Document:

EX-10.1

 

Exhibit 10.1

THIRD AMENDMENT

TO FINANCING AGREEMENT

     THIRD AMENDMENT, dated as of October 8, 2004 (this “Amendment”), to the
Financing Agreement, dated as of April 23, 2004 (as amended, restated or
otherwise modified from time to time, the “Financing Agreement”), by and among
aaiPharma Inc., a Delaware corporation (the “Parent”), Applied Analytical
Industries Learning Center, Inc., a Delaware corporation (“Applied
Analytical”), AAI Technologies, Inc., a Delaware corporation (“AAI
Technologies”), AAI Properties, Inc., a North Carolina corporation (“AAI
Properties”), AAI Japan, Inc., a Delaware corporation (“AAI Japan”), Kansas
City Analytical Services, Inc., a Kansas corporation (“Analytical Services”),
AAI Development Services, Inc., a Massachusetts corporation (“AAI
Development-MA”), aaiPharma LLC, a Delaware limited liability company (“Pharma
LLC”) and AAI Development Services, Inc., a Delaware corporation (“AAI
Development-DE”, and together with the Parent, Applied Analytical, AAI
Technologies, AAI Properties, AAI Japan, Analytical Services, AAI
Development-MA and Pharma LLC, each a “Borrower” and collectively, the
“Borrowers”), the financial institutions from time to time party hereto (each a
“Lender” and collectively, the “Lenders”), Silver Point Finance, LLC, a
Delaware limited liability company (“Silver Point”), as collateral agent for
the Lenders (in such capacity, and any successor in such capacity, the
“Collateral Agent”), and Bank of America, N.A. (“Bank of America”), as
administrative agent for the Lenders (in such capacity, and any successor in
such capacity, the “Administrative Agent” and together with the Collateral
Agent, each an “Agent” and collectively, the “Agents”).

     WHEREAS, the Borrowers, the Agents and the Lenders wish to amend certain
terms and conditions of the Financing Agreement as hereafter set forth;

     NOW, THEREFORE, the Borrowers, the Agents and the Lenders hereby agree as
follows:

     1. Capitalized Terms. All terms which are defined in the Financing
Agreement and not otherwise defined herein are used herein as defined therein.
In addition, as used in this Amendment, the following terms shall have the
respective meanings indicated below, such meanings to be applicable equally to
both the singular and plural forms of such terms:

     “Specified Events” means, collectively, (a) the amendment of the MVI
Sale Agreement pursuant to the terms of Amendment No. 2 to the MVI Sale
Agreement dated as of September 16, 2004, pursuant to which the Parent
will receive an accelerated purchase price adjustment under the MVI Sale
Agreement, (b) the Disposition of the Parent’s rights to its Calcitriol
product pursuant to the terms of the Termination Agreement by and between
the Parent and SICOR Pharmaceuticals, Inc., on terms substantially the
same as the terms set forth in the draft Termination Agreement provided
by the Parent to the Collateral Agent on the date hereof, and (c) the
Disposition of the Parent’s Investment in Aesgen, Inc. pursuant to the
terms of the Agreement and Plan of Merger and Reorganization, dated as of
August 30, 2004, among MGI Pharma, Inc.,

 

 

MGIP Acquisition Corp., Aesgen Inc. and Timothy I. Maudlin, as
equityholder’s representative.

     “Specified Proceeds” means the Net Cash Proceeds received by the
Loan Parties in connection with the Specified Events.

     “Third Amendment Effective Date” has the meaning specified therefor
in Section 4 of this Amendment.

     2. Amendments to Financing Agreement.

	(a)	 	Existing Definitions.

          (i) The definition of the term “Availability” in Section 1.01 of the
Financing Agreement is hereby amended in its entirety to read as follows:

     “‘Availability’ means, at any time, the difference between (i) the
Total Revolving Credit Commitment and (ii) the sum of (A) the aggregate
outstanding principal amount of all Revolving Loans, (B) all Letter of
Credit Obligations and (C) the aggregate amount of all reserves
established by the Administrative Agent at the direction of the
Collateral Agent pursuant to the terms of this Agreement and the other
Loan Documents.”

          (ii) The definition of the term “Consolidated EBITDA” in Section
1.01 of the Financing Agreement is hereby amended in its entirety to read
as follows:

`

     “‘Consolidated EBITDA’ means, with respect to any Person for any
period, the sum of (a) the Consolidated Net Income of such Person and its
Subsidiaries for such period, plus (b) without duplication, the sum of
the following amounts of such Person and its Subsidiaries for such period
and to the extent deducted in determining Consolidated Net Income of such
Person for such Period: (i) Consolidated Net Interest Expense, (ii)
income, value-added, franchise and other similar tax expense, (iii)
depreciation expense, (iv) amortization expense, (v) any other non-cash
charges, expenses and losses, (vi) the Specified Costs and Expenses,
(vii) other non-recurring cash charges and costs incurred in connection
with Acquisitions and Dispositions permitted under this Agreement
(including Acquisitions and Dispositions permitted as a result of being
approved by the Required Lenders), to the extent such charges and costs
are approved by the Collateral Agent, (viii) other non-recurring
restructuring charges (including severance costs and plant closure costs)
made in accordance with FASB Statement of Financial Accounting Standards
Board No. 146, (ix) (A) non-recurring professional fees associated with
the Special Committee Investigation, the pending Securities and Exchange
Commission and Department of Justice investigations involving the
Borrowers, and/or the operational or debt restructuring of the Borrowers
incurred during the fiscal quarter of the Parent and its Subsidiaries
ended September 30, 2004 in an aggregate amount not to exceed $3,000,000
and (B) non-recurring professional fees associated with the Special
Committee Investigation, the pending Securities and Exchange Commission
and Department of Justice investigations involving the Borrowers, and/or
the operational or debt

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restructuring of the Borrowers incurred during the two fiscal
quarters of the Parent and its Subsidiaries ended December 31, 2004 in an
aggregate amount not to exceed $5,900,000, and (x) non-cash charges for
impairment losses on intangible assets made in accordance with FASB
Statement of Financial Accounting Standards No. 142.”

