<PAGE> 1
SECURITIES EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended September 30, 1995
Commission File Number 0-14881
[LOGO]
WASTE RECOVERY, INC.
"Making Waste A Resource"
-------------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
State of Texas 75-1833498
- ------------------------------------- ---------------------------------
(State or Other Jurisdiction of (I.R.S Employer Identification #)
Incorporation or Organization)
309 S. Pearl Expressway, Dallas, Texas 75201
- --------------------------------------- ----------
Address of Principal Executive Offices (Zip Code)
Registrant's telephone number, including area code
(214) 741-3865
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding twelve months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past ninety days.
X
--- ---
Yes No
On November 13, 1995 there were 10,607,979 shares of Common Stock outstanding.
<PAGE> 2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
WASTE RECOVERY, INC.
Consolidated Balance Sheets
<TABLE>
<CAPTION>
Assets September 30, 1995 December 31, 1994
------ ------------------ -----------------
(unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 852,134 $ 261,118
Accounts receivable, less allowance for doubtful accounts of
$26,852 and $25,000, respectively 2,009,687 1,919,004
Receivable from Affiliate (note 3) 644,647 --
Notes and other receivables 116,456 514,816
Inventories (note 4) 929,305 800,805
Deferred income taxes 425,793 447,543
Other current assets 290,570 243,765
------------ -------------
Total current assets 5,268,592 4,187,051
------------ -------------
Property, plant and equipment 11,427,821 9,442,172
Less accumulated depreciation 6,711,625 6,103,133
------------ -------------
Net property, plant and equipment 4,716,196 3,339,039
------------ -------------
Investment in Waste Recovery - Illinois 537,368 335,035
Restricted cash and cash equivalents 536,721 506,521
Industrial revenue bond issuance costs, less accumulated
amortization of $129,211 and $101,786, respectively 199,122 226,547
Goodwill, net of amortization of $25,862 (note 5) 508,922 -
Other assets 127,870 150,884
------------ -------------
1,910,003 1,218,987
------------ -------------
$ 11,894,791 $ 8,745,077
============ =============
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE> 3
WASTE RECOVERY, INC.
Consolidated Balance Sheets, continued
<TABLE>
<CAPTION>
Liabilities and Stockholders' Equity September 30, 1995 December 31, 1994
- ------------------------------------ ------------------ -----------------
(unaudited)
<S> <C> <C>
Current liabilities:
Notes payable $ 43,418 $ 170,915
Convertible subordinated debentures (note 8) 535,000 --
Current installments of long-term debt (note 6) 555,734 224,683
Current installments of capital lease obligations (note 6) 75,079 111,327
Accounts payable 1,891,954 2,318,365
Accrued wages and payroll taxes 233,990 374,881
Other accrued liabilities 424,988 283,502
Deferred revenue (note 3) 337,500 --
------------ --------------
Total current liabilities 4,097,663 3,483,673
Long-term debt, excluding current installments (note 6) 3,590,529 3,065,447
Note payable 139,573 --
Convertible subordinated debentures (note 8) -- 800,000
Obligations under capital leases, excluding
current installments (note 6) 133,896 137,138
------------ --------------
Total liabilities 7,961,661 7,486,258
Stockholders' equity (notes 7 and 8):
Cumulative preferred stock, $1.00 par value, 250,000
shares authorized, 203,580 issued and outstanding in
1995 and 1994 (liquidating preference $ 13.73 per share,
aggregating $ 2,795,710) 203,580 203,580
Preferred stock, $1.00 par value, authorized and unissued
9,750,000 shares in 1995 and 1994 -- --
Common stock, no par value, authorized 30,000,000 shares;
10,711,739 and 7,137,143 shares issued and outstanding
in 1995 and 1994, respectively 407,800 407,800
Additional paid-in capital 13,253,561 10,753,402
Accumulated deficit (9,857,931) (10,032,083)
------------ --------------
4,007,010 1,332,699
Treasury stock, at cost, 103,760 common shares (73,880) (73,880)
------------ --------------
Total stockholders' equity 3,933,130 1,258,819
------------ --------------
$ 11,894,791 $ 8,745,077
============ ==============
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE> 4
WASTE RECOVERY, INC.
Consolidated Statements of Operations
<TABLE>
<CAPTION>
Three Months Ended September 30,
--------------------------------------
1995 1994
--------- --------
(unaudited) (unaudited)
<S> <C> <C>
Tire-derived fuel sales $ 254,729 $ 363,230
Disposal fees, hauling and other revenue 3,279,874 2,846,752
------------- -------------
Total revenues 3,534,603 3,209,982
Operating expenses 2,302,847 2,377,486
------------- -------------
1,231,756 832,496
General and administrative expenses 884,731 502,008
Depreciation and amortization 416,160 165,695
------------- -------------
(69,135) 164,793
------------- -------------
Other income (note 3) 324,775 76,688
Interest income 27,174 5,664
Interest expense (118,885) (104,616)
Equity in income from partnership operations 505 --
------------- -------------
233,569 (22,264)
------------- -------------
Net income before income taxes 164,434 142,529
Provision for income taxes 21,750 6,000
------------- -------------
Net income $ 142,684 $ 136,529
============= =============
Undeclared cumulative preferred stock dividends $ 35,919 $ 35,919
============= =============
Net income available to common shareholders $ 106,765 $ 100,610
============= =============
Net income per common share (note 7) $ .01 $ .01
============= =============
Weighted average number of common and dilutive
common equivalent shares outstanding 11,241,983 8,596,611
============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE> 5
WASTE RECOVERY, INC.
Consolidated Statements of Operations
<TABLE>
<CAPTION>
Nine Months Ended September 30,
-------------------------------------
1995 1994
----------- -----------
(unaudited) (unaudited)
<S> <C> <C>
Tire-derived fuel sales $ 752,089 $ 928,528
Disposal fees, hauling and other revenue 9,203,883 7,620,429
Total revenues 9,955,972 8,548,957
Operating expenses 6,931,387 6,089,460
------------ -------------
3,024,585 2,459,497
General and administrative expenses 1,734,083 1,421,817
Depreciation and amortization 1,092,467 485,485
------------ -------------
198,035 552,195
------------ -------------
Other income (note 3) 362,520 80,339
Interest income 42,039 10,869
Interest expense (350,342) (295,877)
Equity in income from partnership operations (56,350) -
------------ -------------
(2,133) (204,669)
------------ -------------
Net income before income taxes 195,902 347,526
Provision for income taxes 21,750 15,000
------------ -------------
Net income $ 174,152 $ 332,526
============ =============
Undeclared cumulative preferred stock dividends $ 106,585 $ 106,582
============ =============
Net income available to common shareholders $ 67,567 $ 225,944
============ =============
Net income per common share (note 7) $ .01 $ .03
============ =============
Weighted average number of common and dilutive
common equivalent shares outstanding 9,247,134 7,209,143
============ =============
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE> 6
WASTE RECOVERY, INC.
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Nine Months Ended September 30,
-------------------------------
1995 1994
---- ----
(unaudited) (unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 174,152 $ 332,526
Adjustments to reconcile net income to net cash provided
(used) by operating activities:
Deferred income taxes 21,750 --
Depreciation and amortization 1,092,467 864,661
Interest imputed on discounted note payable 4,502 --
Earnings from Partnership development fee (412,500) --
Equity in loss from partnership operations 56,350 --
Stock compensation awarded to Directors 12,000 --
Changes in assets and liabilities:
Accounts receivable 185,786 (654,130)
Inventories (759,431) (615,084)
Other current assets (33,495) (95,681)
Other assets 19,899 (94,204)
Accounts payable (518,521) 585,881
Accrued liabilities 14,204 (27,721)
------------- -------------
Net cash provided (used) by operating activities (142,837) 296,248
------------- -------------
Cash flows from investing activities:
Cash placed in restricted accounts (30,200) (225,600)
Receivable from Affiliate (59,274) --
Proceeds received on notes and other receivables 408,204 --
Purchase of Domino Salvage, Tire Division, Inc., --
net of cash received of $16,165 (151,441) --
Purchases of property, plant and equipment (1,328,987) (372,664)
------------- -------------
Net cash used by investing activities (1,161,698) (598,264)
------------- -------------
Cash flows from financing activities:
Proceeds from issuance of notes payable 69,034 206,784
Proceeds from issuance of long-term debt 88,230 800,000
Repayment of notes payable (196,531) (158,781)
Repayment of long-term debt (169,678) (80,601)
Repayment of capital lease obligations (100,712) (121,662)
Net proceeds from issuance of common stock 2,205,208 155,795
------------- -------------
Net cash provided by financing activities 1,895,551 801,535
------------- -------------
Net increase in cash and cash equivalents 591,016 499,519
Cash and cash equivalents at beginning of period 261,118 139,964
------------- -------------
Cash and cash equivalents at end of period $ 852,134 $ 639,483
============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE> 7
WASTE RECOVERY, INC.
