<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
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Filed by the Registrant /X/
Filed by the Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement / / Confidential, for Use of the
/X/ Definitive Proxy Statement Commission Only (as permitted by
/ / Definitive Additional Materials Rule 14a-6(e)(2))
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
--------------
WASTE RECOVERY, INC.
(Name of Registrant as Specified in its Charter)
--------------
(Name of Person(s) filing Consent Solicitation Statement,
if other than Registrant)
--------------
Payment of Filing fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
--------------
(1) Title of each class of securities to which transaction applies:
- - ------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- - ------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11:
- - ------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- - ------------------------------------------------------------------------------
<PAGE>
(5) Total fee paid:
- - ------------------------------------------------------------------------------
/ / Check box if any part of the fee if offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
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(1) Amount Previously Paid:
- - ------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
[LOGO]
WASTE RECOVERY, INC.
309 SOUTH PEARL EXPRESSWAY
DALLAS, TEXAS 75201
_______________
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 19, 1997
_______________
To the Shareholders of
WASTE RECOVERY, INC.
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Waste
Recovery, Inc. (the "Company"), a Texas corporation, will be held at the
Company's executive offices at 309 South Pearl Expressway, Dallas, Texas on
Monday, May 19, 1997, at 10:00 a.m., Dallas, Texas time, for the following
purposes:
1. To elect (a) four Class B Directors to serve for a term of three
years and (b) one Class C Director to serve for a term of one year (or, if the
proposal described in paragraph 2 below is approved by the Company's
shareholders, to serve with the balance of the Company's directors until the
next Annual Meeting of Shareholders or their respective successors are elected
and qualified);
2. To consider and act upon a proposal of the Company's Board of
Directors to amend the Company's Amended and Restated Articles of Incorporation
to eliminate the classification of the Board of Directors and to provide that
each director shall be elected annually to hold office until the next Annual
Meeting of Shareholders and until his or her successor is elected and qualified;
3. To consider and act upon a proposal of the Company's Board of
Directors to amend the Company's Amended and Restated Articles of Incorporation
to provide for indemnification of officers and directors to the full extent
permitted under Texas law and to ratify and approve a resolution of the Board of
Directors that authorized the Company to enter into Indemnification Agreements
with the Company's directors;
4. To consider and act upon a proposal of the Company's Board of
Directors to amend the Company's Amended and Restated Articles of Incorporation
to eliminate the supermajority voting requirement for the shareholders of the
Company to approve certain transactions; and
5. To transact such other business as properly may come before the
meeting or any adjournment thereof.
The close of business on April 11, 1997 has been fixed by the Board of
Directors as the record date for the Annual Meeting. Only shareholders of
record on that date will be entitled to notice of and to vote at the Annual
Meeting or any adjournment thereof, notwithstanding transfer of any stock on the
books of the Company after such record date. The stock transfer books will not
be closed. A complete list of the shareholders entitled to vote at the meeting
will be open to the examination of any shareholder, for any purpose germane to
the meeting, during ordinary business hours for a period of 10 days prior to the
meeting at the corporate offices of the Company, 309 South Pearl Expressway,
Dallas, Texas 75201.
A Proxy Statement, form of Proxy, and copy of the Annual Report on the
Company's operations during the fiscal year ended December 31, 1996, accompany
this notice.
It is important that your shares be represented at the Annual Meeting. If
you do not expect to attend in person, please sign and date the form of Proxy
and return it in the enclosed postage prepaid envelope. The form of Proxy is
enclosed in the mailing envelope in which this Proxy Statement is contained.
Shareholders who attend the Annual Meeting may revoke their proxies and vote in
person if they desire.
By Order of the Board of Directors
JOHN E. COCKRUM
SECRETARY
April 24, 1997
<PAGE>
[LOGO]
WASTE RECOVERY, INC.
309 SOUTH PEARL EXPRESSWAY
DALLAS, TEXAS 75201
PROXY STATEMENT
FOR THE ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 19, 1997
SOLICITATION OF PROXIES
This Proxy Statement is furnished to shareholders of Waste Recovery, Inc.,
a Texas corporation (the "Company"), in connection with the solicitation of
proxies by the Board of Directors to be voted at the Annual Meeting of
Shareholders of the Company to be held at the Company's executive offices at 309
South Pearl Expressway, Dallas, Texas 75201, on Monday, May 19, 1997, at 10:00
a.m., Dallas, Texas time, or at any adjournment thereof, for the purposes set
forth in the accompanying Notice of Annual Meeting of Shareholders. References
herein to the "Company" include its subsidiaries, unless the context otherwise
requires.
This Proxy Statement and form of Proxy are being mailed to shareholders on
or about April 24, 1997. If the enclosed form of Proxy is executed and
returned, it may nevertheless be revoked by the shareholder at any time by
filing with the Secretary of the Company a written revocation or a duly executed
proxy bearing a later date. A shareholder who attends the meeting in person may
revoke his or her proxy at that time and vote in person if so desired. All
proxies duly signed, dated, and returned will be voted as specified therein, but
unless otherwise specified, will be deemed to grant authority to vote:
(1) FOR the election of the five nominees listed under "Election of
Directors" as nominees of the Company for election as directors;
(2) FOR the proposal to amend the Company's Amended and Restated
Articles of Incorporation to eliminate the classification of the Board of
Directors and to provide that each director shall be elected annually to
hold office until the next Annual Meeting of Shareholders and until his or
her successor is elected and qualified;
(3) FOR the proposal to amend the Company's Amended and Restated
Articles of Incorporation to provide for indemnification of officers and
directors to the full extent permitted under Texas law and to ratify and
approve a resolution of the Board of Directors of the Company that
authorized the Company to enter into Indemnification Agreements with the
Company's directors;
(4) FOR the proposal to amend the Company's Amended and Restated
Articles of Incorporation to eliminate the supermajority voting
requirements for shareholders to approve certain transactions; and
(5) At the discretion of the persons named in the enclosed form of
Proxy, on any other matter that may properly come before the meeting or any
adjournment thereof.
The enclosed Proxy is solicited by and on behalf of the Board of Directors
of the Company. The Company is unaware of any additional matters not set forth
in the Notice of Annual Meeting of Shareholders that will be presented for
consideration at the Annual Meeting. If any other matters are properly brought
before the Annual Meeting and presented for a vote of the shareholders, the
persons named in the Proxy will vote in accordance with their best judgment upon
such matters, unless otherwise restricted by law.
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<PAGE>
The cost of solicitation of proxies will be borne by the Company. In
addition to the use of the mails, proxies may also be solicited by personal
interview, facsimile transmission, and telephone by directors, officers and
employees of the Company, who will receive no special compensation for such
services. The Company will also supply brokers, nominees, or other custodians
with the numbers of Proxy forms, Proxy Statements, and Annual Reports they may
require for forwarding to beneficial owners, and the Company will reimburse such
persons for their reasonable expense in so doing.
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<PAGE>
OUTSTANDING CAPITAL STOCK AND STOCK OWNERSHIP OF
DIRECTORS, CERTAIN EXECUTIVE OFFICERS
AND PRINCIPAL SHAREHOLDERS
The record date for the determination of the shareholders entitled to
notice of and to vote at the Annual Meeting has been established by the Board of
Directors as the close of business on April 11, 1997. At March 31, 1997, the
Company had issued and outstanding and entitled to vote at the Annual Meeting
17,442,621 shares of Common Stock, no par value per share ("Common Stock").
(For a description of the voting rights of the Common Stock, see "Quorum and
Voting" herein.)
The following table sets forth information as of March 31, 1997, regarding
the beneficial ownership of the Company's Common Stock by each person or group
known by management of the Company to own more than five percent (5%) of the
outstanding shares of Common Stock of the Company, by each of the Company's
executive officers named in the Summary Compensation Table below, by each of the
Company's directors and nominees, and by all of its directors and executive
officers as a group.
<TABLE>
SHARES OF COMMON STOCK DIRECTLY AND
BENEFICIALLY OWNED AND PERCENTAGE OF
OUTSTANDING SHARES AS OF MARCH 31, 1997
--------------------------------------------
NUMBER NUMBER
DIRECTLY BENEFICIALLY
NAME OWNED PERCENT OWNED PERCENT
---- --------- ------- ------------ -------
<S> <C> <C> <C> <C>
Stephen P. Adik**. . . . . . . . . . . . -0- 0% -0- 0%
801 East 86th Avenue
Merrillville, Indiana 46410
Jay I. Anderson**. . . . . . . . . . . . 129,075 o 129,075 o
7 Penn Plaza
370 Seventh Avenue
Suite 618
New York, New York 10001
Martin Bernstein*. . . . . . . . . . . . 232,976 1.4% 232,976 1.4%
7 Penn Plaza
370 Seventh Avenue
Suite 618
New York, New York 10001
Andrew Bodner* . . . . . . . . . . . . . 429,158 2.5% 429,158 2.5%
258 West Mountain Road
Ridgefield, Connecticut 06877
Crandall S. Connors(1)***. . . . . . . . 675,064 3.9% 2,904,069 16.6%
108 Forest Avenue
Locust Valley, New York 11560
Roger W. Cope(2)*. . . . . . . . . . . . 45,528 o 45,528 o
5663 East 9 Mile Road
Warren, Michigan 48091
Michael C. Dodge(3)*** . . . . . . . . . 461,712 2.6% 779,712 4.5%
15660 North Dallas Parkway
Suite 400, L.B. 42
Dallas, Texas 75248
Thomas L. Earnshaw(4)*+. . . . . . . . . 179,505 1.0% 179,505 1.0%
-3-
<PAGE>
John C. Kerr(5)* . . . . . . . . . . . . 257,259 1.5% 2,904,069 16.6%
16414 San Pedro
Suite 345
San Antonio, Texas 78232
Steven E. MacIntyre(6)***. . . . . . . . 447,409 2.6% 2,904,069 16.6%
425 Park Avenue
Floor 25
New York, New York 10022
Robert L. Thelen(7)*+. . . . . . . . . . 137,598 o 137,598 o
W. David Walls(8)* . . . . . . . . . . . 37,321 o 37,321 o
1830 North 55th Street
Boulder, Colorado 80301
Riverside Caloric Company++. . . . . . . 1,100,000 6.3% 1,100,000 6.3%
c/o NIPSCO Development Company, Inc.