          (iii) The definition of the term “MVI Sale Agreement” in Section
1.01 of the Financing Agreement is hereby amended in its entirety to read
as follows:

     “‘MVI Sale Agreement’ means, collectively, (i) the Asset Purchase
Agreement, dated as of February 27, 2004 among the Parent, Pharma LLC and
Mayne Pharma (USA) Inc., as amended by Amendment No. 1 to Asset Purchase
Agreement dated as of April 22, 2004 and Amendment No. 2 to Asset
Purchase Agreement dated as of September 16, 2004, and (ii) the other
agreements listed on Schedule 1.01(E).”

     (b) Mandatory Prepayments. Section 2.05(c)(v) of the Financing Agreement
is hereby amended by deleting the parenthetical in clause (x)(2) of the proviso
at the end thereof and substituting in lieu thereof the following:

“(and concurrently with such application to the Revolving Loans, the
Administrative Agent shall, at the direction of the Collateral Agent,
establish and maintain a corresponding reserve to Availability in the
amount so applied, which reserve shall be released by the Administrative
Agent upon the request of the Administrative Borrower and at the
direction of the Collateral Agent (which direction shall be given upon
such request by the Administrative Borrower complying with this Section
2.05(c)(v)) at such time as the Borrowers re-borrow funds in such amount
to be applied in accordance with either of clauses (y) or (z)(2) of this
clause (v))”

     (c) Application of Payments. Section 2.05(d) of the Financing Agreement
is hereby amended by deleting the paragraph at the end thereof and substituting
in lieu thereof the following:

“Notwithstanding anything to the contrary contained in this Section
2.05(d), after the occurrence and during the continuance of an Event of
Default, all prepayments of the Loans pursuant to Section 2.05(c) shall
be applied (or, in the case of prepayments that have been temporarily
applied to the Revolving Loans pending final application thereof as
permitted under the relevant provisions of clause (v) of Section 2.05(c),
shall be re-credited) in accordance with Section 4.04(b).”

     (d) Interest and Fees. Section 2.05(e) of the Financing Agreement is
hereby amended by deleting clause (ii) therein and substituting in lieu thereof
the following:

“(ii) in the case of any prepayment made pursuant to Section 2.05(a)
(excluding the first sentence of Section 2.05(a)(i) thereof) or Section
2.05(c)(iii), any Applicable Prepayment Premium.”

     (e) Unused Line Fee. Section 2.06(a) of the Financing Agreement is hereby
amended by (i) inserting the words “actual daily” immediately before the word
“excess”

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therein and (ii) deleting the word “average” immediately before the words
“principal amount” therein.

     (f) Compliance with Law, Etc. Section 6.01(h) of the Financing Agreement
is hereby amended by deleting clause (iii) therein and substituting in lieu
thereof the following:

“(iii) the Senior Subordinated Note Indenture (other than the default in
the payment of interest due under the Senior Subordinated Note Indenture
on October 1, 2004) or any material term of any Material Contract, and no
Default or Event of Default has occurred and is continuing.”

     (g) Financial Covenants.

          (i) Section 7.03(b) of the Financing Agreement is hereby amended by
inserting therein the following sentence at the end thereof:

“Notwithstanding the foregoing, (i) if Consolidated EBITDA of the Parent
and its Subsidiaries for the fiscal quarter of the Parent and its
Subsidiaries ended September 30, 2004 is greater than $2,000,000, then
the Leverage Ratio of the Parent and its Subsidiaries shall not be tested
under this Section 7.03(b) as of the end of such period and (ii) if
Consolidated EBITDA of the Parent and its Subsidiaries for the two fiscal
quarters of the Parent and its Subsidiaries ended December 31, 2004 is
greater than $7,000,000, then the Leverage Ratio of the Parent and its
Subsidiaries shall not be tested under this Section 7.03(b) as of the end
of such period.”

          (ii) Section 7.03(c) of the Financing Agreement is hereby amended by
inserting therein the following sentence at the end thereof:

“Notwithstanding the foregoing, (i) if Consolidated EBITDA of the Parent
and its Subsidiaries for the fiscal quarter of the Parent and its
Subsidiaries ended September 30, 2004 is greater than $2,000,000, then
the Fixed Charge Coverage Ratio of the Parent and its Subsidiaries shall
not be tested under this Section 7.03(c) as of the end of such period and
(ii) if Consolidated EBITDA of the Parent and its Subsidiaries for the
two fiscal quarters of the Parent and its Subsidiaries ended December 31,
2004 is greater than $7,000,000, then the Fixed Charge Coverage Ratio of
the Parent and its Subsidiaries shall not be tested under this Section
7.03(c) as of the end of such period.”

          (iii) Section 7.03 of the Financing Agreement is hereby amended by
adding the following new subsection (e) at the end thereof:

     “(e) Minimum Revenues. Permit the gross revenues of the Parent and
its Subsidiaries for the fiscal quarter of the Parent and its
Subsidiaries ending December 31, 2004 to be less than $40,000,000.”

-4-

 

          (h) Schedules. Schedules 6.01(x) and 6.01(aa) to the Financing Agreement
are hereby amended by adding to each such Schedule the information set forth on
Annex A attached hereto.