Notes to Consolidated Financial Statements
September 30, 1995
Note 1. Adjustments
The financial information presented as of any date other than December 31
has been prepared from the books and records without audit. Financial
information as of December 31 has been derived from the audited financial
statements of the Company, but does not include all disclosures required by
generally accepted accounting principles. In the opinion of management, all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair presentation of the financial information for the periods indicated, have
been included. The results of operations for the nine months ended September
30, 1995, are not necessarily indicative of operating results for the entire
year. For further information regarding the Company's accounting policies,
refer to the consolidated financial statements and related notes included in
the Company's Annual Report on Form 10-K for the year ended December 31, 1994.
Note 2. Policies
The Company assesses the recoverability of goodwill by determining whether
the amortization of the asset balance over its remaining life can be recovered
through undiscounted future operating cash flows of the acquired operation.
The amount of impairment, if any, is measured based on the estimated fair value
of the operation.
Note 3. Receivable from Affiliate
At September 30, 1995, Waste Recovery - Illinois (the "Partnership) owes a
$750,000 development fee to the Company and the Company owes $105,353 to the
Partnership for inter-company transactions. Per the Partnership Agreement, at
the completion and successful operation of the two Illinois plants, the Company
is to be paid a $750,000 fee for the development of these plants; $500,000 of
this fee must be escrowed, as defined. The plants were completed and
operational at September 30, 1995, and upon formal written sign-off by the
majority interest partner, the fee will be paid to the Company. Fifty-five
percent of this fee, representing the percentage of the Partnership not owned
by the Company, is being recognized in income for the nine months ending
September 30, 1995. The remaining 45% has been recorded as deferred revenue to
be recognized such that it will offset the Company's interest in the excess
depreciation expense recorded by the Partnership related to this portion of the
plant cost.
Note 4. Inventories
The components of inventories are as follows:
<TABLE>
<CAPTION>
September 30, 1995 December 31, 1994
------------------ -----------------
<S> <C> <C>
Finished Inventory $ 331,682 $ 303,764
Work-In-Process 157,176 171,176
Parts Inventory 440,447 325,865
---------- ----------
$ 929,305 $ 800,805
========== ==========
</TABLE>
During the nine months ended September 30, 1995, the Company transferred
$258,683 in tire-derived fuel inventory, at cost, to Waste Recovery - Illinois.
This noncash transaction decreased inventories and increased WRI's investment
in the Partnership.
Note 5. Acquisition
On March 21, 1995, WRI acquired 100% of the outstanding stock of Domino
Salvage, Tire Division, Inc., (Domino), a scrap tire recycling company located
in Conshohocken, Pennsylvania, a suburb of Philadelphia. WRI purchased Domino
for $800,000 with an initial cash payment of $100,000; an additional $50,000 is
due, pending certain obligations. The remaining debt bears interest at the
rate of 1% over prime, interest is payable annually, and the note is secured by
assets and the stock of Domino. Future minimum payments of debt are $200,000
in 1996, $225,000 in 1997, and $225,000 in 1998.
7
<PAGE> 8
The acquisition was accounted for as a purchase and, accordingly, the purchase
price has been allocated to the assets acquired and liabilities assumed based
on estimated fair values at the date of acquisition. The results of operations
of Domino have been included in the Company's consolidated statements of
operations from the date of acquisition through September 30, 1995.
A summary of the assets acquired and liabilities assumed follows:
<TABLE>
<S> <C>
Current assets $ 146,295
Plant, property and equipment 650,765
Debt and notes payable (372,676)
Account payable and accrued liabilities (96,452)
-----------
$ 327,932
===========
</TABLE>
The following unaudited pro forma summary presents the consolidated result
of the Company's operations as if the acquisition had occurred at the beginning
of the periods presented. The information does not purport to be indicative of
the results that actually would have been obtained if the operations were
combined during the periods presented, and is not intended to be a projection
of future results or trends.
<TABLE>
<CAPTION>
For the nine months ended For the nine months ended
September 30, 1995 September 30, 1994
------------------ -------------------
<S> <C> <C>
Revenues $ 10,190,000 $ 9,200,000
============= ============
Net income $ 137,000 $ 275,000
============= ============
Earnings per share $ .01 $ .03
============= ============
</TABLE>
The acquisition also includes a five-year employment agreement with the
former President and owner of Domino. The goodwill associated with this
acquisition is being amortized on a straight-line basis over ten years.
Note 6. Debt
During the nine months ended September 30, 1995, the Company financed
$88,230 of additional term debt and $61,222 of capital lease obligations.
These obligations are payable in monthly payments over approximately five
years, have interest rates ranging from 14% - 15% per annum, and are
collateralized by trailers, office equipment and furniture.
Note 7. Preferred Stock Dividends
Cumulative preferred stock dividends in arrears were $759,909 at September
30, 1995. Net income or loss is adjusted by the effect of undeclared dividends
on preferred stock of $106,585 and $106,582 for the nine months ended September
30, 1995 and 1994, respectively, and by $35,919 and $35,919 for the three
months ended September 30, 1995 and 1994, respectively. The effect was to
decrease net income per common share by $.01 and $.01 for the nine months ended
September 30, 1995 and 1994, respectively, and by $ .00 and $ .01 for the three
months ended September 30, 1995 and 1994, respectfully. Primary and fully
diluted earnings per share are the same in 1995 and 1994.
Note 8. Common Stock
The Company successfully completed its Rights Offering (Offering) on June
26, 1995. This Offering distributed nontransferable subscription rights to
eligible stockholders, as defined, to subscribe for the Company's common stock
at an offering price of $.75 per share. Shareholders were issued 3,238,857
shares through the Offering which generated net cash of $2,205,208. Proceeds
will be used to build wire recycling systems at each of the Company's current
facilities and to renovate the equipment at Domino. Any remaining proceeds
from this offering will be used for working capital purposes.
8
<PAGE> 9
Also during the second quarter, in conjunction with the Offering, $265,000
of subordinated debentures, plus accrued interest of $17,951, were converted at
the rate of $.875 per share into 323,373 shares of common stock. At September
15, 1995, the remaining debenture holders elected to convert interest due on
the debentures in the amount of $51,301 to 58,630 shares of common stock, which
will be issued at the earlier of conversion or maturity of the debentures.
Note 9: The registrant has no material pending legal proceedings.
Other notes have been omitted pursuant to Rule 10-01 (a)(5) of Regulation S-X.
9
<PAGE> 10
Item 2: Management's Discussion and Analysis of
Financial Condition and Results of Operations
Waste Recovery, Inc., ("the Company") owns and operates plants in Houston,
Texas; Atlanta, Georgia; Portland, Oregon; and Conshohocken (Philadelphia),
Pennsylvania, the latter plant being owned by a subsidiary which was purchased
on March 21, 1995. Two new tire processing plants in central and southern
Illinois ("the Illinois facilities") began operations in September 1995. These
plants are owned by Waste Recovery - Illinois, a partnership ("WR - Illinois"),
in which the Company owns a 45% interest and is the managing partner. The
Company will operate the Illinois facilities in close coordination with its
national system and expand its presence in this region of the United States.
