<PAGE> 1
SECURITIES EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended March 31, 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
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as the latest practicable date. Common stock, no par value
7,149,509, May 11, 1995.
<PAGE> 2
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
WASTE RECOVERY, INC.
Consolidated Balance Sheets
Form 10-Q
Part I
<TABLE>
<CAPTION>
Assets March 31, 1995 December 31, 1994
------ -------------- -----------------
(unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 38,055 $ 261,118
Accounts receivable, less
allowance for doubtful accounts
of $30,475 and $25,000, respectively 1,810,450 1,919,004
Notes and other receivables 192,523 514,816
Inventories (note 3) 823,787 800,805
Deferred income taxes 447,543 447,543
Other current assets 287,098 243,765
----------- -----------
Total current assets 3,599,456 4,187,051
----------- -----------
Property, plant and equipment 10,294,147 9,442,172
Less accumulated depreciation 6,241,725 6,103,133
----------- -----------
Net property, plant and equipment 4,052,422 3,339,039
----------- -----------
Investment in Waste Recovery - Illinois 456,660 335,035
Restricted cash and cash equivalents 509,721 506,521
Industrial revenue bond issuance
costs, less accumulated amortization
of $113,751 and $101,786, respectively 214,582 226,547
Goodwill (note 5) 499,706 --
Other assets 139,731 150,884
----------- -----------
1,820,400 1,218,987
----------- -----------
$ 9,472,278 $ 8,745,077
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE> 3
WASTE RECOVERY, INC.
Consolidated Balance Sheets
Form 10-Q
Part I
<TABLE>
<CAPTION>
Liabilities and Stockholders' Equity March 31, 1995 December 31, 1994
- - ------------------------------------ -------------- -----------------
(unaudited)
<S> <C> <C>
Current liabilities:
Notes payable $ 115,428 $ 170,915
Convertible subordinated debentures 800,000 -
Current installments of long-term debt 555,529 224,683
Current installments of capital leases 102,012 111,327
Accounts payable 2,071,609 2,318,365
Accrued wages and payroll taxes 293,892 374,881
Other accrued liabilities 317,040 283,502
------------ ------------
Total current liabilities 4,255,510 3,483,673
Long-term debt, excluding current installments 3,672,978 3,065,447
Note payable 135,095 -
Convertible subordinated debentures - 800,000
Obligations under capital leases, excluding
current installments 111,722 137,138
------------ ------------
Total liabilities 8,175,305 7,486,258
------------ ------------
Stockholders' Equity:
Cumulative preferred stock, $1.00 par
value, 250,000 shares authorized,
203,580 issued and outstanding in
1995 and 1994 (liquidating preference
$13.38 per share, aggregating $2,724,262) 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; 7,149,509 and
7,137,143 shares issued and outstanding
in 1995 and 1994, respectively 407,800 407,800
Additional paid-in capital 10,765,402 10,753,402
Accumulated deficit (10,005,929) (10,032,083)
------------ ------------
1,370,853 1,332,699
Treasury stock, at cost, 103,760
common shares (73,880) (73,880)
------------ ------------
Total stockholders equity 1,296,973 1,258,819
------------ ------------
$ 9,472,278 $ 8,745,077
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE> 4
WASTE RECOVERY, INC.
Consolidated Statements of Operations
Form 10-Q
Part I
<TABLE>
<CAPTION>
Three Months Ended March 31,
1995 1994
---- ----
(unaudited) (unaudited)
<S> <C> <C>
Revenues:
Tire-derived fuel sales $ 257,514 $ 343,330
Disposal fees, hauling and other revenue 2,927,198 2,015,382
------------ ------------
Total revenues 3,184,712 2,358,712
Operating expenses 2,306,079 1,648,484
------------ ------------
878,633 710,228
General and administrative expenses 524,986 401,301
Depreciation and amortization 211,083 159,548
------------ ------------
142,564 149,379
------------ ------------
Other income 15,672 4,021
Interest income 7,698 2,452
Interest expense (112,565) (85,059)
Equity in loss from partnership operations (27,215) -
------------ ------------
(116,410) (78,586)
------------ ------------
Net income before income taxes 26,154 70,793
------------ ------------
Provision for income taxes - -
------------ ------------
Net income $ 26,154 $ 70,793
============ ============
Undeclared cumulative preferred
stock dividends $ 35,138 $ 35,929
============ ============
Net income (loss) available to
common shareholders $ (8,984) $ 34,864
============ ============
Net income per common share (note 4) $ .00 $ .01
============ ============
Weighted average number of common
and dilutive common equivalent
shares outstanding 7,414,946 7,316,615
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE> 5
WASTE RECOVERY, INC.
