SCHEDULE 14A
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant |X|
Filed by a party other than the Registrant|_|
Check the appropriate box:
|_| Preliminary Proxy Statement
|_| CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED BY RULE
14A-6(E)(2))
|X| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to ss. 240.14(a)-11(c) or ss. 240.14a-12
CONSUMAT ENVIRONMENTAL SYSTEMS, INC.
(Name of Registrant as Specified in its Charter)
CONSUMAT ENVIRONMENTAL SYSTEMS, INC.
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
|X| No fee required.
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transactions applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:1
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(4) Proposed maximum aggregate value of transaction:
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|_| Fee paid previously with preliminary materials.
|_| Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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(1) Set forth the amount on which the filing fee is calculated and state how
it was determined.
<PAGE>
CONSUMAT ENVIRONMENTAL SYSTEMS, INC.
POST OFFICE BOX 9379 o RICHMOND, VIRGINIA o 23227
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 5, 1997
TO THE HOLDERS OF COMMON STOCK:
The Annual Meeting of Shareholders of Consumat Environmental
Systems, Inc. (the "Company"), will be held at the offices of the Company, 8407
Erle Road, Mechanicsville, Virginia, on Thursday, June 5, 1997, commencing at
4:30 p.m. E.D.T., for the following purposes:
1. To elect a board of six directors to serve until the 1998
Annual Meeting of Shareholders;
2. To act upon a proposal, previously approved by the Board of
Directors of the Company, to adopt the Peter T. Socha Stock
Option Plan.
3. To ratify the selection of KPMG Peat Marwick LLP, certified
public accountants, as auditors of the Company for the 1997
fiscal year; and
4. To transact such other business as may properly come before
the meeting or any adjournments thereof.
The Board of Directors has fixed the close of business on April 14,
1997, as the record date for the determination of shareholders entitled to
notice of and to vote at the meeting and any adjournments thereof.
The Company's Proxy Statement is submitted herewith. The Annual
Report for the fiscal year ended December 31, 1996, accompanies the Proxy
Statement.
You are requested to complete, sign, date, and return the enclosed
Proxy promptly regardless of whether you expect to attend the meeting. A
self-addressed, stamped envelope is enclosed for your convenience.
IF YOU ARE PRESENT AT THE MEETING, YOU MAY VOTE IN PERSON EVEN IF
YOU HAVE ALREADY SENT IN YOUR PROXY.
By Order of the Board of Directors,
PATRICIA B. BRADLEY,
Corporate Secretary
May 8, 1997
<PAGE>
CONSUMAT ENVIRONMENTAL SYSTEMS, INC.
Post Office Box 9379
Richmond, Virginia 23227
PROXY STATEMENT
To Be Mailed on or about May 8, 1997, for
Annual Meeting of Shareholders To Be Held June 5, 1997
GENERAL
The accompanying proxy is solicited by and on behalf of the Board of
Directors of Consumat Environmental Systems, Inc. (the "Company"), for use at
the Annual Meeting of Shareholders of the Company to be held June 5, 1997, or
any adjournments thereof, for the purposes set forth in this Proxy Statement and
the attached Notice of Annual Meeting of Shareholders. If sufficient proxies are
not returned in response to this solicitation, supplementary solicitations also
may be made by mail or by telephone, telegraph or personal interview by
directors, officers and regular employees of the Company, none of whom will
receive additional compensation for these services. The Company reserves the
right to retain an outside proxy solicitation firm to assist in the solicitation
of proxies, but at this time does not have plans to do so. Costs of solicitation
of proxies will be borne by the Company, which will reimburse banks, brokerage
firms, and other custodians, nominees, and fiduciaries for reasonable
out-of-pocket expenses incurred by them in forwarding proxy materials to the
beneficial owners of shares held by them.
The shares represented by all properly executed proxies received by
the Corporate Secretary of the Company and not revoked as herein provided will
be voted as set forth herein unless the shareholder directs otherwise in the
proxy, in which event such shares will be voted in accordance with such
directions. ANY PROXY MAY BE REVOKED AT ANY TIME BEFORE THE SHARES TO WHICH IT
RELATES ARE VOTED EITHER BY WRITTEN NOTICE (WHICH MAY BE IN THE FORM OF A
SUBSTITUTE PROXY DELIVERED TO THE SECRETARY OF THE MEETING) OR BY ATTENDING THE
MEETING AND VOTING IN PERSON.
VOTING RIGHTS
The Board of Directors has fixed the close of business on April 14,
1997, as the record date for the determination of shareholders entitled to
notice of and to vote at the meeting and any adjournments thereof. Each holder
of record of the Company's common stock, $1.00 par value per share (the "Common
Stock"), on the record date will be entitled to one vote for each share then
registered in his name with respect to all matters to be considered at the
meeting. As of the close of business on the record date, 1,011,200 shares of
Common Stock were outstanding and entitled to vote at the meeting. Presence in
person or by proxy of the holders of a majority of the outstanding shares of
Common Stock entitled to vote at the meeting will constitute a quorum. Shares
for which the holder has elected to abstain or to withhold the proxies'
authority to vote (including broker non-votes) on a matter will count towards a
quorum, but will have no effect on the action taken with respect to such matter.
<PAGE>
PROPOSAL ONE -- ELECTION OF DIRECTORS
NOMINEES AND VOTE REQUIRED
The Company's Board of Directors presently consists of six
directors, each of whom is to serve until the 1997 Annual Meeting of
Shareholders or his earlier resignation or removal in accordance with the
articles of incorporation or bylaws of the Company.
The Board of Directors has nominated all six of such directors as
nominees for re-election as directors. The nominees are identified in the table
below.
Each of the nominees has consented to being named as a nominee in
this Proxy Statement and has agreed to serve if elected. Each of the nominees
has furnished to the Company the information set forth in the table below with
respect to his age and his principal occupation or employment.
It is expected that each of these nominees will be able to serve,
but in the event that any such nominee is unable to serve for any reason (which
event is not now anticipated), the proxies reserve discretion to vote or refrain
from voting for a substitute nominee or nominees. Shareholders may withhold
authority to vote for any of the nominees on the accompanying proxy.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE
NOMINEES SET FORTH BELOW. The six nominees receiving the greatest number of
affirmative votes cast at the Annual Meeting will be elected.
<TABLE>
<CAPTION>
NAME AND (AGE) DIRECTOR PRINCIPAL OCCUPATION FOR LAST FIVE YEARS
- -------------- SINCE AND OTHER INFORMATION
----- ---------------------
<S> <C>
Peter T. Socha (38) 1997 Chairman of the Board of the Company; Vice President of
Sirrom Investments, Inc. (1994-1996); President and Chief
Operating Officer of Stewart Foods, Inc. (1992-1994);
Investment banker with Quest Capital Corporation (1991-
1992).
Robert L. Massey (62) 1971 President and Chief Executive Officer of the Company
Alexander Y. Hoff (61) 1995 President and Chief Executive Officer of Yankee
Engineering Company
James W. Bohlig (50) 1996 Senior Vice President , Chief Operating Officer, and
Director of Casella Waste Systems, Inc.; Officer and
Director of North Country Environmental Services, Inc.;
Director of Nova PB.
