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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
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ANNUAL REPORT PURSUANT TO SECFCON 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1995
Commission File Number 0-10054
COMMODORE ENVIRONMENTAL SERVICES, INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 87-0275043
(State or other jurisdiction of incorporation or organization) (IRS Employer Identification Number)
150 EAST 58TH STREET, NEW YORK, NEW YORK 10155
(Address of principal executive offices) (Zip Code)
</TABLE>
Registrant's telephone number, including area code: (212) 308-5800
Securities registered pursuant to Section 12(b) of the Act:
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<CAPTION>
Name of each exchange
Title of each class on which registered
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<S> <C>
Common Stock $.01 Par Value None
</TABLE>
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES /X/ NO / /
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements contained incorporated by reference in part III of this Form 10-K or
any amendment to this Form 10-K. / /
As of March 15, 1996, (a) 57,348,953 shares of the Company's Common
Stock were outstanding; (b) 23,090,647 shares of Common Stock were held by
non-affiliates; and (c) the aggregate market value of shares of Common Stock
held by non-affiliates was $20,204,316 based upon the closing bid price of $.875
share on March 15, 1996.
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PART I
ITEM 1. BUSINESS
GENERAL
THE COMPANY
Commodore Environmental Services, Inc. (the "Company" or "Commodore")
was reincorporated in the State of Delaware in August 1988. The Company's
predecessor was Commodore Resources Corporation. The current principal business
of the Company is holding interests in commercial real estate properties and the
development of technologies for the destruction or neutralization of hazardous
materials.
For the year ended December 31, 1995, real estate related activities
accounted for approximately 99% of the Company's revenues from operations, 1%
related to environmental services, and oil and gas and mining activities
accounted for less than one percent of the Company's revenues from continuing
operations, although the Company did acquire certain working interests in oil
and gas properties in 1991 and 1994. In addition, in 1993, the Company acquired
two companies which are engaged in the research, development and marketing of
innovative technologies for the destruction of hazardous materials. The Company
is concentrating its efforts on commercial opportunities, partnering and
acquisitions necessary to bringing to market the new technologies. See
"Acquisition of Remediation Businesses" for a description of the acquisitions.
See "Item 2 - Properties" for a description of the Company's real estate
properties and its remaining oil and gas properties.
The Company's principal executive offices are located at 150 East 58th
Street, Suite 3400, New York, New York 10155. Its telephone number is (212)
308-5800.
ACQUISITION OF REMEDIATION BUSINESSES
On December 22, 1993, the Company acquired 90.05% of the issued and
outstanding shares of voting common stock of each of Commodore Laboratories,
Inc. f/k/a A.L. Sandpiper Corporation ("Commodore Labs") and subsidiary and CFC
Technology, Inc. ("CFCT"). Commodore Labs and CFCT are the owners of certain
technologies relating to the destruction of polychlorinated biphenyls ("PCBs"),
dioxins and chlorofluorocarbons ("CFCs").
Commodore Labs was formed on July 1, 1981 to engage in the research,
development, and marketing of innovative technologies for the destruction of
hazardous materials. In 1990, Commodore Labs formed CFCT. Commodore Labs
developed, and in most cases acquired patents for, a wide range of technologies
for the destruction or remediation of hazardous wastes (the "Technology"). At
the present time, virtually all activities of Commodore Labs and CFCT are
concentrated on completing the laboratory development and design, construction
and demonstration of pilot scale equipment for application of the Technology. In
the future, Commodore Labs and CFCT are expected to continue to perform research
and development activities.
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Commodore Labs and CFC have had no commercial operations since they
were formed. Although prototype equipment and processes have been developed and
are continually being tested, management of the Company cannot project when, if
ever, commercialization of the Technology may commence. As of December 31, 1995,
Commodore Labs had spent approximately $7,000,000 in research and development
costs relating to the Technology, and is projected to spend approximately
$2,500,000 on research and development in 1996.
In connection with the closing of the Commodore Labs acquisition, in
exchange for 90.05% of the outstanding common stock of Commodore Labs, the
preacquisition holders of Commodore Labs common stock received shares of
Commodore Labs non-voting series "B" preferred stock and 5-year warrants to
purchase an aggregate of 3,000,000 shares of common stock, $.01 par value, of
the Company (the "Common Stock"), at an exercise price of $.05 per share. Albert
Abel ("Abel"), the President of Commodore Labs, retained ownership of 9.95% of
Commodore Labs voting common stock and received 1,000,000 shares of Common
Stock. In addition, Commodore issued to Abel and Allison L. Augur, Jr.,
("Augur"), the President of CFC, non-qualified stock options to purchase an
aggregate of 1,500,000 shares of Common Stock at an exercise price of $.10 per
share, which options vest at the rate of 20% of the shares subject to such
options per year. At the date of acquisition, Commodore Labs had 977 shares of
its series "A" preferred stock, par value $1,000, which was not exchanged as
part of the acquisition. In December, 1994, the Company issued 1,534,709 shares
of its Series B Preferred Stock in exchange for the 977 shares of series "A" of
Commodore Labs preferred and 557,709 of 577,081 of the shares of Commodore Labs
Series "B" Preferred Stock described above.
Upon the closing of the CFCT acquisition, Commodore (i) obtained
ownership of 90.05% of the outstanding shares of CFCT common stock, with the
remaining 9.95% of such common stock being held by Abel, (ii) issued 750,000
shares of its common stock to Augur, and (iii) paid the aggregate sum of $70,000
to Abel and Augur.
In connection with the closing, Commodore entered into a license
agreement with Commodore Labs and a sublicense agreement with CFCT pursuant to
which the right to utilize and commercialize all patents, confidential
information and know-how owned by Commodore Labs and/or licensed by Commodore
Labs to CFCT was acquired by Commodore. These agreements provide that royalties
of 5% of the revenues generated by Commodore from the Technology will be payable
to Commodore Labs and CFCT, allocated pro rata to the particular technology used
to generate the revenue.
POLYCHLORINATED BIPHYNALS (PCBS) AND DIOXINS
Prior to environmental restrictions, PCBs were used in a number of
applications, including flame- retardant additives in resins and plastics, in
formulas for paints and inks, as additives for thermally sensitive lubricants,
and as dielectric fluids in transformers and resistors. Dioxins generally
consist of herbicides, and as by-products from the use of chlorine in
manufacturing and from the incineration of polyvinyl chloride (PVC) materials in
trash incinerators. The United States Environmental Protection Agent ("EPA") has
determined that PCBs and dioxins are toxic and present a general hazard to the
environment and to human life. As a result, there appears to be a growing market
for the destruction and/or neutralization of these contaminants.
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Commodore Labs has developed and intends to commercialize its patented
process known as AGENT 313tm. AGENT 313 is based upon solvated electron
chemistry, which mixes solvents such as anhydrous liquid ammonia with various
base metals to produce a solvated electron solution. Based on the results of
extensive testing by Commodore Labs, AGENT 313 appears capable of effectively
treating and decontaminating soils and other materials, including sludges,
sediments, oils and other hydrocarbon liquids, metals and porous and non-porous
structures and surfaces, by destroying PCBs, pesticides, dioxins, chlorinated
substances, chemical and biological phosphates and other toxic contaminants to
levels greater than 99.9%. Based upon test results, the Company believes that
AGENT 313 is also capable of neutralizing chemical weapons materials and warfare
agents and of concentrating certain radioactive wastes for more effective
disposal.
On March 15, 1996, the EPA issued to the Company a National Permit for
Alternate Destruction, which will allow the Company to use AGENT 313 on-site to
treat PCB-contaminated soil and other contaminated elements, such as sludges and
sediments. Based on currently published EPA national operating permits, the
Company believes that it possesses the only non-thermal PCB treatment technology
permitted under the EPA's Alternate Destruction Technology Program.
