Item 1.01
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Entry into a Material Definitive Agreement.
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Master Reorganization Agreement
On June 13, 2018, Charah Solutions, Inc., a Delaware corporation (the Company), entered into a Master Reorganization Agreement
(the Master Reorganization Agreement) with Charah Management LLC, a Delaware limited liability company (Charah Management), Allied Power Holdings, LLC (Allied Power Holdings), Charah Holdings LP, a Delaware
limited partnership (Charah Holdings), CEP Holdings, Inc., a Kentucky corporation (CEP Holdings), Charah Management Holdings LLC, a Delaware limited liability company (Charah Management Holdings), Allied
Management Holdings, LLC, a Delaware limited liability company (Allied Management Holdings), and each other signatory listed on the signature pages thereto.
Subject to the terms and conditions set forth in the Master Reorganization Agreement, in connection with the closing of the Companys
initial public offering (the Offering) of common stock, par value $0.01 per share (the Common Stock), (a) (i) Charah Holdings will contribute all of its interests in Charah Management and Allied Power Holdings to the
Company in exchange for 17,514,745 shares of Common Stock, (ii) CEP Holdings will contribute all of its interests in Charah Management and Allied Power Holdings to the Company in exchange for 4,605,465 shares of Common Stock, (iii) Charah
Management Holdings will contribute all of its interests in Charah Management and Allied Power Holdings to the Company in exchange for 907,113 shares of Common Stock and (iv) Allied Management Holdings will contribute all of its interests in
Charah Management and Allied Power Holdings to the Company in exchange for 409,075 shares of Common Stock, (b) each of Charah Management Holdings and Allied Management Holdings will distribute the shares of Common Stock received by them
pursuant to clause (a) to their respective members in accordance with the respective terms of their limited liability company agreements and (c) Charah Holdings will distribute a portion of the shares of Common Stock it received in clause
(a) above to certain direct and indirect blocker entities which will ultimately merge into the Company, with the Company surviving, and the BCP Energy Services Fund, LP, a Delaware limited partnership owned by Bernhard Capital Partners
Management, LP, a Delaware limited partnership (BCP) and certain related affiliates and BCP Energy Services
Fund-A,
LP, a Delaware limited partnership owned by BCP and certain related affiliates
will receive 14,020,861 shares of our Common Stock as consideration in the mergers.
In addition, in exchange for the contribution of
their profits interests in Charah Management Holdings and Allied Management Holdings, the Company will issue to certain of the current officers and employees who own equity interests in Charah Management and Allied Power Holdings, including through
Charah Management Holdings and Allied Management Holdings (the Management Members) 1,215,956 shares of Common Stock at the closing of this offering, of which 911,963 will be subject to time-based vesting conditions, as well as
performance vesting conditions that include metrics based off specified EBITDA targets and achievement of certain safety metrics (the Management Reorganization Consideration). In addition, the Company issued awards of Common Stock in an
aggregate amount of 316,199 shares of Common Stock (of which 248,023 shares were restricted stock subject to vesting conditions) to certain of the Companys non-executive employees.
The foregoing transactions were undertaken in reliance on an exemption from the registration requirements of the Securities Act of 1933, as
amended (the Securities Act) pursuant to Section 4(a)(2) thereof. As a result of these transactions, Charah Management and Allied Power Holdings will become wholly owned subsidiaries of the Company.
The foregoing description is qualified in its entirety by reference to the full text of the Master Reorganization Agreement, which is attached
as Exhibit 2.1 to this Current Report on Form
8-K
and incorporated in this Item 1.01 by reference.
Underwriting Agreement
On
June 13, 2017, the Company and certain stockholders of the Company (the Selling Stockholders) entered into an Underwriting Agreement (the Underwriting Agreement) with Morgan Stanley & Co. LLC and Merrill Lynch,
Pierce, Fenner & Smith Incorporated, for themselves and as representatives of the several underwriters named therein (the Underwriters), relating to the Offering.
The Underwriting Agreement provides for the offer and sale of an aggregate of 7,352,941 shares of Common Stock, including 5,294,117 shares of
Common Stock to be issued and sold by the Company and an aggregate of 2,058,824 shares of Common Stock to be sold by the Selling Stockholders, each at a price to the public of $12.00 per share ($11.16 per share net of underwriting discounts and
commissions).
Pursuant to the Underwriting Agreement the Selling Stockholders have granted the Underwriters a
30-day
option to purchase up to 1,102,941 additional shares of Common Stock to cover over-allotments. The material terms of the Offering are described in the prospectus, dated June 13, 2018 (the
Prospectus), filed by the Company with the Securities and Exchange Commission (the Commission) on June 15, 2018, pursuant to Rule 424(b) under the Securities Act. The Offering is registered with the Commission pursuant
to a Registration Statement on Form
S-1,
as amended (File No. 333- 225051), initially filed by the Company on May 18, 2018 (as amended, the Registration Statement).
The Underwriting Agreement contains customary representations and warranties, agreements and obligations, closing conditions and termination
provisions. The Company and the Selling Stockholders have agreed to indemnify the Underwriters against certain liabilities, including liabilities under the Securities Act, and to contribute to payments the Underwriters may be required to make
because of such liabilities.
The Offering is expected to close on June 18, 2018, subject to the satisfaction of customary closing
conditions, and the Company expects to receive proceeds from the Offering of approximately $51.4 million (net of underwriting discounts and commissions and estimated offering expenses). As described in the Prospectus, the Company intends to use
$40.0 million of the net proceeds of the Offering to repay a portion of the outstanding indebtedness under its term loan and the remaining net proceeds for general corporate purposes. The Company will not receive any proceeds from the sale of shares
of Common Stock by the Selling Stockholders.
The foregoing description is qualified in its entirety by reference to the full text of the
Underwriting Agreement, which is attached as Exhibit 1.1 to this Current Report on Form
8-K
and incorporated in this Item 1.01 by reference.
Relationships
The underwriters
and their respective affiliates are full service financial institutions engaged in various activities, which may include securities trading, commercial and investment banking, financial advisory, investment management, investment research, principal
investment, hedging, financing and brokerage activities. Certain of the underwriters and their respective affiliates have, from time to time, performed, and may in the future perform, various financial advisory and investment banking services for
the Company, for which they received or will receive customary fees and expenses.
In addition, in the ordinary course of their various
business activities, the underwriters and their respective affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (including bank loans) for
their own account and for the accounts of their customers and may at any time hold long and short positions in such securities and instruments. Such investment and securities activities may involve the Companys securities and instruments. The
underwriters and their respective affiliates may also make investment recommendations or publish or express independent research views in respect of such securities or instruments and may at any time hold, or recommend to clients that they acquire,
long or short positions in such securities and instruments.
2018 Omnibus Incentive Plan
The description of the Charah Solutions, Inc. 2018 Omnibus Incentive Plan (the Incentive Plan) provided below under Item 5.02 is
incorporated in this Item 1.01 by reference. A copy of the Incentive Plan is attached as Exhibit 10.1 to this Current Report on Form
8-K
and is incorporated in this Item 1.01 by reference.