Regional services are coordinated from the operating bases mentioned above.
Operations encompass full service scrap tire disposal and the recycling of
tires to a supplemental fuel form. The Company generates revenue from scrap
tire disposal fees, from the hauling of scrap tires and from the sale of
tire-derived fuel (TDF). At the plants, scrap tires are converted and refined
into a high-BTU supplemental fuel, which is currently being sold primarily to
major domestic cement and paper manufacturers. As discussed below, the TDF
output of the Illinois facilities will initially be dedicated to use in
electrical power generating boilers of the Illinois Power Company.
To date the effects of inflation on the Company's operations have been
negligible.
General Comments
During the third quarter of 1995, the Company utilized a portion of the
proceeds from its Rights Offering, which was completed in the second quarter,
to provide for renovation and upgrading of the Pennsylvania facility, Domino
Salvage, Tire Division, Inc. (Domino). Domino will be fully operational and
producing TDF in the fourth quarter of this year; its TDF will be highly
marketable in the Northeastern United States.
The wire recycling systems, also financed by the Rights Offering, have been
ordered and are expected to be completed and placed in service in 1996.
Projected completion and installation dates are January 1996 for Houston, March
1996 for Atlanta, and May 1996 for Portland. The wire recycling systems will
allow the Company to reduce the production costs of TDF by approximately
one-third, thereby improving profit margins and cash flow.
As noted in the second quarter 1995 report, the State of Texas increased
our allocation for the months of July and August. As of September 1, 1995, the
State discontinued the allocation program and left a free market whereby tire
processors may process and receive payment for as much product as they are able
to process. Waste Recovery has been taking advantage of the change and was
able to generate approximately $265,000 in revenues from the Baytown facility
in September 1995. This compares to average monthly revenues of $165,000 for
the period from January through August 1995.
The tire pile abatement project for the State of West Virginia resumed
operations in August 1995 and will continue through December 1995, when the
project should be completed.
Results for the third quarter of 1995 were disappointing in that the
Company maintained a static percentage net income of $142,684 on revenues of
$3,534,603 as compared to net income of $136,529 on revenues of $3,209,982 in
the comparable period of 1994. Although revenues have increased 10% from the
comparable quarter of 1994, net earnings were affected by 1) approximately
$72,000 of losses from Domino, which is still in a renovation phase and much of
the facility is under construction, and 2) minimal earnings from the Illinois
facilities as Dupo was just getting on-line and Marseilles was being completed.
10
<PAGE> 11
Domino and the two Illinois facilities will be in full production during
the fourth quarter of 1995, which should allow the facilities to focus on their
revenues and tire flows. The two Illinois TDF plants, owned by WR - Illinois,
were financed by tax exempt industrial revenue bonds totaling $8.875 million
and supported by the Moral Obligation of the State of Illinois. In addition,
the Illinois Department of Energy and Natural Resources issued grants for these
facilities totaling $1 million. TDF output from the Illinois plants, a minimum
of 60,000 tons per year, is dedicated to fulfilling a purchase contract from
the Illinois Power Company. Management of WRI - Illinois is in the process of
increasing its disposal and hauling customer base and procuring additional
customers for its TDF.
Results of Operations
Third Quarter Ended September 30, 1995 Compared
with Third Quarter Ended September 30, 1994
Total revenue for the third quarter of 1995 was 10% higher than for the same
period in 1994. Revenues continued to increase during this third quarter of
1995 from disposal fees, hauling and other revenues as the Atlanta facility
came on strong. Also, Houston was also able to benefit in August from the
increase in the state allocation and in September by the removal of the state
allocation. The Houston fire occurred during the third quarter of 1994 and no
revenues were generated from August 7, 1994 until mid-December 1994 by this
facility. The large tire pile abatement project for the State of West Virginia
only contributed revenues of $476,000 to this three-month period compared to
$850,000 for the same period in 1994.
Operating expenses for the third quarter of 1995 were 65% of revenues, down
from a level of 74% of revenues for the third quarter of 1994. During 1994,
the third quarter was a high volume period for the West Virginia clean-up site
which drove up operating expenses. During 1995, the Company's overall tire
flow has a growing customer base, which is partially fueled by the population
growth in the Northwest region. Domino incurred an operating loss and required
an additional infusion of operating capital as capital additions are currently
being performed to prepare the plant for ongoing operations.
General and administrative expenses increased slightly over 70% from the third
quarter of 1994 to the third quarter of 1995. Increases in general
administrative expenses are primarily due to higher insurance premiums and
claims, professional fees incurred in working with the governments in Texas and
Oregon, and salaries and related benefits associated with higher levels of
operating and expansion activities.
Depreciation and amortization expense continue to become more significant
costs as the fixed asset structure of the Company expands. Over $1.2 million
has been expended in property, plant and equipment additions for the nine
months ended September 30, 1995. Including the $800,000 of additions in 1994,
a significant amount of depreciable property has been added to the Company's
total assets. Also, approximately $11,000 per month is being depreciated on
Domino's plant and equipment, and $4,000 per month is being amortized for
goodwill, which was generated from the acquisition of Domino.
Interest expense for the third quarter of 1995 increased 14% from the amount
experienced in the third quarter of 1994 and is primarily due to the presence
of the remaining subordinated debentures and debt assumed with the acquisition
of Domino, neither of which were in existence during the third quarter of 1994.
11
<PAGE> 12
Results of Operations
Nine Months Ended September 30, 1995 Compared
with Nine Months Ended September 30, 1994
The table below summarizes the physical activity of the Company as well as
the basic revenue categories for the first nine months of the last three years:
<TABLE>
<CAPTION>
Nine Months Ended September 30:
-------------------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
TDF Tons Sold ** 41,323 53,294 39,137
====== ====== ======
Passenger Tire Equivalents Received (Tons) 83,957 83,126 70,819
====== ====== ======
TDF Sales $ 752,089 $ 928,528 $ 826,508
=========== =========== ===========
Disposal and Hauling Fees $ 9,203,883 $ 7,620,429 $ 5,545,563
=========== =========== ===========
</TABLE>
**Does not include the transfer of 7,500 tons of TDF from Houston to WR -
Illinois in 1995 which represents an additional investment in WR - Illinois;
does include almost 4,000 tons provided for engineering projects in the
Portland area.
Total revenues of $9,955,972 were 16% higher than for the same nine-month
period in 1994. This is attributed to significant increased disposal fees,
hauling and other revenues at Portland and Atlanta. Houston was also more
successful with the state allocation laws changing and being operational the
full nine months during 1995. TDF sales decreased 19% during this time due to
lower tonnage sales and an overall decrease in the average price per ton.
Operating expenses for the first nine months of 1995 increased 14% over the
same period during 1994. General and administrative expenses have increased
$312,000 over the first nine months of 1995, but, as a percent of total
revenues, have remained fairly constant. Depreciation and amortization expense
have increased significantly in 1995 for the reasons cited above, which relate
to the Domino acquisition and the general asset growth the Company as a whole
is experiencing.
Interest expense for 1995 has increased as discussed above for the third
quarter of 1995. New debt of approximately $150,000 in the second quarter and
$43,000 in the third quarter will cause interest to continue to rise slightly,
but at the point the debentures are converted to common stock, the related
interest will also end.
Financial Condition as of September 30, 1995
The Company continues to carry a positive working capital balance at
September 30, 1995 of $1.1 million. This is the result of proceeds from the
Rights Offering received during the second quarter, increased receivables from
the State of Texas (most of which were received in October 1995), and the
receivable from affiliate which was recorded in September 1995. Increases in
inventories are attributable to higher levels of TDF in Atlanta and Portland
and additional parts which have been required at the plants to enhance
maintenance capabilities. Included in current liabilities are the remaining
convertible subordinated debentures which mature, if not converted, in March
1996 and the deferred income portion of the receivable from affiliate, which
will be amortized to match pass-through depreciation expense from the
Partnership.