     3. Waiver and Consent.

          (a) Pursuant to the request of the Borrowers and in accordance with
Section 12.02 of the Financing Agreement, the Agents and the Lenders hereby (i)
consent to, and waive any Event of Default that has or would otherwise arise
under Section 9.01(a) or Section 9.01(c) of the Financing Agreement by reason
of the occurrence of the Specified Events described in clauses (a) and (c) of
the definition thereof and (ii) agree that the Specified Proceeds received by
the Borrowers in connection with the Specified Events shall not be required to
be applied in accordance with Section 2.05(c) of the Financing Agreement;
provided, that no Event of Default (other than those waived herein) has
occurred and is continuing at the time of receipt of any such Specified
Proceeds or would result therefrom.

          (b) The waivers and consents in this Section 3 shall be effective only in
this specific instance and for the specific purpose set forth herein and do not
allow for any other or further departure from the terms and conditions of the
Financing Agreement or any other Loan Document, which terms and conditions
shall continue in full force and effect. The Borrowers hereby acknowledge and
agree that it shall be an Event of Default under the Financing Agreement (as to
which no grace period shall apply) if the Borrowers use Specified Proceeds
other than in accordance with this Section 3.

     4. Conditions. This Amendment shall become effective only upon
satisfaction in full of the following conditions precedent (the first date upon
which all such conditions have been satisfied being herein called the “Third
Amendment Effective Date”):

          (a) Representations and Warranties; No Event of Default. The
representations and warranties contained herein, in Article VI of the Financing
Agreement and in each other Loan Document are true and correct on and as of the
Third Amendment Effective Date as though made on and as of such date, except to
the extent that any such representation or warranty expressly relates solely to
an earlier date (in which case such representation or warranty shall be true
and correct on and as of such earlier date); and no Event of Default (other
than those waived herein) shall have occurred and be continuing on the Third
Amendment Effective Date either immediately before or after giving effect to
this Amendment in accordance with its terms.

          (b) Delivery of Documents. The Collateral Agent shall have received on or
before the Third Amendment Effective Date, the following, each in form and
substance reasonably satisfactory to the Collateral Agent and, unless otherwise
indicated, dated as of the Third Amendment Effective Date:

               (i) counterparts of this Amendment, duly executed by the Borrowers,
the Agents and the Lenders;

               (ii) a certificate of an Authorized Officer of each Loan Party,
certifying as to the matters set forth in clause (a) of this Section 4;
and

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               (iii) such other agreements, instruments, approvals, opinions and
other documents as the Collateral Agent may reasonably request.

          (c) Proceedings. All proceedings in connection with the transactions
contemplated by this Amendment, and all documents incidental hereto, shall be
reasonably satisfactory to the Collateral Agent and its counsel.

          (d) Fees, Etc. The Borrowers shall have paid all fees, costs, expenses
and taxes then payable by the Borrowers pursuant to the Financing Agreement and
the other Loan Documents, including, without limitation, Section 2.06 and 12.04
of the Financing Agreement.

     5. Representations and Warranties. Each Borrower represents and warrants
as follows:

          (a) Organization, Good Standing, Etc. Each Borrower (i) is a corporation
or limited liability company, as the case may be, duly organized, validly
existing and in good standing under the laws of the state of its organization
other than to the extent that the failure to be in good standing in such state
could not reasonably be expected to have a Material Adverse Effect and (ii) has
all requisite power and authority to execute, deliver and perform this
Amendment, and to perform the Financing Agreement, as amended hereby.

          (b) Authorization, Etc. The execution, delivery and performance by each
Borrower of this Amendment and the performance by each Borrower of the
Financing Agreement, as amended hereby (i) have been duly authorized by all
necessary action, (ii) do not and will not violate or create a default under
any such Borrower’s organizational documents or any applicable law or any
material term of any Material Contract, and (iii) except as provided in the
Loan Documents, do not and will not result in or require the creation of any
Lien upon or with respect to any of such Borrower’s property.

          (c) Governmental Approvals. No authorization or approval or other action
by, and no notice to or filing with, any Governmental Authority or other
regulatory body is required in connection with (i) the due execution, delivery
and performance by each Borrower of this Amendment or (ii) the performance by
each Borrower of the Financing Agreement, as amended hereby.

          (d) Enforceability of Loan Documents. Each of this Amendment and the
Financing Agreement, as amended hereby, and the other Loan Documents, is a
legal, valid and binding obligation of each Borrower party hereto, enforceable
against such Borrower in accordance with the terms thereof, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors’ rights
generally.

          (e) Representations and Warranties; No Default. The representations and
warranties contained herein, in Article VI of the Financing Agreement and in
each other Loan Document are true and correct on and as of the Third Amendment
Effective Date as though made on and as of such date, except to the extent that
any such representation or warranty expressly relates solely to an earlier date
(in which case such representation or warranty shall be true and correct on and
as of such earlier date); and no Event of Default (other than those waived
herein)

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shall have occurred and be continuing on the Third Amendment Effective
Date either immediately before or after giving effect to this Amendment in
accordance with its terms.

     6. Continued Effectiveness of the Financing Agreement.

          (a) Ratifications. Except as otherwise expressly provided herein, (i) the
Financing Agreement and the other Loan Documents are, and shall continue to be,
in full force and effect and are hereby ratified and confirmed in all respects,
except that on and after the Third Amendment Effective Date (A) all references
in the Financing Agreement to “this Agreement”, “hereto”, “hereof”, “hereunder”
or words of like import referring to the Financing Agreement shall mean the
Financing Agreement as amended by this Amendment and (B) all references in the
other Loan Documents to the “Financing Agreement”, “thereto”, “thereof”,
“thereunder” or words of like import referring to the Financing Agreement shall
mean the Financing Agreement as amended by this Amendment, (ii) to the extent
that the Financing Agreement or any other Loan Document purports to pledge to
the Collateral Agent, or to grant to the Collateral Agent a security interest
in or lien on, any collateral as security for the Obligations, such pledge or
grant of a security interest or lien is hereby ratified and confirmed in all
respects, and (iii) the execution, delivery and effectiveness of this Amendment
shall not operate as an amendment of any right, power or remedy of the Agents
or the Lenders under the Financing Agreement or any other Loan Document, nor
constitute an amendment of any provision of the Financing Agreement or any
other Loan Document.