801 East 86th Avenue
Merrillville, Indiana 46410
Kerr, Connors Group(9)++ . . . . . . . . - - 2,904,069 16.6%
108 Forest Avenue
Locust Valley, New York 11560
Directors and executive officers
as a group (15 persons)(10)(11). . . . 4,616,763 26.5% 5,359,100 30.7%
</TABLE>
_____________
* Director
** Nominee
*** Director and Nominee
+ Executive Officer
++ Shareholder
o Less than 1%
(1) Columns 1 and 2 include 434,750 shares directly held and 196,301 shares as
to which Mr. Connors has shared beneficial ownership, including 180,000
shares held by MacIntyre Connors General Partnership, of which Messrs.
MacIntyre and Connors are the sole partners, and 44,013 shares of Common
Stock subject to options exercisable within sixty days, and columns 3 and 4
include 2,229,005 shares as to which the Kerr Connors Group (as described
below) has shared voting and dispositive power. Mr. Connors is a member of
a group (for purposes of reference described herein as the "Kerr, Connors
Group"), together with other individuals and entities including Messrs.
Kerr and MacIntyre, that has filed a Schedule 13D with the Securities and
Exchange Commission, as last amended by Amendment No. 3 dated August 9,
1995. Such Schedule 13D stated that the reporting persons set forth
therein, which include, among others, Messrs. Connors, Kerr and MacIntyre,
had reached an oral arrangement of unspecified duration with respect to the
voting and transfer of such stock. The share amount set forth for
Mr. Connors in column 3 includes 2,229,005 shares of Common Stock held by
other members of the Kerr, Connors Group with respect to which he disclaims
beneficial ownership.
(2) Includes 5,000 shares of Common Stock subject to options exercisable within
sixty days.
(3) Columns 1 and 2 include 2,500 shares of Common Stock subject to options
exercisable within sixty days, and columns 3 and 4 include 18,000 shares of
Common Stock and warrants to acquire 300,000 shares of Common Stock held by
Mr. Dodge's daughters, as to which he disclaims beneficial ownership.
(4) Includes 125,000 shares of Common Stock subject to options exercisable
within sixty days.
(5) Columns 1 and 2 include 257,259 shares directly held, and columns 3 and 4
include 2,646,810 shares held by other members of the Kerr, Connors Group
as to which he disclaims beneficial ownership.
(6) Columns 1 and 2 include 267,409 shares directly held, 2,500 shares of
Common Stock subject to options exercisable within sixty days, 36,061
shares of Common Stock issuable upon conversion of Debentures and 180,000
shares held by MacIntyre Connors General Partnership, of which Messrs.
MacIntyre and Connors are the sole partners, and columns 3 and 4 include
2,456,660 shares held by other members of the Kerr, Connors Group with
respect to which he disclaims beneficial ownership.
-4-
<PAGE>
(7) Includes 98,098 shares held directly, 4,500 shares held of record by his
wife and as to which he shares voting power, and 35,000 shares of Common
Stock subject to options exercisable within sixty days.
(8) Includes 5,000 shares of Common Stock subject to options exercisable within
sixty days.
(9) Address is for Kerr, Connors & Co. and not of all of the members of such
group.
(10) Includes 229,013 shares of Common Stock subject to options exercisable
within sixty days.
(11) Outstanding shares for the purpose of calculating these percentages do not
include shares held by or for the account of the Company, and include
shares that can be acquired within sixty days by the exercise of stock
options, warrants and conversion of Debentures. Percentage is calculated
by taking the total number of shares of Common Stock directly owned or
beneficially held, as the case may be, by the individual or entity listed
and dividing that number by the sum of (i) the total number of shares of
Common Stock outstanding and (ii) the number of securities that such person
has the right to acquire within sixty days pursuant to options, warrants,
conversion privileges and other rights. Except as otherwise indicated in
this table, shares are directly owned, and unless indicated to the contrary
the owner has sole voting and investment power.
The address for each of Messrs. Earnshaw and Thelen is 309 South Pearl
Expressway, Dallas, Texas 75201.
QUORUM AND VOTING
The presence, in person or by proxy, of the holders of a majority of the
outstanding shares of the Company entitled to vote is necessary to constitute a
quorum at the meeting. If a quorum is not present or represented at the
meeting, the shareholders entitled to vote, present in person or represented by
proxy, have the power to adjourn the meeting, without notice other than
announcement at the meeting, until a quorum is present or represented. At any
such adjourned meeting at which a quorum is present or represented, any business
may be transacted that might have been transacted at the meeting as originally
notified. The affirmative vote of a plurality of the voting power represented
at the meeting and entitled to vote is required for the election of directors.
Cumulative voting is not permitted in the election of directors. The
affirmative vote of holders of two-thirds of the voting power represented at the
meeting and entitled to vote is required for proposals two through four to be
adopted. A holder of shares of Common Stock will be entitled to one vote per
share of Common Stock as to each matter properly brought before the meeting.
PROPOSALS OF SHAREHOLDERS
Any proposal by a shareholder to be presented at the Company's 1998 Annual
Meeting of Shareholders must be received by the Company at its executive offices
not later than January 1, 1998, in order to be considered for inclusion in the
Company's proxy material relating to the 1998 Annual Meeting. Any proper
proposal should be mailed or delivered to the attention of Corporate Secretary,
Waste Recovery, Inc., 309 South Pearl Expressway, Dallas, Texas 75201. Such
proposals must comply with the requirements of Regulation 14A of the Securities
Exchange Act of 1934.
PROPOSAL ONE
ELECTION OF DIRECTORS
The Company's Articles of Incorporation presently provide that the Board of
Directors is to be divided into three classes, approximately equal in number,
with staggered terms of three years. Except as described below, the four
nominees designated by the Board of Directors for election as Class B directors
at the 1997 Annual Meeting each will serve a three-year term if elected and the
nominee designated by the Board of Directors for election as a Class C director
at the 1997 Annual Meeting to serve with the three Class C directors presently
serving will serve a one-year term if elected. THE BOARD OF DIRECTORS HAS
PROPOSED AMENDING THE COMPANY'S AMENDED AND RESTATED ARTICLES OF INCORPORATION
TO ELIMINATE THE CLASSIFICATION OF THE BOARD OF DIRECTORS. SEE "PROPOSAL TWO-
APPROVAL OF AMENDMENT TO THE COMPANY'S AMENDED AND RESTATED ARTICLES OF
INCORPORATION--ELIMINATION OF CLASSIFIED BOARD OF DIRECTORS." IF PROPOSAL TWO
IS APPROVED BY THE
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<PAGE>
SHAREHOLDERS OF THE COMPANY, EACH OF THE DIRECTORS OF THE COMPANY ELECTED WILL
SERVE UNTIL THE 1998 ANNUAL MEETING OF SHAREHOLDERS OF THE COMPANY AND UNTIL
THEIR RESPECTIVE SUCCESSORS ARE ELECTED AND QUALIFIED.
Shares represented by proxies returned duly executed will be voted, unless
otherwise specified, in favor of the nominees for the Board of Directors named
below. The nominees have indicated that they are able and willing to serve as
directors. If any (or all) such persons should be unable to serve, the persons
named in the enclosed proxy will vote the shares covered thereby for such
substitute nominee (or nominees) as the Board of Directors may select.
Shareholders may withhold authority to vote for any nominee by striking a line
through the name of such nominee in the space provided for such purpose on the
form of Proxy.
The directors will continue to serve until their respective successors are
duly elected and qualified.
NOMINEES FOR DIRECTORS
CLASS B DIRECTORS; TERM EXPIRES IN 2000
Mr. Jay I. Anderson, age 40, has been Chief Financial Officer of The Feil
Organization, Inc., an investment holding company, since May 1980. Prior to
such time Mr. Anderson was a certified public accountant for Deloitte Haskins &
Sell. From December 1993 to July 1996 Mr. Anderson was a director of Achiever
Tire Recycling Corp., the general partner of Achiever Tire Limited Partnership.
In July 1996, Achiever Tire Limited Partnership commenced an assignment for the
benefit of its creditors.
Mr. Crandall S. Connors, age 49, has been a general partner in the
investment banking firm of Kerr, Connors & Co. since its formation in 1990.
Previously, he was a partner with the NYSE member firm of Shields & Co. since
1987, where he was president of its real estate subsidiary. From 1976 to 1986,
he was co-founder and CEO of Connors, Sternlieb & Co., specializing in real
estate and oil and gas syndications. Prior to such time, he had served since
1970 in various management positions with Citicorp N.A. Mr. Connors has served
as a director of the Company since 1994.
Mr. Michael C. Dodge, age 54, is an attorney in Dallas, Texas where he has
practiced law for more than fifteen years. In addition to practicing law, Mr.
Dodge is a director of Auto Wax Company, Inc., of Stirling Cooke North American
Holdings, Ltd., and of Stirling Cooke Texas, Inc. Mr. Dodge has served as a
director of the Company since 1983.
Mr. Steven E. MacIntyre, age 44, has been practicing investment banking
since 1981. He is Managing Director of D.H. Troob & Company, a licensed
broker/dealer, where he has been employed for six years. Prior to joining D.H.
Troob & Company, he was a partner with Rector Street Capital Partners, Inc.,
investment bankers, for approximately two years. Mr. MacIntyre has served as a
director of the Company since 1994.
CLASS C DIRECTOR; TERM EXPIRES IN 1998
Mr. Stephen P. Adik, age 54, has been Executive Vice President, Chief
Financial Officer and Treasurer of NIPSCO Industries, Inc. since January 1994.
From February 1991 through December 1993, Mr. Adik served as Senior Vice
President, Chief Financial Officer and Treasurer of NIPSCO Industries, Inc. Mr.
Adik is also Senior Vice President and General Manager, Finance and Accounting,
of Northern Indiana Public Service Company, a subsidiary of NIPSCO Industries,
Inc., in which positions he has served since 1991. Mr. Adik is an advisory
director of Bank One (Merrillville, Indiana), Chicago SouthShore and South Bend
Railroad and TradeWinds Strategic Planning Committee.
-6-
<PAGE>
DIRECTORS CONTINUING IN OFFICE
CLASS A DIRECTORS; TERM EXPIRES IN 1999
Mr. Martin Bernstein, age 63, was elected Chairman of the Board of
Directors of the Company in February 1997. Mr. Bernstein is President, Chief
Executive Officer and a director of Ponderosa Fibres of America, Inc., in which
positions he has served since November 1980. In addition, Mr. Bernstein is a
director of Empire Insurance Company and All City Insurance Company. From
December 1993 to July 1996 Mr. Bernstein was a director of Achiever Tire
Recycling Corp., the general partner of Achiever Tire Limited Partnership. In
July 1996 Achiever Tire Limited Partnership commenced an assignment for the
benefit of its creditors. Mr. Bernstein was appointed to the Board of Directors
in December 1996.