D. Randolph Graham (46) 1996 Vice President - Administration, Case Management
Division of Maxxim Medical, Inc.; Vice President -
Administration, Chief Financial Officer, and Treasurer of
Sterile Concepts Holdings, Inc. (1994-1996).
Charles E. Horner (57) 1996 Retired from Philip Morris Manufacturing in 1994;
President of Studley Corporation; General Partner of Reed,
L.P.; Director of Metro County Bank.
</TABLE>
<PAGE>
THE COMPANY BOARD MEETINGS AND ATTENDANCE
The Board of Directors held 9 meetings during the fiscal year ended
December 31, 1996. All directors attended seventy-five percent or more of the
meetings, including regularly scheduled and special meetings, and the meetings
of any committees of the Board on which they served, in each case that were held
in the past fiscal year during the periods in which they were directors or
served on such committees. The Board of Directors currently has two standing
committees. The Compensation Committee consists of Mr. Bohlig and Mr. Horner,
and the Audit Committee consists of Mr. Hoff and Mr. Graham.
DIRECTOR COMPENSATION AND REIMBURSEMENT
The Company reimburses the direct travel expenses of directors
associated with Board of Director activities. In 1996, the Company paid its
directors reimbursement expenses in the aggregate amount of $3,009. In addition,
each of the four outside directors of the Board of Directors received
compensation in the form of 300 shares of the common stock of the Company. Two
directors, Mr. Horner and Mr. Graham were each granted options in 1996 to
purchase 25,000 shares of the Company's common stock pursuant to the Company's
1996 Non-Employee Director Stock Option Plan.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of March 31, 1997, the number and
percentage of shares of Common Stock held by persons known to the Company to be
the owners of more than five percent of the Company's issued and outstanding
Common Stock, each of the Company's directors, the Named Officer (as defined
below), and all the Company's directors and executive officers as a group:
AMOUNT
NAME AND ADDRESS OF OF BENEFICIAL PERCENT
BENEFICIAL OWNER OWNERSHIP(1) OF CLASS (APPROX.)
- ---------------- ------------ ------------------
Alexander Y. Hoff 88,832 8.8%
6443 Cloister Gate Drive
Baltimore, Maryland 21212
New England Waste Services, Inc. 107,318 10.6%
P.O. Box 866
Rutland, Vermont 05702
Peter T. Socha 100,000 9.9%
1769-Q Jamestown Road
Williamsburg, Virginia 23185
Carter Kaplan Holdings, L.L.C. 100,000 9.9%
P.O. Box 344
629 East Main Street
Richmond, Virginia 23202
Robert L. Massey 46,370 4.6%
216 Fulham Circle
Richmond, Virginia 23227
James W. Bohlig 300 *
25 Greens Hill Lane
Rutland, Vermont 05702
<PAGE>
D. Randolph Graham 12,300 1.2%
10815 Weather Vane Road
Richmond, Virginia 23233
Charles E. Horner 5,300 *
9471 Studley Farms Drive
Studley, Virginia 23162
Mark E. Hills 32,560 3.2%
4805 Fort McHenry Pkwy.
Glen Allen, Virginia 23060
Patricia B. Bradley 2,860 *
10940 Forest Trace Lane
Glen Allen, Virginia 23060
Robert S. Lee 35,829 3.5%
6015 Arbor View Terrace
Chester, Virginia 23831
All executive officers and 324,351 32.1%
directors as a group (9 persons)
- -----------------------
* Beneficial ownership does not exceed one percent of the outstanding shares of
Common Stock.
(1) Except as otherwise indicated, each director or executive officer has sole
voting and investment power with respect to the shares shown. Notwithstanding
the foregoing, however, of the shares beneficially owned by Mr. Hoff, 88,172
shares of Common Stock are directly owned by Yankee Engineering Company, a
company for which he serves as President and Chief Executive Officer. In
addition, the shares of Common Stock beneficially owned by Mr. Socha are jointly
owned by Mr. Socha and Annabelle K. Socha, Mr. Socha's spouse.
CHANGES IN CONTROL. In connection with financing provided by Sirrom Capital
Corporation and pursuant to the terms of a Stock Purchase Warrant dated March
12, 1996, the Company granted a warrant entitling Sirrom Capital Corporation to
purchase up to approximately 32% of the Common Stock of the Company on a fully
diluted basis at a price of $0.01 per share. The warrant is exercisable
beginning on and after March 31, 1998, until April 30, 2001.
In addition, a change in control of the Company occurred on March 12,
1996, on which date the Company consummated the Second Amended Plan of
Reorganization, as amended (the "Reorganization Plan"). In accordance with the
Reorganization Plan, all equity interests in the Company were canceled,
including, without limitation, the 1,564,699 issued and outstanding shares of
the old common stock of the Company; however, the Company distributed a total of
500,000 shares of the new Common Stock of the Company to or on account of the
holders of the shares of the old common stock of the Company. Certain of the
creditors of the Company received a total of 150,000 shares of the new Common
Stock of the Company in partial satisfaction of their claims against the
Company. Consequently, under the Reorganization Plan, a total of 510,000 shares
of the new Common Stock of the Company were distributed to or on account of the
holders of the old common stock of the Company and the holders of certain claims
against the Company.
In connection with the consummation of the Reorganization Plan,
Environmental Systems Company ("ENSCO"), the holder of approximately thirty-six
percent (36%) of the shares of the old common stock of the Company, assigned its
interest under the Reorganization Plan in 140,000 shares of the new Common Stock
of the Company and disclaimed its interest under the Reorganization Plan in
another 41,009 shares of the new Common Stock of the Company, which 41,009
shares were distributed by the Company to the other holders of the shares of the
old common stock of the Company on a PRO RATA basis. Also in connection with the
<PAGE>
consummation of the Reorganization Plan, ENSCO and another creditor disclaimed
their interests under the Reorganization Plan as creditors of the Company to
receive approximately 38,734 shares of the new Common Stock of the Company,
which 38,734 shares were distributed by the Company to other creditors of the
Company on a PRO RATA basis.
EXECUTIVE COMPENSATION
The following table lists all compensation paid or accrued by the
Company for services in all capacities to the Company's President and Chief
Executive Officer for the years ended December 31, 1996, 1995, and 1994 (the
"Named Officer") No other executive officer received annual compensation and/or
bonus in excess of $100,000 for such years.
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------- ------------
SECURITIES UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY (1) BONUS OPTIONS/SARS(#) ALL OTHER COMPENSATION
- --------------------------- ---- ------ ----- --------------- ----------------------
<S> <C>
Robert L. Massey, 1996 142,805 -0- 30,000
President and Chief 1995 118,269 -0- -0-
Executive Officer 1994 112,500 -0- -0- (2)
</TABLE>
(1) Mr. Massey was entitled under his employment contract to receive a base
salary of $125,000 during each of the fiscal years ending December 31, 1996,
1995, and 1994. The amounts set forth in the above table reflect salary
reductions applicable to Mr. Massey in each of the fiscal years ending December
31, 1995, and 1994. The aggregate amount of such reductions formed a part of Mr.