          (b) No Waivers. Except as otherwise expressly provided herein, this
Amendment is not a waiver of, or consent to, any Default or Event of Default
now existing or hereafter arising under the Financing Agreement or any other
Loan Document and the Agents and the Lenders expressly reserve all of their
rights and remedies under the Financing Agreement and the other Loan Documents,
under applicable law or otherwise.

          (c) Amendment as Loan Document. Each Borrower confirms and agrees that
this Amendment shall constitute a Loan Document under the Financing Agreement.
Accordingly, it shall be an Event of Default under the Financing Agreement if
any representation or warranty made or deemed made by any Borrower under or in
connection with this Amendment shall have been incorrect in any material
respect when made or deemed made or if any Borrower fails to perform or comply
with any covenant or agreement contained herein.

     7. Release. Each Borrower hereby acknowledges and agrees that: (a)
neither it nor any of its Affiliates has any claim or cause of action against
any Agent or any Lender (or any of their respective Affiliates, officers,
directors, employees, attorneys, consultants or agents) and (b) each Agent and
each Lender has heretofore properly performed and satisfied in a timely manner
all of its obligations to the Borrowers and their Affiliates under the
Financing Agreement and the other Loan Documents. Notwithstanding the
foregoing, the Agents and the Lenders wish (and the Borrowers agree) to
eliminate any possibility that any past conditions, acts, omissions, events or
circumstances would impair or otherwise adversely affect any of the Agents’ and
the Lenders’ rights, interests, security and/or remedies under the Financing
Agreement and the other Loan Documents. Accordingly, for and in consideration
of the agreements contained in this Amendment and other good and valuable
consideration, each Borrower (for itself and its Affiliates and the successors,
assigns, heirs and representatives of each of the foregoing)

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(collectively, the “Releasors”) does hereby fully, finally,
unconditionally and irrevocably release and forever discharge each Agent, each
Lender and the L/C Issuer and each of their respective Affiliates, officers,
directors, employees, attorneys, consultants and agents (collectively, the
“Released Parties”) from any and all debts, claims, obligations, damages,
costs, attorneys’ fees, suits, demands, liabilities, actions, proceedings and
causes of action, in each case, whether known or unknown, contingent or fixed,
direct or indirect, and of whatever nature or description, and whether in law
or in equity, under contract, tort, statute or otherwise, which any Releasor
has heretofore had or now or hereafter can, shall or may have against any
Released Party by reason of any act, omission or thing whatsoever done or
omitted to be done on or prior to the Third Amendment Effective Date arising
out of, connected with or related in any way to this Amendment, the Financing
Agreement or any other Loan Document, or any act, event or transaction related
or attendant thereto, or the agreements of any Agent or any Lender contained
therein, or the possession, use, operation or control of any of the assets of
any Borrower, or the making of any Loans or other advances, or the management
of such Loans or advances or the Collateral.

     8. Miscellaneous.

          (a) Counterparts. This Amendment may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which shall be deemed to be an original, but all of which taken together shall
constitute one and the same agreement. Delivery of an executed counterpart of
this Amendment by telefacsimile or electronic mail shall be equally effective
as delivery of an original executed counterpart of this Amendment.

          (b) Headings. Section and paragraph headings herein are included for
convenience of reference only and shall not constitute a part of this Amendment
for any other purpose.

          (c) Governing Law. This Amendment shall be governed by, and construed in
accordance with, the laws of the State of New York.

          (d) Expenses. The Borrowers will pay on demand all reasonable fees, costs
and expenses of the Agents in connection with the preparation, execution and
delivery of this Amendment and all documents incidental hereto, including,
without limitation, the reasonable fees, disbursements and other charges of
Schulte Roth & Zabel LLP, counsel to the Collateral Agent.

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     IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.

	 	 	 	 	 
	 	BORROWERS:

AAIPHARMA INC.

 	 
	 	By:  	/s/ Ludo
Reynders	 
	 	 	Name:  Ludo Reynders
	 	 	Title:  President and Chief Executive
Officer
	 

	 	 	 	 	 
	 	APPLIED ANALYTICAL INDUSTRIES LEARNING 

CENTER, INC.

 	 
	 	By:  	/s/
Gregory S. Bentley	 
	 	 	Name:  Gregory S. Bentley	 
	 	 	Title:  Vice President	 
	 

	 	 	 	 	 
	 	AAI TECHNOLOGIES, INC.

 	 
	 	By:  	/s/
Gregory S. Bentley	 
	 	 	Name:  Gregory S. Bentley	 
	 	 	Title:  Vice President	 
	 

	 	 	 	 	 
	 	AAI PROPERTIES, INC.

 	 
	 	By:  	/s/
Gregory S. Bentley	 
	 	 	Name:  Gregory S. Bentley	 
	 	 	Title:  Vice President	 
	 

	 	 	 	 	 
	 	AAI JAPAN, INC.

 	 
	 	By:  	/s/
Gregory S. Bentley	 
	 	 	Name:  Gregory S. Bentley	 
	 	 	Title:  Vice President	 
	 

	 	 	 	 	 
	 	KANSAS CITY ANALYTICAL SERVICES, INC.

 	 
	 	By:  	/s/
Gregory S. Bentley	 
	 	 	Name:  Gregory S. Bentley	 
	 	 	Title:  Vice President	 

 

 

	 	 	 	 	 

	 	 	 	 	 
	 	AAI DEVELOPMENT SERVICES, INC.

