensed Consolidated Financial Statements 7
Management's Discussion and Analysis of Results
of Operations and Financial Condition 11
PART II - OTHER INFORMATION 16
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SYNAGRO TECHNOLOGIES, INC.
Condensed Consolidated Balance Sheets
MARCH 31, DECEMBER 31,
1999 1998
------------ ------------
UNAUDITED
ASSETS
Current Assets:
Cash and cash equivalents ............... $ 354,104 $ 414,712
Restricted cash ......................... 680,656 680,656
Accounts receivable, net ................ 5,728,770 6,523,943
Notes receivable, current portion ....... 146,690 436,325
Prepaid expenses and other current
assets ................................. 1,693,299 1,679,381
------------ ------------
Total current assets ............... 8,603,519 9,735,017
Property, machinery & equipment, net ......... 12,457,637 12,394,018
Other Assets:
Goodwill, net ........................... 42,873,144 43,130,904
Notes receivable, long-term portion ..... 262,829 262,829
Other assets ............................ 1,016,271 1,115,713
------------ ------------
Total assets ...................... $ 65,213,400 $ 66,638,481
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued
expenses .............................. $ 3,533,582 $ 4,111,511
------------ ------------
Total current liabilities .......... 3,533,582 4,111,511
Long Term Debt:
Long - term debt ........................ 24,436,034 21,596,506
Notes payable to prior owners ........... 4,152,001 6,733,729
------------ ------------
Total long -term debt ............. 28,588,035 28,330,235
Commitments and Contingencies
Stockholders' Equity:
Preferred Stock, $.002 par value,
10,000,000 shares authorized,
none issued and outstanding ........... -- --
Common stock, $.002 par value,
100,000,000 shares authorized,
14,276,706 and 14,251,706 issued
and outstanding ....................... 28,553 28,503
Additional paid in capital .............. 56,548,323 56,495,873
Accumulated deficit ..................... (23,485,093) (22,327,641)
------------ ------------
Total stockholders' equity ......... 33,091,783 34,196,735
------------ ------------
Total liabilities and
stockholders' equity ............. $ 65,213,400 $ 66,638,481
============ ============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS.
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SYNAGRO TECHNOLOGIES, INC.
Condensed Consolidated Statements of Operations
(Unaudited)
THREE MONTHS ENDED MARCH 31,
------------------------------
1999 1998
------------ ------------
Net sales .................................. $ 9,060,478 $ 5,659,969
Cost of operations ......................... 7,748,604 5,307,991
------------ ------------
Gross profit ............................... 1,311,874 351,978
Selling, general and administrative expenses:
Corporate expenses .................... 826,472 360,886
Subsidiary level expenses ............. 827,799 227,949
Amortization of goodwill ................... 322,651 57,222
Special charges (credits) .................. -- (112,999)
------------ ------------
Total ...................... 1,976,922 533,058
Loss from operations ....................... (665,048) (181,080)
Other income (expense):
Other income .......................... 54,902 173,682
Interest expense ...................... (547,306) (260,623)
------------ ------------
Total ...................... (492,404) (86,941)
Loss before provision for income taxes ..... (1,157,452) (268,021)
------------ ------------
Provision for income taxes ................. -- --
Net loss before redeemable
preferred stock dividends .................. (1,157,452) (268,021)
Redeemable preferred stock dividends ....... -- (3,514,587)
Net loss applicable to common
stock ...................................... $ (1,157,452) $ (3,782,608)
Loss per common share equivalent:
Net loss, basic ....................... $ (0.08) $ (0.44)
Net loss, diluted ..................... $ (0.08) $ (0.44)
Weighted average shares
outstanding, basic ....................... 14,262,854 8,610,306
Weighted average shares
outstanding, diluted ..................... 14,262,854 8,610,306
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
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SYNAGRO TECHNOLOGIES, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
THREE MONTHS ENDED MARCH 31,
-----------------------------------
1999 1998
----------- -----------
Cash flows from operating activities:
Net loss before redeemable
preferred stock dividends ........... $(1,157,452) (268,021)
Adjustments to reconcile net
loss to net cash provided by
(used in) operating activities
Depreciation and amortization ..... 912,439 466,046
(Gain) loss on sale of
equipment ...................... 21,815 (110,326)
Special charges (credits) ......... -- (112,999)
(Increase) decrease in the following:
Accounts receivable ................. 795,173 882,527
Prepaid expenses and other .......... (13,918) (392,098)
Other assets ........................ 54,549 (306,869)
Decrease in accounts payable and
accrued expenses .................... (577,929) (240,946)
----------- -----------
Net cash provided by (used in)
operating activities .................. 34,677 (82,686)
Cash flows from investing activities:
Additions to property, machinery &
equipment ........................... (796,727) (415,766)
Proceeds from sale of equipment ....... 101,507 240,698
Proceeds from notes receivable ........ 289,635 --
----------- -----------
Net cash used in investing activities ... (405,585) (175,068)
Cash flows from financing activities:
Proceeds from debt .................... 4,200,000 613,494
Payments on debt ...................... (3,942,200) (483,314)
Decrease in restricted cash ........... -- 1,999
Sale of redeemable preferred
stock ............................... -- 3,500,004
Exercise of options ................... 52,500 --
----------- -----------
Net cash provided by financing
activities ............................ 310,300 3,632,183
----------- -----------
Net increase (decrease) in cash
and cash equivalents .................. (60,608) 3,374,429
Cash and cash equivalents,
beginning of period ................... 414,712 281,043
----------- -----------
Cash and cash equivalents, end of
period ................................ $ 354,104 $ 3,655,472
=========== ===========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
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SYNAGRO TECHNOLOGIES, INC.
QUARTER ENDED MARCH 31,
SUPPLEMENTAL CASH FLOW INFORMATION -----------------------
- (UNAUDITED) 1999 1998
------------------------------------- -------- --------
Interest paid during the period...... $579,845 $293,857
Taxes paid during the period......... -- --
Non-Cash Investing and Financing Activities
On March 31, 1998, the Company issued 1,458,335 shares of Series B Preferred
Stock with a beneficial conversion feature. The Company recognized the value of
the beneficial conversion feature of $3,514,587 as a preferred dividend. See
Note (3) to the Notes to Condensed Consolidated Financial Statements.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(1) BASIS OF PRESENTATION
General
The accompanying unaudited condensed consolidated financial statements have been
prepared by the Registrant ("Synagro Technologies, Inc." or the "Company")
pursuant to the rules and regulations of the Securities and Exchange Commission.
These condensed consolidated financial statements reflect all normal recurring
adjustments which are, in the opinion of management, necessary for the fair
presentation of such financial statements for the periods indicated. Certain
information relating to the Company's organization and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles has been condensed or omitted in this Form 10-Q
pursuant to Rule 10-01 of Regulation S-X for interim financial statements
required to be filed with the Securities and Exchange Commission. However, the
Company believes that the disclosures herein are adequate to make the
information presented not misleading. The results for the three months ended
March 31, 1999, are not necessarily indicative of future operating results. It
is suggested that these financial statements be read in conjunction with the
financial statements and notes thereto included in the Company's Annual Report
on Form 10-K, as amended, for the year ended December 31, 1998.
The accounting policies followed by the Company in preparing interim
consolidated financial statements are consistent with those described in the
"Notes to Consolidated Financial Statements" in the Company's Form 10-K, as
amended, for the year ended December 31, 1998.
The Company is engaged in the biosolids management business. The Company does
this through beneficial reuse of organic materials, transportation and
monitoring of biosolids, and the marketing of end products from the treatment of
such materials. The Company operates throughout the United States.
Accounting Pronouncements
Effective December 31, 1998, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 131, "Disclosures about segments of an
enterprise and related information." SFAS No. 131 establishes new standards for
segment reporting which are based on the way management organizes segments
within a Company for making operating decisions and assessing performance.
Through March 31, 1999, the Company operated in one segment, namely, the
biosolids management business segment.
In March 1998, the AICPA issued Statement of Position (SOP) 98-1, "Accounting
for the Costs of Computer Software Developed or Obtained for Internal Use." The
SOP provides guidance with respect to accounting for the various types of costs
incurred for computer software developed or obtained for the Company's use. The
Company adopted SOP 98-1 in the first quarter of fiscal 1999 and it had no
effect on the Company's consolidated financial statements.
In April 1998, the AICPA issued SOP 98-5, "Reporting on the Costs of Start-Up
Activities." At adoption, SOP 98-5 requires the Company to write-off any
unamortized start-up costs as a cumulative change in accounting principle and,
going forward, expense all start-up activity costs as they are incurred. The
Company adopted SOP 98-5 in the first quarter of fiscal 1999 and it had no
effect on its consolidated financial statements.
(2) ACQUISITIONS AND DISPOSITIONS
National Resource Recovery, Inc.
During March 1999, Synagro Technologies, Inc. completed the acquisition of all
the common stock of National Resource Recovery, Inc. ("NRR"), in a business
transaction accounted for as a "pooling-of-interests" transaction. NRR,
headquartered in Michigan, provides biosolids management services. Synargo
issued 1,000,001 shares of Common Stock in exchange for all the common stock of
NRR. There were no transactions between Synagro and NRR during the periods prior
to the business combination.
The Company's historical financial statements have been restated to reflect the
NRR pooling the transaction.
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The following table summarized the unaudited restated revenues, net income and
per share data of Synagro after giving effect to the NRR pooling transaction (in
thousands except per share data)
Three Months Ended
March 31, 1998
------------------
Revenues and net income- Revenues Net income
As reported ................. $ 5,622 $(3,407)
NRR ......................... 38 (375)
--------- -------
As restated ................. $ 5,660 $(3,782)
========= =======
Basic earning per share-
As reported ................. $ (0.45)
NRR ......................... 0.01
-------
As restated ................. $ (0.44)
=======
Diluted earning per share-
As reported ................. $ (0.45)
NRR ......................... 0.01
-------
As restated ................. $ (0.44)
=======
Environmental Waste Recycling, Inc.
On November 5, 1998, the Company acquired Environmental Waste Recycling, Inc.
("EWR"), a biosolids management company, for approximately $9,487,000. The
acquisition was financed through the issuance of 865,125 shares of Common Stock
with a market value of approximately $2,812,000, $200,000 in debt and
approximately $6,475,000 in cash and acquisition costs. The Common Stock was
valued in accordance with the provisions of Emerging Issues Task Force ("EITF"),
95-19. The transaction was recorded using the purchase method of accounting. The
accompanying balance sheet as of March 31, 1999, includes a preliminary
allocation of the purchase price and is subject to final adjustments which
management believes will not be material. The preliminary allocation resulted in
approximately $7,091,000 of goodwill that is being amortized over 40 years. The
purchase agreement provides for additional cash and stock consideration in an
aggregate amount not to exceed $2,956,216 in the event certain financial targets
are realized during the twelve-month period after closing. The Company financed
the cash portion of the merger consideration with borrowings under its credit
facility with Bank of America.
Recyc, Inc.
On July 24, 1998, the Company acquired Recyc, Inc. ("Recyc"), a biosolids
composting company, for approximately $15,573,000. The acquisition was financed
through the issuance of 1,475,323 shares of Common Stock with a market trading
value of approximately $8,573,000, $5,646,000 in debt, and $1,354,000 in cash
and acquisition costs. The Common Stock Issued was valued in accordance with the
provisions of EITF 95-19. The transaction was recorded using the purchase method
of accounting. The accompanying balance sheet as of March 31, 1999, includes a
preliminary allocation of the purchase price and is subject to final adjustments
which management believes will not be material. The preliminary allocation
resulted in approximately $14,946,000 of goodwill that is being amortized over
40 years. An unsecured note in the approximate amount of $2,305,000 was issued
to the prior owner with principal due November, 2000. The note bears interest of
7% and is payable quarterly with the first payment made in November, 1998. The
note has no financial covenants. The principal owed under the promissory note
may be offset, and up to 375,000 of the shares issued to the prior owners may be
returned to the Company if certain postclosing conditions are not met. In
connection with the acquisition, the Company entered into a lease agreement with
an option to purchase with the prior owners, as trustees of a family trust of
said stockholders, providing for a lease by Recyc of a composting facility. In
addition, the Company entered into a transportation agreement with an initial
term of two years with Recyc Trucking, Inc., ("RTI"), a company owned by the
prior owners, for the provision of RTI of certain transportation services
relating to Recyc's operations.
A&J Cartage and Related Companies
On June 23, 1998, the Company purchased the stock of A&J Cartage, Inc., a
Wisconsin company, Michigan Organic Resources, Inc.,
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a Michigan company, and A&J Cartage Southeast, Inc., a Florida company
(collectively "A&J") all of which provide biosolids waste management services,
for approximately $19,802,000. The acquisitions were financed through the
issuance of 1,812,533 shares of Common Stock with a market trading value of
approximately $12,398,000, approximately $5,823,000 in debt and $1,581,000 in
cash and acquisition costs. The Common Stock issued was valued in accordance
with the provisions of EITF 95-19. The transactions were recorded using the
purchase method of accounting. The accompanying balance sheet as of March 31,
1999, includes a preliminary allocation of the purchase price and is subject to
final adjustments which management believes will not be material. The
preliminary allocation resulted in approximately $17,372,000 of goodwill that is
being amortized over 40 years. The unsecured notes issued to the prior owner are
payable in quarterly installments with the first installment due January 1,
1999. The notes bear annual interest rate of 7%. The notes have no financial
covenants.
(3) PREFERRED STOCK
The Company is authorized to issue up to 10,000,000 shares of preferred stock.
The stock may be issued in one or more series or classes by the Board of
Directors of the Company prior to issuance of the shares. Each such series or
class shall have such powers, preferences, rights and restrictions as determined
by resolution by the Board of Directors. Series A Junior Participating Preferred
Stock will be issued upon exercise of the Stockholder Rights described below.
Series B Redeemable Preferred Stock
On March 31, 1998, the Company issued 1,458,335 shares of Series B Preferred
Stock for $3,500,004. The Series B Preferred Stock is convertible by the holders
to Common Stock at conversion rate of 1:1, with a beneficial conversion feature
permitting the shareholders to convert their holdings to Common Stock at $2.40.
The market price of the Common Stock at date of issuance was $4.81. The Company
recognized the value of the beneficial conversion feature of approximately $3.5
Million as a preferred stock dividend. The value of such preferred stock
dividend had no impact on the Company's cash flows, but reduced basic and
diluted earnings available to holders of Common Stock.
On June 10, 1998, a cash dividend of $420,000 was paid to the holders of the
Series B Preferred Stock in connection with their conversion of the shares of
Series B Preferred Stock into 1,458,335 shares of Common Stock. All of the
shares of Series B Preferred Stock were converted to Common Stock at that time.
(4) STOCKHOLDERS' RIGHTS PLAN
In December 1996, the Company adopted a stockholders' rights plan (the "Rights
Plan"). The Rights Plan provides for a dividend distribution of one preferred
stock purchase right ("Right") for each outstanding share of the Company's
common stock, to stockholders of record at the close of business on January 10,
1997. The Rights Plan is designed to deter coercive takeover tactics and to
prevent an acquirer from gaining control of the Company without offering a fair
price to all of the Company's stockholders. The Rights will expire on December
31, 2006.
Each Right entitles stockholders to buy one one-thousandth of a newly issued
share of Series A Junior Participating Preferred Stock of the Company at an
exercise price of $10. The Rights are exercisable only if a person or group
acquires beneficial ownership of 15 percent or more of the Company's common
stock or commences a tender or exchange offer which, if consummated, would
result in that person or group owning 15 percent or more of the common stock of
the Company. However, the Rights will not become exercisable if common stock is
acquired pursuant to an offer for all shares which a majority of the board of
directors determines to be fair to and otherwise in the best interests of the
Company and its stockholders. If, following an acquisition of 15 percent or more
of the Company's common stock, the Company is acquired by that person or group
in a merger or other business combination transaction, each Right would then
entitle its holder to purchase common stock of the acquiring company having a
value of twice the exercise price. The effect will be to entitle the Company
stockholder to buy stock in the acquiring company at 50 percent of its market
price.
The Company may redeem the Rights at $.001 per Right at any time on or prior to
the tenth business day following the acquisition of 15 percent or more of its
common stock by a person or group or commencement of a tender offer for such 15
percent ownership.
(5) CREDIT FACILITY
As of March 31, 1999, the Company had current maturities of long-term debt of
approximately $3,387,000. The Company currently has the intent and the ability
to refinance the current maturities with its credit facility and has classified
this debt as long-term
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indebtedness in the consolidated balance sheet as of March 31, 1999. The
Company's total debt was approximately $28,588,000 at March 31, 1999.
The Company has a $ 40 million bank credit facility with Bank of America
National Trust and Savings Association, which has the right to add participants
to the credit facility. The credit facility bears interest at the bank
Eurodollar rate plus a margin based upon a pricing schedule in the credit
facility. The credit facility is secured by substantially all of the Company's
assets. At March 31, 1999, the Company had borrowings under this credit facility
of approximately $22,400,000 and amounts available under the credit facility of
approximately $5,195,000. Amounts under the credit facility are subject to a
borrowing base equal to 4.25 times earnings before interest, taxes, depreciation
and amortization ("EBITDA") based on a trailing proforma twelve month
calculation, as defined in the credit facility, less funded debt as defined
(which includes notes payable to prior owners, which can be refinanced through
the credit facility), until June 30, 1999, 4.00 until September 30, 1999, and
3.75 times thereafter. The credit facility requires the Company to meet certain
loan covenants, and the Company was in compliance with those covenants as of
March 31, 1999. The credit facility expires in October 2001.
(6) COMMITMENTS / CONTINGENCIES
The Company currently and from time to time is subject to claims and lawsuits
arising in the ordinary course of business. In the opinion of management, the
outcome of such proceedings will not have a material adverse effect on the
Company's consolidated financial position or results of operations.
(7) SPECIAL CHARGES - (CREDITS)
Special charges (credits), net were approximately ($113,000) for the quarter
ended March 31, 1998 which were related to notes receivable previously reserved.
There were no such credits in the first quarter of 1999.
(8) EARNINGS (LOSS) PER COMMON SHARE
The FASB issued SFAS No. 128, "Earnings Per Share" in February 1997.
Implementation of SFAS No. 128 is required for periods ending after December 15,
1997. SFAS No. 128 requires dual presentation of earnings per share (EPS); basic
EPS and diluted EPS. Basic EPS excludes dilution and is computed by dividing net
income by the weighted average number of common shares outstanding for the
period. Diluted EPS reflects the potential dilution that could occur if
securities or other contracts to issue common stock were exercised or converted
into common stock. For purposes of the calculation, outstanding stock options,
warrants and redeemable preferred stock are considered common stock equivalents.
The Company's common stock equivalents for the three months ended March 31, 1999
and 1998, totaled approximately 956,358 and 604,888, respectively, and have been
excluded from dulited shares outstanding because their effect is anti -dilutive
for the periods presented. The following table summarizes the basic EPS and
diluted EPS computations for the quarters ended March 31, 1999 and 1998:
QUARTER ENDED MARCH 31,
----------------------------------
1999 1998
-------------- --------------
(UNAUDITED)
Net loss before redeemable
preferred stock dividend ............... $ (1,154,452) $ (268,021)
Redeemable preferred stock dividend ..... -- 3,514,587
-------------- --------------
Net loss applicable to
common stock ........................... $ (1,154,452) $ (3,782,608
============== ==============
Basic loss per share:
Earnings per share prior
to preferred dividend .................. $ (0.08) $ (0.03)
Preferred stock dividend ................ $ -- $ (0.41)
-------------- --------------
Basic loss per common
share .................................. $ (0.08) (0.44)
Weighted average number
of common shares ....................... 14,262,854 8,610,306
Diluted loss per share:
Loss per share prior to
preferred dividend ..................... $ (0.08) $ (0.03)
Preferred stock dividend ................ -- (0.41)
-------------- --------------
Diluted loss per common
share .................................. $ (0.08) $ (0.44)
Weighted average number
of common shares ....................... 14,262,854 8,610,306
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(9) SUBSEQUENT EVENTS
Subsequent to March 31, 1999, the Company acquired four bio-solids management
companies and certain assets and revenue contracts of a fifth. The total
purchase price of the companies was approximately $23,853,000. These
acquisitions were funded through the issuance of approximately 3,045,000 shares
of Common Stock and $13,827,000 in cash. The cash was funded through the
Company's credit facility. The transactions will be recorded using the purchase
method of accounting.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the accompanying
condensed consolidated financial statements and notes thereto, and the Company's
audited consolidated financial statements and notes thereto for the fiscal year
ended December 31, 1998.
(Unaudited)
THREE MONTHS ENDED MARCH 31,
1999 % 1998 %
----------- ----- ----------- -----
Net sales ...................... $ 9,060,478 100.0 $ 5,659,969 100.0
Cost of operations ............. 7,748,604 85.5 5,307,991 93.8
----------- ----- ----------- -----
Gross profit ................... 1,311,874 14.5 351,978 6.2
Selling, general and
administrative expenses:
Corporate expenses ........ 826,472 360,886 6.4
Subsidiary level expenses . 827,799 9.1 227,949 4.0
Amortization of goodwill ....... 322,651 9.1 57,222 1.0
Special charges (credits) ...... -- 3.6 (112,999) (2.0)
----------- ----- ----------- -----
Total .......... 1,976,922 21.8 533,058 9.4
Loss from operations ........... (665,048) (7.3) (181,080) (3.2)
Other income (expense):
Other income .............. 54,902 0.5 173,682 3.1
Interest expense .......... (547,306) (6.0) (260,623) (4.6)
----------- ----- ----------- -----
Total .......... (492,404) (5.5) (86,941) (1.5)
Loss before provision for income
taxes ......................... (1,157,452) (12.8) (268,021) (4.7)
----------- -----------
For the quarter ended March 31, 1999, net sales were approximately $9,060,000
compared to approximately $5,660,000 for the same period in 1998, an increase of
approximately $3,400,000 or 60.1%. The increase related to the acquisition of
the A&J companies (approximately $1,295,000), Recyc, Inc. (approximately
$1,680,000), and EWR, Inc.(approximately $1,148,000), partially offset by
reduced volume in Arkansas (approximately $466,000) due to the planned
non-renewal of certain low margin contracts during the first quarter of 1998.
Costs of operations and gross profit for the quarter ended March 31, 1999, was
approximately $7,749,000 and $1,312,000, respectively, compared to approximately
$5,308,000 and $352,000 respectively, for the year ended 1998, resulting in an
increase in gross profit as a percentage of sales in the first quarter from 6.2%
in 1998 to 14.5% in 1999. The increase in gross profit as a percentage of sales
was due to unusual weather conditions in the Mid-Atlantic Region and
unseasonably heavy rainfall in California in 1998, which caused (a) additional
expenses associated with transportation to land application sites unaffected by
the conditions and (b) increased land disposal costs which were incurred when
land application sites were not available. Landfill disposal costs and
transportation costs associated with these conditions totaled approximately
$280,000. The remainder of the increase is attributed to higher margins
associated with certain acquisitions completed during 1998.
Selling, general and administrative expenses were approximately $1,654,271 for
the quarter ended March 31, 1999 and approximately $588,834 for the quarter
ended March 31, 1998, or an increase of approximately $1,065,437. The increase
related to increased staffing at the corporate level (approximately $466,000) to
implement the Company's acquisitions and growth strategies, and additional
selling, general and administrative costs associated with the businesses
acquired (approximately $480,000).
Amortization of goodwill increased from approximately $57,000 for the three
months ended March 31, 1998 to approximately $323,000 for the same period in
1999, due to acquisitions made during 1998.
Interest expense for the quarter ended March 31, 1999 was approximately $547,000
compared to approximately $261,000 for the same period in 1998. The increase in
interest expense is related to the additional debt incurred to finance the
acquisitions.
Special charges (credits), net were approximately ($113,000) for the quarter
ended March 31, 1998 which were related to notes receivable previously reserved.
There were no such credits in the first quarter of 1999.
Other income for the quarter ended March 31, 1999 was approximately $55,000
compared to $174,000 for the same period in 1998. The decrease relates to a loss
on sale of assets of approximately $22,000 for the quarter ended March 31, 1999
compared to a gain on sale on assets of approximately $110,000 for the same
period in 1998.
As a result of the foregoing, a net loss of approximately $1,157,000 before
preferred stock dividends or $0.08 loss per share was reported for the three
months ended March 31, 1999 compared to net loss of approximately $268,000
before preferred stock dividends or $0.03 loss per share for the same period in
1998.
During the first quarter of 1998, the Company recognized a preferred stock
dividends of approximately $3,515,000, related to redeemable Preferred Stock
issued with a beneficial conversion feature. See Note (3) herein for further
discussion. There was no such dividend during the first quarter of 1999.
As a result of the Company's cumulative operating losses, the Company has not
paid federal income tax since inception. As of December 31, 1998, the Company
had net operating loss carry forwards totaling approximately $11,690,000.
Utilization of the Company's net operating losses may be subject to limitation
under certain circumstances.
LIQUIDITY AND CAPITAL RESOURCES.
The Company has historically financed its operations principally through the
sale of equity, bank credit facility arrangements and through funds provided by
operating activities.
The Company purchased additional capital assets during the three months ended
March 31, 1999 in the amount of approximately $797,000 and sold capital assets
with proceeds totaling approximately $102,000.
As of March 31, 1999, the Company had current maturities of long-term debt of
approximately $3,387,000. The Company currently has the intent and the ability
to refinance the current maturities with its credit facility and has classified
this debt as long-term indebtedness in the consolidated balance sheet as of
March 31, 1999. The Company's total debt was approximately $28,588,000 at March
31, 1999.
The Company has a $40 million bank credit facility with Bank of America National
Trust and Savings Association, which has the right to add participants to the
credit facility. In March 1999, the credit facility was amended to adjust the
financial covenants for the seasonability of recent acquisitions. The credit
facility bears interest at the bank Eurodollar rate plus a margin based upon a
pricing schedule in the credit facility. The credit facility is secured by
substantially all of the Company's assets. At March 31, 1999, the Company had
borrowings under this credit facility of approximately $22,400,000 and amounts
available under the credit facility of approximately $5,195,000. Amounts under
the credit facility are subject to a borrowing base equal to 4.25 times earnings
before interest, taxes, depreciation and amortization ("EBITDA") based on a
trailing proforma twelve month calculation, as defined in the credit facility
less funded debt as defined (which includes notes payable to prior owners, which
can be refinanced through the credit facility), until June 30, 1999, 4.00 until
September 30, 1999, and 3.75 times thereafter. The credit facility requires the
Company to meet certain loan covenants, and the Company was in compliance with
those covenants as of March 31, 1999. The credit facility expires in October
2001 and management anticipates that it will renegotiate and/or refinance this
credit facility prior to that time. As of May 11 1999 the Company has
$2,200,000 available under the credit facility.
At March 31, 1999, the Company had working capital of approximately $5,070,000.
The Company evaluates the collectibility of its receivables based on a specific
account-by-account review. The Company has an allowance of approximately
$197,000 at March 31, 1999. Accounts payable and accrued expenses and accounts
receivable decreased by approximately $578,000 and $795,000 respectively from
December 31, 1998, due primarily to decreased sales related to the seasonality
of operations in the Midwest and Southeast. The Company believes its cash
requirements for the next twelve months can be met with existing cash, cash
flows from operations and its borrowing availability under its credit facility.
YEAR 2000
Impact of year 2000.
The year 2000 issue exists because many computer systems and applications
currently use two-digit fields to designate the year. As the century changes,
computer programs, computers, and embedded microprocessors controlling equipment
with date-sensitive systems may recognize the year as 1900, or not at all. This
inability to recognize or properly handle the year 2000 date may result in
computer system failures or miscalculations of financial and operational
information as well as failures of equipment controlling date-sensitive
microprocessors. Most of our customers are municipalities with wastewater
treatment plants. It is likely that most of these plants have
computer-controlled processes, some of which may slow down or even halt the
delivery of biosolids. We will address all of these potential problem areas in
the sections below.
State of readiness.
We began a plan to address the year 2000 issue in 1997. The plan consists of
three phases: awareness, assessment, and renovation. In the awareness phase, we
established a year 2000 committee with membership from executive, operations,
legal, financial and information technology departments. This committee provides
the leadership for developing a plan, assessing the impact of the year 2000
issues, and giving directives to each of the functional areas for
implementations of a plan.
To date our primary focus has been on the assessment of our own internal
systems. We have inventoried all of the Company's computer hardware. Most of
this hardware was purchased after August of 1998 from a national manufacturer,
was NTSL tested prior to shipment, and is in full compliance. The remaining
hardware will either be replaced or have BIOS upgrades by the end of the third
quarter 1999.
The Company is using Microsoft Office for our desktop suite so no year 2000
impact is expected. All significant accounting and financial reporting functions
are performed at corporate office using third party software from a national
vendor that is year 2000 compliant. Our current locations are running
proprietary software that has been written to collect data pertaining to the
pickup, hauling, application and composting of biosolids. There are potential
issues concerning year 2000 that could arise if these systems are not year 2000
compliant. We are currently implementing a new Manifest and compliance system
that is year 2000 compliant. The implementation of this new system is expected
to be completed by the fall of 1999. Additionally, there is the possibility that
some of the spreading equipment that we use in our land application process has
embedded microprocessors. We are currently reviewing all of this equipment to
ensure its year 2000 compliance. If the equipment cannot be made compliant,
there are alternative land application methods available that are compliant.
We have recently begun to assess the potential for year 2000 problems with
information systems of our customers, vendors, sub-contractors and other third
parties. Additionally, we are preparing questionnaires, which we intend to mail
in spring of 1999. We expect to engage in discussions with those parties who
have failed to show proof of compliance prior to the summer of 1999 in an
attempt to determine the extent to which we are vulnerable to those parties' in
non-compliance. We are currently unable to estimate the costs that we may incur
to remedy the year 2000 issues relating to these parties.
Costs to address the year 2000 issue
Our costs to date for the year 2000 program have not been material. Although we
have not completed our assessment, we do not currently believe that the future
costs associated with our year 2000 compliance program will be material.
Risk to the Company.
The risk to the Company involves the failure of our customers, vendors,
sub-contractors and third parties to reach compliance. The customers may suffer
failures that cause those customers to delay placing orders for biosolids
removal from their wastewater treatment plants. Date functionality is typically
not used in process control application software. More common is the use of the
relative time. We are still however, dependant on our customers having an
effective year 2000 compliance program in place. In the case of our vendors and
sub-contractors, we will take special care in reviewing the compliance of all of
the equipment and services needed to perform day-to-day operational functions.
This includes spreading equipment, transportation equipment, necessary power,
telecommunications, and financial services.