During this third quarter, the Company continued to benefit from the
success of our Rights Offering, and the continuing interest by the public in
Waste Recovery has provided management the source and means to grow the
Company. Implementation of the wire recycling systems will allow wire
extracted from the tires to be recycled, therefore eliminating the need to
incur disposal fees associated with this waste by-product. The Partnership has
begun to reap the benefit of producing a clean wire product which is marketable
as recycled steel, and Waste Recovery will soon be following suit. As
previously mentioned, this will significantly reduce TDF production costs. The
renovation of the Domino plant is nearing completion and will enable the
Company
12
<PAGE> 13
to immediately become active in the TDF market in the northeastern United
States, which the Company was instrumental in establishing. This will also
provide a means of improving cash flow at the Domino plant and move it towards
being self- supportive.
Although the Company is on a strong growth pattern, management still
remains sensitive to the risk that the Company will not have the financial
strength to take advantage of additional opportunities that could be
developing. The Company will apply for a relisting on the NASDAQ system when
the stock price reaches a higher level. The Company now meets the standards
for capital and surplus requirements and is putting forth efforts to satisfy
the minimum bid price. A relisting by NASDAQ would provide the Company greater
public exposure and generate more consistent interest in the success of its
on-going operations.
Part II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The Company held its Annual Meeting of Shareholders on August 14, 1995, in
Dallas, Texas. The shareholders approved the election of directors, an
increase in shares available for issuance under WRI's 1989 Stock Plan for
Employees and limitation of individual grants thereunder, and the selection of
independent accountants as follows:
<TABLE>
<CAPTION>
Withheld
Item For Authority Against Abstain
---- --- --------- ------- -------
<S> <C> <C> <C> <C>
Election of Directors:
Roger W. Cope 8,013,261 36,253 N/A N/A
Allan Shivers, Jr. 8,013,661 35,853 N/A N/A
Increase in Shares: 6,607,974 N/A 357,333 12,620
Selection of
Independent Accountants: 8,101,265 N/A 7,550 3,370
</TABLE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.029 Form of Incentive Stock Option Agreement dated
as of June 29, 1995, for grants to executive officers
Thomas L. Earnshaw, Sharon K. Price, and Robert L.
Thelen (the Agreements are the same, except that
the first two pages vary).
10.030 Form of Non-qualified Stock Option Agreement
dated as of August 14, 1995, whereby options were
granted pursuant to the Company's 1992 Stock Plan for
Non-Employee Directors.
(b) Reports on Form 8-K
None
Item 27. Financial Data Schedule
13
<PAGE> 14
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant had duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WASTE RECOVERY, INC.
<TABLE>
<S> <C>
DATE: November 13, 1995 /s/ THOMAS L. EARNSHAW
-----------------------
By: Thomas L. Earnshaw
President and Chief Executive Officer
(Principal Executive)
DATE: November 13, 1995 /s/ SHARON K. PRICE
--------------------
By: Sharon K. Price
Vice President of Finance
(Principal Financial and Accounting Officer)
</TABLE>
14
<PAGE> 15
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
10.029 Form of Incentive Stock Option Agreement dated
as of June 29, 1995, for grants to executive officers
Thomas L. Earnshaw, Sharon K. Price, and Robert L.
Thelen (the Agreements are the same, except that
the first two pages vary).
10.030 Form of Non-qualified Stock Option Agreement
dated as of August 14, 1995, whereby options were
granted pursuant to the Company's 1992 Stock Plan for
Non-Employee Directors.
27 Financial Data Schedule
</TABLE>
<PAGE> 1
WASTE RECOVERY, INC.
INCENTIVE STOCK OPTION AGREEMENT
THIS INCENTIVE STOCK OPTION AGREEMENT ("Agreement"), made and entered
into in Dallas, Texas, as of the 29th day of June, 1995, by and between Waste
Recovery, Inc., a corporation organized and existing under the laws of Texas
(the "Company") and _Thomas L. Earnshaw (the "Participant").
WHEREAS, Participant is now a full-time employee of the Company, and
will render faithful and efficient service to the Company; and
WHEREAS, the Company desires to continue to receive the benefit of
Participant's services and to fully identify his interests with the Company's
future and success; and
WHEREAS, the Board of Directors ("Board") of the Company and the
stockholders of the Company have heretofore approved the Company's 1989 Stock
Plan for Employees (the "Plan") providing for, among other things, the granting
of stock options under the Plan to certain employees of the Company, including
officers of the Company; and
WHEREAS, pursuant to the provisions of such Plan, the Board has
granted and authorized the terms and provisions in this Agreement pursuant to
Section 422 of the Internal Revenue Code of 1986 (the "Code"):
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, and other good and valuable consideration, it is
understood and agreed as follows:
1. OPTION TO PURCHASE.
(a) The Company hereby grants to Participant an irrevocable right
and option ("Option") to purchase from the Company One Hundred Thousand
(100,000) shares (subject, however, to adjustment as provided in Paragraph 8),
of the common stock, no par value, of the Company (the "Option Shares") upon
the terms and conditions herein contained.
(b) The purchase price payable to the Company for the shares to be
acquired pursuant to the exercise of this Option will be Ninety-Eight Cents
($0.98) per share, which shall be paid to the Company in the manner hereinafter
described at the time of exercise. Such purchase price is referred to herein
as the "Option Price".
INCENTIVE STOCK OPTION AGREEMENT PAGE 1
<PAGE> 2
2. EXERCISE OF OPTION.
(a) Vesting.
(1) Except as otherwise provided in Section 2(a)(2)
below, the Option Shares will become vested in accordance with the following
schedule, if as of each relevant date the Participant is still employed by the
Company or any of its subsidiaries:
(i) As of June 29, 1996, Participant shall vest
in 20,000 of the Option Shares;
(ii) As of June 29, 1997, Participant shall vest
in an additional 20,000 of the Option Shares;
(iii) As of June 29, 1998, Participant shall vest
in an additional 20,000 of the Option Shares;
(iv) As of June 29, 1999, Participant shall vest
in an additional 20,000 of the Option Shares;
and
(v) As of June 29, 2000, Participant shall vest
in an additional 20,000 of the Option Shares.
(2) Notwithstanding Section 2(a)(1) above, upon a merger
or dissolution in which the Company is not the surviving corporation, or a
transfer of substantially all the assets of the Company, Participant shall vest
in all of the Option Shares less any such shares as to which this Option has
been previously exercised.
(b) Exercisable Option Shares. Participant can exercise this
Option on a cumulative basis to the extent hereinafter provided with respect to
all or any part of the number of "Exercisable Option Shares" subject to this
Option, and such right shall be a continuing one during the term of the Option
as provided in paragraph 3 hereof, until this Option has been fully exercised
with respect to the number of Option Shares stated in paragraph 1.
"Exercisable Option Shares" shall be the Option Shares granted in paragraph 1
and vested in accordance with paragraph 2(a) hereof, less Option Shares
previously exercised.
(c) Exercise After Participant's Death. Upon the death of
Participant, this Option shall still be exercisable in full with respect to
Option Shares which are Exercisable Option Shares on the date of Participant's
death, and may be exercised in whole or in part by the estate of the
Participant or by such person or persons to whom this Option shall be
transferred by the Will of Participant, or by the applicable laws of descent
and distribution, but only within one hundred eighty (180) days after the
Participant's death, or within the unexpired term of this Option, whichever is
shorter, at which time
INCENTIVE STOCK OPTION AGREEMENT PAGE 2
<PAGE> 3
this Option shall lapse and become void.
(d) Exercise After Termination of Employment. If the Participant
shall voluntarily terminate his employment without the consent of the Company
(of which the Board shall be the sole judge), his rights under any then
outstanding Options shall terminate immediately. In the event that the
Participant shall voluntarily terminate his employment with the consent of the
Company (regarding which the Board shall be the sole judge), or in the event
that the Participant's employment shall be involuntarily terminated by the
Company other than for cause (regarding which the Board shall be the sole
judge), or in the event of a Participant's retirement under any retirement plan
of the Company, its parent, or any of its subsidiaries, an Option shall be
exercisable by the Participant at any time prior to the expiration date of its
term or within three (3) months after the date of such termination of
employment, whichever is the shorter period, but only to the extent of the
accrued right to purchase at the date of such termination; otherwise, his
rights under any then outstanding Option shall terminate immediately. In the
case of a Participant who is permanently and totally disabled at the time of
leaving the Company, the above stated three (3) month period shall be increased
to one (1) year.