Massey's claim against the Company in its Chapter 11 proceeding, which claim was
paid in part in 1996 and discharged pursuant to the Reorganization Plan.
(2) Substantially less than $50,000 or 10% of salary.
CERTAIN AGREEMENTS
The Company and the Company's Chief Executive Officer, Mr. Massey,
are parties to an employment contract dated February 12, 1991. The employment
contract had an initial term of two years but is automatically renewed annually
unless notice of non-renewal is given by one of the parties. The employment
contract provides for an annual base salary of $125,000 and additional benefits.
As of December 31, 1996, Mr. Massey was indebted to the Company in
the amount of $19,028 as a result of a loan made to him in December 1985. The
loan does not bear interest and is to be repaid on demand out of future bonuses,
when declared, or otherwise one year following termination of employment with
the Company.
BONUS PLAN
The Company has a bonus plan which provides for the payment of
periodic bonuses to employees. The Company did not pay cash bonuses to its
officers in 1996.
<PAGE>
COMMON STOCK OPTIONS
The following table provides information relating to the
grant of common stock options to the Named Officer during the year ended
December 31, 1996 pursuant to the Company's 1996 Incentive Stock Option Plan:
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
-----------------
NUMBER OF % OF TOTAL OPTIONS
SECURITIES GRANTED TO EMPLOYEES EXERCISE OF BASE PRICE
NAME UNDERLYING OPTIONS IN FISCAL YEAR ($/SH) EXPIRATION DATE
---- GRANTED (#) -------------- ------ ---------------
-----------
<S> <C>
Robert L. Massey, President 30,000 26.8% $1.5625 12/12/2006
and Chief Executive Officer
</TABLE>
PROPOSAL TWO -- APPROVAL OF THE PETER T. SOCHA STOCK OPTION PLAN
INTRODUCTION
On January 14, 1997, the Board of Directors approved, subject to
shareholder approval, the Peter T. Socha Stock Option Plan (the "Socha Plan")
and directed that it be submitted to shareholders for approval. The Socha Plan
became effective January 14, 1997, subject to shareholder approval. Unless
sooner terminated by the Board of Directors, the Socha Plan will terminate on
January 13, 2007. No incentive awards may be made under the Socha Plan after
termination.
On January 14, 1997, the Company granted Mr. Socha incentive stock
options to purchase an aggregate of 100,000 shares of Common Stock at an
exercise price of $1.3125 per share, which represented the average bid price of
the Common Stock on the date of grant, pursuant to the Socha Plan. The
effectiveness of the grant of such options, however, is subject to (i)
shareholder approval and (ii) the Company and Mr. Socha entering into a
standstill agreement with respect to the shares of Common Stock underlying the
options so granted (the "Underlying Stock"), which agreement shall contain
provisions concerning the acquisition, disposition and voting of shares of
capital stock of the Company and the participation of Mr. Socha in certain
activities which may lead to a change in control of the Company. The options
granted to Mr. Socha expire on January 13, 2007, or such other date determined
in accordance with the terms of the Socha Plan. The options granted to Mr. Socha
shall vest in three equal installments on January 14, 2004, January 14, 2005 and
January 14, 2006. Notwithstanding the foregoing, however, the options granted to
Mr. Socha shall immediately vest and shall become fully exercisable upon the
last day of any period of four consecutive fiscal quarters in which (i) the
Company's earnings per share of Common Stock shall equal at least 200% of the
Company's earnings per share of Common Stock for the fiscal year ended December
31, 1996 or (ii) the Company's pre-tax earnings for any period of four
consecutive fiscal quarters equals at least $2,000,000. Under no circumstances
shall any options granted to Mr. Socha vest prior to July 14, 1997. As of
January 14, 1997, the market value of the Underlying Stock was approximately
$131,250. This value, however, does not take into effect the exercise
price that must be paid by Mr. Socha to receive the Underlying Stock.
The Socha Plan is intended to provide an incentive for Mr. Socha,
the Chairman of the Board of Directors of the Company, to increase shareholder
value through the development and execution of a long-term strategic plan
for the Company. The incentive stock options granted to Mr. Socha under
the Socha Plan are in addition to his salary of $1 per year and the usual
benefits made available by the Company to its executive officers.
The principal features of the Socha Plan are summarized below. The
summary is qualified by reference to the complete text of the Socha Plan, which
is attached hereto as Exhibit A.
GENERAL
The Socha Plan reserves 100,000 shares of the Common Stock of the
Company for issuance pursuant to incentive awards in the form of incentive stock
options or nonstatutory stock options (as described below). The issuance of all
such shares would result in a nine percent (9%) dilution of the percentage
ownership interest of existing shareholders. Only Mr. Socha is eligible to
receive incentive awards under the Socha Plan.
If an option is cancelled, terminates or lapses unexercised, any
unissued shares allocable to such option may be subjected again to an incentive
award.
<PAGE>
Adjustments will be made in the number and kind of shares which may
be issued under the Socha Plan in the event of a future stock dividend, stock
split or similar change in the number of outstanding shares of Common Stock or
the future creation or issuance to shareholders generally of rights, options or
warrants for the purchase of capital stock of the Company.
The Company may register the Socha Plan under the Securities Act of
1933 after shareholder approval is received.
ADMINISTRATION
The Socha Plan will be administered by a committee comprised of at
least two directors of the Company who are not eligible to participate in the
Socha Plan or any similar plan of the Company. The committee has the power and
complete discretion to determine whether to grant incentive awards, when Mr.
Socha will receive incentive awards, whether the award will be an incentive
stock option or a nonstatutory stock option (as described below), whether the
award of a nonstatutory stock option will include a tax offset right, and the
number of shares to be allocated to each incentive award. The committee will
impose conditions upon the exercise of options and may impose such other
restrictions and requirements as it may deem appropriate.
STOCK OPTIONS
Options to purchase shares of Common Stock granted under the Socha
Plan may be incentive stock options or nonstatutory stock options. Incentive
stock options qualify for favorable income tax treatment under section 422 of
the Internal Revenue Code of 1986, as amended (the "Code"), while nonstatutory
stock options do not. The option price of Common Stock covered by an incentive
stock option or a statutory stock option may not be less than 100% (or, in the
case of an incentive stock option granted to a 10% shareholder, 110%) of the
fair market value of the Common Stock on the date of the option grant.
The value of incentive stock options, based on the exercise price,
that first become exerciseable by a participant in any calendar year under the
Socha Plan or any other similar plan maintained by the Company, is limited to
$100,000.
Options may be exercised only at such times as may be specified by
the committee; provided, however, that incentive stock options may not be
exercised after the first to occur of (i) ten years (or, in the case of an
incentive stock option granted to a 10% shareholder, five years) from the date
on which the incentive stock option was granted, (ii) three months from Mr.
Socha's termination of employment with the Company for reasons other than death
<PAGE>
or disability, or (iii) one year from Mr. Socha's termination of employment on
account of death or disability.