Furthermore, as a result of the Company's ongoing acquisition program, our
assessment of the year 2000 issues may change. As we acquire companies we
attempt to assess year 2000 issues relating to their computer systems and
operating processes. Our current integration plan also attempts to have them
integrated into our business systems within a short period of time. We feel that
this minimizes our exposure to their failure to meet year 2000 compliance.
If any of the above uncertainties were to occur, our business, financial
conditions, and result of operations would be adversely affected. As such, there
can be no assurance that the systems of vendors, customers, newly acquired
companies, sub-contractors, and other third party relationships on which we may
rely will be made year 2000 compliant in a timely manner or that any such
failure to be year 2000 compliant by another company would not have an adverse
affect on our business or consolidated results of operations, financial position
or liquidity. We are currently unable to assess the likelihood of such events
occurring or the extent of the effect on the Company.
Contingency plan.
We are in the process of developing a comprehensive contingency plan to address
the avoidable and unavoidable year 2000 risks with internal information
technology systems and with customers, vendors, newly acquired companies,
sub-contractors, and other third parties. We expect to have this plan completed
by the summer of 1999.
SEASONALITY
The Company's business historically has not been seasonal, but has been subject
to certain unusual weather conditions and unseasonably heavy rainfall which can
temporarily reduce the availability of land application sites in close proximity
to the Company's business.
During 1998 and 1999, the Company acquired certain companies, whose operations
are subject to significant seasonal variations. During the winter months the
ground is frozen and land application cannot be preformed. Generally, the
product is stored by the customer during the winter months with transportation
and land application services preformed as the ground thaws. The company now
expects its revenues and operational results to be generally lower in the first
calendar quarter.
ITEM 3. QUANTITATIVE AND QUALITIVE DISCLOSURES ABOUT MARKET RISK.
The Company utilizes financial instruments which inherently have some degree of
market risk due to interest rate fluctuations. Management is actively involved
in monitoring exposure to market risk and continues to develop and utilize
appropriate risk management techniques. The Company is not exposed to any other
significant market risks, including commodity price risks, foreign currency
exchange risk or interest rate risks from the use of derivative financial
instruments for trading or to speculate in changes in interest rates or on
commodity prices.
INTEREST RISK RATE
Total debt at March 31, 1999, included approximately 22,740,000 in floating rate
debt attributed to the bank credit facility borrowings and a note to another
financial institution at an average interest rate of 7.51%. As a result the
Company's annual interest rate cost in 1999 will fluctuate based on short-term
interest rates. The impact on annual cash flow of a ten-percent change in the
floating rate (approximately 50 basis points) would be approximately $113,700.
At March 31, 1999, the Company's fixed rate debt had a book value and fair
market value of $5,848,035. The floating rate debt will mature in October.
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PART II - OTHER INFORMATION
ITEM 1.
The Company is currently involved in certain routine litigation. Management
believes that all such litigation arose in the ordinary course of business and
that costs of settlements or judgments arising from such suits will not have a
material adverse effect on the Company's consolidated financial position or
results of operations.
ITEM 5. OTHER INFORMATION
Subsequent to March 31, 1999, the Company acquired four bio-solids management
companies and certain assets and revenue contracts of a fifth. The total
purchase price of the companies was approximately $23,853,000. These
acquisitions were funded through the issuance of approximately 3,045,000 shares
of Common Stock and $13,827,000 in cash. The cash was funded through the
Company's credit facility. The transactions will be recorded using the purchase
method of accounting.
ITEM 6. FINANCIAL STATEMENTS, EXHIBITS AND REPORTS ON FORM 8-K.
a. EXHIBIT INDEX
EXHIBIT DESCRIPTION OF EXHIBIT
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3.1 Restated Certificate of Incorporation of Synagro
Technologies, Inc. (the "Company") dated August 16, 1996
(Exhibit 3.1 to the Company's Post-Effective Amendment
No. 1 to Registration Statement No. 33-95028, dated
October 25, 1996, is incorporated herein by reference).
3.2 Bylaws of the Company dated August 5, 1996. (Exhibit 3.2
to the Company's Post-Effective Amendment No. 1 to
Registration Statement No. 33-95028, dated October 25,
1996, is Incorporated herein by reference).
4.1 Specimen Common Stock Certificate of the Company.
(Exhibit 4.1 to the Company's Registration Statement on
Form 10, dated December 29, 1992, is incorporated herein
by reference).
4.2 Specimen Warrant Certificate of the Company. (Exhibit
4.2 to the Company's Registration Statement on Form S-1
(No. 33-95028), dated July 27, 1995, and as amended, is
Incorporated herein by reference).
4.3 Rights Agreement, dated as of December 20, 1996, between
the Company and Intercontinental Registrar & Transfer
Agency, Inc., as Rights Agent, which includes as Exhibit
A thereto the Synagro Technologies, Inc. Statement of
Designations, Preferences, Limitations and Relative
Rights of its Series A Junior Participating Preferred
Stock, and as Exhibit C Thereto the Form of Rights
Certificate (Incorporated by Reference to Exhibit No.
4.1 to Registrant's Registration Statement on Form 8-A
dated December 27, 1996).
4.4 Certificate of Designation, Preferences, Rights and
Limitations of Series B Preferred Stock of Synagro
Technologies, Inc. (Exhibit 4.4 to the Company's Amended
and Restated Annual Report on Form 10-K, as amended, for
the year Ended December 31, 1997, is incorporated herein
by reference)
4.5 Registration Rights Agreement, dated as of March 31,
1998, Among the Company, Environmental Opportunities
Fund, L.P., Environmental Fund (Cayman), L.P. and other
purchasers of the Company's Series B Preferred Stock as
listed on Exhibit A Thereto. (Exhibit 4.5 to the
Company's Amended and Restated Annual Report on Form
10-K, as amended, for the year ended December 31, 1997,
is incorporated herein by reference)
4.6 Specimen Series B Preferred Stock Certificate. (Exhibit
4.6 to the Company's Amended and Restated Annual Report
on Form 10-K, as amended, for the year ended December
31, 1997, is Incorporated herein by reference)
10.1 Synagro Technologies, Inc. Subscription Agreement, dated
as of March 31, 1998 among the Company, Environmental
Opportunities Fund, L.P., Environment Opportunities Fund
(Cayman), L.P. and other purchasers of the Company's
Series B Preferred Stock as listed on Exhibit A thereto.
(Exhibit 10.1 to the Company's Amended and Restated
Annual Report on Form 10-K, as amended, for the year
ended December 31, 1997, is Incorporated herein by
reference)
10.2 Form of Indemnification Agreement. (Appendix F to the
Company's Proxy Statement on Schedule 14A for Annual
Meeting of Stockholders, dated May 9, 1996, is
incorporated herein by Reference).
10.3 Amended and Restated 1993 Stock Option Plan dated August
5, 1996. (Exhibit 4.1 to the Company's Registration
Statement on Form S-8 (No. 333-18029), dated December
17, 1996, is Incorporated herein by reference).
10.4 6% Promissory Note made by Custom Poultry to Organi-Gro
and the Company in the principal amount of $1,152,381,
dated April 1, 1997 (Exhibit 10.8 to the Company's
Annual Report on Form 10-K for the year ended December
31, 1996, is Incorporated herein by reference).
10.5 Guaranty of Tony D. Childers ("Childers") for 6%
Promissory Note made by Custom Poultry to Organi-Gro,
dated April 1, 1997 (Exhibit 10.9 to the Company's
Annual Report on Form 10-K for the year ended December
31, 1996, is incorporated herein by reference).
*10.6 Employment Agreement between the Company and Ross M.
Patten, dated February 19, 1999.
*10.6.1 Employment agreement between the Company and Alvin L.
Thomas II, dated February 19, 1999
*10.6.2 Employment agreement between the Company and Mark A.
Rome, dated February 19, 1999
*10.6.3 Employment agreement between the Company and Paul C.
Sellew, dated February 19, 1999
10.7 Credit agreement entered into among Synagro
Technologies, Inc., Various financial institutions, and
Bank of America National Trust And Savings Association,
dated as of October 7, 1998; First Amendment to credit
agreement dated as of November 2, 1998; Second Amendment
to Credit Agreement dated as of November 13, 1998;
Assignment Agreement dated as of December 4, 1998.
(Exhibit 10.7 to the Company's Annual Report on Form
10-K as amended, for the year ended December 31, 1998,
is incorporated herein by reference.)
*10.7.1 Third Amendment to credit agreement entered into among
Synagro Technologies Inc., various financial
institutions, and Bank of America national Trust and
Savings Association, dated as of March 30, 1999.
21.1 Subsidiaries of Synagro Technologies, Inc. (Exhibit 21.1
to the Company's Annual Report on Form 10-K, as amended,
for the year ended December 31, 1998, is incorporated
herein by reference)
*27.1 Financial Data Schedule.
- ---------------------
*Filed herewith
b. REPORTS ON FORM 8-K.
1. Form 8-K, filed on March 12, 1999, describing an Agreement and Plan of
Merger with National Resource Recycling, Inc. No financial statements were
required to be filed.
2. Form 8-K/A, filed on March 12, 1999, amending Items 7(a) and (b) from
the Form 8-K filed on December 16, 1998.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SYNAGRO TECHNOLOGIES, INC.
Date: May 14, 1999 By: Ross M. Patten /s/ ROSS M. PATTEN
Chief Executive Officer
Date: May 14, 1999 By: Paul Withrow /s/ PAUL WITHROW
Chief Financial Officer
EXHIBIT 10.6
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT, made and entered into as of the ____ day of
February, 1999 (the "EFFECTIVE DATE"), by and between Synagro Technologies,
Inc., a Delaware corporation (hereafter "COMPANY") and Ross M. Patten (hereafter
"EXECUTIVE"), an individual;
W I T N E S S E T H:
WHEREAS, Company wishes to secure the services of the Executive subject
to the terms and conditions hereafter set forth; and
WHEREAS, the Executive is willing to enter into this Agreement upon the
terms and conditions hereafter set forth,
NOW, THEREFORE, in consideration of the mutual promises and agreements set
forth herein, the parties hereto agree as follows:
1. EMPLOYMENT. During the Employment Period (as defined in SECTION 4
hereof), the Company shall employ Executive, and Executive shall serve, as Chief
Executive Officer of the Company. Executive's principal place of employment
shall be at the Company's principal corporate offices in Houston, Texas during
the Employment Period.
2. COMPENSATION. The Company shall pay or cause to be paid to Executive
during the Employment Period an annual base salary for his services under this
Agreement of not less than $150,000, payable in equal monthly or semi-monthly
installments in accordance with the Company's normal payroll procedures.
Executive's base salary shall be subject to annual review and may be increased,
depending upon the performance of the Company and Executive, upon the
recommendation of the Board of Directors of the Company (hereafter "BOARD OF
DIRECTORS"). Executive shall be entitled to participate in the bonus "pool" or
other structure established for the Company's top level of management. Nothing
contained herein shall preclude the payment of a bonus, supplemental or
incentive compensation to Executive provided that the Board of Directors
authorizes any such compensation payment. As additional compensation to
Executive for the services previously rendered by him, the services to be
rendered by him pursuant to, and Executive's other duties and obligations
arising under this Agreement, including, without limitation, his obligations
under Sections 12 and 14 hereof, the Company has granted to Executive options to
purchase 485,000 shares of common stock of the Company, par value $.002 per
share, between the Company and Executive.
<PAGE>
3. DUTIES AND RESPONSIBILITIES OF EXECUTIVE. During the Employment Period,
Executive shall devote his services full time to the business of the Company and
perform the duties and responsibilities assigned to him by the Board of
Directors to the best of his ability and with reasonable diligence. In
determining Executive's duties and responsibilities, the Board of Directors
shall act in good faith and shall not assign duties and responsibilities to
Executive that are not appropriate or customary with respect to the position of
Executive hereunder. This SECTION 3 shall not be construed as preventing
Executive from engaging in reasonable volunteer services for charitable,
educational or civic organizations, or from investing his assets in such form or
manner as will not require a material amount of his services in the operations
of the companies or businesses in which such investments are made.
4. TERM OF EMPLOYMENT. Executive's term of employment with the Company
under this Agreement shall be for 24 consecutive months beginning on the
Effective Date and continuing thereafter so that the remaining term of
employment hereunder is always 24 months, unless Notice of Termination pursuant
to SECTION 7 is given by either the Company or Executive to the other party. The
Company and Executive shall each have the right to give Notice of Termination at
will, with or without cause, at any time, subject to the terms of this Agreement
regarding rights and duties of the parties upon termination of employment. This
"evergreen" 24-month employment period hereunder shall be referred to herein as
the "TERM OF EMPLOYMENT." The period from the Effective Date through the date of
Executive's termination of employment for whatever reason shall be referred to
herein as the "EMPLOYMENT PERIOD."
5. BENEFITS. Subject to the terms and conditions of this Agreement, during
the Employment Period, Executive shall be entitled to the following:
(a) REIMBURSEMENT OF EXPENSES. The Company shall pay or reimburse
Executive for all reasonable travel, entertainment and other reasonable
expenses paid or incurred by Executive in performing his business
obligations hereunder. The Company shall also provide Executive with
suitable office space and secretarial help. Executive shall provide
substantiating documentation for expense reimbursement requests as
reasonably required by the Company for its tax and other business records.
(b) EXPENSE ALLOWANCES. Executive shall be entitled to: (i) a car
allowance of $500 per month, and (ii) family medical and dental insurance
coverage paid for 100% by Company and which allows Executive to choose
among all options for medical and dental insurance provided to other
Company employees in the same area.
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(c) OTHER BENEFITS. Executive shall be entitled to participate in
any pension, profit-sharing, stock option, deferred compensation, or
similar plan or program of the Company established by the Company, to the
extent that he is eligible under the provisions thereof. Executive shall
also be entitled to participate in any group insurance, hospitalization,
medical, health and accident, disability or similar plan or program
established by the Company, to the extent that he is eligible under the
provisions thereof.
(d) PAID VACATION. Executive shall initially be entitled to three
(3) weeks of paid vacation during each 12-month period of employment with
the Company (which shall accrue monthly on a PRO RATA basis). Executive
shall thereafter be entitled to the number of days of paid vacation each
year that is accorded under the Company's vacation policy as in effect
from time to time or three (3) weeks, whichever is greater. Unused
vacation days up to a maximum of two (2) weeks in one year shall be
carried forward for a period not to exceed 12 months in accordance with
Company's vacation policy as in effect from time to time.
6. RIGHTS AND PAYMENTS UPON TERMINATION. The Executive's right to
compensation and benefits for periods after the date on which his employment
with the Company terminates for whatever reason (the "TERMINATION DATE") shall
be determined in accordance with this SECTION 6,
(a) MINIMUM PAYMENTS. Executive shall be entitled to the following
payments, in addition to any payments or benefits to which the Executive
is entitled under the terms of any employee benefit plan or the following
provisions of this SECTION 6:
(1) his unpaid salary for the full month in which his
Termination Date occurred; provided, however, if Executive is
terminated for Cause pursuant to SECTION 6(B) below, he shall only
be entitled to receive his accrued but unpaid salary through his
Termination Date; and
(2) his accrued but unpaid vacation pay for the period ending
on his Termination Date in accordance with the Company's vacation
pay policy as in effect at such time.
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(b) SEVERANCE PAYMENT. Notwithstanding any other provision of this
Agreement to the contrary, in the event that (i) Executive's employment
hereunder is terminated by the Company at any time for any reason EXCEPT
(A) for Cause (as defined below) or (B) Executive's death or Disability
(as defined below) or (ii) Executive terminates his own employment
hereunder at any time for Good Reason (as defined below), then, in either
such event, Executive shall be entitled to receive, and the Company shall
be obligated to pay, a lump sum cash payment equal to two hundred percent
(200%) of the sum of X and Y. For purposes of the immediately preceding
sentence, X is the present value of Executive's base annual salary
pursuant to SECTION 2 or the annual salary then being paid to him,
whichever is greater, and Y is the Executive's bonus payment(s) made by
the Company to Executive in the Company's fiscal year immediately
preceding the fiscal year in which his termination of employment occurred.
For purposes of the immediately preceding sentence, the "present value" of
such base annual salary shall be determined in accordance with the
regulations under Section 280G of the Code (as defined below). Also,
except as otherwise specifically provided in this SECTION 6(B), such
severance payment shall be in addition to, and shall not reduce or offset,
any other payments that are due to Executive from the Company or any other
source or under any other agreements, except any severance pay plan or
program maintained by the Company that covers employees generally. The
provisions of this SECTION 6(B) shall supersede any conflicting provisions
of this Agreement but shall not be construed to curtail, offset or limit
Executive's rights to any other payments, whether contingent upon a Change
in Control (as defined below) or otherwise, under the Agreement or any
other agreement, contract, plan or other source of payment except as
specifically provided herein. In addition, in the event of a Change in
Control, Executive shall be entitled to receive the bonus payment
described in SECTION 9 hereof, if applicable.
Notwithstanding any provision of this SECTION 6(B) to the contrary,
the Executive must first execute an appropriate release and waiver
agreement whereby Executive agrees to release and waive, in return for the
severance payment described in this SECTION 6(B), any claims that he may
have against the Company for (1) unlawful discrimination (including,
without limitation, age discrimination) and (2) severance pay under any
other severance pay plan or program maintained by the Company that covers
Executive; provided, however, such agreement shall not release or waive
any claims that may be brought by Executive for payments that may be due
under this Agreement, without Executive's express written consent. Any
severance payment required under this SECTION 6(B) shall be paid to
Executive within twenty (20) days after Executive executes such release
and waiver agreement, unless the parties agree in writing before then to
another payment date or method of payment, e.g., installment payments.
Executive shall not be required to mitigate any damages under this SECTION
6(B) or any other provision of this Agreement.
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A "CHANGE IN CONTROL" of the Company shall be deemed to have
occurred if any of the following shall have taken place: (1) a change in
control is reported by the Company in response to either Item 6(e) of
Schedule 14A of Regulation 14A promulgated under the Securities Exchange
Act of 1934 (the "EXCHANGE ACT") or Item 1 of Form 8-K promulgated under
the Exchange Act, or any successor provisions thereto; (2) any "person"
(as such term is used in Sections 13(d) and 14(d)(2) of the Exchange Act)
is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), or any successor provisions thereto, directly or
indirectly, of securities of the Company representing twenty-five (25%) or
more of the combined voting power of the Company's then-outstanding
securities; (3) the approval by the stockholders of the Company of a
reorganization, merger, or consolidation, in each case with respect to
which persons who were stockholders of the Company immediately prior to
such reorganization, merger, or consolidation do not, immediately
thereafter, own or control more than fifty percent (50%) of the combined
voting power entitled to vote generally in the election of directors of
the reorganized, merged or consolidated Company's then outstanding
securities, or a liquidation or dissolution of the Company or of the sale
of all or substantially all of the Company's assets; (4) in the event any
person shall be elected by the stockholders of the Company to the Board of
Directors who shall have not been nominated for election by a majority of
the Board of Directors or any duly appointed committee thereof; or (5)
following the election or removal of directors, a majority of the Board of
Directors consists of individuals who were not members of the Board of
Directors two (2) years before such election or removal, unless the
election of each director who is not a director at the beginning of such
two-year period has been approved in advance by directors representing at
least a majority of the directors then in office who were directors at the
beginning of the two-year period.
"DISABILITY" means a "permanent and total disability" as defined in
Section 22(e)(3) of the Code and the Treasury regulations thereunder.
Evidence of such Disability shall be certified by a physician acceptable
to both the Company and Executive. In the event that the parties are not
able to agree on the choice of a physician, each shall select a physician
who, in turn, shall select a third physician to render such certification.
All costs relating to the determination of whether Executive has incurred
a Disability shall be paid by the Company.
"CODE" means the Internal Revenue Code of 1986, as amended.
References in this Agreement to any Section of the Code shall include any
"Successor Provisions" as defined in SECTION 9(E).
"CAUSE" means a termination of employment directly resulting from:
(1) the Executive having engaged in intentional misconduct that caused or
would have caused, if the Company did not intervene, a serious violation
by the Company of any state or federal laws, (2) the Executive having
engaged in a theft of corporate funds or corporate assets or in a material
act of fraud upon the Company, (3) an intentional act of personal
dishonesty taken by the Executive that was intended to result in personal
enrichment of the Executive at the expense of the Company, (4) repeated
violations by the Executive of Executive's primary or regular obligations
under this Agreement or under written policies of the Company which are
demonstrably willful on the Executive's part, and for which Executive has
received more than two written warnings that specify each area of
Executive's violations, (5) Executive's use of illegal drugs as evidenced
by a drug test authorized by Company, (6) Executive's final conviction (or
the entry of a plea of nolo contendere or equivalent plea) in a court of
competent jurisdiction of a felony or other crime involving dishonesty,
and (7) a breach by the Executive during the Employment Period of the
provisions of SECTIONS 11, 12, 13 OR 14 below, if such breach results in a
material injury to the Company.
"GOOD REASON" means the occurrence of any of the following events
without Executive's express written consent:
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(1) A ten percent (10%) or greater reduction in Executive's
annual base salary; or
(2) Any breach by the Company or its successors of any
material provision of this Agreement; or
(3) A substantial and adverse change in the Executive's
duties, control, authority, status or position, or the assignment to
the Executive of any duties or responsibilities which are materially
inconsistent with such status or position, or a material reduction
in the duties and responsibilities previously exercised by the
Executive, or a loss of title, loss of office, loss of significant
authority, power or control, or any removal of Executive from, or
any failure to reappoint or reelect him to, such positions, except
in connection with the termination of his employment for Cause,
Disability or death; or
(4) Following a Change in Control (as defined in SECTION 6(B))
any of the following events:
(A) the failure by the Company or its successor to
expressly assume and agree to continue and perform this
Agreement in the same manner and to the same extent that the
Company would be required to perform if such Change in Control
had not occurred;
(B) a relocation of more than twenty-five (25) miles of
Executive's principal office from the location of such office
immediately prior to the Change in Control date;
(C) a substantial increase in the business travel
required of Executive by the Company or its successor; or
(D) the Company or its successor fails to continue in
effect any pension plan, health-and-accident plan, or
disability income plan in which Executive was participating at
the time of the Change in Control (or plans providing
Executive with substantially equal and similar benefits), or
the taking of any action by the Company or its successor which
would adversely affect Executive's participation in or
materially reduce his benefits under any such plan that was
enjoyed by him immediately prior to the Change in Control.
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(c) STOCK OPTIONS. In the event of a Change in Control, Executive's
resignation for Good Reason or Executive's termination without Cause, all
unvested stock options previously granted to Executive shall immediately
vest and be exercisable as set forth below. In the event that there is a
termination of Executive's employment hereunder for any reason, Executive
shall be entitled to exercise any and all stock options that were
previously granted to him by the Company, and are outstanding, vested and
unexercised as of his Termination Date, during the exercise period ending
on the shorter of (i) two (2) years from his Termination Date or (ii) the
expiration date of the stock option as specified in the stock option plan
or stock option agreement, as applicable, notwithstanding any provision in
such plan or agreement that provides for a more limited time period to
exercise stock options following termination of employment; provided
however, if said stock option plan or stock option agreement provides
therein for a longer period of time to exercise such outstanding, vested
and unexercised stock options following his Termination Date, then such
stock option plan or agreement shall control and the remaining provisions
of this SECTION 6(C) shall be inapplicable and without further force or
effect. In the event that there is a termination of Executive's employment
hereunder for Cause or Executive voluntarily resigns without Good Reason
within two years for the date of this Agreement, Executive shall forfeit
any and all stock options that were previously granted to him by the
Company, and are unvested and unexercised as of his Termination Date.
During the extension period specified in the previous paragraph, if
applicable, the Executive shall be considered an employee of the Company
who shall make himself available to provide consulting services to the
Company in consideration for such extension of the option exercise period
and any post-termination payments provided to Executive under SECTION 6(A)
OR (B) of this Agreement. In this regard, Executive agrees to be
classified as an employee of the Company solely for the limited purpose of
making himself available to provide consulting services on an as-needed
basis; provided, however, Executive hereby specifically waives any right,
entitlement, claim or demand to (i) any additional compensation for such
consulting services and (ii) coverage or benefits under any of the
Company's employee benefit plans or programs, or other perquisites, terms
and conditions of employment, except as expressly specified in other
provisions of this Agreement. Except as expressly provided in this SECTION
6(C), the provision of consulting services by Executive shall not expand
his rights or duties under this Agreement. Executive hereby agrees to
provide, upon request of the Company, consulting services to the Company
on the following terms and conditions:
(1) Executive will make himself available, on an as-needed basis,
to provide consulting services to the Company for up to three
(3) days per month during the period beginning on the day
after his Termination Date and ending on the last day of the
extension period for exercising stock options as provided in
the first paragraph of SECTION 6(C) above, subject to the
following conditions:
(A) At least five (5) days written advance notice to
Executive is provided by the Company;
(B) There is no concurrent illness of Executive or his
spouse;
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(C) There is no prior commitment of Executive including,
without limitation, vacation or attention to personal
affairs; and
(D) No travel is required of Executive in excess of 200
miles round-trip.
Executive, in any particular instance, may waive any or all of
the conditions set forth in clauses (A), (B), (C) or (D) above
in his complete discretion. Any such waiver shall not be a
continuing waiver and shall not release Executive of any of
his rights hereunder.
(2) Executive agrees to provide such information, services, advice
and recollection of events as may from time to time be
reasonably requested by, or on behalf of, the Company
regarding corporate, regulatory or business matters of which
Executive may have knowledge, information or understanding,
including testifying truthfully in any litigation or other
proceedings involving the Employer, provided that (i)
Executive first determines that his interests are not adverse,
or potentially adverse, to those of the Company, and (ii) the
Company has indemnified Executive to his satisfaction
including, without limitation, for reasonable attorney's fees
and costs. The parties hereto agree that it is the quality,
and not the quantity, of the consulting services to be
provided by Executive that is important to the Company.
(3) The Company will reimburse Executive for all reasonable
out-of-pocket expenses incurred by Executive in the course of
his performance of consulting services, including, without
limitation, supplies, mileage and travel expenses. Executive
agrees not to incur any expense, obligation, or liability on
behalf of the Company without its prior written consent.
(4) The provision of consulting services by Executive for the
Company is non-exclusive and shall not, in any way, limit the
rights of Executive to seek and maintain other employment or
to perform compensatory services on behalf of any other person
or entity.
(5) The consulting services contemplated under this SECTION 6(c)
shall not be considered part of Executive's Employment Period
pursuant to SECTION 4, nor affect his Termination Date.
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7. NOTICE OF TERMINATION. Any termination by the Company or the Executive
shall be communicated by Notice of Termination to the other party hereto. For
purposes of this Agreement, the term "NOTICE OF TERMINATION" means a written
notice which indicates the specific termination provision of this Agreement
relied upon and sets forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Executive's employment under
the provision so indicated.
8. NO MITIGATION REQUIRED. Executive shall not be required to mitigate the
amount of any payment provided for under this Agreement by seeking other
employment or in any other manner.
9. CHANGE IN CONTROL: REQUIREMENT OF BONUS PAYMENT IN CERTAIN
CIRCUMSTANCES.
(a) In the event that Executive is deemed to have received an
"excess parachute payment" (as such term is defined in Section 280G(b) of
the Code) which is subject to the excise taxes (the "EXCISE TAXES")
imposed by Section 4999 of the Code in respect of any payment pursuant to
this Agreement, or any other agreement, plan, instrument or obligation, in
whatever form, the Company shall make the Bonus Payment (defined below) to
Executive promptly after the date on which Executive received or is deemed
to have received any excess parachute payment notwithstanding any contrary
provision herein.
(b) The term "BONUS PAYMENT" means a cash payment in an amount equal
to the sum of (i) all Excise Taxes payable by Executive, plus (ii) all
additional Excise Taxes and federal or state income taxes to the extent
such taxes are imposed in respect of the Bonus Payment, such that
Executive shall be in the same after-tax position and shall have received
the same benefits that he would have received if the Excise Taxes had not
been imposed. For purposes of calculating any income taxes attributable to
the Bonus Payment, Executive shall be deemed for all purposes to be paying
income taxes at the highest marginal federal income tax rate, taking into
account any applicable surtaxes and other generally applicable taxes which
have the effect of increasing the marginal federal income tax rate and, if
applicable, at the highest marginal state income tax rate, to which the
Bonus Payment and Executive are subject. An example of the calculation of
the Bonus Payment is set forth below: Assume that the Excise Tax rate is
20%, the highest federal marginal income tax rate is 40% and Executive is
not subject to state income taxes. Further assume that Executive has
received an excess parachute payment in the amount of $200,000, on which
$40,000 in Excise Taxes are payable. The amount of the required Bonus
Payment is thus $100,000. The Bonus Payment of $100,000, less additional
Excise Taxes on the Bonus Payment of $20,000 (i.e., 20% x $100,000) and
income taxes of $40,000 (i.e., 40% x $100,000), yields $40,000, the amount
of the Excise Taxes payable in respect of the original excess parachute
payment.
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(c) Executive agrees to reasonably cooperate with the Company to
minimize the amount of the excess parachute payments, including, without
limitation, assisting the Company in establishing that some or all of the
payments received by Executive that are "contingent on a change", as
described in Section 280G(b)(2)(A)(i) of the Code, are reasonable
compensation for personal services actually rendered by Executive before
the date of such change or to be rendered by Executive on or after the
date of such change. In the event that the Company is able to establish
that the amount of the excess parachute payments is less than originally
anticipated by Executive, Executive shall refund to the Company any excess
Bonus Payment to the extent not required to pay Excise Taxes or income
taxes (including those incurred in respect of receipt of the Bonus
Payment). Notwithstanding the foregoing, Executive shall not be required
to take any action which his attorney or tax advisor advises him in
writing (i) is improper or (ii) exposes Executive to material personal
liability. Executive may require the Company to deliver to Executive an
indemnification agreement in form and substance satisfactory to Executive
as a condition to taking any action required by this subsection (c).
(d) The Company shall make any payment required to be made under
this SECTION 9 in cash and on demand. Any payment required to be paid by
the Company under this SECTION 9 which is not paid within 30 days of
receipt by the Company of Executive's written demand therefor shall
thereafter be deemed delinquent, and the Company shall pay to Executive
immediately upon demand interest at the highest nonusurious rate per annum
allowed by applicable law from the date such payment becomes delinquent to
the date of payment of such delinquent sum with interest.
(e) In the event that there is any change to the Code which results
in the recodification of Section 280G or Section 4999 of the Code, or in
the event that either such section of the Code is amended, replaced or
supplemented by other provisions of the Code of similar import ("SUCCESSOR
PROVISIONS"), then this Agreement shall be applied and enforced with
respect to such new Code provisions in a manner consistent with the intent
of the parties as expressed herein, which is to assure that Employee is in
the same after-tax position and has received the same benefits that he
would have been in and received if any taxes imposed by Section 4999 or
any Successor Provisions had not been imposed.