Most of the current treatment and disposal methods involve air
pollution emission, transportation, treatment and safety risks, and may not be
permanent solutions. In addition, certain of these treatment and disposal
methods result in large volumes of residual waste which may require further
treatment prior to disposal. As a result, many of these methods are being met
with increasing public resistance and more stringent regulations.
The Company believes that AGENT 313 is more effective than incineration
and other destruction methods for toxic substances, in that:
* it does not emit toxic fumes into the atmosphere, as is
sometimes the case with thermal or incineration methods;
* the Company's equipment is portable and can be moved directly
to the contaminated site, substantially reducing the risk of
off-site contamination;
* the Company's equipment utilizing AGENT 313 can be operated in
various numbers of units and configurations to treat
contaminated materials in widely varying amounts;
* In tests conducted by Geomet, Inc. (one of only eight surety
laboratories licensed by the United States government to
conduct tests on live chemical warfare agents), AGENT 313
neutralized or destroyed all chemical weapons material and
warfare agents on which it was tested, consisting of all known
chemical weapons material and warfare agents in the United
States stockpile, and Lewisite (the primary chemical weapons
material and warfare agent of the former Soviet Union);
* the reaction time of AGENT 313 is under three minutes per load
of soils and other materials, as compared to between four and
six hours reaction time required for alternative
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processes, such as thermal desorption and chemical treatment;
* the Company's equipment can be installed and operated inside
industrial plant facilities, thereby immediately treating
hazardous wastes as part of the manufacturing process;
* approximately 95% of the solvent used by AGENT 313 can be
recovered and reused for additional applications; and
* as a by-product when treating soils, AGENT 313 yields
nitrogen-enriched soils that can be reused on-site, avoiding
replacement and post-treatment costs of off-site disposal.
The Environmental Business Journal estimates that the annual global
market for all environmental products and services was approximately $420
billion in 1995 and is expected to reach $500 billion by 2000. The Company
estimates that the United States market for the destruction of PCBs, dioxins,
chlorinated substances and other toxic contaminants, including soils and water,
industrial and chemical facilities, gas pipelines and other contaminated areas,
is approximately $100 billion. Additionally, the Chemical Weapons Convention,
consisting of most of the world's nations, has adopted a treaty which mandates
the worldwide destruction of all chemical weapons and warfare agents by 2006.
Based upon reports furnished by the United States Department of Defense, the
United States military and other government agencies have estimated the
expenditure of approximately $12 billion over the next ten years for the
destruction of domestic stockpile and non-stockpile chemical weapons and
chemical warfare agents. The projected international market for such services
over the same period is estimated at approximately $50 billion.
The Company's business strategy to commercialize AGENT 313 is to
establish collaborative joint working and marketing arrangements with
established engineering and environmental service organizations. The Company
intends to enter into these relationships as a principal (i) in individual
projects, in projects involving specific applications throughout the
marketplace, or in projects involving specific industries, or (ii) as licensing
arrangements with third parties for their use of AGENT 313 in specific
industries or applications. The Company is currently involved in several
demonstration projects and is negotiating potential working arrangements with
several companies, including Teledyne Brown Engineering, Inc. and Sverdrup
Corporation.
Although the Company believes that it will be able to enter into one or
more definitive agreements with collaborative partners and be awarded contracts
to use AGENT 313 in significant projects, there can be no assurance that any of
these discussions will result in collaborative agreements or contract awards.
Even if such contracts are awarded, there is no assurance that AGENT 313 will
perform successfully on a large-scale commercial basis or that it will be
profitable to the Company. There can also be no assurance that AGENT 313 will
not be superseded by other competing technologies.
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CHLOROFLUOROCARBONS (CFCS)
CFCs are a class of chemicals that have properties that have made them
attractive as refrigerants, aerosol propellants, fire retardants, foam-blowing
agents and cleaning compounds. On the other hand, they present serious
environmental problems, as CFCs have been confirmed as a cause of the depletion
of the Earth's ozone layer.
These circumstances have prompted worldwide efforts to eliminate CFC
manufacture and use, in favor of ozone-safe alternatives. However, this
transition will take a decade or more to be completed worldwide. In 1987,
delegates from all of the industrialized countries in the world met in Montreal
to draft the first global environmental law concerning the cutback and eventual
halt to production of all the ozone-depleting chemicals that the world was
using. It provides that CFCs will be banned from production worldwide by the end
of 1995. After 1995, when CFC production ceases, the only CFC refrigerants which
will be available will be those recovered from an operating system, i.e.,
recycled.
It is estimated that for the developed world, about 350 million pounds
of CFCs are needed to service existing equipment each year. Even more
significant, somewhere between one billion and two billion pounds will be needed
by the time that equipment is retired or converted to use other refrigerants
about a third of the way into the 21st century.
Presently, there is only one means of preserving the existing CFC
stocks to service ongoing needs. That is to remove the material from the
refrigeration or air conditioning unit, remove contaminants (such as moisture,
acid, oil or chloride particulates) to established industry purity standards,
and then return the reclaimed material to use, either in the same system or in
another one. CFC reclaimers provide this service.
While providing a valuable service, the reclaiming industry cannot fill
one urgent need. That need is for a means of returning to productive use
mixtures of refrigerants that have become cross- contaminated during use. One
approach is to blend pure refrigerant into the mixture until the contaminant
component refrigerant is driven below the 0.5% level as mandated by industry
standards. This is only economical, however, if the mixed refrigerant has small
percentages of the offending contaminate refrigerant. If the contaminant
percentage is too high, the cost of adding virgin refrigerant is extremely
uneconomical. To further exacerbate the situation, there will be no more virgin
CFCs available to blend after 1996. Presently, most mixed and contaminated
refrigerants are being stockpiled pending an economic solution.
Commodore has developed and patented a process which, in test
applications of limited quantities of CFCs, has been able to separate mixtures
of refrigerants so that they can be returned to productive use at purity levels
meeting industry standards.
An example of the benefit of this process involves automobile air
conditioners. EPA econometrics models predict that by 1996, there will be over
120,000,000 cars in the U.S. alone that will still rely on R12 as the
refrigerant in their systems. Based on limited test results to date, it appears
that Commodore's process can provide the required stocks economically through
the patented separation
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process.
A dilemma also arises when parties have to decide what to do with their
CFC stockpiles (banks) and daily usage waste streams that can not be recycled
and must be destroyed. The current capacity of approved destruction technologies
cannot destroy the anticipated stockpiles of ozone-depleting substances within a
reasonable time frame. There exists a need to expand the options available for
destruction/transformation technologies to ensure that the disposal of
stockpiles is performed in an environmentally acceptable manner. Commodore has
demonstrated, on a limited trial basis, the ability to destroy a number of the
high ozone-depleting refrigerants to the required levels of destructive
efficiency. This technology has not, however, been utilized on a commercial
scale.
Commodore's CFC separation and destruction technologies may be a
solution to a rapidly growing worldwide problem for which an economic and
effective alternative is not otherwise known to be available. The Commodore
process employs fundamental chemical principles in novel combinations to deal
with two aspects of the CFC problem:
1. On a limited trial basis, the technology has separated
mixtures of CFCs that have become cross-contaminated during
use, thereby returning acceptable purity, high-valued CFCs to
economic and productive use, and
2. The technology has also destroyed low-value CFCs, and mixtures
thereof, that do not merit recycling. This is done in a
non-thermal process, which is believed to have considerable
cost advantage over alternative destruction processes.
To date, the separation and destruction technologies have proven
effective in test applications of limited quantities of CFCs. Commodore hopes to
place the technologies into commercial-scale use and application beginning in
1996, although there can be no assurance that this will occur.
