<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 22, 1997
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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WASTE RECOVERY, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
TEXAS 3998 75-1833498
(State of other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
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309 SOUTH PEARL EXPRESSWAY DAVID G. GREENSTEIN
DALLAS, TEXAS 75201 309 SOUTH PEARL EXPRESSWAY
(214) 741-3865 DALLAS, TEXAS 75201
(214) 741-3865
(Address, including zip code, and telephone (Name, address, including zip code,
number, including area code, of registrant's and telephone number, including area
principal executive offices) code, of agent for service)
</TABLE>
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COPY TO:
KENT JAMISON
LOCKE PURNELL RAIN HARRELL
(A PROFESSIONAL CORPORATION)
2200 ROSS AVENUE, SUITE 2200
DALLAS, TEXAS 75201-6776
(214) 740-8000
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
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If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 check the following box. /X/
If the registrant elects to deliver its latest annual report to security
holders, or a complete and legible facsimile thereof, pursuant to Item 11(a)(1)
of this form, check the following box. /X/
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If the delivery of the prospectus is expected to be made pursuant to
Rule 434, please check the following box. / /
CALCULATION OF REGISTRATION FEE
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Proposed Maximum Proposed Maximum
Title of Shares To be Amount To Be Offering Price per Aggregate Offering Amount of Registration
Registered Registered Share(1) Price(1) Fee
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<S> <C> <C> <C> <C>
Common Stock, no 8,421,913 $0.64 $5,390,024.32 $1,590.06
par value
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</TABLE>
(1) Estimated solely for the purpose of determining the registration fee
calculated pursuant to Rule 457(c) and based on the average of the bid and
asked prices for the Registrant's Common Stock as of December 18, 1997.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
SUBJECT TO COMPLETION, DATED DECEMBER 22, 1997
PROSPECTUS
[LOGO]
WASTE RECOVERY, INC.
8,421,913 SHARES
COMMON STOCK
Certain shareholders (the "Selling Shareholders") of Waste Recovery, Inc.
("Waste Recovery" or the "Company") are offering, pursuant to this Prospectus,
up to 8,421,913 shares of Common Stock of Waste Recovery, no par value per share
("Common Stock"), which shares, though being offered by the Selling
Shareholders, are being registered by the Company on behalf of the Selling
Shareholders. The Registration Statement, of which this Prospectus is a part,
is being filed to meet the undertakings made by the Company to register the
resale of the Common Stock issued on issuable to the Selling Shareholders in
connection with (i) the Company's acquisitions in December 1996 of U.S. Tire
Recycling Partners, L.P. and of Riverside Caloric Company's 55% interest in
Waste Recovery - Illinois, a general partnership; (ii) the Common Stock and
Warrant Purchase Agreement dated December 26, 1996 by and among the Company and
the Investors listed at Schedule A thereto; (iii) the Dodge Common Stock and
Warrant Purchase Agreement dated December 24, 1996 by and among the Company and
Michael C. Dodge; and (iv) conversion of the Company's 10% Convertible
Subordinated Debentures issued in September, 1994. In addition, the Company is
registering 1 million shares of Common Stock issuable upon exercise of that
certain Stock Option Agreement dated February 12, 1997 by and among the Company
and Martin Bernstein.
The Company has been advised by the Selling Shareholders that they or their
successors may sell all or a portion of the Common Stock offered hereby from
time to time in the over-the-counter market, in privately negotiated
transactions, or otherwise, including sales through or directly to a broker or
brokers. Sales will be at prices and terms then prevailing, if any, or at
prices related to the then current market prices or at negotiated prices. In
connection with any sales, any broker or dealer participating in such sales may
be deemed to be an underwriter within the meaning of the Securities Act of 1933.
See "Plan of Distribution."
A description of the Common Stock is set forth in "Description of Capital
Stock." The Company will receive no part of the proceeds of the sales of Common
Stock offered hereby. All expenses incurred in connection with this offering,
which expenses are not expected to exceed $75,000, are being borne by the
Company.
The Common Stock of Waste Recovery is traded in the over-the-counter market
under the trading symbol WRII. The average of the bid and asked prices for the
Common Stock on December 18, 1997 was $0.64 per share.
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THERE ARE CERTAIN RISKS INVOLVED WITH THE OWNERSHIP OF THE
COMPANY'S COMMON STOCK INCLUDING RISKS RELATED TO ITS BUSINESS
AND MARKET FOR THE COMMON STOCK. FOR INFORMATION REGARDING
CERTAIN RISKS RELATING TO THE COMPANY, SEE "RISK FACTORS"
(PAGES 4 - 7 HEREOF)
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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The date of this Prospectus is _______________ __, 1997.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational reporting requirements of
the Securities Exchange Act of 1934 (the "Exchange Act") and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). These reports, proxy
statements and other information can be inspected and copied at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Room 1024, Washington, D.C. 20549, and the Commission's Regional Offices at
the Chicago Regional Office, Northwest Atrium Center, 500 West Madison
Street, Suite 1400, Chicago, IL 60661-2511, and the New York Regional Office,
Seven World Trade Center, 12th Floor, New York, NY 10048. Copies of such
materials can also be obtained from the Public Reference Section of the
Commission at Judicial Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549,
at prescribed rates. The Commission maintains a web site
(http://www.sec.gov) that contains reports, proxy, and information statements
and other information regarding registrants, such as the Company, that file
electronically with the Commission. Similar information can be inspected and
copied at the Company's offices at 309 South Pearl Expressway, Dallas, Texas
75201.
The Company has filed with the Commission in Washington, D.C., a
Registration Statement on Form S-2 (the "Registration Statement") under the
Securities Act of 1933, as amended (the "Securities Act"), with respect to
the shares of Common Stock offered hereby. This Prospectus does not contain
all of the information set forth in the Registration Statement, certain parts
of which are omitted in accordance with the rules and regulations of the
Commission. For further information with respect to the Company and the
Common Stock offered hereby, reference is made to the Registration Statement,
including the exhibits and financial statements filed therewith or
incorporated therein by reference. Statements contained in this Prospectus as
to the contents of any contract or other document are not necessarily
complete, and in each instance, reference is made to the copy of such
contract or other document filed as an exhibit to the Registration Statement
or incorporated therein by reference, each statement being qualified in its
entirety by such reference. The Registration Statement, including the
exhibits thereto, may be inspected without charge at the Commission's
principal office in Washington, D.C., and copies of any and all parts thereof
may be obtained from such office after payment of the fees prescribed by the
Commission.
ANNUAL AND QUARTERLY REPORTS
This Prospectus is accompanied by a copy of the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1996, and its Quarterly
Report on Form 10-Q for the quarters ended March 31, 1997, June 30, 1997 and
September 30, 1997, each as filed with the Commission.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents heretofore filed by the Company under the
Exchange Act with the Commission (File No. 000-14881) are incorporated herein
by reference:
(1) The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996;
(2) The Company's Quarterly Reports on Form 10-Q for the periods ending
March 31, 1997, June 30, 1997 and September 30, 1997;
(3) The Company's Current Report on Form 8-K dated December 9, 1996, filed
on December 24, 1996, as amended by Current Report on Form 8-K/A filed
February 24, 1997 and Current Report on Form 8-K/A filed February 28,
1997, and as further amended by Current Report on Form 8-K/A filed
August 27, 1997;
(4) The Company's Current Report on Form 8-K dated December 17, 1997; and
(5) All other reports filed by the Company pursuant to Section 13(a) or
15(d) of the Exchange Act since December 31, 1996.
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<PAGE>
Any statement made in a document incorporated by reference herein shall
be deemed to be modified or superseded for purposes of this Prospectus to the
extent that such statement is replaced or modified by a statement contained
in a subsequently dated document incorporated by reference or contained in
this Prospectus.
The Company hereby undertakes to provide without charge to each person
to whom a copy of this Prospectus has been delivered, on the written or oral
request of such person, a copy of any or all of the documents referred to
above which have been or may be incorporated in this Prospectus by reference,
other than exhibits to such documents (unless such exhibits are specifically
incorporated by reference into such documents). Written or oral requests for
such copies should be directed to Waste Recovery, Inc., 309 South Pearl
Expressway, Dallas, Texas 75201. The Company's telephone number is (214)
741-3865.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This Prospectus and the Company's Annual Report on Form 10-K for the
year ended December 31, 1996, its Quarterly Reports on Form 10-Q for the
quarters ended March 31, 1997, June 30, 1997 and September 30, 1997 and its
Current Report on Form 8-K dated December 9, 1996, as amended, all of which
are incorporated by reference herein include certain statements that may be
deemed to be "forward-looking statements" within the meaning of Section 27A
of the Securities Act and Section 21E of the Exchange Act. All statements,
other than statements of historical facts, included in this Prospectus that
address activities, events or developments that the Company expects, believes
or anticipates will or may occur in the future, including, but not limited
to, such matters as future product development, business development,
marketing arrangements, future revenue from contracts, business strategies,
expansion and growth of the Company's operations and other such matters are
forward-looking statements. These statements are based on certain
assumptions and analyses made by the Company in light of its experience and
perception of historical trends, current conditions, expected future
developments and other factors it believes are appropriate in the
circumstances. Such statements are subject to a number of assumptions, risks
and uncertainties, including the risk factors discussed below, general
economic and business conditions, the business opportunities (or lack
thereof) that may be presented to and pursued by the Company, changes in law
or regulations and other factors, many of which are beyond the control of the
Company. Prospective investors are cautioned that any such statements are
not guarantees of future performance and that actual results or developments
may differ materially from those projected in the forward-looking statements.
THE COMPANY
Waste Recovery is a specialized service and process company operating in
the environmental services industry. The Company is involved in all aspects
of scrap tire disposal and in conversion of scrap tires, through a
proprietary process, into a uniform, high quality, wire-free, tire-derived
fuel (TDF).
The Company believes it is the largest firm in the United States
specializing in disposal and recycling of scrap tires into a high quality
fuel supplement. Presently, the Company has TDF producing facilities
operating in or near Portland, Oregon; Houston, Texas; Atlanta, Georgia;
Philadelphia, Pennsylvania; Chicago, Illinois; St. Louis, Missouri; and
Charlotte, North Carolina.
The Company was organized in 1982 to acquire the assets of two
operations in Portland, Oregon, one of which had been producing TDF since
1976. The Houston facility began producing TDF in 1986, and the Atlanta
operation in 1988. In March 1995 the Company acquired Domino Salvage, Tire
Division, Inc. ("Domino") and after the addition of specific, proprietary
processing equipment, Domino began producing a quality TDF in late 1995. The
Chicago and St. Louis facilities became operational in late 1995 and were
originally owned and operated by Waste Recovery-Illinois (WR-Illinois), a
general partnership of which the Company and Riverside Caloric Company
("RCC"), a wholly-owned subsidiary of NIPSCO Industries, Inc., were the sole
general partners. In December, 1996 the Company, through its subsidiary
Waste Recovery - Illinois, L.L.C., acquired all of RCC's general partnership
interest in WR-Illinois. The Charlotte facility was purchased by the Company
in December of 1996 and conducts business as U.S. Tire Recycling Partners,
L.P. The Charlotte facility operates a scrap tire monofill and primarily
markets processed material for civil engineering purposes.
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<PAGE>
Scrap tires collected by the Company for a fee are processed into
various forms of tire-derived material, the bulk of which is sold as TDF. In
general, the TDF production process consists of conveying whole tires to a
primary shredder which cuts them into thin strips. These strips are
processed into a chip form and then passed through a magnetic separator to
remove most of the bead wire and steel belting. The resulting product is a
chip of rubber compound nominally less than two inches in any dimension and
98% free of bead wire. Most of the processing equipment by which scrap tires
are converted into TDF has been designed or extensively modified by the
Company's own technical personnel. The Company continually endeavors to
improve its process economics and product quality. During 1996, the Company
installed wire recycling systems at its Houston, Atlanta and Portland
facilities. These systems, designed and constructed by the Company, allow
the facilities to operate waste-free, i.e., there is no waste residue from
the manufacturing process, thus improving profit margins. These systems were
also included in the Chicago and St. Louis facilities when they were
constructed in 1995.
Since 1982, the Company has been refining and improving its production
process and has improved tire shredding techniques, equipment durability, and
the process for removal of most of the steel wire in scrap tires. The
Company has developed proprietary metering devices for use by TDF customers
to control the flow of TDF as a fuel supplement to maximize TDF utilization
within each customer's particular requirements and the framework of existing
environmental constraints.
In 1996 the Company was one of the largest producers of TDF in the
United States. The Company's market share of 1996 TDF tonnage sold was
approximately 34%. The Company provides TDF to industrial solid fuel users
that typically buy coal or other solid fuels to produce process steam or
generate electricity. Pulp and paper manufacturers use TDF as a fuel
supplement usually with bark and waste wood and the cement industries use TDF
as a fuel supplement, usually with coal in kiln drying operations.