If the option so provides, Mr. Socha may pay the purchase price in
cash; by delivering a promissory note; by delivering or causing to be withheld
from the option shares, shares of Common Stock; or by delivering an exercise
notice together with irrevocable instructions to a broker to promptly deliver to
the Company the amount of sale or loan proceeds from the option shares to pay
the exercise price.
TAX OFFSET RIGHTS
The committee may, in its discretion, award tax offset rights in
conjunction with any nonstatutory stock option. Tax offset rights entitle the
participant to receive an amount of cash from the Company sufficient to satisfy
the income and payroll taxes legally required to be withheld upon exercise of
the nonstatutory stock option.
TRANSFERABILITY OF INCENTIVE AWARDS
Options may not be sold, transferred, pledged, or otherwise disposed
of, other than by will or by the laws of descent and distribution. All rights
granted to Mr. Socha under the Socha Plan shall be exercisable during his
lifetime only by Mr. Socha, or his guardians or legal representatives. Upon the
death of Mr. Socha, his personal representative or beneficiary may exercise his
rights under the Socha Plan.
AMENDMENT OF THE SOCHA PLAN AND INCENTIVE AWARDS
The Board of Directors may amend the Socha Plan in such respects as
it deems advisable; provided that the shareholders of the Company must approve
any amendment that would (i) materially increase the benefits accruing to
participants under the Socha Plan, (ii) materially increase the number of shares
of Common Stock that may be issued under the Socha Plan, or (iii) materially
modify the requirements of eligibility for participation in the Socha Plan.
Incentive awards granted under the Socha Plan may be amended with the consent of
the recipient so long as the amended award is consistent with the terms of the
Socha Plan.
FEDERAL INCOME TAX CONSEQUENCES
Mr. Socha will not incur federal income tax when he is granted an
option, whether or not he is granted a tax offset right in connection therewith.
Upon exercise of a nonstatutory stock option, Mr. Socha will
recognize compensation income, which is subject to income tax withholding by the
Company, equal to the difference between the fair market value of the Common
Stock on the date of the exercise and the option price. The committee has
authority under the Socha Plan to include provisions allowing Mr. Socha to
deliver Common Stock, or to elect to have withheld a portion of the shares he
would otherwise acquire upon exercise, to cover his tax liabilities. The
election will be effective only if approved by the committee and made in
compliance with other requirements set forth in the Socha Plan. When Mr. Socha
exercises an incentive stock option, he generally will not recognize income,
unless he is subject to the alternative minimum tax.
<PAGE>
If the terms of an option permit, Mr. Socha may deliver shares of
Common Stock instead of cash to acquire shares under an option, without having
to recognize taxable gain (except in some cases with respect to "statutory
option stock") on any appreciation in value of the shares delivered. However, if
Mr. Socha delivers shares of "statutory option stock" in satisfaction of all, or
any part, of the exercise price under an incentive stock option, and if the
applicable holding periods of the "statutory option stock" have not been met
(two years from grant and one year from exercise), he will be considered to have
made a taxable disposition of the "statutory option stock." "Statutory option
stock" is stock acquired upon the exercise of incentive stock options.
Upon exercise of a tax offset right, Mr. Socha generally will
recognize ordinary income, which is subject to income tax withholding by the
Company, equal to the amount of cash received.
The Company usually will be entitled to a business expense
deduction, except as explained below, at the time and in the amount that the
recipient of an incentive award recognizes ordinary compensation income in
connection therewith. As stated above, this usually occurs upon exercise of
nonstatutory options or tax offset rights. Generally, the Company's deduction is
contingent upon the Company's meeting withholding tax requirements. No deduction
is allowed in connection with an incentive stock option, unless the employee
disposes of Common Stock received upon exercise in violation of the holding
period requirements. For tax years after December 31, 1996, the Company's right
to a tax deduction for income recognized in connection with incentive awards or
the exercise of options by executives whose total compensation is subject to the
proxy disclosure rules will depend upon whether the compensation of such
executive in the aggregate exceeds $1,000,000; if so, the excess over $1,000,000
will not be deductible.
This summary of the federal income tax consequences of incentive
stock options, nonstatutory stock options and tax offset rights does not purport
to be complete. There may also be state and local income taxes applicable to
these transactions.
VOTE REQUIRED
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSED SOCHA
PLAN. Approval of the proposed Socha Plan requires the affirmative vote of the
holders of a majority of the shares of Common Stock voting at the meeting.
PROPOSAL THREE -- RATIFICATION OF SELECTION OF AUDITORS
INTRODUCTION AND PROPOSAL
KPMG Peat Marwick LLP, independent certified public accountants, has
been selected by the Board of Directors as accountants and auditors for the
Company for the current fiscal year, subject to ratification by the Company's
shareholders. The firm has no relationship with the Company except that it has
served as its independent accountants and auditors since October 18, 1996.
Representatives of KPMG Peat Marwick LLP are expected to be present at the
Annual Meeting of Shareholders and will have an opportunity to make a statement
<PAGE>
if they so desire and are expected to be available to respond to appropriate
questions from shareholders. In the event the shareholders do not ratify the
selection of KPMG Peat Marwick LLP, the selection of other accountants and
auditors will be considered by the Board of Directors.
Action by shareholders is not required by law in the selection of
independent auditors, but their selection is submitted by the Board of Directors
in order to give shareholders the final choice in the designation of independent
auditors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE SELECTION OF KPMG
PEAT MARWICK LLP. Ratification of the selection requires the affirmative vote of
a majority of shares of Common Stock voting at the meeting.
THE COMPANY'S AUDITED CONSOLIDATED FINANCIAL STATEMENTS
The Company's Audited Consolidated Financial Statements are included
in the accompanying Annual Report to Shareholders, and are filed as part of the
Company's Annual Report on Form 10-KSB for the year ended December 31, 1996.
COMPLIANCE WITH SECTION 16 OF THE
SECURITIES AND EXCHANGE ACT OF 1934
Based on the representations of the Company's officers, directors
and significant shareholders, the Company believes that, during the year
ending December 31, 1996, the following transactions were not timely reported to
the Securities and Exchange Commission:
(i) Mr. Graham, Mr. Horner, Mr. Hoff, Mr. Bohlig and New England
Waste Services, Inc. failed to timely file their respective initial filings on
Form 3;
(ii) Mr. Massey failed to timely report the acquisition of options
to purchase 30,000 shares of Common Stock pursuant to the Company's 1996
Incentive Stock Option Plan (the "Stock Option Plan");
(iii) Mr. Lee and Mr. Hills failed to timely report the acquisition
of options to purchase 20,000 shares of Common Stock each pursuant to the Stock
Option Plan;
(iv) Ms. Bradley failed to timely report the acquisition of
options to purchase 2,500 shares of Common Stock pursuant to the Stock Option
Plan;
<PAGE>
(v) Mr. Bohlig, Mr. Graham, Mr. Hoff and Mr. Horner failed to
timely report the acquisition from the Company of 300 shares of Common Stock
each on December 26, 1996;
(vi) Mr. Graham failed to timely report the acquisition of (A)
10,000 shares of Common Stock on the open market on October 26, 1996; (B) 2,000
shares of Common Stock on the open market on August 19, 1996; and (C) options to
purchase 25,000 shares of the Company's Common Stock on June 14, 1996 pursuant
to the Company's 1996 Non-Employee Director Stock Option Plan;
(vii) Mr. Hoff failed to timely report the sale by Yankee
Engineering Company, a company which he controls, of 10,00 shares of Common
Stock on October 29, 1996; and
(viii) Mr. Horner failed to timely report the (A) purchase of 4,000
shares of Common Stock on October 31, 1996 on the open market; (B) purchase of
1,000 shares of Common Stock on July 25, 1996 on the open market; and (C)
acquisition of options to purchase 25,000 shares of Common Stock on June 14,
1996 pursuant to the Company's 1996 Non-Employee Director Stock Option Plan.