LIABILITY INSURANCE
In July 1987, the Company established Harvest American Insurance
Company ("Harvest"), a wholly-owned subsidiary of the Company, licensed by the
State of Vermont as a "captive" insurance company. Harvest issued "occurrence"
based insurance policies to each of the Company's former asbestos abatement
subsidiaries, but not to any other persons or entities. An occurrence-based
policy insures against claims arising at any time in the future based upon
events which occurred while the policy was in effect. The policies were in
effect from July 1987 through January 1989. The operating subsidiaries of the
Company paid premiums to Harvest based upon a percentage of sales and had
coverage through January 1989. Beginning in January 1989, in response to greater
availability of "occurrence type" insurance, the subsidiaries obtained asbestos
abatement-related general liability insurance from unrelated insurance
companies. Harvest no longer issues new policies. The maximum exposure under the
outstanding policies is $5,000,000 in the aggregate.
In December 1994, the Vermont Department of Banking and Insurance (the
"Department") and the Company entered into a Settlement Agreement (the
"Agreement") with respect to an order served by
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the Department against Harvest in November 1991. The Agreement required the
Company to fund Harvest an additional $750,000 over an 18-month period. Those
funds have been and will be deposited into a Harvest interest-bearing account.
As of December 31, 1995, Harvest had $792,900 in an interest-bearing account and
an amended $4,514,683 intercompany demand note (the "Company Note") made to the
order of Harvest by the Company. The Company funded an additional $150,000 on
January 15, 1996 and will fund another $100,000 on July 15, 1996 as per the
Agreement. The Department and/or Harvest have the right use proceeds from the
reserve account to purchase reinsurance in order to eliminate all or part of the
insurance risk.
In addition, the Company will indemnify and defend Harvest against any
claims made against Harvest. There is currently one claim relating to a fire
which occurred at a job site which Harvest insured. This claim is currently
being investigated and defended by Harvest. See Item 3 - Legal Proceedings.
In 1994, the Company had an independent actuary evaluate the loss
reserve required as of December 31, 1994. The actuary determined that a loss
reserve of $994,000 is adequate in connection with the policies issued by
Harvest. The Company thereby maintains its loss reserve at $994,000.
Finally, under the terms of the 1990 agreements pursuant to which the
Company disposed of its former asbestos abatement subsidiaries, Hesco
Environmental Safety Co., Inc. and AWI Environmental Services, Inc.
(respectively, the "Hesco Agreement" and the "Allwash Agreement"), the Company
has agreed to indemnify Hesco and Allwash for failures of Harvest to pay amounts
payable under Harvest insurance policies, except that each of such indemnified
parties (i) shall bear the first $25,000 of liability for each claim against
such party, respectively, for which Harvest fails to make payment (as identified
above), up to a maximum of $250,000 for all such claims against such party,
respectively, and (ii) shall bear 20% of any such claim against such party,
respectively, payable by Harvest, above the $25,000 deductible referred to in
subprovision (i), for which it is entitled to indemnification under the Hesco
Agreement or Allwash Agreement, up to a maximum of $250,000 for any single claim
and up to a maximum of $500,000 for such claims against such party,
respectively, in the aggregate.
EMPLOYEES
The Company had twenty-one employees as of March 15, 1996. None of such
employees are covered by collective bargaining agreements, and the Company's
relations with its employees are believed to be satisfactory.
ITEM 2. PROPERTIES
Office and Warehouse Facilities
The Company's executive offices are located in New York City in
approximately 2,000 square feet of space leased by an affiliate of Bentley J.
Blum, the Company's Chairman of the Board and Principal Beneficial Shareholder
("Blum"). The Company's financial offices are located in Great Neck, New York,
in approximately 2,000 square feet of space leased from a non-affiliate, under a
lease
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terminating on September 30, 1998. The total annual rent expense is
approximately $58,000. The Company believes that its office facilities are
sufficient for the continued operation of its current business. Commodore Labs
and CFCT facilities are located in two research facilities in and around
Columbus, Ohio, in approximately 12,000 square feet of space leased on a
month-to-month basis from non-affiliates. The total annual rent expense for
these facilities is approximately $70,000.
Real Estate Properties
From 1979 through 1985, the Company and its predecessor company
purchased and sold various real estate properties. The Company has mortgage
notes receivable and a note payable on its balance sheet in respect of the
properties described below:
North Carolina Property
The Company owned a mortgage receivable relating to a 154-unit garden
apartment complex located in Cary, North Carolina with a net book value of
$3,600,000 in principal, accrued interest, land rent and management fees, net of
deferred income and realization allowance, which approximated an appraised value
performed on the underlying property in 1993. With respect to this property, the
Company had a liability under a mortgage payable of $2,294,000. In 1994, the
Company received approximately $3,330,000 as partial satisfaction for the
mortgage. The Company fully satisfied the underlying mortgage payable with the
proceeds. The balance due from the debtor is now unsecured. Management has
adjusted the realization allowance to reflect management's estimate of the net
realizable value of the receivable. On December 30, 1994, the Company entered
into an agreement with the debtor whereby the debtor would pay to the Company
all future proceeds from a note in the amount of approximately $277,000 which
the debtor received as proceeds from the sale of the property.
Illinois Property
The Company owned a mortgage note receivable and a note receivable
related to two Illinois properties, totalling an aggregate of $5,318,000 in
principal and interest, net of deferred income; of this aggregate amount, the
note receivable totals $912,000 in principal and interest, and may be deemed to
be unsecured due to the fact that the value of the underlying collateral is less
than the amount of the principal and accrued interest owed under the superior
first mortgage. The properties consist of two warehouses with a combined square
footage of approximately 585,000 square feet, located on adjacent properties in
Cook County, Illinois. With respect to the secured portion of these notes, the
Company has a mortgage note payable of $1,735,000. In 1995, the Company received
approximately $4,800,000 as partial satisfaction of the mortgage receivable. The
Company fully satisfied the underlying mortgage payable with the proceeds. The
balance due from the debtor is now unsecured. Management has adjusted the
realization allowance to reflect management's estimate of the net realizable
value of the receivable.
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Oil and Gas Properties
In March 1991, the Company paid $200,000 to acquire a 14.0625% working
interest in an oil and gas field located in Oklahoma (the "Field"). The Blum
Family Trust, of which Mr. Blum is a trustee, also participated in this
acquisition. See "Item 13-Certain Relationships and Related Transactions". The
Company invested an additional $9,375 and $37,500 in the venture in 1993 and
1992, respectively.
In 1994, the Company exchanged its interest in the Field for a joint
ownership interest in an oil and gas field located in Louisiana (the "Louisiana
Property"). The Company has a 22.67% working interest in the Louisiana Property.
The Louisiana Property is approximately 10,000 acres which contain a number of
producing wells. Some wells need remedial work and other wells require minor
work to be brought back on line. In addition, a geological and geophysical study
on the Louisiana Property was performed in 1995 to recommend new drilling
locations and the operator is preparing to initiate a drilling program. The
Company's portion of revenues and expenses relating to the property were $4,300
and $13,600, respectively in 1995 and $2,700 and $5,600, respectively, in 1994.
The Blum Family Trust also participated in this acquisition. See "Item
13-Certain Relationships and Related Transactions".
ITEM 3. LEGAL PROCEEDINGS
Pursuant to the Hesco Agreement and the Allwash Agreement, contingent
liabilities relating to pending litigation against Hesco and Allwash were
retained by Hesco and Allwash, respectively. However, under the terms of the
Hesco Agreement and the Allwash Agreement, the Company has agreed to indemnify
Hesco and Allwash for certain possible future failures of Harvest to pay Hesco,
Allwash or their respective subsidiaries under Harvest insurance policies. See
Item 1 - Business Liability Insurance.