Consolidated Statements of Cash Flows
Form 10-Q
Part I
<TABLE>
<Caption
Three Months Ended March 31,
1995 1994
---- ----
(unaudited) (unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 26,154 $ 70,793
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 299,933 285,007
Equity in loss from partnership operations 4,866 -
Compensation of stock awarded to Directors 12,000 -
Changes in assets and liabilities:
Accounts receivable 220,396 (261,452)
Inventories (116,005) (113,288)
Other current assets (30,023) 34,544
Other assets 10,125 25,490
Accounts payable (338,866) 19,512
Accrued liabilities (51,793) 5,520
------------ ------------
Net cash provided by operating activities 36,787 66,126
------------ ------------
Cash flows from investing activities:
Cash placed in restricted accounts (3,200) -
Proceeds received on note and other receivables 332,137 -
Investment in Waste Recovery - Illinois (121,625) -
Purchase of Domino Salvage, Tire Division,
Inc., net of cash received of $11,299 (121,205) -
Purchases of property, plant and equipment (256,535) (142,811)
------------ ------------
Net cash used by financing activities (170,428) (142,811)
------------ ------------
Cash flows from financing activities:
Proceeds from notes payable 21,347 -
Payment of notes payable (76,834) (82,959)
Proceeds from long-term debt 44,114 -
Repayment of long-term debt (43,318) (9,862)
Repayment of capital lease obligations (34,731) (23,023)
Proceeds from issuance of common stock - 153,920
------------ ------------
Net cash provided (used) by financing activities (89,422) 38,076
------------ ------------
Net decrease in cash and cash equivalents (223,063) (38,609)
Cash and cash equivalents at beginning of period 261,118 139,964
------------ ------------
Cash and cash equivalents at end of period $ 38,055 $ 101,355
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE> 6
WASTE RECOVERY, INC.
Notes to Consolidated Financial Statements
March 31, 1995
Form 10-Q
Part I
Note 1: The interim consolidated financial statements reflect all
adjustments which are, in the opinion of management, necessary for a
fair statement of the financial position and results of operations for
the interim periods presented. These adjustments are of a normal,
recurring nature.
Note 2: 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: The components of inventories are as follows:
<TABLE>
<CAPTION>
March 31, 1995 December 31, 1994
-------------- -----------------
<S> <C> <C>
Finished Inventory $ 274,454 $ 303,764
Work-In-Process 134,162 171,176
Parts Inventory 415,171 325,865
--------- ----------
$ 823,787 $ 800,805
========== ==========
</TABLE>
Note 4: Cumulative preferred stock dividends in arrears were $688,462
at March 31, 1995. Net income or loss is adjusted by the effect of
undeclared dividends on preferred stock of $35,138 and $35,929 at March
31, 1995 and 1994, respectively. The effect was to decrease net income
per common share by $.004 and $.005 for each of the three month
periods ending March 31, 1995 and 1994, respectively. Primary and
fully diluted earnings per share are the same in 1995 and 1994.
Note 5: 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. 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.
6
<PAGE> 7
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 March 31, 1995.
A summary of the assets acquired and liabilities assumed follows:
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
=========
The following unaudited pro forma summary presents the consolidated
result of the Company's operations as if the acquisitions 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.
For the three months For the three months
ended March 31, 1995 ended March 31, 1994
-------------------- --------------------
Revenues $ 3,471,900 $ 2,358,712
=========== ===========
Net income $ (32,833) $ 58,800
=========== ===========
Earnings per share $ .00 $ .00
=========== ===========
The acquisition also includes a five year employment agreement with
the former President and owner of Domino. The goodwill associated with
this acquisition will be amortized on a straight line basis over ten
years.
Note 6: As of March 30, 1995, Waste Recovery, Inc. began proceedings
for a Rights Offering to distribute nontransferable subscription
rights to the eligible stockholders, as defined, to subscribe for the
Company's common stock at an offering price of $.75 per share. This
"Rights Offering" is expected to raise capital, which will be
utilized for specific equipment improvements at each of the Company's
facilities, including Domino, and is expected to be completed in June
1995.
Note 7: The registrant has no material pending legal proceedings.
Other notes have been omitted pursuant to Rule 10-01 (a)(5) of Regulation S-X.
7
<PAGE> 8
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, which was purchased on March 21, 1995. Late in
1994, construction began in central and southern Illinois on two new tire
processing plants scheduled to begin operation by mid-1995. These plants are
owned by Waste Recovery - Illinois, a general partnership ("WR-Illinois") of
which the Company owns a 45% interest and is the managing partner. The Company
will operate the Illinois plants 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 recycling tires
to a supplemental fuel form. The Company generates revenue from scrap tire
disposal fees and from the hauling of scrap tires and the sale of tire-derived
fuel (TDF). At the plants, scrap tires are converted and refined into a
high-BTU supplement fuel, which is 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
Results for the first quarter of 1995 were positive in that the Company
earned $26,154 on revenues of $3,184,712 as compared to net income of $70,793 on
revenues of $2,358,712 in the comparable period of 1994. Although 1995 results
were below 1994, it should be noted that the 1995 results include approximately
$27,000 of losses representing the Company's interest in the losses of the
operations of the Illinois partnership incurred during the preoperating phase.
Construction is in progress on plants in Marseilles and Dupo, Illinois, with an
estimated start-up of mid-1995. These two 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, up to a
minimum of 60,000 tons per year, is dedicated to fulfilling a purchase contract
from the Illinois Power Company. WR-Illinois is also in discussion with other
prospective customers for its TDF. A Regional Manager has been hired to oversee
operations of the Illinois facilities, coordinate relations with Illinois Power
and develop business with additional customers. Experienced management from the
Company's other operations has also been transferred to this area to help train
personnel and start up these facilities.
8
<PAGE> 9
Results of Operations
1st Quarter 1995 vs 1st Quarter 1994
The table below summarizes the physical activity of the Company as well
as the basic revenue categories for the first quarter of the last three years.