Mr. Thomas L. Earnshaw, age 42, was elected President and Chief Executive
Officer of the Company in March 1990. Mr. Earnshaw worked for Peat, Marwick,
Mitchell & Co., and in the retail business, before joining the Company when it
was founded in 1982. Mr. Earnshaw was elected Vice President - Operations in
1985 and Executive Vice President - Operations in 1987. Mr. Earnshaw has served
as director of the Company since 1990.
Mr. Robert L. Thelen, age 58, is one of the Company's original founders,
joining the Company in 1982. He was elected Vice President - Engineering of the
Company in 1989, and Executive Vice President - Engineering in 1991. He is
responsible for the design and improvement of plant equipment, plant
construction and technical assistance to customers. Mr. Thelen has served as a
director of the Company since 1990.
Mr. W. David Walls, age 53, spent twelve years in the investment banking
business, ten years of which were with Wood, Gundy, Inc. and two years with the
Company's original underwriters, Balis Zorn & Gerard, Inc. In September 1987,
he went into business as a private investor, and in August 1988 became Chairman
of Inside Communications, Inc., a publishing company. Mr. Walls has served as
director of the Company since 1986.
CLASS C DIRECTORS; TERM EXPIRES IN 1998
Mr. Andrew Bodner, age 39, served as President of U.S. Tire Recycling
Corp., the general partner of U.S. Tire Recycling Partners, L.P., from April
1992 until the Company acquired U.S. Tire Recycling Partners, L.P. in December
1996. Mr. Bodner is presently President of Oxford Penacook Investments, Inc., a
general partner of limited partnerships that own and operate hydroelectric
generating facilities, in which capacity he has served for more than five years.
Mr. Bodner has been an executive officer and a director of Arc Global Maritime,
Inc. since May 1993, of Essex Power Services, Inc. since January 1995, and of
Essex Hydro Associates, L.L.C. since June 1995. From December 1993 until July
1996, Mr. Bodner was President of Achiever Tire Recycling Corp., the general
partner of Achiever Tire Limited Partnership. In July 1996, Achiever Tire
Limited Partnership commenced an assignment for the benefit of its creditors.
Mr. Bodner was appointed to the Company's Board of Directors in December 1996.
Mr. Roger W. Cope, age 56, began serving as Vice President of Business
Development for Lamb Technicon Machining Systems in April 1996. He also serves
as a director of Gulf South Systems, Inc. and L.S. Capital Corp. From January
1993 through December 1995, Mr. Cope was President of Lone Star Casino
Corporation of Las Vegas, Nevada. Previously, he was Director - Air Force
Marketing and Strategic Planning for the Litton Applied Technology Division of
San Jose, California from April 1991 until December 1992. Mr. Cope has served
as a director of the Company since 1983.
Mr. John C. Kerr, age 49, has been a general partner in the investment
banking firm of Kerr, Connors & Co. for over five years. He is also a general
partner in Southwest Venture Partners III, a newly-formed venture capital
partnership in San Antonio, Texas. Mr. Kerr serves as Chairman of the Board of
Directors of the Texas Public Finance Authority, the bond issuing authority for
the State of Texas. Mr. Kerr was appointed to the Company's Board of Directors
in December 1995.
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<PAGE>
MEETINGS AND COMMITTEES OF BOARD OF DIRECTORS
The Board of Directors held a total of four meetings in fiscal 1996.
During the time each director served as a director of the Company, he attended
at least 75% of the aggregate of the total meetings held by the Board of
Directors and all of the meetings held by committees of the Board on which he
served. The Board of Directors has a Compensation Committee, the members of
which are Roger W. Cope, Michael C. Dodge and W. David Walls. The Board of
Directors does not have a nominating committee or a standing audit committee or
committees performing similar functions.
COMPENSATION COMMITTEE. The Compensation Committee, which consists of
Messrs. Cope, Dodge and Walls, approves executive compensation arrangements and
oversees administration of the Company's stock-based employee benefit plans of
the Company, including determination of the grantees, grant amounts and purchase
or exercise prices, if any. The Compensation Committee met two times during
fiscal 1996.
PROPOSAL TWO
APPROVAL OF AMENDMENT TO THE COMPANY'S AMENDED
AND RESTATED ARTICLES OF INCORPORATION
ELIMINATION OF CLASSIFIED BOARD OF DIRECTORS
On February 3, 1997, the Company's Board of Directors unanimously approved
and recommended that the shareholders of the Company approve an amendment to
Section 12.1 to the Amended and Restated Articles of Incorporation of the
Company that would eliminate the existing classification of the Board of
Directors into three classes of directors with staggered terms of office, and
would provide that each director is to be elected annually for a term of one
year and until his or her successor is elected and qualified. The text of the
proposed new Section 12.1 is set forth on APPENDIX A. IF THIS PROPOSAL TWO IS
APPROVED, THE NOMINEES FOR DIRECTOR DESCRIBED IN PROPOSAL ONE, TOGETHER WITH THE
REMAINING EIGHT (8) DIRECTORS, WILL SERVE UNTIL THE 1998 ANNUAL MEETING OF
SHAREHOLDERS AND UNTIL THEIR RESPECTIVE SUCCESSORS ARE ELECTED AND QUALIFIED
NOTWITHSTANDING THE TERMS FOR SUCH DIRECTORS DESCRIBED IN PROPOSAL ONE.
The Board of Directors believes that the Company's classified Board of
Directors significantly extends the time required to effect a change in control
of the Board of Directors and discourages acquisition proposals and takeover
bids with respect to the Company. Currently, it takes at least two Annual
Meetings for even a majority of shareholders to make a change in control of the
Board of Directors, because only a minority of the directors will be elected at
each meeting pursuant to the classification of the Company's Board. If the
proposed amendment is approved by the Company's shareholders, a change in
control of the Board of Directors could be made by shareholders holding a
plurality of the votes cast at a single Annual Meeting.
If the proposed amendment is approved by the Company's shareholders, all
directors of the Company will be elected annually and all of the directors may
be removed, with or without cause, by a majority vote of the outstanding shares
of the Common Stock. Cumulative voting is expressly denied by the Company's
Amended and Restated Articles of Incorporation.
ADVANTAGES. Because of the additional time required to change control of
the Board of Directors, the classified board tends to perpetuate present
management. Without the ability to obtain immediate control of the Board of
Directors, a bidder is not able to take action to remove other impediments to
its acquisition of the Company. Because the classified board increases the
amount of time required for a bidder to obtain control of the Company without
the cooperation of the Board of Directors, even if a bidder were to acquire a
majority of the Company's outstanding stock, it has the effect of discouraging
certain tender offers or proxy contests, including some potential tender offers
or acquisition proposals that shareholders may feel would be in their best
interests. The classified board also makes it more difficult and time-consuming
for the shareholders to change the composition of the Board of Directors even if
the shareholders believes such a change would be desirable.
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DISADVANTAGES. The classified board would provide continuity and stability
in the Board of Directors' leadership and policies. The Board of Directors also
believes that an advantage of the classified board is that it assists the Board
of Directors in protecting the interests of the Company's shareholders in the
event of an unsolicited, hostile offer for the Company.
REQUIRED VOTE
In order to be adopted, this proposal must receive the affirmative vote of
holders holding two-thirds of the shares of stock eligible to vote at the Annual
Meeting.
THE COMPANY'S BOARD OF DIRECTORS RECOMMENDS APPROVAL OF THIS PROPOSAL.
PROPOSAL THREE
APPROVAL OF AMENDMENT TO THE COMPANY'S AMENDED
AND RESTATED ARTICLES OF INCORPORATION AND RATIFICATION
OF INDEMNIFICATION AGREEMENTS
INDEMNIFICATION OF OFFICERS AND DIRECTORS
INTRODUCTION
On February 3, 1997, the Board of Directors unanimously approved and
recommended that the shareholders of the Company approve an amendment to Article
8 of the Company's Amended and Restated Articles of Incorporation that would, to
the fullest extent permitted under applicable law as from time to time in
effect, require indemnification (including advancement of expenses) of the
Company's directors and officers and, at the option of the Board of Directors in
any particular case, the Company's employees and agents. The text of the
proposed new Article 8 regarding indemnification is set forth in APPENDIX B.
In addition, on February 3, 1997, the Board of Directors unanimously
authorized the Company to enter into Indemnification Agreements with the
Company's directors in the form set forth in APPENDIX C. The Indemnity
Agreements are being submitted to the shareholders of the Company for
ratification at the Annual Meeting.
INDEMNIFICATION AMENDMENT. The Board of Directors believes that the
proposed amendment to the Amended and Restated Articles of Incorporation
concerning indemnification is desirable in order for the Company to be able to
continue to attract and retain responsible individuals to serve as directors and
officers in light of the present difficult environment in which such persons,
particularly directors, must serve. In recent years, investigations, claims,
actions, suits or proceedings (including derivative actions) ("Proceedings")
seeking to impose liability on directors and officers of publicly held
corporations have become increasingly common. Such Proceedings are typically
extremely expensive whatever their eventual outcome. In view of the costs and
uncertainties of litigation in general, it is often prudent to settle
Proceedings in which claims against a director or officers are made. Settlement
amounts, even if immaterial to the corporation involved and minor compared to
the enormous amounts frequently claimed, often exceed the financial resources of
most individual director or officer defendants. As a result, an individual may
conclude that potential exposure to the costs and risks of Proceeding in which
he or she may become involved may exceed any benefit to him or her from serving
as a director or officer of a public corporation. This is particularly true for
directors who are not employees of the corporation concerned.
If the proposed amendment is approved by the Company's shareholders, the
Amended and Restated Articles of Incorporation will require indemnification
(including advancement of expenses) of the Company's directors and officers and,
at the option of the Board of Directors in any particular case, the Company's
employees and agents, to the fullest extent permitted under applicable law as
from time to time in effect. The
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proposed amendment also authorizes individual directors and officers to
enforce their right to indemnification and advancement of expenses.
The purpose of the Board of Directors in approving and submitting to the
shareholders for approval the proposed amendment concerning indemnification is
to gain shareholder approval of indemnification (including the advancement of
expenses), to the fullest extent permitted by law, of directors and officers
and, at the option of the Company's Board of Directors in any particular case,
employees and agents, who were or are involved in any manner in Proceedings by
reason of the fact that they serve or served as directors or officers, or
employees or agents, as the case may be, all as set forth in the proposed
amendment.