 	 
	 	By:  	/s/
Gregory S. Bentley	 
	 	 	Name:  Gregory S. Bentley	 
	 	 	Title:  Vice President	 
	 

	 	 	 	 	 
	 	AAIPHARMA LLC

 	 
	 	By:  	/s/
Gregory S. Bentley	 
	 	 	Name:  Gregory S. Bentley	 
	 	 	Title:  Vice President	 
	 

	 	 	 	 	 
	 	AAI DEVELOPMENT SERVICES, INC.

 	 
	 	By:  	/s/
Gregory S. Bentley	 
	 	 	Name:  Gregory S. Bentley	 
	 	 	Title:  Vice President	 

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	 	COLLATERAL AGENT:

SILVER POINT FINANCE, LLC,

as Collateral Agent

 	 
	 	By:  	/s/
Edward A. Mulé	 
	 	 	Name:  Edward A. Mulé	 
	 	 	Title:  Authorized
Signatory	 
	 

	 	 	 	 	 
	 	ADMINISTRATIVE AGENT:

BANK OF AMERICA, N.A.,

as Administrative Agent

 	 
	 	By:  	/s/
Annie Cuenco	 
	 	 	Name:  Annie Cuenco	 
	 	 	Title:  Assistant Vice President	 
	 

	 	 	 	 	 
	 	LENDERS:

BANK OF AMERICA, N.A.,

as L/C Issuer

 	 
	 	By:  	/s/
Adonis A. Hembrick	 
	 	 	Name:  Adonis A. Hembrick	 
	 	 	Title:  Vice President	 
	 

	 	 	 	 	 
	 	BANK OF AMERICA, N.A.,

as a Lender

 	 
	 	By:  	/s/
Adonis A. Hembrick	 
	 	 	Name:  Adonis A. Hembrick	 
	 	 	Title:  Vice President	 
	 

	 	 	 	 	 
	 	SEA PINES FUNDING LLC,

as a Lender

 	 
	 	By:  	/s/
Diana M. Himes	 
	 	 	Name:  Diana M. Himes	 
	 	 	Title:  Assistant Vice President	 

-3-

 

	 	 	 	 	 

	 	 	 	 	 
	 	TRS THEBE LLC,

as a Lender

 	 
	 	By:  	/s/
Alice L. Wagner	 
	 	 	Name:  Alice L. Wagner	 
	 	 	Title:  Vice President	 
	 

	 	 	 	 	 
	 	SIL LOAN FUNDING LLC,

as a Lender

 	 
	 	By:  	/s/
Jason Trala	 
	 	 	Name:  Jason Trala	 
	 	 	Title:  Attorney-In-Fact	 
	 

	 	 	 	 	 
	 	SILVER POINT ONSHORE CDO, LLC,

as a Lender

 	 
	 	By:  	/s/
Edward A. Mulé	 
	 	 	Name:  Edward A. Mulé	 
	 	 	Title:  Authorized
Signatory	 
	 

	 	 	 	 	 
	 	GOLDMAN SACHS CREDIT PARTNERS L.P.,

as a Lender

 	 
	 	By:  	/s/ Mark
DeNatale	 
	 	 	Name:  Mark DeNatale	 
	 	 	Title:  Authorized
Signatory	 

-4-<PAGE>
                                                                   Exhibit 10.16

                              EMPLOYMENT AGREEMENT

                  This employment agreement (the "EMPLOYMENT AGREEMENT") is made
this 17th day of March 2003 (the "EFFECTIVE DATE"), by and between Michael K.
Miller (the "EMPLOYEE") and Dycom Industries, Inc., a Florida corporation (the
"COMPANY").

                  1. EMPLOYMENT.

                  Subject to the terms and conditions hereof, as of the
Effective Date, the Company hereby agrees to employ the Employee as the General
Counsel of the Company. The Employee agrees to perform such specific duties and
accept such responsibilities as the board of directors of the Company (the
"BOARD") and the Chief Executive Officer may from time to time establish that
are reasonably related and consistent with the Employee's position as the
General Counsel of the Company. The Employee shall report directly to the Chief
Executive Officer and the Chief Financial Officer. The Employee hereby accepts
employment by the Company as General Counsel, subject to the terms and
conditions hereof, and agrees to devote his full business time and attention to
his duties hereunder, to the best of his abilities.

                  2. TERM OF EMPLOYMENT.

                  The Employee's employment pursuant to the Employment Agreement
shall commence on the Effective Date and shall terminate upon the earlier to
occur of (i) termination pursuant to paragraph 5 hereof or (ii) the second
anniversary of the Effective Date (the "EMPLOYMENT TERM").

                  3. COMPENSATION, BENEFITS AND EXPENSES.

                  (a) For services rendered under this Employment Agreement, the
Company will pay the Employee (i) during the period commencing on the Effective
Date and continuing up to and including July 26, 2003, a base annual salary of
$140,000 and (ii) from the period commencing on July 27, 2003 and continuing
through the Employment Term, a base annual salary of $150,000 (such applicable
annual rate referred to herein as the "BASE SALARY"). Payment will be made on
the regularly scheduled pay dates of the Company, subject to all appropriate
withholdings or other deductions required by applicable law or by the Company's
established policies applicable to employees of the Company. The Board may
increase the Base Salary in its sole discretion, but shall not reduce the Base
Salary below the rate established by the Employment Agreement without the
Employee's written consent.

                  (b) During the Employment Term, the Employee shall be entitled
to participate in the Company's annual incentive plan, under which the Employee
shall be eligible to receive an annual target bonus equal to an amount between
twenty percent (20%) and fifty percent (50%) of Base Salary if certain
performance criteria and measures are satisfied, as determined by and within the
sole discretion of the Board.