<TABLE>
<CAPTION>
First Three Months Of:
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
TDF Tons Sold 14,781 19,727 19,591
=========== =========== ===========
Passenger Tire Equivalents
Received (Tons) 23,554 24,319 20,434
=========== =========== ===========
TDF Sales $ 257,514 $ 343,330 $ 374,197
=========== =========== ===========
Disposal & Hauling Fees $ 2,927,198 $ 2,015,382 $ 1,789,464
=========== =========== ===========
</TABLE>
Revenues from TDF tonnage sold decreased by approximately 25% during
the first quarter of 1995 when compared to the same period of 1994. This
decrease is primarily due to the contribution of TDF from the Company's
facilities to the Illinois partnership, to begin sales to Illinois Power. The
Company reported the contribution of inventory as an investment in the Illinois
partnership; thus, this tonnage was not available for sale to other customers.
Revenues received from disposal fees, hauling and other revenues
continue to strengthen as regulations requiring the proper disposal of scrap
tires are implemented. The Company's position in its operating regions allows
it to take significant advantage of this activity as demonstrated by a 45%
increase in disposal fees, hauling and other revenue during the first quarter
1995 over the same period in 1994. Contributing to this increase was the
continuation of a large tire pile abatement project for the State of West
Virginia. This project contributed 19% of total revenues. Tires associated
with the project were not received by the Company and therefore are not
included in passenger tire equivalents received. The Company completed the
first phase during the last quarter of 1994 having removed approximately two
million scrap tires. The Company's contract was renewed by the State of West
Virginia and a similar quantity should be done in 1995. The majority of these
scrap tires will be sent to Illinois to help start up one of the Illinois
Partnership facilities. As a result, the Company's consolidated operations
will reflect less revenue from this project in the last half of 1995 than for
the corresponding period in 1994. This accounts for the lack of increase in
PTE's received. These revenues will be adequately replaced if the Company's
allocations from the State of Texas are increased.
Operating expenses for the first quarter of 1995 were 72% of revenues,
up slightly from a level of 70% of revenues for the first quarter of 1994. As a
large portion of the increase in
9
<PAGE> 10
revenues was attributed to the relatively low capital intensive activity
associated with the large tire pile clean-up project in West Virginia, other
operating expense categories increase at a greater percentage than revenues.
However, this is a type of business that because it is less capital intensive,
provides high returns on investment and the Company can get in and out over a
much shorter time frame.
General and administrative expenses increased $123,685 but continued to
decrease as a percent of total revenues reaching 16% in 1995, down from 17% in
1994. Increases in general administrative expenses are primarily due to higher
insurance premiums and salaries associated with higher levels of operating and
expansion activities.
Depreciation and amortization expense increased 32% in 1995 primarily
as a result of rebuilding the Houston facility after the 1994 fire.
Interest expense for 1995 increased 32% from the amount experienced in
the first quarter of 1994 and is primarily due to the presence of subordinated
debentures in 1995 which were not in existence during the first quarter of 1994.
Financial Condition as of March 31, 1994
The Company's working capital balance of March 31, 1995, was a deficit
amount of $656,054. This deficit reflects the classification, to current, of
its convertible subordinated debentures in accordance with their terms.
Concurrently with the issuance of WR-Illinois bonds, referenced above, the
Company privately placed these convertible subordinated debentures in the
aggregate amount of $800,000 in September of 1994. Proceeds from the debentures
were used to meet collateral requirements related to another bond financing and
to provide corporate working capital.
Management remains sensitive to the risk that the Company will not have
the financial strength to take advantage of the opportunities that are
developing. It is anticipated that with operating results continuing their
improvement, the Company will be able to adequately fund its working capital
requirements and capital expenditures for at least the next twelve months.
However, to fully benefit from its leadership position and to capitalize on
relationships that have been developed throughout the past year, the Company
began proceedings for a Rights Offering to distribute non-transferable rights to
eligible stockholders, as defined, to subscribe to the Company's common stock at
an offering price of $.75 per share. This Rights Offering is expected to raise
approximately $2.4 million in capital and will be utilized for specific
equipment improvements at each of the Company's facilities, including the
Philadelphia operation. The Rights Offering is expected to be completed in June
1995 and will be offered to all shareholders of record on April 14, 1995. The
Rights Offering will also provide for the Company's net worth to reach levels to
qualify it to be listed on the NASDAQ's system and the Company has applied for
such relisting subject to the completion of the Rights Offering. The Company's
application was not approved because the Company fails to meet the standards for
capital and surplus and minimum bid price. Following completion of the
10
<PAGE> 11
"Rights Offering" the Company will request a hearing before the NASDAQ listing
qualification committee to appeal the rejection.
Capital expenditures for the remainder of 1995 will be subject to
completion of the aforementioned Rights Offering. If successful, amounts will
be expended at each facility to install wire recycling systems that will enable
the Company to avoid the portion of its cost of TDF production associated with
the disposal of this waste by-product. The Company will also be investing
approximately $600,000 into the Philadelphia facility to bring its processing
capacity up to levels existing at the Company's other facilities. In March
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. WRI is withholding an
additional $50,000 contingent upon certain events which, once resolved, will
become due and payable. The remaining payments will be made over a three year
term. The purchase note bears an interest rate of 1% over prime with interest
payable annually and is secured by the assets and the stock of Domino. The
acquisition also includes a five year employment agreement with the former
President and owner of Domino.
11
<PAGE> 12
Form 10-Q
Part II
Part II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.026 Employment agreement, March 21, 1995, between
the Registrant and Andrew J. Sabia.
10.027 Incentive stock option agreement, March 21,
1995, between the Registrant and Andrew J. Sabia.
27 Financial Data Schedule.
(b) Reports on Form 8-K
None
12
<PAGE> 13
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.