10. POST-TERMINATION MEDICAL COVERAGE. If the employment of Executive is
terminated for any reason except for Cause (as defined in SECTION 6(B)), death
or voluntary resignation without Good Reason, then the Company shall provide
post-employment medical coverage in accordance with the terms and conditions of
this SECTION 10. The Company shall continue to cover Executive and his spouse
(hereinafter referred to as "SPOUSE") and his eligible dependent children, if
any, from the Termination Date until two (2) years following the Termination
Date, under the group health care plan maintained by the Company to provide
major medical insurance coverage for employees and their dependents (such group
medical plan or its successor shall be hereinafter referred to as the "HEALTH
CARE PLAN").
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Executive, on behalf of himself and his Spouse and other dependents, if
any, shall be required to pay premiums for their coverage under the Health Care
Plan at the rates, if any, charged by the Company to active employees who are
senior officers of the Company at the time the premium is charged. Any
post-employment coverage under the Health Care Plan provided under this SECTION
10 shall run concurrently with COBRA continuation coverage under the Health Care
Plan and, therefore, Executive and the other qualifying beneficiaries shall
elect any COBRA continuation coverage offered to them under the Health Care Plan
following the Termination Date. The Company shall not be responsible for the
payment of any income or other taxes which may be imposed on Executive, or on
his Spouse or dependents, as the result of receiving coverage under the Health
Care Plan pursuant to this SECTION 10.
Executive, on behalf of himself and his Spouse and dependents, hereby
agrees and consents to acquire and maintain any coverage that of any them are
entitled to at any time during the two year period (as specified above in this
SECTION 10) under the Medicare program or any similar or succeeding plan or
program that is sponsored or maintained by the United States Government or any
agency thereof (hereinafter referred to as "MEDICARE"). The coverage described
in the immediately preceding sentence includes, without limitation, parts A and
B of Medicare and any additional or successor parts of Medicare. Executive, on
behalf of himself and his Spouse, further agrees and consents to pay all
required premiums and other costs for Medicare coverage from their personal
funds. Medicare coverage shall be primary payor to the coverage provided under
the Health Care Plan to the extent permitted by applicable federal law.
11. CONFLICTS OF INTEREST. In keeping with his fiduciary duties to
Company, Executive hereby agrees that he shall not become involved in a conflict
of interest, or upon discovery thereof, allow such a conflict to continue at any
time during the Employment Period. Moreover, Executive agrees that he shall
immediately disclose to the Board of Directors any facts that might involve a
conflict of interest that has not been approved by the Board of Directors.
Executive and Company recognize and acknowledge that it is not possible to
provide an exhaustive list of actions or interests that may constitute a
"conflict of interest." Moreover, Company and Executive recognize there are many
borderline situations. In some instances, full disclosure of facts by the
Executive to the Board of Directors may be all that is necessary to enable
Company to protect its interests. In others, if no improper motivation appears
to exist and Company's interests have not demonstrably suffered, prompt
elimination of the outside interest may suffice. In other egregious instances,
it may be necessary for Company to terminate Executive's employment for Cause
pursuant to SECTION 6(B) hereof. The Board of Directors reserves the right to
take such action as, in its good faith judgment, will resolve the conflict of
interest.
Executive hereby agrees that any direct or indirect interest in,
connection with, or benefit from any outside activities, particularly commercial
activities, which interest might adversely affect the Company or any of its
affiliated entities, involves a possible conflict of interest. Circumstances in
which a conflict of interest on the part of Executive would or might arise, and
which should be reported immediately to the Board of Directors, include, but are
not limited to, any of the following:
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(a) Ownership of more than a DE MINIMIS interest in any lender,
supplier, contractor, customer or other entity with which Company or any
of its affiliated entities does business;
(b) Misuse of information, property or facilities to which Executive
has access in a manner which is demonstrably injurious to the interests of
Company or any of its affiliated entities, including its business,
reputation or goodwill; or
(c) Materially trading in products or services connected with
products or services designed or marketed by or for the Company or any of
its affiliated entities.
For purposes of this Agreement, "AFFILIATED ENTITY" means any entity which
owns or controls, is owned or controlled by, or is under common ownership or
control with, the Company.
12. CONFIDENTIAL INFORMATION.
(a) CONFIDENTIAL INFORMATION DEFINED. Executive hereby acknowledges
that in his senior management position, he will create, acquire and have
access to confidential information and trade secrets pertaining to the
business of Company (hereafter "Confidential Information" as defined
below). Executive hereby acknowledges that such Confidential Information
is unique and valuable to Company's business and that Company would suffer
irreparable injury if Confidential Information was divulged to the public
or to persons or entities in competition with Company. Therefore,
Executive hereby covenants and agrees to keep in strict secrecy and
confidence, both during and after the Employment Period, any Confidential
Information. Executive specifically agrees that he will not at any time
disclose to others, use, copy or permit to be copied, except in pursuance
of his duties on behalf of Company or with the prior consent of Company,
Confidential Information relating to the Company or any of its affiliated
entities. For purposes of this Agreement, "CONFIDENTIAL INFORMATION" shall
mean and include, without limitation, information related to the business
affairs, property, methods of operation, future plans, financial
information, customer or client information, or other data which relates
to the business or operations of Company or any of its affiliated
entities, and all other information obtained by Executive from and during
the Employment Period which concerns the affairs of Company or any of its
affiliated entities and which Company has requested be held in confidence
or could reasonably be expected to desire be held in confidence, or the
disclosure of which would likely be embarrassing, detrimental or
disadvantageous to the Company or any of its affiliated entities, or its
and their directors, officers, employees or shareholders. Confidential
Information, however, shall not include information that is at the time of
receipt by Executive in the public domain or is otherwise generally known
in the industry or subsequently enters the public domain or becomes
generally known in the industry through no fault of Executive or breach of
his duty under this SECTION 12.
(b) REQUIRED DISCLOSURE. In the event that Executive is required by
law which cannot be waived to disclose any Confidential Information,
Executive agrees that he will provide prompt notice of such potential
disclosure to Company so that an appropriate protective order may be
sought and/or a waiver of compliance with the provisions of this Agreement
may be granted. In the event that (i) such protection or other remedy is
not obtained or (ii) Company waives in writing the compliance by Executive
with this provision, Executive agrees that he may furnish only that
portion of the Confidential Information which Executive is advised by
written opinion of counsel is legally required to be disclosed, and
Executive shall exercise his best efforts to obtain assurances that
confidential treatment will be accorded such Confidential Information.
(c) DELIVERY OF DOCUMENTS. Executive further agrees to deliver to
Company at the termination of his employment, all correspondence,
memoranda, notes, records, drawings, plans, customer lists or other
documents, and all copies thereof made, composed or received by Executive,
solely or jointly with others, and which are in Executive's possession,
custody or control at such date and which relate in any manner to the
past, present or anticipated business of Company or any of its affiliated
entities.
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(d) REMEDIES. In the event of a breach or threatened breach of any
of the provisions of this SECTION 12, Company shall be entitled to an
injunction ordering the return of all such documents, and any and all
copies thereof, and restraining Executive from using or disclosing, for
his benefit or the benefit of others, in whole or in part, any
Confidential Information, including, but not limited to, the Confidential
Information which such documents contain, constitute or embody. Executive
further agrees that any breach or threatened breach of any of the
provisions of this SECTION 12 would cause irreparable injury to Company,
for which it would have no adequate remedy at law. Nothing herein shall be
construed as prohibiting Company from pursuing any other remedies
available to it for any such breach or threatened breach, including the
recovery of damages.
13. PROPERTY RIGHTS. In keeping with his fiduciary duties to Company,
Executive hereby covenants and agrees that during his Employment Period, and for
a period of one (1) year following his Termination Date, Executive shall
promptly disclose in writing to Company any and all information, ideas,
concepts, improvements, discoveries, inventions and other intellectual
properties, whether patentable or not, and whether or not reduced to practice,
which are conceived, developed, made or acquired by Executive, either
individually or jointly with others, and which relate to the business, products
or services of Company or any of its affiliated entities. In consideration for
his employment hereunder, Executive hereby specifically sells, assigns and
transfers to Company all of his worldwide right, title and interest in and to
all such information, ideas, concepts, improvements, discoveries, inventions and
other intellectual properties.
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If during the Employment Period, Executive creates any original work of
authorship or other property fixed in any tangible medium of expression which
(a) is the subject matter of copyright (including computer programs) and (b)
relates to Company's present or planned business, products, or services, whether
such property is created solely by Executive or jointly with others, such
property shall be deemed a work for hire, with the copyright automatically
vesting in Company. To the extent that any such writing or other property is
determined not to be a work for hire for whatever reason, Executive hereby
consents and agrees to the unconditional waiver of "moral rights" in such
writing or other property, and to assign to Company all of his right, title and
interest, including copyright, in such writing or other property.
Executive hereby agrees to (a) assist Company or its nominee at all times
in the protection of any and all property subject to this SECTION 13, (b) not to
disclose any such property to others without the written consent of Company or
its nominee, except as required by his employment hereunder, and (c) at the
request of Company, to execute such assignments, certificates or other interests
as Company or its nominee may from time to time deem desirable to evidence,
establish, maintain, perfect, protect or enforce its rights, title or interests
in or to any such property.
14. AGREEMENT NOT TO COMPETE. Executive hereby recognizes and acknowledges
that: (a) in his executive capacity with Company he will be given knowledge of,
and access to, the Confidential Information (as described in SECTION 12); (b) in
the event that Executive was to enter into competition with Company, Executive's
knowledge of such Confidential Information would be of invaluable benefit to a
competitor of Company, and could cause irreparable harm to Company's business
interests; and (c) Executive's consent and agreement to enter into the
noncompetition provisions and covenants set forth herein is an integral
condition of this Agreement, without which Company would not have agreed to
provide Confidential Information to Executive, nor to his compensation,
benefits, and other terms of this Agreement. Accordingly, in consideration for
his employment, compensation, benefits, access to and entrustment of
Confidential Information, the goodwill, training and experience provided to
Executive during his Employment Period, Executive hereby covenants, consents and
agrees (regardless of whether or not there has been a Change of Control) that
during the Employment Period, and for a period two (2) years after his
employment is terminated for any reason, Executive shall not, directly or
indirectly, acting alone or in conjunction with others, for his own account or
for the account of others, including, without limitation, as an officer,
director, stockholder, owner, partner, member, manager, joint venturer,
employee, promoter, consultant, agent, lender, guarantor, representative, or
otherwise:
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(a) Solicit, canvass, or accept any fees or business from any
customer of Company for himself or any other person or entity engaged in a
"Similar Business to Company" (as defined below);
(b) Engage or participate in any Similar Business to Company within
any states of the United States in which the Company transacts business on
Executive's termination of employment date, or in which, as of such
termination date, the Company has made any plans or proposals to transact
business within one year from such termination date (referred to herein as
the "RESTRICTED AREA");
(c) Request or advise any service provider, supplier, or customer to
reduce or cancel any business that it may transact with Company or any of
its affiliated entities;
(d) Solicit, induce, or otherwise attempt to influence any employee
of the Company or any of its affiliated entities, to terminate his or her
relationship with the Company or any of its affiliated entities; or
(e) Make any statement or perform any act intended to advance an
interest of an existing or prospective competitor of the Company or any of
its affiliated entities in any way that demonstrably injures the
reputation, goodwill or any other business interest of Company or any of
its affiliated entities.
For purposes of this Agreement, "SIMILAR BUSINESS TO COMPANY" means any
business or other enterprise that is competitive with the current or planned
businesses, products, services or operations of the Company or any of its
affiliated entities at the time of termination of Executive's employment
including, without limitation, municipal biosolids.
Executive hereby agrees that the limitations set forth above on his rights
to compete with Company after his termination of employment are reasonable and
necessary for the protection of Company. In this regard, Executive specifically
agrees that such limitations as to the period of time, geographic area and types
and scopes of restriction on his activities, as specified above, are reasonable
and necessary to protect the goodwill and other business interests of Company.
However, should the time period, the geographic area or any other
non-competition provision set forth herein be deemed invalid or unenforceable in
any respect, then Executive acknowledges and agrees that, as set forth in
SECTION 15 hereof, reformation may be made with respect to such time period,
geographic area or other non-competition provision in order to protect Company's
reasonable business interests to the maximum permissible extent.
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15. REMEDIES. In the event of any pending, threatened or actual breach of
any of the covenants or provisions of SECTION 11, 12, 13 OR 14, it is understood
and agreed by Executive that the remedy at law for a breach of any of the
covenants or provisions of these Sections may be inadequate, and, therefore,
Company shall be entitled to a restraining order or injunctive relief from any
court of competent jurisdiction, in addition to any other remedies at law and in
equity. In the event that Company seeks to obtain a restraining order or
injunctive relief, Executive hereby agrees that Company shall not be required to
post any bond in connection therewith. Should a court of competent jurisdiction
or an arbitrator (pursuant to SECTION 24) declare any provision of SECTION 11,
12, 13 OR 14 to be unenforceable due to an unreasonable restriction of duration
or geographical area, or for any other reason, such court or arbitrator is
hereby granted the consent of each of Executive and the Company to reform such
provision and/or to grant the Company any relief, at law or in equity,
reasonably necessary to protect the reasonable business interests of Company or
any of its affiliated entities. Executive hereby acknowledges and agrees that
all of the covenants and other provisions of SECTIONS 11, 12, 13 AND 14 are
reasonable and necessary for the protection of the Company's reasonable business
interests. Executive hereby agrees that if the Company prevails in any action,
suit or proceeding with respect to any matter arising out of or in connection
with SECTION 11, 12, 13 OR 14, Company shall be entitled to all equitable and
legal remedies, including, but not limited to, injunctive relief and
compensatory damages.
16. DEFENSE OF CLAIMS. Executive agrees that, during the Employment Period
and for a period of two (2) years after his Termination Date, upon reasonable
request from the Company, he will cooperate with the Company and its affiliated
entities in the defense of any claims or actions that may be made by or against
the Company or any of its affiliated entities that affect his prior areas of
responsibility, except if Executive's reasonable interests are adverse to the
Company (or affiliated entity) in such claim or action. To the extent travel is
required to comply with the requirements of this SECTION 16, the Company shall,
to the extent possible, provide Executive with notice at least 10 days prior to
the date on which such travel would be required. The Company agrees to promptly
pay or reimburse Executive upon demand for all of his reasonable travel and
other direct expenses incurred, or to be reasonably incurred, to comply with his
obligations under this SECTION 16.
17. DETERMINATIONS BY THE BOARD OF DIRECTORS.
(a) TERMINATION OF EMPLOYMENT. Prior to a Change in Control (as
defined in SECTION 6(B)), any question as to whether and when there has
been a termination of Executive's employment, and the cause of such
termination, shall be determined by the Board of Directors in its
discretion.
(b) COMPENSATION. Prior to a Change in Control (as defined in
SECTION 6(B)), any question regarding salary, bonus and other compensation
payable to Executive pursuant to this Agreement shall be determined by the
Board of Directors in its discretion.
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18 WITHHOLDINGS: RIGHT OF OFFSET. Company may withhold and deduct from any
benefits and payments made or to be made pursuant to this Agreement (a) all
federal, state, local and other taxes as may be required pursuant to any law or
governmental regulation or ruling, (b) all other normal employee deductions made
with respect to Company's employees generally, and (c) any advances made to
Executive and owed to Company.
19 NONALIENATION. The right to receive payments under this Agreement shall
not be subject in any manner to anticipation, alienation, sale, transfer,
assignment, pledge or encumbrance by Executive, his dependents or beneficiaries,
or to any other person who is or may become entitled to receive such payments
hereunder. The right to receive payments hereunder shall not be subject to or
liable for the debts, contracts, liabilities, engagements or torts of any person
who is or may become entitled to receive such payments, nor may the same be
subject to attachment or seizure by any creditor of such person under any
circumstances, and any such attempted attachment or seizure shall be void and of
no force and effect.
20 INCOMPETENT OR MINOR PAYEES. Should the Board of Directors determine
that any person to whom any payment is payable under this Agreement has been
determined to be legally incompetent or is a minor, any payment due hereunder
may, notwithstanding any other provision of this Agreement to the contrary, be
made in any one or more of the following ways: (a) directly to such minor or
person; (b) to the legal guardian or other duly appointed personal
representative of the person or estate of such minor or person; or (c) to such
adult or adults as have, in the good faith knowledge of the Board of Directors,
assumed custody and support of such minor or person; and any payment so made
shall constitute full and complete discharge of any liability under this
Agreement in respect to the amount paid.
21 SEVERABILITY. It is the desire of the parties hereto that this
Agreement be enforced to the maximum extent permitted by law, and should any
provision contained herein be held unenforceable by a court of competent
jurisdiction or arbitrator (pursuant to SECTION 24), the parties hereby agree
and consent that such provision shall be reformed to create a valid and
enforceable provision to the maximum extent permitted by law; provided, however,
if such provision cannot be reformed, it shall be deemed ineffective and deleted
here from without affecting any other provision of this Agreement.
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22 TITLE AND HEADINGS; CONSTRUCTION. Titles and headings to Sections
hereof are for the purpose of reference only and shall in no way limit, define
or otherwise affect the provisions hereof. Any and all Exhibits referred to in
this Agreement are, by such reference, incorporated herein and made a part
hereof for all purposes. The words "herein", "hereof", "hereunder" and other
compounds of the word "here" shall refer to the entire Agreement and not to any
particular provision hereof.
23 CHOICE OF LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, WITHOUT REGARD TO THE PRINCIPLES
OF CONFLICTS OF LAW.
24 ARBITRATION.
(a) ARBITRABLE MATTERS. If any dispute or controversy arises between
Executive and the Company as to their respective rights or obligations
under this Agreement, then either party may submit the dispute or
controversy to arbitration under the then-current National Employment
Dispute Resolution Rules of the American Arbitration Association (AAA)
(the "RULES"); provided, however, the Company shall retain its rights to
seek a restraining order or injunctive relief pursuant to SECTION 15. Any
arbitration hereunder shall be conducted before a single arbitrator unless
the parties mutually agree to a panel of three arbitrators. The site for
any arbitration hereunder shall be in Montgomery County or Harris County,
Texas, unless otherwise mutually agreed by the parties.
(b) SUBMISSION TO ARBITRATION. The party submitting any matter to
arbitration shall do so in accordance with the Rules. Notice to the other
party shall state the question or questions to be submitted for decision
or award by arbitration. Notwithstanding any provision in this SECTION 24,
Executive shall be entitled to seek specific performance of the
Executive's right to be paid during the pendency of any dispute or
controversy arising under this Agreement. In order to prevent irreparable
harm, the arbitrator may grant temporary or permanent injunctive or other
equitable relief for the protection of property rights.
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(c) ARBITRATION PROCEDURES. The arbitrator shall set the date, time
and place for each hearing, and shall give the parties advance written
notice in accordance with the Rules. Any party may be represented by
counsel or other authorized representative at any hearing. The arbitration
shall be governed by the Federal Arbitration Act, 9 U.S.C. ss.ss. 1 et.
seq. (or its successor). The arbitrator shall apply the substantive law
(and the law of remedies, if applicable) of the State of Texas to the
claims asserted to the extent that the arbitrator determines that federal
law is not controlling.
(d) COMPLIANCE WITH AWARD.
(1) Any award of an arbitrator shall be final and binding upon
the parties to such arbitration, and each party shall immediately
make such changes in its conduct or provide such monetary payment or
other relief as such award requires. The parties agree that the
award of the arbitrator shall be final and binding and shall be
subject only to the judicial review permitted by the Federal
Arbitration Act
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(2) The parties hereto agree that the arbitration award may be
entered with any court having jurisdiction and the award may then be
enforced as between the parties, without further evidentiary
proceedings, the same as if entered by the court at the conclusion
of a judicial proceeding in which no appeal was taken. The Company
and the Executive hereby agree that a judgment upon any award
rendered by an arbitrator may be enforced in other jurisdictions by
suit on the judgment or in any other manner provided by law.
(e) COSTS AND EXPENSES. Each party shall pay any monetary amount
required by the arbitrator's award, and the fees, costs and expenses for
its own counsel, witnesses and exhibits, unless otherwise determined by
the arbitrator in the award. The compensation and costs and expenses
assessed by the arbitrator and AAA shall be paid by the losing party
unless otherwise determined by the arbitrator in the award. If court
proceedings to stay litigation or compel arbitration are necessary, the
party who unsuccessfully opposes such proceedings shall pay all associated
costs, expenses, and attorney's fees which are reasonably incurred by the
other party as determined by the arbitrator.
25 BINDING EFFECT: THIRD PARTY BENEFICIARIES. This Agreement shall be
binding upon and inure to the benefit of the parties hereto, and to their
respective heirs, executors, personal representatives, successors and permitted
assigns hereunder, but otherwise this Agreement shall not be for the benefit of
any third parties.
26 ENTIRE AGREEMENT AND AMENDMENT. This Agreement contains the entire
agreement of the parties with respect to Executive's employment and the other
matters covered herein; moreover, this Agreement supersedes all prior and
contemporaneous agreements and understandings, oral or written, between the
parties hereto concerning the subject matter hereof. This Agreement may be
amended, waived or terminated only by a written instrument executed by both
parties hereto.
27 SURVIVAL OF CERTAIN PROVISIONS. Wherever appropriate to the intention
of the parties hereto, the respective rights and obligations of said parties,
including, but not limited to, the rights and obligations set forth in SECTIONS
6 THROUGH 17 AND 24 hereof, shall survive any termination or expiration of this
Agreement.
28 WAIVER OF BREACH. No waiver by either party hereto of a breach of any
provision of this Agreement by any other party, or of compliance with any
condition or provision of this Agreement to be performed by such other party,
will operate or be construed as a waiver of any subsequent breach by such other
party or any similar or dissimilar provision or condition at the same or any
subsequent time. The failure of either party hereto to take any action by reason
of any breach will not deprive such party of the right to take action at any
time while such breach continues.
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29 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and inure
to the benefit of Company and its affiliated entities, and its and their
successors, and upon any person or entity acquiring, whether by merger,
consolidation, purchase of assets or otherwise, all or substantially all of the
assets and business of Company. Any reference herein to "Company" shall mean the
Company as first written above, as well as any successor or successors thereto.
This Agreement is personal to Executive, and Executive may not assign,
delegate or otherwise transfer all or any of his rights, duties or obligations
hereunder without the consent of the Board of Directors. Any attempt by the
Executive to assign, delegate or otherwise transfer this Agreement, any portion
hereof, or his rights, duties or obligations hereunder without the prior written
consent of the Board of Directors shall be deemed void and of no force and
effect. Subject to the preceding provisions of this paragraph, this Agreement
shall be binding upon and inure to the benefit of Executive and his heirs and
assigns.
30 NOTICES. Notices provided for in this Agreement shall be in writing and
shall be deemed to have been duly received (a) when delivered in person or sent
by facsimile transmission, (b) on the first business day after it is sent by air
express overnight courier service, or (c) on the third business day following
deposit in the United States mail, registered or certified mail, return receipt
requested, postage prepaid and addressed, to the following address, as
applicable:
(1) If to Company, addressed to:
Synagro Technologies, Inc.
5850 San Felipe, Suite 500
Houston, Texas 77057
Attention: General Counsel
(2) If to Executive, addressed to the address set forth below his
name on the execution page hereof;
or to such other address as either party may have furnished to the other party
in writing in accordance with this SECTION 30.
31 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be an original,
but all such counterparts shall together constitute one and the same instrument.
Each counterpart may consist of a copy hereof containing multiple signature
pages, each signed by one party hereto, but together signed by both of the
parties hereto.
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32 EXECUTIVE ACKNOWLEDGMENT/NO STRICT CONSTRUCTION. The Executive
represents to Company that he is knowledgeable and sophisticated as to business
matters, including the subject matter of this Agreement, that he has read the
Agreement and that he understands its terms and conditions. The parties hereto
agree that the language used in this Agreement shall be deemed to be the
language chosen by them to express their mutual intent, and no rule of strict
construction shall be applied against either party hereto. Executive also
represents that he is free to enter into this Agreement including, without
limitation, that he is not subject to any other contract of employment or
covenant not to compete that would conflict in any way with his duties under
this Agreement. Executive acknowledges that he has had the opportunity to
consult with counsel of his choice, independent of Employer's counsel, regarding
the terms and conditions of this Agreement and has done so to the extent that
he, in his unfettered discretion, deemed to be appropriate.
33 SUPERSEDING AGREEMENT. This Employment Agreement shall supersede any
prior employment agreement entered into between the Company and Executive.
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IN WITNESS WHEREOF, the Executive has hereunto set his hand, and Company
has caused these presents to be executed in its name and on its behalf, to be
effective as of the Effective Date first above written.
WITNESS: EXECUTIVE:
Signature: Signature:
Printed Name: Printed Name: ROSS M. PATTEN
Date: Date:
Address for Notices:
99 NORTH POST OAK, #4408
HOUSTON, TEXAS 77024
ATTEST: SYNAGRO TECHNOLOGIES, INC.:
By: By: __ __________________________
--------------------------------
Title: Its: Executive Vice President,
General Counsel & Secretary
Printed Name: Printed Name: ALVIN L. THOMAS II
Date: Date:
23
EXHIBIT 10.6.1
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT, made and entered into as of the ____ day of
February __, 1999 (the "EFFECTIVE DATE"), by and between Synagro Technologies,
Inc., a Delaware corporation (hereafter "COMPANY") and Alvin L.
Thomas II (hereafter "EXECUTIVE"), an individual;
W I T N E S S E T H:
WHEREAS, Company wishes to secure the services of the Executive subject
to the terms and conditions hereafter set forth; and
WHEREAS, the Executive is willing to enter into this Agreement upon the
terms and conditions hereafter set forth,
NOW, THEREFORE, in consideration of the mutual promises and agreements set
forth herein, the parties hereto agree as follows:
1. EMPLOYMENT. During the Employment Period (as defined in SECTION 4
hereof), the Company shall employ Executive, and Executive shall serve, as
Executive Vice President and General Counsel of the Company. Executive's
principal place of employment shall be at the Company's principal corporate
offices in Houston, Texas during the Employment Period.
2. COMPENSATION. The Company shall pay or cause to be paid to Executive
during the Employment Period an annual base salary for his services under this
Agreement of not less than $120,000, payable in equal monthly or semi-monthly
installments in accordance with the Company's normal payroll procedures.
Executive's base salary shall be subject to annual review and may be increased,
depending upon the performance of the Company and Executive, upon the
recommendation of the Chairman or the Board of Directors of the Company
(hereafter "BOARD OF DIRECTORS"). Executive shall be entitled to participate in
the bonus "pool" or other structure established for the Company's top level of
management. Nothing contained herein shall preclude the payment of a bonus,
supplemental or incentive compensation to Executive provided that the Board of
Directors authorizes any such compensation payment. As additional compensation
to Executive for the services previously rendered by him, the services to be
rendered by him pursuant to, and Executive's other duties and obligations
arising under this Agreement, including, without limitation, his obligations
under Sections 12 and 14 hereof, the Company has granted to Executive options to
purchase 200,000 shares of common stock of the Company, par value $.002 per
share, between the Company and Executive.
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3. DUTIES AND RESPONSIBILITIES OF EXECUTIVE. During the Employment Period,
Executive shall devote his services full time to the business of the Company and
perform the duties and responsibilities assigned to him by Ross M. Patten or the
Board of Directors to the best of his ability and with reasonable diligence. In
determining Executive's duties and responsibilities, Ross M. Patten and the
Board of Directors shall act in good faith and shall not assign duties and
responsibilities to Executive that are not appropriate or customary with respect
to the position of Executive hereunder. This SECTION 3 shall not be construed as
preventing Executive from engaging in reasonable volunteer services for
charitable, educational or civic organizations, or from investing his assets in
such form or manner as will not require a material amount of his services in the
operations of the companies or businesses in which such investments are made.
4. TERM OF EMPLOYMENT. Executive's term of employment with the Company
under this Agreement shall be for 24 consecutive months beginning on the
Effective Date, unless Notice of Termination pursuant to SECTION 7 is given by
either the Company or Executive to the other party. The Company and Executive
shall each have the right to give Notice of Termination at will, with or without
cause, at any time, subject to the terms of this Agreement regarding rights and
duties of the parties upon termination of employment. This 24-month employment
period hereunder shall be referred to herein as the "TERM OF EMPLOYMENT." The
period from the Effective Date through the date of Executive's termination of
employment for whatever reason shall be referred to herein as the "EMPLOYMENT
PERIOD."
5. BENEFITS. Subject to the terms and conditions of this Agreement, during
the Employment Period, Executive shall be entitled to the following:
(a) REIMBURSEMENT OF EXPENSES. The Company shall pay or reimburse
Executive for all reasonable travel, entertainment and other reasonable
expenses paid or incurred by Executive in performing his business
obligations hereunder. The Company shall also provide Executive with
suitable office space and secretarial help. Executive shall provide
substantiating documentation for expense reimbursement requests as
reasonably required by the Company for its tax and other business records.
(b) EXPENSE ALLOWANCES. Executive shall be entitled to: (i) a car
allowance of $500 per month, and (ii) family medical and dental insurance
coverage paid for 100% by Company and which allows Executive to choose
among all options for medical and dental insurance provided to other
Company employees in the same area.
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(c) OTHER BENEFITS. Executive shall be entitled to participate in
any pension, profit-sharing, stock option, deferred compensation, or
similar plan or program of the Company established by the Company, to the
extent that he is eligible under the provisions thereof. Executive shall
also be entitled to participate in any group insurance, hospitalization,
medical, health and accident, disability or similar plan or program
established by the Company, to the extent that he is eligible under the
provisions thereof.
(d) PAID VACATION. Executive shall initially be entitled to three
(3) weeks of paid vacation during each 12-month period of employment with
the Company (which shall accrue monthly on a PRO RATA basis). Executive
shall thereafter be entitled to the number of days of paid vacation each
year that is accorded under the Company's vacation policy as in effect
from time to time or three (3) weeks, whichever is greater. Unused
vacation days up to a maximum of two (2) weeks in one year shall be
carried forward for a period not to exceed 12 months in accordance with
Company's vacation policy as in effect from time to time.