The Company has no knowledge of any present or pre-existing circumstances
or events to which the proposed amendment might apply. In addition, the
proposed amendment is not being proposed in response to any specific
resignation, threat of resignation or refusal to serve by any director or
officer or potential director or officer. The Board of Directors and management
recognize that adoption of the proposed amendment may have the effect of
reducing the likelihood of derivative litigation against directors and officers,
and may also discourage or deter shareholders from bringing a lawsuit against
directors or officers for money damages, even though such an action, if
successful, would benefit the Company and its shareholders (any amount which
might practicably be received from the directors and officers would, in any
event, not likely be significant to the Company's financial condition). The
Board of Directors and management also recognize that, to the extent that the
amendment increases the Company's indemnification obligations as a result of
future changes in applicable law, pertinent court decisions or otherwise, and if
insurance coverage for such indemnification is not available, all or a portion
of any large damage award against a director or officer could be paid by the
Company, thus adversely affecting a shareholder's investment. Finally, it
should be recognized that the directors and officers of the Company could
benefit from the proposed amendment and thus have a personal interest in having
it approved even though it may prevent shareholders from collecting money
damages from directors and officers or increase the Company's indemnification
expenses. However, given the difficult environment and potential for incurring
expenses and liabilities currently facing directors and officers of publicly
held corporations, the Board of Directors believes that the proposed amendment
is in the best interests of the Company and its shareholders since it should
enhance the Company's ability to attract and retain qualified directors and
officers.
INDEMNIFICATION AGREEMENTS. Pursuant to authority granted by its Board of
Directors, the Company has entered into separate Indemnification Agreements (the
"Indemnification Agreements"), in the form attached hereto as APPENDIX C, with
its directors. The Board believes that the Indemnification Agreements are in
the best interests of the Company and its shareholders. In the Board's view, it
is extremely important for the Company to continue to be able to retain and
attract responsible and well-qualified individuals to serve as its directors.
At the same time, the Board feels that the Company's ability in this regard is
threatened by a growing risk of litigation directed against corporate directors
generally, and the difficult market for directors' and officers' liability
insurance, in which the Company has not been able to obtain coverage in a manner
that the Company believes to be cost-effective. The Indemnification Agreements
will, in the Board's opinion, enhance the Company's ability to retain and
attract well-qualified directors. Over the past few years, several directors
have expressed their concern over lack of the directors' and officers' insurance
coverage available to them. At the present time, no director has indicated that
he will resign as a director because of this problem.
Although shareholder approval of the Indemnification Agreements is not
required by law, the Board of Directors considers it appropriate to submit the
Indemnification Agreements to the shareholders of the Company for their
ratification and approval, because the members of the Board are parties to, and
therefore the beneficiaries of the rights contained in, the Indemnification
Agreements. Although the Company cannot determine in advance its position with
respect to any challenge to the enforceability of the Indemnification
Agreements, by a shareholder, the Company may assert shareholder approval of the
Indemnification Agreements as a defense. A shareholder of the Company may be
estopped from making a claim that the Indemnification Agreements or future
indemnification agreements entered into by the Company with directors of the
Company are invalid if the shareholder votes in favor of such ratification and
approval.
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Each Indemnification Agreement provides that it shall terminate at the
conclusion of this year's Annual Meeting if it has not been ratified and
approved at such meeting. In the event approval of this Proposal Three is not
received, the Company's directors and its officers would continue to have
indemnification rights provided by the Texas law and Article 8 of the Company's
Amended and Restated Articles of Incorporation as presently constituted.
In the case of persons who from time to time in the future become members
of the Board of Directors of the Company, the Board anticipates that
indemnification agreements substantially in the form of APPENDIX C hereto will,
if the Indemnification Agreements now in effect are ratified and approved as
proposed, be entered into which such new directors, subject to being authorized
by the Board. The Board currently expects that such future agreements may
differ from the Indemnification Agreements now in effect in that the future
agreements may not provide for the termination thereof upon the failure to
receive shareholder approval, and the Board at present does not expect to seek
shareholder approval or ratification for any such future agreements. A
shareholder of the Company may be estopped from making a claim that such future
similar agreements regarding indemnification entered into by the Company with
directors of the Company are invalid if the shareholder votes in favor of such
ratification and approval.
The Indemnification Agreements became effective upon their execution and
delivery and will, in accordance with their terms, provide indemnification
protection to the Company's directors who are parties thereto, with respect to
actions, suits and proceedings threatened or commenced before, as well as after,
such date. The Board of Directors knows of no threatened, pending or completed
action, suit or proceeding to which the Indemnification Agreements would apply.
The Company has no present plans to provide indemnification protection to
its directors and officers beyond that provided by the Indemnification
Agreements and in the Amended and Restated Articles of Incorporation as now in
effect or as it may be amended pursuant to this proposal.
REQUIRED VOTE
In order to be adopted, this proposal must receive the affirmative vote of
holders holding two-thirds of the shares of stock eligible to vote at the Annual
Meeting.
THE COMPANY'S BOARD OF DIRECTORS RECOMMENDS APPROVAL OF THIS PROPOSAL.
PROPOSAL FOUR
APPROVAL OF AMENDMENT TO THE COMPANY'S
AMENDED AND RESTATED ARTICLES OF INCORPORATION
ELIMINATION OF SUPERMAJORITY VOTING REQUIREMENTS
On February 3, 1997, the Company's Board of Directors unanimously approved
and recommended that the shareholders approve the elimination of Section 13.1 of
Article 13 of the Company's Amended and Restated Articles of Incorporation.
Section 13.1 presently provides that proposals to effect a merger of the
Company, to sell or exchange all or substantially all of the Company's assets or
to amend, alter, change or repeal the Amended and Restated Articles of
Incorporation require the approval of the holders of the two-thirds of each
outstanding class of capital stock entitled to vote.
At present, Section 13.1 of the Company's Amended and Restated Articles of
Incorporation is designed primarily to discourage in advance hostile tender
offers, particularly those by which an outsider may acquire with a view to a
subsequent business combination only that portion of the Company stock necessary
to effect control of the Company or a business combination. In addition, such
provision also has the arguably negative effect of disproportionately
benefitting a minority of the shareholders of the Company by giving such
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shareholders in effect veto power over combinations regardless of whether the
transaction is desired by or beneficial to holders of a majority of the
Company's shares and the management of the Company.
The existing supermajority provision could have the effect of overriding
applicable Texas Business Corporation Act requirements, as now existing or as
hereafter amended, that provide for less onerous approval requirements for the
transactions of the type described in Section 13.1. Elimination of the existing
supermajority voting requirement would permit the Company and its management and
shareholders, as well as parties contemplating a transaction with the Company or
its shareholders, to look to Texas statutory requirements to determine the
shareholder approval requirements for significant transactions.
The Board of Directors believes that through its beneficial ownership of
approximately 26% of the outstanding shares of Common Stock it has a substantial
economic interest parallel to the public shareholders. In recommending adoption
of this amendment, it has attempted to balance the possibility of an unduly
burdensome veto power in the minority against the possible added protection
afforded by such provisions for public shareholders.
REQUIRED VOTE
In order to be adopted, this proposal must receive the affirmative vote of
holders holding two-thirds of the shares of stock eligible to vote at the Annual
Meeting.
THE COMPANY'S BOARD OF DIRECTORS RECOMMENDS APPROVAL OF THIS PROPOSAL.
EXECUTIVE OFFICERS OF THE COMPANY
The executive officers of the Company are as follows:
NAME AGE POSITION WITH COMPANY
---- --- ---------------------
Thomas L. Earnshaw 42 President and Chief Executive Officer,
Treasurer and Director
Robert L. Thelen 58 Senior Vice President - Engineering and
Director
David Greenstein 37 Senior Vice President and President of
New U.S. Tire Recycling Corp.
Mark Hope 43 Senior Vice President of Marketing and
Environmental Affairs
C. Ron McNutt 52 Senior Vice President of Operations
Information concerning the business experience of Messrs. Earnshaw and
Thelen is provided under the caption "Election of Directors" above. Set forth
below is information concerning the business experience of the other executive
officers of the Company.
Mr. David Greenstein joined the Company in December 1996 as Senior Vice
President and as President of the Company's wholly-owned subsidiary, New U.S.
Tire Recycling Corp. Mr. Greenstein most recently had been Executive Vice
President of U.S. Tire Recycling Corp., the general partner of U.S. Tire
Recycling Partners, L.P., which he joined in April 1992.
Mr. Mark Hope became Senior Vice President of Marketing and Environmental
Affairs in October 1996. From January 1990 until October 1996 Mr. Hope served
the Company as Vice President-Northwest Region and from 1985 through December
1989 was the Company's Marketing and Governmental Affairs Manager.
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Mr. C. Ron McNutt joined the Company in April 1996 as Senior Vice President
of Operations. Mr. McNutt most recently had been Regional Vice President and
General Manager at The Newark Group, a paperboard manufacturing and recycling
company which he joined in 1980.
All executive officers are elected annually by the Board of Directors to
serve until the next annual meeting of the Board of Directors and until their
respective successors are chosen and qualified.
EXECUTIVE COMPENSATION
The following information summarizes annual and long-term compensation for
services in all capacities to the Company for the fiscal years ended December
31, 1996, 1995 and 1994, of the Chief Executive Officer. No other executive
officer's total salary and bonus exceeded $100,000 for any of such fiscal years.
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
------------------- ----------
SECURITIES
UNDERLYING ALL OTHER
NAME AND BONUS OPTIONS COMPENSATION
PRINCIPAL POSITION YEAR SALARY($) ($)(2) (#) ($)
------------------ ---- --------- ------ ---------- ------------
Thomas L. Earnshaw 1996 $100,000 $-0- -0- $40,000(3)
President and Chief 1995 $100,000 $-0- 100,000 $ -0-
Executive Officer(1) 1994 $ 81,250 $-0- -0- $10,600(4)
_____________
(1) In January 1996 the Company entered into an employment agreement with
Mr. Earnshaw pursuant to which Mr. Earnshaw receives an annual base salary
of $100,000. In February 1997 Mr. Earnshaw's employment agreement was
amended to provide for a base salary of $150,000 and an incentive stock
option grant for 100,000 shares of Common Stock. See "Executive
Compensation and Other Matters--Employment Agreement."
(2) No executive officer received any perquisites or other personal benefits in
fiscal 1996, 1995 or 1994 that in the aggregate exceeded the lesser of
$50,000 or 10% of such executive officer's salary and bonus for such year.