DATE: May 12, 1995 /s/ THOMAS L. EARNSHAW
--------------------------------------------
By: Thomas L. Earnshaw
President and Chief Executive Officer
(Principal Executive)
DATE: May 12, 1995 /s/ SHARON K. PRICE
--------------------------------------------
By: SHARON K. PRICE
Vice President of Finance
(Principal Financial and Accounting Officer)
13
<PAGE> 14
EXHIBIT INDEX
Exhibit
Number Decription
- - ------- ----------
10.026 Employment agreement, March 21, 1995, between
the Registrant and Andrew J. Sabia.
10.027 Incentive stock option agreement, March 21,
1995, between the Registrant and Andrew J. Sabia.
27 Financial Data Schedule.
<PAGE> 1
EXHIBIT 10.026
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT is made and entered as of the 21st day of
March, 1995, by and between Waste Recovery, Inc., a corporation organized
pursuant to the laws of the State of Texas ("Company"), and Andrew J. Sabia
("Employee").
WITNESSETH:
WHEREAS, in connection with the purchase of all of the stock of the
Domino Salvage, Tire Division, Inc., a Pennsylvania corporation ("Domino"), by
the Company, the parties have agreed to enter into this Employment Agreement;
NOW THEREFORE, for and in consideration of the premises and the mutual
covenants contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, and subject to the
terms and conditions hereinafter set forth, the parties hereto agree as
follows:
1. DEFINITIONS.
In addition to the words and terms elsewhere defined in this Agreement,
the following words and terms as used herein shall have the following meanings,
unless the context or use indicates a different meaning:
"Agreement" shall mean this Employment Agreement.
"Base Contract Amount" shall mean the annual salary set out in Section 4a.
"Board" shall mean the board of directors of the Company.
"Notice of Termination" shall mean, with respect to any Termination of
Service, a written notice which shall set forth the date of Termination of
Service, indicate the specific provision in this Agreement relied upon, and
state the facts and circumstances that are a basis therefor.
"Term of Employment" shall mean the period commencing on the date
hereof and expiring at the close of business on the last of February, 2000, and
continuing on a year-to-year basis thereafter unless, starting with calendar
year 2000, either party gives Notice of Termination prior to the start of such
year, to be effective at the end of February of such year.
"Termination of Service" shall be the termination of Employee's
employment with the Company in accordance with Section 5 hereof.
1
<PAGE> 2
2. EMPLOYMENT.
a. Company hereby agrees to employ Employee, and Employee hereby agrees
to serve Company, on the terms and conditions set forth herein.
b. The employment of Employee by Company shall be for the Term of
Employment.
3. POSITION AND DUTIES.
Employee shall serve as a regional Vice President of the Company and
shall (i) be a Vice President of Domino, (ii) manage Domino's operations and
facility with the same degree of care as would a prudent owner, (iii) assist
senior management of the Company with the growth of business in the
Northeastern United States, including any additional facilities added or
built by the Company, and (iv) perform such other compatible duties
consistent with his aforementioned positions as the Board may from time to
time determine. Employee's principal place of employment shall be
Conshohocken, Pennsylvania. During his Term of Employment, Employee shall
engage in no activities that will adversely affect his responsibilities with
the Company, or, as prohibited in Section 7 below, compete with the Company.
4. COMPENSATION AND EXPENSES.
a. Base Contract Amount. The Base Contract Amount shall be an annual
salary of $60,000 paid in accordance with the Company's regular payroll
practices with respect to employee compensation and withholding, as from time
to time in effect. Employee shall be eligible for increases in the Base
Contract Amount as determined by the Board.
b. Annual Incentive Bonus. Employee shall be paid an annual incentive
bonus on the following terms and conditions. Such bonus will be twenty-five
percent (25%) of "net cash flow" from the existing Domino facility, and from
an additional facility that the Company may place under Employee's managerial
responsibility in the Territory (as hereinafter defined); provided however,
that such bonus cannot exceed (i) $100,000.00 for the existing Domino
facility, or (ii) $100,000.00 for any second facility. Net cash flow is
defined as net income in accordance with generally accepted accounting
principles, plus depreciation and amortization, less principal payments and
capital expenditures, determined consistent with the method of calculation of
the projections prepared by Domino and the Company dated March 17, 1995, and
attached hereto, with the understanding that the Company makes no warranties
as to the projections. The bonus will be paid forty-five (45) days after the
end of each of the Company's fiscal quarters, subject to audited adjustments
at the end of the fiscal year.
2
<PAGE> 3
c. Expenses. During the Term of Employment, Employee shall be entitled
to receive prompt reimbursement for all reasonable expenses incurred by him
in performing services hereunder, provided that Employee properly accounts
therefor in accordance with Company policy.
d. Company Car. Employee shall be entitled to a Company car at a rental
value of $350.00 per month, with maintenance and insurance paid by the
Company.
e. Employee Benefits: Stock Options. Employee will receive all employee
benefits generally available to employees of the Company. During each of the
first three (3) years of his employment, Employee will be granted a stock
option for 10,000 shares of the Company's common stock at fair market value
granted as of the last day of February (except that for the first year the
option shall be granted upon signing this Agreement) and otherwise on terms
consistent with the Company's practices. Such stock options shall be vested
on the date of grant.