OTHER MATTERS
The Board of Directors knows of no other matters which will be
brought before the meeting. However, if any other matters are properly
presented, or if any question arises as to whether any matter has been properly
presented and is a proper subject for shareholder action, the persons named as
proxies in the accompanying proxy intend to vote the shares represented by such
proxy in accordance with their best judgment.
SHAREHOLDER PROPOSALS FOR 1998
ANNUAL MEETING OF SHAREHOLDERS
Proposals of shareholders intended to be presented at the 1998
Annual Meeting of Shareholders must be received by the Company at its principal
executive offices no later than January 1, 1998, for inclusion in the Company's
1998 proxy materials. Such proposals should meet the applicable requirements of
the Securities Exchange Act of 1934, as amended, and the rules and regulations
thereunder.
FURTHER INFORMATION
THE COMPANY WILL PROVIDE WITHOUT CHARGE TO EACH PERSON FROM WHOM A
PROXY IS SOLICITED BY THE BOARD OF DIRECTORS, UPON THE WRITTEN REQUEST OF ANY
SUCH PERSON, A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-KSB, INCLUDING THE
FINANCIAL STATEMENTS THERETO, AS FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, FOR THE
<PAGE>
COMPANY'S FISCAL YEAR ENDED DECEMBER 31, 1996. Such written requests should be
sent to the Corporate Secretary, Consumat Environmental Systems, Inc., Post
Office Box 9379, Richmond, Virginia 23227.
BY ORDER OF THE BOARD OF DIRECTORS,
PATRICIA B. BRADLEY
Corporate Secretary
May 8, 1997
PLEASE FILL IN, SIGN, DATE AND RETURN PROMPTLY THE ACCOMPANYING PROXY. IF YOU
ATTEND THE MEETING IN PERSON, YOU MAY WITHDRAW YOUR PROXY AND VOTE YOUR OWN
SHARES.
<PAGE>
EXHIBIT A
CONSUMAT ENVIRONMENTAL SYSTEMS, INC.
PETER T. SOCHA STOCK OPTION PLAN
1. PURPOSE. The purpose of this Consumat Environmental Systems,
Inc. Peter T. Socha Stock Option Plan (the "Plan") is to provide incentive to
Peter T. Socha to improve the long term stability and financial success of
Consumat Environmental Systems, Inc., (the "Company"). The Plan is intended to
conform to the provisions of Securities and Exchange Commission Rule 16b-3.
2. DEFINITIONS. As used in the Plan, the following terms have the
meanings indicated:
(a) "Act" means the Securities Exchange Act of 1934, as amended.
(b) "Agreement" means a written agreement (including any
amendment or supplement thereto) between the Company and the
Participant specifying the terms and conditions of an Option granted
to such Participant.
(c) "Applicable Withholding Taxes" means the aggregate amount of
federal, state and local income and payroll taxes that the Company
is required to withhold in connection with any exercise of a
Nonstatutory Stock Option.
(d) "Affiliate" means any "parent" or "subsidiary" corporation
(within the meaning of Code Section 424) of the Company.
(e) "Board" means the board of directors of the Company.
(f) "Change of Control" means:
<PAGE>
(i) The acquisition, other than from the Company, by any
individual, entity or group (within the meaning of Section 13(d)(3)
or 14 (d)(2) of the Act), of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Act) of 20% or more of
either the then outstanding shares of common stock of the Company or
the combined voting power of the then outstanding voting securities
of the Company entitled to vote generally in the election of
directors, but excluding for this purpose, any such acquisition by
the Company or any of its subsidiaries, or any employee benefit plan
(or related trust) of the Company or its subsidiaries, or any
corporation with respect to which, following such acquisition, more
than 50% of, respectively, the then outstanding shares of common
stock of such corporation and the combined voting power of the then
outstanding voting securities of such corporation entitled to vote
generally in the election of directors is then beneficially owned,
directly or indirectly, by the individuals and entities who were the
beneficial owners, respectively, of the common stock and voting
securities of the Company immediately prior to such acquisition in
substantially the same proportion as their ownership, immediately
prior to such acquisition, of the then outstanding shares of common
stock of the Company or the combined voting power of the then
outstanding voting securities of the Company entitled to vote
generally in the election of directors, as the case may be; or
(ii) Individuals who, as of the date hereof, constitute the
Board (as of the date hereof the "Incumbent Board") cease for any
reason to constitute at least a majority of the Board, provided that
any
<PAGE>
individual becoming a director subsequent to the date hereof whose
election or nomination for election by the Company's shareholders
was approved by a vote of at least a majority of the directors
comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for
this purpose, any such individual whose initial assumption of office
is in connection with an actual or threatened election contest
relating to the election of the Directors of the Company (as such
terms are used in Rule 14a-11 of Regulation 14A promulgated under
the Act); or
(iii) Approval by the shareholders of the Company of a
reorganization, merger or consolidation, in each case, with respect
to which the individuals and entities who were the respective
beneficial owners of the common stock and voting securities of the
Company immediately prior to such reorganization, merger or
consolidation do not, following such reorganization, merger or
consolidation, beneficially own, directly or indirectly, more than
50% of, respectively, the then outstanding shares of common stock
and the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of directors,
as the case may be, of the corporation resulting from such
reorganization, merger or consolidation, or a complete liquidation
or dissolution of the Company or of its sale or other disposition of
all or substantially all of the assets of the Company.
(g) "Code" means the Internal Revenue Code of 1986, as amended.
(h) "Committee" means the committee appointed by the Board as
described under Section 16.
(i) "Company" means Consumat Environmental Systems, Inc., a
Virginia corporation.
(j) "Company Stock" means Common Stock, $1.00 par value, of the
Company. If the par value of the Company Stock is changed, or in
the event of a change in the capital structure of the Company (as
provided in Section 15), the shares resulting from such a change
shall be deemed to be Company Stock within the meaning of the Plan.
(k) "Date of Grant" means the date on which an Option is granted
by the Committee.
(l) "Disability" or "Disabled" means a Disability within the
meaning of Code Section 22(e)(3).