6. RIGHTS AND PAYMENTS UPON TERMINATION. The Executive's right to
compensation and benefits for periods after the date on which his employment
with the Company terminates for whatever reason (the "TERMINATION DATE") shall
be determined in accordance with this SECTION 6,
(a) MINIMUM PAYMENTS. Executive shall be entitled to the following
payments, in addition to any payments or benefits to which the Executive
is entitled under the terms of any employee benefit plan or the following
provisions of this SECTION 6:
(1) his unpaid salary for the full month in which his
Termination Date occurred; provided, however, if Executive is
terminated for Cause pursuant to SECTION 6(B) below, he shall only
be entitled to receive his accrued but unpaid salary through his
Termination Date; and
(2) his accrued but unpaid vacation pay for the period ending
on his Termination Date in accordance with the Company's vacation
pay policy as in effect at such time.
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(b) SEVERANCE PAYMENT. Notwithstanding any other provision of this
Agreement to the contrary, in the event that: (i) Executive's employment
hereunder is terminated by the Company at any time for any reason EXCEPT
(A) for Cause (as defined below) or (B) Executive's death or Disability
(as defined below) or (ii) Executive terminates his own employment
hereunder at any time for Good Reason (as defined below), then, in either
such event, Executive shall be entitled to receive, and the Company shall
be obligated to pay, a lump sum cash payment equal to one hundred percent
(100%) the present value of Executive's annual salary pursuant to SECTION
2 or the annual salary then being paid to him, whichever is greater. For
purposes of the immediately preceding sentence, the "present value" of
such annual salary shall be determined in accordance with the regulations
under Section 280G of the Code (as defined below). Also, except as
otherwise specifically provided in this SECTION 6(B), such severance
payment shall be in addition to, and shall not reduce or offset, any other
payments that are due to Executive from the Company or any other source or
under any other agreements, except any severance pay plan or program
maintained by the Company that covers employees generally. The provisions
of this SECTION 6(B) shall supersede any conflicting provisions of this
Agreement but shall not be construed to curtail, offset or limit
Executive's rights to any other payments, whether contingent upon a Change
in Control (as defined below) or otherwise, under the Agreement or any
other agreement, contract, plan or other source of payment except as
specifically provided herein. In addition, in the event of a Change in
Control, Executive shall be entitled to receive the bonus payment
described in SECTION 9 hereof, if applicable.
Notwithstanding any provision of this SECTION 6(B) to the contrary,
the Executive must first execute an appropriate release and waiver
agreement whereby Executive agrees to release and waive, in return for the
severance payment described in this SECTION 6(B), any claims that he may
have against the Company for (1) unlawful discrimination (including,
without limitation, age discrimination) and (2) severance pay under any
other severance pay plan or program maintained by the Company that covers
Executive; provided, however, such agreement shall not release or waive
any claims that may be brought by Executive for payments that may be due
under this Agreement, without Executive's express written consent. Any
severance payment required under this SECTION 6(B) shall be paid to
Executive within twenty (20) days after Executive executes such release
and waiver agreement, unless the parties agree in writing before then to
another payment date or method of payment, e.g., installment payments.
Executive shall not be required to mitigate any damages under this SECTION
6(B) or any other provision of this Agreement.
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A "CHANGE IN CONTROL" of the Company shall be deemed to have
occurred if any of the following shall have taken place: (1) a change in
control is reported by the Company in response to either Item 6(e) of
Schedule 14A of Regulation 14A promulgated under the Securities Exchange
Act of 1934 (the "EXCHANGE ACT") or Item 1 of Form 8-K promulgated under
the Exchange Act, or any successor provisions thereto; (2) any "person"
(as such term is used in Sections 13(d) and 14(d)(2) of the Exchange Act)
is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), or any successor provisions thereto, directly or
indirectly, of securities of the Company representing twenty-five (25%) or
more of the combined voting power of the Company's then-outstanding
securities; (3) the approval by the stockholders of the Company of a
reorganization, merger, or consolidation, in each case with respect to
which persons who were stockholders of the Company immediately prior to
such reorganization, merger, or consolidation do not, immediately
thereafter, own or control more than fifty percent (50%) of the combined
voting power entitled to vote generally in the election of directors of
the reorganized, merged or consolidated Company's then outstanding
securities, or a liquidation or dissolution of the Company or of the sale
of all or substantially all of the Company's assets; (4) in the event any
person shall be elected by the stockholders of the Company to the Board of
Directors who shall have not been nominated for election by a majority of
the Board of Directors or any duly appointed committee thereof; or (5)
following the election or removal of directors, a majority of the Board of
Directors consists of individuals who were not members of the Board of
Directors two (2) years before such election or removal, unless the
election of each director who is not a director at the beginning of such
two-year period has been approved in advance by directors representing at
least a majority of the directors then in office who were directors at the
beginning of the two-year period.
"DISABILITY" means a "permanent and total disability" as defined in
Section 22(e)(3) of the Code and the Treasury regulations thereunder.
Evidence of such Disability shall be certified by a physician acceptable
to both the Company and Executive. In the event that the parties are not
able to agree on the choice of a physician, each shall select a physician
who, in turn, shall select a third physician to render such certification.
All costs relating to the determination of whether Executive has incurred
a Disability shall be paid by the Company.
"CODE" means the Internal Revenue Code of 1986, as amended.
References in this Agreement to any Section of the Code shall include any
"Successor Provisions" as defined in SECTION 9(E).
"CAUSE" means a termination of employment directly resulting from:
(1) the Executive having engaged in intentional misconduct that caused or
would have caused, if the Company did not intervene, a serious violation
by the Company of any state or federal laws, (2) the Executive having
engaged in a theft of corporate funds or corporate assets or in a material
act of fraud upon the Company, (3) an intentional act of personal
dishonesty taken by the Executive that was intended to result in personal
enrichment of the Executive at the expense of the Company, (4) repeated
violations by the Executive of Executive's primary or regular obligations
under this Agreement or under written policies of the Company which are
demonstrably willful on the Executive's part, and for which Executive has
received more than two written warnings that specify each area of
Executive's violations, (5) Executive's use of illegal drugs as evidenced
by a drug test authorized by Company, (6) Executive's final conviction (or
the entry of a plea of nolo contendere or equivalent plea) in a court of
competent jurisdiction of a felony or other crime involving dishonesty,
and (7) a breach by the Executive during the Employment Period of the
provisions of SECTIONS 11, 12, 13 OR 14 below, if such breach results in a
material injury to the Company.
"GOOD REASON" means the occurrence of any of the following events
without Executive's express written consent:
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(1) A ten percent (10%) or greater reduction in Executive's
annual base salary; or
(2) Any breach by the Company or its successors of any
material provision of this Agreement; or
(3) A substantial and adverse change in the Executive's
duties, control, authority, status or position, or the assignment to
the Executive of any duties or responsibilities which are materially
inconsistent with such status or position, or a material reduction
in the duties and responsibilities previously exercised by the
Executive, or a loss of title, loss of office, loss of significant
authority, power or control, or any removal of Executive from, or
any failure to reappoint or reelect him to, such positions, except
in connection with the termination of his employment for Cause,
Disability or death; or
(4) Following a Change in Control (as defined in SECTION 6(B))
any of the following events:
(A) the failure by the Company or its successor to
expressly assume and agree to continue and perform this
Agreement in the same manner and to the same extent that the
Company would be required to perform if such Change in Control
had not occurred;
(B) a relocation of more than twenty-five (25) miles of
Executive's principal office from the location of such office
immediately prior to the Change in Control date;
(C) a substantial increase in the business travel
required of Executive by the Company or its successor; or
(D) the Company or its successor fails to continue in
effect any pension plan, health-and-accident plan, or
disability income plan in which Executive was participating at
the time of the Change in Control (or plans providing
Executive with substantially equal and similar benefits), or
the taking of any action by the Company or its successor which
would adversely affect Executive's participation in or
materially reduce his benefits under any such plan that was
enjoyed by him immediately prior to the Change in Control.
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(c) STOCK OPTIONS. In the event of a Change in Control, Executive's
resignation for Good Reason or Executive's termination without Cause, all
unvested stock options previously granted to Executive shall immediately
vest and be exercisable as set forth below. In the event that there is a
termination of Executive's employment hereunder for any reason, Executive
shall be entitled to exercise any and all stock options that were
previously granted to him by the Company, and are outstanding, vested and
unexercised as of his Termination Date, during the exercise period ending
on the shorter of (i) two (2) years from his Termination Date or (ii) the
expiration date of the stock option as specified in the stock option plan
or stock option agreement, as applicable, notwithstanding any provision in
such plan or agreement that provides for a more limited time period to
exercise stock options following termination of employment; provided
however, if said stock option plan or stock option agreement provides
therein for a longer period of time to exercise such outstanding, vested
and unexercised stock options following his Termination Date, then such
stock option plan or agreement shall control and the remaining provisions
of this SECTION 6(C) shall be inapplicable and without further force or
effect. In the event that there is a termination of Executive's employment
hereunder for Cause or Executive voluntarily resigns without Good Reason
within two years for the date of this Agreement, Executive shall forfeit
any and all stock options that were previously granted to him by the
Company, and are unvested and unexercised as of his Termination Date.
During the extension period specified in the previous paragraph, if
applicable, the Executive shall be considered an employee of the Company
who shall make himself available to provide consulting services to the
Company in consideration for such extension of the option exercise period
and any post-termination payments provided to Executive under SECTION 6(A)
OR (B) of this Agreement. In this regard, Executive agrees to be
classified as an employee of the Company solely for the limited purpose of
making himself available to provide consulting services on an as-needed
basis; provided, however, Executive hereby specifically waives any right,
entitlement, claim or demand to (i) any additional compensation for such
consulting services and (ii) coverage or benefits under any of the
Company's employee benefit plans or programs, or other perquisites, terms
and conditions of employment, except as expressly specified in other
provisions of this Agreement. Except as expressly provided in this SECTION
6(C), the provision of consulting services by Executive shall not expand
his rights or duties under this Agreement. Executive hereby agrees to
provide, upon request of the Company, consulting services to the Company
on the following terms and conditions:
(1) Executive will make himself available, on an as-needed basis,
to provide consulting services to the Company for up to three
(3) days per month during the period beginning on the day
after his Termination Date and ending on the last day of the
extension period for exercising stock options as provided in
the first paragraph of SECTION 6(C) above, subject to the
following conditions:
(A) At least five (5) days written advance notice to
Executive is provided by the Company;
(B) There is no concurrent illness of Executive or his
spouse;
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(C) There is no prior commitment of Executive including,
without limitation, vacation or attention to personal
affairs; and
(D) No travel is required of Executive in excess of 200
miles round-trip.
Executive, in any particular instance, may waive any or all of
the conditions set forth in clauses (A), (B), (C) or (D) above
in his complete discretion. Any such waiver shall not be a
continuing waiver and shall not release Executive of any of
his rights hereunder.
(2) Executive agrees to provide such information, services, advice
and recollection of events as may from time to time be
reasonably requested by, or on behalf of, the Company
regarding corporate, regulatory or business matters of which
Executive may have knowledge, information or understanding,
including testifying truthfully in any litigation or other
proceedings involving the Employer, provided that (i)
Executive first determines that his interests are not adverse,
or potentially adverse, to those of the Company, and (ii) the
Company has indemnified Executive to his satisfaction
including, without limitation, for reasonable attorney's fees
and costs. The parties hereto agree that it is the quality,
and not the quantity, of the consulting services to be
provided by Executive that is important to the Company.
(3) The Company will reimburse Executive for all reasonable
out-of-pocket expenses incurred by Executive in the course of
his performance of consulting services, including, without
limitation, supplies, mileage and travel expenses. Executive
agrees not to incur any expense, obligation, or liability on
behalf of the Company without its prior written consent.
(4) The provision of consulting services by Executive for the
Company is non-exclusive and shall not, in any way, limit the
rights of Executive to seek and maintain other employment or
to perform compensatory services on behalf of any other person
or entity.
(5) The consulting services contemplated under this SECTION 6(c)
shall not be considered part of Executive's Employment Period
pursuant to SECTION 4, nor affect his Termination Date.
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7. NOTICE OF TERMINATION. Any termination by the Company or the Executive
shall be communicated by Notice of Termination to the other party hereto. For
purposes of this Agreement, the term "NOTICE OF TERMINATION" means a written
notice which indicates the specific termination provision of this Agreement
relied upon and sets forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Executive's employment under
the provision so indicated.
8. NO MITIGATION REQUIRED. Executive shall not be required to mitigate the
amount of any payment provided for under this Agreement by seeking other
employment or in any other manner.
9. CHANGE IN CONTROL: REQUIREMENT OF BONUS PAYMENT IN CERTAIN
CIRCUMSTANCES.
(a) In the event that Executive is deemed to have received an
"excess parachute payment" (as such term is defined in Section 280G(b) of
the Code) which is subject to the excise taxes (the "EXCISE TAXES")
imposed by Section 4999 of the Code in respect of any payment pursuant to
this Agreement, or any other agreement, plan, instrument or obligation, in
whatever form, the Company shall make the Bonus Payment (defined below) to
Executive promptly after the date on which Executive received or is deemed
to have received any excess parachute payment notwithstanding any contrary
provision herein.
(b) The term "BONUS PAYMENT" means a cash payment in an amount equal
to the sum of (i) all Excise Taxes payable by Executive, plus (ii) all
additional Excise Taxes and federal or state income taxes to the extent
such taxes are imposed in respect of the Bonus Payment, such that
Executive shall be in the same after-tax position and shall have received
the same benefits that he would have received if the Excise Taxes had not
been imposed. For purposes of calculating any income taxes attributable to
the Bonus Payment, Executive shall be deemed for all purposes to be paying
income taxes at the highest marginal federal income tax rate, taking into
account any applicable surtaxes and other generally applicable taxes which
have the effect of increasing the marginal federal income tax rate and, if
applicable, at the highest marginal state income tax rate, to which the
Bonus Payment and Executive are subject. An example of the calculation of
the Bonus Payment is set forth below: Assume that the Excise Tax rate is
20%, the highest federal marginal income tax rate is 40% and Executive is
not subject to state income taxes. Further assume that Executive has
received an excess parachute payment in the amount of $200,000, on which
$40,000 in Excise Taxes are payable. The amount of the required Bonus
Payment is thus $100,000. The Bonus Payment of $100,000, less additional
Excise Taxes on the Bonus Payment of $20,000 (i.e., 20% x $100,000) and
income taxes of $40,000 (i.e., 40% x $100,000), yields $40,000, the amount
of the Excise Taxes payable in respect of the original excess parachute
payment.
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(c) Executive agrees to reasonably cooperate with the Company to
minimize the amount of the excess parachute payments, including, without
limitation, assisting the Company in establishing that some or all of the
payments received by Executive that are "contingent on a change", as
described in Section 280G(b)(2)(A)(i) of the Code, are reasonable
compensation for personal services actually rendered by Executive before
the date of such change or to be rendered by Executive on or after the
date of such change. In the event that the Company is able to establish
that the amount of the excess parachute payments is less than originally
anticipated by Executive, Executive shall refund to the Company any excess
Bonus Payment to the extent not required to pay Excise Taxes or income
taxes (including those incurred in respect of receipt of the Bonus
Payment). Notwithstanding the foregoing, Executive shall not be required
to take any action which his attorney or tax advisor advises him in
writing (i) is improper or (ii) exposes Executive to material personal
liability. Executive may require the Company to deliver to Executive an
indemnification agreement in form and substance satisfactory to Executive
as a condition to taking any action required by this subsection (c).
(d) The Company shall make any payment required to be made under
this SECTION 9 in cash and on demand. Any payment required to be paid by
the Company under this SECTION 9 which is not paid within 30 days of
receipt by the Company of Executive's written demand therefor shall
thereafter be deemed delinquent, and the Company shall pay to Executive
immediately upon demand interest at the highest nonusurious rate per annum
allowed by applicable law from the date such payment becomes delinquent to
the date of payment of such delinquent sum with interest.
(e) In the event that there is any change to the Code which results
in the recodification of Section 280G or Section 4999 of the Code, or in
the event that either such section of the Code is amended, replaced or
supplemented by other provisions of the Code of similar import ("SUCCESSOR
PROVISIONS"), then this Agreement shall be applied and enforced with
respect to such new Code provisions in a manner consistent with the intent
of the parties as expressed herein, which is to assure that Employee is in
the same after-tax position and has received the same benefits that he
would have been in and received if any taxes imposed by Section 4999 or
any Successor Provisions had not been imposed.
10. POST-TERMINATION MEDICAL COVERAGE. If the employment of Executive is
terminated for any reason except for Cause (as defined in SECTION 6(B)), death
or voluntary resignation without Good Reason, then the Company shall provide
post-employment medical coverage in accordance with the terms and conditions of
this SECTION 10. The Company shall continue to cover Executive and his spouse
(hereinafter referred to as "SPOUSE") and his eligible dependent children, if
any, from the Termination Date until two (2) years following the Termination
Date, under the group health care plan maintained by the Company to provide
major medical insurance coverage for employees and their dependents (such group
medical plan or its successor shall be hereinafter referred to as the "HEALTH
CARE PLAN").
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Executive, on behalf of himself and his Spouse and other dependents, if
any, shall be required to pay premiums for their coverage under the Health Care
Plan at the rates, if any, charged by the Company to active employees who are
senior officers of the Company at the time the premium is charged. Any
post-employment coverage under the Health Care Plan provided under this SECTION
10 shall run concurrently with COBRA continuation coverage under the Health Care
Plan and, therefore, Executive and the other qualifying beneficiaries shall
elect any COBRA continuation coverage offered to them under the Health Care Plan
following the Termination Date. The Company shall not be responsible for the
payment of any income or other taxes which may be imposed on Executive, or on
his Spouse or dependents, as the result of receiving coverage under the Health
Care Plan pursuant to this SECTION 10.
Executive, on behalf of himself and his Spouse and dependents, hereby
agrees and consents to acquire and maintain any coverage that of any them are
entitled to at any time during the two year period (as specified above in this
SECTION 10) under the Medicare program or any similar or succeeding plan or
program that is sponsored or maintained by the United States Government or any
agency thereof (hereinafter referred to as "MEDICARE"). The coverage described
in the immediately preceding sentence includes, without limitation, parts A and
B of Medicare and any additional or successor parts of Medicare. Executive, on
behalf of himself and his Spouse, further agrees and consents to pay all
required premiums and other costs for Medicare coverage from their personal
funds. Medicare coverage shall be primary payor to the coverage provided under
the Health Care Plan to the extent permitted by applicable federal law.
11. CONFLICTS OF INTEREST. In keeping with his fiduciary duties to
Company, Executive hereby agrees that he shall not become involved in a conflict
of interest, or upon discovery thereof, allow such a conflict to continue at any
time during the Employment Period. Moreover, Executive agrees that he shall
immediately disclose to the Board of Directors any facts that might involve a
conflict of interest that has not been approved by the Board of Directors.
Executive and Company recognize and acknowledge that it is not possible to
provide an exhaustive list of actions or interests that may constitute a
"conflict of interest." Moreover, Company and Executive recognize there are many
borderline situations. In some instances, full disclosure of facts by the
Executive to the Board of Directors may be all that is necessary to enable
Company to protect its interests. In others, if no improper motivation appears
to exist and Company's interests have not demonstrably suffered, prompt
elimination of the outside interest may suffice. In other egregious instances,
it may be necessary for Company to terminate Executive's employment for Cause
pursuant to SECTION 6(B) hereof. The Board of Directors reserves the right to
take such action as, in its good faith judgment, will resolve the conflict of
interest.
Executive hereby agrees that any direct or indirect interest in,
connection with, or benefit from any outside activities, particularly commercial
activities, which interest might adversely affect the Company or any of its
affiliated entities, involves a possible conflict of interest. Circumstances in
which a conflict of interest on the part of Executive would or might arise, and
which should be reported immediately to the Board of Directors, include, but are
not limited to, any of the following:
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(a) Ownership of more than a DE MINIMIS interest in any lender,
supplier, contractor, customer or other entity with which Company or any
of its affiliated entities does business;
(b) Misuse of information, property or facilities to which Executive
has access in a manner which is demonstrably injurious to the interests of
Company or any of its affiliated entities, including its business,
reputation or goodwill; or
(c) Materially trading in products or services connected with
products or services designed or marketed by or for the Company or any of
its affiliated entities.
For purposes of this Agreement, "AFFILIATED ENTITY" means any entity which
owns or controls, is owned or controlled by, or is under common ownership or
control with, the Company.
12. CONFIDENTIAL INFORMATION.
(a) CONFIDENTIAL INFORMATION DEFINED. Executive hereby acknowledges that
in his senior management position, he will create, acquire and have access to
confidential information and trade secrets pertaining to the business of Company
(hereafter "Confidential Information" as defined below). Executive hereby
acknowledges that such Confidential Information is unique and valuable to
Company's business and that Company would suffer irreparable injury if
Confidential Information was divulged to the public or to persons or entities in
competition with Company. Therefore, Executive hereby covenants and agrees to
keep in strict secrecy and confidence, both during and after the Employment
Period, any Confidential Information. Executive specifically agrees that he will
not at any time disclose to others, use, copy or permit to be copied, except in
pursuance of his duties on behalf of Company or with the prior consent of
Company, Confidential Information relating to the Company or any of its
affiliated entities. For purposes of this Agreement, "CONFIDENTIAL INFORMATION"
shall mean and include, without limitation, information related to the business
affairs, property, methods of operation, future plans, financial information,
customer or client information, or other data which relates to the business or
operations of Company or any of its affiliated entities, and all other
information obtained by Executive from and during the Employment Period which
concerns the affairs of Company or any of its affiliated entities and which
Company has requested be held in confidence or could reasonably be expected to
desire be held in confidence, or the disclosure of which would likely be
embarrassing, detrimental or disadvantageous to the Company or any of its
affiliated entities, or its and their directors, officers, employees or
shareholders. Confidential Information, however, shall not include information
that is at the time of receipt by Executive in the public domain or is otherwise
generally known in the industry or subsequently enters the public domain or
becomes generally known in the industry through no fault of Executive or breach
of his duty under this SECTION 12.
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(b) REQUIRED DISCLOSURE. In the event that Executive is required by
law which cannot be waived to disclose any Confidential Information,
Executive agrees that he will provide prompt notice of such potential
disclosure to Company so that an appropriate protective order may be
sought and/or a waiver of compliance with the provisions of this Agreement
may be granted. In the event that (i) such protection or other remedy is
not obtained or (ii) Company waives in writing the compliance by Executive
with this provision, Executive agrees that he may furnish only that
portion of the Confidential Information which Executive is advised by
written opinion of counsel is legally required to be disclosed, and
Executive shall exercise his best efforts to obtain assurances that
confidential treatment will be accorded such Confidential Information.
(c) DELIVERY OF DOCUMENTS. Executive further agrees to deliver to
Company at the termination of his employment, all correspondence,
memoranda, notes, records, drawings, plans, customer lists or other
documents, and all copies thereof made, composed or received by Executive,
solely or jointly with others, and which are in Executive's possession,
custody or control at such date and which relate in any manner to the
past, present or anticipated business of Company or any of its affiliated
entities.
(d) REMEDIES. In the event of a breach or threatened breach of any
of the provisions of this SECTION 12, Company shall be entitled to an
injunction ordering the return of all such documents, and any and all
copies thereof, and restraining Executive from using or disclosing, for
his benefit or the benefit of others, in whole or in part, any
Confidential Information, including, but not limited to, the Confidential
Information which such documents contain, constitute or embody. Executive
further agrees that any breach or threatened breach of any of the
provisions of this SECTION 12 would cause irreparable injury to Company,
for which it would have no adequate remedy at law. Nothing herein shall be
construed as prohibiting Company from pursuing any other remedies
available to it for any such breach or threatened breach, including the
recovery of damages.
13. PROPERTY RIGHTS. In keeping with his fiduciary duties to Company,
Executive hereby covenants and agrees that during his Employment Period, and for
a period of one (1) year following his Termination Date, Executive shall
promptly disclose in writing to Company any and all information, ideas,
concepts, improvements, discoveries, inventions and other intellectual
properties, whether patentable or not, and whether or not reduced to practice,
which are conceived, developed, made or acquired by Executive, either
individually or jointly with others, and which relate to the business, products
or services of Company or any of its affiliated entities. In consideration for
his employment hereunder, Executive hereby specifically sells, assigns and
transfers to Company all of his worldwide right, title and interest in and to
all such information, ideas, concepts, improvements, discoveries, inventions and
other intellectual properties.
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If during the Employment Period, Executive creates any original work of
authorship or other property fixed in any tangible medium of expression which
(a) is the subject matter of copyright (including computer programs) and (b)
relates to Company's present or planned business, products, or services, whether
such property is created solely by Executive or jointly with others, such
property shall be deemed a work for hire, with the copyright automatically
vesting in Company. To the extent that any such writing or other property is
determined not to be a work for hire for whatever reason, Executive hereby
consents and agrees to the unconditional waiver of "moral rights" in such
writing or other property, and to assign to Company all of his right, title and
interest, including copyright, in such writing or other property.
Executive hereby agrees to (a) assist Company or its nominee at all times
in the protection of any and all property subject to this SECTION 13, (b) not to
disclose any such property to others without the written consent of Company or
its nominee, except as required by his employment hereunder, and (c) at the
request of Company, to execute such assignments, certificates or other interests
as Company or its nominee may from time to time deem desirable to evidence,
establish, maintain, perfect, protect or enforce its rights, title or interests
in or to any such property.
14. AGREEMENT NOT TO COMPETE. Executive hereby recognizes and acknowledges
that: (a) in his executive capacity with Company he will be given knowledge of,
and access to, the Confidential Information (as described in SECTION 12); (b) in
the event that Executive was to enter into competition with Company, Executive's
knowledge of such Confidential Information would be of invaluable benefit to a
competitor of Company, and could cause irreparable harm to Company's business
interests; and (c) Executive's consent and agreement to enter into the
noncompetition provisions and covenants set forth herein is an integral
condition of this Agreement, without which Company would not have agreed to
provide Confidential Information to Executive, nor to his compensation,
benefits, and other terms of this Agreement. Accordingly, in consideration for
his employment, compensation, benefits, access to and entrustment of
Confidential Information, the goodwill, training and experience provided to
Executive during his Employment Period, Executive hereby covenants, consents and
agrees (regardless of whether or not there has been a Change of Control) that
during the Employment Period, and for a period two (2) years after his
employment is terminated for any reason, Executive shall not, directly or
indirectly, acting alone or in conjunction with others, for his own account or
for the account of others, including, without limitation, as an officer,
director, stockholder, owner, partner, member, manager, joint venturer,
employee, promoter, consultant, agent, lender, guarantor, representative, or
otherwise:
(a) Solicit, canvass, or accept any fees or business from any
customer of Company for himself or any other person or entity engaged in a
"Similar Business to Company" (as defined below);
(b) Engage or participate in any Similar Business to Company within
any states of the United States in which the Company transacts business on
Executive's termination of employment date, or in which, as of such
termination date, the Company has made any plans or proposals to transact
business within one year from such termination date (referred to herein as
the "RESTRICTED AREA");
(c) Request or advise any service provider, supplier, or customer to
reduce or cancel any business that it may transact with Company or any of
its affiliated entities;
(d) Solicit, induce, or otherwise attempt to influence any employee
of the Company or any of its affiliated entities, to terminate his or her
relationship with the Company or any of its affiliated entities; or
(e) Make any statement or perform any act intended to advance an
interest of an existing or prospective competitor of the Company or any of
its affiliated entities in any way that demonstrably injures the
reputation, goodwill or any other business interest of Company or any of
its affiliated entities.
For purposes of this Agreement, "SIMILAR BUSINESS TO COMPANY" means any
business or other enterprise that is competitive with the current or planned
businesses, products, services or operations of the Company or any of its
affiliated entities at the time of termination of Executive's employment
including, without limitation, municipal biosolids.
Executive hereby agrees that the limitations set forth above on his rights
to compete with Company after his termination of employment are reasonable and
necessary for the protection of Company. In this regard, Executive specifically
agrees that such limitations as to the period of time, geographic area and types
and scopes of restriction on his activities, as specified above, are reasonable
and necessary to protect the goodwill and other business interests of Company.
However, should the time period, the geographic area or any other
non-competition provision set forth herein be deemed invalid or unenforceable in
any respect, then Executive acknowledges and agrees that, as set forth in
SECTION 15 hereof, reformation may be made with respect to such time period,
geographic area or other non-competition provision in order to protect Company's
reasonable business interests to the maximum permissible extent.
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15. REMEDIES. In the event of any pending, threatened or actual breach of
any of the covenants or provisions of SECTION 11, 12, 13 OR 14, it is understood
and agreed by Executive that the remedy at law for a breach of any of the
covenants or provisions of these Sections may be inadequate, and, therefore,
Company shall be entitled to a restraining order or injunctive relief from any
court of competent jurisdiction, in addition to any other remedies at law and in
equity. In the event that Company seeks to obtain a restraining order or
injunctive relief, Executive hereby agrees that Company shall not be required to
post any bond in connection therewith. Should a court of competent jurisdiction
or an arbitrator (pursuant to SECTION 24) declare any provision of SECTION 11,
12, 13 OR 14 to be unenforceable due to an unreasonable restriction of duration
or geographical area, or for any other reason, such court or arbitrator is
hereby granted the consent of each of Executive and the Company to reform such
provision and/or to grant the Company any relief, at law or in equity,
reasonably necessary to protect the reasonable business interests of Company or
any of its affiliated entities. Executive hereby acknowledges and agrees that
all of the covenants and other provisions of SECTIONS 11, 12, 13 AND 14 are
reasonable and necessary for the protection of the Company's reasonable business
interests. Executive hereby agrees that if the Company prevails in any action,
suit or proceeding with respect to any matter arising out of or in connection
with SECTION 11, 12, 13 OR 14, Company shall be entitled to all equitable and
legal remedies, including, but not limited to, injunctive relief and
compensatory damages.
16. DEFENSE OF CLAIMS. Executive agrees that, during the Employment Period
and for a period of two (2) years after his Termination Date, upon reasonable
request from the Company, he will cooperate with the Company and its affiliated
entities in the defense of any claims or actions that may be made by or against
the Company or any of its affiliated entities that affect his prior areas of
responsibility, except if Executive's reasonable interests are adverse to the
Company (or affiliated entity) in such claim or action. To the extent travel is
required to comply with the requirements of this SECTION 16, the Company shall,
to the extent possible, provide Executive with notice at least 10 days prior to
the date on which such travel would be required. The Company agrees to promptly
pay or reimburse Executive upon demand for all of his reasonable travel and
other direct expenses incurred, or to be reasonably incurred, to comply with his
obligations under this SECTION 16.
17. DETERMINATIONS BY THE BOARD OF DIRECTORS.
(a) TERMINATION OF EMPLOYMENT. Prior to a Change in Control (as
defined in SECTION 6(B)), any question as to whether and when there has
been a termination of Executive's employment, and the cause of such
termination, shall be determined by the Board of Directors in its
discretion.