Hesco, a former subsidiary of the Company and a named insured under
insurance policies issued by Harvest, is presently a named party in a number of
pending cases which Harvest has been asked to defend and cover under its
insurance policy. All but one of these cases involve workmen's compensation
claims and Harvest has denied coverage. All of such litigation is incidental to
the business conducted by Hesco. The specific identification of one such
litigation below is not necessarily indicative of its materiality to the
Company. In the event that Harvest has insufficient assets to meet its
obligations under these insurance policies, should Harvest be required to cover
any losses thereunder, Harvest can attempt to seek payment therefor by demanding
funds from the Company under the Company Note. (See Item 1 - Business-Liability
Insurance.) A successful claim for which there is inadequate insurance coverage
would likely have a material adverse effect on the Company. There is no
assurance that Harvest will not ultimately be found liable for coverage of
Hesco's losses in connection with any or all of such actions, and counsel to
Harvest has not expressed an opinion on the likelihood of Harvest's liability
therefor.
In or about September 1991, Hesco was served with a summons and
complaint by Insurance Company of North America, American Home Assurance Co.,
Home Insurance Co., Subscription Participants, as collective subrogees of The
Long Island Lighting Company, in connection with a fire
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which occurred at The Long Island Lighting Company power station which
plaintiffs claim was caused by the negligence of Hesco. The complaint seeks
$1,250,000 in damages. Harvest, through its counsel, is in the process of
investigating and defending the action brought against Hesco in accordance with
the terms, conditions and limitations of the insurance policy issued by Harvest
to Hesco. The outcome of the litigation cannot be determined or predicted at
this time.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
MARKET PRICE INFORMATION
The Company's Common Stock is traded in the over-the-counter market. Stock price
quotations for the Company's common stock were reported on the NASDAQ System
under the symbol COES from January l, 1988 until December 26, 1989. Since
December 26, 1989, stock price quotations for the Company's common stock have
been reported in the "pink sheets" by the National Quotation Bureau and through
the NASD OTC Bulletin Board. The quotations as reported by the National
Quotation Bureau and the NASD OTC Bulletin Board reflect inter-dealer quotations
without retail markup, markdown or commission and may not necessarily represent
actual transactions. The following table sets forth the high and low bid
quotations for the Company's Common Stock for each full quarterly period within
the two most recent fiscal years.
<TABLE>
<CAPTION>
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FISCAL YEAR ENDED DECEMBER 31, 1995
First Second Third Fourth
Quarter Quarter Quarter Quarter
<S> <C> <C> <C> <C>
High: $.781 $.968 $.75 $.50
Low: $.375 $.50 $.437 $.343
</TABLE>
<TABLE>
<CAPTION>
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FISCAL YEAR ENDED DECEMBER 31, 1994
First Second Third Fourth
Quarter Quarter Quarter Quarter
<S> <C> <C> <C> <C>
High: $.031 $. 07 $.156 $.906
Low: $.01 $. 01 $.01 $.07
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</TABLE>
As of March 15, 1996, the Company had 57,348,953 outstanding shares of Common
Stock, held by approximately 2,180 shareholders of record.
DIVIDENDS
The Company has not, for the last three fiscal years, paid cash dividends on its
Common Stock nor does the Company plan to do so in the future. The Company paid
dividends on its Preferred Stock of $296,201 in 1995. Payment of cash dividends
in the future will be dependent on the financial condition, capital requirements
and earnings of the Company and such other factors as the Board of Directors may
deem relevant.
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REGISTRAR AND TRANSFER AGENT
The Bank of New York, 101 Barclay Street, New York, New York 11286, acts as the
Company's Registrar and Transfer Agent.
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER DECEMBER DECEMBER DECEMBER DECEMBER
31, 1995 31, 1994 31, 1993 31, 1992 31, 1991
<S> <C> <C> <C> <C> <C>
Revenue $ 1,089,000 $ 1,848,000 $ 803,000 $ 1,075,000 $ 871,000
Costs and Expenses 4,212,000 3,321,000 3,266,000 1,196,000 1,084,000
Net Income (Loss) (3,123,000) (1,473,000) (2,463,000) (121,000) (213,000)
Net Income (Loss) Per
Share (.056) (.027) (.047) .003 (.005)
Dividends Per Share -- -- -- -- --
Total Assets 7,460,000 13,069,000 15,129,000 11,418,000 11,094,000
Long-Term Obligations
(including current
portions) 4,000,000 5,735,000 8,243,000 4,292,000 4,408,000
Redeemable Preferred
Stock (including
accrued interest) 0 0 567,000 517,000 468,000
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Fiscal Year Ended December 31, 1995 Compared to Fiscal Year Ended December 31,
1994
Total revenues for the year ended December 31, 1995 were $1,089,000 as compared
with $1,848,000 for the year ended December 31, 1994. The decrease in total
revenues is the result of the following:
- - Revenues in 1994 included an $836,000 adjustment to the insurance loss
reserve which was not adjusted in 1995, and the Company recovered a bad
debt in 1994 of $148,000 relating to an estimate of a mortgage
receivable collected in 1994. In 1995, the Company realized a gain on
the collection of a mortgage receivable of $573,000. Revenues from 1995
also included interest income from mortgage receivables of $468,000 as
compared to $818,000 in 1994, a decrease of $350,000. The decrease was
due to the collection of two mortgage receivables, one in December
13
<PAGE> 14
1994 and one in October 1995. The Company expects a minimal amount of
revenue to be generated by interest from mortgages in the future.
Costs and expenses for the year ended December 31, 1995 were $4,212,000 as
compared with $3,321,000 for the year ended December 31, 1994. The analysis of
costs and expenses is as follows:
- - In 1995, the Company incurred approximately $2,136,000 in research and
development costs, of which $146,000 was capitalized as equipment costs
and the balance of $1,990,000 was expensed. In 1994, the Company
incurred approximately $1,747,000 in research and development costs, of
which $710,000 was capitalized as equipment costs and the balance of
$1,037,000 was expensed.
- - In 1995, consultants were hired as full-time employees and assigned to
the research and development subsidiaries. The costs related to such
personnel are now being included in research and development expense.
- - In 1995, general and administrative expenses increased from $1,526,000
to $1,672,000, an increase of $145,000. The Company incurred an
additional $135,000 in travel-related expenses which were attributable
to support ongoing marketing of the Technology and the seeking of new
business opportunities. The Company also incurred additional insurance
expense of $64,000, relating to equipment and other operating issues.
- - In 1995, interest expense decreased from $758,000 for the year ended
December 31, 1994 to $550,000 for the year ended December 31, 1995. The
decrease is the result of the satisfaction of a mortgage payable in the
fourth quarter of 1995. The decrease in interest expense partially
offset the other cost increases noted above.
The net loss for the year ended December 31, 1995 was $3,123,000, as compared to
a net loss for the year ended December 31, 1994 of $1,473,000. The difference is
due to the decrease in total revenues and increase in expenses as noted above.
Fiscal Year Ended December 31, 1994 Compared to Fiscal Year Ended December 31,
1993
Total revenues for the year ended December 31, 1994 were $1,848,000 as compared
with $803,000 for the year ended December 31, 1993. The increase in total
revenues is the result of the following:
- - In 1994, the Company had an actuarial valuation performed on its
captive insurance company in order to determine an adequate reserve. As
a result of the valuation, it was determined that the reserve was
overaccrued by $836,000. Because no asbestos abatement claims have been
made to date and management believes the probability of a claim being
reported is remote, management has reduced the reserve to agree with
the actuary's findings and recognized $836,000 in revenue in 1994.
- - Interest income from commercial real estate activities increased in
1994 from that in 1993 by
14
<PAGE> 15
approximately $326,000. At December 1993, the aggregate value of a
certain mortgage receivable approximated market value of the underlying
real estate security. In 1994, the Company received cash and recognized
interest income to the extent of the contractual amount of the
mortgage. In 1993, the interest income was offset by a realization
allowance since the receivable was in excess of the market value of the
underlying real estate property.