(m) "Fair Market Value" means, on any given date, the value of a
share of Company Stock based upon the average of the highest and
lowest reported sales prices per share of the Company Stock on such
day on the NASDAQ Bulletin Board (or, if there have been no
transactions, the bid price).
(o) "Incentive Stock Option" means an Option intended to meet the
requirements of, and qualify for favorable federal income tax
treatment, under Code Section 422.
(p) "Insider" means a person subject to Section 16(b) of the Act.
<PAGE>
(q) "Nonstatutory Stock Option" means an Option that does not
meet the requirements of Code Section 422, or, even if meeting the
requirements of Code Section 422, is not intended to be an Incentive
Stock Option and is so designated.
(r) "Option" means a right to purchase Company Stock granted
under the Plan, at a price determined in accordance with the Plan
and set forth in an Agreement.
(s) "Participant" means any employee who receives an Option under
the Plan.
(t) "Plan" means the Consumat Environmental Systems, Inc. Peter
T. Socha Stock Option Plan.
(u) "Rule 16b-3" means Rule 16b-3 of the Securities and Exchange
Commission promulgated under the Act. A reference in the Plan to
Rule 16b-3 shall include a reference to any corresponding rule (or
number redesignation) of any amendments to Rule 16b-3 enacted after
the effective date of the Plan's adoption.
(v) "10% Shareholder" means an individual who owns, directly or
indirectly, stock possessing more than 10% of the total combined
voting power of all classes of stock of the Company or of an
Affiliate. Indirect ownership of stock shall be determined in
accordance with Code Section 424(d).
(w) "Tax Offset Right" means a right to receive amounts in cash
from the Company as described in Section 9 of the Plan.
(x) "Window Period" means the period beginning on the third
business day and ending on the twelfth business day following the
release for publication of quarterly or annual summary statements of
the Company's sales and earnings. The release for publication shall
<PAGE>
be deemed to have occurred if the specified financial data (i)
appears on a wire service, (ii) appears in a financial news service,
(iii) appears in a newspaper of general circulation, or (iv) is
otherwise made publicly available.
3. GENERAL. The sole type of incentive awards that may be granted
under the Plan are Incentive Stock Options and Nonstatutory Stock Options.
4. STOCK. Subject to Section 15 of the Plan, there shall be reserved
for issuance under the Plan an aggregate of 100,000 shares of Company Stock,
which shall be authorized, but unissued shares. Shares allocable to Options or
portions thereof granted under the Plan that expire or otherwise terminate
unexercised may again be subjected to an award under the Plan. For purposes of
determining the number of shares that are available for award as Options under
the Plan, such number shall, to the extent permissible under Rule 16b-3, include
the number of shares surrendered by an optionee or retained by the Company in
payment of Applicable Withholding Taxes.
5. ELIGIBILITY.
(a) Peter T. Socha is the sole employee of the Company who is
eligible to participate in the Plan. Mr. Socha will become a Participant only if
the Committee, in its sole discretion, selects him to receive an Option. The
Committee has the sole discretion to determine for Mr. Socha the terms and
conditions, the nature of the award and the number of shares to be allocated to
each employee as part of each Option. Any Option granted under this Plan shall
be evidenced by an Agreement which shall be subject to the applicable provisions
of this Plan and to other such provisions as the Committee may impose.
<PAGE>
(b) The grant of an Option shall not obligate the Company or any
Affiliate to pay an employee any particular amount of remuneration, to continue
the employment of the employee after the grant or to make further grants to the
employee at any time thereafter.
<PAGE>
6. STOCK OPTIONS.
(a) Whenever the Committee deems it appropriate to grant Options,
notice shall be given to the Participant stating the number of shares for which
Options are granted, the Option price per share, whether the Options are
Incentive Stock Options or Nonstatutory Stock Options, and the conditions to
which the grant and exercise of the Options are subject. This notice, when duly
accepted in writing by the Participant, shall become an Agreement.
(b) The exercise price of shares of Company Stock covered by an
Option shall be not less than 100% of the Fair Market Value of such shares on
the Date of Grant; provided that if an Option is granted to a Participant who,
at the time of the grant, is a 10% Shareholder, then the exercise price of the
shares covered by the Option shall be not less than 110% of the Fair Market
Value of such shares on the Date of Grant.
(c) Options may be exercised in whole or in part at such times as
may be specified by the Committee in the Participant's Agreement; provided that,
the exercise provisions for Incentive Stock Options shall in all events not be
more liberal than the following provisions:
(i) No Incentive Stock Option may be exercised after the
first to occur of (x) ten years (or, in the case of an Incentive
Stock Option granted to a 10% Shareholder, five years) from the Date
of Grant, (y) three months following the date of the Participant's
retirement or termination of employment with the Company and all
Affiliates for reasons other than Disability or death, or (z) one
year following the date of the Participant's termination of
employment on account of Disability or death.
(ii) Except as otherwise provided in this paragraph, no
Incentive Stock Option may be exercised unless the Participant is
employed by the Company or an Affiliate at the time of the exercise
<PAGE>
and has been employed by the Company or an Affiliate of the Company
at all times since the Date of Grant. If a Participant's employment
is terminated other than by reason of his Disability or death at a
time when the Participant holds an Incentive Stock Option that is
exercisable (in whole or in part), the Participant may exercise any
or all of the exercisable portion of the Incentive Stock Option (to
the extent exercisable on the date of termination) within three
months after the Participant's termination of employment. If a
Participant's employment is terminated by reason of his Disability
at a time when the Participant holds an Incentive Stock Option that
is exercisable (in whole or in part), the Participant may exercise
any or all of the exercisable portion of the Incentive Stock Option
(to the extent exercisable on the date of Disability) within one
year after the Participant's termination of employment. If a
Participant's employment is terminated by reason of his death at a
time when the Participant holds an Incentive Stock Option that is
exercisable (in whole or in part), the Incentive Stock Option may be
exercised (to the extent exercisable on the date of death) within
one year after the Participant's death by the person to whom the
Participant's rights under the Incentive Stock Option shall have
passed by will or by the laws of descent and distribution.
(iii) An Incentive Stock Option by its terms, shall be
exercisable in any calendar year only to the extent that the
aggregate Fair Market Value (determined at the Date of Grant) of the
Company Stock with respect to which Incentive Stock Options are
exercisable for the first time during the calendar year does not
exceed $100,000 (the "Limitation Amount"). Incentive Stock Options
granted after 1986 under the Plan and all other plans of the Company
<PAGE>
and any Affiliate shall be aggregated for purposes of determining
whether the Limitation Amount has been exceeded. The Board may
impose such conditions as it deems appropriate on an Incentive Stock
Option to ensure that the foregoing requirement is met. If Incentive
Stock Options that first become exercisable in a calendar year
exceed the Limitation Amount, the excess Options will be treated as
Nonstatutory Stock Options to the extent permitted by law.
(e) Notwithstanding the foregoing, no Option shall be exercisable
within the first six months after it is granted; provided that, this restriction
shall not apply if the Participant becomes Disabled or dies during the six-month
period.