(b) COMPENSATION. Prior to a Change in Control (as defined in
SECTION 6(B)), any question regarding salary, bonus and other compensation
payable to Executive pursuant to this Agreement shall be determined by the
Board of Directors in its discretion.
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18 WITHHOLDINGS: RIGHT OF OFFSET. Company may withhold and deduct from any
benefits and payments made or to be made pursuant to this Agreement (a) all
federal, state, local and other taxes as may be required pursuant to any law or
governmental regulation or ruling, (b) all other normal employee deductions made
with respect to Company's employees generally, and (c) any advances made to
Executive and owed to Company.
19 NONALIENATION. The right to receive payments under this Agreement shall
not be subject in any manner to anticipation, alienation, sale, transfer,
assignment, pledge or encumbrance by Executive, his dependents or beneficiaries,
or to any other person who is or may become entitled to receive such payments
hereunder. The right to receive payments hereunder shall not be subject to or
liable for the debts, contracts, liabilities, engagements or torts of any person
who is or may become entitled to receive such payments, nor may the same be
subject to attachment or seizure by any creditor of such person under any
circumstances, and any such attempted attachment or seizure shall be void and of
no force and effect.
20 INCOMPETENT OR MINOR PAYEES. Should the Board of Directors determine
that any person to whom any payment is payable under this Agreement has been
determined to be legally incompetent or is a minor, any payment due hereunder
may, notwithstanding any other provision of this Agreement to the contrary, be
made in any one or more of the following ways: (a) directly to such minor or
person; (b) to the legal guardian or other duly appointed personal
representative of the person or estate of such minor or person; or (c) to such
adult or adults as have, in the good faith knowledge of the Board of Directors,
assumed custody and support of such minor or person; and any payment so made
shall constitute full and complete discharge of any liability under this
Agreement in respect to the amount paid.
21 SEVERABILITY. It is the desire of the parties hereto that this
Agreement be enforced to the maximum extent permitted by law, and should any
provision contained herein be held unenforceable by a court of competent
jurisdiction or arbitrator (pursuant to SECTION 24), the parties hereby agree
and consent that such provision shall be reformed to create a valid and
enforceable provision to the maximum extent permitted by law; provided, however,
if such provision cannot be reformed, it shall be deemed ineffective and deleted
here from without affecting any other provision of this Agreement.
22 TITLE AND HEADINGS; CONSTRUCTION. Titles and headings to Sections
hereof are for the purpose of reference only and shall in no way limit, define
or otherwise affect the provisions hereof. Any and all Exhibits referred to in
this Agreement are, by such reference, incorporated herein and made a part
hereof for all purposes. The words "herein", "hereof", "hereunder" and other
compounds of the word "here" shall refer to the entire Agreement and not to any
particular provision hereof.
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23 CHOICE OF LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, WITHOUT REGARD TO THE PRINCIPLES
OF CONFLICTS OF LAW.
24 ARBITRATION.
(a) ARBITRABLE MATTERS. If any dispute or controversy arises between
Executive and the Company as to their respective rights or obligations
under this Agreement, then either party may submit the dispute or
controversy to arbitration under the then-current National Employment
Dispute Resolution Rules of the American Arbitration Association (AAA)
(the "RULES"); provided, however, the Company shall retain its rights to
seek a restraining order or injunctive relief pursuant to SECTION 15. Any
arbitration hereunder shall be conducted before a single arbitrator unless
the parties mutually agree to a panel of three arbitrators. The site for
any arbitration hereunder shall be in Montgomery County or Harris County,
Texas, unless otherwise mutually agreed by the parties.
(b) SUBMISSION TO ARBITRATION. The party submitting any matter to
arbitration shall do so in accordance with the Rules. Notice to the other
party shall state the question or questions to be submitted for decision
or award by arbitration. Notwithstanding any provision in this SECTION 24,
Executive shall be entitled to seek specific performance of the
Executive's right to be paid during the pendency of any dispute or
controversy arising under this Agreement. In order to prevent irreparable
harm, the arbitrator may grant temporary or permanent injunctive or other
equitable relief for the protection of property rights.
(c) ARBITRATION PROCEDURES. The arbitrator shall set the date, time
and place for each hearing, and shall give the parties advance written
notice in accordance with the Rules. Any party may be represented by
counsel or other authorized representative at any hearing. The arbitration
shall be governed by the Federal Arbitration Act, 9 U.S.C. ss.ss. 1 et.
seq. (or its successor). The arbitrator shall apply the substantive law
(and the law of remedies, if applicable) of the State of Texas to the
claims asserted to the extent that the arbitrator determines that federal
law is not controlling.
(d) COMPLIANCE WITH AWARD.
(1) Any award of an arbitrator shall be final and binding upon
the parties to such arbitration, and each party shall immediately
make such changes in its conduct or provide such monetary payment or
other relief as such award requires. The parties agree that the
award of the arbitrator shall be final and binding and shall be
subject only to the judicial review permitted by the Federal
Arbitration Act.
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(2) The parties hereto agree that the arbitration award may be
entered with any court having jurisdiction and the award may then be
enforced as between the parties, without further evidentiary
proceedings, the same as if entered by the court at the conclusion
of a judicial proceeding in which no appeal was taken. The Company
and the Executive hereby agree that a judgment upon any award
rendered by an arbitrator may be enforced in other jurisdictions by
suit on the judgment or in any other manner provided by law.
(e) COSTS AND EXPENSES. Each party shall pay any monetary amount
required by the arbitrator's award, and the fees, costs and expenses for
its own counsel, witnesses and exhibits, unless otherwise determined by
the arbitrator in the award. The compensation and costs and expenses
assessed by the arbitrator and AAA shall be paid by the losing party
unless otherwise determined by the arbitrator in the award. If court
proceedings to stay litigation or compel arbitration are necessary, the
party who unsuccessfully opposes such proceedings shall pay all associated
costs, expenses, and attorney's fees which are reasonably incurred by the
other party as determined by the arbitrator.
25 BINDING EFFECT: THIRD PARTY BENEFICIARIES. This Agreement shall be
binding upon and inure to the benefit of the parties hereto, and to their
respective heirs, executors, personal representatives, successors and permitted
assigns hereunder, but otherwise this Agreement shall not be for the benefit of
any third parties.
26 ENTIRE AGREEMENT AND AMENDMENT. This Agreement contains the entire
agreement of the parties with respect to Executive's employment and the other
matters covered herein; moreover, this Agreement supersedes all prior and
contemporaneous agreements and understandings, oral or written, between the
parties hereto concerning the subject matter hereof. This Agreement may be
amended, waived or terminated only by a written instrument executed by both
parties hereto.
27 SURVIVAL OF CERTAIN PROVISIONS. Wherever appropriate to the intention
of the parties hereto, the respective rights and obligations of said parties,
including, but not limited to, the rights and obligations set forth in SECTIONS
6 THROUGH 17 AND 24 hereof, shall survive any termination or expiration of this
Agreement.
28 WAIVER OF BREACH. No waiver by either party hereto of a breach of any
provision of this Agreement by any other party, or of compliance with any
condition or provision of this Agreement to be performed by such other party,
will operate or be construed as a waiver of any subsequent breach by such other
party or any similar or dissimilar provision or condition at the same or any
subsequent time. The failure of either party hereto to take any action by reason
of any breach will not deprive such party of the right to take action at any
time while such breach continues.
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29 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and inure
to the benefit of Company and its affiliated entities, and its and their
successors, and upon any person or entity acquiring, whether by merger,
consolidation, purchase of assets or otherwise, all or substantially all of the
assets and business of Company. Any reference herein to "Company" shall mean the
Company as first written above, as well as any successor or successors thereto.
This Agreement is personal to Executive, and Executive may not assign,
delegate or otherwise transfer all or any of his rights, duties or obligations
hereunder without the consent of the Board of Directors. Any attempt by the
Executive to assign, delegate or otherwise transfer this Agreement, any portion
hereof, or his rights, duties or obligations hereunder without the prior written
consent of the Board of Directors shall be deemed void and of no force and
effect. Subject to the preceding provisions of this paragraph, this Agreement
shall be binding upon and inure to the benefit of Executive and his heirs and
assigns.
30 NOTICES. Notices provided for in this Agreement shall be in writing and
shall be deemed to have been duly received (a) when delivered in person or sent
by facsimile transmission, (b) on the first business day after it is sent by air
express overnight courier service, or (c) on the third business day following
deposit in the United States mail, registered or certified mail, return receipt
requested, postage prepaid and addressed, to the following address, as
applicable:
(1) If to Company, addressed to:
Synagro Technologies, Inc.
5850 San Felipe, Suite 500
Houston, Texas 77057
Attention: CEO
(2) If to Executive, addressed to the address set forth below his
name on the execution page hereof;
or to such other address as either party may have furnished to the other party
in writing in accordance with this SECTION 30.
31 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be an original,
but all such counterparts shall together constitute one and the same instrument.
Each counterpart may consist of a copy hereof containing multiple signature
pages, each signed by one party hereto, but together signed by both of the
parties hereto.
32 EXECUTIVE ACKNOWLEDGMENT/NO STRICT CONSTRUCTION. The Executive
represents to Company that he is knowledgeable and sophisticated as to business
matters, including the subject matter of this Agreement, that he has read the
Agreement and that he understands its terms and conditions. The parties hereto
agree that the language used in this Agreement shall be deemed to be the
language chosen by them to express their mutual intent, and no rule of strict
construction shall be applied against either party hereto. Executive also
represents that he is free to enter into this Agreement including, without
limitation, that he is not subject to any other contract of employment or
covenant not to compete that would conflict in any way with his duties under
this Agreement. Executive acknowledges that he has had the opportunity to
consult with counsel of his choice, independent of Employer's counsel, regarding
the terms and conditions of this Agreement and has done so to the extent that
he, in his unfettered discretion, deemed to be appropriate.
33 SUPERSEDING AGREEMENT. This Employment Agreement shall supersede any
prior employment agreement entered into between the Company and Executive.
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IN WITNESS WHEREOF, the Executive has hereunto set his hand, and Company
has caused these presents to be executed in its name and on its behalf, to be
effective as of the Effective Date first above written.
WITNESS: EXECUTIVE:
Signature: Signature:
Printed Name: Printed Name: ALVIN L. THOMAS II
Date: Date:
Address for Notices:
2342 QUENBY STREET
HOUSTON, TEXAS 77005
ATTEST: SYNAGRO TECHNOLOGIES, INC.:
By: By: __________________________
Title: Its: CHAIRMAN & CEO
Printed Name: Printed Name: ROSS M. PATTEN
Date: Date:
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EXHIBIT 10.6.2
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT, made and entered into as of the ____ day of
February, 1999 (the "EFFECTIVE DATE"), by and between Synagro Technologies,
Inc., a Delaware corporation (hereafter "COMPANY") and Mark A. Rome (hereafter
"EXECUTIVE"), an individual;
W I T N E S S E T H:
WHEREAS, Company wishes to secure the services of the Executive subject
to the terms and conditions hereafter set forth; and
WHEREAS, the Executive is willing to enter into this Agreement upon the
terms and conditions hereafter set forth,
NOW, THEREFORE, in consideration of the mutual promises and agreements set
forth herein, the parties hereto agree as follows:
1. EMPLOYMENT. During the Employment Period (as defined in SECTION 4
hereof), the Company shall employ Executive, and Executive shall serve, as
Executive Vice President and Chief Development Officer of the Company.
Executive's principal place of employment shall be at the Company's principal
corporate offices in Houston, Texas during the Employment Period.
2. COMPENSATION. The Company shall pay or cause to be paid to Executive
during the Employment Period an annual base salary for his services under this
Agreement of not less than $120,000, payable in equal monthly or semi-monthly
installments in accordance with the Company's normal payroll procedures.
Executive's base salary shall be subject to annual review and may be increased,
depending upon the performance of the Company and Executive, upon the
recommendation of the Chairman or the Board of Directors of the Company
(hereafter "BOARD OF DIRECTORS"). Executive shall be entitled to participate in
the bonus "pool" or other structure established for the Company's top level of
management. Nothing contained herein shall preclude the payment of a bonus,
supplemental or incentive compensation to Executive provided that the Board of
Directors authorizes any such compensation payment. As additional compensation
to Executive for the services previously rendered by him, the services to be
rendered by him pursuant to, and Executive's other duties and obligations
arising under this Agreement, including, without limitation, his obligations
under Sections 12 and 14 hereof, the Company has granted to Executive options to
purchase 240,000 shares of common stock of the Company, par value $.002 per
share, between the Company and Executive.
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3. DUTIES AND RESPONSIBILITIES OF EXECUTIVE. During the Employment Period,
Executive shall devote his services full time to the business of the Company and
perform the duties and responsibilities assigned to him by Ross M. Patten or the
Board of Directors to the best of his ability and with reasonable diligence. In
determining Executive's duties and responsibilities, Ross M. Patten and the
Board of Directors shall act in good faith and shall not assign duties and
responsibilities to Executive that are not appropriate or customary with respect
to the position of Executive hereunder. This SECTION 3 shall not be construed as
preventing Executive from engaging in reasonable volunteer services for
charitable, educational or civic organizations, or from investing his assets in
such form or manner as will not require a material amount of his services in the
operations of the companies or businesses in which such investments are made.
4. TERM OF EMPLOYMENT. Executive's term of employment with the Company
under this Agreement shall be for 24 consecutive months beginning on the
Effective Date, unless Notice of Termination pursuant to SECTION 7 is given by
either the Company or Executive to the other party. The Company and Executive
shall each have the right to give Notice of Termination at will, with or without
cause, at any time, subject to the terms of this Agreement regarding rights and
duties of the parties upon termination of employment. This 24-month employment
period hereunder shall be referred to herein as the "TERM OF EMPLOYMENT." The
period from the Effective Date through the date of Executive's termination of
employment for whatever reason shall be referred to herein as the "EMPLOYMENT
PERIOD."
5. BENEFITS. Subject to the terms and conditions of this Agreement, during
the Employment Period, Executive shall be entitled to the following:
(a) REIMBURSEMENT OF EXPENSES. The Company shall pay or reimburse
Executive for all reasonable travel, entertainment and other reasonable
expenses paid or incurred by Executive in performing his business
obligations hereunder. The Company shall also provide Executive with
suitable office space and secretarial help. Executive shall provide
substantiating documentation for expense reimbursement requests as
reasonably required by the Company for its tax and other business records.
(b) EXPENSE ALLOWANCES. Executive shall be entitled to: (i) a car
allowance of $500 per month, and (ii) family medical and dental insurance
coverage paid for 100% by Company and which allows Executive to choose
among all options for medical and dental insurance provided to other
Company employees in the same area.
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(c) OTHER BENEFITS. Executive shall be entitled to participate in
any pension, profit-sharing, stock option, deferred compensation, or
similar plan or program of the Company established by the Company, to the
extent that he is eligible under the provisions thereof. Executive shall
also be entitled to participate in any group insurance, hospitalization,
medical, health and accident, disability or similar plan or program
established by the Company, to the extent that he is eligible under the
provisions thereof.
(d) PAID VACATION. Executive shall initially be entitled to three
(3) weeks of paid vacation during each 12-month period of employment with
the Company (which shall accrue monthly on a PRO RATA basis). Executive
shall thereafter be entitled to the number of days of paid vacation each
year that is accorded under the Company's vacation policy as in effect
from time to time or three (3) weeks, whichever is greater. Unused
vacation days up to a maximum of two (2) weeks in one year shall be
carried forward for a period not to exceed 12 months in accordance with
Company's vacation policy as in effect from time to time.
6. RIGHTS AND PAYMENTS UPON TERMINATION. The Executive's right to
compensation and benefits for periods after the date on which his employment
with the Company terminates for whatever reason (the "TERMINATION DATE") shall
be determined in accordance with this SECTION 6,
(a) MINIMUM PAYMENTS. Executive shall be entitled to the following
payments, in addition to any payments or benefits to which the Executive
is entitled under the terms of any employee benefit plan or the following
provisions of this SECTION 6:
(1) his unpaid salary for the full month in which his
Termination Date occurred; provided, however, if Executive is
terminated for Cause pursuant to SECTION 6(B) below, he shall only
be entitled to receive his accrued but unpaid salary through his
Termination Date; and
(2) his accrued but unpaid vacation pay for the period ending
on his Termination Date in accordance with the Company's vacation
pay policy as in effect at such time.
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(b) SEVERANCE PAYMENT. Notwithstanding any other provision of this
Agreement to the contrary, in the event that: (i) Executive's employment
hereunder is terminated by the Company at any time for any reason EXCEPT
(A) for Cause (as defined below) or (B) Executive's death or Disability
(as defined below) or (ii) Executive terminates his own employment
hereunder at any time for Good Reason (as defined below), then, in either
such event, Executive shall be entitled to receive, and the Company shall
be obligated to pay, a lump sum cash payment equal to one hundred percent
(100%) the present value of Executive's annual salary pursuant to SECTION
2 or the annual salary then being paid to him, whichever is greater. For
purposes of the immediately preceding sentence, the "present value" of
such annual salary shall be determined in accordance with the regulations
under Section 280G of the Code (as defined below). Also, except as
otherwise specifically provided in this SECTION 6(B), such severance
payment shall be in addition to, and shall not reduce or offset, any other
payments that are due to Executive from the Company or any other source or
under any other agreements, except any severance pay plan or program
maintained by the Company that covers employees generally. The provisions
of this SECTION 6(B) shall supersede any conflicting provisions of this
Agreement but shall not be construed to curtail, offset or limit
Executive's rights to any other payments, whether contingent upon a Change
in Control (as defined below) or otherwise, under the Agreement or any
other agreement, contract, plan or other source of payment except as
specifically provided herein. In addition, in the event of a Change in
Control, Executive shall be entitled to receive the bonus payment
described in SECTION 9 hereof, if applicable.
Notwithstanding any provision of this SECTION 6(B) to the contrary,
the Executive must first execute an appropriate release and waiver
agreement whereby Executive agrees to release and waive, in return for the
severance payment described in this SECTION 6(B), any claims that he may
have against the Company for (1) unlawful discrimination (including,
without limitation, age discrimination) and (2) severance pay under any
other severance pay plan or program maintained by the Company that covers
Executive; provided, however, such agreement shall not release or waive
any claims that may be brought by Executive for payments that may be due
under this Agreement, without Executive's express written consent. Any
severance payment required under this SECTION 6(B) shall be paid to
Executive within twenty (20) days after Executive executes such release
and waiver agreement, unless the parties agree in writing before then to
another payment date or method of payment, e.g., installment payments.
Executive shall not be required to mitigate any damages under this SECTION
6(B) or any other provision of this Agreement.
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A "CHANGE IN CONTROL" of the Company shall be deemed to have
occurred if any of the following shall have taken place: (1) a change in
control is reported by the Company in response to either Item 6(e) of
Schedule 14A of Regulation 14A promulgated under the Securities Exchange
Act of 1934 (the "EXCHANGE ACT") or Item 1 of Form 8-K promulgated under
the Exchange Act, or any successor provisions thereto; (2) any "person"
(as such term is used in Sections 13(d) and 14(d)(2) of the Exchange Act)
is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), or any successor provisions thereto, directly or
indirectly, of securities of the Company representing twenty-five (25%) or
more of the combined voting power of the Company's then-outstanding
securities; (3) the approval by the stockholders of the Company of a
reorganization, merger, or consolidation, in each case with respect to
which persons who were stockholders of the Company immediately prior to
such reorganization, merger, or consolidation do not, immediately
thereafter, own or control more than fifty percent (50%) of the combined
voting power entitled to vote generally in the election of directors of
the reorganized, merged or consolidated Company's then outstanding
securities, or a liquidation or dissolution of the Company or of the sale
of all or substantially all of the Company's assets; (4) in the event any
person shall be elected by the stockholders of the Company to the Board of
Directors who shall have not been nominated for election by a majority of
the Board of Directors or any duly appointed committee thereof; or (5)
following the election or removal of directors, a majority of the Board of
Directors consists of individuals who were not members of the Board of
Directors two (2) years before such election or removal, unless the
election of each director who is not a director at the beginning of such
two-year period has been approved in advance by directors representing at
least a majority of the directors then in office who were directors at the
beginning of the two-year period.
"DISABILITY" means a "permanent and total disability" as defined in
Section 22(e)(3) of the Code and the Treasury regulations thereunder.
Evidence of such Disability shall be certified by a physician acceptable
to both the Company and Executive. In the event that the parties are not
able to agree on the choice of a physician, each shall select a physician
who, in turn, shall select a third physician to render such certification.
All costs relating to the determination of whether Executive has incurred
a Disability shall be paid by the Company.
"CODE" means the Internal Revenue Code of 1986, as amended.
References in this Agreement to any Section of the Code shall include any
"Successor Provisions" as defined in SECTION 9(E).
"CAUSE" means a termination of employment directly resulting from:
(1) the Executive having engaged in intentional misconduct that caused or
would have caused, if the Company did not intervene, a serious violation
by the Company of any state or federal laws, (2) the Executive having
engaged in a theft of corporate funds or corporate assets or in a material
act of fraud upon the Company, (3) an intentional act of personal
dishonesty taken by the Executive that was intended to result in personal
enrichment of the Executive at the expense of the Company, (4) repeated
violations by the Executive of Executive's primary or regular obligations
under this Agreement or under written policies of the Company which are
demonstrably willful on the Executive's part, and for which Executive has
received more than two written warnings that specify each area of
Executive's violations, (5) Executive's use of illegal drugs as evidenced
by a drug test authorized by Company, (6) Executive's final conviction (or
the entry of a plea of nolo contendere or equivalent plea) in a court of
competent jurisdiction of a felony or other crime involving dishonesty,
and (7) a breach by the Executive during the Employment Period of the
provisions of SECTIONS 11, 12, 13 OR 14 below, if such breach results in a
material injury to the Company.
"GOOD REASON" means the occurrence of any of the following events
without Executive's express written consent:
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(1) A ten percent (10%) or greater reduction in Executive's
annual base salary; or
(2) Any breach by the Company or its successors of any
material provision of this Agreement; or
(3) A substantial and adverse change in the Executive's
duties, control, authority, status or position, or the assignment to
the Executive of any duties or responsibilities which are materially
inconsistent with such status or position, or a material reduction
in the duties and responsibilities previously exercised by the
Executive, or a loss of title, loss of office, loss of significant
authority, power or control, or any removal of Executive from, or
any failure to reappoint or reelect him to, such positions, except
in connection with the termination of his employment for Cause,
Disability or death; or
(4) Following a Change in Control (as defined in SECTION 6(B))
any of the following events:
(A) the failure by the Company or its successor to
expressly assume and agree to continue and perform this
Agreement in the same manner and to the same extent that the
Company would be required to perform if such Change in Control
had not occurred;
(B) a relocation of more than twenty-five (25) miles of
Executive's principal office from the location of such office
immediately prior to the Change in Control date;
(C) a substantial increase in the business travel
required of Executive by the Company or its successor; or
(D) the Company or its successor fails to continue in
effect any pension plan, health-and-accident plan, or
disability income plan in which Executive was participating at
the time of the Change in Control (or plans providing
Executive with substantially equal and similar benefits), or
the taking of any action by the Company or its successor which
would adversely affect Executive's participation in or
materially reduce his benefits under any such plan that was
enjoyed by him immediately prior to the Change in Control.
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(c) STOCK OPTIONS. In the event of a Change in Control, Executive's
resignation for Good Reason or Executive's termination without Cause, all
unvested stock options previously granted to Executive shall immediately
vest and be exercisable as set forth below. In the event that there is a
termination of Executive's employment hereunder for any reason, Executive
shall be entitled to exercise any and all stock options that were
previously granted to him by the Company, and are outstanding, vested and
unexercised as of his Termination Date, during the exercise period ending
on the shorter of (i) two (2) years from his Termination Date or (ii) the
expiration date of the stock option as specified in the stock option plan
or stock option agreement, as applicable, notwithstanding any provision in
such plan or agreement that provides for a more limited time period to
exercise stock options following termination of employment; provided
however, if said stock option plan or stock option agreement provides
therein for a longer period of time to exercise such outstanding, vested
and unexercised stock options following his Termination Date, then such
stock option plan or agreement shall control and the remaining provisions
of this SECTION 6(C) shall be inapplicable and without further force or
effect. In the event that there is a termination of Executive's employment
hereunder for Cause or Executive voluntarily resigns without Good Reason
within two years for the date of this Agreement, Executive shall forfeit
any and all stock options that were previously granted to him by the
Company, and are unvested and unexercised as of his Termination Date.
During the extension period specified in the previous paragraph, if
applicable, the Executive shall be considered an employee of the Company
who shall make himself available to provide consulting services to the
Company in consideration for such extension of the option exercise period
and any post-termination payments provided to Executive under SECTION 6(A)
OR (B) of this Agreement. In this regard, Executive agrees to be
classified as an employee of the Company solely for the limited purpose of
making himself available to provide consulting services on an as-needed
basis; provided, however, Executive hereby specifically waives any right,
entitlement, claim or demand to (i) any additional compensation for such
consulting services and (ii) coverage or benefits under any of the
Company's employee benefit plans or programs, or other perquisites, terms
and conditions of employment, except as expressly specified in other
provisions of this Agreement. Except as expressly provided in this SECTION
6(C), the provision of consulting services by Executive shall not expand
his rights or duties under this Agreement. Executive hereby agrees to
provide, upon request of the Company, consulting services to the Company
on the following terms and conditions:
(1) Executive will make himself available, on an as-needed basis,
to provide consulting services to the Company for up to three
(3) days per month during the period beginning on the day
after his Termination Date and ending on the last day of the
extension period for exercising stock options as provided in
the first paragraph of SECTION 6(C) above, subject to the
following conditions:
(A) At least five (5) days written advance notice to
Executive is provided by the Company;
(B) There is no concurrent illness of Executive or his
spouse;
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(C) There is no prior commitment of Executive including,
without limitation, vacation or attention to personal
affairs; and
(D) No travel is required of Executive in excess of 200
miles round-trip.
Executive, in any particular instance, may waive any or all of
the conditions set forth in clauses (A), (B), (C) or (D) above
in his complete discretion. Any such waiver shall not be a
continuing waiver and shall not release Executive of any of
his rights hereunder.
(2) Executive agrees to provide such information, services, advice
and recollection of events as may from time to time be
reasonably requested by, or on behalf of, the Company
regarding corporate, regulatory or business matters of which
Executive may have knowledge, information or understanding,
including testifying truthfully in any litigation or other
proceedings involving the Employer, provided that (i)
Executive first determines that his interests are not adverse,
or potentially adverse, to those of the Company, and (ii) the
Company has indemnified Executive to his satisfaction
including, without limitation, for reasonable attorney's fees
and costs. The parties hereto agree that it is the quality,
and not the quantity, of the consulting services to be
provided by Executive that is important to the Company.
(3) The Company will reimburse Executive for all reasonable
out-of-pocket expenses incurred by Executive in the course of
his performance of consulting services, including, without
limitation, supplies, mileage and travel expenses. Executive
agrees not to incur any expense, obligation, or liability on
behalf of the Company without its prior written consent.
(4) The provision of consulting services by Executive for the
Company is non-exclusive and shall not, in any way, limit the
rights of Executive to seek and maintain other employment or
to perform compensatory services on behalf of any other person
or entity.
(5) The consulting services contemplated under this SECTION 6(c)
shall not be considered part of Executive's Employment Period
pursuant to SECTION 4, nor affect his Termination Date.
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7. NOTICE OF TERMINATION. Any termination by the Company or the Executive
shall be communicated by Notice of Termination to the other party hereto. For
purposes of this Agreement, the term "NOTICE OF TERMINATION" means a written
notice which indicates the specific termination provision of this Agreement
relied upon and sets forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Executive's employment under
the provision so indicated.
8. NO MITIGATION REQUIRED. Executive shall not be required to mitigate the
amount of any payment provided for under this Agreement by seeking other
employment or in any other manner.
9. CHANGE IN CONTROL: REQUIREMENT OF BONUS PAYMENT IN CERTAIN
CIRCUMSTANCES.
(a) In the event that Executive is deemed to have received an
"excess parachute payment" (as such term is defined in Section 280G(b) of
the Code) which is subject to the excise taxes (the "EXCISE TAXES")
imposed by Section 4999 of the Code in respect of any payment pursuant to
this Agreement, or any other agreement, plan, instrument or obligation, in
whatever form, the Company shall make the Bonus Payment (defined below) to
Executive promptly after the date on which Executive received or is deemed
to have received any excess parachute payment notwithstanding any contrary
provision herein.
(b) The term "BONUS PAYMENT" means a cash payment in an amount equal
to the sum of (i) all Excise Taxes payable by Executive, plus (ii) all
additional Excise Taxes and federal or state income taxes to the extent
such taxes are imposed in respect of the Bonus Payment, such that
Executive shall be in the same after-tax position and shall have received
the same benefits that he would have received if the Excise Taxes had not
been imposed. For purposes of calculating any income taxes attributable to
the Bonus Payment, Executive shall be deemed for all purposes to be paying
income taxes at the highest marginal federal income tax rate, taking into
account any applicable surtaxes and other generally applicable taxes which
have the effect of increasing the marginal federal income tax rate and, if
applicable, at the highest marginal state income tax rate, to which the
Bonus Payment and Executive are subject. An example of the calculation of
the Bonus Payment is set forth below: Assume that the Excise Tax rate is
20%, the highest federal marginal income tax rate is 40% and Executive is
not subject to state income taxes. Further assume that Executive has
received an excess parachute payment in the amount of $200,000, on which
$40,000 in Excise Taxes are payable. The amount of the required Bonus
Payment is thus $100,000. The Bonus Payment of $100,000, less additional
Excise Taxes on the Bonus Payment of $20,000 (i.e., 20% x $100,000) and
income taxes of $40,000 (i.e., 40% x $100,000), yields $40,000, the amount
of the Excise Taxes payable in respect of the original excess parachute
payment.
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(c) Executive agrees to reasonably cooperate with the Company to
minimize the amount of the excess parachute payments, including, without
limitation, assisting the Company in establishing that some or all of the
payments received by Executive that are "contingent on a change", as
described in Section 280G(b)(2)(A)(i) of the Code, are reasonable
compensation for personal services actually rendered by Executive before
the date of such change or to be rendered by Executive on or after the
date of such change. In the event that the Company is able to establish
that the amount of the excess parachute payments is less than originally
anticipated by Executive, Executive shall refund to the Company any excess
Bonus Payment to the extent not required to pay Excise Taxes or income
taxes (including those incurred in respect of receipt of the Bonus
Payment). Notwithstanding the foregoing, Executive shall not be required
to take any action which his attorney or tax advisor advises him in
writing (i) is improper or (ii) exposes Executive to material personal
liability. Executive may require the Company to deliver to Executive an
indemnification agreement in form and substance satisfactory to Executive
as a condition to taking any action required by this subsection (c).