The Company has three primary sources of revenues. Most of its revenue
currently comes from fees generated by receiving, hauling, handling and
disposing of scrap tires ("tipping fees"). The Company also receives revenue
from the sale of TDF. The Company's business strategy emphasizes increasing
direct retail collection of tires as a percentage of the tires handled by the
Company and producing additional higher value tire derived material.
Although TDF sales represent a small portion of the Company's revenues, they
provide the primary outlet for the Company's processed material that supports
the Company's growth. TDF sales accounted for 10%, 7%, and 9% of total
Company revenues for 1996, 1995 and 1994, respectively. The Company's third
source of revenue is wire sales, which accounted for 2% of total Company
revenue for 1996 and 0% for both 1995 and 1994, whereas tipping fees, hauling
and other services accounted for 88%, 93% and 91% of total Company revenues
for 1996, 1995 and 1994, respectively.
The Company's offices are located at 309 South Pearl Expressway, Dallas,
Texas 75201, and its telephone number is (214) 741-3865.
RISK FACTORS
IN ADDITION TO THE OTHER INFORMATION CONTAINED IN THIS PROSPECTUS,
PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE FACTORS DISCUSSED BELOW
IN EVALUATING THE COMPANY AND ITS BUSINESS BEFORE PURCHASING ANY OF THE
SHARES OF COMMON STOCK OFFERED HEREBY. THIS PROSPECTUS CONTAINS
FORWARD-LOOKING STATEMENTS WHICH INVOLVE RISKS AND UNCERTAINTIES. THE
COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED IN
THESE FORWARD-LOOKING STATEMENTS AS A RESULT OF CERTAIN FACTORS, INCLUDING
THOSE SET FORTH IN THE FOLLOWING RISK FACTORS AND ELSEWHERE IN THIS
PROSPECTUS AND INFORMATION INCORPORATED BY REFERENCE INTO THIS PROSPECTUS.
SEE "DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS."
NEED TO CONTINUE TO DEVELOP NEW CUSTOMERS FOR TDF. Except for the year
ended December 31, 1996, sales of TDF by the Company have been flat for the
last several years. Effective utilization of the Company's capacity and TDF
revenue growth are dependent upon the development of new TDF customers or
increases in TDF purchases by existing customers. There can be no assurance
that the Company's efforts to find additional TDF purchasers or increase
sales to existing customers will be successful.
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<PAGE>
UNCERTAINTY RESULTING FROM PRICE OF OTHER FUELS. The Company's business
strategy emphasizes increasing sales of TDF. Although the Company is
presently selling TDF for the British Thermal Unit (BTU) heat equivalent of
an average of approximately $4.98 per barrel of oil, there can be no
assurance that existing customers would continue to use TDF if the price of
fossil or other forms of fuels declines. As demand for lumber increases, the
resulting increase in available waste wood fuel could adversely impact the
Company's business with pulp and paper mill customers. Coal is used as a
supplemental fuel by some of the Company's customers and any decline in the
price of coal could impede the Company's ability to develop new TDF customers
and require adjustments in TDF prices that could have a material adverse
effect on the Company's results.
HISTORICAL OPERATING LOSSES. The Company was organized in 1982 and has
had a history of operating losses since inception. Although the Company was
marginally profitable for the years ended December 31, 1992, 1994 and 1996,
there can be no assurance that the Company's operations will continue to be
profitable or produce a reasonable return on investment.
GOVERNMENT REGULATIONS. The Company works within a network of
government regulations and programs at both the scrap tire supply side and
the TDF supply side of the business. Due to the recognized fire and
mosquito-borne health hazards associated with stockpiles of scrap tires and
the desire to curtail additional growth of stockpiles, more restrictive
regulation with respect to the disposal of current generation of scrap tires
has been implemented at all levels of jurisdiction with increasing intensity
in recent years. Generally, the Company and its customers must comply with
established mandatory disposal regulations and safety guidelines. The
burning of TDF is subject to regulation by federal, state and local
governmental agencies. TDF customers must comply with certain emissions and
ash content standards, and with the requirements of the U.S. Environmental
Protection Agency and certain portions of the Clean Air Act. It is
anticipated that initial permit applications to burn TDF in new states will
be thoroughly scrutinized by regulatory bodies for emissions standards and
ash content compliance. Future regulations may severely restrict the use of
TDF as waste fuels, the availability of raw material to produce TDF or
necessitate costly modifications to customers' plants, and thereby have a
material adverse effect on the Company's business. Such changes could
eliminate any competitive price advantage which the Company's fuel products
might otherwise enjoy, or require price modifications to restore incentives
for its customers.
SEASONALITY. Historically, the Company's business has been highly
seasonal. Most of the Company's customers have been pulp and paper mill
companies in the Pacific Northwest region, which have more demand for TDF in
the fall and winter when their primary fuel, wood waste, is more moist.
Extended periods of clear, dry weather may adversely affect demand for TDF.
Also, as homebuilding increases in the spring and summer, there is a higher
demand for lumber from sawmills, which increases the amount of waste wood
fuel available. More recently, however, as the Company has expanded with
facilities throughout the country, the Company's TDF sales have experienced
less seasonal fluctuations due to an increase in the percentage of the
Company's total sales that is sold to industrial users that use coal as a
primary fuel source. In 1995, sales of TDF to such industrial users
accounted for approximately 68% of the Company's total TDF sales, and in
fiscal year 1996 such percentage increased to 86%.
RELIANCE ON KEY MANAGEMENT. The Company's business depends upon the
availability of Martin B. Bernstein, Chairman of the Board of Directors,
David G. Greenstein, President and Chief Executive Officer, Thomas L.
Earnshaw, Vice Chairman of the Board of Directors and Robert L. Thelen,
Director and Senior Vice President -Engineering. The loss of any one of
their services would likely have a material adverse effect on the Company.
All four individuals have stock options under the Company's stock plans, and
the Company has entered into employment contracts with Messrs. Greenstein and
Earnshaw. However, there is no assurance that such individuals will continue
to be available in the future. The future success of the Company's business
will depend, in part, upon attracting and retaining additional qualified
personnel. There can be no assurance that the Company will be able to
attract and hire such personnel or retain the services of said people.
MINIMAL PROTECTION AFFORDED BY PATENTS. The Company has rights to nine
issued United States patents and several foreign patents. These patents
afford only minimal protection in the areas in which the Company intends to
concentrate. Future technologies and discoveries made or developed by the
Company may not qualify for patents or, if qualified, may be subject to
challenge or to protracted legal proceedings. There can be no assurance that
patents will afford the Company protection from competitive products or
processes. In addition, others may develop
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<PAGE>
proprietary information independently, or obtain access to know-how and
expertise which may be substantially equivalent to that which the Company has
acquired. There can be no assurance that existing patents or any future
patents obtained by or licensed to the Company will be enforceable, that the
Company's equipment will not infringe patents owned by others, or that
competitors will not develop similar or functionally similar patents.
COMPETITION. The scrap tire disposal industry is highly fragmented.
Participants include the divisions of a few large companies and many small
operators who, for the most part, either stockpile tires or shred and
landfill them. One of the largest collectors and processors of scrap tires
into fuel on the East Coast is Emanuel Tire Company in Baltimore, Maryland.
Archer Daniels Midland Company of Decatur, Illinois, one of the largest scrap
tire processors in Illinois, processes tires it receives into supplemental
fuel for its own use. The Company's primary competition for the acquisition
of scrap tire casings comes from the companies mentioned above, numerous
individual collectors, and Lakin General. Lakin General is a large
Midwestern collector of scrap tires on a national level. Lakin's primary
business is the "culling" out of usable casings from the scrap flow and
selling them into secondary markets as used tires. The Company, at some
locations, is a recipient of scrap from Lakin General. The Company's scrap
tire disposal operations and expansions are and will be subject to
competition from these and other companies, many of whom have substantially
greater financial, marketing, research and development, and personnel
resources than the Company. The Company's TDF production operations compete
in the resource recovery industry, particularly with those companies creating
energy from treatment of various wastes. The industry is highly competitive
and the capital requirements for entry are relatively small. Several of such
companies are larger than the Company, with substantially greater capital
resources and larger research and development staffs and facilities. Such
companies may have a competitive edge over the Company in developing new
technologies. The Company will face different competition depending upon the
type and size of systems used by its competitors and new entrants into the
market. There can be no assurance that the Company will compete successfully
in its tire disposal and resource recovery operations.
LACK OF DIVIDEND HISTORY; NO DIVIDENDS CONTEMPLATED. Since its
inception, the Company has not paid any cash dividends, and does not
anticipate paying any cash dividends on shares of its Common Stock in the
foreseeable future. The Company plans to retain its future earnings, if any,
to finance the growth and development of its operations. See "Dividend
Policy."
USE OF UNPROVEN NEW TECHNOLOGY AND POTENTIAL LACK OF ECONOMIC BENEFIT.
A portion of the Company's strategy is predicated on installing and operating
steel bead wire recycling machinery at its plants. This technology is
relatively new to the tire recycling industry or the Company for recycling
bead wire. In 1996, wire sales accounted for 2% of total Company revenues.
There can be no assurance that the use of wire recycling systems will
continue to provide increased revenues or reduced operating expenses. If the
cost of disposing of steel bead wire should decline, it may not be economical
for the Company to utilize this technology in its operations.
LIMITED MARKET AND POSSIBLE VOLATILITY OF STOCK PRICE. Since February
20, 1990, the Common Stock of the Company has been traded on the
over-the-counter market, and there can be no assurance that a more active
trading market for the Common Stock will develop or continue after this
offering. The offering price of the shares of Common Stock offered hereby is
likely the market price in the over-the-counter market. There may not be any
direct relationship between the offering price and the Company's assets, book
value, shareholders' equity or any other recognized criterion of value. From
time to time after the offering, there may be significant volatility in the
market price of the Common Stock. Operating results of the Company or of
other tire recyclers, changes in general conditions in the economy (national
or regional), the financial markets or the tire recycling industry or other
developments affecting the Company or its competitors could cause the market
price of the Common Stock to fluctuate substantially.
RECENT DEVELOPMENTS
On July 30, 1997 the Company's Board of Directors appointed Thomas L.
Earnshaw, formerly President and Chief Executive Officer of the Company, as
Vice Chairman of the Board of Directors. David Greenstein,
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<PAGE>
formerly President of the Company's U.S. Tire subsidiary, was appointed
President and Chief Executive Officer of the Company.
On August 6, 1997 and August 4, 1997, respectively, David Walls and
Andrew Bodner resigned from the Board of Directors to focus on their outside
business activities. On December 10, 1997 the Company appointed David G.
Greenstein to its Board of Directors. As of December 19, 1997 the Company
had not appointed a successor to fill the remaining vacancy.
As of September 30, 1997, the Company was not in compliance with the
minimum working capital covenant contained in the Company's 10.5% note
payable to the Development Authority of Fulton County, Georgia pertaining to
industrial revenue bonds issued to finance construction of the Company's
Atlanta, Georgia production facility. As of September 30, 1997, the
outstanding balance of the note was $1,520,000, of which $1,480,000 was
classified as long-term debt. The Company has received a waiver of the
covenant from the holder of the bonds which expires on November 30, 1998. If
the Company is not in compliance with the covenant by this date, it will be
required to reclassify the long-term portion of the debt as short-term. No
other debt would be affected by this re-classification.
In connection with the bonds issued to provide funding for the
construction of the WR-Illinois facilities, the indenture trustee determined
in August of 1997 that, although the debt service reserve fund was fully
funded, the supplementary sinking fund had not been adequately funded,
resulting in a default, and the reclassification of the bonds to current
liabilities. The Company has entered into an agreement with the bondholders
which provides for a cure of this default through periodic payments.
As reported on the Company's Current Report on Form 8-K dated December
17, 1997 and incorporated herein by reference, the Company dismissed Price
Waterhouse LLP and engaged Grant Thornton LLP to act as the Company's
independent certified public accountant.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the Common
Stock by the Selling Shareholders.
DIVIDEND POLICY
The Company has not paid any dividends on shares of its Common Stock
since its inception in 1982. The Company does not anticipate paying cash
dividends on the Common Stock in the foreseeable future and intends to
continue its present policy of retaining earnings for reinvestment in the
operations of the Company. The terms of certain indebtedness of the Company
restrict the ability of the Company to pay dividends. In addition, the 7%
Cumulative Preferred Stock (the "Cumulative Preferred Stock") issued in 1990
has had no dividends paid thereon. Accordingly, total dividends in arrears
thereon aggregate $1,045,312 at September 30, 1997, which represents an
arrearage of approximately $5.13 per share of the Cumulative Preferred Stock
outstanding. The Company is obligated to eliminate all arrearages on the
accumulated dividends attributable to the Cumulative Preferred Stock before
it may declare and pay a dividend on the Common Stock. See "Description of
Capital Stock -- 7% Cumulative Preferred Stock" in this Prospectus.