- - In 1993, the Company realized $125,000 of revenue on a note receivable
that was theretofore deemed unrecoverable.
Costs and expenses for the year ended December 31, 1994 were $3,321,000 as
compared with $3,266,000 for the year ended December 31, 1993. The analysis of
costs and expenses is as follows:
- - In 1994, the Company incurred approximately $1,747,000 in research and
development costs, of which $710,000 was capitalized as equipment costs
and the balance of $1,037,000 was expensed. Research and development
costs were insignificant in 1993, as the acquisitions of Commodore Labs
and CFT were not completed until December 22, 1993.
- - During 1993, the Company increased its receivable and non-performing
asset allowance by $1,970,665. This non-cash expense was made to adjust
the carrying value of its mortgage and other related receivables to be
approximately that of the underlying security. The Company evaluates
periodically the underlying security of the mortgage notes and other
receivables. An independent appraisal was obtained on some of the
underlying security in 1993, as all underlying security has appraisals
performed on a rotating basis. Although the Company is not looking to
the underlying security to recover the value of the recorded assets,
the Company believes that it is prudent to maintain the value of the
receivables at the estimated fair market value of the underlying
assets. The writedown of $1,970,665 was due to the poor economic
conditions in the real estate industry and resulting depressed real
estate values. The non-recurrence of this item in 1994 was
substantially offset by the increase in research and development
expenses noted above, and by the increases in travel and interest
expenses noted below.
- - The Company incurred $214,000 of consulting expense in 1993, of which
$165,000 was paid to a related party. In 1994, the consultants were
hired as full-time employees and assigned to the research and
development subsidiaries. The costs related to such personnel are now
being included in research and development expense. Additional
consultants were hired in 1994 at a cost of approximately $50,000.
- - In 1994, the Company incurred travel and related expenses of
approximately $220,000 in connection with the obtaining of overseas
financing and research and development activities. In addition, the
Company incurred $170,000 in salaries and wages and $164,000 in
professional fees relating to research and development activities which
did not occur in 1993.
- - During 1993, the Company was audited by the State of New York for tax
returns filed in previous years. The Company paid interest and
additional taxes of approximately $80,000, which was expensed in 1993.
15
<PAGE> 16
- - Interest expense increased from $443,000 for the year ended December
31, 1993 to $758,000 for the year ended December 31, 1994. The increase
is the result of an increase in long-term debt.
The net loss for the year ended December 31, 1994 was $1,473,000, as compared to
a net loss for the year ended December 31, 1993 of $2,463,000. The difference
was due primarily to the increase in total revenues noted above.
LIQUIDITY AND CAPITAL RESOURCES
The Company had a working capital deficit of $793,000 on December 31,
1995 as compared to a working capital deficit of $78,000 on December 31, 1994.
The Company incurred approximately $2,136,000 in research and
development costs associated with the Technology in 1995. The Company
anticipates that it will incur research and development costs of approximately
$2,500,000 in 1996, given its present level of activities. The Company is
currently in the process of negotiating a line of credit with a commercial bank,
to enable the Company to continue its research and development efforts and
paying ongoing expenses; however, the Company does not have a commitment for any
financing, and there can be no assurance as to whether or when any financing can
be obtained. The Company's continued viability is dependent upon meeting its
cash requirements during 1996. Currently, a corporation owned by the majority
shareholder has been advancing the Company funds to continue to meet its
obligations. In the event that the Company is not successful in obtaining third
party financing, its continued existence will be totally dependent on the
majority shareholder's ability to fund the Company. As of March 26, 1996, the
Company is indebted to the majority shareholder's corporation for $1,875,000.
Harvest American Insurance Company
In July 1987, the Company established Harvest, a wholly-owned
subsidiary of the Company, licensed by the State of Vermont as a "captive"
insurance company. Harvest issued "occurrence" based insurance policies to each
of the Company's former asbestos abatement subsidiaries, but not to any other
persons or entities. An occurrence-based policy insures against claims arising
at any time in the future based upon events which occurred while the policy was
in effect. The policies were in effect from July 1987 through January 1989. The
operating subsidiaries of the Company paid premiums to Harvest based upon a
percentage of sales and had coverage through January 1989. Beginning in January
1989, in response to greater availability of "occurrence type" insurance, the
subsidiaries obtained asbestos abatement-related general liability insurance
from unrelated insurance companies. Harvest no longer issues new policies. The
maximum exposure under the outstanding policies is $5,000,000 in the aggregate.
In December 1994, the Department and the Company entered into a
Settlement Agreement (the "Agreement") with respect to an order served by the
Department against Harvest in November 1991. The Agreement requires the Company
to fund Harvest an additional $750,000. Those funds have been and will be
deposited into a Harvest interest-bearing account. As of December 31, 1995,
Harvest had
16
<PAGE> 17
$792,900 in an interest- bearing account and an amended $4,514,683 intercompany
demand note (the "Company Note") made to the order of Harvest by the Company.
The Company funded an additional $150,000 on January 15, 1996 and will fund
another $100,000 on July 15, 1996 as per the Agreement. The Department and/or
Harvest have the right use proceeds from the reserve account to purchase
reinsurance in order to eliminate all or part of the insurance risk.
In addition, the Company will indemnify and defend Harvest against any
claims made against Harvest. There is currently one claim relating to a fire
which occurred at a job site which Harvest insured. This claim is currently
being investigated and defended by Harvest. See Item 3 - Legal Proceedings).
In 1994, the Company had an independent actuary evaluate the loss
reserve required as of December 31, 1994. The actuary determined that a loss
reserve of $994,000 is adequate in connection with the policies issued by
Harvest. The Company thereby maintains its loss reserve to $994,000.
Finally, under the terms of the Hesco Agreement and the Allwash
Agreement, the Company has agreed to indemnify Hesco and Allwash for failures of
Harvest to pay amounts payable under Harvest insurance policies, except that
each of such indemnified parties (i) shall bear the first $25,000 of liability
for each claim against such party, respectively, for which Harvest fails to make
payment (as identified above), up to a maximum of $250,000 for all such claims
against such party, respectively, and (ii) shall bear 20% of any such claim
against such party, respectively, payable by Harvest, above the $25,000
deductible referred to in subprovision (i), for which it is entitled to
indemnification under the Hesco Agreement or Allwash Agreement, up to a maximum
of $250,000 for any single claim and up to a maximum of $500,000 for such claims
against such party, respectively, in the aggregate.
IMPACT OF INFLATION
Management does not believe that inflation is likely to have a
significant impact on the results of the Company's current operations.
ITEM 8. LIST OF FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA
The following consolidated financial statements of Commodore
Environmental Services, Inc. and subsidiaries are included as Item 8 and can be
found on pages F-1 through F-28, inclusive:
Consolidated Balance Sheets - December 31, 1995 and 1994.
Consolidated Statements of Operations - Years ended December 31, 1995,
1994 and 1993.
Consolidated Statements of Stockholders' Equity - Years ended December
31, 1995, 1994 and 1993.
Consolidated Statements of Cash Flow - Years ended December 31, 1995,
1994 and 1993.
17
<PAGE> 18
Notes to Consolidated Financial Statements.
The following consolidated financial statement schedule of Commodore
Environmental Services, Inc. and subsidiaries is included in this Item 8:
Schedule II - Valuation and Qualifying Accounts
All other schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable, and, therefore, have been omitted.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
18
<PAGE> 19
COMMODORE ENVIRONMENTAL
SERVICES, INC.
DECEMBER 31, 1995, 1994 AND 1993
CONSOLIDATED FINANCIAL STATEMENTS
<PAGE> 20
INDEPENDENT AUDITORS' REPORT
TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF
COMMODORE ENVIRONMENTAL SERVICES, INC.