(d) The Company shall make any payment required to be made under
this SECTION 9 in cash and on demand. Any payment required to be paid by
the Company under this SECTION 9 which is not paid within 30 days of
receipt by the Company of Executive's written demand therefor shall
thereafter be deemed delinquent, and the Company shall pay to Executive
immediately upon demand interest at the highest nonusurious rate per annum
allowed by applicable law from the date such payment becomes delinquent to
the date of payment of such delinquent sum with interest.
(e) In the event that there is any change to the Code which results
in the recodification of Section 280G or Section 4999 of the Code, or in
the event that either such section of the Code is amended, replaced or
supplemented by other provisions of the Code of similar import ("SUCCESSOR
PROVISIONS"), then this Agreement shall be applied and enforced with
respect to such new Code provisions in a manner consistent with the intent
of the parties as expressed herein, which is to assure that Employee is in
the same after-tax position and has received the same benefits that he
would have been in and received if any taxes imposed by Section 4999 or
any Successor Provisions had not been imposed.
10. POST-TERMINATION MEDICAL COVERAGE. If the employment of Executive is
terminated for any reason except for Cause (as defined in SECTION 6(B)), death
or voluntary resignation without Good Reason, then the Company shall provide
post-employment medical coverage in accordance with the terms and conditions of
this SECTION 10. The Company shall continue to cover Executive and his spouse
(hereinafter referred to as "SPOUSE") and his eligible dependent children, if
any, from the Termination Date until two (2) years following the Termination
Date, under the group health care plan maintained by the Company to provide
major medical insurance coverage for employees and their dependents (such group
medical plan or its successor shall be hereinafter referred to as the "HEALTH
CARE PLAN").
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Executive, on behalf of himself and his Spouse and other dependents, if
any, shall be required to pay premiums for their coverage under the Health Care
Plan at the rates, if any, charged by the Company to active employees who are
senior officers of the Company at the time the premium is charged. Any
post-employment coverage under the Health Care Plan provided under this SECTION
10 shall run concurrently with COBRA continuation coverage under the Health Care
Plan and, therefore, Executive and the other qualifying beneficiaries shall
elect any COBRA continuation coverage offered to them under the Health Care Plan
following the Termination Date. The Company shall not be responsible for the
payment of any income or other taxes which may be imposed on Executive, or on
his Spouse or dependents, as the result of receiving coverage under the Health
Care Plan pursuant to this SECTION 10.
Executive, on behalf of himself and his Spouse and dependents, hereby
agrees and consents to acquire and maintain any coverage that of any them are
entitled to at any time during the two year period (as specified above in this
SECTION 10) under the Medicare program or any similar or succeeding plan or
program that is sponsored or maintained by the United States Government or any
agency thereof (hereinafter referred to as "MEDICARE"). The coverage described
in the immediately preceding sentence includes, without limitation, parts A and
B of Medicare and any additional or successor parts of Medicare. Executive, on
behalf of himself and his Spouse, further agrees and consents to pay all
required premiums and other costs for Medicare coverage from their personal
funds. Medicare coverage shall be primary payor to the coverage provided under
the Health Care Plan to the extent permitted by applicable federal law.
11. CONFLICTS OF INTEREST. In keeping with his fiduciary duties to
Company, Executive hereby agrees that he shall not become involved in a conflict
of interest, or upon discovery thereof, allow such a conflict to continue at any
time during the Employment Period. Moreover, Executive agrees that he shall
immediately disclose to the Board of Directors any facts that might involve a
conflict of interest that has not been approved by the Board of Directors.
Executive and Company recognize and acknowledge that it is not possible to
provide an exhaustive list of actions or interests that may constitute a
"conflict of interest." Moreover, Company and Executive recognize there are many
borderline situations. In some instances, full disclosure of facts by the
Executive to the Board of Directors may be all that is necessary to enable
Company to protect its interests. In others, if no improper motivation appears
to exist and Company's interests have not demonstrably suffered, prompt
elimination of the outside interest may suffice. In other egregious instances,
it may be necessary for Company to terminate Executive's employment for Cause
pursuant to SECTION 6(B) hereof. The Board of Directors reserves the right to
take such action as, in its good faith judgment, will resolve the conflict of
interest.
Executive hereby agrees that any direct or indirect interest in,
connection with, or benefit from any outside activities, particularly commercial
activities, which interest might adversely affect the Company or any of its
affiliated entities, involves a possible conflict of interest. Circumstances in
which a conflict of interest on the part of Executive would or might arise, and
which should be reported immediately to the Board of Directors, include, but are
not limited to, any of the following:
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(a) Ownership of more than a DE MINIMIS interest in any lender,
supplier, contractor, customer or other entity with which Company or any
of its affiliated entities does business;
(b) Misuse of information, property or facilities to which Executive
has access in a manner which is demonstrably injurious to the interests of
Company or any of its affiliated entities, including its business,
reputation or goodwill; or
(c) Materially trading in products or services connected with
products or services designed or marketed by or for the Company or any of
its affiliated entities.
For purposes of this Agreement, "AFFILIATED ENTITY" means any entity which
owns or controls, is owned or controlled by, or is under common ownership or
control with, the Company.
12. CONFIDENTIAL INFORMATION. (a) CONFIDENTIAL INFORMATION DEFINED.
Executive hereby acknowledges that in his senior management position, he will
create, acquire and have access to confidential information and trade secrets
pertaining to the business of Company (hereafter "Confidential Information" as
defined below). Executive hereby acknowledges that such Confidential Information
is unique and valuable to Company's business and that Company would suffer
irreparable injury if Confidential Information was divulged to the public or to
persons or entities in competition with Company. Therefore, Executive hereby
covenants and agrees to keep in strict secrecy and confidence, both during and
after the Employment Period, any Confidential Information. Executive
specifically agrees that he will not at any time disclose to others, use, copy
or permit to be copied, except in pursuance of his duties on behalf of Company
or with the prior consent of Company, Confidential Information relating to the
Company or any of its affiliated entities. For purposes of this Agreement,
"CONFIDENTIAL INFORMATION" shall mean and include, without limitation,
information related to the business affairs, property, methods of operation,
future plans, financial information, customer or client information, or other
data which relates to the business or operations of Company or any of its
affiliated entities, and all other information obtained by Executive from and
during the Employment Period which concerns the affairs of Company or any of its
affiliated entities and which Company has requested be held in confidence or
could reasonably be expected to desire be held in confidence, or the disclosure
of which would likely be embarrassing, detrimental or disadvantageous to the
Company or any of its affiliated entities, or its and their directors, officers,
employees or shareholders. Confidential Information, however, shall not include
information that is at the time of receipt by Executive in the public domain or
is otherwise generally known in the industry or subsequently enters the public
domain or becomes generally known in the industry through no fault of Executive
or breach of his duty under this SECTION 12.
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(b) REQUIRED DISCLOSURE. In the event that Executive is required by
law which cannot be waived to disclose any Confidential Information,
Executive agrees that he will provide prompt notice of such potential
disclosure to Company so that an appropriate protective order may be
sought and/or a waiver of compliance with the provisions of this Agreement
may be granted. In the event that (i) such protection or other remedy is
not obtained or (ii) Company waives in writing the compliance by Executive
with this provision, Executive agrees that he may furnish only that
portion of the Confidential Information which Executive is advised by
written opinion of counsel is legally required to be disclosed, and
Executive shall exercise his best efforts to obtain assurances that
confidential treatment will be accorded such Confidential Information.
(c) DELIVERY OF DOCUMENTS. Executive further agrees to deliver to
Company at the termination of his employment, all correspondence,
memoranda, notes, records, drawings, plans, customer lists or other
documents, and all copies thereof made, composed or received by Executive,
solely or jointly with others, and which are in Executive's possession,
custody or control at such date and which relate in any manner to the
past, present or anticipated business of Company or any of its affiliated
entities.
(d) REMEDIES. In the event of a breach or threatened breach of any
of the provisions of this SECTION 12, Company shall be entitled to an
injunction ordering the return of all such documents, and any and all
copies thereof, and restraining Executive from using or disclosing, for
his benefit or the benefit of others, in whole or in part, any
Confidential Information, including, but not limited to, the Confidential
Information which such documents contain, constitute or embody. Executive
further agrees that any breach or threatened breach of any of the
provisions of this SECTION 12 would cause irreparable injury to Company,
for which it would have no adequate remedy at law. Nothing herein shall be
construed as prohibiting Company from pursuing any other remedies
available to it for any such breach or threatened breach, including the
recovery of damages.
13. PROPERTY RIGHTS. In keeping with his fiduciary duties to Company,
Executive hereby covenants and agrees that during his Employment Period, and for
a period of one (1) year following his Termination Date, Executive shall
promptly disclose in writing to Company any and all information, ideas,
concepts, improvements, discoveries, inventions and other intellectual
properties, whether patentable or not, and whether or not reduced to practice,
which are conceived, developed, made or acquired by Executive, either
individually or jointly with others, and which relate to the business, products
or services of Company or any of its affiliated entities. In consideration for
his employment hereunder, Executive hereby specifically sells, assigns and
transfers to Company all of his worldwide right, title and interest in and to
all such information, ideas, concepts, improvements, discoveries, inventions and
other intellectual properties.
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If during the Employment Period, Executive creates any original work of
authorship or other property fixed in any tangible medium of expression which
(a) is the subject matter of copyright (including computer programs) and (b)
relates to Company's present or planned business, products, or services, whether
such property is created solely by Executive or jointly with others, such
property shall be deemed a work for hire, with the copyright automatically
vesting in Company. To the extent that any such writing or other property is
determined not to be a work for hire for whatever reason, Executive hereby
consents and agrees to the unconditional waiver of "moral rights" in such
writing or other property, and to assign to Company all of his right, title and
interest, including copyright, in such writing or other property.
Executive hereby agrees to (a) assist Company or its nominee at all times
in the protection of any and all property subject to this SECTION 13, (b) not to
disclose any such property to others without the written consent of Company or
its nominee, except as required by his employment hereunder, and (c) at the
request of Company, to execute such assignments, certificates or other interests
as Company or its nominee may from time to time deem desirable to evidence,
establish, maintain, perfect, protect or enforce its rights, title or interests
in or to any such property.
14. AGREEMENT NOT TO COMPETE. Executive hereby recognizes and acknowledges
that: (a) in his executive capacity with Company he will be given knowledge of,
and access to, the Confidential Information (as described in SECTION 12); (b) in
the event that Executive was to enter into competition with Company, Executive's
knowledge of such Confidential Information would be of invaluable benefit to a
competitor of Company, and could cause irreparable harm to Company's business
interests; and (c) Executive's consent and agreement to enter into the
noncompetition provisions and covenants set forth herein is an integral
condition of this Agreement, without which Company would not have agreed to
provide Confidential Information to Executive, nor to his compensation,
benefits, and other terms of this Agreement. Accordingly, in consideration for
his employment, compensation, benefits, access to and entrustment of
Confidential Information, the goodwill, training and experience provided to
Executive during his Employment Period, Executive hereby covenants, consents and
agrees (regardless of whether or not there has been a Change of Control) that
during the Employment Period, and for a period two (2) years after his
employment is terminated for any reason, Executive shall not, directly or
indirectly, acting alone or in conjunction with others, for his own account or
for the account of others, including, without limitation, as an officer,
director, stockholder, owner, partner, member, manager, joint venturer,
employee, promoter, consultant, agent, lender, guarantor, representative, or
otherwise:
(a) Solicit, canvass, or accept any fees or business from any
customer of Company for himself or any other person or entity engaged in a
"Similar Business to Company" (as defined below);
(b) Engage or participate in any Similar Business to Company within
any states of the United States in which the Company transacts business on
Executive's termination of employment date, or in which, as of such
termination date, the Company has made any plans or proposals to transact
business within one year from such termination date (referred to herein as
the "RESTRICTED AREA");
(c) Request or advise any service provider, supplier, or customer to
reduce or cancel any business that it may transact with Company or any of
its affiliated entities;
(d) Solicit, induce, or otherwise attempt to influence any employee
of the Company or any of its affiliated entities, to terminate his or her
relationship with the Company or any of its affiliated entities; or
(e) Make any statement or perform any act intended to advance an
interest of an existing or prospective competitor of the Company or any of
its affiliated entities in any way that demonstrably injures the
reputation, goodwill or any other business interest of Company or any of
its affiliated entities.
For purposes of this Agreement, "SIMILAR BUSINESS TO COMPANY" means any
business or other enterprise that is competitive with the current or planned
businesses, products, services or operations of the Company or any of its
affiliated entities at the time of termination of Executive's employment
including, without limitation, municipal biosolids.
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Executive hereby agrees that the limitations set forth above on his rights
to compete with Company after his termination of employment are reasonable and
necessary for the protection of Company. In this regard, Executive specifically
agrees that such limitations as to the period of time, geographic area and types
and scopes of restriction on his activities, as specified above, are reasonable
and necessary to protect the goodwill and other business interests of Company.
However, should the time period, the geographic area or any other
non-competition provision set forth herein be deemed invalid or unenforceable in
any respect, then Executive acknowledges and agrees that, as set forth in
SECTION 15 hereof, reformation may be made with respect to such time period,
geographic area or other non-competition provision in order to protect Company's
reasonable business interests to the maximum permissible extent.
15. REMEDIES. In the event of any pending, threatened or actual breach of
any of the covenants or provisions of SECTION 11, 12, 13 OR 14, it is understood
and agreed by Executive that the remedy at law for a breach of any of the
covenants or provisions of these Sections may be inadequate, and, therefore,
Company shall be entitled to a restraining order or injunctive relief from any
court of competent jurisdiction, in addition to any other remedies at law and in
equity. In the event that Company seeks to obtain a restraining order or
injunctive relief, Executive hereby agrees that Company shall not be required to
post any bond in connection therewith. Should a court of competent jurisdiction
or an arbitrator (pursuant to SECTION 24) declare any provision of SECTION 11,
12, 13 OR 14 to be unenforceable due to an unreasonable restriction of duration
or geographical area, or for any other reason, such court or arbitrator is
hereby granted the consent of each of Executive and the Company to reform such
provision and/or to grant the Company any relief, at law or in equity,
reasonably necessary to protect the reasonable business interests of Company or
any of its affiliated entities. Executive hereby acknowledges and agrees that
all of the covenants and other provisions of SECTIONS 11, 12, 13 AND 14 are
reasonable and necessary for the protection of the Company's reasonable business
interests. Executive hereby agrees that if the Company prevails in any action,
suit or proceeding with respect to any matter arising out of or in connection
with SECTION 11, 12, 13 OR 14, Company shall be entitled to all equitable and
legal remedies, including, but not limited to, injunctive relief and
compensatory damages.
16. DEFENSE OF CLAIMS. Executive agrees that, during the Employment Period
and for a period of two (2) years after his Termination Date, upon reasonable
request from the Company, he will cooperate with the Company and its affiliated
entities in the defense of any claims or actions that may be made by or against
the Company or any of its affiliated entities that affect his prior areas of
responsibility, except if Executive's reasonable interests are adverse to the
Company (or affiliated entity) in such claim or action. To the extent travel is
required to comply with the requirements of this SECTION 16, the Company shall,
to the extent possible, provide Executive with notice at least 10 days prior to
the date on which such travel would be required. The Company agrees to promptly
pay or reimburse Executive upon demand for all of his reasonable travel and
other direct expenses incurred, or to be reasonably incurred, to comply with his
obligations under this SECTION 16.
17. DETERMINATIONS BY THE BOARD OF DIRECTORS.
(a) TERMINATION OF EMPLOYMENT. Prior to a Change in Control (as
defined in SECTION 6(B)), any question as to whether and when there has
been a termination of Executive's employment, and the cause of such
termination, shall be determined by the Board of Directors in its
discretion.
(b) COMPENSATION. Prior to a Change in Control (as defined in
SECTION 6(B)), any question regarding salary, bonus and other compensation
payable to Executive pursuant to this Agreement shall be determined by the
Board of Directors in its discretion.
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18 WITHHOLDINGS: RIGHT OF OFFSET. Company may withhold and deduct from any
benefits and payments made or to be made pursuant to this Agreement (a) all
federal, state, local and other taxes as may be required pursuant to any law or
governmental regulation or ruling, (b) all other normal employee deductions made
with respect to Company's employees generally, and (c) any advances made to
Executive and owed to Company.
19 NONALIENATION. The right to receive payments under this Agreement shall
not be subject in any manner to anticipation, alienation, sale, transfer,
assignment, pledge or encumbrance by Executive, his dependents or beneficiaries,
or to any other person who is or may become entitled to receive such payments
hereunder. The right to receive payments hereunder shall not be subject to or
liable for the debts, contracts, liabilities, engagements or torts of any person
who is or may become entitled to receive such payments, nor may the same be
subject to attachment or seizure by any creditor of such person under any
circumstances, and any such attempted attachment or seizure shall be void and of
no force and effect.
20 INCOMPETENT OR MINOR PAYEES. Should the Board of Directors determine
that any person to whom any payment is payable under this Agreement has been
determined to be legally incompetent or is a minor, any payment due hereunder
may, notwithstanding any other provision of this Agreement to the contrary, be
made in any one or more of the following ways: (a) directly to such minor or
person; (b) to the legal guardian or other duly appointed personal
representative of the person or estate of such minor or person; or (c) to such
adult or adults as have, in the good faith knowledge of the Board of Directors,
assumed custody and support of such minor or person; and any payment so made
shall constitute full and complete discharge of any liability under this
Agreement in respect to the amount paid.
21 SEVERABILITY. It is the desire of the parties hereto that this
Agreement be enforced to the maximum extent permitted by law, and should any
provision contained herein be held unenforceable by a court of competent
jurisdiction or arbitrator (pursuant to SECTION 24), the parties hereby agree
and consent that such provision shall be reformed to create a valid and
enforceable provision to the maximum extent permitted by law; provided, however,
if such provision cannot be reformed, it shall be deemed ineffective and deleted
here from without affecting any other provision of this Agreement.
22 TITLE AND HEADINGS; CONSTRUCTION. Titles and headings to Sections
hereof are for the purpose of reference only and shall in no way limit, define
or otherwise affect the provisions hereof. Any and all Exhibits referred to in
this Agreement are, by such reference, incorporated herein and made a part
hereof for all purposes. The words "herein", "hereof", "hereunder" and other
compounds of the word "here" shall refer to the entire Agreement and not to any
particular provision hereof.
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23 CHOICE OF LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, WITHOUT REGARD TO THE PRINCIPLES
OF CONFLICTS OF LAW.
24 ARBITRATION.
(a) ARBITRABLE MATTERS. If any dispute or controversy arises between
Executive and the Company as to their respective rights or obligations
under this Agreement, then either party may submit the dispute or
controversy to arbitration under the then-current National Employment
Dispute Resolution Rules of the American Arbitration Association (AAA)
(the "RULES"); provided, however, the Company shall retain its rights to
seek a restraining order or injunctive relief pursuant to SECTION 15. Any
arbitration hereunder shall be conducted before a single arbitrator unless
the parties mutually agree to a panel of three arbitrators. The site for
any arbitration hereunder shall be in Montgomery County or Harris County,
Texas, unless otherwise mutually agreed by the parties.
(b) SUBMISSION TO ARBITRATION. The party submitting any matter to
arbitration shall do so in accordance with the Rules. Notice to the other
party shall state the question or questions to be submitted for decision
or award by arbitration. Notwithstanding any provision in this SECTION 24,
Executive shall be entitled to seek specific performance of the
Executive's right to be paid during the pendency of any dispute or
controversy arising under this Agreement. In order to prevent irreparable
harm, the arbitrator may grant temporary or permanent injunctive or other
equitable relief for the protection of property rights.
(c) ARBITRATION PROCEDURES. The arbitrator shall set the date, time
and place for each hearing, and shall give the parties advance written
notice in accordance with the Rules. Any party may be represented by
counsel or other authorized representative at any hearing. The arbitration
shall be governed by the Federal Arbitration Act, 9 U.S.C. ss.ss. 1 et.
seq. (or its successor). The arbitrator shall apply the substantive law
(and the law of remedies, if applicable) of the State of Texas to the
claims asserted to the extent that the arbitrator determines that federal
law is not controlling.
(d) COMPLIANCE WITH AWARD.
(1) Any award of an arbitrator shall be final and binding upon
the parties to such arbitration, and each party shall immediately
make such changes in its conduct or provide such monetary payment or
other relief as such award requires. The parties agree that the
award of the arbitrator shall be final and binding and shall be
subject only to the judicial review permitted by the Federal
Arbitration Act.
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(2) The parties hereto agree that the arbitration award may be
entered with any court having jurisdiction and the award may then be
enforced as between the parties, without further evidentiary
proceedings, the same as if entered by the court at the conclusion
of a judicial proceeding in which no appeal was taken. The Company
and the Executive hereby agree that a judgment upon any award
rendered by an arbitrator may be enforced in other jurisdictions by
suit on the judgment or in any other manner provided by law.
(e) COSTS AND EXPENSES. Each party shall pay any monetary amount
required by the arbitrator's award, and the fees, costs and expenses for
its own counsel, witnesses and exhibits, unless otherwise determined by
the arbitrator in the award. The compensation and costs and expenses
assessed by the arbitrator and AAA shall be paid by the losing party
unless otherwise determined by the arbitrator in the award. If court
proceedings to stay litigation or compel arbitration are necessary, the
party who unsuccessfully opposes such proceedings shall pay all associated
costs, expenses, and attorney's fees which are reasonably incurred by the
other party as determined by the arbitrator.
25 BINDING EFFECT: THIRD PARTY BENEFICIARIES. This Agreement shall be
binding upon and inure to the benefit of the parties hereto, and to their
respective heirs, executors, personal representatives, successors and permitted
assigns hereunder, but otherwise this Agreement shall not be for the benefit of
any third parties.
26 ENTIRE AGREEMENT AND AMENDMENT. This Agreement contains the entire
agreement of the parties with respect to Executive's employment and the other
matters covered herein; moreover, this Agreement supersedes all prior and
contemporaneous agreements and understandings, oral or written, between the
parties hereto concerning the subject matter hereof. This Agreement may be
amended, waived or terminated only by a written instrument executed by both
parties hereto.
27 SURVIVAL OF CERTAIN PROVISIONS. Wherever appropriate to the intention
of the parties hereto, the respective rights and obligations of said parties,
including, but not limited to, the rights and obligations set forth in SECTIONS
6 THROUGH 17 AND 24 hereof, shall survive any termination or expiration of this
Agreement.
28 WAIVER OF BREACH. No waiver by either party hereto of a breach of any
provision of this Agreement by any other party, or of compliance with any
condition or provision of this Agreement to be performed by such other party,
will operate or be construed as a waiver of any subsequent breach by such other
party or any similar or dissimilar provision or condition at the same or any
subsequent time. The failure of either party hereto to take any action by reason
of any breach will not deprive such party of the right to take action at any
time while such breach continues.
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29 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and inure
to the benefit of Company and its affiliated entities, and its and their
successors, and upon any person or entity acquiring, whether by merger,
consolidation, purchase of assets or otherwise, all or substantially all of the
assets and business of Company. Any reference herein to "Company" shall mean the
Company as first written above, as well as any successor or successors thereto.
This Agreement is personal to Executive, and Executive may not assign,
delegate or otherwise transfer all or any of his rights, duties or obligations
hereunder without the consent of the Board of Directors. Any attempt by the
Executive to assign, delegate or otherwise transfer this Agreement, any portion
hereof, or his rights, duties or obligations hereunder without the prior written
consent of the Board of Directors shall be deemed void and of no force and
effect. Subject to the preceding provisions of this paragraph, this Agreement
shall be binding upon and inure to the benefit of Executive and his heirs and
assigns.
30 NOTICES. Notices provided for in this Agreement shall be in writing and
shall be deemed to have been duly received (a) when delivered in person or sent
by facsimile transmission, (b) on the first business day after it is sent by air
express overnight courier service, or (c) on the third business day following
deposit in the United States mail, registered or certified mail, return receipt
requested, postage prepaid and addressed, to the following address, as
applicable:
(1) If to Company, addressed to:
Synagro Technologies, Inc.
5850 San Felipe, Suite 500
Houston, Texas 77057
Attention: CEO
(2) If to Executive, addressed to the address set forth below his
name on the execution page hereof;
or to such other address as either party may have furnished to the other party
in writing in accordance with this SECTION 30.
31 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be an original,
but all such counterparts shall together constitute one and the same instrument.
Each counterpart may consist of a copy hereof containing multiple signature
pages, each signed by one party hereto, but together signed by both of the
parties hereto.
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32 EXECUTIVE ACKNOWLEDGMENT/NO STRICT CONSTRUCTION. The Executive
represents to Company that he is knowledgeable and sophisticated as to business
matters, including the subject matter of this Agreement, that he has read the
Agreement and that he understands its terms and conditions. The parties hereto
agree that the language used in this Agreement shall be deemed to be the
language chosen by them to express their mutual intent, and no rule of strict
construction shall be applied against either party hereto. Executive also
represents that he is free to enter into this Agreement including, without
limitation, that he is not subject to any other contract of employment or
covenant not to compete that would conflict in any way with his duties under
this Agreement. Executive acknowledges that he has had the opportunity to
consult with counsel of his choice, independent of Employer's counsel, regarding
the terms and conditions of this Agreement and has done so to the extent that
he, in his unfettered discretion, deemed to be appropriate.
33 SUPERSEDING AGREEMENT. This Employment Agreement shall supersede any
prior employment agreement entered into between the Company and Executive.
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IN WITNESS WHEREOF, the Executive has hereunto set his hand, and Company
has caused these presents to be executed in its name and on its behalf, to be
effective as of the Effective Date first above written.
WITNESS: EXECUTIVE:
Signature: Signature:
Printed Name: Printed Name: MARK A. ROME
Date: Date:
Address for Notices:
306 CINNAMON OAKS LANE
HOUSTON, TEXAS 77079
ATTEST: SYNAGRO TECHNOLOGIES, INC.:
By: By: __________________________
Title: Its: CHAIRMAN & CEO
Printed Name: Printed Name: ROSS M. PATTEN
Date: Date:
EXHIBIT 10.6.3
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT, made and entered into as of the ____ day of
February, 1999 (the "EFFECTIVE DATE"), by and between Synagro Technologies,
Inc., a Delaware corporation (hereafter "COMPANY") and Paul C. Sellew (hereafter
"EXECUTIVE"), an individual;
W I T N E S S E T H:
WHEREAS, Company wishes to secure the services of the Executive subject
to the terms and conditions hereafter set forth; and
WHEREAS, the Executive is willing to enter into this Agreement upon the
terms and conditions hereafter set forth,
NOW, THEREFORE, in consideration of the mutual promises and agreements set
forth herein, the parties hereto agree as follows:
1. EMPLOYMENT. During the Employment Period (as defined in SECTION 4
hereof), the Company shall employ Executive, and Executive shall serve, as
President and Chief Operations Officer of the Company. Executive's principal
place of employment shall be at a location in or around Lebanon Connecticut
until such time as the Company establishes another office in the North Eastern
United States at which time Executive shall relocate his office to that
location.
2. COMPENSATION. The Company shall pay or cause to be paid to Executive
during the Employment Period an annual base salary for his services under this
Agreement of not less than $95,000, payable in equal monthly or semi-monthly
installments in accordance with the Company's normal payroll procedures.
Executive's base salary shall be subject to annual review and may be increased,
depending upon the performance of the Company and Executive, upon the
recommendation of the Chairman or the Board of Directors of the Company
(hereafter "BOARD OF DIRECTORS"). Executive shall be entitled to participate in
the bonus "pool" or other structure established for the Company's top level of
management. Nothing contained herein shall preclude the payment of a bonus,
supplemental or incentive compensation to Executive provided that the Board of
Directors authorizes any such compensation payment. As additional compensation
to Executive for the services previously rendered by him, the services to be
rendered by him pursuant to, and Executive's other duties and obligations
arising under this Agreement, including, without limitation, his obligations
under Sections 12 and 14 hereof, the Company has granted to Executive options to
purchase 300,000 shares of common stock of the Company, par value $.002 per
share, between the Company and Executive.
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3. DUTIES AND RESPONSIBILITIES OF EXECUTIVE. During the Employment Period,
Executive shall devote his services full time to the business of the Company and
perform the duties and responsibilities assigned to him by Ross M. Patten or the
Board of Directors to the best of his ability and with reasonable diligence. In
determining Executive's duties and responsibilities, Ross M. Patten and the
Board of Directors shall act in good faith and shall not assign duties and
responsibilities to Executive that are not appropriate or customary with respect
to the position of Executive hereunder. This SECTION 3 shall not be construed as
preventing Executive from engaging in reasonable volunteer services for
charitable, educational or civic organizations, or from investing his assets in
such form or manner as will not require a material amount of his services in the
operations of the companies or businesses in which such investments are made.
4. TERM OF EMPLOYMENT. Executive's term of employment with the Company
under this Agreement shall be for 24 consecutive months beginning on the
Effective Date, unless Notice of Termination pursuant to SECTION 7 is given by
either the Company or Executive to the other party. The Company and Executive
shall each have the right to give Notice of Termination at will, with or without
cause, at any time, subject to the terms of this Agreement regarding rights and
duties of the parties upon termination of employment. This 24-month employment
period hereunder shall be referred to herein as the "TERM OF EMPLOYMENT." The
period from the Effective Date through the date of Executive's termination of
employment for whatever reason shall be referred to herein as the "EMPLOYMENT
PERIOD."
5. BENEFITS. Subject to the terms and conditions of this Agreement, during
the Employment Period, Executive shall be entitled to the following:
(a) REIMBURSEMENT OF EXPENSES. The Company shall pay or reimburse
Executive for all reasonable travel, entertainment and other reasonable
expenses paid or incurred by Executive in performing his business
obligations hereunder. The Company shall also provide Executive with
suitable office space and secretarial help. Executive shall provide
substantiating documentation for expense reimbursement requests as
reasonably required by the Company for its tax and other business records.
(b) EXPENSE ALLOWANCES. Executive shall be entitled to: (i) a car
allowance of $500 per month, and (ii) family medical and dental insurance
coverage paid for 100% by Company and which allows Executive to choose
among all options for medical and dental insurance provided to other
Company employees in the same area.
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(c) OTHER BENEFITS. Executive shall be entitled to participate in
any pension, profit-sharing, stock option, deferred compensation, or
similar plan or program of the Company established by the Company, to the
extent that he is eligible under the provisions thereof. Executive shall
also be entitled to participate in any group insurance, hospitalization,
medical, health and accident, disability or similar plan or program
established by the Company, to the extent that he is eligible under the
provisions thereof.