-7-
<PAGE>
SELLING SHAREHOLDERS
The following table sets forth for each of the Selling Shareholders (i)
the number of shares of Common Stock beneficially owned and percentage of
class ownership before the offering; (ii) the number of shares of Common
Stock covered by this Prospectus; and (iii) the number of shares of Common
Stock beneficially owned and percentage of class ownership after the
offering. Certain information set forth below has been provided to the
Company by the Selling Shareholders:
<TABLE>
Shares of Common Stock Shares of Common Stock
Beneficially Owned Beneficially Owned
Before Offering After Offering
------------------------- Common Stock -------------------------
Percentage Covered by Percentage
Selling Shareholders Number of Class(1) this Prospectus Number(2) of Class(1)(2)
- -------------------- ------ ----------- --------------- --------- --------------
<S> <C> <C> <C> <C> <C>
NIPSCO Development Company, Inc. 1,100,000 6.3% 1,100,000 0 *
Michael C. Dodge(3)(4) 761,712 4.4% 300,000 161,712 *
Susan R. Dodge(5) 100,000 * 100,000 0 *
Elizabeth W. Dodge(5) 100,000 * 100,000 0 *
Ann C. Dodge(5) 100,000 * 100,000 0 *
Bette Nagelberg(6) 733,332 4.2% 733,332 0 *
Ronald I. Heller(7) 733,334 4.2% 366,667 0 *
Rachel Heller(8) 50,000 * 50,000 0 *
Ronald I. Heller,
Custodian for Evan Heller(9) 733,334 4.2% 50,000 0 *
Delaware Charter Guaranty & Trust Co.
f/b/o Ronald I. Heller IRA(10) 266,667 1.5% 266,667 0 *
R. Anthony Cioffari(11) 33,334 * 33,334 0 *
Andrew M. Bodner(12)(13) 562,414 3.2% 562,414 0 *
David G. Greenstein(12)(14) 562,414 3.2% 562,414 0 *
Environmental Venture Fund, L.P.(15) 318,436 1.8% 318,436 0 *
Argentum Capital Partners, L.P.(15) 318,436 1.8% 318,436 0 *
Louis Feil(16) 291,646 1.7% 291,646 0 *
Martin B. Bernstein(16)(17)(27) 1,291,646 7.4% 1,291,646 0 *
Jeffrey J. Feil(16) 291,646 1.7% 291,646 0 *
Jay I. Anderson(18)(19) 146,248 * 146,248 0 *
Ross M. Patten(20) 212,291 1.2% 212,291 0 *
Alfred Tyler II(20) 212,291 1.2% 212,291 0 *
Sheri Gersten(21) 53,072 * 53,072 0 *
Michelle Goldstein(21) 53,072 * 53,072 0 *
Cary Caster(21) 53,072 * 53,072 0 *
</TABLE>
-8-
<PAGE>
<TABLE>
Shares of Common Stock Shares of Common Stock
Beneficially Owned Beneficially Owned
Before Offering After Offering
------------------------- Common Stock -------------------------
Percentage Covered by Percentage
Selling Shareholders Number of Class(1) this Prospectus Number(2) of Class(1)(2)
- -------------------- ------ ----------- --------------- --------- --------------
<S> <C> <C> <C> <C> <C>
Roger Miller(21) 53,072 * 53,072 0 *
John E. Drury(20) 212,291 1.2% 212,291 0 *
Don A. Sanders(20) 212,291 1.2% 212,291 0 *
Spencer Davidson, Ltd.(22) 440,242 2.5% 7,242 273,000 1.6%
GTLK Holdings, Inc. 205,460 1.2% 27,159 0 *
Kent E. Lovelace, Jr. 7,242 * 7,242 0 *
Steven E. MacIntyre(23)(24) 2,942,630 16.8% 5,432 2,937,198 16.8%
Kenneth D. Pasternak 710,000 4.1% 14,694 695,306 4.0%
Leslie M. Connors(25) 2,934,069 16.8% 30,000 2,904,069 16.6%
The Hudson Partnership LP 433,000 2.5% 160,000 273,000 1.6%
Cameron Associates, Inc. 60,806 * 60,806 0 *
Eduardo Mestre 183,634 1.0% 40,000 143,634 *
GKN Securities Corp.(26) 25,000 * 25,000 0 *
---------
Total 8,421,913
</TABLE>
- ----------------------
*Less than 1%
(1) In the case of each person or entity listed, the percentage is calculated
by taking the total number of shares of Common Stock beneficially held by
such individual or entity and dividing that number by 17,494,323 (the total
number of shares of the Company's Common Stock which were issued and
outstanding as of September 30, 1997).
(2) Assumes all shares of Common Stock covered by this Prospectus are sold by
each Selling Shareholder in the offering.
(3) Mr. Dodge is a member of the Company's Board of Directors.
(4) Columns 1 and 2 include 2,500 shares of Common Stock subject to options
exercisable within sixty days and warrants to acquire 300,000 shares of
Common Stock held by Mr. Dodge's daughters, as to which he disclaims
beneficial ownership.
(5) Columns 1 and 2 consist of warrants to acquire 100,000 shares of Common
Stock exercisable within sixty days.
(6) Columns 1 and 2 consist of 366,666 shares of Common Stock owned directly
and warrants to acquire an additional 366,666 shares of Common Stock
exercisable within sixty days.
(7) Columns 1 and 2 consist of warrants to acquire 366,667 shares of Common
Stock exercisable within sixty days, 100,000 shares held by Mr. Heller's
children either directly or beneficially, as to which he disclaims
beneficial ownership, and 266,667 shares held in Mr. Heller's Individual
Retirement Account by Delaware Charter Guaranty & Trust Co. for the benefit
of Mr. Heller.
(8) Columns 1 and 2 consist of 50,000 shares held directly.
(9) Columns 1 and 2 consist of 683,334 shares beneficially owned by Ronald I.
Heller, and 50,000 shares held by Ronald I. Heller, as custodian for Evan
Heller, his son, as to which Ronald I. Heller disclaims beneficial
ownership.
(10) Columns 1 and 2 consist of 266,667 shares held in Mr. Heller's Individual
Retirement Account by Delaware Charter Guaranty & Trust Co. for the benefit
of Mr. Heller.
-9-
<PAGE>
(11) Columns 1 and 2 consist of 16,667 shares of Common Stock and warrants to
acquire 16,667 shares of Common Stock exercisable within sixty days.
(12) Columns 1 and 2 include 125,065 shares of Common Stock issuable upon
conversion of the Company's convertible subordinated notes.
(13) Mr. Bodner was formerly a member of the Company's Board of Directors and
was the Company's Chief Financial Officer. On August 4, 1997, Mr. Bodner
resigned from the Board of Directors and resigned from his position as the
Company's Chief Financial Officer. See "Recent Developments" above.
(14) Mr. Greenstein is the Company's President and Chief Executive Officer and
is a member of the Company's Board of Directors.
(15) Columns 1 and 2 consist of 258,315 shares of Common Stock and 60,121 shares
issuable upon conversion of the Company's convertible subordinated notes.
(16) Columns 1 and 2 consist of 232,976 shares of Common Stock, 55,063 shares of
Common Stock issuable upon conversion of the Company's convertible
subordinated notes.
(17) Mr. Bernstein is a member and Chairman of the Company's Board of Directors.
(18) Mr. Anderson is a member of the Company's Board of Directors.
(19) Columns 1 and 2 consist of 131,073 shares of Common Stock and 15,175 shares
of Common Stock issuable upon conversion of the Company's convertible
subordinated notes.
(20) Columns 1 and 2 consist of 172,210 shares of Common Stock and 40,081 shares
of Common Stock issuable upon conversion of the Company's convertible
subordinated notes.
(21) Columns 1 and 2 consist of 43,052 shares of Common Stock and 10,020 shares
of Common Stock issuable upon conversion of the Company's convertible
subordinated notes.
(22) Columns 1 and 2 consist of 433,000 shares of Common Stock held by The
Hudson Partnership LP, of which Spencer Davidson, Ltd. is the General
Partner.
(23) Mr. MacIntyre is a member of the Company's Board of Directors.
(24) Columns 1 and 2 include 248,959 shares directly held, 2,500 shares subject
to options exercisable within sixty days, 36,061 shares of Common Stock
issuable upon conversion of debentures, 180,000 shares held by the
MacIntyre Connors General Partnership, of which Mr. MacIntyre and Mr.
Crandall S. Connors are the sole general partners, warrants to acquire
18,450 shares of Common Stock exercisable within sixty days and 2,456,660
shares held by other members of the Kerr, Connors Group (as described
below) with respect to which he disclaims beneficial ownership. Mr.
MacIntyre is a member of a group (for purposes of reference described
herein as the "Kerr, Connors Group"), together with other individuals and
entities including Mr. Connors and Mr. John C. Kerr, that has filed a
Schedule 13D with the Securities and Exchange Commission. 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.
(25) Columns 1 and 2 include 30,000 shares of Common Stock owned directly, and
2,904,069 shares of Common Stock beneficially owned by her husband,
Crandall S. Connors.
(26) Columns 1 and 2 consist of warrants to acquire shares of Common Stock
exercisable within sixty days.
(27) Columns 1 and 2 include an option to acquire 1,000,000 shares of Common
Stock exercisable within sixy days.
-10-
<PAGE>
PLAN OF DISTRIBUTION
The Common Stock offered hereby may be sold by the Selling Shareholders or
by their pledgees, donees, transferees or other successors-in-interest. Such
sales may be made in the over-the-counter market, in privately negotiated
transactions, or otherwise, at prices and at terms then prevailing, at prices
related to the then current market prices or at negotiated prices. The Common
Stock may be sold by one or more of the following methods: (a) a block trade in
which the broker or dealer so engaged will attempt to sell the Common Stock as
agent, but may position and resell a portion of the block as principal in order
to consummate the transaction; (b) a purchase by a broker or dealer as
principal, and the resale by such broker or dealer for its account pursuant to
this Prospectus, including resale to another broker or dealer; or (c) ordinary
brokerage transactions and transactions in which the broker solicits purchasers.
In effecting sales, brokers or dealers engaged by a Selling Shareholder may
arrange for other brokers or dealers to participate. Any such brokers or
dealers may receive commissions or discounts from a Selling Shareholder in
amounts to be negotiated immediately prior to the sale. Such brokers or dealers
and any other participating brokers or dealers may be deemed to be
"underwriters" within the meaning of the Securities Act. Any gain realized by
such a broker or dealer on the sale of shares which it purchases as a principal
may be deemed to be compensation to the broker or dealer in addition to any
commission paid to the broker by a Selling Shareholder.
The Common Stock covered by this Prospectus may be sold under Rule 144
instead of under this Prospectus. In general, under Rule 144, "restricted
securities" may be sold after a one-year holding period in ordinary market
transactions through a broker or with a market maker subject to volume
limitations as follows: within any three-month period, a number of shares may
be sold which does not exceed the greater of 1% of the number of outstanding
shares of Common Stock or the average of the weekly trading volume of the Common
Stock during the four calendar weeks prior to such sale. Sales under Rule 144
require the filing of a Form 144 with the Securities and Exchange Commission.
However, if the shares have been held for more than one year by a person who is
not an "affiliate", there is no limitation on the manner of sale or the volume
of shares that may be sold and no such filing is required. The Company will not
receive any portion of the proceeds of the Common Stock sold by the Selling
Shareholders. There is no assurance that the Selling Shareholders will sell any
or all of the Common Stock offered hereby.
The Selling Shareholders have been advised by the Company that during the
time each is engaged in distribution of the Common Stock covered by this
Prospectus, each must comply with Rule 10b-5, Rule 102, Rule 104 and Rule 105
under the Exchange Act, and pursuant thereto: (i) each must not engage in any
stabilization activity in connection with the Company's securities; (ii) each
must furnish each broker through which the Common Stock covered by this
Prospectus may be offered the number of copies of this Prospectus and the
accompanying Annual Report and Quarterly Report which are required by each
broker; and (iii) each must not bid for or purchase any securities of the
Company or attempt to induce any person to bid for or purchase any of the
Company's securities or engage in certain short selling activities other than as
permitted under the Exchange Act.
-11-
<PAGE>
DESCRIPTION OF CAPITAL STOCK
As of September 30, 1997, the authorized capital stock of the Company
consisted of (i) 30,000,000 shares of Common Stock, no par value, of which a
total of 17,494,323 shares were outstanding; and (ii) 10,000,000 shares of
Preferred Stock, $1.00 par value of which 250,000 shares have been designated as
7% Cumulative Preferred Stock, $1.00 par value, and of which 203,580 shares were
outstanding.
COMMON STOCK
Each holder of Common Stock is entitled to one vote per share in the
election of Directors and for all other purposes. There are no cumulative
voting or preemptive rights applicable to any shares of Common Stock. All
shares of Common Stock are entitled to participate pro rata in distributions and
in such dividends as may be declared by the Board of Directors out of funds
legally available therefor, subject to the restrictions under certain of the
Company's indebtedness and to any preferential dividend rights of outstanding
shares of Preferred Stock. Subject to the prior rights of creditors, all shares
of Common Stock are entitled in the event of liquidation to participate ratably
in the distribution of all remaining assets of the Company after distribution in
full of preferential amounts, if any, to be distributed to holders of Preferred
Stock.
