Introductory Note
On March 16, 2020, Charah Solutions, Inc. (the “Company,” “we,” “us” and “our”), closed (the “Closing”) its sale of 26,000 shares of its preferred stock, par value $0.01 per share, designated as “Series A Preferred Stock” (the “Preferred Stock”), for approximately $25.2 million in gross proceeds, pursuant to a Preferred Stock Purchase Agreement (the “Preferred Stock Purchase Agreement”) with Charah Preferred Stock Aggregator, LP (the “Investor”), an affiliate of Bernhard Capital Partners Management, LP (“BCP”). In addition, the previously announced Amendment No. 3 to the Company’s credit agreement with Bank of America, N.A., as administrative agent, the lenders party thereto and certain subsidiary guarantors named therein became effective at the Closing.
| Item 1.01 | Entry into Material Definitive Agreement. |
Registration Rights Agreement Amendment
As a condition to the Closing, on March 16, 2020, the Company amended its existing registration rights agreement (the “Registration Rights Agreement Amendment”) with BCP Energy Services Fund, LP, BCP Energy ServicesFund-A, LP, Charah Holdings LP, and CEP Holdings, Inc. (the “Holders”) in order to grant to the Investor the registration rights applicable to the otherBCP-affiliated parties thereto with respect to the Company’s common stock into which the Preferred Stock is convertible.
The foregoing description of the Registration Rights Agreement Amendment is qualified in its entirety by reference to the full text of such agreement, which is attached as Exhibit 4.1 to this Current Report on Form8-K and incorporated herein by reference.
| Item 3.03 | Material Modification to Rights of Security Holders. |
The information contained in Item 5.03 below relating to the rights of the holders of the Preferred Stock is incorporated herein by reference.
| Item 5.03 | Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year. |
On March 16, 2020, the Company filed a Certificate of Designations (the “Certificate”) with the Secretary of State of the State of Delaware, which amended the Company’s amended and restated Certificate of Incorporation, to create the Preferred Stock issued by the Company in connection with the Closing and is attached to this Current Report on Form8-K as Exhibit 3.1.
The Preferred Stock ranks senior to the Company’s common stock with respect to dividend rights and with respect to rights on liquidation, winding up and dissolution. Each share of Preferred Stock is issued with an initial Liquidation Preference (as defined in the Certificate) of $1,000, for a total initial face value of $26,000,000 as of the date of issuance. The Preferred Stock is entitled to a dividend at a rate of 10% per annum of the Liquidation Preference payable in cash on a quarterly basis, or at the election of the Company, a dividend at the rate of 13% per annum of the Liquidation Preference payable by accruing such dividend and adding it to the Liquidation Preference. Any increase in the Liquidation Preference will, among other things, increase the number of shares of common stock issuable upon conversion of each share of Preferred Stock. The Preferred Stock will also participate in dividends on our common stock on anas-converted basis.
The Preferred Stock is convertible at the option of the holders at any time after the three month anniversary of the issuance of Preferred Stock into the amount of shares of common stock per share of Preferred Stock (such rate, the “Conversion Rate”) equal to the quotient of (i) the Liquidation Preference in effect on the conversion date divided by (ii) a conversion price of $2.77 per share of common stock (the “Conversion Price”), which represents a 30% premium tothe 20-day volume-weighted average price of the common stock ending March 4, 2020, subject to customary anti-dilution adjustments and customary provisions related to partial dividend periods.
At any time following the three year anniversary of issuance of the Preferred Stock, the Company may give 30 days’ notice to the holders of the Preferred Stock that it intends to cause the conversion of the Preferred Stock at the Conversion Rate, provided the closing sale price of the common stock equals or exceeds 120% of the Conversion Price for the 20 trading days ending on the date immediately prior to the date of delivery of the Company’s notice to convert and subject to certain other requirements. Upon delivery of such notice, each holder of the Preferred Stock proposed to be converted will have the option, at its discretion, to have its Preferred Stock converted at the then-applicable Conversion Rate or redeemed in cash at the then-applicable Redemption Price (as defined below).
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