3. TERM OF OPTION.
Subject to the limitations contained elsewhere in this Agreement, this
Option shall remain open and exercisable for a period of ten (10) years,
through and including June 28, 2005, after which this Option shall lapse and
become void.
4. MANNER OF EXERCISE OF OPTION.
(a) This Option shall be exercised in whole or in part by written
notice to the Company addressed to the President of the Company at such place
as the Company's executive offices may then be located, such notice, in
accordance with the attached exercise form, together with payment for the
Option Price for the number of Option Shares being exercised and stated
therein, to be delivered either personally or by registered or certified mail.
Such notice, if delivered by registered or certified mail, shall be deemed to
be received by the Company at the time of receipt, provided it is received by
the Company before the expiration of the term hereof. Such notice shall state
the number of Option Shares such Participant (or other person as may be
exercising this Option) elects to exercise under this Option (such number not
to exceed the maximum number of Exercisable Option Shares).
(b) Manner of Payment. Payment for Option Shares purchased upon
exercising all or part of this Option shall be made in full at the time of
exercise, in cash, or, in the Company's discretion, in common stock of the
Company owned by the Participant, valued as of the close of business on the
immediately preceding business day, and such other forms of consideration
having a current value equal to the Option Price as may be suitable to the
Board, or in any combination of the foregoing. No Option Shares may be
delivered
INCENTIVE STOCK OPTION AGREEMENT PAGE 3
<PAGE> 4
until full payment of the Option Price thereof has been made.
5. RIGHTS AS A STOCKHOLDER.
After receipt of the notice of exercise as provided in paragraph 4
above, the Company shall cause to be issued and delivered such certificates, in
such denominations as Participant may direct, representing the number of
fully-paid, nonassessable shares of common stock which the Participant is
entitled to receive, registered in the name of Participant, but Participant
shall have no right as a stockholder with respect to any such shares until the
issuance of such stock certificates, and no adjustment shall be made for cash
dividends or other rights for which the record date is prior to the time such
stock certificates are issued, except as otherwise provided herein. The
Company agrees to issue such stock certificates with thirty (30) business days
after such receipt of notice of the exercise of this Option, along with
payment. Each certificate shall be issued in the name of Participant so
exercising this Option, or in the name of Participant and his spouse as joint
tenants, if Participant should so request.
6. RESTRICTIONS ON OPTION.
This Option shall not be transferred by Participant other than by
Will, or by the applicable laws of descent and distribution, or a qualified
domestic relations order as defined in the Code ("QUADRO"), and can be
exercised during his lifetime only by Participant, his guardian or legal
representative, or the QUADRO beneficiaries. This Option shall not be subject
to any claim of any creditor of Participant; shall not be subject to
attachment, garnishment or other legal or equitable process by or on behalf of
any such creditor; and shall not in anywise be liable for or subject to the
debts, contracts, liabilities, engagements or torts of Participant. This
Option shall not be pledged, hypothecated, or otherwise encumbered, and any
attempt to do so shall be void.
7. HOLDING PERIODS.
(a) With respect to Participants who are also executive officers,
directors or ten percent shareholders of the Company, the Option Shares
received upon exercise of this Option shall not be sold or disposed of within
six (6) months from the date of this Agreement.
(b) With respect to all Participants, the Option Shares received
by the Participant upon exercise of this Option shall not be sold or disposed
of within one (1) year after their acquisition by exercise of this Option, nor
within two (2) years from granting of this Option. Should Participant dispose
of Option Shares received before the expiration of either of such holding
periods, such disposition shall be a "disqualifying disposition" of an
"incentive stock option" and any gain realized by Participant on such
disposition for federal income tax purposes will be taxable as ordinary income
in accordance with the Code.
INCENTIVE STOCK OPTION AGREEMENT PAGE 4
<PAGE> 5
8. CAPITAL ADJUSTMENTS AND REORGANIZATIONS.
(a) The Option Shares covered by this Option, and the Option
Price, shall be adjusted to reflect any stock dividend, stock split, share
combination, exchange of shares, recapitalization, merger, consolidation,
separation, reorganization, liquidation or the like, of or by the Company, in
accordance with the Plan.
(b) Nothing in this paragraph 8 shall in any way extend the time
within which this Option must be exercised as provided in paragraph 3 above.
9. DISSOLUTION OR MERGER.
In the event that, prior to the delivery by the Company of all the
Option Shares pursuant to this Option, a merger or dissolution in which the
Company is not the surviving corporation shall occur, or a transfer of
substantially all the assets of the Company shall occur:
(a) If provision is made in writing in connection with such
transaction for the assumption and continuance of the Option hereby granted, or
the substitution for such Option of a new option covering the shares of the
successor corporation, with appropriate adjustment as to the number and kind of
shares and prices, this Option, or the new option substituted therefore, as the
case may be, shall continue in the same manner and under the terms provided.
(b) In the event provision is not made in such transaction for the
continuance and assumption of this Option or for the substitution of an option
covering the shares of the successor corporation, then Participant shall be
entitled within a reasonable period of time, prior to the effective date of any
such transaction, to purchase the full number of Exercisable Option Shares,
failing which purchase, any unexercised portion thereof shall be deemed
cancelled as of such effective transaction date.
10. WITHHOLDING TAX.
Should the Company be required to withhold any tax pursuant to the
exercise of this Option by Participant, Participant agrees to make arrangements
satisfactory to the Board to ensure that the amount required to be withheld is
made available to the Company for timely payment. If agreeable to the Board,
Participant shall be allowed to deliver shares of the Company's common stock
previously owned by Participant, or Option Shares from the exercise of this
Option, for the payment of such withholding tax.
11. CONTINUED EMPLOYMENT.
By acceptance of this Option and in consideration thereof, and subject to the
INCENTIVE STOCK OPTION AGREEMENT PAGE 5
<PAGE> 6
qualifications and exceptions contained in paragraph 2 above, this Option may
be exercised only while Participant remains in the continuous employ of the
Company; provided, however, that this Option does not confer upon the
Participant any right to continue in the employ of the Company, nor does it
interfere in any way with the right of the Company to terminate the employment
of the Participant at any time.
12. PLAN.
The Option provided for in this Agreement is granted pursuant to the
Plan, as amended, which was adopted by the Board on March 6, 1989, and approved
by the Shareholders on May 22, 1989. The terms and provisions of the Plan are
incorporated by reference herein, and in case of conflict between the terms and
conditions of this Agreement, and those of the Plan, those of the Plan shall
prevail and be controlling.
13. GENDER AND NUMBER.
Whenever the masculine, feminine, or neuter gender, or the singular or
plural number, is used herein, the application of one shall include the
application of the other as the context so indicates.
14. NOTICES.
Any notice relating to this Agreement shall be in writing and
delivered in person or by certified mail to the Company at its principal place
of business, to the attention of the President. All notices to the Participant
or other person or persons then entitled to exercise the Option, shall be
delivered to the Participant or such other person or persons at the
Participant's address below specified.
15. APPLICATION.
If any provision of this Agreement, or the application to any entity,
individual or circumstance shall be invalid or unenforceable to any extent,
such provision shall be modified to the minimum extent necessary to make it or
its application valid and enforceable. The remainder of this Agreement, and
the application of such provision to other entities, persons or circumstances,
shall not be affected thereby, and shall be enforced to the greatest extent
permitted by law.
16. BOARD OF DIRECTORS.
The term "Board", or "Board of Directors", means the Board of
Directors of the Company, or its properly authorized committee or
representative.