5. TERMINATION OF SERVICE.
a. Termination by Death or Disability. Employee's employment hereunder
shall terminate upon his death or disability. If Employee is unable to
perform his duties on a full time basis due to a medically certifiable
physical or mental impairment ("Disability"), and such Disability has lasted
in excess of one hundred eighty (180) days, then the Company shall have the
right to terminate this Agreement.
b. Termination by Company for Cause. The company may terminate
Employee's employment hereunder at any time for "cause". The term "cause"
shall mean:
(i) a felony conviction involving moral turpitude, including
embezzlement, theft or fraud, or a breach of a position of trust in a
business relation; or
(ii) Employee fails to perform or negligently performs specific,
material duties assigned to him hereunder; or
(iii) Employee commits a material breach of this Agreement, or
of any promulgated policy of the Company applicable to a person of his
position with the Company;
3
<PAGE> 4
provided that regarding items (ii) and (iii) above, cause shall exist only
after the Company gives Employee written notice specifying the omissions,
acts or breaches, and such reasons for termination continue after thirty (30)
days from receipt of such notice.
c. Termination by Employee. Employee shall have the right to terminate
this Agreement in the event that (i) the Company shall default in the payment
of that certain promissory note (the "Note") executed contemporaneously with
this Agreement in connection with the Company's purchase of the capital stock
of Domino, and such default shall remain uncured for 180 days after such
default, or (ii) the Company is in material default of this Agreement
(including default under Sections 4(a) or (b)) hereof and such default is not
cured within thirty (30) days, after the Company has received notice from
Employee of such default, except non-payment under Section 4(a) shall be
cured within five (5) business days after receipt of notice. Unless Employee
is entitled to terminate his employment as provided in this Agreement,
termination by Employee will be a breach of this Agreement.
d. Expiration of Term of Employment. Unless terminated earlier pursuant
to the provisions hereof, this Agreement shall terminate at the end of the
Term of Employment.
e. Compensation Rights. Upon Termination of Service, Employee shall be
entitled to all compensation, including any bonuses earned during his
employment. Employee stock options shall be governed by the terms of a
written agreement with the Company.
f. No Duty to Mitigate. In the event of termination of Employee's
employment by the Company other than for "cause" (as defined above), Employee
shall not be required to seek other employment in order to mitigate any
amounts recoverable for such action.
6. NOTICE OF TERMINATION.
Any termination of Service pursuant to Section 5 hereof shall be
communicated by a Notice of Termination.
7. COVENANT NOT TO COMPETE OR DISCLOSE.
a. Trade Secrets and Confidential Information.
(i) Employee will have access to, or become familiar with,
during the Term of Employment, various technical data and trade secrets
related to the business of the Company, which is the collection,
disposal and recycling of scrap tires and the manufacture, production
and marketing of
4
<PAGE> 5
tire-derived fuel (TDF) (the "Business"). Such items include, not by way
of limitation, patterns, tradenames, trademarks, patents, formulae,
devices, inventions, processes, software products, documentation,
copyrighted material; proprietary materials and technology advances;
compilations of information, records, files, drawings and
specifications; and other related tangible and intangible property and
discoveries, including, not by way of limitation, discoveries regarding
optimum characteristics of TDF combustion design conditions to permit
maximum energy recovery efficiency consistent with certain air
commission criteria; product manuals, customer lists, customer
requirements, supplier lists, raw materials, and marketing concepts (all
hereinabove referred to as "Trade Secrets" or "Confidential
Information"). Employee specifically agrees:
(1) not to, directly or indirectly, disclose or make
available to anyone not employed or affiliated with the Company
or use outside of the Company, during or after his employment,
any Trade Secrets or Confidential Information of the Company
without the written consent of the President of the Company;
(2) to use reasonable best efforts to safeguard all
Trade Secrets and Confidential Information entrusted to
Employee so that they are not removed from the Company's offices
(except for use in the Company's business), without the written
consent of the President of the Company, and are not exposed to
or taken by unauthorized persons, companies or corporations;
(3) subject to the understanding that Employee has been
engaged in business with similarities to the Business, and
accordingly has the right to retain all trade secrets that are
Employee's prior to the effective date hereof, Employee agrees
that all Trade Secrets and Confidential Information hereafter
learned, created, invented, improved, developed or prepared by
Employee during his employment shall be the exclusive property
of the Company, and Employee hereby irrevocably assigns all of
his such property rights to the Company; and
(4) that in the event of termination of his employment
with the Company, to deliver to the Company all of the
Company's such property in his possession or control, including,
not by way of limitation, personal notes and reproductions
relating to Trade Secrets and Confidential Information, with the
full understanding that compensation and
5
<PAGE> 6
benefits may be withheld if Employee fails to comply,
without restricting the Company from any other legal and
equitable remedies.
(ii) Employee agrees and acknowledges that:
(1) The Company has expended substantial time, money and
effort in developing the Trade Secrets and Confidential
Information;
(2) Employee will receive substantial training related
to the Business during the course of his employment, and be
personally entrusted with, the Company's Trade Secrets and
Confidential Information;
(3) The Company is engaged in a highly competitive and
highly specialized industry;
(4) Employee could, by using or making available to
third parties, the training, experience, Trade Secrets, and
Confidential Information he has received from the Company,
become a competitor of the Company; and
(5) The Company will suffer great loss if Employee were,
after termination of his employment with the Company, directly
or indirectly, enter into competition with the Company to the
extent competition is otherwise restricted by this Agreement.