(3) Consents of a $40,000 loan made by the Company to Mr. Earnshaw to be repaid
from the proceeds under future bonuses from the Company.
(4) Consists of approximately $3,100 attributable to the use of an automobile
and $7,500 of forgiven debt.
OPTION GRANTS IN LAST FISCAL YEAR
There were no options granted during fiscal 1996 to the named executive
officer.
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AGGREGATED OPTION EXERCISES IN
LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
The following table shows information concerning the exercise of stock
options during 1996 by the named executive officer and number and estimated
value of unexercised options held by the named executive officer at fiscal year-
end:
<TABLE>
Number of Securities
Underlying Unexercised Value of Unexercised
Options at Fiscal In-the-Money Options
Shares Year-End (#) at Fiscal Year-end ($)(2)
Acquired on Value --------------------------- ---------------------------
Name Exercise (#) Realized (1) Exercisable Unexercisable Exercisable Unexercisable
---- ------------ ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Thomas L. Earnshaw 15,000 $13,200 105,000 80,000 $94,150 $91,200
</TABLE>
- - -------------------
(1) Based on the average of the closing bid and asked price for the Company's
Common Stock on the exercise date, less the exercise price of the option.
(2) Based on the average of the closing bid and asked price for the Company's
Common Stock of $2.12 on December 31, 1996.
EMPLOYMENT AGREEMENT
On January 17, 1996, the Company entered into an employment agreement with
Thomas L. Earnshaw, the Company's President and Chief Executive Officer. The
employment agreement with Mr. Earnshaw originally had a five-year term expiring
on December 31, 2006. On February 3, 1997 the Company and Mr. Earnshaw amended
the agreement to provide that it would expire in December 31, 1997. Under the
agreement, Mr. Earnshaw is to receive a base annual salary of $150,000, subject
to increases in the discretion of the Board of Directors of the Company, and is
eligible to receive an incentive bonus, based upon the Company reaching certain
specified earnings per share increments, ranging from $37,500 to $150,000 for
the year. The agreement with Mr. Earnshaw also provides for the payment of a
car allowance and the payment or reimbursement of certain expenses of Mr.
Earnshaw.
Under the agreement, Mr. Earnshaw agrees not to participate during the term
of the agreement and for a period of two years thereafter, within certain
specified geographical areas, in the collection, disposal and recycling of scrap
tires and the production and marketing of tire-derived fuel.
COMPENSATION OF DIRECTORS
At the April 1987 meeting of the Company's Board of Directors, the
directors voted to waive directors' fees until such time as the Company became
profitable. In 1992, the shareholders approved the 1992 Stock Plan for Non-
Employee Directors and awards under this plan began in 1993. By the terms of
such plan, at the conclusion of each annual meeting of shareholders, each
elected or incumbent non-employee director receives a nonqualified stock option
to purchase 2,500 shares of Company Common Stock at the then fair market value,
but only if the Company's net income for the fiscal year just ended was improved
over the net income for the prior year. Also, in consideration for service on
the Board, in January each such director receives a grant of Common Stock equal
in value to $2,000, but only if in the prior fiscal year such director attended
at least two regular or special meetings of the Board, and 75% of all such
meetings held that year while he was a director. This plan terminates upon the
sooner to occur of January 31, 2000, or the January 31st next following after
options have been granted on five occasions. By resolution made at the March
23, 1994 meeting of the Board of Directors and effective thereafter, fees for
non-employee directors were resumed with $500 to be paid for each Board or
committee meeting. A one-time directors' fee was paid in August 1995 to each
non-employee director then in office. All directors' fees are contingent upon
the availability of net income and cash reserves as determined by the Board of
Directors.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.
As a company registered under Section 12 of the Securities Exchange Act of
1934, the executive officers, directors and beneficial owners of more than 10%
of the Company's Common Stock have reporting requirements pursuant to Section
16(a) of such Act. Based on information available to it, the Company
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<PAGE>
believes that all statements of beneficial ownership required to be filed
with the Securities and Exchange Commission for the fiscal year ended
December 31, 1996 have been timely filed.
COMPENSATION AND OTHER COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
In 1996, the Compensation Committee consisted of Messrs. Cope, Dodge and
Walls. All of the members of the Compensation Committee are non-employee
directors of the Company and are not former officers of the Company. During
1996, no executive officer of the Company served as a member of the Board of
Directors or on the compensation committee of a corporation with respect to
which any of its executive officers served on the Compensation Committee or on
the Board of Directors of the Company.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In December 1996 the Company acquired U.S. Tire Recycling Partners, L.P.
("Old U.S. Tire"), an entity in which Messrs. Anderson, Bernstein, Bodner and
Greenstein had ownership interests, for an aggregate consideration consisting of
3,242,997 shares of Common Stock, Convertible Subordinated Notes in the
aggregate amount of $1,850,000, and notes payable in the aggregate amount of
$605,035. Upon the closing of this transaction, Messrs. Bernstein and Bodner
were appointed to the Company's Board of Directors. Messrs. Anderson,
Bernstein, Bodner and Greenstein received Common Stock and Convertible
Subordinated Notes in the following amounts: 129,075 shares and $37,373.70
(Anderson); 232,976 shares and $135,616 (Bernstein); 429,158 shares and $308,025
(Bodner); and 429,158 shares and $308,025 (Greenstein).
In connection with the acquisition of Old U.S. Tire, the Company paid
Cameron Associates, Inc., a shareholder of the Company and the Company's public
relations firm, 243,224 shares of Common Stock of the Company for its assistance
as a financial advisor in arranging and facilitating the acquisition of Old U.S.
Tire. Mr. Crandall Connors, a director of the Company and an employee of
Cameron Associates, received $175,000 from Cameron Associates in connection with
his assistance to Cameron Associates in connection with the closing of the Old
U.S. Tire transaction.
In connection with the sale by the Company in December 1996 of 750,000
shares of Common Stock and 750,000 warrants to purchase Common Stock, the
Company paid Mr. Crandall Connors a total of $20,000 for arranging the
transaction.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Decisions on compensation of the Company's executive officers generally are
made by the three-member Compensation Committee of the Board. Each member of
the Compensation Committee is a non-employee director. All decisions by the
Compensation Committee relating to compensation of the Company's executive
officers are reviewed by the Board. Decisions with respect to awards under
certain of the Company's stock-based compensation plans are made solely by the
Compensation Committee, in order for such awards to an exemption provided under
Rule 16b-3 under the Securities Exchange Act of 1934. Set forth below is a
report prepared by Messrs. Cope, Dodge and Walls in their capacity as the
Compensation Committee addressing the Company's compensation policies for fiscal
year 1996 as they affected the Company's executive officers, including the
Company's Chief Executive Officer, Mr. Earnshaw.
The Compensation Committee's executive compensation policies are designed
to provide competitive levels of compensation that integrate pay with the
Company's annual and long-term performance goals, reward above-average corporate
performance, recognize individual initiative and achievements, and assist the
Company in attracting and retaining qualified executives. Targeted levels of
total executive compensation are generally set at levels that the Compensation
Committee believes to be generally consistent with or at levels slightly below
others in the Company's industry, although actual compensation levels in any
particular year may be above or below those of the Company's competitors,
depending upon the Company's performance.
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The Compensation Committee is mindful of grants or awards made to the
Company's executive officers under the Company's stock-based compensation plans.
In order to have sufficient cash flow to meet operational needs, and to reward
executives commensurate with the Company's success, the Company has emphasized
stock options as a form of compensation. The Compensation Committee endorses
the position that stock ownership by management and stock-based performance
compensation arrangements are beneficial in aligning management's and
shareholders' interests in the enhancement of shareholder value. Thus, the
Compensation Committee takes into account these stock-based elements in
designing the compensation packages of the Company's executive officers.
In 1993, Congress amended the Internal Revenue Code to add Section 162(m).
This section provides that publicly held companies may not deduct compensation
paid to certain executive officers in excess of $1 million annually, with
certain exemptions. Because of the relatively modest compensation level of the
Company's executive salary structure, this would not be an issue except for the
fact that stock options theoretically have no upper limit for appreciation. The
Company has examined its compensation policies in view of Section 162(m) and the
regulations adopted by the Internal Revenue Service to implement this section
and has determined that these provisions are not likely to affect the
deductibility of executive compensation for fiscal 1996. It is currently not
expected that any part of the Company's deduction for executive compensation
will be disallowed for fiscal 1997.
BASE SALARIES
Each executive officer's base salary is reviewed annually by the
Compensation Committee and is subject to adjustment on the basis of individual
and corporate performance. Base salaries are generally set at or somewhat below
competitive levels, with the result that the Company relies on annual and longer
term incentive compensation to attract and retain executive officers of
outstanding ability and to motivate them to perform to the full extent of their
abilities. The base salaries of the Company's executive officers are kept
within a fairly narrow range in an effort to keep the amount of total base
salaries under control and otherwise reflect the relatively comparable
contributions made by the Company's executive officers to the Company's overall
performance. During fiscal 1996 there were no increases in salary for executive
officers, and no executives received a bonus in fiscal 1996. Mr. Earnshaw's
Employment Agreement was amended in early 1997 and his annual base compensation
thereunder was increased from $100,000 to $150,000, and the revised Employment
Agreement provides the opportunity for Mr. Earnshaw to earn bonuses ranging from
$37,500 to $150,000 if the Company reaches certain earnings per share increments
set forth therein.
Executive officers of the Company are evaluated on the basis of both their
individual performance, as well as the Company's performance. The Chairman of
the Board is evaluated on his leadership of the Board. The Chief Executive
Officer's compensation is generally based on factors related to his leadership
of the Company, as well as his specific accomplishments and the performance of
the Company. See "--Fiscal 1996 Chief Executive Officer Compensation." Mr.
Thelen is evaluated for his engineering expertise and its application, as he is
responsible for equipment design and improvement, plant construction and
technical assistance to customers. On February 1997 the Chairman of the Board
received a non-qualified stock option to acquire 1,000,000 shares of Common
Stock with exercise prices ranging from a low of $2.50 per share to up to $7.00
per share with respect to 250,000 share increments. Further, in connection with
the amendment of Mr. Earnshaw's Employment Agreement, the Company granted Mr.
Earnshaw an incentive stock option to acquire 100,000 shares of Common Stock at
a price of $2.14 per share, the fair market value at the grant date. It is
contemplated that this performance-based compensation will continue to be an
important component of executive compensation.