7% CUMULATIVE PREFERRED STOCK
The holders of the 7% Cumulative Preferred Stock are entitled to a dividend
preference before any dividends are paid to the holders of Common Stock.
Satisfaction of this dividend preference would reduce the amount of funds
available for the payment of dividends on Common Stock. Dividends on this class
of stock are payable at an annual compounded rate of seventy cents ($0.70) per
share, payable quarterly. Dividends on these shares cumulate. The Company has
the right to redeem these shares at its option by paying to the holders ten
dollars ($10.00) per share plus any accrued and unpaid dividends. Holders of
this class of stock are entitled to receive a preference payment in the event of
any liquidation, dissolution or winding-up of the Company before any payment is
made to the holders of Common Stock. As of September 30, 1997, the liquidating
preference of these shares amounted to $15.13 per share, aggregating $3,081,112.
PREFERRED STOCK
The Company's Board of Directors may, without further action by the
Company's shareholders, from time to time direct the issuance of Preferred Stock
in series and, at the time of issuance, determine the rights, preferences and
limitations of each series. Satisfaction of any dividend preferences of
outstanding Preferred Stock would reduce the amount of funds available for the
payment of dividends on Common Stock. Also, holders of Preferred Stock would
normally be entitled to receive a preference payment in the event of any
liquidation, dissolution or winding-up of the Company before any payment is made
to the holders of Common Stock. In addition, under certain circumstances, the
issuance of such Preferred Stock may render more difficult or tend to discourage
a merger, tender offer or proxy contest, the assumption of control by a large
block of the Company's securities, or the removal of incumbent management. The
Board of Directors of the Company, without shareholder approval, may issue
Preferred Stock with voting and conversion rights which could adversely affect
the holders of the Common Stock.
CONVERTIBLE SUBORDINATED NOTES
In connection with the purchase of U.S. Tire Recycling Partners, L.P.
("U.S. Tire"), the Company issued convertible subordinated notes in the
aggregate amount of $1,850,000 payable to the former partners and shareholders
of U.S. Tire. The notes bear interest at an annual rate of 5% for the first
twelve months, 6% for the second twelve months and 7% until maturity. Principal
payments are due in the amounts of $500,000 on March 31, 1999, $450,000 on
September 30, 1999, $450,000 on March 31, 2000 and $450,000 on September 30,
2000. The holders of the notes have the right at their option, at any time
after September 30, 1997, to convert all but not less than all of the principal
amount of the notes then outstanding into Common Stock of the Company at the
price of $2.50 per share, provided that such election to convert shall be agreed
upon unanimously by the holders of the notes then outstanding. The convertible
subordinated note agreements provide for reductions to the principal amount of
the notes contingent
-12-
<PAGE>
upon certain minimum future cash flow of U.S. Tire. These notes are
subordinate to all other funded debt of the Company.
OPTIONS, WARRANTS, AND OTHER RIGHTS TO PURCHASE COMMON STOCK CURRENTLY
OUTSTANDING
At September 30, 1997, there were outstanding 1,479,425 warrants to
purchase shares of Common Stock at prices per share between $0.86 and $2.06 and
options to purchase 617,900 shares of Common Stock at prices per share between
$0.75 and $1.41. The warrants and options contain various terms including anti-
dilution provisions to avoid dilution of the equity interest represented by the
underlying shares of Common Stock upon the occurrence of certain events
including share dividends or splits, mergers, or acquisitions. Certain holders
of the warrants and options have been granted certain rights to have the shares
issuable upon exercise thereof registered by the Company under the Securities
Act.
TRANSFER AGENT
The transfer agent and registrar for the Common Stock of the Company is
Securities Transfer Corporation, Dallas, Texas.
REPORTS TO SHAREHOLDERS
The Company intends to furnish to its shareholders annual reports
containing audited financial statements of the Company and may from time to time
also furnish unaudited interim reports.
LEGAL MATTERS
The validity of the Common Stock offered by this Prospectus will be passed
upon for the Company by Locke Purnell Rain Harrell (A Professional Corporation),
Dallas, Texas.
EXPERTS
The consolidated financial statements of the Company as of December 31,
1996 and December 31, 1995 and for each of the three years in the period ended
December 31, 1996 incorporated in this Prospectus by reference to the Company's
Annual Report on Form 10-K for the year ended December 31, 1996, except as they
relate to U.S. Tire Recycling Partners, L.P. for the year ended December 31,
1996, have been audited by Price Waterhouse LLP, independent accountants, and
insofar as they relate to U.S. Tire Recycling Partners, L.P., by Cohen & Rosen,
P.C., independent accountants, whose reports thereon are incorporated therein.
Such financial statements have been so incorporated in reliance on the reports
of such independent accountants given on the authority of such firms as experts
in auditing and accounting.
The financial statements of Waste Recovery-Illinois, an Illinois general
partnership, as of December 31, 1995 and 1994, and for the years then ended,
incorporated in this Prospectus by reference to the Company's Current Report on
Form 8-K/A dated December 9, 1996 have been so incorporated in reliance on the
report of Price Waterhouse LLP, independent accountants, given on the authority
of said firm as experts in auditing and accounting.
The financial statements of U.S. Tire Recycling Partners, L.P., as of
December 31, 1995 and 1994, and for the years then ended, incorporated by
reference to the Company's Current Report on Form 8-K dated December 9, 1996, as
amended, have been so incorporated in reliance on the report of Cohen & Rosen,
P.C., independent accountants, given on the authority of said firm as experts in
auditing and accounting.
INDEMNIFICATION
In general, under Article 2.02-1 of the Texas Business Corporation Act
("TBCA"), a Texas corporation may indemnify a person who was, is or is
threatened to be made a named defendant or respondent in a proceeding by virtue
of his position in the corporation if he acted in good faith and in a manner he
reasonably believed to be in
-13-
<PAGE>
or not opposed to the best interests of the corporation, and, in the case of
criminal proceedings, had no reasonable cause to believe his conduct was
unlawful. A corporation may not indemnify any person in respect of a
proceeding in which the person is found liable on the basis that personal
benefit was improperly received by him, whether or not the benefit resulted
from an action taken in the person's official capacity, or in which the
person is found liable to the corporation.
At the Company's 1997 Annual Meeting, the Company's shareholders approved
an amendment to Article 8 of the Company's Amended and Restated Articles of
Incorporation that requires 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. Reference is hereby made to the
Articles of Amendment to the Company's Amended and Restated Articles of
Incorporation filed June 13, 1997 with the Texas Secretary of State which set
forth the full text of Article 8, as amended, and which are being filed as an
exhibit to the Company's Registration Statement on Form S-2, of which this
Prospectus is a part.
Also at the Company's 1997 Annual Meeting, the Company's shareholders
ratified a form of indemnification agreement which the Company's Board of
Directors authorized the Company to enter into with each of the Company's
directors. Copies of these indemnification agreements as entered into with each
director (collectively, the "Indemnification Agreements") are being filed
herewith as exhibits to the Company's Registration Statement on Form S-2, of
which this Prospectus is a part.
The above discussion of the Company's Amended and Restated Articles of
Incorporation, the TBCA, and the Indemnification Agreements is not intended to
be exhaustive and is qualified in its entirety by the Amended and Restated
Articles of Incorporation, such statutes and agreements.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Company has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act of
1933 and is, therefore, unenforceable.
-14-
<PAGE>
No person has been authorized to give any information or to make any
representations in connection with this offering other than those contained in
this Prospectus and, if given or made, such other information and
representations must not be relied upon as having been authorized by the
Company. Neither the delivery of this Prospectus nor any sale made hereunder
shall, under any circumstances, create any implication that there has been no
change in the affairs of the Company since the date hereof or that the
information contained herein is correct as of any time subsequent to its date.
This Prospectus does not constitute an offer to sell or a solicitation of an
offer to buy any securities other than the registered securities to which it
relates. This Prospectus does not constitute an offer to sell or a solicitation
of an offer to buy such securities in any circumstances in which such offer or
solicitation is unlawful.
---------------
Table of Contents
Page
----
Available Information. . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Annual and Quarterly Reports . . . . . . . . . . . . . . . . . . . . . . . 2
Documents Incorporated by Reference. . . . . . . . . . . . . . . . . . . . 2
Disclosure Regarding
Forward-Looking Statements . . . . . . . . . . . . . . . . . . . . . . . 3
The Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Recent Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Dividend Policy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Selling Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Plan of Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Description of Capital Stock . . . . . . . . . . . . . . . . . . . . . . . 12
Legal Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Experts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
8,421,913 Shares
WASTE RECOVERY, INC.
Common Stock
---------------
PROSPECTUS
---------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table indicates the expenses to be incurred in connection
with the offering described in this Registration Statement. All expenses are
estimated except the Securities and Exchange Commission registration fee.
Securities and Exchange Commission registration fee . . . . . . . .$ 1,633
Accounting fees . . . . . . . . . . . . . . . . . . . . . . . . .$ 15,000
Legal services and expenses . . . . . . . . . . . . . . . . . . . .$ 40,000
Printing and communication expenses . . . . . . . . . . . . . . . .$ 10,000
Miscellaneous expenses. . . . . . . . . . . . . . . . . . . . . . .$ 8,367
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . .$ 75,000
The Selling Shareholders are bearing no portion of the expenses of the
offering.
ITEM 15. LIMITATION OF LIABILITY AND INDEMNIFICATION OF DIRECTORS AND OFFICERS.
In general, under Article 2.02-1 of the Texas Business Corporation Act
("TBCA"), a Texas corporation may indemnify a person who was, is or is
threatened to be made a named defendant or respondent in a proceeding by virtue
of his position in the corporation 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
corporation, and, in the case of criminal proceedings, had no reasonable cause
to believe his conduct was unlawful. A corporation may not indemnify any person
in respect of a proceeding in which the person is found liable on the basis that
personal benefit was improperly received by him, whether or not the benefit
resulted from an action taken in the person's official capacity, or in which the
person is found liable to the corporation.
At the Company's 1997 Annual Meeting, the Company's shareholders approved
an amendment to Article 8 of the Company's Amended and Restated Articles of
Incorporation that requires 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. Reference is hereby made to the
Articles of Amendment to the Company's Amended and Restated Articles of
Incorporation filed June 13, 1997 with the Texas Secretary of State which set
forth the full text of Article 8, as amended, and which are being filed as an
exhibit to the Company's Registration Statement on Form S-2, of which this
Prospectus is a part.
Also at the Company's 1997 Annual Meeting, the Company's shareholders
ratified a form of indemnification agreement which the Company's Board of
Directors authorized the Company to enter into with each of the Company's
directors. Copies of these indemnification agreements as entered into with each
director (collectively, the "Indemnification Agreements") are being filed
herewith as exhibits to the Company's Registration Statement on Form S-2, of
which this Prospectus is a part.
The above discussion of the Company's Amended and Restated Articles of
Incorporation, the TBCA, and the Indemnification Agreements is not intended to
be exhaustive and is qualified in its entirety by the Amended and Restated
Articles of Incorporation, such statutes and agreements.
II-1
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
Exhibit
Number Exhibit
- ------- -------
3.1 Amended and Restated Articles of Incorporation filed July 5, 1988,
with the Secretary of State of Texas, incorporated herein
by reference to Exhibit 3.4 to the Company's Form 10-K filed March
24, 1989.
3.2 Articles of Amendment to the Articles of Incorporation filed June 8,
1990, with the Secretary of State of Texas, incorporated herein by
reference to Exhibit 3.5 to the Company's Form 10-K filed March 27,
1991.
3.3 Articles of Amendment to the Amended and Restated Articles of
Incorporation filed June 13, 1997, with the Texas Secretary of
State.(1)
3.4 By-Laws, amended and restated as of March 10, 1992, incorporated
herein by reference to Exhibit 3.6 to the Company's Form 10-K filed
March 26, 1992.
4.1 Form of Common Stock Certificate of Registrant, incorporated herein
by reference to the Company's Form S-1, as amended, filed July 15,
1986.
4.2 Form of 7% Cumulative Preferred Stock Certificate of the Registrant.(1)
4.3 Form of Convertible Subordinated Note of the Registrant,
incorporated herein by reference to Exhibit 1.1 of the Company's
Current Report on Form 8-K dated December 9, 1996, filed December
24, 1996.
4.4 Indenture of Trust dated April 1, 1988, between Development
Authority of Fulton County and Citizens and Southern Trust Company
(Georgia), National Association, as Trustee, incorporated herein by
reference to Exhibit 4.2 to the Company's report on Form 8-K filed
June 1, 1988.
4.5 Form of 10% Convertible Subordinated Debenture due March 15, 1996,
incorporated herein by reference to Exhibit 4.6 to the Company's
report on Form 8-K filed October 5, 1994.