Notwithstanding anything herein to the contrary, the foregoing
restrictions in this Section 7, shall not apply to any information which
is or comes into the public domain other than through the fault of
Employee. Also, in the event of a default by the Company under the Note
whereby Employee reacquires ownership of all or part of the capital
stock of Domino, Employee will acquire all of the trade secrets held by
Domino prior to effective date hereof.
b. Covenant Not to Compete. During the term of employment, and for a
period of two (2) years after termination, Employee shall not, for any
reason, directly or indirectly, by any means or device whatsoever, for
himself or on behalf of or in conjunction with any other person, do any one
or more of the following:
(i) Engage in a Competing Business in the states of Connecticut,
Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey,
6
<PAGE> 7
New York, Pennsylvania, and Vermont, or any other states to which
Employee may be assigned managerial duties consistent with Section 3 of
this Agreement (the "Territory"). For the purposes of the foregoing
sentence, the term "engage" shall mean Employee being a principal,
consultant, officer, director, employee, owner (other than the holder of
less than five percent of the outstanding stock of a publicly-traded
company), partner, or equity owner in any business enterprise,
regardless of structure, that engages in a Competing Business. Competing
Business shall mean any business enterprise that engages in the
collection, disposal and recycling of scrap tires, or the manufacture,
production and marketing of tire-derived fuel.
(ii) Sell, offer for sale, participate in or advise about a
sale, or solicit the sale of products or services of a Competing
Business regarding any account in the Territory which Employee learned
of or did business with during the Term of Employment;
(iii) Divert, take away, or attempt to take away any account of
the Company, which Employee sold, visited, solicited, or otherwise
learned of during the Term of Employment;
(iv) Hire or attempt to hire or employ any person who is or
within the twelve months preceding was an employee of the Company,
except this clause (iv) shall not apply to employee Christopher P.
Conicello.
Provided however, that the restrictions in this Section 7(b) shall terminate
(i) if Employee is terminated without cause, or (ii) if the Company defaults
in its payment of the Note and such default shall remain uncured for 180 days
after such default.
c. Acknowledgement by Employee. Employee understands that the provisions
of this Section 7 may limit his ability to earn a livelihood in a business
similar to the Business, but nevertheless agrees and hereby acknowledges that
the consideration provided under this Agreement is sufficient to justify the
restrictions contained in such provisions. Employee further agrees that the
provisions and restrictions contained in this Section 7 are reasonable. The
provisions and restrictions contained in Section 7b regarding
non-competition, non-solicitation and non-interference are designed to
enforce and protect the Company's interest in its Trade Secrets and
Confidential Information. If at the time of enforcement of Section 7b, a
court holds that the duration, scope or area restrictions stated herein are
unreasonable under circumstances then existing, the parties agree that the
maximum duration, scope or area reasonable under such circumstances shall be
substituted for the stated duration, scope or area and that the court shall
be allowed to revise the restrictions contained herein to cover the maximum
period, scope and area permitted by law.
7
<PAGE> 8
d. Remedies for Breach of this Agreement. In the event of a breach,
actual or threatened, of this Section 7 by the Employee resulting in or which
might result in damages to the Company, the Company may recover from Employee
any and all actual damages which may be sustained. In addition, in the event
of an actual or threatened breach of this Agreement, Employee shall be
subject to all restraining orders and injunctions, both temporary and
permanent, which may be available to ensure that Employee does not breach the
provisions hereof relating to Trade Secrets and Confidential Information and
to ensure the non-competition provided for in herein, or to prevent or stop a
threatened or actual breach of this Agreement. The Company and Employee agree
that a violation of the covenants contained herein may cause irreparable
injury to the Company, and accordingly, the Company shall be entitled to all
equitable remedies as well as its remedies at law.
8. BINDING ARBITRATION.
Should a dispute arise pursuant to this Agreement, then such dispute
shall be determined by binding arbitration in Montgomery County, Pennsylvania
under the administration of and in accordance with the commercial arbitration
rules of the American Arbitration Association (the "AAA"). The arbitration
shall be conducted by one (1) impartial arbitrator selected by mutual
agreement, or by three (3) arbitrators if the parties are unable to agree on
a single arbitrator within thirty (30) days of first demand for arbitration.
If three arbitrators are necessary, each party shall appoint one (1)
arbitrator with thirty (30) days after the first demand for arbitration, and
the third arbitrator shall be appointed by the first two. If either party
fails to appoint its arbitrator or if a third arbitrator is not chosen by
agreement of the first two within forty-five (45) days after the first demand
for arbitration, either party may request the AAA to appoint the remaining
arbitrators. In such event, the selection of any arbitrator shall be final
and binding on the parties. Each arbitrator shall be independent of, and not
affiliated with the party appointing him arbitrator, and shall not be a
customer or supplier or, or recipient of any payment (other than arbitration
fees and expenses) from the party appointing him arbitrator.
Notwithstanding this Section 8, the Company shall be entitled to its
equitable remedies pursuant to Section 7d.
9. MISCELLANEOUS.
a. Attorneys' Fees and Costs. If any action, at law or in equity,
including arbitration, is necessary to enforce or interpret the terms of this
Agreement, the prevailing party shall be entitled to reasonable attorneys's
fees and costs, in addition to any other relief to which such party may be
entitled.
8
<PAGE> 9
b. No waiver. No provisions of the Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is approved by
Employee and the Company. No waiver by any party hereto at any time of any
breach by the other party hereof of, or compliance with, any condition or
provision of this Agreement to be performed by such other party, shall be
deemed a waiver of similar or dissimilar provisions or conditions at the same
time or at any prior or subsequent time.
c. Choice of Governing Laws. THIS AGREEMENT IS ENTERED INTO, AND SHALL
BE GOVERNED, CONSTRUED, INTERPRETED, AND ENFORCED IN ACCORDANCE WITH THE
SUBSTANTIVE LAWS OF THE COMMONWEALTH OF PENNSYLVANIA. THE COURTS OF THE
COMMONWEALTH OF PENNSYLVANIA SHALL HAVE JURISDICTION TO ENTERTAIN ANY ACTION
PERMITTED HEREBY AND ARISING HEREUNDER, AND VENUE SHALL LIE MONTGOMERY
COUNTY, PENNSYLVANIA.
d. Assignment: Successors: Binding Agreement. This Agreement, and all
rights of Employee hereunder, shall inure to the benefit of, and be
enforceable by, and shall be binding upon, the parties hereto and their
respective heirs, devisees, legatees, executors, administrators, successors,
personal or legal representatives, and assignees, except the right of
employment runs only to Employee.