FISCAL 1996 CHIEF EXECUTIVE OFFICER COMPENSATION
Mr. Earnshaw's compensation for fiscal 1996 as Chairman and Chief Executive
Officer of the Company principally consisted of a base salary. Mr. Earnshaw's
base salary for fiscal 1996 was approved by the Compensation Committee. On
February, 1997, Mr. Earnshaw entered into an amendment to his employment
agreement that set his base salary for fiscal 1997 at $150,000 (see "Executive
Compensation and Other
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Matters--Employment Agreement"). Consistent with its performance-based focus,
Mr. Earnshaw's amended Employment Agreement provides for cash bonuses upon the
satisfaction of certain earnings per share thresholds. Mr. Earnshaw does not
participate in the Compensation Committee's decision regarding his compensation.
Submitted by the Compensation Committee
of the Board of Directors
ROGER W. COPE
MICHAEL C. DODGE
W. DAVID WALLS
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PERFORMANCE GRAPH
The following graph compares the annual cumulative total shareholder return
on an investment of $100 on January 1, 1992 in the Company's Common Stock, with
that of a like investment in the NASDAQ Market Index and an industry group
comprised of companies with the refuse systems standard industrial
classification (SIC) code number of 4953. The peer companies industry group
includes companies significantly larger than the Company with significantly
different purposes, such as Browning-Ferris and Waste Management, but was the
closest relevant peer group to that of the Company for which statistics could be
reasonably obtained. To the knowledge of the Company, there are no companies in
such industry group whose primary business is scrap tire recycling. Likewise,
NASDAQ was the closest broad market index for which statistics were available to
the Company. The Company was delisted from NASDAQ in 1990 for failing to meet
its capital and surplus requirements. The year-end values of each investment
are calculated by adding dividends, if any (and assuming reinvestment thereof),
to the difference between the Common Stock price at the beginning and end of the
measurement period, and dividing such sum by the price at the beginning of the
measurement period. The calculations used in plotting the graph are also set
out below.
COMPARISON OF 5-YEAR CUMULATIVE TOTAL RETURN
OF THE COMPANY, INDUSTRY GROUP AND NASDAQ MARKET INDEX
[PERFORMANCE GRAPH]
COMPANY OR INDEX 1991 1992 1993 1994 1995 1996
- - ---------------- ------ ------ ------ ------ ------ ------
Waste Recovery, Inc. 100 147.22 38.89 47.22 134.72 344.44
Industry Index 100 94.39 68.66 64.62 77.09 88.45
Broad Market 100 100.98 121.13 127.17 164.96 204.98
ANNUAL REPORT ON FORM 10-K
UPON WRITTEN REQUEST OF ANY BENEFICIAL SHAREHOLDER OR SHAREHOLDER OF
RECORD, A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR
ENDED DECEMBER 31, 1996 (INCLUDING THE EXHIBITS, FINANCIAL STATEMENTS, AND THE
SCHEDULES THERETO) REQUIRED TO BE FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 13A-1 UNDER THE SECURITIES EXCHANGE ACT OF 1934, MAY
BE OBTAINED, WITHOUT CHARGE, FROM JOHN E. COCKRUM, SECRETARY, 309 SOUTH PEARL
EXPRESSWAY, DALLAS, TEXAS 75201.
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OTHER MATTERS
At the date of this Proxy Statement, management was not aware that any
matters not referred to in this Proxy Statement would be presented for action at
the meeting. If any other matters should come before the meeting, the persons
named in the accompanying form of Proxy will have discretionary authority to
vote all proxies in accordance with their best judgment, unless otherwise
restricted by law.
By Order of the Board of Directors
JOHN E. COCKRUM
SECRETARY
Dated: April 24, 1997
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APPENDIX A
PROPOSED NEW SECTION 12.1 TO
THE COMPANY'S AMENDED AND
RESTATED ARTICLES OF INCORPORATION
Section 12.1. NUMBER AND TERMS OF OFFICE OF DIRECTORS. The business and
affairs of the Corporation shall be managed by or under the direction of a Board
of Directors, none of whom need be shareholders of the Corporation. The number
of directors constituting the Board of Directors shall be fixed from time to
time by resolution passed by a majority of the Board of Directors. The
directors shall, except as otherwise provided under applicable provisions of the
Texas Business Corporation Act for filling vacancies, be elected at each annual
meeting of shareholders, and shall hold office until their respective successors
are elected and qualified or until their earlier death, resignation or removal.
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APPENDIX B
PROPOSED NEW ARTICLE 8 TO
THE COMPANY'S AMENDED AND
RESTATED ARTICLES OF INCORPORATION
ARTICLE 8
Section 8.1. INDEMNIFICATION. The Corporation shall indemnify any person
who was, is, or is threatened to be made a named defendant or respondent in a
proceeding (as hereinafter defined) because the person (a) is or was a director
or officer of the Corporation or (b) while a director or officer of the
Corporation, is or was serving at the request of the Corporation as a director,
officer, partner, venturer, proprietor, trustee, employee, agent, or similar
functionary of another foreign or domestic corporation, partnership, joint
venture, sole proprietorship, trust, employee benefit plan or other enterprise,
to the fullest extent that a Corporation may grant indemnification to a person
serving in such capacity under the Texas Business Corporation Act, as the same
exists or may hereafter be amended.
Such right shall be a contract right and shall include the right to be paid
by the Corporation for all expenses incurred in defending any such proceeding in
advance of its final disposition to the maximum extent permitted under the Texas
Business Corporation Act, as the same exists or may hereafter be amended. If a
claim for indemnification or advancement of expenses hereunder is not paid in
full by the Corporation within 90 days after a written claim has been received
by the Corporation, the claimant may at any time thereafter bring suit against
the Corporation to recover the unpaid amount of the claim and, if successful in
whole or in part, the claimant shall be entitled to be paid also the expenses of
prosecuting such claim. It shall be a defense to any such action that such
indemnification or advancement of costs of defense is not permitted under the
Texas Business Corporation Act, but the burden of proving such defense shall be
on the Corporation. Neither the failure of the Corporation (including its Board
of Directors or any committee thereof, special legal counsel, or shareholders)
to have made its determination prior to the commencement of such action that
indemnification of, or advancement of costs of defense to, the claimant is
permissible in the circumstances nor an actual determination by the Corporation
(including the Board of Directors or any committee thereof, special legal
counsel, or shareholders) that such indemnification or advancement is not
permissible shall be a defense to the action or create presumption that such
indemnification or advancement is not permissible.
The Corporation additionally may indemnify any person covered by the grant
of mandatory indemnification contained above to such further extent as is
permitted by law and may indemnify any other person to the fullest extent
permitted by law.
As used herein, the term "proceeding" means any threatened, pending, or
completed action, suit, or proceeding, whether civil, criminal, administrative,
arbitrative, or investigative, any appeal in such an action, or proceeding, and
any inquiry or investigation that could lead to such an action, suit, or
proceeding.
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APPENDIX C
FORM OF INDEMNIFICATION AGREEMENT
AGREEMENT OF INDEMNIFICATION OF DIRECTORS
AGREEMENT OF INDEMNIFICATION OF DIRECTORS, made and executed this 3rd day
of February, 1997, by and between WASTE RECOVERY, INC., a Texas corporation (the
"Company"), and ___________________ , an individual resident of the State of
_________________ (the "Indemnitee");
P R E A M B L E
The Company is aware that, in order to induce highly competent persons to
serve the Company as directors or in other capacities, the Company must provide
such persons with adequate protection through insurance and indemnification
against inordinate risks of claims and actions against them arising out of their
service to and activities on behalf of the Company. The difficulty of obtaining
adequate directors and officers liability insurance in the current market has
increased the difficulty of attracting and retaining such persons. The Board of
Directors of the Company has determined that (i) it is essential to the best
interests of the Company's shareholders that the Company act to assure such
persons that there will be increased certainty of such protection in the future,
and that (ii) it is reasonable, prudent and necessary for the Company
contractually to obligate itself to indemnify such persons to the fullest extent
permitted by applicable law so that they will continue to serve the Company free
from undue concern that they will not be so indemnified. The Indemnitee is
willing to serve, continue to serve, and take on additional service for or on
behalf of the Company on the condition that he be so indemnified;
NOW THEREFORE, for and in consideration of the premises and the mutual
promises and covenants contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Company and the Indemnitee do hereby agree as follows:
1. SERVICE BY THE INDEMNITEE. The Indemnitee will continue to serve as a
director of the Company faithfully and will discharge his duties and
responsibilities to the best of his ability so long as he is duly elected or
qualified in accordance with the provisions of the Amended and Restated Articles
of Incorporation and Bylaws of the Company and the Business Corporation Act of
the State of Texas or until his earlier death, resignation or removal. The
Indemnitee may at any time and for any reason resign from such position (subject
to any other contractual obligation or other obligation imposed by operation of
law), in which event the Company shall have no obligation under this Agreement
to continue the Indemnitee in any such position. Nothing in this Agreement
shall confer upon the Indemnitee the right to continue in the employ of the
Company or as a director of the Company or affect the right of the Company to
terminate the Indemnitee's employment at any time in the sole discretion of the
Company, with or without cause, subject to any contract rights of the Indemnitee
created or existing otherwise than under this Agreement.
2. INDEMNIFICATION. The Company shall indemnify the Indemnitee to the
fullest extent permitted by the Business Corporation Act of the State of Texas
or other applicable law, as in effect from time to time. Without diminishing
the scope of the indemnification provided by this Section 2, the rights of
indemnification of the Indemnitee provided hereunder shall include, but shall
not be limited to, those rights hereinafter set forth, except that no
indemnification shall be paid to the Indemnitee:
On account of any suit in which judgment is rendered against the
Indemnitee for disgorgement of profits made from the purchase or sale by
the Indemnitee of securities of the Company pursuant to the provisions of
Section 16(b) of the Securities Exchange Act of 1934, as amended, or
similar provisions of any federal, state or local statutory law;
On account of conduct of the Indemnitee that is finally adjudged by a
court of competent jurisdiction to have been knowingly fraudulent or to
constitute willful misconduct;
<PAGE>
In any circumstance where such indemnification is expressly prohibited
by applicable law;
With respect to liability for which payment is actually made to the
Indemnitee under a valid and collectible insurance policy or under a valid
and enforceable indemnity clause, bylaw or agreement (other than this
Agreement), except in respect of any liability in excess of payment under
such insurance, clause, bylaw or agreement;
If a final decision by a court having jurisdiction in the matter shall
determine that such indemnification is not lawful (and, in this respect,
both the Company and the Indemnitee have been advised that it is the
position of the Securities and Exchange Commission that indemnification for
liabilities arising under the federal securities laws is against public
policy and is, therefore, unenforceable, and that claims for
indemnification should be submitted to the appropriate court for
adjudication); or
In connection with any proceeding (or part thereof) initiated by the
Indemnitee, or any proceeding by the Indemnitee against the Company or its
directors, officers, employees or other Indemnitees, unless (i) such
indemnification is expressly required to be made by law, (ii) the
proceeding was authorized by the Board of Directors of the Company, (iii)
such indemnification is provided by the Company in its sole discretion,
pursuant to the powers vested in the Company under applicable law, or (iv)
except as provided in Sections 10 and 13 hereof.