                  (c) During the Employment Term, in addition to the
compensation payable to the Employee as described above, the Employee shall be
entitled to participate in all the employee benefit plans or programs of the
Company that are available to employees of the Company generally ("EMPLOYEE
BENEFITS").

<PAGE>

                  (d) As soon as administratively practicable following the
Effective Date, the Board shall grant the Employee options (the "OPTIONS") to
acquire 10,000 shares of common stock of the Company, pursuant to the terms of
the Company's 1998 Incentive Stock Option Plan (the "OPTION PLAN"). In addition,
during the Employment Term, the Employee shall be eligible for subsequent annual
Option grants under the Option Plan, or any such successor stock option plan, at
the time such grants are made under the Option Plan to management employees of
the Company generally, with a targeted grant of Options to acquire between 5,000
and 10,000 shares of common stock of the Company per year, as determined by and
within the sole discretion of the Board.

                  (e) During the Employment Term, the Company shall reimburse
the Employee for such reasonable out-of-pocket expenses as he may incur from
time to time for and on behalf of the furtherance of the Company's business,
provided that the Employee submits to the Company satisfactory documentation or
other support for such expenses in accordance with the Company's expense
reimbursement policy.

                  4. COVENANTS OF THE EMPLOYEE.

                  (a) The Employee agrees with the Company that, during the
Employment Term, the Employee shall not directly or indirectly, whether as a
proprietor, partner, joint venturer, employer, agent, employee, consultant,
officer or beneficial or record owner of more than one percent (1%) of the stock
of any corporation or association of any nature, engage in any business which is
competitive to the business conducted by the Company, its subsidiaries or its
affiliates (collectively, the "COMPANIES"), in any geographic area in which the
Companies have engaged or will engage during the Employment Term (including,
without limitation, any area in which any customer of the Companies may be
located).

                  (b) The Employee agrees with the Company that at no time
during the Employment Term, or at any time following his termination of
employment with the Company, will the Employee directly or indirectly divulge to
any person, entity or other organization or appropriate for the Employee's own
use or for the use of others any trade secrets or confidential information or
confidential knowledge pertaining to the business of the Companies
(collectively, the "PROPRIETARY INFORMATION"). The Employee shall retain all
copies and extracts of any written confidential information acquired or
developed by him during his employment for the sole benefit of the Companies.
The Employee further agrees that he will not remove or take from the Companies'
premises (or, if previously removed or taken, he will, at the Company's request,
promptly return) any written confidential information or any copies or extracts
thereof. The Employee shall promptly make all disclosures, execute all
instruments and papers, and perform all acts reasonably necessary to vest and
confirm to the Company, fully and completely, all rights created or contemplated
by this paragraph 4(b).

                  (c) In the event the Employee resigns his employment with the
Company for any reason, or if the Company terminates his employment without
Cause (as defined in paragraph 5(a) below), other than a termination without
Cause during the six-month period immediately following a Change of Control (as
defined in paragraph 5(f) below), the Employee separately agrees, being fully
aware that the performance of the Employment Agreement is important to preserve
the present value of the property and business of the Company that for the

                                       2
<PAGE>

Severance Period (as defined below) (the "RESTRICTED PERIOD"), the Employee
shall not directly or indirectly engage in any business, whether as proprietor,
partner, joint venturer, employer, agent, employee, consultant, officer or
beneficial or record owner of more than one percent (1%) of the stock of any
corporation or association of any nature which is competitive to the business
conducted by the Companies, in the geographical service area in which the
Companies have engaged or will engage during such period (including, without
limitation, any area in which any such customer of the Companies may be
located).

                  (d) As a separate and independent covenant, the Employee
agrees with the Company that, for so long as the Employee is employed by the
Company and for the Restricted Period, he will not in any way, directly or
indirectly, for the purpose of conducting or engaging in any competitive
business with the Companies, call upon, solicit, advise or otherwise do, or
attempt to do, business with any person who is, or was, during the then most
recent 12-month period, a customer of the Companies, or solicit, induce, hire,
attempt to hire, interfere with or attempt to interfere with, any person who is,
or was during the then most recent 12-month period, an employee, officer,
representative or agent of the Companies.

                  (e) The Employee agrees that the breach by the Employee of any
of the foregoing covenants is likely to result in immediate and irreparable
harm, directly or indirectly, to the Companies. The Employee, therefore,
consents and agrees that if the Employee violates any of such covenants, the
Companies shall be entitled, among and in addition to any other rights or
remedies available under the Employment Agreement or at law or in equity, to
temporary and permanent injunctive relief, without bond or other security, to
prevent the Employee from committing or continuing a breach of such covenants.
Such injunctive relief in any court shall be available to the Companies, in lieu
of, or prior to or pending determination in, any arbitration proceeding.

                  (f) It is the desire, intent and agreement of the Employee and
the Company that the restrictions placed on the Employee by this paragraph 4 be
enforced to the fullest extent permissible under the law and public policy
applied by any jurisdiction in which enforcement is sought. Accordingly, if and
to the extent that any portion of this paragraph 4 shall be adjudicated to be
unenforceable, such portion shall be deemed amended to delete therefrom or to
reform the portion thus adjudicated to be invalid or unenforceable, such
deletion or reformation to apply only with respect to the operation of such
portion in the particular jurisdiction in which such adjudication is made.

                  (g) Except with respect to the equitable relief contemplated
under paragraph 4(e), any controversy or claim arising out of or relating to the
Employment Agreement shall be resolved by arbitration in Palm Beach County,
Florida, in accordance with the rules then in effect of the American Arbitration
Association, and judgment upon the award rendered may be entered in any court
having jurisdiction thereon. The prevailing party in any such arbitration
proceeding will be reimbursed by the other party hereto for its reasonable
attorney fees and fees and costs incurred attributable to such arbitration.