It is understood that the Company may reorganize its corporate structure, and
accordingly the Company is permitted to assign this Agreement to one of its
subsidiaries, but the Company will remain liable for the performance of such
subsidiary; in case of such assignment, the covenants of Employee under
Section 7 shall run for the benefit of Waste Recover, Inc. and its
subsidiaries.
e. Severability of Invalid Provisions. If any provisions of this
Agreement executed hereunder is held to be illegal, invalid, or unenforceable
under present or future laws effective during the term of such Agreement,
such provision shall be fully severable, the Agreement shall be construed and
enforced as if such illegal, invalid, or unenforceable provision had never
comprised a part of such Agreement; and the remaining provisions of such
Agreement shall remain in full force and effect and shall not be affected by
the illegal invalid, or unenforceable provision or by its severance from such
Agreement. Furthermore, in lieu or each such illegal, invalid, or
unenforceable provision there shall be added automatically as part of such
Agreement a provision as similar in terms to such illegal, invalid, or
unenforceable provision as may be possible and be legal, valid, and
enforceable.
f. Headings. The purpose of Section headings in this Agreement is solely
convenience, and such headings shall not affect the construction,
interpretation, or administration of this Agreement.
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<PAGE> 10
g. Word Usage. Words used in the masculine or feminine gender shall
apply to the other where applicable, and whenever the context dictates the
plural shall be read as the singular and the singular as the plural.
h. Notices. For purpose of this Agreement, notices and all other
communications required or permitted by this Agreement shall be in writing
and either be: (i) delivered in person; (ii) deposited in the United States
mail, first class, certified, return receipt requested, postage prepaid; or
(iii) sent charges prepaid by Federal Express or other reputable overnight
delivery service, and shall be deemed given when so delivered personally, or
if mailed, five (5) business days after the date of such mailing, or if sent
by overnight delivery service the first business day after deposited
therewith, and shall be addressed as follows:
If to Employee:
Andrew J. Sabia
232 Cardinal Drive
Conshohocken, PA 19428
with a copy to:
David J. Brooman, Esq.
COHEN, SHAPIRO, POLISHER, SHIEKMAN AND COHEN
22nd Floor, PSFS Building
12 South 12th Street
Philadelphia, PA 19107-3981
If to the Company:
Waste Recovery, Inc.
309 South Pearl Expressway
Dallas, Texas 75201
Attn: Thomas L. Earnshaw
with copies to:
Thomas J. Howell, Esq.
Storey Armstrong Steger & Martin, P.C.
4600 First Interstate Bank Tower
1445 Ross Avenue
Dallas, Texas 75202
or to such other address as either party may have furnished to the other in
writing in accordance and effective as hereinabove provided.
10
<PAGE> 11
Executed in duplicate originals this 21st day of March, 1995, effective
the date first above written.
WASTE RECOVERY, INC.
BY: /s/ THOMAS L. EARNSHAW,
----------------------
Thomas L. Earnshaw,
President and Chief
Executive Officer
/s/ ANDREW J. SABIA
--------------------------
ANDREW J. SABIA
11
<PAGE> 1
EXHIBIT 10.027
WASTE RECOVERY, INC.
INCENTIVE STOCK OPTION AGREEMENT
THIS INCENTIVE STOCK OPTION AGREEMENT ("Agreement"), made and entered
into in Dallas, Texas, as of the 21st day of March, 1995, by and between Waste
Recovery, Inc., a corporation organized and existing under the laws of Texas
(the "Company") and Andrew J. Sabia (the "Participant").
WHEREAS, Participant is now a full-time employee of the Company, or one
of its subsidiaries, and will render faithful and efficient service; 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 so
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
nonqualified option ("Option") to purchase from the Company Ten Thousand
(10,000) 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 One and 06/100ths
Dollars ($1.06) 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) 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 hereof, less
Option Shares previously exercised.
(b) 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
Option shall lapse and become void.
(c) 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 such Option 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 (3) month period shall be increased to one (1) year.
3. BASIC TERM OF OPTION.
Subject to the limitations contained elsewhere in this Agreement, this
Option shall remain open and exercisable for a period of 10 (10) years, through
and including March 20, 2005, after which this Option shall lapse and become
void.
INCENTIVE STOCK OPTION AGREEMENT PAGE 2
<PAGE> 3
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 Basic 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). Unless Participant
has been given notice by the Company that the Option Shares have been
registered pursuant to the Securities Act of 1933, as amended, such notice
shall contain a certificate substantially as follows:
"I hereby represent and warrant to the Company that I am
acquiring the shares pursuant to this Option for my own account for
investment; that I am not acquiring such shares with a view to, or in
connection with, any offering or distribution; and that I have no
present intention of selling or otherwise disposing of any of such
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 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 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 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 Participant so exercising this
Option, or in the name of Participant and his spouse as joint tenants, if
Participant should so request.