3. ACTIONS OR PROCEEDINGS OTHER THAN AN ACTION BY OR IN THE RIGHT OF THE
COMPANY. The Indemnitee shall be entitled to the indemnification rights
provided in this Section if he is or was a party or is threatened to be made a
party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative, arbitrative or investigative in nature,
other than an action by or in the right of the Company, by reason of the fact
that he is or was a director, officer, employee or agent of the Company, or is
or was serving at the request of the Company as a director, officer, partner,
venturer, proprietor, trustee, employee, agent or similar functionary of any
other entity, including, but not limited to another corporation, partnership,
joint venture, sole proprietorship, trust, employee benefit plan or other
entity, or by reason of any act or omission by him in any such capacity.
Pursuant to this Section 3, the Indemnitee shall be indemnified against all
expenses (including court costs and attorneys' fees), costs, judgments,
penalties, fines and amounts paid in settlement that were actually and
reasonably incurred by him in connection with such action, suit or proceeding
(including, but not limited to, the investigation, defense or appeal thereof),
if he acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Company, and, with respect to any criminal
action or proceeding, if he had no reasonable cause to believe his conduct was
unlawful.
4. ACTIONS BY OR IN THE RIGHT OF THE COMPANY. The Indemnitee shall be
entitled to the indemnification rights provided in this Section 4 if he is or
was a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding brought by or in the right of the Company
to procure a judgment in its favor by reason of the fact that he is or was a
director, officer, employee or agent of the Company, or is or was serving at the
request of the Company as a director, officer, partner, venturer, proprietor,
trustee, employee, agent or similar functionary of another entity, including,
but not limited to another corporation, partnership, joint venture, sole
proprietorship, trust, employee benefit plan or other entity, or by reason of
any act or omission by him in any such capacity. Pursuant to this Section 4,
the Indemnitee shall be indemnified against all expenses (including court costs
and attorneys' fees), costs, judgments, penalties, fines and amounts paid in
settlement that were actually and reasonably incurred by him in connection with
such action, suit or proceeding (including, but not limited to, the
investigation, defense or appeal thereof), if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to be the best interests
of the Company; PROVIDED, HOWEVER, that no such indemnification shall be made in
respect of any claim, issue or matter as to which applicable law expressly
prohibits such indemnification by reason of any adjudication of liability of the
Indemnitee to the Company, unless and only to the extent that the court in which
such action or suit was brought shall determine upon application that, despite
the adjudication of
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<PAGE>
liability but in view of all the circumstances of the case, the Indemnitee is
fairly and reasonably entitled to indemnity for such expenses and costs which
such court shall deem proper.
5. INDEMNIFICATION FOR COSTS, CHARGES AND EXPENSES OF SUCCESSFUL PARTY.
Notwithstanding the other provisions of this Agreement, to the extent that the
Indemnitee has served on behalf of the Company as a witness or other participant
in any claim, action or proceeding, or has been successful, on the merits or
otherwise, in defense of any action, suit or proceeding referred to in Sections
3 and 4 hereof, or in defense of any claim, issue or matter therein, including,
but not limited to, the dismissal of any action without prejudice, he shall be
indemnified against all costs, charges and expenses (including court costs and
attorneys' fees) actually and reasonably incurred by him in connection
therewith.
6. PARTIAL INDEMNIFICATION. If the Indemnitee is entitled under any
provision of this Agreement to indemnification by the Company for some or a
portion of the expenses (including court costs and attorneys' fees), costs,
judgments, fines and amounts paid in settlement actually and reasonably incurred
by him in connection with the investigation, defense, appeal or settlement of
such suit, action, investigation or proceeding described in Sections 3 or 4
hereof, but is not entitled to indemnification for the total amount thereof, the
Company shall nevertheless indemnify the Indemnitee for the portion of such
expenses (including court costs and reasonable attorneys' fees), costs,
judgments, penalties, fines and amounts paid in settlement actually and
reasonably incurred by him to which the Indemnitee is entitled. Without
limiting the generality of the foregoing, if the action, suit, investigation or
proceeding is brought against the Indemnitee in his capacity as a director,
officer, employee or shareholder, the presumption shall be that recovery is
sought by reason of the Indemnitee's status as a director of the Company.
7. DETERMINATION OF ENTITLEMENT TO INDEMNIFICATION. Upon written request
by the Indemnitee for indemnification pursuant to Section 3 or 4 hereof, the
entitlement of the Indemnitee to indemnification pursuant to the terms of this
Agreement shall be determined by the following person or persons, who shall be
empowered to make such determination: (a) the Board of Directors of the Company,
by a majority vote of a quorum consisting of Disinterested Directors (as defined
in Section 18); or (b) if such a quorum is not obtainable, by majority vote of a
committee of two or more Disinterested Directors designated to act in the matter
by majority vote of all directors; or (c) by Independent Counsel (as hereinafter
defined) if the Board of Directors, by the majority vote of Disinterested
Directors, so directs in a written opinion to the Board of Directors, a copy of
which shall be delivered to the Indemnitee. Such Independent Counsel shall be
selected by the majority vote of Disinterested Directors and reasonably approved
by the Indemnitee. Such determination of entitlement to indemnification shall
be made not later than 45 days after receipt by the Company of a written request
for indemnification by or on behalf of the Indemnitee. Such request shall
include documentation or information which is necessary for such determination
and which is reasonably available to the Indemnitee. Any costs or expenses
(including court costs and attorneys' fees) incurred by the Indemnitee in
connection with his request for indemnification hereunder shall be borne by the
Company. If the person making such determination shall determine that the
Indemnitee is entitled to indemnification as part (but not all) of the
application for indemnification, such person shall reasonably prorate such
partial indemnification among such claims, issues or matters.
8. PRESUMPTIONS AND EFFECT OF CERTAIN PROCEEDINGS. The Secretary of the
Company shall, promptly upon receipt of the Indemnitee's request for
indemnification, advise in writing the Board of Directors, or such other person
or persons as are empowered to make the determination pursuant to Section 7,
that the Indemnitee has made such request for determination. Upon making such
request for indemnification, the Indemnitee shall be presumed to be entitled to
indemnification hereunder and the Company shall have the burden of proof in
making of any determination contrary to such presumption. If the person or
persons so empowered to make such determination shall have failed to make the
requested indemnification within 45 days after receipt by the Company of such
request, the requisite determination of entitlement to indemnification shall be
deemed to have been made and the Indemnitee shall be absolutely entitled to such
indemnification, absent actual and material fraud in the request for
indemnification. The termination of any action, suit, investigation or
proceeding described in Sections 3 or 4 hereof by judgment,
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<PAGE>
order, settlement or conviction, or upon a plea of NOLO CONTENDERE or its
equivalent, shall not, of itself: (a) create a presumption that the
Indemnitee did not act in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interests of the Company, and,
with respect to any criminal action or proceeding, that the Indemnitee had
reasonable cause to believe that his conduct was unlawful; or (b) otherwise
adversely affect the rights of the Indemnitee to indemnification, except as
may be provided herein.
9. ADVANCEMENT OF EXPENSES AND COSTS. All reasonable expenses and costs
actually incurred by the Indemnitee (including reasonable attorneys' fees,
retainers and advances of disbursements required of the Indemnitee) shall be
paid by the Company in advance of the final disposition of such action, suit or
proceeding, if so requested by the Indemnitee, within 30 days after the receipt
by the Company of a statement or statements from time to time. The Indemnitee's
entitlement to such expenses shall include those incurred in connection with any
proceeding by the Indemnitee seeking an adjudication or award in arbitration
pursuant to this Agreement. Such statement or statements shall reasonably
evidence the expenses and costs incurred by him in connection therewith and
shall include or be accompanied by an undertaking by or on behalf of the
Indemnitee to repay such amount if it is ultimately determined that the
Indemnitee is not entitled to be indemnified against such expense and costs by
the Company pursuant to this Agreement or otherwise.
10. REMEDIES OF THE INDEMNITEE IN CASES OF DETERMINATION NOT TO INDEMNIFY
OR TO ADVANCE EXPENSES. In the event that a determination is made that the
Indemnitee is not entitled to indemnification hereunder or if payment has not
been timely made following a determination of entitlement to indemnification
pursuant to Sections 7 and 8, or if expenses are not advanced pursuant to
Section 9, the Indemnitee shall be entitled to a final adjudication in an
appropriate court of the State of Texas or any other court of competent
jurisdiction of his entitlement to such indemnification or advance.
Alternatively, the Indemnitee may, at his option, seek an award in arbitration
to be conducted by a single arbitrator pursuant to the rules of the American
Arbitration Association, such award to be made within 60 days following the
filing of the demand for arbitration. The Company shall not oppose the
Indemnitee's right to seek any such adjudication or award in arbitration or any
other claim. Such judicial proceeding or arbitration shall be made DE NOVO and
the Indemnitee shall not be prejudiced by reason of a determination (if so made)
that he is not entitled to indemnification. If a determination is made or
deemed to have been made pursuant to the terms of Section 7 or Section 8 hereof
that the Indemnitee is entitled to indemnification, the Company shall be bound
by such determination and shall be precluded from asserting that such
determination has not been made or that the procedure by which such
determination was made is not valid, binding and enforceable. The Company
further agrees to stipulate in any such court or before any such arbitrator that
the Company is bound by all the provisions of this Agreement and is precluded
from making any assertions to the contrary. If the court or arbitrator shall
determine that the Indemnitee is entitled to any indemnification hereunder, the
Company shall pay all reasonable expenses (including reasonable attorneys' fees)
and costs actually incurred by the Indemnitee in connection with such
adjudication or award in arbitration (including, but not limited to, any
appellate proceedings).