(d) PAID VACATION. Executive shall initially be entitled to three
(3) weeks of paid vacation during each 12-month period of employment with
the Company (which shall accrue monthly on a PRO RATA basis). Executive
shall thereafter be entitled to the number of days of paid vacation each
year that is accorded under the Company's vacation policy as in effect
from time to time or three (3) weeks, whichever is greater. Unused
vacation days up to a maximum of two (2) weeks in one year shall be
carried forward for a period not to exceed 12 months in accordance with
Company's vacation policy as in effect from time to time.
6. RIGHTS AND PAYMENTS UPON TERMINATION. The Executive's right to
compensation and benefits for periods after the date on which his employment
with the Company terminates for whatever reason (the "TERMINATION DATE") shall
be determined in accordance with this SECTION 6,
(a) MINIMUM PAYMENTS. Executive shall be entitled to the following
payments, in addition to any payments or benefits to which the Executive
is entitled under the terms of any employee benefit plan or the following
provisions of this SECTION 6:
(1) his unpaid salary for the full month in which his
Termination Date occurred; provided, however, if Executive is
terminated for Cause pursuant to SECTION 6(B) below, he shall only
be entitled to receive his accrued but unpaid salary through his
Termination Date; and
(2) his accrued but unpaid vacation pay for the period ending
on his Termination Date in accordance with the Company's vacation
pay policy as in effect at such time.
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(b) SEVERANCE PAYMENT. Notwithstanding any other provision of this
Agreement to the contrary, in the event that: (i) Executive's employment
hereunder is terminated by the Company at any time for any reason EXCEPT
(A) for Cause (as defined below) or (B) Executive's death or Disability
(as defined below) or (ii) Executive terminates his own employment
hereunder at any time for Good Reason (as defined below), then, in either
such event, Executive shall be entitled to receive, and the Company shall
be obligated to pay, a lump sum cash payment equal to one hundred percent
(100%) the present value of Executive's annual salary pursuant to SECTION
2 or the annual salary then being paid to him, whichever is greater. For
purposes of the immediately preceding sentence, the "present value" of
such annual salary shall be determined in accordance with the regulations
under Section 280G of the Code (as defined below). Also, except as
otherwise specifically provided in this SECTION 6(B), such severance
payment shall be in addition to, and shall not reduce or offset, any other
payments that are due to Executive from the Company or any other source or
under any other agreements, except any severance pay plan or program
maintained by the Company that covers employees generally. The provisions
of this SECTION 6(B) shall supersede any conflicting provisions of this
Agreement but shall not be construed to curtail, offset or limit
Executive's rights to any other payments, whether contingent upon a Change
in Control (as defined below) or otherwise, under the Agreement or any
other agreement, contract, plan or other source of payment except as
specifically provided herein. In addition, in the event of a Change in
Control, Executive shall be entitled to receive the bonus payment
described in SECTION 9 hereof, if applicable.
Notwithstanding any provision of this SECTION 6(B) to the contrary,
the Executive must first execute an appropriate release and waiver
agreement whereby Executive agrees to release and waive, in return for the
severance payment described in this SECTION 6(B), any claims that he may
have against the Company for (1) unlawful discrimination (including,
without limitation, age discrimination) and (2) severance pay under any
other severance pay plan or program maintained by the Company that covers
Executive; provided, however, such agreement shall not release or waive
any claims that may be brought by Executive for payments that may be due
under this Agreement, without Executive's express written consent. Any
severance payment required under this SECTION 6(B) shall be paid to
Executive within twenty (20) days after Executive executes such release
and waiver agreement, unless the parties agree in writing before then to
another payment date or method of payment, e.g., installment payments.
Executive shall not be required to mitigate any damages under this SECTION
6(B) or any other provision of this Agreement.
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A "CHANGE IN CONTROL" of the Company shall be deemed to have
occurred if any of the following shall have taken place: (1) a change in
control is reported by the Company in response to either Item 6(e) of
Schedule 14A of Regulation 14A promulgated under the Securities Exchange
Act of 1934 (the "EXCHANGE ACT") or Item 1 of Form 8-K promulgated under
the Exchange Act, or any successor provisions thereto; (2) any "person"
(as such term is used in Sections 13(d) and 14(d)(2) of the Exchange Act)
is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), or any successor provisions thereto, directly or
indirectly, of securities of the Company representing twenty-five (25%) or
more of the combined voting power of the Company's then-outstanding
securities; (3) the approval by the stockholders of the Company of a
reorganization, merger, or consolidation, in each case with respect to
which persons who were stockholders of the Company immediately prior to
such reorganization, merger, or consolidation do not, immediately
thereafter, own or control more than fifty percent (50%) of the combined
voting power entitled to vote generally in the election of directors of
the reorganized, merged or consolidated Company's then outstanding
securities, or a liquidation or dissolution of the Company or of the sale
of all or substantially all of the Company's assets; (4) in the event any
person shall be elected by the stockholders of the Company to the Board of
Directors who shall have not been nominated for election by a majority of
the Board of Directors or any duly appointed committee thereof; or (5)
following the election or removal of directors, a majority of the Board of
Directors consists of individuals who were not members of the Board of
Directors two (2) years before such election or removal, unless the
election of each director who is not a director at the beginning of such
two-year period has been approved in advance by directors representing at
least a majority of the directors then in office who were directors at the
beginning of the two-year period.
"DISABILITY" means a "permanent and total disability" as defined in
Section 22(e)(3) of the Code and the Treasury regulations thereunder.
Evidence of such Disability shall be certified by a physician acceptable
to both the Company and Executive. In the event that the parties are not
able to agree on the choice of a physician, each shall select a physician
who, in turn, shall select a third physician to render such certification.
All costs relating to the determination of whether Executive has incurred
a Disability shall be paid by the Company.
"CODE" means the Internal Revenue Code of 1986, as amended.
References in this Agreement to any Section of the Code shall include any
"Successor Provisions" as defined in SECTION 9(E).
"CAUSE" means a termination of employment directly resulting from:
(1) the Executive having engaged in intentional misconduct that caused or
would have caused, if the Company did not intervene, a serious violation
by the Company of any state or federal laws, (2) the Executive having
engaged in a theft of corporate funds or corporate assets or in a material
act of fraud upon the Company, (3) an intentional act of personal
dishonesty taken by the Executive that was intended to result in personal
enrichment of the Executive at the expense of the Company, (4) repeated
violations by the Executive of Executive's primary or regular obligations
under this Agreement or under written policies of the Company which are
demonstrably willful on the Executive's part, and for which Executive has
received more than two written warnings that specify each area of
Executive's violations, (5) Executive's use of illegal drugs as evidenced
by a drug test authorized by Company, (6) Executive's final conviction (or
the entry of a plea of nolo contendere or equivalent plea) in a court of
competent jurisdiction of a felony or other crime involving dishonesty,
and (7) a breach by the Executive during the Employment Period of the
provisions of SECTIONS 11, 12, 13 OR 14 below, if such breach results in a
material injury to the Company.
"GOOD REASON" means the occurrence of any of the following events
without Executive's express written consent:
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(1) A ten percent (10%) or greater reduction in Executive's
annual base salary; or
(2) Any breach by the Company or its successors of any
material provision of this Agreement; or
(3) A substantial and adverse change in the Executive's
duties, control, authority, status or position, or the assignment to
the Executive of any duties or responsibilities which are materially
inconsistent with such status or position, or a material reduction
in the duties and responsibilities previously exercised by the
Executive, or a loss of title, loss of office, loss of significant
authority, power or control, or any removal of Executive from, or
any failure to reappoint or reelect him to, such positions, except
in connection with the termination of his employment for Cause,
Disability or death; or
(4) Following a Change in Control (as defined in SECTION 6(B))
any of the following events:
(A) the failure by the Company or its successor to
expressly assume and agree to continue and perform this
Agreement in the same manner and to the same extent that the
Company would be required to perform if such Change in Control
had not occurred;
(B) a relocation of more than twenty-five (25) miles of
Executive's principal office from the location of such office
immediately prior to the Change in Control date;
(C) a substantial increase in the business travel
required of Executive by the Company or its successor; or
(D) the Company or its successor fails to continue in
effect any pension plan, health-and-accident plan, or
disability income plan in which Executive was participating at
the time of the Change in Control (or plans providing
Executive with substantially equal and similar benefits), or
the taking of any action by the Company or its successor which
would adversely affect Executive's participation in or
materially reduce his benefits under any such plan that was
enjoyed by him immediately prior to the Change in Control.
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(c) STOCK OPTIONS. In the event of a Change in Control, Executive's
resignation for Good Reason or Executive's termination without Cause, all
unvested stock options previously granted to Executive shall immediately
vest and be exercisable as set forth below. In the event that there is a
termination of Executive's employment hereunder for any reason, Executive
shall be entitled to exercise any and all stock options that were
previously granted to him by the Company, and are outstanding, vested and
unexercised as of his Termination Date, during the exercise period ending
on the shorter of (i) two (2) years from his Termination Date or (ii) the
expiration date of the stock option as specified in the stock option plan
or stock option agreement, as applicable, notwithstanding any provision in
such plan or agreement that provides for a more limited time period to
exercise stock options following termination of employment; provided
however, if said stock option plan or stock option agreement provides
therein for a longer period of time to exercise such outstanding, vested
and unexercised stock options following his Termination Date, then such
stock option plan or agreement shall control and the remaining provisions
of this SECTION 6(C) shall be inapplicable and without further force or
effect. In the event that there is a termination of Executive's employment
hereunder for Cause or Executive voluntarily resigns without Good Reason
within two years for the date of this Agreement, Executive shall forfeit
any and all stock options that were previously granted to him by the
Company, and are unvested and unexercised as of his Termination Date.
During the extension period specified in the previous paragraph, if
applicable, the Executive shall be considered an employee of the Company
who shall make himself available to provide consulting services to the
Company in consideration for such extension of the option exercise period
and any post-termination payments provided to Executive under SECTION 6(A)
OR (B) of this Agreement. In this regard, Executive agrees to be
classified as an employee of the Company solely for the limited purpose of
making himself available to provide consulting services on an as-needed
basis; provided, however, Executive hereby specifically waives any right,
entitlement, claim or demand to (i) any additional compensation for such
consulting services and (ii) coverage or benefits under any of the
Company's employee benefit plans or programs, or other perquisites, terms
and conditions of employment, except as expressly specified in other
provisions of this Agreement. Except as expressly provided in this SECTION
6(C), the provision of consulting services by Executive shall not expand
his rights or duties under this Agreement. Executive hereby agrees to
provide, upon request of the Company, consulting services to the Company
on the following terms and conditions:
(1) Executive will make himself available, on an as-needed basis,
to provide consulting services to the Company for up to three
(3) days per month during the period beginning on the day
after his Termination Date and ending on the last day of the
extension period for exercising stock options as provided in
the first paragraph of SECTION 6(C) above, subject to the
following conditions:
(A) At least five (5) days written advance notice to
Executive is provided by the Company;
(B) There is no concurrent illness of Executive or his
spouse;
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(C) There is no prior commitment of Executive including,
without limitation, vacation or attention to personal
affairs; and
(D) No travel is required of Executive in excess of 200
miles round-trip.
Executive, in any particular instance, may waive any or all of
the conditions set forth in clauses (A), (B), (C) or (D) above
in his complete discretion. Any such waiver shall not be a
continuing waiver and shall not release Executive of any of
his rights hereunder.
(2) Executive agrees to provide such information, services, advice
and recollection of events as may from time to time be
reasonably requested by, or on behalf of, the Company
regarding corporate, regulatory or business matters of which
Executive may have knowledge, information or understanding,
including testifying truthfully in any litigation or other
proceedings involving the Employer, provided that (i)
Executive first determines that his interests are not adverse,
or potentially adverse, to those of the Company, and (ii) the
Company has indemnified Executive to his satisfaction
including, without limitation, for reasonable attorney's fees
and costs. The parties hereto agree that it is the quality,
and not the quantity, of the consulting services to be
provided by Executive that is important to the Company.
(3) The Company will reimburse Executive for all reasonable
out-of-pocket expenses incurred by Executive in the course of
his performance of consulting services, including, without
limitation, supplies, mileage and travel expenses. Executive
agrees not to incur any expense, obligation, or liability on
behalf of the Company without its prior written consent.
(4) The provision of consulting services by Executive for the
Company is non-exclusive and shall not, in any way, limit the
rights of Executive to seek and maintain other employment or
to perform compensatory services on behalf of any other person
or entity.
(5) The consulting services contemplated under this SECTION 6(c)
shall not be considered part of Executive's Employment Period
pursuant to SECTION 4, nor affect his Termination Date.
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7. NOTICE OF TERMINATION. Any termination by the Company or the Executive
shall be communicated by Notice of Termination to the other party hereto. For
purposes of this Agreement, the term "NOTICE OF TERMINATION" means a written
notice which indicates the specific termination provision of this Agreement
relied upon and sets forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Executive's employment under
the provision so indicated.
8. NO MITIGATION REQUIRED. Executive shall not be required to mitigate the
amount of any payment provided for under this Agreement by seeking other
employment or in any other manner.
9. CHANGE IN CONTROL: REQUIREMENT OF BONUS PAYMENT IN CERTAIN
CIRCUMSTANCES.
(a) In the event that Executive is deemed to have received an
"excess parachute payment" (as such term is defined in Section 280G(b) of
the Code) which is subject to the excise taxes (the "EXCISE TAXES")
imposed by Section 4999 of the Code in respect of any payment pursuant to
this Agreement, or any other agreement, plan, instrument or obligation, in
whatever form, the Company shall make the Bonus Payment (defined below) to
Executive promptly after the date on which Executive received or is deemed
to have received any excess parachute payment notwithstanding any contrary
provision herein.
(b) The term "BONUS PAYMENT" means a cash payment in an amount equal
to the sum of (i) all Excise Taxes payable by Executive, plus (ii) all
additional Excise Taxes and federal or state income taxes to the extent
such taxes are imposed in respect of the Bonus Payment, such that
Executive shall be in the same after-tax position and shall have received
the same benefits that he would have received if the Excise Taxes had not
been imposed. For purposes of calculating any income taxes attributable to
the Bonus Payment, Executive shall be deemed for all purposes to be paying
income taxes at the highest marginal federal income tax rate, taking into
account any applicable surtaxes and other generally applicable taxes which
have the effect of increasing the marginal federal income tax rate and, if
applicable, at the highest marginal state income tax rate, to which the
Bonus Payment and Executive are subject. An example of the calculation of
the Bonus Payment is set forth below: Assume that the Excise Tax rate is
20%, the highest federal marginal income tax rate is 40% and Executive is
not subject to state income taxes. Further assume that Executive has
received an excess parachute payment in the amount of $200,000, on which
$40,000 in Excise Taxes are payable. The amount of the required Bonus
Payment is thus $100,000. The Bonus Payment of $100,000, less additional
Excise Taxes on the Bonus Payment of $20,000 (i.e., 20% x $100,000) and
income taxes of $40,000 (i.e., 40% x $100,000), yields $40,000, the amount
of the Excise Taxes payable in respect of the original excess parachute
payment.
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(c) Executive agrees to reasonably cooperate with the Company to
minimize the amount of the excess parachute payments, including, without
limitation, assisting the Company in establishing that some or all of the
payments received by Executive that are "contingent on a change", as
described in Section 280G(b)(2)(A)(i) of the Code, are reasonable
compensation for personal services actually rendered by Executive before
the date of such change or to be rendered by Executive on or after the
date of such change. In the event that the Company is able to establish
that the amount of the excess parachute payments is less than originally
anticipated by Executive, Executive shall refund to the Company any excess
Bonus Payment to the extent not required to pay Excise Taxes or income
taxes (including those incurred in respect of receipt of the Bonus
Payment). Notwithstanding the foregoing, Executive shall not be required
to take any action which his attorney or tax advisor advises him in
writing (i) is improper or (ii) exposes Executive to material personal
liability. Executive may require the Company to deliver to Executive an
indemnification agreement in form and substance satisfactory to Executive
as a condition to taking any action required by this subsection (c).
(d) The Company shall make any payment required to be made under
this SECTION 9 in cash and on demand. Any payment required to be paid by
the Company under this SECTION 9 which is not paid within 30 days of
receipt by the Company of Executive's written demand therefor shall
thereafter be deemed delinquent, and the Company shall pay to Executive
immediately upon demand interest at the highest nonusurious rate per annum
allowed by applicable law from the date such payment becomes delinquent to
the date of payment of such delinquent sum with interest.
(e) In the event that there is any change to the Code which results
in the recodification of Section 280G or Section 4999 of the Code, or in
the event that either such section of the Code is amended, replaced or
supplemented by other provisions of the Code of similar import ("SUCCESSOR
PROVISIONS"), then this Agreement shall be applied and enforced with
respect to such new Code provisions in a manner consistent with the intent
of the parties as expressed herein, which is to assure that Employee is in
the same after-tax position and has received the same benefits that he
would have been in and received if any taxes imposed by Section 4999 or
any Successor Provisions had not been imposed.
10. POST-TERMINATION MEDICAL COVERAGE. If the employment of Executive is
terminated for any reason except for Cause (as defined in SECTION 6(B)), death
or voluntary resignation without Good Reason, then the Company shall provide
post-employment medical coverage in accordance with the terms and conditions of
this SECTION 10. The Company shall continue to cover Executive and his spouse
(hereinafter referred to as "SPOUSE") and his eligible dependent children, if
any, from the Termination Date until two (2) years following the Termination
Date, under the group health care plan maintained by the Company to provide
major medical insurance coverage for employees and their dependents (such group
medical plan or its successor shall be hereinafter referred to as the "HEALTH
CARE PLAN").
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Executive, on behalf of himself and his Spouse and other dependents, if
any, shall be required to pay premiums for their coverage under the Health Care
Plan at the rates, if any, charged by the Company to active employees who are
senior officers of the Company at the time the premium is charged. Any
post-employment coverage under the Health Care Plan provided under this SECTION
10 shall run concurrently with COBRA continuation coverage under the Health Care
Plan and, therefore, Executive and the other qualifying beneficiaries shall
elect any COBRA continuation coverage offered to them under the Health Care Plan
following the Termination Date. The Company shall not be responsible for the
payment of any income or other taxes which may be imposed on Executive, or on
his Spouse or dependents, as the result of receiving coverage under the Health
Care Plan pursuant to this SECTION 10.
Executive, on behalf of himself and his Spouse and dependents, hereby
agrees and consents to acquire and maintain any coverage that of any them are
entitled to at any time during the two year period (as specified above in this
SECTION 10) under the Medicare program or any similar or succeeding plan or
program that is sponsored or maintained by the United States Government or any
agency thereof (hereinafter referred to as "MEDICARE"). The coverage described
in the immediately preceding sentence includes, without limitation, parts A and
B of Medicare and any additional or successor parts of Medicare. Executive, on
behalf of himself and his Spouse, further agrees and consents to pay all
required premiums and other costs for Medicare coverage from their personal
funds. Medicare coverage shall be primary payor to the coverage provided under
the Health Care Plan to the extent permitted by applicable federal law.
11. CONFLICTS OF INTEREST. In keeping with his fiduciary duties to
Company, Executive hereby agrees that he shall not become involved in a conflict
of interest, or upon discovery thereof, allow such a conflict to continue at any
time during the Employment Period. Moreover, Executive agrees that he shall
immediately disclose to the Board of Directors any facts that might involve a
conflict of interest that has not been approved by the Board of Directors.
Executive and Company recognize and acknowledge that it is not possible to
provide an exhaustive list of actions or interests that may constitute a
"conflict of interest." Moreover, Company and Executive recognize there are many
borderline situations. In some instances, full disclosure of facts by the
Executive to the Board of Directors may be all that is necessary to enable
Company to protect its interests. In others, if no improper motivation appears
to exist and Company's interests have not demonstrably suffered, prompt
elimination of the outside interest may suffice. In other egregious instances,
it may be necessary for Company to terminate Executive's employment for Cause
pursuant to SECTION 6(B) hereof. The Board of Directors reserves the right to
take such action as, in its good faith judgment, will resolve the conflict of
interest.
Executive hereby agrees that any direct or indirect interest in,
connection with, or benefit from any outside activities, particularly commercial
activities, which interest might adversely affect the Company or any of its
affiliated entities, involves a possible conflict of interest. Circumstances in
which a conflict of interest on the part of Executive would or might arise, and
which should be reported immediately to the Board of Directors, include, but are
not limited to, any of the following:
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(a) Ownership of more than a DE MINIMIS interest in any lender,
supplier, contractor, customer or other entity with which Company or any
of its affiliated entities does business;
(b) Misuse of information, property or facilities to which Executive
has access in a manner which is demonstrably injurious to the interests of
Company or any of its affiliated entities, including its business,
reputation or goodwill; or
(c) Materially trading in products or services connected with
products or services designed or marketed by or for the Company or any of
its affiliated entities.
For purposes of this Agreement, "AFFILIATED ENTITY" means any entity which
owns or controls, is owned or controlled by, or is under common ownership or
control with, the Company.
12. CONFIDENTIAL INFORMATION. (a) CONFIDENTIAL INFORMATION DEFINED.
Executive hereby acknowledges that in his senior management position, he will
create, acquire and have access to confidential information and trade secrets
pertaining to the business of Company (hereafter "Confidential Information" as
defined below). Executive hereby acknowledges that such Confidential Information
is unique and valuable to Company's business and that Company would suffer
irreparable injury if Confidential Information was divulged to the public or to
persons or entities in competition with Company. Therefore, Executive hereby
covenants and agrees to keep in strict secrecy and confidence, both during and
after the Employment Period, any Confidential Information. Executive
specifically agrees that he will not at any time disclose to others, use, copy
or permit to be copied, except in pursuance of his duties on behalf of Company
or with the prior consent of Company, Confidential Information relating to the
Company or any of its affiliated entities. For purposes of this Agreement,
"CONFIDENTIAL INFORMATION" shall mean and include, without limitation,
information related to the business affairs, property, methods of operation,
future plans, financial information, customer or client information, or other
data which relates to the business or operations of Company or any of its
affiliated entities, and all other information obtained by Executive from and
during the Employment Period which concerns the affairs of Company or any of its
affiliated entities and which Company has requested be held in confidence or
could reasonably be expected to desire be held in confidence, or the disclosure
of which would likely be embarrassing, detrimental or disadvantageous to the
Company or any of its affiliated entities, or its and their directors, officers,
employees or shareholders. Confidential Information, however, shall not include
information that is at the time of receipt by Executive in the public domain or
is otherwise generally known in the industry or subsequently enters the public
domain or becomes generally known in the industry through no fault of Executive
or breach of his duty under this SECTION 12.
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(b) REQUIRED DISCLOSURE. In the event that Executive is required by
law which cannot be waived to disclose any Confidential Information,
Executive agrees that he will provide prompt notice of such potential
disclosure to Company so that an appropriate protective order may be
sought and/or a waiver of compliance with the provisions of this Agreement
may be granted. In the event that (i) such protection or other remedy is
not obtained or (ii) Company waives in writing the compliance by Executive
with this provision, Executive agrees that he may furnish only that
portion of the Confidential Information which Executive is advised by
written opinion of counsel is legally required to be disclosed, and
Executive shall exercise his best efforts to obtain assurances that
confidential treatment will be accorded such Confidential Information.
(c) DELIVERY OF DOCUMENTS. Executive further agrees to deliver to
Company at the termination of his employment, all correspondence,
memoranda, notes, records, drawings, plans, customer lists or other
documents, and all copies thereof made, composed or received by Executive,
solely or jointly with others, and which are in Executive's possession,
custody or control at such date and which relate in any manner to the
past, present or anticipated business of Company or any of its affiliated
entities.
(d) REMEDIES. In the event of a breach or threatened breach of any
of the provisions of this SECTION 12, Company shall be entitled to an
injunction ordering the return of all such documents, and any and all
copies thereof, and restraining Executive from using or disclosing, for
his benefit or the benefit of others, in whole or in part, any
Confidential Information, including, but not limited to, the Confidential
Information which such documents contain, constitute or embody. Executive
further agrees that any breach or threatened breach of any of the
provisions of this SECTION 12 would cause irreparable injury to Company,
for which it would have no adequate remedy at law. Nothing herein shall be
construed as prohibiting Company from pursuing any other remedies
available to it for any such breach or threatened breach, including the
recovery of damages.
13. PROPERTY RIGHTS. In keeping with his fiduciary duties to Company,
Executive hereby covenants and agrees that during his Employment Period, and for
a period of one (1) year following his Termination Date, Executive shall
promptly disclose in writing to Company any and all information, ideas,
concepts, improvements, discoveries, inventions and other intellectual
properties, whether patentable or not, and whether or not reduced to practice,
which are conceived, developed, made or acquired by Executive, either
individually or jointly with others, and which relate to the business, products
or services of Company or any of its affiliated entities. In consideration for
his employment hereunder, Executive hereby specifically sells, assigns and
transfers to Company all of his worldwide right, title and interest in and to
all such information, ideas, concepts, improvements, discoveries, inventions and
other intellectual properties.
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If during the Employment Period, Executive creates any original work of
authorship or other property fixed in any tangible medium of expression which
(a) is the subject matter of copyright (including computer programs) and (b)
relates to Company's present or planned business, products, or services, whether
such property is created solely by Executive or jointly with others, such
property shall be deemed a work for hire, with the copyright automatically
vesting in Company. To the extent that any such writing or other property is
determined not to be a work for hire for whatever reason, Executive hereby
consents and agrees to the unconditional waiver of "moral rights" in such
writing or other property, and to assign to Company all of his right, title and
interest, including copyright, in such writing or other property.
Executive hereby agrees to (a) assist Company or its nominee at all times
in the protection of any and all property subject to this SECTION 13, (b) not to
disclose any such property to others without the written consent of Company or
its nominee, except as required by his employment hereunder, and (c) at the
request of Company, to execute such assignments, certificates or other interests
as Company or its nominee may from time to time deem desirable to evidence,
establish, maintain, perfect, protect or enforce its rights, title or interests
in or to any such property.
14. AGREEMENT NOT TO COMPETE. Executive hereby recognizes and acknowledges
that: (a) in his executive capacity with Company he will be given knowledge of,
and access to, the Confidential Information (as described in SECTION 12); (b) in
the event that Executive was to enter into competition with Company, Executive's
knowledge of such Confidential Information would be of invaluable benefit to a
competitor of Company, and could cause irreparable harm to Company's business
interests; and (c) Executive's consent and agreement to enter into the
noncompetition provisions and covenants set forth herein is an integral
condition of this Agreement, without which Company would not have agreed to
provide Confidential Information to Executive, nor to his compensation,
benefits, and other terms of this Agreement. Accordingly, in consideration for
his employment, compensation, benefits, access to and entrustment of
Confidential Information, the goodwill, training and experience provided to
Executive during his Employment Period, Executive hereby covenants, consents and
agrees (regardless of whether or not there has been a Change of Control) that
during the Employment Period, and for a period two (2) years after his
employment is terminated for any reason, Executive shall not, directly or
indirectly, acting alone or in conjunction with others, for his own account or
for the account of others, including, without limitation, as an officer,
director, stockholder, owner, partner, member, manager, joint venturer,
employee, promoter, consultant, agent, lender, guarantor, representative, or
otherwise:
(a) Solicit, canvass, or accept any fees or business from any
customer of Company for himself or any other person or entity engaged in a
"Similar Business to Company" (as defined below);
(b) Engage or participate in any Similar Business to Company within
any states of the United States in which the Company transacts business on
Executive's termination of employment date, or in which, as of such
termination date, the Company has made any plans or proposals to transact
business within one year from such termination date (referred to herein as
the "RESTRICTED AREA");
(c) Request or advise any service provider, supplier, or customer to
reduce or cancel any business that it may transact with Company or any of
its affiliated entities;
(d) Solicit, induce, or otherwise attempt to influence any employee
of the Company or any of its affiliated entities, to terminate his or her
relationship with the Company or any of its affiliated entities; or
(e) Make any statement or perform any act intended to advance an
interest of an existing or prospective competitor of the Company or any of
its affiliated entities in any way that demonstrably injures the
reputation, goodwill or any other business interest of Company or any of
its affiliated entities.
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For purposes of this Agreement, "SIMILAR BUSINESS TO COMPANY" means any
business or other enterprise that is competitive with the current or planned
businesses, products, services or operations of the Company or any of its
affiliated entities at the time of termination of Executive's employment
including, without limitation, municipal biosolids.
Executive hereby agrees that the limitations set forth above on his rights
to compete with Company after his termination of employment are reasonable and
necessary for the protection of Company. In this regard, Executive specifically
agrees that such limitations as to the period of time, geographic area and types
and scopes of restriction on his activities, as specified above, are reasonable
and necessary to protect the goodwill and other business interests of Company.
However, should the time period, the geographic area or any other
non-competition provision set forth herein be deemed invalid or unenforceable in
any respect, then Executive acknowledges and agrees that, as set forth in
SECTION 15 hereof, reformation may be made with respect to such time period,
geographic area or other non-competition provision in order to protect Company's
reasonable business interests to the maximum permissible extent.
15. REMEDIES. In the event of any pending, threatened or actual breach of
any of the covenants or provisions of SECTION 11, 12, 13 OR 14, it is understood
and agreed by Executive that the remedy at law for a breach of any of the
covenants or provisions of these Sections may be inadequate, and, therefore,
Company shall be entitled to a restraining order or injunctive relief from any
court of competent jurisdiction, in addition to any other remedies at law and in
equity. In the event that Company seeks to obtain a restraining order or
injunctive relief, Executive hereby agrees that Company shall not be required to
post any bond in connection therewith. Should a court of competent jurisdiction
or an arbitrator (pursuant to SECTION 24) declare any provision of SECTION 11,
12, 13 OR 14 to be unenforceable due to an unreasonable restriction of duration
or geographical area, or for any other reason, such court or arbitrator is
hereby granted the consent of each of Executive and the Company to reform such
provision and/or to grant the Company any relief, at law or in equity,
reasonably necessary to protect the reasonable business interests of Company or
any of its affiliated entities. Executive hereby acknowledges and agrees that
all of the covenants and other provisions of SECTIONS 11, 12, 13 AND 14 are
reasonable and necessary for the protection of the Company's reasonable business
interests. Executive hereby agrees that if the Company prevails in any action,
suit or proceeding with respect to any matter arising out of or in connection
with SECTION 11, 12, 13 OR 14, Company shall be entitled to all equitable and
legal remedies, including, but not limited to, injunctive relief and
compensatory damages.