(f) The Committee may, in its sole discretion, grant Options that by
their terms become fully exercisable upon a Change of Control, notwithstanding
other conditions on exercisability in the Agreement.
7. METHOD OF EXERCISE OF OPTIONS.
(a) Options may be exercised by the Participant giving written
notice of the exercise to the Company, stating the number of shares the
Participant has elected to purchase under the Option. Such notice shall be
effective only if accompanied by the exercise price in full in cash; provided
that, if the terms of an Option so permit, the Participant may (i) deliver, or
cause to be withheld from the Option shares, shares of Company Stock (valued at
their Fair Market Value on the date of exercise) in satisfaction of all or any
part of the exercise price, (ii) deliver a properly executed exercise notice
together with irrevocable instructions to a broker to deliver promptly to the
Company, from the sale or loan proceeds with respect to the sale of Company
Stock or a loan secured by Company Stock, the amount necessary to pay the
<PAGE>
exercise price and, if required by the Committee, Applicable Withholding Taxes,
or (iii) deliver an interest bearing promissory note, payable to the Company, in
payment of all or part of the exercise price together with such collateral as
may be required by the Committee at the time of exercise. The interest rate
under any such promissory note shall be established by the Committee and shall
be at least equal to the minimum interest rate required at the time to avoid
imputed interest under the Code.
(b) The Company may place on any certificate representing Company
Stock issued upon the exercise of an Option any legend deemed desirable by the
Company's counsel to comply with federal or state securities laws, and the
Company may require a customary written indication of the Participant's
investment intent. Until the Participant has made any required payment,
including any Applicable Withholding Taxes, and has had issued a certificate for
the shares of Company Stock acquired, he shall possess no shareholder rights
with respect to the shares.
(c) As an alternative to making a cash payment to the Company to
satisfy Applicable Withholding Taxes, if the Agreement so provides, the
Participant may, subject to the provisions set forth below, elect to (i) deliver
shares of already owned Company Stock or (ii) have the Company retain that
number of shares of Company Stock that would satisfy all or a specified portion
of the Applicable Withholding Taxes. The Committee shall have sole discretion to
approve or disapprove any such election. If the Participant is an Insider, the
following provisions apply to elections to satisfy Applicable Withholding Taxes,
to the extent required by Rule 16b-3:
<PAGE>
(i) The Participant's election to have the Company
retain from the shares of Company Stock to be issued upon exercise
of an Option the number of shares of Company Stock that would
satisfy Applicable Withholding Taxes must be made at least six
months after the Option was granted, and either:
(x) during a Window Period; or
(y) at least six months before the amount of
Applicable Withholding Taxes is calculated.
(ii) The Participant's election must be irrevocable.
(iii) Notwithstanding any of the foregoing
provisions, the manner and timing of elections may be varied from
those provided, and elections previously made as irrevocable may be
revoked, if such variance or revocation is permissible under Rule
16b-3.
(d) Notwithstanding anything herein to the contrary, Options shall
always be granted and exercised in such a manner as to conform to the provisions
of Rule 16b-3.
8. NONTRANSFERABILITY OF OPTIONS. Options by their terms, shall not
be transferable except by will or by the laws of descent and distribution or, if
permitted by Rule 16b-3, pursuant to a qualified domestic relations order (as
defined in Code Section 414(p)) ("QDRO") and shall be exercisable, during the
Participant's lifetime, only by the Participant or, if permitted by Rule 16b-3,
an alternative payee under a QDRO, or by his guardian, duly authorized
attorney-in-fact or other legal representative.
<PAGE>
9. TAX OFFSET RIGHTS.
(a) Whenever the Committee deems it appropriate, Tax Offset Rights
may be granted in connection with Nonstatutory Stock Options. Tax Offset Rights
shall be evidenced in writing as part of the Agreement to which they pertain.
(b) Tax Offset Rights shall entitle the Participant, upon exercise
of all or any part of Nonstatutory Stock Option to receive in cash from the
Company an amount equal to or approximating the Applicable Withholding Taxes.
(c) A Participant may exercise a Tax Offset Right by giving the
Committee written notice of exercise simultaneously with the exercise of a
Nonstatutory Stock Option. To the extent exercised, the Tax Offset Right shall
lapse.
(d) The Committee may limit the amount the Participant will be
entitled to receive in connection with a Tax Offset Right and may include any
provisions in a Tax Offset Right that the Committee deems appropriate to ensure
that the Tax Offset Right will not be characterized as an "equity security" or
"derivative security" for purposes of Section 16 of the Act and the rules and
regulations thereunder.
10. EFFECTIVE DATE OF THE PLAN. This Plan shall be effective on
January 14, 1997, and shall be submitted to the shareholders of the Company for
approval. Until (i) the Plan has been approved by the Company's shareholders,
and (ii) the requirements of any applicable State securities laws have been met,
no Option shall be exercisable.
11. TERMINATION, MODIFICATION, CHANGE. If not sooner terminated by
the Board, this Plan shall terminate at the close of business on January 13,
2007. No Option awards shall be made under the Plan after its termination. The
Board may terminate the Plan or may amend the Plan in such respects as it shall
<PAGE>
deem advisable; provided that, if and to the extent required by the Code or Rule
16b-3, no change shall be made that increases the total number of shares of
Company Stock reserved for issuance pursuant to Option awards granted under the
Plan (except pursuant to Section 12), materially modifies the requirements as to
eligibility for participation in the Plan, or materially increases the benefits
accruing to Participants under the Plan, or unless such change is authorized by
the shareholders of the Company. Notwithstanding the foregoing, the Board may
unilaterally amend the Plan and Option awards as it deems appropriate to ensure
compliance with Rule 16b-3 and to cause Incentive Stock Options to meet the
requirements of the Code and regulations thereunder. Except as provided in the
preceding sentence, a termination or amendment of the Plan shall not, without
the consent of the Participant, adversely affect a Participant's rights under an
Option previously granted to him.
12. CHANGE IN CAPITAL STRUCTURE.
(a) In the event of a stock dividend, stock split or combination of
shares, recapitalization or merger in which the Company is the surviving
corporation or other change in the Company's capital stock (including, but not
limited to, the creation or issuance to shareholders generally of rights,
options or warrants for the purchase of common stock or preferred stock of the
Company), the number and kind of shares of stock or securities of the Company to
be subject to the Plan and to Options then outstanding or to be granted
thereunder, the maximum number of shares or securities which may be delivered
under the Plan, the exercise price and other relevant provisions shall be
appropriately adjusted by the Committee, whose determination shall be binding on
all persons. If the adjustment would produce fractional shares with respect to
<PAGE>
any unexercised Option, the Committee may adjust appropriately the number of
shares covered by the Option so as to eliminate the fractional shares.
(b) If the Company is a party to a consolidation or a merger in
which the Company is not the surviving corporation, a transaction that results
in the acquisition of substantially all of the Company's outstanding stock by a
single person or entity, or a sale or transfer of substantially all of the
Company's assets, the Committee may take such actions with respect to
outstanding Options as the Committee deems appropriate.