5.1 Opinion of Locke Purnell Rain Harrell (A Professional Corporation).(1)
10.6 Agreement dated May 9, 1986, between Registrant and The Goodyear
Tire and Rubber Company, incorporated herein by reference to Exhibit
10.32 to the Company's Amendment No. 1 to Form S-1 filed July 1,
1986.
10.7 Lease Agreement dated January 15, 1988, between Southern Metal
Finishing Company, Inc. and the Registrant, incorporated herein by
reference to Exhibit 10.37 to the Company's Form 10-K filed
March 25, 1988.
10.8 Indemnity Agreement dated January 29, 1988, by the Registrant and
Southern Metal Finishing Company, Inc., incorporated herein by
reference to Exhibit 10.38 to the Company's Form 10-K filed
March 25, 1988.
10.10 Estoppel Deed, dated December 28, 1989, between the Registrant as
Grantor, and Tex A. Perkins, et al., as Grantee, incorporated herein
by reference to Exhibit 10.64 to the Company's Form 10-K filed
March 26, 1990.
10.11 Lease of Real Property, dated January 1, 1990, between the
Registrant, as Lessee, and Tex A. Perkins, et al., as Lessor,
incorporated herein by reference to Exhibit 10.65 to the Company's
Form 10-K filed March 26, 1990.
10.12 Warranty Deed, dated February 7, 1990, between Tex A. Perkins, et
al., as Grantor, and Wayne Easley, as Grantee, incorporated herein
by reference to Exhibit 10.66 to the Company's Form 10-K filed March
26, 1990.
II-2
<PAGE>
10.13 Assignment of Lease, dated February 7, 1990, from Tex A. Perkins, et
al., as Assignor, and Wayne Easley, as Assignee, incorporated herein
by reference to Exhibit 10.68 to the Company's Form 10-K filed March
26, 1990.
10.14 The Registrant's 1989 Stock Plan for Employees, effective March 6,
1989, and approved by the Registrant's shareholders at the 1989
Annual Meeting, incorporated herein by reference to Exhibit 10.73 to
the Company's Form 10-K filed March 26, 1990.
10.15 Amendment No. 1 to the Registrant's 1989 Stock Plan for Employees,
incorporated herein by reference to Exhibit 10.15 to the Company's
Form 10-K filed March 28, 1996.
10.16 Nonqualified Stock Option Agreement dated April 4, 1990, granted by
the Registrant to Allan Shivers, Jr. for 200,000 shares,
incorporated herein by reference to Exhibit 10.77 to the Company's
Form 10-K filed March 27, 1991.
10.17 Form of Nonqualified Stock Option Agreement for grants to employees
made January 7, 1991, incorporated herein by reference to Exhibit
10.89 to the Company's Form 10-K filed March 26, 1992.
10.18 Form of Incentive Stock Option Agreement for grants to employees
made October 1, 1991, incorporated herein by reference to Exhibit
10.90 to the Company's Form 10-K filed March 26, 1992.
10.19 1992 Stock Plan for Non-Employee Directors, incorporated herein by
reference to Exhibit 4.8 of the Company's Form S-8 filed May 8, 1992.
10.20 Form of Nonqualified Stock Option Agreement for grants to
non-employee directors made January 4, 1991, incorporated herein by
reference to Exhibit 10.88 to the Company's Form 10-K filed
March 26, 1992.
10.21 Indemnity and Security Agreement, dated June 1, 1990, between
Registrant and The Goodyear Tire and Rubber Company, incorporated
herein by reference to Exhibit 10.82 to the Company's Form 10-K
filed March 27, 1991.
10.22 Amendment to Lease of Real Property dated April 25, 1991, between
the Registrant, as Lessee, and George Glanz, as Lessor, incorporated
herein by reference to Exhibit 10.86 to the Company's Form 10-K
filed March 26, 1992.
10.23 Agreement (for supply of TDF) between the Registrant and Illinois
Power Company dated October 12, 1993, (paragraph 4 of Exhibit 10.007
is subject to a request for confidential treatment), incorporated
herein by reference to Exhibit 10.007 to the Company's report on
Amendment No. 1 to Form 8-K/A filed December 14, 1993.
10.24 Leasehold Commercial Deed of Trust, Security Agreement, Fixture
Filing, Financing Statement, and Assignment of Leases and Rents
dated September 20, 1994, executed by the Registrant as Grantor, for
the benefit of NationsBank of Georgia N.A. as Trustee, incorporated
herein by reference to Exhibit 10.021 to the Company's Form 10-K
filed March 30, 1995.
10.25 Stock Purchase Agreement for the purchase by the Registrant of the
outstanding stock of Domino Salvage, Tire Division, Inc., dated
March 21, 1995, incorporated herein by reference to Exhibit 10.024
to the Company's Form 10-K filed March 30, 1995.
10.26 Loan Agreements dated April 1, 1988, between Development Authority
of Fulton County and the Registrant, incorporated herein by
reference to Exhibit 28.2 to the Company's report on Form 8-K filed
June 1, 1988.
II-3
<PAGE>
10.27 Promissory Note dated April 1, 1988, from the Registrant to
Development Authority of Fulton County, incorporated herein by
reference to Exhibit 28.3 to the Company's report on Form 8-K filed
June 1, 1988.
10.28 Leasehold Deed to Secure Debt and Security Agreement dated April 1,
1988, between the Registrant and the Trustee, incorporated herein by
reference to Exhibit 28.5 to the Company's report on Form 8-K filed
June 1, 1988.
10.29 First Amendment to Lease Agreement dated April 1, 1988, between
Southern Metal Finishing Company, Inc. and the Registrant,
incorporated herein by reference to Exhibit 28.6 to the Company's
report on Form 8-K filed June 1, 1988.
10.30 Assignment of Contracts dated April 1, 1988, between the Registrant
and Development Authority of Fulton County, incorporated herein by
reference to Exhibit 28.7 to the Company's report on Form 8-K filed
June 1, 1988.
10.31 Promissory Note dated February 29, 1996, executed by the Registrant
as maker payable to Texas Commerce Bank National Association in
principal amount of $1,119,309.01, incorporated herein by reference
to Exhibit 10.31 to the Company's Form 10-K filed April 15, 1997.
10.32 Note Purchase Agreement dated February 29, 1996, between The
Goodyear Tire and Rubber Company and Texas Commerce Bank National
Association, incorporated herein by reference to Exhibit 10.32 to
the Company's Form 10-K filed April 15, 1997.
10.33 Form of Convertible Subordinated Debenture Conversion Agreements
effective July 1, 1996, incorporated herein by reference to Exhibit
10.33 to the Company's Form 10-K filed April 15, 1997.
10.34 Form of Warrant to Purchase Common Stock of Waste Recovery, Inc. as
of July 1, 1996, as Exhibit "A" to the Convertible Subordinated
Debenture Conversion Agreements incorporated herein by reference to
Exhibit 10.47 to the Company's Form 10-K filed April 15, 1997.
10.35 Dodge Common Stock and Warrant Purchase Agreement dated December 24,
1996 between Waste Recovery, Inc. and Michael C. Dodge, incorporated
herein by reference to Exhibit 10.35 to the Company's Form 10-K
filed April 15, 1997.
10.36 Common Stock and Warrant Purchase Agreement dated December 26, 1996
by and among Waste Recovery, Inc. and Bette Nagelberg, Ronald I.
Heller, Rachel Heller, Ronald I. Heller as custodian for Evan
Heller, Delaware Charter Guaranty & Trust Co. FBO, and R. Anthony
Cioffari, incorporated herein by reference to Exhibit 10.36 to the
Company's Form 10-K filed April 15, 1997.
10.37 Agreement and Plan of Reorganization dated as of the 30th day of
September 1996 by and among Waste Recovery, Inc., New U.S. Tire
Recycling Corp., U.S. Tire Recycling Partners, L.P.,
Bodner/Greenstein Capital Holdings, Inc., Tirus, Inc., Tirus
Associates, L.L.C., Environmental Venture Fund, L.P., Argentum
Capital, L.P., and Certain Shareholders, incorporated herein by
reference to Exhibit 1.1 of the Company's Current Report on Form 8-K
dated December 9, 1996, as amended.
10.38 Partnership Purchase Agreement dated as of December 16, 1996,
between Riverside Caloric Company, Waste Recovery, Inc., and Waste
Recovery-Illinois, L.L.C., incorporated herein by reference to
Exhibit 1.2 of the Company's Current Report on Form 8-K dated
December 9, 1996, as amended.
II-4
<PAGE>
10.39 Deed of Trust and Security Agreement between New U.S. Tire Recycling
Corp. (a wholly-owned subsidiary of the Registrant) as Grantor, and
the former partners and shareholders of U.S. Tire Recycling
Partners, L.P. as Beneficiary, incorporated herein by reference to
Exhibit 10.39 to the Company's Form 10-K filed April 15, 1997.
10.40 Letter Agreement between Waste Recovery, Inc. and Cameron &
Associates relating to the retention of Cameron & Associates as
financial advisor in connection with the acquisition of U.S. Tire,
incorporated herein by reference to Exhibit 10.40 to the Company's
Form 10-K filed April 15, 1997.
10.41 Indemnification Agreement between Waste Recovery, Inc. and David G.
Greenstein dated December 10, 1997.(1)
10.42 Indemnification Agreement between Waste Recovery, Inc. and Martin B.
Bernstein dated February 3, 1997.(1)
10.43 Indemnification Agreement between Waste Recovery, Inc. and Thomas L.
Earnshaw dated February 3, 1997.(1)
10.44 Indemnification Agreement between Waste Recovery, Inc. and Andrew M.
Bodner dated February 3, 1997.(1)
10.45 Indemnification Agreement between Waste Recovery, Inc. and Robert L.
Thelen dated February 3, 1997.(1)
10.46 Indemnification Agreement between Waste Recovery, Inc. and Stephen P.
Adik dated May 19, 1997.(1)
10.47 Indemnification Agreement between Waste Recovery, Inc. and Jay I.
Anderson dated May 19, 1997.(1)
10.48 Indemnification Agreement between Waste Recovery, Inc. and Crandall S.
Connors dated February 3, 1997.(1)
10.49 Indemnification Agreement between Waste Recovery, Inc. and Roger W.
Cope dated February 3, 1997.(1)
10.50 Indemnification Agreement between Waste Recovery, Inc. and Michael C.
Dodge dated February 3, 1997.(1)
10.51 Indemnification Agreement between Waste Recovery, Inc. and John C.
Kerr dated December 16, 1997.(1)
10.52 Indemnification Agreement between Waste Recovery, Inc. and Steven E.
MacIntyre dated February 3, 1997.(1)
10.53 Indemnification Agreement between Waste Recovery, Inc. and W. David
Walls dated February 3, 1997.(1)
10.54 Stock Option Agreement dated February 12, 1997 by and between the
Company and Martin Bernstein.(1)
11.1 Statement regarding computation of per share earnings, incorporated
by reference to page F-5 to the Company's Form 10-K filed April 15,
1997.
13.1 The Company's Annual Report on Form 10-K for its fiscal year ended
December 31, 1996, incorporated by reference to the Company's Form
10-K filed April 15, 1997.
13.2 The Company's Quarterly Report on Form 10-Q for its fiscal quarter
ended March 31, 1997, incorporated by reference to the Company's
Form 10-Q filed May 15, 1997.
II-5
<PAGE>
13.3 The Company's Quarterly Report on Form 10-Q for its fiscal quarter
ended June 30, 1997, incorporated by reference to the Company's Form
10-Q filed August 14, 1997.
13.4 The Company's Quarterly Report on Form 10-Q for its fiscal quarter
ended September 30, 1997, incorporated by reference to the Company's
Form 10-Q filed November 14, 1997.
21.1 Subsidiaries of the Company, incorporated herein by reference to
Exhibit 21.1 to the Company's Form 10-K filed April 15, 1997.
23.1 Consent of Price Waterhouse LLP.(1)
23.2 Consent of Cohen & Rosen, P.C.(1)
23.3 Consent of Locke Purnell Rain Harrell (A Professional Corporation)
(included in Exhibit 5.1).
24. Power of Attorney (included on the signature page to Registration
Statement).
27.1 Financial Data Schedule, incorporated herein by reference to
Exhibit 27.1 to the Company's Form 10-K filed April 15, 1997.
- --------------------
(1) Filed herewith
ITEM 17. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act
of 1934 (the "Securities Act") may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions (set
forth in Item 15 above), or otherwise, the Registrant has been advised that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
The undersigned Registrant hereby undertakes:
(a)(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the Registration Statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement; and
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the Registration Statement
or any material change to such information in the Registration
Statement.
Provided, however, that paragraphs (i) and (ii) above do not apply if
the information required to be included in a post-effective amendment
by those paragraphs is contained in periodic reports filed
II-6
<PAGE>
by the Registrant pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference
in this Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination
of the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) The undersigned Registrant hereby undertakes to deliver or cause to be
delivered with the Prospectus, to each person to whom the Prospectus is sent or
given, the latest annual report to security holders that is incorporated by
reference in the Prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 under the Securities Exchange Act of 1934; and, where
interim financial information required to be presented by Article 3 of
Regulation S-X are not set forth in the Prospectus, to deliver, or cause to be
delivered to each person to whom the Prospectus is sent or given, the latest
quarterly report that is specifically incorporated by reference in the
Prospectus to provide such interim financial information.