INCENTIVE STOCK OPTION AGREEMENT PAGE 3
<PAGE> 4
6. RESTRICTIONS ON OPTION.
(a) 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.
(b) THERE CAN BE NO ASSURANCE THAT THE SHARES ISSUED PURSUANT TO THIS
OPTION WILL BE REGISTERED UNDER THE SECURITIES ACT OF 1933, OR THE APPLICABLE
SECURITIES LAWS OF ANY STATE. EACH STOCK CERTIFICATE SHALL CARRY SUCH
APPROPRIATE LEGEND, AND SUCH WRITTEN INSTRUCTIONS SHALL BE GIVEN TO THE
COMPANY'S TRANSFER AGENT, AS MAY BE DEEMED ADVISABLE BY COUNSEL TO THE COMPANY,
TO COMPLY WITH THE SECURITIES ACT OF 1933 OR ANY STATE SECURITIES LAW.
ACCORDINGLY, THE OWNER OF SUCH SHARES MAY BE REQUIRED TO HOLD THEM FOR AN
INDEFINITE PERIOD OF TIME.
7. HOLDING PERIODS.
(a) With respect to Participants who are also executive officers,
directors or ten percent shareholders of the Company, the Options 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 the 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.
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,
INCENTIVE STOCK OPTION AGREEMENT PAGE 4
<PAGE> 5
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 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:
(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 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
canceled 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 qualifications and exceptions contained in Paragraph 2 above, this
Option may be exercised only while Participant remains in the continuous employ
of the Company, or one of its subsidiaries; provided, however, that this Option
does not confer upon Participant any right to continue in the employ of the
Company, or one of its subsidiaries, nor does it interfere in any way with the
right to terminate the employment of the Participant at any time.
INCENTIVE STOCK OPTION AGREEMENT PAGE 5
<PAGE> 6
12. PIGGYBACK REGISTRATION RIGHTS
(a) If, at any time from this date forward, the Company proposes to
file a registration statement relating to any of its common stock or other
securities under the Securities Act of 1933 (the "Securities Act"), and the
Option Shares are not then registered, the Company will promptly, but in any
event not less than thirty (30) days prior to the initial filing of such
registration statement, deliver written notice of such intention to the
Participant, setting forth the type of securities proposed to be registered,
the intended method of disposition, the maximum proposed offering price,
commissions and discounts in connection therewith and other relevant
information. If the Participant so requests within twenty (20) days after such
notification, the Company hereby agrees to use its best efforts to register the
Option Shares or any part thereof by inclusion in such registration statement
so that such Option Shares may be sold at such times and in such manner as the
Participant shall determine.
(b) The Company shall not be required to register Option Shares under
the Securities Act or under any state securities law: (i) if the opinion of
counsel for both the Participant and the Company (or should they not agree, in
the opinion of another counsel experienced in securities law matters agreeable
to counsel for the Participant and for the Company), the proposed public
offering or transfer of the number of Option Shares, as to which registration
is requested, is exempt from the registration provisions of the Securities Act
and the securities laws of the state in which the Option Shares are to be sold
or transferred, or (ii) to the extent that in an underwritten public offering
by the Company, the managing underwriter in any way limits the Option Shares
that can be registered.
(c) All costs and expenses in connection with the registration of any
Option Shares pursuant to the Participant's exercise of his "piggyback
registration rights," including federal and state registration and filing
fees, printing expenses (including such number of any preliminary prospectus
and the final prospectus as may reasonably be requested) and the fees and
disbursements of counsel and of independent accountants and other experts of
the Company shall be borne pro rata by the Company and the Participant;
provided, however, that the Company shall not be obligated to pay fees and
disbursements of counsel for the Participant or any underwriting commission or
discounts relating to the Option Shares.
13. 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 any conflict between the terms
and conditions of this Agreement, and those of the Plan, those of the Plan
shall prevail and be controlling.
INCENTIVE STOCK OPTION AGREEMENT PAGE 6
<PAGE> 7
reference herein, and in 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.
14. 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.
15. 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.
16. 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.
17. 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.
18. 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.
INCENTIVE STOCK OPTION AGREEMENT PAGE 7
<PAGE> 8
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
PARTICIPANT:
------------------------------
(signature)
------------------------------
(printed name)
------------------------------
------------------------------
(address)
INCENTIVE STOCK OPTION AGREEMENT PAGE 8
<PAGE> 9
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 March 21, 1995, and encloses payment of $ ____________ therefor, or
other sufficient consideration; (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 1993, 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 1993 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
EXCERCISE FORM PAGE 1
<PAGE> 10
Company that with respect to legended share, I am acquiring the shares pursuant
to this 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.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<CASH> 38,055
<SECURITIES> 0
<RECEIVABLES> 2,033,448
<ALLOWANCES> (30,475)
<INVENTORY> 823,787
<CURRENT-ASSETS> 3,599,456
<PP&E> 10,294,147
<DEPRECIATION> 6,241,725
<TOTAL-ASSETS> 9,472,278
<CURRENT-LIABILITIES> 4,255,510
<BONDS> 0
<COMMON> 407,800
0
203,580
<OTHER-SE> 685,593
<TOTAL-LIABILITY-AND-EQUITY> 9,472,278
<SALES> 3,184,712
<TOTAL-REVENUES> 3,208,082
<CGS> 2,306,079
<TOTAL-COSTS> 3,042,148
<OTHER-EXPENSES> (27,215)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (112,565)
<INCOME-PRETAX> 26,154
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 26,154
<EPS-PRIMARY> .00
<EPS-DILUTED> .00
</TABLE>