11. NOTIFICATION AND DEFENSE OF CLAIM. Promptly after receipt by the
Indemnitee of notice of the commencement of any action, suit or proceeding, the
Indemnitee will, if a claim in respect thereof is to be made against the Company
under this Agreement, notify the Company in writing of the commencement thereof,
but the omission to so notify the Company will not relieve the Company from any
liability that it may have to the Indemnitee except to the extent that the
Company shows by clear and convincing evidence that it has been materially and
adversely prejudiced by such failure to give timely notice. Notwithstanding any
other provision of this Agreement, with respect to any such action, suit or
proceeding as to which the Indemnitee gives notice to the Company of the
commencement thereof:
The Company will be entitled to participate therein at its own
expense; and
Except as otherwise provided in this Section 11, to the extent that it
may wish, the Company, jointly with any other indemnifying party similarly
notified, shall be entitled to assume the defense thereof, with counsel
reasonably satisfactory to the Indemnitee. After notice from the Company
to
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<PAGE>
the Indemnitee of its election to so assume the defense thereof, the
Company shall not be liable to the Indemnitee under this Agreement for any
legal or other expenses subsequently incurred by the Indemnitee in
connection with the defense thereof other than reasonable costs of
investigation or as otherwise provided below. The Indemnitee shall have
the right to employ his own counsel in such action, suit or proceeding, but
the fees and expenses of such counsel incurred after notice from the
Company of its assumption of the defense thereof shall be at the expense of
the Indemnitee unless (i) the employment of counsel by the Indemnitee has
been authorized by the Company, (ii) the Indemnitee shall have reasonably
concluded that there is a conflict of interest between the Company and the
Indemnitee in the conduct of the defense of such action, or (iii) the
Company shall not in fact have employed counsel to assume the defense of
the action, in each of which cases the fees and expenses of counsel shall
be at the expense of the Company. The Company shall not be entitled to
assume the defense of any action, suit or proceeding brought by or on
behalf of the Company or as to which the Indemnitee shall have reasonably
reached the conclusion provided for in clause (ii) above.
The Company shall not be liable to indemnify the Indemnitee under this
Agreement for any amounts paid in settlement of any action or claim
effected without its written consent. The Company shall not settle any
action or claim in any manner that would impose any penalty or limitation
on the Indemnitee without the Indemnitee's written consent. Neither the
Company nor the Indemnitee will unreasonably withhold their consent to any
proposed settlement.
12. OTHER RIGHTS TO INDEMNIFICATION. The indemnification and advancement
of expenses (including court costs and attorneys' fees) and costs provided by
this Agreement shall not be deemed exclusive of any other rights to which the
Indemnitee may now or in the future be entitled under any provision of the
Bylaws of the Company, any provision of the Amended and Restated Articles of
Incorporation of the Company, any vote of shareholders or Disinterested
Directors, any provision of law or otherwise.
13. ATTORNEYS' FEES AND OTHER EXPENSES TO ENFORCE AGREEMENT. In the event
that the Indemnitee is subject to or intervenes in any proceeding in which the
validity or enforceability of this Agreement is at issue or seeks an
adjudication or award in arbitration to enforce his rights under, or to recover
damages for breach of, this Agreement, the Indemnitee, if he prevails in whole
or in part in such action, shall be entitled to recover from the Company and
shall be indemnified by the Company against any actual expenses for attorneys'
fees and disbursements reasonably incurred by him.
14. DURATION OF AGREEMENT. This Agreement shall continue until and
terminate upon the later of (a) 10 years after the Indemnitee has ceased to
occupy any of the positions or have any relationship described in Sections 3 and
4 of this Agreement, and (b) the final termination of all pending or threatened
actions, suits, proceedings or investigations to which the Indemnitee may be
subject by reason of the fact that he is or was a director, officer, employee or
agent of the Company or is or was serving at the request of the Company as a
director, officer, employee, partner, venturer, proprietor, trustee, agent or
similar functionary of any other entity, including, but not limited to, another
corporation, partnership, joint venture, sole proprietorship, trust, employee
benefit plan or other entity, or by reason of any act or omission by him in any
such capacity. The indemnification provided under this Agreement shall continue
as to the Indemnitee even though he may have ceased to be a director or officer
of the Company. This Agreement shall be binding upon the Company and its
successors and assigns and shall inure to the benefit of the Indemnitee and his
spouse, successors, assigns, heirs, devisees, executors, administrators or other
legal representatives.
Notwithstanding anything in this Agreement to the contrary, this Agreement
shall terminate and be of no force or effect in the event that it is not
ratified and approved at the 1997 Annual Meeting of Shareholders of the Company.
15. SEVERABILITY. If any provision or provisions of this Agreement shall
be held invalid, illegal or unenforceable for any reason whatsoever, (a) the
validity, legality and enforceability of the remaining
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<PAGE>
provisions of this Agreement (including, but not limited to, all portions of any
Sections of this Agreement) containing any such provision held to be invalid,
illegal or unenforceable) shall not in any way be affected or impaired thereby,
and (b) to the fullest extent possible, the provisions of this Agreement
(including but not limited to, all portions of any paragraph of this Agreement
containing any such provision held to be invalid, illegal or unenforceable, that
are not themselves invalid, illegal or unenforceable) shall be construed so as
to give effect to the intent manifest by the provision held invalid, illegal or
unenforceable.
16. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall for all purposes be deemed to be an original
but all of which together shall constitute one and the same Agreement. Only one
such counterpart signed by the party against whom enforceability is sought shall
be required to be produced to evidence the existence of this Agreement.
17. CAPTIONS. The captions and headings used in this Agreement are
inserted for convenience only and shall not be deemed to constitute part of this
Agreement or to affect the construction thereof.
18. DEFINITIONS. For purposes of this Agreement:
"Disinterested Director" shall mean a director of the Company who is
not or was not a party to the action, suit, investigation or proceeding in
respect of which indemnification is being sought by the Indemnitee.
"Independent Counsel" shall mean a law firm or a member of a law firm
that neither is presently nor in the past five years has been retained to
represent (i) the Company or the Indemnitee in any matter material to
either such party, or (ii) any other party to the action, suit,
investigation or proceeding giving rise to a claim for indemnification
hereunder. Notwithstanding the foregoing, the term "Independent Counsel"
shall not include any person who, under the applicable standards of
professional conduct then prevailing, would have a conflict of interest in
representing either the Company or the Indemnitee in an action to determine
the Indemnitee's right to indemnification under this Agreement.
19. MODIFICATION AND WAIVER. No supplement, modification or amendment of
this Agreement shall be binding unless executed in writing by both parties
hereto. No waiver of any of the provisions of this Agreement shall be deemed or
shall constitute a waiver of any other provisions hereof (whether or not
similar) nor shall such waiver constitute a continuing waiver.
20. NOTICES. All notices, requests, demands or other communications
hereunder shall be in writing and shall be deemed to have been duly give if (i)
delivered by hand with receipt acknowledged by the party to whom said notice or
other communication shall have been directed or if (ii) mailed by certified or
registered mail, return receipt requested, with postage prepaid, on the date
shown on the return receipt:
If to the Indemnitee to:
If to the Company, to: Waste Recovery, Inc.
309 South Pearl Expressway
Dallas, Texas 75201
or to such other address as may be furnished to the Indemnitee by the Company or
to the Company by the Indemnitee, as the case may be.
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<PAGE>
21. GOVERNING LAW. The parties hereto agree that this Agreement shall be
governed by, and construed and enforced in accordance with, the laws of the
State of Texas, applied without giving effect to any conflicts-of-law
principles.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first above written.
WASTE RECOVERY, INC.
By:
------------------------------
Its:
-----------------------------
INDEMNITEE:
---------------------------------
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<PAGE>
WASTE RECOVERY, INC.
ANNUAL MEETING OF SHAREHOLDERS - MAY 19, 1997
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby (i) acknowledges receipt of the Notice
P of Annual Meeting of Shareholders dated April 18, 1997 of WASTE
RECOVERY, INC. (the "Company") to be held on May 19, 1997 in the
R offices of the Company, and the Proxy Statement in connection
therewith, and (ii) appoints Thomas L. Earnshaw, Don Phillips and
O John E. Cockrum, and each of them (acting together, or if only one
be present, then by that one alone), his attorneys and proxies,
X with full power of substitution to each, to vote all shares of
Common Stock of the Company of the undersigned at said meeting and
Y at any adjournment thereof, as follows:
1. ELECTION OF DIRECTORS
/ / FOR all nominees listed / / WITHHOLD AUTHORITY to vote
below (except as marked for all nominees listed
to the contrary below) below
Jay I. Anderson, Crandall S. Connors, Michael C. Dodge,
Steven E. MacIntyre (Class B Directors);
Stephen P. Adik (Class C Director)
2. The proposal to amend the Company's Amended and Restated Articles of
Incorporation to eliminate the classification of the Board of Directors
into three classes and to provide that each director shall be elected
annually to hold office until the next Annual Meeting of Shareholders and
until his or her successor is elected and qualified.
3. The proposal to amend the Company's Amended and Restated Articles of
Incorporation to provide for indemnification of officers and directors to
the fullest extent permitted under Texas law and to ratify and approve a
resolution of the Board of Directors that authorized the Company to enter
into Indemnification Agreements with the Company's directors.
4. The proposal to amend the Company's Amended and Restated Articles of
Incorporation to eliminate the supermajority voting requirement for the
shareholders of the Company to approve certain transactions.
/ / FOR / / AGAINST / / ABSTAIN
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, STRIKE A
LINE THROUGH THE NOMINEE'S NAME IN THE LIST ABOVE.)
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)
<PAGE>
(CONTINUED FROM OTHER SIDE)
5. In their discretion on any other matter that may properly come before the
meeting or any adjournment thereof.
This proxy when properly executed will be voted as directed above. (IF NO
DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR THE NOMINEES LISTED ON ITEM 1
AND FOR THE PROPOSALS SET FORTH IN ITEMS 2, 4 AND 5.)
IMPORTANT: You are encouraged to attend this meeting in person, but if you
cannot do so, please complete, date and sign this proxy and mail it promptly
in the enclosed return envelope.
DATED ___________________, 1997 ____________________________________
____________________________________
PLEASE SIGN HERE
Please date this proxy and sign your
name exactly as it appears hereon.
Where there is more than one owner,
each should sign. When signing as an
agent, attorney, administrator,
executor, guardian or trustee, please
add your title as such. If executed
by a corporation, the proxy should be
signed by a duly authorized officer
who should indicate his title. Please
date, sign and mail this proxy as soon
as possible. No postage is required if
mailed in the United States.