INCENTIVE STOCK OPTION AGREEMENT PAGE 6
<PAGE> 7
17. LAW GOVERNING; VENUE.
THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY
THE LAWS OF THE STATE OF TEXAS AND APPLICABLE FEDERAL LAW. VENUE SHALL LIE IN
DALLAS, TEXAS.
IN WITNESS WHEREOF, this Agreement is executed in duplicate originals
as of the date and year first above shown.
ATTEST: WASTE RECOVERY, INC.
By:________________________ By:_____________________________
John E. Cockrum Allan Shivers, Jr. Secretary
Secretary Chairman
309 South Pearl Expressway
Dallas, Texas 75201
PARTICIPANT:
________________________________
(signature)
________________________________
(printed name)
________________________________
________________________________
(address)
INCENTIVE STOCK OPTION AGREEMENT PAGE 7
<PAGE> 8
EXERCISE FORM
(To be executed by the registered owner to purchase Common Stock
pursuant to the Incentive Stock Option Agreement)
Waste Recovery, Inc.
309 South Pearl Expressway
Dallas, Texas 75201
Attention: President
The undersigned hereby: (1) irrevocably subscribes for __________
shares of your Common Stock pursuant to his or her Incentive Stock Option
granted June 29, 1995, and encloses payment of $____________ therefor, or other
sufficient consideration agreed to by the Company in writing; (2) requests that
a certificate for the shares by issued in the name of the undersigned and
delivered to the undersigned at the address below; (3) requests that if such
number of shares is not all of the shares purchasable hereunder, a new Option
of like tenor for the balance of the remaining shares purchasable hereunder be
issued in the name of the undersigned and delivered to the undersigned at the
address below; (4) agrees that if they have not been registered under the
Securities Act of 1933, the certificate(s) for shares of Common Stock may bear
a legend in substantially this form:
THESE SHARES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, OR UNDER ANY APPLICABLE STATE LAW. THEY MAY NOT BE OFFERED
FOR SALE, SOLD, TRANSFERRED OR PLEDGED WITHOUT (1) REGISTRATION UNDER
THE SECURITIES ACT OF 1933 AND ANY APPLICABLE STATE LAW OR (2) AN
OPINION (SATISFACTORY TO THE COMPANY) OF COUNSEL (SATISFACTORY TO THE
COMPANY) THAT REGISTRATION IS NOT REQUIRED;
(5) acknowledges that I have received the Company's: annual report for its last
fiscal year (including financial statements prepared by independent certified
public accountants); most recent definitive proxy statement filed therewith;
all interim quarterly reports on Form 10-Q filed since such annual report; and
information on the use of proceeds from this sale. I have requested and been
advised of any material changes in the Company's affairs since the date of such
documents; and have received or had made available to me all financial or other
information which I consider necessary to an informed judgment as to the
investment merits of this exercise of Option; and (6) represents and warrants
to the Company that with respect to legended shares, I am acquiring the shares
pursuant to this
<PAGE> 9
Option for my own account for investment; I am not acquiring such shares with a
view to, or in connection with, any offering or distribution; and I have no
present intention of selling or otherwise disposing of any of such shares.
Date:___________________ ____________________________________
(Please sign exactly as name appears
on Option)
____________________________________
Printed Name
____________________________________
Address
___________________________________
Address
___________________________________
Taxpayer ID No.
<PAGE> 1
WASTE RECOVERY, INC.
INCENTIVE STOCK OPTION AGREEMENT
THIS INCENTIVE STOCK OPTION AGREEMENT ("Agreement"), made and entered
into in Dallas, Texas, as of the 29th day of June, 1995, by and between Waste
Recovery, Inc., a corporation organized and existing under the laws of Texas
(the "Company") and Thomas L. Earnshaw (the "Participant").
WHEREAS, Participant is now a full-time employee of the Company, and
will render faithful and efficient service to the Company; and
WHEREAS, the Company desires to continue to receive the benefit of
Participant's services and to fully identify his interests with the Company's
future and success; and
WHEREAS, the Board of Directors ("Board") of the Company and the
stockholders of the Company have heretofore approved the Company's 1989 Stock
Plan for Employees (the "Plan") providing for, among other things, the granting
of stock options under the Plan to certain employees of the Company, including
officers of the Company; and
WHEREAS, pursuant to the provisions of such Plan, the Board has
granted and authorized the terms and provisions in this Agreement pursuant to
Section 422 of the Internal Revenue Code of 1986 (the "Code"):
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, and other good and valuable consideration, it is
understood and agreed as follows:
1. OPTION TO PURCHASE.
(a) The Company hereby grants to Participant an irrevocable right
and option ("Option") to purchase from the Company One Hundred Thousand
(100,000) shares (subject, however, to adjustment as provided in Paragraph 8),
of the common stock, no par value, of the Company (the "Option Shares") upon
the terms and conditions herein contained.
(b) The purchase price payable to the Company for the shares to be
acquired pursuant to the exercise of this Option will be Ninety-Eight Cents
($0.98) per share, which shall be paid to the Company in the manner hereinafter
described at the time of exercise. Such purchase price is referred to herein
as the "Option Price".
<PAGE> 2
2. EXERCISE OF OPTION.
(a) Vesting.
(1) Except as otherwise provided in Section 2(a)(2)
below, the Option Shares will become vested in accordance with the following
schedule, if as of each relevant date the Participant is still employed by the
Company or any of its subsidiaries:
(i) As of June 29, 1996, Participant shall vest
in 20,000 of the Option Shares;
(ii) As of June 29, 1997, Participant shall vest
in an additional 20,000 of the Option Shares;
(iii) As of June 29, 1998, Participant shall vest
in an additional 20,000 of the Option Shares;
(iv) As of June 29, 1999, Participant shall vest
in an additional 20,000 of the Option Shares;
and
(v) As of June 29, 2000, Participant shall vest
in an additional 20,000 of the Option Shares.
(2) Notwithstanding Section 2(a)(1) above, upon a merger
or dissolution in which the Company is not the surviving corporation, or a
transfer of substantially all the assets of the Company, Participant shall vest
in all of the Option Shares less any such shares as to which this Option has
been previously exercised.
(b) Exercisable Option Shares. Participant can exercise this
Option on a cumulative basis to the extent hereinafter provided with respect to
all or any part of the number of "Exercisable Option Shares" subject to this
Option, and such right shall be a continuing one during the term of the Option
as provided in paragraph 3 hereof, until this Option has been fully exercised
with respect to the number of Option Shares stated in paragraph 1.
"Exercisable Option Shares" shall be the Option Shares granted in paragraph 1
and vested in accordance with paragraph 2(a) hereof, less Option Shares
previously exercised.
(c) Exercise After Participant's Death. Upon the death of
Participant, this Option shall still be exercisable in full with respect to
Option Shares which are Exercisable Option Shares on the date of Participant's
death, and may be exercised in whole or in part by the estate of the
Participant or by such person or persons to whom this Option shall be
transferred by the Will of Participant, or by the applicable laws of descent
and distribution, but only within one hundred eighty (180) days after the
Participant's death, or within the unexpired term of this Option, whichever is
shorter, at which time this
<PAGE> 3
WASTE RECOVERY, INC.
INCENTIVE STOCK OPTION AGREEMENT
THIS INCENTIVE STOCK OPTION AGREEMENT ("Agreement"), made and entered
into in Dallas, Texas, as of the 29th day of June, 1995, by and between Waste
Recovery, Inc., a corporation organized and existing under the laws of Texas
(the "Company") and _Sharon K. Price (the "Participant").