16. DEFENSE OF CLAIMS. Executive agrees that, during the Employment Period
and for a period of two (2) years after his Termination Date, upon reasonable
request from the Company, he will cooperate with the Company and its affiliated
entities in the defense of any claims or actions that may be made by or against
the Company or any of its affiliated entities that affect his prior areas of
responsibility, except if Executive's reasonable interests are adverse to the
Company (or affiliated entity) in such claim or action. To the extent travel is
required to comply with the requirements of this SECTION 16, the Company shall,
to the extent possible, provide Executive with notice at least 10 days prior to
the date on which such travel would be required. The Company agrees to promptly
pay or reimburse Executive upon demand for all of his reasonable travel and
other direct expenses incurred, or to be reasonably incurred, to comply with his
obligations under this SECTION 16.
17. DETERMINATIONS BY THE BOARD OF DIRECTORS.
(a) TERMINATION OF EMPLOYMENT. Prior to a Change in Control (as
defined in SECTION 6(B)), any question as to whether and when there has
been a termination of Executive's employment, and the cause of such
termination, shall be determined by the Board of Directors in its
discretion.
(b) COMPENSATION. Prior to a Change in Control (as defined in
SECTION 6(B)), any question regarding salary, bonus and other compensation
payable to Executive pursuant to this Agreement shall be determined by the
Board of Directors in its discretion.
15
<PAGE>
18 WITHHOLDINGS: RIGHT OF OFFSET. Company may withhold and deduct from any
benefits and payments made or to be made pursuant to this Agreement (a) all
federal, state, local and other taxes as may be required pursuant to any law or
governmental regulation or ruling, (b) all other normal employee deductions made
with respect to Company's employees generally, and (c) any advances made to
Executive and owed to Company.
19 NONALIENATION. The right to receive payments under this Agreement shall
not be subject in any manner to anticipation, alienation, sale, transfer,
assignment, pledge or encumbrance by Executive, his dependents or beneficiaries,
or to any other person who is or may become entitled to receive such payments
hereunder. The right to receive payments hereunder shall not be subject to or
liable for the debts, contracts, liabilities, engagements or torts of any person
who is or may become entitled to receive such payments, nor may the same be
subject to attachment or seizure by any creditor of such person under any
circumstances, and any such attempted attachment or seizure shall be void and of
no force and effect.
20 INCOMPETENT OR MINOR PAYEES. Should the Board of Directors determine
that any person to whom any payment is payable under this Agreement has been
determined to be legally incompetent or is a minor, any payment due hereunder
may, notwithstanding any other provision of this Agreement to the contrary, be
made in any one or more of the following ways: (a) directly to such minor or
person; (b) to the legal guardian or other duly appointed personal
representative of the person or estate of such minor or person; or (c) to such
adult or adults as have, in the good faith knowledge of the Board of Directors,
assumed custody and support of such minor or person; and any payment so made
shall constitute full and complete discharge of any liability under this
Agreement in respect to the amount paid.
21 SEVERABILITY. It is the desire of the parties hereto that this
Agreement be enforced to the maximum extent permitted by law, and should any
provision contained herein be held unenforceable by a court of competent
jurisdiction or arbitrator (pursuant to SECTION 24), the parties hereby agree
and consent that such provision shall be reformed to create a valid and
enforceable provision to the maximum extent permitted by law; provided, however,
if such provision cannot be reformed, it shall be deemed ineffective and deleted
here from without affecting any other provision of this Agreement.
22 TITLE AND HEADINGS; CONSTRUCTION. Titles and headings to Sections
hereof are for the purpose of reference only and shall in no way limit, define
or otherwise affect the provisions hereof. Any and all Exhibits referred to in
this Agreement are, by such reference, incorporated herein and made a part
hereof for all purposes. The words "herein", "hereof", "hereunder" and other
compounds of the word "here" shall refer to the entire Agreement and not to any
particular provision hereof.
16
<PAGE>
23 CHOICE OF LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, WITHOUT REGARD TO THE PRINCIPLES
OF CONFLICTS OF LAW.
24 ARBITRATION.
(a) ARBITRABLE MATTERS. If any dispute or controversy arises between
Executive and the Company as to their respective rights or obligations
under this Agreement, then either party may submit the dispute or
controversy to arbitration under the then-current National Employment
Dispute Resolution Rules of the American Arbitration Association (AAA)
(the "RULES"); provided, however, the Company shall retain its rights to
seek a restraining order or injunctive relief pursuant to SECTION 15. Any
arbitration hereunder shall be conducted before a single arbitrator unless
the parties mutually agree to a panel of three arbitrators. The site for
any arbitration hereunder shall be in Montgomery County or Harris County,
Texas, unless otherwise mutually agreed by the parties.
(b) SUBMISSION TO ARBITRATION. The party submitting any matter to
arbitration shall do so in accordance with the Rules. Notice to the other
party shall state the question or questions to be submitted for decision
or award by arbitration. Notwithstanding any provision in this SECTION 24,
Executive shall be entitled to seek specific performance of the
Executive's right to be paid during the pendency of any dispute or
controversy arising under this Agreement. In order to prevent irreparable
harm, the arbitrator may grant temporary or permanent injunctive or other
equitable relief for the protection of property rights.
(c) ARBITRATION PROCEDURES. The arbitrator shall set the date, time
and place for each hearing, and shall give the parties advance written
notice in accordance with the Rules. Any party may be represented by
counsel or other authorized representative at any hearing. The arbitration
shall be governed by the Federal Arbitration Act, 9 U.S.C. ss.ss. 1 et.
seq. (or its successor). The arbitrator shalL apply the substantive law
(and the law of remedies, if applicable) of the State of Texas to the
claims asserted to the extent that the arbitrator determines that federal
law is not controlling.
(d) COMPLIANCE WITH AWARD.
(1) Any award of an arbitrator shall be final and binding upon
the parties to such arbitration, and each party shall immediately
make such changes in its conduct or provide such monetary payment or
other relief as such award requires. The parties agree that the
award of the arbitrator shall be final and binding and shall be
subject only to the judicial review permitted by the Federal
Arbitration Act.
17
<PAGE>
(2) The parties hereto agree that the arbitration award may be
entered with any court having jurisdiction and the award may then be
enforced as between the parties, without further evidentiary
proceedings, the same as if entered by the court at the conclusion
of a judicial proceeding in which no appeal was taken. The Company
and the Executive hereby agree that a judgment upon any award
rendered by an arbitrator may be enforced in other jurisdictions by
suit on the judgment or in any other manner provided by law.
(e) COSTS AND EXPENSES. Each party shall pay any monetary amount
required by the arbitrator's award, and the fees, costs and expenses for
its own counsel, witnesses and exhibits, unless otherwise determined by
the arbitrator in the award. The compensation and costs and expenses
assessed by the arbitrator and AAA shall be paid by the losing party
unless otherwise determined by the arbitrator in the award. If court
proceedings to stay litigation or compel arbitration are necessary, the
party who unsuccessfully opposes such proceedings shall pay all associated
costs, expenses, and attorney's fees which are reasonably incurred by the
other party as determined by the arbitrator.
25 BINDING EFFECT: THIRD PARTY BENEFICIARIES. This Agreement shall be
binding upon and inure to the benefit of the parties hereto, and to their
respective heirs, executors, personal representatives, successors and permitted
assigns hereunder, but otherwise this Agreement shall not be for the benefit of
any third parties.
26 ENTIRE AGREEMENT AND AMENDMENT. This Agreement contains the entire
agreement of the parties with respect to Executive's employment and the other
matters covered herein; moreover, this Agreement supersedes all prior and
contemporaneous agreements and understandings, oral or written, between the
parties hereto concerning the subject matter hereof. This Agreement may be
amended, waived or terminated only by a written instrument executed by both
parties hereto.
27 SURVIVAL OF CERTAIN PROVISIONS. Wherever appropriate to the intention
of the parties hereto, the respective rights and obligations of said parties,
including, but not limited to, the rights and obligations set forth in SECTIONS
6 THROUGH 17 AND 24 hereof, shall survive any termination or expiration of this
Agreement.
28 WAIVER OF BREACH. No waiver by either party hereto of a breach of any
provision of this Agreement by any other party, or of compliance with any
condition or provision of this Agreement to be performed by such other party,
will operate or be construed as a waiver of any subsequent breach by such other
party or any similar or dissimilar provision or condition at the same or any
subsequent time. The failure of either party hereto to take any action by reason
of any breach will not deprive such party of the right to take action at any
time while such breach continues.
18
<PAGE>
29 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and inure
to the benefit of Company and its affiliated entities, and its and their
successors, and upon any person or entity acquiring, whether by merger,
consolidation, purchase of assets or otherwise, all or substantially all of the
assets and business of Company. Any reference herein to "Company" shall mean the
Company as first written above, as well as any successor or successors thereto.
This Agreement is personal to Executive, and Executive may not assign,
delegate or otherwise transfer all or any of his rights, duties or obligations
hereunder without the consent of the Board of Directors. Any attempt by the
Executive to assign, delegate or otherwise transfer this Agreement, any portion
hereof, or his rights, duties or obligations hereunder without the prior written
consent of the Board of Directors shall be deemed void and of no force and
effect. Subject to the preceding provisions of this paragraph, this Agreement
shall be binding upon and inure to the benefit of Executive and his heirs and
assigns.
30 NOTICES. Notices provided for in this Agreement shall be in writing and
shall be deemed to have been duly received (a) when delivered in person or sent
by facsimile transmission, (b) on the first business day after it is sent by air
express overnight courier service, or (c) on the third business day following
deposit in the United States mail, registered or certified mail, return receipt
requested, postage prepaid and addressed, to the following address, as
applicable:
(1) If to Company, addressed to:
Synagro Technologies, Inc.
5850 San Felipe, Suite 500
Houston, Texas 77057
Attention: CEO
(2) If to Executive, addressed to the address set forth below his
name on the execution page hereof;
or to such other address as either party may have furnished to the other party
in writing in accordance with this SECTION 30.
31 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be an original,
but all such counterparts shall together constitute one and the same instrument.
Each counterpart may consist of a copy hereof containing multiple signature
pages, each signed by one party hereto, but together signed by both of the
parties hereto.
19
<PAGE>
32 EXECUTIVE ACKNOWLEDGMENT/NO STRICT CONSTRUCTION. The Executive
represents to Company that he is knowledgeable and sophisticated as to business
matters, including the subject matter of this Agreement, that he has read the
Agreement and that he understands its terms and conditions. The parties hereto
agree that the language used in this Agreement shall be deemed to be the
language chosen by them to express their mutual intent, and no rule of strict
construction shall be applied against either party hereto. Executive also
represents that he is free to enter into this Agreement including, without
limitation, that he is not subject to any other contract of employment or
covenant not to compete that would conflict in any way with his duties under
this Agreement. Executive acknowledges that he has had the opportunity to
consult with counsel of his choice, independent of Employer's counsel, regarding
the terms and conditions of this Agreement and has done so to the extent that
he, in his unfettered discretion, deemed to be appropriate.
33 SUPERSEDING AGREEMENT. This Employment Agreement shall supersede any
prior employment agreement entered into between the Company and Executive.
20
<PAGE>
IN WITNESS WHEREOF, the Executive has hereunto set his hand, and Company
has caused these presents to be executed in its name and on its behalf, to be
effective as of the Effective Date first above written.
WITNESS: EXECUTIVE:
Signature: Signature:
Printed Name: Printed Name: PAUL C. SELLEW
Date: Date:
Address for Notices:
520 GOSHEN HILL ROAD
LEBANON, CT 06249
ATTEST: SYNAGRO TECHNOLOGIES, INC.:
By: By: __________________________
Title: Its: CHAIRMAN & CEO
Printed Name: Printed Name: ROSS M. PATTEN
Date: Date:
21
EXHIBIT 10.7.1
THIRD AMENDMENT AND WAIVER
THIS THIRD AMENDMENT AND WAIVER dated as of March 30, 1999 (this
"Amendment") amends the Credit Agreement dated as of October 7, 1998 (as
previously amended, the "Credit Agreement") among Synagro Technologies, Inc.
(the "Company"), various financial institutions (the "Banks") and Bank of
America National Trust and Savings Association, as Agent (in such capacity, the
"Agent"). Terms defined in the Credit Agreement are, unless otherwise defined
herein or the context otherwise requires, used herein as defined therein.
WHEREAS, the Company, the Banks and the Agent have entered
into the Credit Agreement; and
WHEREAS, the parties hereto desire to amend the Credit Agreement in
certain respects as more fully set forth herein;
NOW, THEREFORE, the parties hereto agree as follows:
SECTION 1 AMENDMENTS. Effective on (and subject to the occurrence of) the
Amendment Effective Date (as defined below), the Credit Agreement shall be
amended as set forth below:
1.1 AMENDMENT TO DEFINITION. The definition of "Interest Coverage
Computation Period" in Section 1.1 is amended in its entirety to read as
follows:
INTEREST COVERAGE COMPUTATION PERIOD means each of the following
periods: (a) the period of four consecutive months ending January 31,
1999; (b) the period of five consecutive months ending February 28, 1999;
(c) the period of six consecutive months ending March 31, 1999; (d) the
period of seven consecutive months April 30, 1999; (e) the period of eight
consecutive months ending May 31, 1999; (f) the period of nine consecutive
months ending June 30, 1999; (g) the period of ten consecutive months
ending July 31, 1999; (h) the period of eleven consecutive months ending
August 31, 1999; (i) the period of twelve consecutive months ending
September 30, 1999; (j) the period of twelve consecutive months ending
October 31, 1999; (k) the period of twelve consecutive months ending
November 30, 1999; (l) the period of twelve consecutive months ending
December 31, 1999; and (m) each period of four consecutive Fiscal Quarters
ending on the last day of a Fiscal Quarter on or after March 31, 2000.
<PAGE>
1.2 AMENDMENT OF SECTION 10.6.1. Section 10.6.1 is amended by (i) deleting
the amount "$30,700,000" in clause (a) and substituting "$32,000,000" therefor;
(ii) deleting the date "December 31, 1998" in clause (b) and substituting "March
31, 1999" therefor; and (iii) deleting the words "the Effective Date" in clause
(c) and substituting "January 31, 1999" therefor.
1.3 AMENDMENT OF SECTION 10.6.2. Section 10.6.2 is amended by deleting the
chart therein and substituting the following chart therefor:
INTEREST COVERAGE
COMPUTATION INTEREST
PERIOD ENDING: COVERAGE RATIO
----------------------------------------------------------
1/31/99 1.30 to 1.0
2/28/99 1.00 to 1.0
3/31/99 0.65 to 1.0
4/30/99 1.15 to 1.0
5/31/99 1.25 to 1.0
6/30/99 1.50 to 1.0
7/31/99, 8/31/99 & 9/30/99 1.60 to 1.0
10/31/99, 11/30/99 & 12/31/99 1.85 to 1.0
3/31/00 and thereafter 2.10 to 1.0.
1.4 AMENDMENT OF SECTION 10.6.3. Section 10.6.3 is amended by deleting the
chart therein and substituting the following chart therefor:
COMPUTATION FUNDED DEBT TO
PERIOD ENDING: EBITDA RATIO
------------- ------------
3/30/99 through 6/30/99 4.25 to 1.0
9/30/99 4.00 to 1.0
12/31/99 and thereafter 3.75 to 1.0.
1.5 AMENDMENT OF SECTION 10.6.4. Section 10.6.4 is amended by deleting the
chart therein and substituting the following chart therefor:
SENIOR FUNDED
COMPUTATION DEBT TO
PERIOD ENDING: EBITDA RATIO
------------- ------------
9/30/98 through 6/30/99 3.50 to 1.0
9/30/99 and thereafter 3.25 to 1.0.
1.6 AMENDMENT OF PRICING SCHEDULE. Schedule 1.1 to the Credit Agreement is
amended to read in its entirety as set forth on Schedule 1.1 to this Amendment.
<PAGE>
1.7 AMENDMENT OF COMPLIANCE CERTIFICATES. Exhibits B-1 and B-2 to the
Credit Agreement are amended to read in their entirety as set forth on Exhibits
B-1 and B-2 to this Amendment.
SECTION 2 WAIVER. The Required Banks hereby waive any Event of Default or
Unmatured Event of Default under Section 10.6.1 or 10.6.2 of the Credit
Agreement for any period prior to March 31, 1999.
SECTION 3 REPRESENTATIONS AND WARRANTIES. The Company represents and
warrants to the Agent and the Banks that, after giving effect to the
effectiveness hereof, (a) each warranty set forth in Section 9 (excluding
Sections 9.6 and 9.8) of the Credit Agreement is true and correct as of the date
of the execution and delivery of this Amendment by the Company, with the same
effect as if made on such date, and (b) no Event of Default or Unmatured Event
of Default exists.
SECTION 4 EFFECTIVENESS. The amendments set forth in SECTION 1 above shall
become effective on such date (the "AMENDMENT EFFECTIVE DATE") when the Agent
shall have received (a) counterparts of this Amendment executed by the Company
and the Required Banks, (b) copies, certified by the Secretary or an Assistant
Secretary of the Company, as to resolutions of the Board of Directors of the
Company authorizing the execution and delivery by the Company of this Amendment
and the performance by the Company of its obligations under the Credit Agreement
as amended hereby, (c) an opinion of counsel to the Company in form and
substance satisfactory to the Agent and (d) a confirmation in the form of
ATTACHMENT A hereto signed by the Company and each Guarantor.
SECTION 5 MISCELLANEOUS.
5.1 CONTINUING EFFECTIVENESS, ETC. As herein amended, the Credit Agreement
shall remain in full force and effect and is hereby ratified and confirmed in
all respects. After the effectiveness of this Amendment, all references in the
Credit Agreement and the other Loan Documents to "Credit Agreement" or similar
terms shall refer to the Credit Agreement as amended hereby.
5.2 COUNTERPARTS. This Amendment may be executed in any number of
counterparts and by the different parties on separate counterparts, and each
such counterpart shall be deemed to be an original but all such counterparts
shall together constitute one and the same Amendment.
5.3 GOVERNING LAW. This Amendment shall be a contract made
under and governed by the laws of the State of
<PAGE>
Illinois applicable to contracts made and to be performed entirely within
such state.
5.4 SUCCESSORS AND ASSIGNS. This Amendment shall be binding upon the
Company, the Banks and the Agent and their respective successors and assigns,
and shall inure to the benefit of the Company, the Banks and the Agent and the
respective successors and assigns of the Banks and the Agent.
<PAGE>
Delivered at Chicago, Illinois, as of the day and year first above
written.
SYNAGRO TECHNOLOGIES, INC.
By
Title
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as Agent
By
Title
BANK OF AMERICA NATIONAL TRUST AND
SAVING ASSOCIATION, as Issuing Bank
and as a Bank
By
Title
UNION BANK OF CALIFORNIA, N.A., as
a Bank
By
Title
<PAGE>
SCHEDULE 1.1
PRICING SCHEDULE
AS AMENDED
(Effective April 1, 1999)
The Base Rate Margin, the Eurodollar Margin, the Non-Use Fee Rate and the
LC Fee Rate for Financial Letters of Credit and Non-Financial Letters of Credit,
respectively, shall be determined in accordance with the table below and the
other provisions of this SCHEDULE 1.1.
LEVEL Level Level Level Level
I II III IV V
Rate for
Non-Use Fee 0.350% 0.350% 0.400% 0.450% 0.500%
Eurodollar Margin 1.750% 2.000% 2.250% 2.500% 2.750%
Base Rate Margin 0 0.125% 0.125% 0.250% 0.375%
LC Rate for
Non-Financial
Letters of Credit 0.875% 1.000% 1.125% 1.250% 1.375%
LC Rate for
Financial Letters
of Credit 1.750% 2.000% 2.250% 2.500% 2.750%
- ------------------- ---------- ----------- ---------- ----------- ----------
LEVEL I applies when the Funded Debt to EBITDA Ratio is less than 2.0 to
1.
LEVEL II applies when the Funded Debt to EBITDA Ratio is equal to or
greater than 2.0 to 1 but less than 2.5 to 1.
LEVEL III applies when the Funded Debt to EBITDA Ratio is equal to or
greater than 2.5 to 1 but less than 3.0 to 1.
LEVEL IV applies when the Funded Debt to EBITDA Ratio is equal to or
greater than 3.0 to 1 but less than 3.5 to 1.
LEVEL V applies when the Funded Debt to EBITDA Ratio is equal to or
greater than 3.5 to 1.
This Pricing Schedule shall be effective on April 1, 1999 (replacing the
existing Pricing Schedule on such date) and on such date the applicable Level
shall be Level V. The applicable
<PAGE>
Level shall be adjusted, to the extent applicable, 45 days (or, in the case of
the last Fiscal Quarter of any Fiscal Year, 90 days) after the end of each
Fiscal Quarter beginning with the Fiscal Quarter ending June 30, 1999, based on
the Funded Debt to EBITDA Ratio as of the last day of such Fiscal Quarter;
PROVIDED that if the Company fails to deliver the financial statements required
by SECTION 10.1.1 or 10.1.2, as applicable, and the related certificate required
by SECTION 10.1.3 by the 45th day (or, if applicable, the 90th day) after any
Fiscal Quarter, Level V shall apply until such financial statements are
delivered.
<PAGE>
EXHIBIT B-1
SYNAGRO TECHNOLOGIES, INC.
FINANCIAL COMPLIANCE CERTIFICATE
FOR PERIOD ENDED _____________ (the "COMPUTATION DATE")
To: Bank of America National Trust
and Savings Association, as Agent
Reference is made to Section 10.1.4(a) of the Credit Agreement dated as of
October 7, 1998 (as amended or otherwise modified from time to time, the "CREDIT
AGREEMENT") among Synagro Technologies, Inc. (the "COMPANY"), various financial
institutions and Bank of America National Trust and Savings Association, as
Agent for the Banks. Capitalized terms used but not otherwise defined herein are
used as defined in the Credit Agreement.
The Company hereby certifies and warrants to you that the following is a
true and correct computations of the Minimum Interest Coverage ratio set forth
in Section 10.6.2 of the Credit Agreement:
10.6.2 MINIMUM INTEREST
COVERAGE
Consolidated Net Income $___________
Plus: Interest Expense $___________
taxes $___________
amortization $___________
Earnings before interest, $_________(x)
taxes and amortization
Interest Expense __________(y)
Ratio of (x) to (y) ____ to ____
Minimum Required
1/31/99 1.30 to 1.0
2/28/99 1.00 to 1.0
3/31/99 0.65 to 1.0
4/30/99 1.15 to 1.0
5/31/99 1.25 to 1.0
6/30/99 1.50 to 1.0
7/31/99, 8/31/99 & 9/30/99 1.60 to 1.0
10/31/99, 11/30/99 & 12/31/99 1.85 to 1.0
3/31/00 and thereafter: 2.10 to 1.0
======================================== =================== ===================
<PAGE>
The Company further certifies to you that no Event of Default or Unmatured
Event of Default has occurred and is continuing.
IN WITNESS WHEREOF, the Company has caused this Certificate to be executed
and delivered by its duly authorized officer this ____ day of _________, ____.
SYNAGRO TECHNOLOGIES, INC.
By_________________________
Title______________________
<PAGE>
EXHIBIT B-2
SYNAGRO TECHNOLOGIES, INC.
FINANCIAL COMPLIANCE CERTIFICATE
FOR PERIOD ENDED _____________ (the "COMPUTATION DATE")
To: Bank of America National Trust
and Savings Association, as Agent
Reference is made to Section 10.1.4(b) of the Credit Agreement dated as of
October 7, 1998 (as amended or otherwise modified from time to time, the "CREDIT
AGREEMENT") among Synagro Technologies, Inc. (the "COMPANY"), various financial
institutions and Bank of America National Trust and Savings Association, as
Agent for the Banks. Capitalized terms used but not otherwise defined herein are
used as defined in the Credit Agreement.
The Company hereby certifies and warrants to you that the following are
true and correct computations of the financial ratios and restrictions set forth
in Section 10.6 of the Credit Agreement:
10.6.1 MINIMUM NET WORTH
Initial minimum: $32,000,000
Plus: 75% of the sum of
Consolidated Net
Income for each
Fiscal Quarter
(excluding any Fiscal
Quarter in which there
is a loss) from and
after January 31,
1999 to the Computation
Date $___________
Plus: 100% of net proceeds of
any equity issued by
the Company or any of
its Subsidiaries after
January 31, 1999 $___________
Total (Minimum Required) $___________
Actual Net Worth $___________
<PAGE>
10.6.2 MINIMUM INTEREST
COVERAGE
Consolidated Net Income $___________
Plus: Interest Expense $___________
taxes $___________
amortization $___________
Earnings before interest, $_________(x)
taxes and amortization
Interest Expense __________(y)
Ratio of (x) to (y) ____ to ____
Minimum Required
1/31/99 1.30 to 1.0
2/28/99 1.00 to 1.0
3/31/99 0.65 to 1.0
4/30/99 1.15 to 1.0
5/31/99 1.25 to 1.0
6/30/99 1.50 to 1.0
7/31/99, 8/31/99 & 9/30/99 1.60 to 1.0
10/31/99, 11/30/99 & 12/31/99 1.85 to 1.0
3/31/00 and thereafter: 2.10 to 1.0
10.6.3 FUNDED DEBT TO EBITDA
RATIO
Funded Debt $_________(x)
Consolidated1/ Net Income $___________
-
Plus: Interest Expense $___________
Income tax expense $___________
Depreciation and
amortization $___________
Plus: Add-back2/ $___________
Total3/ $_________(a)
- --------
1/Excluding Recyc, Inc.
2/For the Computation Periods ending 9/30/98 and 12/31/98, $900,000; for the
Computation Period ending 3/31/99, $600,000; and for the Computation Period
ending 6/30/99, $300,000.
3/For the Computation Period ending 9/30/98, multiply the total by 1.33.
<PAGE>
Recyc Net Income $___________
Plus4/: Interest Expense $___________
Income tax expense $___________
Depreciation and
amortization $___________
Total (Recyc EBITDA)5/ $_________ (b)
Lesser of (b) and $1,983,000 $_________ (c)
EBITDA6/ $_________ (y)
Ratio of (x) to (y) ____ to ____
Maximum allowed
3/30/99 thru 6/30/99: 4.25 to 1.0
9/30/99 4.00 to 1.0
12/31/99 and thereafter: 3.75 to 1.0
10.6.4 SENIOR FUNDED DEBT TO
EBITDA RATIO
Funded Debt
Minus: Debt described in $___________
Section 10.7(b) $___________
Total $_________(x)
Consolidated7/ Net Income $___________
-
Plus: Interest Expense $___________
Income tax expense $___________
Depreciation and
amortization $___________
Plus: Add-back8/ $___________
Total9/ $_________(a)
- --------
4/To the extent deducted in determining Recyc Net Income.
5/For the two months ending 9/30/98, the five months ending 12/31/98, the eight
months ending 3/31/99, and the eleven months ending 6/30/99, multiply the total
by 6, 2.4, 1.5, and 1.09, respectively. 6/For the Computation Periods ending
9/30/98 and 12/31/98, the sum of (a) plus (c); for Computation Periods ending
thereafter, the sum of (a) plus (b). 7/Excluding Recyc, Inc. 8/For the
Computation Periods ending 9/30/98 and 12/31/98, $900,000; for the Computation
Period ending 3/31/99, $600,000; and for the Computation Period ending 6/30/99,
$300,000. 9/For the Computation Period ending 9/30/98, multiply the total by
1.33.
<PAGE>
Recyc Net Income $___________
Plus10/: Interest Expense $___________
Income tax expense $___________
Depreciation and
amortization $___________
Total (Recyc EBITDA)11/ $_________ (b)
Lesser of (b) and $1,983,000 $_________ (c)
EBITDA12/ $_________ (y)
Ratio of (x) to (y) ____ to ____
Maximum allowed
9/30/98 thru 6/30/99: 3.50 to 1.0
9/30/99 and thereafter: 3.25 to 1.0
- ---------------------------------------- ------------------- -------------------
10.6.5 DEBT TO CAPITALIZATION
RATIO
- ---------------------------------------- ------------------- -------------------
Funded Debt $_________(x)
- ---------------------------------------- ------------------- -------------------
Sum of (x) PLUS Net Worth $_________(y)
- ---------------------------------------- ------------------- -------------------
Ratio of (x) to (y) ____ to ____
- ---------------------------------------- ------------------- -------------------
Maximum allowed
9/30/98 thru 12/31/98: 60%
3/31/99 thru 12/31/99: 55%
3/31/00 and thereafter: 50%
10.6.6 CAPITAL EXPENDITURES Aggregate amount of all Capital Expenditures made by
the Company and its Subsidiaries in the preceding
Fiscal Year $__________(x)
- ---------------------------------------- ------------------- -------------------
- --------
10/To the extent deducted in determining Recyc Net Income.
11/For the two months ending 9/30/98, the five months ending 12/31/98, the eight
months ending 3/31/99, and the eleven months ending 6/30/99, multiply the total
by 6, 2.4, 1.5, and 1.09, respectively. 12/For the Computation Periods ending
9/30/98 and 12/31/98, the sum of (a) plus (c); for Computation Periods ending
thereafter, the sum of (a) plus (b).
<PAGE>
- ---------------------------------------- ------------------- -------------------
Depreciation and amortization
of the Company and its
Subsidiaries in the preceding
Fiscal Year $_________(a)
- ---------------------------------------- ------------------- -------------------
Product of (a) TIMES 1.5 $__________(y)
- ---------------------------------------- ------------------- -------------------
Sum of (y) MINUS (x) (must be
equal to or greater than zero) $__________
======================================== =================== ===================
The Company further certifies to you that no Event of Default or Unmatured
Event of Default has occurred and is continuing.
IN WITNESS WHEREOF, the Company has caused this Certificate to be executed
and delivered by its duly authorized officer this ____ day of _________, ____.
SYNAGRO TECHNOLOGIES, INC.
By_________________________
Title______________________
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 354,104
<SECURITIES> 0
<RECEIVABLES> 5,925,540
<ALLOWANCES> 196,770
<INVENTORY> 0
<CURRENT-ASSETS> 8,603,519
<PP&E> 18,422,185
<DEPRECIATION> 5,964,548
<TOTAL-ASSETS> 65,213,400
<CURRENT-LIABILITIES> 3,533,582
<BONDS> 0
0
0
<COMMON> 28,553
<OTHER-SE> 33,063,230
<TOTAL-LIABILITY-AND-EQUITY> 65,213,400
<SALES> 9,060,478
<TOTAL-REVENUES> 9,060,478
<CGS> 7,748,604
<TOTAL-COSTS> 7,748,604
<OTHER-EXPENSES> (54,902)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 547,306
<INCOME-PRETAX> (1,157,452)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,157,452)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,157,452)
<EPS-PRIMARY> (0.08)
<EPS-DILUTED> (0.08)
</TABLE>