We have audited the consolidated balance sheet of Commodore
Environmental Services, Inc., and subsidiaries as of December 31, 1995 and 1994,
and the related consolidated statements of operations, stockholders' equity and
cash flows for the three years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statements presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Commodore
Environmental Services, Inc., and subsidiaries at December 31, 1995 and 1994,
and the results of their operations and their cash flows for the three years
then ended, in conformity with generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As discussed in note
P, the Company's significant operating losses, and deficits in working capital
and retained earnings raise substantial doubt about its ability to continue as a
going concern. Management's plans in regard to these matters are also described
in note P. The accompanying consolidated financial statements do not include any
adjustment that might result from the outcome of this uncertainty.
F-1
<PAGE> 21
Our audit, referred to above, also included the financial schedule
listed in answer to item 14(a)(2). In our opinion, such financial schedule
present fairly the information required to be set forth therein.
The Company established a captive insurance subsidiary in July, 1987,
for the purpose of providing liability insurance coverage to the environmental
services subsidiaries of the Company for asbestos abatement site work performed
during the period July, 1987 to January, 1989. The accompanying financial
statements at December 31, 1995 and 1994 reflect a reserve of $994,000 to offset
possible future claims. As discussed in note O, the subsidiary does not have
sufficient experience to accurately determine the estimate of possible claims
which may be filed. Accordingly, the financial statements do not include any
adjustments that might result from the outcome of these uncertainties.
TANNER + CO.
Salt Lake City, Utah
February 6, 1996
F-2
<PAGE> 22
COMMODORE ENVIRONMENTAL SERVICES, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
ASSETS
------
Current assets:
Cash (note B) $ 36,189 3,011,423
Certificates of deposit restricted (note B) 50,000 50,000
Other receivable 39,561 39,561
Notes and advances to related parties (note N) 7,500 8,544
Inventories 45,572 --
Prepaid assets 25,000 --
Restricted cash (note B) 1,792,900 291,622
----------- -----------
Total current assets 1,996,722 3,401,150
----------- -----------
Receivables, net (notes B, D, and H) 303,517 4,683,290
Furniture and equipment less accumulated
depreciation of $140,460 and $92,586
(note B) 1,053,983 715,233
Other investments (note F) 356,892 356,892
Note receivable - related party (note N) 125,000 125,000
Nonperforming assets (note E) 911,862 911,862
Other assets (notes B and G):
Goodwill, net 2,139,255 2,293,375
Deferred financing costs, net 288,000 384,000
Deferred acquisition costs, net 45,144 90,292
Patent costs, net 205,898 82,466
Other 33,600 25,556
----------- -----------
2,711,897 2,875,689
----------- -----------
$ 7,459,873 13,069,116
=========== ===========
</TABLE>
<PAGE> 23
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 669,887 1,039,179
Payables to related parties (note N) 1,085,490 1,294,829
Current portion - long-term debt (note H) -- 151,462
Insurance loss reserve (note O) 994,000 994,000
------------ ------------
Total current liabilities 2,749,377 3,479,470
------------ ------------
Bonds payable (note I) 4,000,000 4,000,000
Long-term debt (note H) 1,583,175
Commitments and contingencies (notes M and O) -- --
Stockholders' equity (note L):
Preferred stock, par value $.01 per share,
authorized 10,000,000 shares, issued
and outstanding 4,534,709 shares and
4,434,709 shares 45,347 44,347
Common stock, par value $.01 per share,
authorized 100,000,000 shares, issued
56,768,953 shares and 56,406,687
shares 567,689 564,067
Additional paid-in capital 19,209,445 19,386,555
Retained deficit (19,086,672) (15,963,185)
------------ ------------
735,809 4,031,784
Less 506,329 shares of treasury stock,
at cost (25,313) (25,313)
------------ ------------
Total stockholders' equity 710,496 4,006,471
------------ ------------
$ 7,459,873 13,069,116
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE> 24
COMMODORE ENVIRONMENTAL SERVICES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Revenues:
Income from commercial
real estate activities (notes B and D) $ 1,041,366 818,336 649,141
Income from refrigerant technology services 2,901 -- --
Interest income 44,445 46,464 28,360
Bad debt recovery (notes D and E) -- 147,545 125,000
Other income (note O) -- 835,922 --
----------- ----------- -----------
Total revenues 1,088,712 1,848,267 802,501
----------- ----------- -----------
Costs and expenses:
Research and development 1,990,395 1,036,892 --
General and administrative:
Salaries and wages 393,138 362,918 193,200
Travel 356,901 221,979 --
Amortization 232,556 219,521 --
Rent (notes K and N) 126,992 97,829 65,789
Professional Fees 122,497 240,721 76,867
Insurance 121,386 57,488 19,128
Consulting -- 50,443 214,000
Other 318,434 275,675 281,983
Increase in receivable realization
allowance -- -- 1,970,665
Interest 549,900 758,201 443,402
----------- ----------- -----------
Total expense 4,212,199 3,321,667 3,265,034
----------- ----------- -----------
Net loss before income taxes (3,123,487) (1,473,400) (2,462,533)
Income tax expense (note J) -- -- --
----------- ----------- -----------
Net loss $(3,123,487) (1,473,400) (2,462,533)
=========== =========== ===========
Net loss per share (note B) $ (.056) (.027) (.047)
=========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE> 25
COMMODORE ENVIRONMENTAL SERVICES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
PREFERRED
PREFERRED STOCK
STOCK PAR
SHARES VALUE
--------- ---------
<S> <C> <C>
Balance, January 1, 1993 -- --
Issuance of common stock for services -- --
Issuance of common stock for investment
in subsidiary -- --
Issuance of preferred stock for cash 925,000 $ 9,250
Dividends on preferred stock -- --
Dividends on redeemable preferred stock -- --
Net (loss) -- --
--------- ---------
Balance, December 31, 1993 925,000 9,250
Issuance of preferred stock less offering
costs for cash 1,975,000 19,750
Exchange of preferred stock for
preferred stock of subsidiary 1,534,709 15,347
Issuance of common stock -
exercise of options -- --
Issuance of common stock options -- --
Dividends on preferred stock -- --
Dividends on redeemable preferred stock -- --
Net (loss) -- --
--------- ---------
Balance, December 31, 1994 4,434,709 44,347
Issuance of preferred stock less offering
costs for cash 100,000 1,000
Issuance of common stock -
exercise of options -- --
Dividends on preferred stock -- --
Net loss -- --
--------- ---------
Balance, December 31, 1995 4,534,709 $ 45,347
========= =========
</TABLE>
<PAGE> 26
<TABLE>
<CAPTION>
COMMON COMMON
COMMON STOCK ADDITIONAL STOCK
STOCK PAR PAID-IN RETAINED HELD IN
SHARES VALUE CAPITAL DEFICIT TREASURY
------ ----- ------- ------- --------
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1993 46,536,687 465,367 15,535,698 (12,027,252) (25,313)
Issuance of common stock for services 7,300,000 73,000 2,000 -- --
Issuance of common stock for investment
in subsidiary 1,750,000 17,500 -- -- --
Issuance of preferred stock for cash -- -- 915,750 -- --
Dividends on preferred stock -- -- (6,514) -- --
Dividends on redeemable preferred stock -- -- (49,500) -- --
Net (loss) -- -- -- (2,462,533) --
----------- ----------- ----------- ----------- -----------
Balance, December 31, 1993 55,586,687 555,867 16,397,434 (14,489,785) (25,313)
Issuance of preferred stock less offering
costs for cash -- -- 1,595,250 -- --
Exchange of preferred stock for
preferred stock of subsidiary -- -- 1,519,362 -- --
Issuance of common stock -
exercise of options 820,000 8,200 4,000 -- --
Issuance of common stock options -- -- 25,000 -- --
Dividends on preferred stock -- -- (143,623) -- --
Dividends on redeemable preferred stock -- -- (10,868) -- --
Net (loss) -- -- -- (1,473,400) --