II-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, Waste
Recovery, Inc. certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-2 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Dallas, State of Texas, on the 17th day of
December, 1997.
WASTE RECOVERY, INC.
By: /s/ David G. Greenstein
-------------------------------------
David G. Greenstein, President and
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN AND WOMEN BY THESE PRESENTS, that each person whose signature
appears below hereby constitutes and appoints David G. Greenstein and Donald R.
Phillips, and each of them, such individual's true and lawful attorneys-in-fact
and agents, with full power of substitution and resubstitution, for such
individual and in his or her name, place and stead, in any and all capacities,
to sign any and all amendments to this Form S-2 under the Securities Act of
1933, as amended, and to file the same, with all exhibits thereto, and all
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises as fully and to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents, or any of them, or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ David G. Greenstein President, Chief Executive Officer, December 17, 1997
- -------------------------------- Director (Principal Executive Officer)
David G. Greenstein
/s/ Martin B. Bernstein Chairman of the Board, Director December 17, 1997
- --------------------------------
Martin B. Bernstein
/s/ Thomas L. Earnshaw Vice Chairman of the Board, Director December 17, 1997
- -------------------------------- (Principal Financial and Accounting Officer)
Thomas L. Earnshaw
/s/ Robert L. Thelen Senior Vice President - Engineering, Director December 17, 1997
- --------------------------------
Robert L. Thelen
/s/ Stephen P. Adik Director December 17, 1997
- --------------------------------
Stephen P. Adik
/s/ Jay I. Anderson Director December 17, 1997
- --------------------------------
Jay I. Anderson
<PAGE>
/s/ Crandall S. Connors Director December 17, 1997
- --------------------------------
Crandall S. Connors
/s/ Roger W. Cope Director December 17, 1997
- --------------------------------
Roger W. Cope
/s/ Michael C. Dodge Director December 17, 1997
- --------------------------------
Michael C. Dodge
/s/ John C. Kerr Director December 17, 1997
- --------------------------------
John C. Kerr
/s/ Steven E. MacIntyre Director December 17, 1997
- --------------------------------
Steven E. MacIntyre
</TABLE>
<PAGE>
ARTICLES OF AMENDMENT
TO THE
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
WASTE RECOVERY, INC.
Pursuant to the provisions of Article 4.04 of the Texas Business Corporation
Act, the undersigned corporation adopts the following Articles of Amendment to
its Amended and Restated Articles of Incorporation:
FIRST: The name of the corporation is WASTE RECOVERY, INC.
SECOND: The following amendments to the Amended and Restated Articles of
Incorporation of the corporation were adopted by the shareholders of the
corporation on May 19, 1997:
BE IT RESOLVED, that Section 12.1 of Article 12 of the Amended and Restated
Articles of Incorporation of the corporation, be amended to read as follows:
"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."
BE IT RESOLVED, that Section 8.1 of Article 8 of the Amended and Restated
Articles of Incorporation of the corporation, be amended to read as follows:
"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
<PAGE>
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 any 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."
BE IT RESOLVED, that Section 13.1 of Article 13 of the Amended and Restated
Articles of Incorporation of the corporation be eliminated and that Section 13.2
of the Amended and Restated Articles of Incorporation of the corporation be
renumbered as Section 13.1.
THIRD: The number of shares of the corporation outstanding at the time of
the adoption of these three amendments was 17,442,621 shares of the
corporation's common stock; and the number of shares entitled to vote thereon
was 17,442,621.
-2-
<PAGE>
FOURTH: The number of shares voted for the amendment to Article 12 of the
corporation's Amended and Restated Articles of Incorporation was 10,239,731 and
the number of shares voted against such amendment was 272,962, and 66,120 shares
abstained from voting on such proposal; the number of shares voted for the
amendment to Article 8 of the corporation's Amended and Restated Articles of
Incorporation was 12,417,741 and the number of shares voted against such
amendment was 356,579, and 53,917 shares abstained from voting on such proposal;
and the number of shares voted for the amendment to Article 13 of the
corporation's Amended and Restated Articles of Incorporation was 10,166,567 and
the number of shares voted against such amendment was 355,032, and 57,210 shares
abstained from voting on such proposal.
IN WITNESS WHEREOF, the undersigned officer of the corporation has executed
the Articles of Amendment on behalf of the corporation this 12th day of June,
1997.
WASTE RECOVERY, INC.
By: /s/ THOMAS L. EARNSHAW
------------------------------------
Printed Name: Thomas L. Earnshaw
Title: President and Chief Executive
Officer
-3-
<PAGE>
Certificate No. P-____________ ____________ Shares
WASTE RECOVERY, INC.
Incorporated Under the Laws of the State of Texas
7% Cumulative Preferred Stock ($1.00 Par Value Per Share)
Nonconvertible, Redeemable, Nonparticipating
This certifies that The Goodyear Tire & Rubber Company is the owner of
__________ shares of fully paid and non-assessable 7% Cumulative Preferred
Stock ($1.00 par value) of Waste Recovery, Inc., transferable only on the
books of the corporation by the holder hereof in person or by attorney on
surrender of this certificate properly endorsed.
This certificate and the shares represented by it are issued and shall be
held subject to all provisions of the Articles of Incorporation and the Bylaws
of the corporation as amended from time to time (copies of which may be
inspected at the offices of the corporation). The holder, by accepting this
certificate, expressly assents to the same.
This certificate and the shares represented by it are issued and shall be
held subject to all provisions of the Certificate of Designations of 7%
Cumulative Preferred Stock of Waste Recovery, Inc. (copies of which may be
inspected at the offices of the corporation). The holder, by accepting this
certificate, expressly assents to the same.
ANY RIGHT OF A SHAREHOLDER TO HAVE A PRE-EMPTIVE RIGHT TO ACQUIRE
UNISSUED OR TREASURY SHARES OF THE CORPORATION IS DENIED BY THE ARTICLES OF
INCORPORATION OF THE CORPORATION.
Witness the seal of the corporation and the signatures of its authorized
officers.
Dated: August 1, 1990 WASTE RECOVERY, INC.
By:
- --------------------------------- ------------------------------
Secretary President
(SEE REVERSE SIDE FOR RESTRICTIONS)
SHARES $1.00 PAR VALUE
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER ANY STATE SECURITIES LAWS.
THESE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED, OR PLEDGED
WITHOUT (1) REGISTRATION UNDER THE SECURITIES ACT OF 1933 AND ANY APPLICABLE
STATE LAW, OR (2) AN OPINION (SATISFACTORY TO THE CORPORATION) OF COUNSEL
(SATISFACTORY TO THE CORPORATION) THAT REGISTRATION IS NOT REQUIRED.
<PAGE>
For value received I/we hereby sell, assign and transfer to __________________,
(name of transferee)
__________ of shares represented by this certificate, and irrevocably appoint
(number)
____________________ (with full power of substitution) to transfer the shares
(name of attorney)
on the books of the corporation.
Date:
---------------------------- --------------------------------
(Please sign exactly as name
appears on certificate)
- --------------------------------- --------------------------------
Witness Taxpayer ID No.
Signature guaranteed by:
--------------------------------
A FULL STATEMENT OF ALL THE DESIGNATIONS, PREFERENCES, LIMITATIONS, AND
RELATIVE RIGHTS OF THE SHARES OF EACH CLASS OF SHARES WHICH THE CORPORATION IS
AUTHORIZED TO ISSUE IS SET FORTH IN THE ARTICLES OF INCORPORATION AND THE
AMENDMENTS THERETO ON FILE IN THE OFFICE OF THE SECRETARY OF STATE AND THE
CORPORATION WILL FURNISH A COPY OF SAID STATEMENT TO THE RECORD HOLDER OF THIS
CERTIFICATE WITHOUT CHARGE ON WRITTEN REQUEST TO THE CORPORATION AT ITS
PRINCIPAL PLACE OF BUSINESS.
<PAGE>
December 22, 1997
Waste Recovery, Inc.
309 South Pearl Expressway
Dallas, Texas 75201
Re: Registration Statement on Form S-2
Gentlemen:
We have acted as counsel for Waste Recovery, Inc., a Texas corporation
(the "Company"), in connection with the preparation of the Company's
Registration Statement on Form S-2 (the "Registration Statement"), filed with
the Securities and Exchange Commission (the "Commission") under the
Securities Act of 1933, as amended (the "Securities Act"), in connection with
the proposed sale of up to 8,421,913 shares (the "Shares") of Common Stock,
no par value per share (the "Common Stock"), of the Company by certain
shareholders of the Company identified therein (the "Selling Shareholders").
The Shares are proposed to be sold by the Selling Shareholders in the manner
set forth in the Prospectus constituting Part I of the Registration Statement
under the caption "Plan of Distribution." The Registration Statement is
being filed to meet the undertakings made by the Company to register the
resale of the Common Stock issued to the Selling Shareholders in connection
with (i) the Company's acquisitions in December 1996 of U.S. Tire Recycling
Partners, L.P. and of Riverside Caloric Company's 55% interest in Waste
Recovery - Illinois, a general partnership; (ii) the Common Stock and Warrant
Purchase Agreement dated December 26, 1996 by and among the Company and Bette
Nagelberg, Ronald I. Heller, Rachel Heller, Ronald I. Heller as custodian for
Evan Heller, Delaware Charter Guaranty & Trust Co. FBO Ronald I. Heller IRA,
and R. Anthony Cioffari (the "Heller Agreement") pursuant to which the
Company also issued warrants to purchase shares of Common Stock (the "Heller
Warrants"); (iii) the Dodge Common Stock and Warrant Purchase Agreement dated
December 24, 1996 by and among the Company and Michael C. Dodge (the "Dodge
Agreement") pursuant to which the Company also issued warrants to purchase
shares of Common Stock (the "Dodge Warrants"); and (iv) conversion of the
Company's 10% Convertible Subordinated Debentures issued in September, 1994.
In addition, the Company is registering one million shares of Common Stock
issuable upon exercise of that certain Stock Option Agreement dated February
12, 1997 by and among the Company and Martin Bernstein (the "Bernstein
Option")(the foregoing transactions being referred to collectively as the
"Subject Transactions" or in the singular as a "Subject Transaction" and the
foregoing documents being referred to collectively herein as the "Subject
Documents" or in the singular as a "Subject Document"). Of the total Shares
the Company proposes to register under the Registration Statement, you have
<PAGE>
Waste Recovery, Inc.
December 22, 1997
Page 2
advised us that approximately 5,595,773 Shares are issued and outstanding
(the "Issued Shares") and the remainder of the Shares, or approximately
2,826,140 Shares, are subject to issuance in accordance with the terms of the
Subject Documents and Subject Transactions (the "Issuable Shares").
In connection with the foregoing, we have examined the originals or
copies, certified or otherwise authenticated to our satisfaction, of such
corporate records of the Company, certificates of public officials and other
instruments and documents as we have deemed necessary to require as a basis
for the opinions hereinafter expressed, including but not limited to (i)
those certain Convertible Subordinated Debenture Conversion Agreements
effective July 1, 1996 by and between the Company and the persons named
therein; (ii) that certain Agreement and Plan of Reorganization dated as of
the 30th day of September 1996 by and among the Company, New U.S. Tire
Recycling Corp., U.S. Tire Recycling Partners, L.P., Bodner/Greenstein
Capital Holdings, Inc., Tirus, Inc., Tirus Associates, L.L.C., Environmental
Venture Fund, L.P., Argentum Capital, L.P., and Certain Shareholders, as
amended; (iii) that certain Partnership Purchase Agreement dated as of
December 16, 1996, between Riverside Caloric Company, the Company, and Waste
Recovery-Illinois, L.L.C.; and (iv) the Subject Documents. As to questions of
fact material to such opinions, we have, where relevant facts were not
independently established, relied upon statements and certificates of
officers of the Company.
On the basis of the foregoing and in reliance thereon, we advise you that
in our opinion:
(i) the Issued Shares that may be sold by the Selling Shareholders
pursuant to the Registration Statement are legally issued, fully paid and
nonassessable; and
(ii) the Issuable Shares that may be sold by the Selling
Shareholders pursuant to the Registration Statement, when issued by the
Company (i) upon exercise of the Heller Warrants; (ii) upon exercise of the
Dodge Warrants; (iii) upon exercise of the Bernstein Option, or otherwise,
but in each case in accordance with (x) the terms of the relevant Subject
Document and (y) the terms of the relevant Subject Transaction, will be
legally issued, fully paid and nonassessable.
<PAGE>
Waste Recovery, Inc.