WHEREAS, Participant is now a full-time employee of the Company, and
will render faithful and efficient service to the Company; and
WHEREAS, the Company desires to continue to receive the benefit of
Participant's services and to fully identify his interests with the Company's
future and success; and
WHEREAS, the Board of Directors ("Board") of the Company and the
stockholders of the Company have heretofore approved the Company's 1989 Stock
Plan for Employees (the "Plan") providing for, among other things, the granting
of stock options under the Plan to certain employees of the Company, including
officers of the Company; and
WHEREAS, pursuant to the provisions of such Plan, the Board has
granted and authorized the terms and provisions in this Agreement pursuant to
Section 422 of the Internal Revenue Code of 1986 (the "Code"):
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, and other good and valuable consideration, it is
understood and agreed as follows:
1. OPTION TO PURCHASE.
(a) The Company hereby grants to Participant an irrevocable right
and option ("Option") to purchase from the Company Twenty Five Thousand
(25,000) shares (subject, however, to adjustment as provided in Paragraph 8),
of the common stock, no par value, of the Company (the "Option Shares") upon
the terms and conditions herein contained.
(b) The purchase price payable to the Company for the shares to be
acquired pursuant to the exercise of this Option will be Ninety-Eight Cents
($0.98) per share, which shall be paid to the Company in the manner hereinafter
described at the time of exercise. Such purchase price is referred to herein
as the "Option Price".
<PAGE> 4
2. EXERCISE OF OPTION.
(a) Vesting.
(1) Except as otherwise provided in Section 2(a)(2)
below, the Option Shares will become vested in accordance with the following
schedule, if as of each relevant date the Participant is still employed by the
Company or any of its subsidiaries:
(i) As of June 29, 1995, Participant shall vest
in 5,000 of the Option Shares;
(ii) As of June 29, 1996, Participant shall vest
in an additional 5,000 of the Option Shares;
(iii) As of June 29, 1997, Participant shall vest
in an additional 5,000 of the Option Shares;
(iv) As of June 29, 1998, Participant shall vest
in an additional 5,000 of the Option Shares;
and
(v) As of June 29, 1999, Participant shall vest
in an additional 5,000 of the Option Shares.
(2) Notwithstanding Section 2(a)(1) above, upon a merger
or dissolution in which the Company is not the surviving corporation, or a
transfer of substantially all the assets of the Company, Participant shall vest
in all of the Option Shares less any such shares as to which this Option has
been previously exercised.
(b) Exercisable Option Shares. Participant can exercise this
Option on a cumulative basis to the extent hereinafter provided with respect to
all or any part of the number of "Exercisable Option Shares" subject to this
Option, and such right shall be a continuing one during the term of the Option
as provided in paragraph 3 hereof, until this Option has been fully exercised
with respect to the number of Option Shares stated in paragraph 1.
"Exercisable Option Shares" shall be the Option Shares granted in paragraph 1
and vested in accordance with paragraph 2(a) hereof, less Option Shares
previously exercised.
(c) Exercise After Participant's Death. Upon the death of
Participant, this Option shall still be exercisable in full with respect to
Option Shares which are Exercisable Option Shares on the date of Participant's
death, and may be exercised in whole or in part by the estate of the
Participant or by such person or persons to whom this Option shall be
transferred by the Will of Participant, or by the applicable laws of descent
and distribution, but only within one hundred eighty (180) days after the
Participant's death, or within the unexpired term of this Option, whichever is
shorter, at which time this
<PAGE> 5
WASTE RECOVERY, INC.
NONQUALIFIED STOCK OPTION AGREEMENT
THIS AGREEMENT, made and entered into in Dallas, Texas, as of the 14th
day of August, 1995, by and between Waste Recovery, Inc., a corporation
organized and existing under the laws of Texas (the "Company") and Allan
Shivers, Jr. (the "Grantee").
WHEREAS, Grantee is now a non-employee member of the Board of
Directors ("Board") of the Company and will render faithful and efficient
service to the Company; and
WHEREAS, the Board and the shareholders of the Company have heretofore
approved the Company's 1992 Stock Plan for Non-Employee Directors (the "Plan")
which provides, among other things, that at the conclusion of each Annual
Meeting of Shareholders of the Company, each elected or incumbent non-employee
director shall automatically be granted an option to purchase Two Thousand Five
Hundred (2,500) shares of common stock, but only if the Company's net income
for the fiscal year just ended was improved over the net income for the prior
fiscal year; and
WHEREAS, the above conditions have been met, and Grantee, as such a
director, is entitled to receive such a stock option in accordance with the
Plan;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained and other good and valuable consideration, it is
understood and agreed as follows:
1. OPTION TO PURCHASE.
(a) The Company hereby grants to Grantee an irrevocable right and
nonqualified option ("Option") to purchase from the Company Two Thousand Five
Hundred (2,500) shares (subject, however, to adjustment as provided in
paragraph 7), of the common stock, no par value, of the Company (the "Option
Shares") upon the terms and conditions herein contained.
(b) The purchase price payable to the Company for the shares to be
acquired pursuant to the exercise of this Option will be One and 41/100 Dollars
($1.41) per share, which shall be paid to the Company in the manner hereinafter
described at the time of exercise. Such purchase price is referred to herein
as the "Option Price".
2. EXERCISE OF OPTION.
(a) Exercisable Option Shares. Grantee can exercise this Option
on a cumulative basis to the extent hereinafter provided with respect to all or
any part of the number of "Exercisable Option Shares" subject to this Option,
and such right shall be a continuing one during the term of the Option as
provided in paragraph 3 hereof, until this Option has been
NONQUALIFIED STOCK OPTION AGREEMENT PAGE 1
<PAGE> 6
fully exercised with respect to the number of Option Shares stated in paragraph
1. "Exercisable Option Shares" shall be the Option Shares granted in paragraph
1 hereof, less Option Shares previously exercised.
(b) Exercise After Grantee's Death. Upon the death of Grantee,
this Option shall still be exercisable in full with respect to Option Shares
which are Exercisable Option Shares on the date of Grantee's death, and may be
exercised in whole or in part by the estate of the Grantee or by such person or
persons to whom this Option shall be transferred by the Will of Grantee, or by
the applicable laws of descent and distribution, but only within one hundred
eighty (180) days after the Grantee's death or within the unexpired term of
this Option, whichever is shorter, at which time this Option shall lapse and
become void.
3. TERM OF OPTION. Subject to the limitations contained
elsewhere in this Option, this Option shall remain open and exercisable for a
period of ten (10) years, through and including August 13, 2005, after which
this Option shall lapse and become void.
4. MANNER OF EXERCISE OF OPTION.
(a) This Option shall be exercised in whole or in part by written
notice to the Company addressed to the President of the Company at such place
as the Company's executive offices may then be located, such notice, in
accordance with the attached exercise form, together with payment for the
Option Price for the number of Option Shares being exercised and stated
therein, to be delivered either personally or by registered or certified mail.
Such notice, if delivered by registered or certified mail, shall be deemed to
be received by the Company at the time stated in the postmark thereon, provided
it is received by the Company before the expiration of the term of this Option.
Such notice shall state the number of Option Shares such Grantee (or other
person as may be exercising this Option) elects to exercise under this Option
(such number not to exceed the maximum number of Exercisable Option Shares).
(b) Manner of Payment. Payment for Option Shares purchased upon
exercising all or part of this Option shall be made in full at the time of
exercise, in cash, or, in the Company's discretion, in common stock of the
Company owned by the Grantee, valued as of the close of business on the
immediately preceding business day, and such other forms of consideration
having a current value equal to the option price as may be suitable to the
Board, or in any combination of the foregoing. No Option Shares may be
delivered until full payment of the purchase price thereof has been made.
5. RIGHTS AS A STOCKHOLDER. After receipt of the notice of
exercise as provided in paragraph 4 above, the Company shall cause to be issued
and delivered such certificates, in such denominations as Grantee may direct,
representing the number of fully-paid, nonassessable shares of common stock
which the Grantee is entitled to receive, registered in the name of Grantee,
but Grantee shall have no right as a stockholder with respect to any such
shares until the issuance of such stock certificates, and no adjustment
NONQUALIFIED STOCK OPTION AGREEMENT PAGE 2
<PAGE> 7
shall be made for cash dividends or other rights for which the record date is
prior to the time such stock certificates are issued, except as provided
herein. The Company agrees to issue such stock certificates within thirty (30)
business days after such receipt of notice of the exercise of this Option,
along with payment. Each certificate shall be issued in the name of Grantee so
exercising this Option, or in the name of Grantee and his spouse as joint
tenants, if Grantee should so request.