(c) Notwithstanding anything in the Plan to the contrary, the
Committee may take the foregoing actions without the consent of any Participant,
and the Committee's determination shall be conclusive and binding on all persons
for all purposes.
13. ADMINISTRATION OF THE PLAN. The Plan shall be administered by
the Committee, which shall consist of not less than two members of the Board,
who shall be appointed by the Board. Subject to paragraph (d) below, the
Committee shall be the Compensation Committee unless the Board shall appoint
another Committee to administer the Plan. The Committee shall have general
authority to impose any limitation or condition upon an Option the Committee
deems appropriate to achieve the objectives of the Option and the Plan and,
without limitation and in addition to powers set forth elsewhere in the Plan,
shall have the following specific authority:
(a) The Committee shall have the power and sole and
complete discretion to determine (i) which eligible employees shall
receive Option and the nature of each Option, (ii) the number of
shares of Company Stock to be covered by each Option, (iii) whether
<PAGE>
Options shall be Incentive Stock Options or Nonstatutory Stock
Options, (iv) when, whether and to what extent Tax Offset Rights
shall be granted and the terms thereof, (v) the Fair Market Value of
Company Stock, (vi) the time or times when an Option shall be
granted, (vii) whether an Option shall become vested over a period
of time or upon the attainment of financial performance goals, or a
combination thereof, (viii) when Options may be exercised, (ix)
whether a Disability exists, (x) the manner in which payment will be
made upon the exercise of Options, (xi) conditions relating to the
length of time before disposition of Company Stock received upon the
exercise of Options is permitted, (xii) whether to approve a
Participant's election (A) to deliver shares of already owned
Company Stock to satisfy Applicable Withholding Taxes or (B) to have
the Company withhold from the shares to be issued upon the exercise
of a Nonstatutory Stock Option the number of shares necessary to
satisfy Applicable Withholding Taxes, (xiii) notice provisions
relating to the sale of Company Stock acquired under the Plan, and
(xiv) any additional requirements relating to Options that the
Committee deems appropriate. Notwithstanding the foregoing, no
"tandem stock options" (where two stock options are issued together
and the exercise of one option affects the right to exercise the
other option) may be issued in connection with Incentive Stock
Options. The Committee shall have the power to amend the terms of
previously granted Options so long as the terms as amended are
consistent with the terms of the Plan and provided that the consent
of the Participant is obtained with respect to any amendment that
<PAGE>
would be detrimental to him, except that such consent will not be
required if such amendment is for the purpose of complying with Rule
16b-3 or any requirement of the Code applicable to the Option.
(b) The Committee may adopt rules and regulations for
carrying out the Plan. The interpretation and construction of any
provision of the Plan by the Committee shall be final and
conclusive. The Committee may consult with counsel, who may be
counsel to the Company, and shall not incur any liability for any
action taken in good faith in reliance upon the advice of counsel.
(c) A majority of the members of the Committee shall
constitute a quorum, and all actions of the Committee shall be taken
by a majority of the members present. Any action may be taken by a
written instrument signed by all of the members, and any action so
taken shall be fully effective as if it had been taken at a meeting.
(d) The Board from time to time may appoint members
previously appointed and may fill vacancies, however caused, in the
Committee. Insofar as it is necessary to satisfy the requirements of
Section 16(b) of the Act, (i) no member of the Committee shall be
granted or awarded equity securities pursuant to the Plan or any
other plan of the Company or any Affiliate that entitles
participants to acquire stock, stock options or stock appreciation
rights of the Company or Affiliate, and (ii) no person shall become
a member of the Committee if, within the preceding one-year period,
the person shall have been granted or awarded equity securities
pursuant to such a plan; provided, however, that the foregoing
prohibitions on Committee membership shall be subject to the
exception set forth in clauses (A) through (D) of Rule
16b-3(c)(2)(i) and (ii)).
<PAGE>
14. NOTICE. All notices and other communications required or
permitted to be given under this Plan shall be in writing and shall be deemed to
have been duly given if delivered personally or mailed first class, postage
prepaid, as follows (a) if to the Company - at its principal business address to
the attention of the Treasurer; (b) if to any Participant - at the last address
of the Participant known to the sender at the time the notice or other
communication is sent.
15. INTERPRETATION. The terms of this Plan are subject to all
present and future regulations and rulings of the Secretary of the Treasury or
his delegate relating to the qualification of Incentive Stock Options under the
Code. If any provision of the Plan conflicts with any such regulation or ruling,
then that provision of the Plan shall be void and of no effect. The terms of
this Plan shall be governed by the laws of the Commonwealth of Virginia.
16. EFFECTIVE DATE. This Plan shall be effective as of January 14,
1997.
IN WITNESS WHEREOF, the Company has caused this Plan to be executed
this 14th day of January, 1997.
CONSUMAT ENVIRONMENTAL SYSTEMS, INC.
By: /s/ Robert L. Massey
------------------------------------------
President, and Chief Executive Officer
<PAGE>
CONSUMAT ENVIRONMENTAL SYSTEMS, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned, revoking all prior proxies, hereby appoints James
K. Fishback, George P. Fultz, and Florence M. Hurt as proxies, and each or any
of them with full power of substitution, to represent the undersigned and vote,
as designated below, all the shares of Common Stock of Consumat Environmental
Systems, Inc., held of record by the undersigned on April 14, 1997, at the
Annual Meeting of Shareholders to be held June 5, 1997, or any adjournment
thereof on each of the following matters:
<TABLE>
<CAPTION>
1. Election of Directors (Proposal One of the Proxy Statement).
<S> <C>
[ ] FOR all Nominees listed below [ ] WITHHOLD AUTHORITY
(except as marked to the contrary below) (to vote for all nominees listed below)
</TABLE>
[Peter T. Socha, Robert L. Massey, Alexander Y. Hoff, James W.
Bohlig, D. Randolph Graham, and Charles E. Horner].
INSTRUCTIONS: To withhold authority to vote for any individual nominee,
print the name of the nominee in the space provided below.
----------------------------------------------------------------------------
2. To adopt the Peter T. Socha Stock Option Plan (Proposal Two of the Proxy
Statement).
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. To ratify the selection by the Audit Committee of the Board of Directors of
KPMG Peat Marwick LLP, independent certified public accountants, as auditors
of the Company for 1997 (Proposal Three of the proxy statement).
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting. The Board of Directors
has not been notified of any such matters.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER
DIRECTED BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED "FOR" EACH PROPOSAL. ALL JOINT OWNERS MUST SIGN.
PLEASE SIGN EXACTLY AS YOUR NAME APPEARS ON THE REVERSE SIDE OF THIS
PROXY CARD. WHEN SIGNING AS ATTORNEY, EXECUTOR, ADMINISTRATOR, TRUSTEE OR
GUARDIAN, PLEASE GIVE FULL TITLE AS SUCH.
DATED ______________________ ___________________________________________
SIGNATURE
- --------------------- -------------------------------------------
NUMBER OF SHARES SIGNATURE (IF JOINTLY OWNED)
- --------------------------------------------------------------------------------
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY IN THE ENCLOSED ENVELOPE.