December 22, 1997
Page 3
We hereby consent to the filing of this opinion with the Commission as
Exhibit 5.1 of the Registration Statement and to the reference to us in the
Prospectus under the caption "Legal Matters." In giving this consent, we do
not thereby admit that we come within the category of persons whose consent
is required under Section 7 of the Securities Act or the rules or regulations
of the Commission thereunder.
Respectfully submitted,
LOCKE PURNELL RAIN HARRELL
(A Professional Corporation)
By: /s/ Kent Jamison
------------------------------------------
<PAGE>
AGREEMENT OF INDEMNIFICATION OF DIRECTORS
AGREEMENT OF INDEMNIFICATION OF DIRECTORS, made and executed as of this
19th day of May, 1997, by and between WASTE RECOVERY, INC., a Texas
corporation (the "Company"), and JAY I. ANDERSON, an individual resident of
the State of New York (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
<PAGE>
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;
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,
-2-
<PAGE>
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 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,
-3-
<PAGE>
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,
-4-
<PAGE>
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, 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
-5-
<PAGE>
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 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
-6-
<PAGE>
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.
-7-
<PAGE>
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 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
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<PAGE>
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: Jay I. Anderson
7 Penn Plaza
370 Seventh Avenue
Suite 618
New York, New York 10001
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.
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.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year first above written.
WASTE RECOVERY, INC.
By: /s/ Thomas L. Earnshaw
----------------------------------
Its: President & CEO
----------------------------------
INDEMNITEE:
/s/ Jay I. Anderson
---------------------------------------
Jay I. Anderson
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<PAGE>
AGREEMENT OF INDEMNIFICATION OF DIRECTORS
AGREEMENT OF INDEMNIFICATION OF DIRECTORS, made and executed as of this
19th day of May, 1997, by and between WASTE RECOVERY, INC., a Texas corporation
(the "Company"), and STEPHEN P. ADIK, an individual resident of the State of
Indiana (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
<PAGE>
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;
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,
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<PAGE>
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 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,
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<PAGE>
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,
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<PAGE>
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, 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
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<PAGE>
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 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
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<PAGE>
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.
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<PAGE>
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 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
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<PAGE>
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: Stephen P. Adik
801 East 86th Avenue
Merrillville, Indiana 46410
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.
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.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first above written.
WASTE RECOVERY, INC.
By: THOMAS L. EARNSHAW
-----------------------------------
Its: President & CEO
-----------------------------------
INDEMNITEE:
/s/ Stephen P. Adik
---------------------------------------
Stephen P. Adik
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<PAGE>
AGREEMENT OF INDEMNIFICATION OF DIRECTORS
AGREEMENT OF INDEMNIFICATION OF DIRECTORS, made and executed as of this
3rd day of February, 1997, by and between WASTE RECOVERY, INC., a Texas
corporation (the "Company"), and ANDREW M. BODNER, an individual resident of
the State of Connecticut (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
<PAGE>
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;
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,
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<PAGE>
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 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,
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<PAGE>
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,
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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, 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
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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 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
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<PAGE>
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.
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<PAGE>
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 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
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<PAGE>
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: Andrew M. Bodner
258 West Mountain Road
Ridgefield, Connecticut 06877
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.
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.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year first above written.
WASTE RECOVERY, INC.
By: /s/ THOMAS L. EARNSHAW
---------------------------------------
Its: President & CEO
--------------------------------------
INDEMNITEE:
/s/ Andrew M. Bodner
-------------------------------------------
Andrew M. Bodner
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<PAGE>
AGREEMENT OF INDEMNIFICATION OF DIRECTORS
AGREEMENT OF INDEMNIFICATION OF DIRECTORS, made and executed as of this 3rd
day of February, 1997, by and between WASTE RECOVERY, INC., a Texas corporation
(the "Company"), and MARTIN B. BERNSTEIN, an individual resident of the State of
New York (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
<PAGE>
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;
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,
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<PAGE>
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 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,
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<PAGE>
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,
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<PAGE>
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, 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
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<PAGE>
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 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
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<PAGE>
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.
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<PAGE>
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 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
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<PAGE>
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: Martin B. Bernstein
7 Penn Plaza
370 Seventh Avenue
Suite 618
New York, New York 10001
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.
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.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first above written.
WASTE RECOVERY, INC.
By: /s/ THOMAS L. EARNSHAW
---------------------------------------
Its: President and CEO
--------------------------------------
INDEMNITEE:
/s/ MARTIN B. BERNSTEIN
------------------------------------------
Martin B. Bernstein
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<PAGE>
AGREEMENT OF INDEMNIFICATION OF DIRECTORS
AGREEMENT OF INDEMNIFICATION OF DIRECTORS, made and executed as of this
3rd day of February, 1997, by and between WASTE RECOVERY, INC., a Texas
corporation (the "Company"), and CRANDALL S. CONNORS, an individual resident
of the State of New York (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
<PAGE>
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;
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
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<PAGE>
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 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.
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<PAGE>
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
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<PAGE>
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,
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
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<PAGE>
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 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.
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<PAGE>
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 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.
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<PAGE>
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: Crandall S. Connors
108 Forest Avenue
Locust Valley, New York 11560
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<PAGE>
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.
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.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year first above written.
WASTE RECOVERY, INC.
By: /s/ Thomas L. Earnshaw
------------------------------------
Its: Vice Chairman
-----------------------------------
INDEMNITEE:
/s/ Crandall S. Connors
----------------------------------------
Crandall S. Connors
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<PAGE>
AGREEMENT OF INDEMNIFICATION OF DIRECTORS
AGREEMENT OF INDEMNIFICATION OF DIRECTORS, made and executed as of this 3rd
day of February, 1997, by and between WASTE RECOVERY, INC., a Texas corporation
(the "Company"), and ROGER W. COPE, an individual resident of the State of
Michigan (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
<PAGE>
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;
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,
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<PAGE>
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 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,
-3-
<PAGE>
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,
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<PAGE>
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, 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
-5-
<PAGE>
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 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
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<PAGE>
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.
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<PAGE>
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 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
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<PAGE>
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: Roger W. Cope
5663 East 9 Mile Road
Warren, Michigan 48091
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.
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.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first above written.
WASTE RECOVERY, INC.
By: THOMAS L. EARNSHAW
-----------------------------------
Its: President & CEO
-----------------------------------
INDEMNITEE:
/s/ ROGER W. COPE
---------------------------------------
Roger W. Cope
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<PAGE>
AGREEMENT OF INDEMNIFICATION OF DIRECTORS
AGREEMENT OF INDEMNIFICATION OF DIRECTORS, made and executed as of this 3rd
day of February, 1997, by and between WASTE RECOVERY, INC., a Texas corporation
(the "Company"), and MICHAEL C. DODGE, an individual resident of the State of
Texas (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
<PAGE>
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;
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,
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<PAGE>
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 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,
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<PAGE>
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,
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<PAGE>
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, 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
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<PAGE>
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 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
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<PAGE>
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.
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<PAGE>
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 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
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<PAGE>
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: Michael C. Dodge
15660 North Dallas Parkway
Suite 400, L.B. 42
Dallas, Texas 75248
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.
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.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first above written.
WASTE RECOVERY, INC.
By: Thomas L. Earnshaw
------------------------------
Its: President & CEO
-----------------------------
INDEMNITEE:
Michael C. Dodge
---------------------------------
Michael C. Dodge
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<PAGE>
AGREEMENT OF INDEMNIFICATION OF DIRECTORS
AGREEMENT OF INDEMNIFICATION OF DIRECTORS, made and executed as of this 3rd
day of February, 1997, by and between WASTE RECOVERY, INC., a Texas corporation
(the "Company"), and THOMAS L. EARNSHAW, an individual resident of the State of
Texas (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
<PAGE>
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;
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,
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<PAGE>
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 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,
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<PAGE>
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,
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<PAGE>
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, 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
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<PAGE>
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 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
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<PAGE>
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.
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<PAGE>
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 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
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<PAGE>
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: Thomas L. Earnshaw
309 South Pearl Expressway
Dallas, Texas 75201
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.
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.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first above written.
WASTE RECOVERY, INC.
By:
-----------------------------------
Its:
-----------------------------------
INDEMNITEE:
/s/ THOMAS L. EARNSHAW
---------------------------------------
Thomas L. Earnshaw
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<PAGE>
AGREEMENT OF INDEMNIFICATION OF DIRECTORS
AGREEMENT OF INDEMNIFICATION OF DIRECTORS, made and executed as of this
10th day of December, 1997, by and between WASTE RECOVERY, INC., a Texas
corporation (the "Company"), and DAVID G. GREENSTEIN, an individual resident
of the State of Texas (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
<PAGE>
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;
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
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<PAGE>
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 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.
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<PAGE>
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
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<PAGE>
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,
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
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<PAGE>
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 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.
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<PAGE>
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 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.
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<PAGE>
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: David G. Greenstein
309 South Pearl Expressway
Dallas, Texas 75201
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<PAGE>
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.
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.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first above written.
WASTE RECOVERY, INC.
By: /s/ THOMAS L. EARNSHAW
------------------------------
Its: Vice Chairman
-----------------------------
INDEMNITEE:
/s/ DAVID G. GREENSTEIN
---------------------------------
David G. Greenstein
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<PAGE>
AGREEMENT OF INDEMNIFICATION OF DIRECTORS
AGREEMENT OF INDEMNIFICATION OF DIRECTORS, made and executed as of this 3rd
day of February, 1997, by and between WASTE RECOVERY, INC., a Texas corporation
(the "Company"), and STEVEN E. MACINTYRE, an individual resident of the State of
New York (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
<PAGE>
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;
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,
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<PAGE>
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 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,
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<PAGE>
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,
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<PAGE>
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, 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
-5-
<PAGE>
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 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
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<PAGE>
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.
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<PAGE>
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 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
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<PAGE>
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: Steven E. MacIntyre
425 Park Avenue
Floor 25
New York, New York 10022
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.
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.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first above written.
WASTE RECOVERY, INC.
By: Thomas L. Earnshaw
---------------------------
Its: President & CEO
--------------------------
INDEMNITEE:
Steven E. MacIntyre
------------------------------
Steven E. MacIntyre
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<PAGE>
AGREEMENT OF INDEMNIFICATION OF DIRECTORS
AGREEMENT OF INDEMNIFICATION OF DIRECTORS, made and executed as of this 3rd
day of February, 1997, by and between WASTE RECOVERY, INC., a Texas corporation
(the "Company"), and ROBERT L. THELEN, an individual resident of the State of
Texas (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
<PAGE>
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;
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,
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<PAGE>
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 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,
-3-
<PAGE>
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,
-4-
<PAGE>
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, 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
-5-
<PAGE>
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 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
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<PAGE>
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.
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<PAGE>
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 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
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<PAGE>
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: Robert L. Thelen
309 South Pearl Expressway
Dallas, Texas 75201
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.
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.
-9-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first above written.
WASTE RECOVERY, INC.
By: /s/ Thomas L. Earnshaw
---------------------------------------
Its: President and Chief Executive Officer
--------------------------------------
INDEMNITEE:
/s/ Robert L. Thelen
------------------------------------------
Robert L. Thelen
-10-
<PAGE>
AGREEMENT OF INDEMNIFICATION OF DIRECTORS
AGREEMENT OF INDEMNIFICATION OF DIRECTORS, made and executed as of this
3rd day of February, 1997, by and between WASTE RECOVERY, INC., a Texas
corporation (the "Company"), and W. DAVID WALLS, an individual resident of
the State of Colorado (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
<PAGE>
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;
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,
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<PAGE>
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 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,
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<PAGE>
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,
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<PAGE>
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, 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
-5-
<PAGE>
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 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
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<PAGE>
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.
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<PAGE>
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 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
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<PAGE>
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: W. David Walls
309 South Pearl Expressway
Dallas, Texas 75201
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.
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.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year first above written.
WASTE RECOVERY, INC.
By: /s/ Thomas L. Earnshaw
------------------------------------
Its: President & CEO
-----------------------------------
INDEMNITEE:
/s/ W. David Walls
----------------------------------------
W. David Walls
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<PAGE>
STOCK OPTION AGREEMENT
WASTE RECOVERY, INC.
Date of Grant: February 12, 1997
Name of Optionee: MARTIN BERNSTEIN
Number of Shares: 1,000,000 Shares of Common Stock
Prices Per Share: $2.03 per Share with respect to 250,000
Shares of Common Stock; $3.50 per Share with
respect to 250,000 Shares of Common Stock;
$4.75 per Share with respect to 250,000
Shares of Common Stock; and $7.00 per Share
with respect to 250,000 Shares of Common
Stock
WASTE RECOVERY, INC., a Texas corporation (the "Corporation"), hereby
grants to the above-named optionee (the "Optionee") an option (the "Option") to
purchase from the Corporation, for the price per share set forth above, the
number of shares of Common Stock, no par value per share (the "Shares"), of the
Corporation set forth above pursuant to the terms and conditions set forth
herein. This option is not intended by the parties to be an "incentive stock
option" within the meaning of Section 422 of the Internal Revenue Code of 1986,
as amended (the "Code").