6. RESTRICTIONS ON OPTION AND SHARES.
(a) This Option shall not be transferred by Grantee other than by
Will or by the applicable laws of descent and distribution or a qualified
domestic relations order as defined in the Internal Revenue Code ("QUADRO"),
and can be exercised during his lifetime only by Grantee, his guardian or legal
representative, or the QUADRO beneficiaries. This Option shall not be subject
to any claim of any creditor of Grantee; shall not be subject to attachment,
garnishment or other legal or equitable process by or on behalf of any such
creditor; and shall not in anywise be liable for or subject to the debts,
contracts, liabilities, engagements or torts of Grantee. This Option shall not
be pledged, hypothecated, or otherwise encumbered, and any attempt to do so
shall be void.
(b) Holding Period. Since the Grantee is a director of the
Company, the Option Shares shall not be sold or disposed of within six months
of the date of this Agreement.
7. CAPITAL ADJUSTMENTS AND REORGANIZATIONS.
(a) The Option Shares covered by this Option, and the Option
Price, shall be adjusted to reflect, any stock dividend, stock split, share
combination, exchange of shares, recapitalization, merger, consolidation,
separation, reorganization, liquidation or the like, of or by the Company, in
accordance with the Plan.
(b) Nothing in this paragraph 7 shall in any way extend the time
within which this Option must be exercised as provided in Paragraph 3 above.
8. WITHHOLDING TAX. Should the Company be required to withhold
any tax pursuant to the exercise of this Option by Grantee, as a condition to
the Company's obligation to deliver shares upon such exercise, Grantee agrees
to make arrangements satisfactory to the Board to insure that the amount
required to be withheld is made available to the Company for timely payment.
If agreeable to the Board, Grantee shall be allowed to deliver shares of the
Company's common stock previously owned by Grantee, or Option Shares from the
exercise of this Option, for the payment of such withholding tax.
9. DISSOLUTION OR MERGER. In the event that, prior to the
delivery by the Company of all the Option Shares in respect of which Options
are granted, a merger or dissolution in which the Company is not the surviving
Corporation shall occur, or a transfer of substantially all the assets of the
Company shall occur:
NONQUALIFIED STOCK OPTION AGREEMENT PAGE 3
<PAGE> 8
(a) If provision be made in writing in connection with such
transaction for the assumption and continuance of the Option hereby granted, or
the substitution for such Option of a new option covering the shares of the
successor corporation, with appropriate adjustment as to number and kind of
shares and prices, this Option, or the new option substituted therefore, as the
case may be, shall continue in the same manner and under the terms provided.
(b) In the event provision is not made in such transaction for the
continuance and assumption of this Option or for the substitution of an option
covering the shares of the successor corporation, then Grantee shall be
entitled within a reasonable period of time, prior to the effective date of any
such transaction, to purchase the full number of Exercisable Option Shares,
failing which purchase, any unexercised portion thereof shall be deemed
canceled as of such effective transaction date.
10. EARLY TERMINATION. This Option will terminate, as to any
unexercised portion, thirty (30) days following the voluntary resignation of
Grantee from the Board.
11. PLAN. The Option provided for in this Agreement is granted
pursuant to the Plan, as amended, which was adopted by the Board effective
March 10, 1992, and approved by the shareholders on May 18, 1992. The terms
and provisions of the Plan are incorporated by reference herein, and in the
case of any conflict between the terms and conditions of this Agreement and
those of the Plan, those of the Plan shall prevail and be controlling.
12. GENDER AND NUMBER. Whenever the masculine, feminine or neuter
gender, or the singular or plural number is used herein, the application of one
shall include the application of the other as the context so indicates.
13. NOTICES. Any notice relating to this Agreement shall be in
writing and delivered in person or by certified mail to the Company at its
principal place of business, to the attention of the President. All notices to
the Grantee or other person or persons then entitled to exercise the Option,
shall be delivered to the Grantee or such other person or persons at the
Grantee's address below specified.
14. APPLICATION. If any provision of this Agreement, or the
application to any entity, individual or circumstance shall be invalid or
unenforceable to any extent, such provision shall be modified to the minimum
extent necessary to make it or its application valid and enforceable. The
remainder of this Agreement, and the application of such provision to other
entities, persons or circumstances, shall not be affected thereby, and shall be
enforced to the greatest extent permitted by law.
15. BOARD OF DIRECTORS. The term "Board" or "Board of Directors"
means the Board of Directors of the Company, or its properly authorized
committee or representative.
16. LAW GOVERNING; VENUE. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF TEXAS
NONQUALIFIED STOCK OPTION AGREEMENT PAGE 4
<PAGE> 9
AND APPLICABLE FEDERAL LAW, AND SHALL BE PERFORMABLE IN DALLAS COUNTY, TEXAS.
IN WITNESS WHEREOF, this Agreement is executed in duplicate originals
as of the date and year first above shown.
ATTEST: WASTE RECOVERY, INC.
By: By:
-------------------------- -----------------------------
John E. Cockrum Thomas L. Earnshaw
Secretary President
309 South Pearl Expressway
Dallas, Texas 75201
Grantee:
--------------------------------
(signature)
--------------------------------
(printed name)
--------------------------------
--------------------------------
(address)
NONQUALIFIED STOCK OPTION AGREEMENT PAGE 5
<PAGE> 10
EXERCISE FORM
(To be executed by the registered owner to purchase Common
Stock pursuant to the Nonqualified Stock Option Agreement)
Waste Recovery, Inc.
309 South Pearl Expressway
Dallas, Texas 75201
Attention: President
The undersigned hereby: (1) irrevocably subscribes for
__________________ shares of your Common Stock pursuant to his or her
Nonqualified Stock Option granted August 14, 1995, and encloses payment of
$___________________ therefor, or other sufficient consideration agreed to by
you in writing; (2) requests that a certificate for the shares be issued in the
name of the undersigned and delivered to the undersigned at the address below;
(3) requests that if such number of shares is not all of the shares purchasable
hereunder, a new Option of like tenor for the balance of the remaining shares
purchasable hereunder be issued in the name of the undersigned and delivered to
the undersigned at the address below; (4) agrees that the certificate(s) for
shares of Common Stock may bear a legend in substantially this form:
THESE SHARES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, OR UNDER ANY APPLICABLE STATE LAW. THEY MAY NOT BE OFFERED
FOR SALE, SOLD, TRANSFERRED, OR PLEDGED WITHOUT (1) REGISTRATION UNDER
THE SECURITIES ACT OF 1933 AND ANY APPLICABLE STATE LAW OR (2) AN
OPINION (SATISFACTORY TO THE COMPANY) OF COUNSEL (SATISFACTORY TO THE
COMPANY) THAT REGISTRATION IS NOT REQUIRED;
(5) acknowledges that I have received the Company's: annual report for its last
fiscal year (including financial statements prepared by independent certified
public accountants); most recent definitive proxy statement filed therewith;
all interim quarterly reports on Form 10-Q filed since such annual report; and
information on the use of proceeds from this sale. I have requested and been
advised of any material changes in the Company's affairs since the date of such
documents; and have received or had made available to me all financial or other
information which I consider necessary to an informed judgment as to the
investment merits of this exercise of Option; and (6) represents and warrants
to the Company that with respect to legended shares, I am acquiring the shares
pursuant to this Option for my own account for investment; I am not acquiring
such shares with a
EXERCISE FORM PAGE 1
<PAGE> 11
view to, or in connection with, any offering or distribution; and I have no
present intention of selling or otherwise disposing of any of such shares.
Date:
----------------------- ---------------------------------------
(Please sign exactly as name appears on
Option)
---------------------------------------
Printed Name
---------------------------------------
Address
---------------------------------------
Address
---------------------------------------
Taxpayer ID No.
EXERCISE FORM PAGE 2
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<S> <C>
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<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> SEP-30-1995
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203,580
0
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