----------- ----------- ----------- ----------- -----------
Balance, December 31, 1994 56,406,687 564,067 19,386,555 (15,963,185) (25,313)
Issuance of preferred stock less offering
costs for cash -- -- 99,000 -- --
Issuance of common stock -
exercise of options 362,266 3,622 20,091 -- --
Dividends on preferred stock -- -- (296,201) -- --
Net loss -- -- -- (3,123,487) --
----------- ----------- ----------- ----------- -----------
Balance, December 31, 1995 56,768,953 567,689 19,209,445 (19,086,672) (25,313)
=========== =========== =========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE> 27
COMMODORE ENVIRONMENTAL SERVICES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(3,123,487) (1,473,400) (2,462,533)
Adjustments to reconcile net loss
to net cash used in operating
activities:
Depreciation and amortization 356,841 322,226 10,942
Gain on collection of note receivable (573,025) -- --
Bad debt recovery -- (147,545) (125,000)
Decrease in insurance loss reserve -- (835,922) --
Increase in receivable allowances -- -- 1,970,665
Issuance of stock for services -- 25,000 75,000
Increase in other receivables -- (39,561) --
Increase in inventories (45,572) -- --
Increase in prepaid assets (25,000) -- --
(Increase) decrease in other assets (8,044) 3,016 1,956
Increase (decrease) in accounts
payable and accrued liabilities (369,292) 440,634 319,329
Increase in patents (137,131) (66,890) --
----------- ----------- -----------
Net cash used in
operating activities (3,924,710) (1,772,442) (209,641)
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments received on receivables 3,242,382 4,047,819 615,043
Increase in receivables, net -- (920,172) (644,280)
Purchase of furniture and equipment (386,624) (707,766) --
Increase in other investments -- (110,017) (9,375)
Payments recovered on nonperforming assets -- 37,645 44,190
(Increase) decrease in notes and
advances to related parties 1,044 16,456 (150,000)
Increase in restricted cash (1,501,278) (11,461) (6,860)
Advances to subsidiary -- -- (403,715)
Payments received on notes receivable -- -- 325,000
Acquisition of Commodore Laboratories, formerly
A.L. Sandpiper, and CFC Technologies -- -- (18,216)
Increase in deferred acquisition costs -- -- (135,440)
----------- ----------- -----------
Net cash provided by (used in)
investing activities $ 1,355,524 2,352,504 (383,653)
----------- ----------- -----------
</TABLE>
F-6
<PAGE> 28
COMMODORE ENVIRONMENTAL SERVICES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
<TABLE>
<CAPTION>
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of preferred stock 100,000 1,975,000 925,000
Issuance of bonds -- 1,500,000 2,500,000
Payments of long-term debt (24,221) (2,454,337) (102,558)
Payment of preferred stock and dividend (296,201) (721,123) --
Offering costs of preferred stock -- (360,000) --
Payables to related parties, net (209,339) (142,474) 350,050
Increase in deferred financing costs -- (77,500) (392,500)
Increase of stock for cash 23,713 12,200 --
----------- ----------- -----------
Net cash provided by (used in)
financing activities (406,048) (268,234) 3,279,992
----------- ----------- -----------
Increase (decrease) in cash (2,975,234) 311,828 2,686,698
Cash, beginning of year 3,011,423 2,699,595 12,897
----------- ----------- -----------
Cash, end of year $ 36,189 3,011,423 2,699,595
=========== =========== ===========
</TABLE>
NONCASH INVESTING AND FINANCING ACTIVITIES:
During the year ended December 31, 1993, the Company acquired 90.05
percent of the outstanding common stock of Commodore Laboratories, formerly
A.L. Sandpiper, and subsidiary for 1,000,000 shares of the Company's common
stock. The Company also acquired 90.05 percent of the outstanding common
stock of CFC Technologies for $70,000 cash and the issuance of 750,000
shares of the Company's common stock. Assets and liabilities acquired are as
follows:
<TABLE>
<S> <C>
Cash $ 51,784
Furniture and equipment less accumulated depreciation 11,423
Patent costs 20,080
Other assets 4,476
Accounts payable and accrued expenses (115,734)
Payables related parties (409,170)
Preferred stock (1,554,081)
Advances from Commodore (403,715)
-----------
Net liabilities in excess of assets purchased (2,394,937)
Cash paid (70,000)
Issuance of common stock (17,500)
-----------
Goodwill purchased (2,482,437)
1994 adjustment for revaluation of accrued liabilities 25,236
-----------
$(2,457,201)
===========
</TABLE>
F-7
<PAGE> 29
COMMODORE ENVIRONMENTAL SERVICES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
NONCASH INVESTING AND FINANCING ACTIVITIES - CONTINUED:
In December 1994, the Company exchanged 977 shares of series "A" (par
value $1,000) and 557,709 of the 577,081 shares of series "B" (par value $1)
outstanding preferred stock in Commodore Laboratories, formerly A.L.
Sandpiper, for 1,534,709 shares of Commodore series "B" preferred stock (par
value $.01) totaling $1,534,709. In addition, the Company accrued $19,372 of
accrued liabilities for the 19,372 shares of series "B" (par value $1)
preferred stock that was not exchanged.
During 1995, the Company released a property in Illinois, in which it
held a security interest, to be sold in exchange for pay off of the mortgage
note payable of $1,710,416, which the Company owed. The balance outstanding
on the note receivable at the date of payoff was $1,137,391 and the Company
recognized a gain on the collection of the receivable of $573,025.
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Operations reflect actual amounts paid for interest and income taxes as
follows:
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Interest $454,000 662,000 427,000
======== ======== ========
Income taxes $ 81,000 90,000 40,000
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-8
<PAGE> 30
COMMODORE ENVIRONMENTAL SERVICES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - BACKGROUND
Commodore Environmental Services, Inc., and subsidiaries (the
"Company"), from January 1, 1991 to December 31, 1995, has been engaged
in real estate operations. Effective December 22, 1993, the Company
acquired 90.05 percent of the common stock in two entities (technology
entities) which own technology relating to the destruction of
polychlorinated biphenyls and chlorofluorocarbons. Since acquisition,
the Company has also been engaged in activities relating to these
technologies.
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of
Commodore Environmental Services, Inc., and its wholly-owned
subsidiaries, which are over 50% owned. All significant intercompany
balances and transactions have been eliminated in consolidation.
Effective December 22, 1993, the Company acquired 90.05
percent of the issued and outstanding common stock of Commodore
Laboratories, Inc., formerly A.L. Sandpiper, and subsidiary (Commodore
Labs) and 90.05 percent of the outstanding common stock of CFC
Technologies, Inc., (CFCT). The acquisitions are accounted for as a
purchase. The consolidated financial statements include the operations
of the Company and its subsidiaries for all years presented and
Commodore Labs and CFCT from December 22, 1993 to December 31, 1995.
Separate operations of Commodore Labs and CFCT for the period December
22, 1993 through December 31, 1993 are not presented separately as the
amounts are immaterial.
CASH AND CASH EQUIVALENTS
The Company considers cash and highly liquid debt instruments
with maturities of three months or less to be cash equivalents.
CERTIFICATES OF DEPOSIT
At December 31, 1995 and 1994, the Company maintained $50,000
in certificates of deposit which is security for a letter of credit.
RESTRICTED CASH
Effective October 1995, the Company is required to maintain,
in an interest-bearing escrow account, $1,000,000 designated as
collateral security for the repayment of principal and interest of the
Convertible Bonds. In addition, the Company maintains $792,900 and
$291,622 as of December 31, 1995 and 1994, respectively, in an
interest-bearing deposit account pursuant to the Harvest American
Insurance Company settlement agreement.