The terms and conditions of the Option granted hereby are as follows:
1. (a) EXERCISE PRICES. The prices at which each Share subject to this
Option may be purchased shall be the prices set forth above, subject to any
adjustments as set forth in this SECTION 1.
(b) SPLIT, SUBDIVISION OR COMBINATION OF SHARES. If the outstanding
shares of the Corporation's Common Stock at any time while this Option remains
outstanding and unexpired shall be subdivided or split into a greater number of
shares, or a dividend in Common Stock shall be paid in respect of Common Stock,
or a similar change in the Corporation's capitalization occurs which affects the
outstanding Common Stock, as a class, then the exercise prices set forth in the
first paragraph of this Option in effect immediately prior to such subdivision
or at the record date of such dividend shall, simultaneously with the
effectiveness of such subdivision or split or immediately after the record date
of such dividend (as the case may be), be proportionately decreased. If the
outstanding shares of Common Stock shall be combined or reverse-split into a
smaller number of shares, the exercise prices set forth in the first paragraph
of this Option in effect immediately prior to such combination or reverse split
shall, simultaneously with the effectiveness of such combination or reverse
split, be proportionately increased.
(c) RECLASSIFICATION, REORGANIZATION, CONSOLIDATION OR MERGER. In
the case of any reclassification of the Common Stock or any reorganization,
consolidation or merger
<PAGE>
of the Corporation with or into another corporation (other than a merger or
reorganization with respect to which the Corporation is the continuing
corporation and which does not result in any reclassification of the Common
Stock), or a transfer of all or substantially all of the assets of the
Corporation, or the payment of a liquidating distribution then, as part of
any such reorganization, reclassification, consolidation, merger, sale or
liquidating distribution, the Corporation shall arrange for the other party
to the transaction to agree to, and lawful provision shall be made, so that
the Optionee shall have the right thereafter to receive upon the exercise of
this Option (to the extent, if any, still exercisable), the kind and amount
of Shares or other securities or property which the Optionee would have been
entitled to receive if, immediately prior to any such reorganization,
reclassification, consolidation, merger, sale or liquidating distribution, as
the case may be, such Optionee had held the number of Shares that were then
purchasable upon the exercise of this Option. In any such case, appropriate
adjustment (as reasonably determined by the Board of Directors of the
Corporation) shall be made in the application of the provisions set forth
herein with respect to the rights and interests thereafter of the Optionee
such that the provisions set forth in this SECTION 1(c) (including provisions
with respect to the exercise prices as set forth in the first paragraph of
this Option) shall thereafter be applicable as nearly as is reasonably
practicable, in relation to any Shares or other securities or property
thereafter deliverable upon the exercise of this Option.
2. VESTING. This Option shall vest and may be exercised no earlier than
the date that is one (1) year after the Date of Grant, at which time it shall
become one hundred percent (100%) exercisable. In no event shall this Option be
exercisable after the date five (5) years from the Date of Grant. In the event
that for any reason the Optionee is no longer serving as Chairman of the Board
of Directors of the Corporation, the Optionee shall have a period of ninety (90)
days from the date of such termination of service to exercise this Option to the
extent then exercisable, and at the end of the 90-day period, all rights of the
Optionee under this Option shall terminate and be forfeited immediately as to
any unexercised portion thereof.
3. EXERCISE OF OPTION. The Optionee (or his legal representative or
guardian, as applicable) may exercise any portion of this Option that has become
exercisable in accordance with the terms hereof as to all or any of the Shares
then available for purchase by delivering to the Corporation written notice
specifying:
(i) The number of whole Shares to be purchased together with
payment in full of the aggregate option price of such Shares specified in
the written notice, provided that this Option may not be exercised for less
than one thousand (1,000) Shares or the number of Shares remaining subject
to this Option, whichever is smaller;
(ii) The address to which dividends, notices, reports, etc. are to
be sent; and
(iii) The Optionee's social security number.
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<PAGE>
Payment shall be in cash (or by certified or cashier's check payable to the
order of the Corporation). The Optionee shall not be entitled to any rights and
privileges as a shareholder of the Corporation in respect of any Shares covered
by this Option until such Shares shall have been paid for in full and issued to
the Optionee.
4. DELIVERY OF CERTIFICATE(S). As soon as practicable after the
Corporation receives payment for Shares covered by this Option, it shall deliver
a certificate or certificates representing the Shares so purchased to the
Optionee. Only one certificate evidencing the Shares will be issued unless the
Optionee otherwise requests in writing. Such certificate shall be registered in
the name of the Optionee. Such stock certificate shall carry such appropriate
legends, and such written instructions shall be given to the Corporation's
transfer agent, if any, as may be deemed necessary or advisable by counsel to
the Corporation in order to comply with the requirements of the Securities Act
of 1933, as amended (the "1933 Act"), and any state securities laws or any other
applicable laws.
5. SECURITIES LAWS. Optionee acknowledges that this Option and the
Shares subject to this Option have not been registered under the 1933 Act, and
agrees not to sell, pledge, distribute, offer for sale, transfer or otherwise
dispose of this Option or any Shares subject to this Option issued upon its
exercise in the absence of (a) an effective registration statement under the
1933 Act as to this Option or such Shares subject to this Option and
registration or qualification of this Option or such Shares subject to this
Option under any applicable Blue Sky or state securities law then in effect or
(b) an opinion of counsel, satisfactory to the Corporation, that such
registration and qualification are not required. Without limiting the
generality of the foregoing, unless the offering and sale of the Shares subject
to this Option to be issued upon the exercise of this Option shall have been
effectively registered under the 1933 Act, the Corporation shall be under no
obligation to issue the Shares covered by such exercise unless and until the
Optionee shall have executed an investment letter in form and substance
satisfactory to the Corporation, including a warranty at the time of such
exercise that it is acquiring such Shares for its own account, and will not
transfer the Shares subject to this Option unless pursuant to an effective and
current registration statement under the 1933 Act or an exemption from the
registration requirements of the 1933 Act and any other applicable restrictions,
in which event the Optionee shall be bound by the provisions of a legend or
legends to such effect which shall be endorsed upon the certificate(s)
representing the Shares subject to this Option issued pursuant to such exercise.
The Shares subject to this Option issued upon exercise thereof shall be
imprinted with legends in substantially the following form:
"THE SECURITIES REPRESENTED BY THE STOCK OPTION AGREEMENT DATED AS OF
FEBRUARY 12, 1997 BETWEEN THE CORPORATION AND MARTIN BERNSTEIN HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE SOLD,
PLEDGED OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION
STATEMENT WITH RESPECT THERETO UNDER THE ACT OR PURSUANT TO AN
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SAID ACT AND
COMPLIANCE WITH ANY APPLICABLE STATE
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SECURITIES LAW, OR UNLESS THE COMPANY RECEIVES AN OPINION OF COUNSEL,
SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT SUCH REGISTRATION IS
NOT REQUIRED."
After the Registration Statement referred to in SECTION 6 below is declared
effective by the Securities and Exchange Commission (the "Commission"), the
Optionee may deliver to the Corporation the certificates representing the Shares
subject to this Option so registered, and the Corporation will, within three
days after receipt by the Corporation of the foregoing, issue new certificates
representing and in exchange for the aforementioned certificates, which new
certificates shall be legended as follows:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THE SECURITIES MAY BE
SOLD PURSUANT TO THE REGISTRATION STATEMENT PROVIDED THAT (i) THE
REGISTRATION STATEMENT IS CURRENT AND EFFECTIVE, (ii) THE HOLDER
COMPLIES WITH THE PROSPECTUS DELIVERY REQUIREMENTS UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND (iii) THE SALE IS IN
COMPLIANCE WITH THE PLAN OF DISTRIBUTION SET FORTH IN THE PROSPECTUS."
6. REGISTRATION RIGHTS OF OPTIONEE. The Corporation shall register the
Shares subject to this Option on a Registration Statement under the 1933 Act
(the "Registration Statement") with the Commission in accordance with
Section 10.1 of the Agreement and Plan of Reorganization dated as of September
30, 1996 by and among the Corporation, New U.S. Tire Recycling Corp., U.S. Tire
Recycling Partners, L.P., Bodner/Greenstein Capital Holdings, Inc., Tirus, Inc.,
Tirus Associates, L.L.C., Environmental Venture Fund, L.P., Argentum Capital,
L.P. and the Shareholders named therein (the "Reorganization Agreement")
relating to Section 6.7 of the Old Asset Purchase Agreement (as defined in the
Reorganization Agreement). These registration rights shall inure to the benefit
of any transferee of the Shares subject to this Option.
7. TRANSFERABILITY; ASSIGNABILITY. This Option is personal to the
Optionee and during the Optionee's lifetime may be exercised only by the
Optionee or his guardian or legal representative as set forth herein. In the
event of the death or permanent disability of the Optionee, the Option may be
exercised by the person or persons entitled to do so under the Optionee's will,
if he shall die intestate, by his legal representative or representatives, or,
in the case of his permanent disability, by the Optionee or his guardian or
legal representative. This Option shall not be transferable otherwise than by
will or the laws of descent and distribution, or to a Permitted Transferee. For
purposes of this SECTION 7, the term "Permitted Transferee" shall mean Immediate
Family Members or the Optionee, trusts for the benefit of such Immediate Family
Members of the Optionee, and partnerships in which the Optionee and/or such
Immediate Family Members are the only partners, provided in each event that no
consideration is provided for such transfer; and the term "Immediate Family
Member" shall mean the Optionee's descendants (children, grandchildren and more
remote descendants), and shall include step-children and relationships arising
from legal adoption.
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8. WITHHOLDING. (a) The Corporation shall have the right to deduct
from all amounts paid in cash in consequence of the exercise of the Option any
taxes required by law to be withheld with respect to such cash payments.
Subject to SECTION 8(b) below, where the Optionee is entitled to receive Shares
pursuant to the exercise of the Option, the Corporation shall have the right to
require the Optionee to pay to the Corporation the amount of any taxes that the
Corporation is required to withhold with respect to such Shares, or, in lieu
thereof, to retain, or sell without notice, a sufficient number of such Shares
to cover the amount required to be withheld.
(b) SURRENDER OF SHARES. For so long as the Optionee is subject
to Section 16 of the Securities Exchange Act of 1934, as amended (the "1934
Act"), all tax withholding obligations shall be satisfied through the
withholding or surrender of Shares as necessary to comply with Section 16 of the
1934 Act and the rules and regulations thereunder or to obtain any exemption
therefrom.
9. NO GUARANTEE. This Option does not confer on the Optionee any right
to continue in his present position as Chairman of the Board of the Corporation
for any period of time or at any particular rate of compensation.
10. NOTICES. All notices hereunder to the parties to this Stock Option
Agreement shall be delivered, mailed or telecopied (with confirmation of
receipt) to the following addresses:
If to the Corporation:
Waste Recovery, Inc.
309 South Pearl Expressway
Dallas, Texas 75201
Attention: President
Telecopy Number: (214) 745-8945
If to the Optionee:
Martin Bernstein
The File Organization
7 Penn Plaza
370 Seventh Avenue, Suite 618
New York, New York 10001
Telecopy Number: (212) 563-6657
Such addresses for the service of notices may be changed at any time provided
notice of such change is furnished in advance to the other party.
11. GOVERNING LAW. This Stock Option Agreement shall be governed by and
construed in accordance with the laws of the State of Texas without application
of the conflict of laws principles thereof, except to the extent preempted by
federal law, which shall govern to such extent.
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IN WITNESS WHEREOF, the undersigned have caused this Stock Option Agreement
to be duly executed as of the date first above written.
CORPORATION:
WASTE RECOVERY, INC.
By: /s/ Thomas L. Earnshaw
-------------------------------------
Its: President and Chief Executive Officer
-------------------------------------
OPTIONEE:
/s/ Martin Bernstein
-----------------------------------------
Signature
Social Security # ###-##-####
-----------------------------------------
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CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-2 of our report dated
March 31, 1997 appearing on page F-1 of the Annual Report on Form 10-K of Waste
Recovery, Inc. for the year ended December 31, 1996 and our report dated March
27, 1996 for Waste Recovery-Illinois (an Illinois general partnership) for the
year ended December 31, 1995 appearing in the Company's Current Report on Form
8-K/A dated February 28, 1997. We also consent to the reference to us under the
heading "Experts" in such Prospectus.
PRICE WATERHOUSE LLP
Dallas, Texas
December 19, 1997
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-2 of our report dated
January 24, 1997 appearing on page F-2 of the Annual Report on Form 10-K of
Waste Recovery, Inc. for the year ended December 31, 1996 and our report dated
February 28, 1996 for U.S. Tire Recycling Partners, L.P. (a limited partnership)
for the year ended December 31, 1995 appearing in the Company's Current Report
on Form 8-K/A dated February 28, 1997. We also consent to the reference to us
under the heading "Experts" in such Prospectus.
/s/ Cohen & Rosen, CPA, P.C.
COHEN & ROSEN, CPA, P.C.
New York, New York
December 22, 1997