                                       3
<PAGE>

                  5. TERMINATION.

                  (a) TERMINATION FOR CAUSE. The Company shall have the right to
terminate the Employee's employment at any time and for any reason. If the
Employee is terminated for Cause (as defined below), the Company shall not have
any obligation to pay the Employee any Base Salary or other compensation or to
provide any employee benefits subsequent to the date of such Employee's
termination of employment (unless required by applicable law), including,
without limitation, Severance Benefits (as defined in paragraph 5(b) hereof).
Termination for "CAUSE" shall mean termination of employment for any of the
following reasons:

                  (i)      The Employee entering a plea of no-contest with
                           respect to, or being convicted by a court of
                           competent and final jurisdiction of, any crime,
                           whether or not involving the Companies, that
                           constitutes a felony in the jurisdiction involved;

                  (ii)     any willful misconduct by the Employee that is
                           injurious to the financial condition or business
                           reputation of the Company;

                  (iii)    Employee materially breaches a duty of loyalty owed
                           to the Companies or, as a result of his gross
                           negligence, breaches a duty of care owed to
                           Companies; or

                  (iv)     Employee materially breaches this Employment
                           Agreement or fails or refuses to perform any of his
                           material duties as required by this Employment
                           Agreement in any respect, after Employee being given
                           written notice of such breach, failure or refusal,
                           and Employee's failure to cure the same within 30
                           calendar days of receipt of such notice.

                  (b) TERMINATION WITHOUT CAUSE. Subject to the provisions of
paragraph 5(c), if, prior to the expiration of the Employment Term, the Company
terminates the Employee's employment without Cause, the Company shall, subject
to the Employee's execution of a general release of claims against the Company
in a form satisfactory to the Company, provide the Employee with Severance
Benefits. "SEVERANCE BENEFITS" mean (i) Base Salary (at the rate then in effect
thirty (30) days prior to such termination) for the twelve (12) month period
immediately following Employee's termination of employment without Cause (such
period being referred to hereunder as the "SEVERANCE PERIOD"), at such intervals
as the same would have been paid had the Employee remained in the active service
of the Company, and (ii) the Company shall also provide the Employee and his
eligible dependents with group medical and life insurance after termination of
the Employee's employment without Cause (to the extent such eligible dependents
were participating in the Company's group medical and life insurance programs
prior to the Employee's termination of employment), until the earlier of (x) the
date the Employee becomes eligible for group medical and life insurance coverage
as the result of the Employee accepting another position with a new employer or
(y) the termination of the Severance Period, whichever shall occur first.

                  (c) CONDITIONS APPLICABLE TO SEVERANCE PERIOD. If, during the
Severance Period, the Employee breaches any of his obligations under the
Employment Agreement (including, but not limited to, paragraph 4) or such other
agreement between the Company and the Employee, the Company may, upon written
notice to the Employee terminate the Severance

                                       4
<PAGE>

Period and cease to make any payments or provide any benefits, including,
without limitation, Severance Benefits.

                  (d) RESIGNATION BY THE EMPLOYEE. In the event the Employee
resigns his employment with the Company, the Employee: (i) shall provide the
Company with sixty (60) days prior written notice; (ii) shall not make any
public announcements concerning his resignation prior to the resignation date
without the written consent of the Company and (iii) shall continue to perform
faithfully the duties assigned to him under the Employment Agreement (or such
other duties as the Company or Board may assign to him) from the date of such
notice until the termination date. In addition, in the event the Employee
resigns his employment with the Company for any reason, the Company shall not
have any obligation to pay the Employee any Base Salary or other compensation or
to provide any employee benefits subsequent to the date of such Employee's
termination of employment (unless required by applicable law), including,
without limitation, Severance Benefits.

                  (e) TERMINATION UPON DEATH OR DISABILITY. Unless otherwise
terminated earlier pursuant to the terms of the Employment Agreement, the
Employee's employment under the Employment Agreement shall terminate upon his
death and may be terminated by the Company upon giving not less than thirty (30)
days written notice to the Employee in the event that the Employee, because of
physical or mental disability or incapacity, is unable to perform (or, in the
opinion of a physician, is reasonably expected to be unable to perform) his
duties hereunder for an aggregate of one hundred eighty (180) days during any
twelve-month period ("DISABLED"). All questions arising with respect to whether
the Employee is Disabled shall be determined by a reputable physician mutually
selected by the Company and the Employee at the time such question arises. If
the Company and the Employee cannot agree upon the selection of a physician
within a period of seven (7) days after such question arises, then the Chief of
Staff of Good Samaritan Hospital in Palm Beach County, Florida shall be asked to
select a physician to make such determination. The determination of the
physician selected pursuant to the above provisions of this paragraph 5(e) as to
such matters shall be conclusively binding upon the parties hereto.

                  (f) TERMINATION UPON A CHANGE OF CONTROL. In the event of a
"CHANGE OF CONTROl," notwithstanding any provisions in the Option Plan or any
successor stock option plan to the contrary, all outstanding Options under the
Option Plan or any successor stock option plan, to the extent not already
vested, shall become fully and immediately vested as of the date of the
occurrence of a Change of Control. For purposes of the Employment Agreement, a
"CHANGE OF CONTROL" shall be deemed to have occurred with respect to the Company
if any one or more of the following events occur:

                  (i)      A tender offer is made and consummated for the
                           ownership of fifty percent (50%) or more of the
                           outstanding voting securities of the Company;

                  (ii)     a "person," within the meaning of Section 3(a)9 or
                           Section 13(d) (as in effect on the date hereof) of
                           the Securities Exchange Act of 1934, shall acquire
                           fifty percent (50%) or more of the outstanding voting
                           securities of the Company;

                                       5
<PAGE>

                  (iii)    substantially all of the assets of the Company are
                           sold or transferred to another person, corporation or
                           entity that is not a wholly owned subsidiary of the
                           Company; or

                  (iv)     a change in the Board such that a majority of the
                           seats on the Board are occupied by individuals who
                           were neither nominated by a majority of the directors
                           of the Company as of the close of business on the
                           Effective Date nor appointed by directors so
                           nominated.

                  6. ASSIGNMENT AND SUCCESSION.

                  (a) The services to be rendered and obligations to be
performed by the Employee under the Employment Agreement shall not be assignable
or transferable.

                  (b) The Employment Agreement shall inure to the benefit of and
be binding upon and enforceable by the Company and the Employee and their
respective successors, permitted assigns, heirs, legal representatives,
executors, and administrators. If the Company shall be merged into or
consolidated with another entity, the provisions of the Employment Agreement
shall be binding upon and inure to the benefit of the entity surviving such
merger or resulting from such consolidation. The Company will require any
successor (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to expressly assume and agree to perform the Employment Agreement in
the same manner that the Company would be required to perform it if no such
succession had taken place. The provisions of this paragraph 6(b) shall continue
to apply to each subsequent Company of the Employee hereunder in the event of
any subsequent merger, consolidation, or transfer of assets of such subsequent
Company.

                  7. NOTICES.

                  All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by delivery in person, by cable,
telegram or telex or by registered or certified mail (postage prepaid, return
receipt requested) to the respective parties at the following addresses (or at
such other address for a party as shall be specified in a notice given in
accordance with this paragraph 7):

                  if to the Company:

                  Dycom Industries, Inc.
                  First Union Center
                  4440 PGA Boulevard
                  Suite 500
                  Palm Beach Gardens, Florida  33410
                  Attention: Richard L. Dunn
                                 Steven E. Nielsen

                                       6
<PAGE>

                  if to the Employee:

                  Michael K. Miller
                  253 De Sota Road
                  West Palm Beach, Florida  33405

                  8. WAIVER OF BREACH.

                  (a) The waiver by the Company or the Employee of a breach of
any provision of the Employment Agreement shall not operate or be construed as a
waiver by such party of any subsequent breach.

                  (b) The parties hereto recognize that the laws and public
policies of various jurisdictions may differ as to the validity and
enforceability of covenants similar to those set forth herein. It is the
intention of the parties that the provisions hereof be enforced to the fullest
extent permissible under the laws and policies of each jurisdiction in which
enforcement may be sought, and that the unenforceability (or the modification to
conform to such laws or policies) of any provisions hereof shall not render
unenforceable, or impair, the remainder of the provisions hereof. Accordingly,
if, at the time of enforcement of any provision hereof, a court of competent
jurisdiction holds that the restrictions stated herein are unreasonable under
circumstances then existing, the parties hereto agree that the maximum period,
scope or geographic area reasonable under such circumstances will be substituted
for the stated period, scope or geographical area and that such court shall be
allowed to revise the restrictions contained herein to cover the maximum period,
scope and geographical area permitted by law.

                  9. AMENDMENT.

                  The Employment Agreement may be amended only by a written
instrument signed by the parties hereto.

                  10. FULL SETTLEMENT.

                  The Company's obligation to pay the Employee the amounts
required by the Employment Agreement shall be absolute and unconditional and
shall not be affected by any circumstances, including, without limitation, any
setoff, counterclaim, recoupment, defense or other right which the Company may
have against the Employee or anyone else. All payments and benefits to which the
Employee is entitled under the Employment Agreement shall be made and provided
without offset, deduction, or mitigation on account of income that the Employee
may receive from employment from the Company or otherwise.

                  11. OTHER SEVERANCE BENEFITS.

                  In consideration for the payments to be made to the Employee
under the Employment Agreement, the Employee agrees to waive any and all rights
to any payments or benefits under any other severance plan, program or
arrangement of the Companies.

                                       7
<PAGE>

                  12. GOVERNING LAW; JURISDICTION AND SERVICE OF PROCESS.

                  The Employment Agreement shall be governed by the laws of the
State of Florida applicable to contracts executed in and to be performed in that
State.

                  13. AUTHORITY TO ENTER INTO EMPLOYMENT AGREEMENT.

                  The Employee represents and warrants that he is not subject to
any employment agreements, non-competition agreements or any other agreement or
understanding, whether or not in writing, that would prevent him from entering
into the Employment Agreement and performing the duties hereunder.

                  14. PARTIAL INVALIDITY.

                  The invalidity or unenforceability of any provision hereof
shall in no way affect the validity or enforceability of any other provision.

                  15. WITHHOLDING.

                  The payment of any amount pursuant to the Employment Agreement
shall be subject to applicable withholding and payroll taxes, and such other
deductions as may be required under the Company's employee benefit plans, if
any.

                  16. COUNTERPARTS.

                  The Employment Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instruments.

                  17. ENTIRE AGREEMENT.

                  All prior negotiations and agreements between the parties
hereto with respect to the matters contained herein are superseded by the
Employment Agreement, and there are no representations, warranties,
understandings or agreements other than those expressly set forth herein.

                                       8
<PAGE>
                  IN WITNESS WHEREOF, the Employee and the Employer have entered
into this Employment Agreement as of the date set forth above.

                                       EMPLOYEE

                                        /s/ MICHAEL K. MILLER
                                        ----------------------------------------
                                    By: Michael K. Miller
                                        DYCOM INDUSTRIES, INC.,
                                        a Florida corporation

                                    By: /s/ STEVEN NIELSEN
                                        ----------------------------------------
                                        Name:  Steven E. Nielsen
                                        Title: President and Chief Executive
                                               Officer

                                       9

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