F-9
<PAGE> 31
COMMODORE ENVIRONMENTAL SERVICES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
REVENUE RECOGNITION
REAL ESTATE
Revenues are recognized from sales of real estate on the
installment method. Cash receipts are apportioned between cost recovery
and profit recognition in the same ratio that cost and profit bore to
the original sales price.
INTEREST INCOME
The Company recognizes interest income on notes receivable
when earned. The recognition of interest income on notes receivable is
discontinued when management determines that the continual accrual of
interest may exceed the underlying security of the receivables.
REALIZATION ALLOWANCE
Receivable losses are accounted for under the allowance
method. Losses and recoveries are charged or credited directly to the
allowance. The allowance is adjusted so that the net mortgage
receivable is valued at its estimated recovery amount. The difference
between the original mortgage notes receivable with the accrued
interest and the estimated fair market value of the underlying security
is the value of the allowance. While management uses the best
information available on which to base estimates, future adjustments to
the reserve may be necessary if economic conditions differ
substantially from the assumptions used by management.
INVENTORIES
Inventories consist of materials and supplies, including
contaminated agents, stated at cost, on a first-in, first-out basis,
and labor costs to purify the contaminated agents preparing them for
resale. Inventories are stated at the lower of cost or market.
FURNITURE AND EQUIPMENT
Furniture and equipment is carried at cost. Improvements which
substantially increase the useful lives of the assets are capitalized.
Maintenance and repairs are expensed as incurred. Upon retirement or
disposal, the related cost and accumulated depreciation are removed
from the respective accounts and any gain or loss is credited or
charged to income.
Provisions for depreciation are computed on the straight-line
method based on the estimated useful lives of the assets.
F-10
<PAGE> 32
COMMODORE ENVIRONMENTAL SERVICES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
AMORTIZATION OF OTHER ASSETS
The Company has included in other assets patent costs,
deferred acquisition costs, goodwill, and deferred financing costs.
These assets are being amortized over the following estimated useful
lives:
<TABLE>
<S> <C>
Patents 17 years
Goodwill 15 years
Deferred financing costs 5 years
Deferred acquisition costs 3 years
</TABLE>
INSURANCE LOSS RESERVE
Insurance loss reserves are estimates of the ultimate cost of
both reported and unreported claims incurred and unpaid at year-end
(see note O).
LOSS PER SHARE
Loss per share is computed based on the weighted average
number of shares outstanding. Shares used to determine loss per share
exclude common stock equivalents as they are antidilutive. Accordingly,
loss per share is based on weighted average shares outstanding of
56,212,000 for the year ended December 31, 1995, 55,535,000 for the
year ended December 31, 1994 and 52,450,000 for the year ended December
31, 1993.
CONCENTRATION OF CREDIT RISK
The Company's principal operations and substantially all
revenues are from collections on mortgage notes receivable. These
mortgage notes receivables are from real estate transactions in
Illinois and North Carolina. As discussed in note D and E, the Company
has a second position security interest in the Illinois property and
the receivable on the North Carolina property is unsecured.
The Company maintains its cash in bank deposit accounts which,
at times, may exceed federally insured limits. The Company has not
experienced any losses in such account. The Company believes it is not
exposed to any significant credit risk on cash and cash equivalents.
INCOME TAXES
The Company provides for deferred income taxes on temporary
differences which represent the tax effects on transactions reported
for tax purposes in periods different than for book purposes.
F-11
<PAGE> 33
COMMODORE ENVIRONMENTAL SERVICES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
INCOME TAXES - CONTINUED
Temporary differences relate primarily to recognizing income
on mortgage notes receivable and nonperforming assets, the realization
allowance, and the income loss reserve.
RECENT ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board has issued Statement
of Financial Accounting Standard No. 121 "Accounting for Long Lived
Assets" and No. 123 "Accounting for Stock Based compensation."
Statement Nos. 121 and 123 are effective for years beginning after
December 15, 1995. The effect of adoption of Statement Nos. 121 and 123
are not anticipated to have a material impact on the Company's
financial statements.
ACCOUNTING ESTIMATES
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expense during the reporting period. Actual results could
differ from those estimates.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of financial instruments is determined by
reference to various market data and other valuation techniques as
appropriate. Financial instruments subject to possible material market
variations from the recorded book value are the convertible bonds and
notes receivable. There are no material differences in these financial
instruments from the recorded book value as of December 31, 1995.
RECLASSIFICATIONS
Certain amounts in the 1993 and 1994 presentation have been
reclassified to conform with the 1995 presentation.
NOTE C - ACQUISITION
The Company entered into an agreement which was completed
December 22, 1993, to acquire 90.05 percent of the issued and
outstanding shares of voting common stock of each Commodore Labs and
CFCT. Commodore Labs and CFCT are the owners or licensees of certain
technologies relating to the destruction of polychlorinated biphenyls
and chlorofluorocarbons (the Technologies).
F-12
<PAGE> 34
COMMODORE ENVIRONMENTAL SERVICES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE C - ACQUISITION - CONTINUED
In connection with the Commodore Labs acquisition, the holders
of Commodore Labs common stock received 577,081 shares of Commodore
Labs non-voting series "B" preferred stock par value $1.00 and 5 year
warrants to purchase an aggregate of 3,000,000 shares of Commodore
common stock at an exercise price of $.05 per share. Albert Abel
(Abel), the president of Commodore Labs, retained ownership of 9.95
percent of the Commodore Labs common stock and received 1,000,000
shares of Commodore common stock. In addition, Commodore issued to Abel
and Allison L. Augur, Jr. (Augur), the former president of CFCT,
non-qualified stock options to purchase an aggregate of 1,500,000
shares of Commodore common stock at the rate of 20 percent per year at
an exercise price of $.10 per share.
At the date of acquisition, Commodore Labs had 977 shares of
its series "A" preferred stock par value $1,000 which was not
exchanged.
In December, 1994, the Company extended an agreement to the
holders of Commodore Labs Series "A" and "B" preferred stock to
exchange their Commodore Labs preferred stock for Commodore Series "B"
preferred stock. See description of Series "B" Preferred Stock in Note
L. The Company received acceptance from shareholders holding 977 shares
of series "A" preferred stock and 557,709 of the 577,081 shares of
series "B" preferred stock and accrued a liability of $19,372 for those
shareholder that had not returned the agreement.
In connection with the closing of the CFCT acquisition,
Commodore acquired 90.05 percent of the outstanding shares of CFCT
common stock, with the remaining 9.95 percent of such common stock
being held by Abel, through the issuance of 750,000 shares of its
common stock to Augur and, in addition, paid the aggregate sum of
$70,000 to Abel and Augur.
The Company has not recorded minority interest inasmuch as
Commodore Labs and CFCT had a deficit in stockholders' equity at the
date of acquisition and has a deficit in stockholders' equity at
December 31, 1995.
In connection with the closing, Commodore entered into a
license agreement with Commodore Labs and a sublicense agreement with
CFCT pursuant to which all patents, confidential information and
know-how owned by Commodore Labs and licensed by Commodore Labs to CFCT
were acquired by Commodore. These agreements provide that royalties of
5 percent of the revenues generated by the Commodore Labs Technologies
will be payable to Commodore Labs.
F-13
<PAGE> 35
COMMODORE ENVIRONMENTAL SERVICES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE D - RECEIVABLES
The Company is the holder of certain mortgage notes receivable
and other related receivables at December 31, 1995 and 1994, which
arose through the sale of certain properties.
The purchasers of the properties have all been limited
partnerships for whom the majority stockholder of the Company was
initially the primary promoter. The majority shareholder is no longer
directly affiliated with the limited partnerships, except that certain
general partners are affiliated with companies owned by the majority
stockholder.
The Company has adopted a position whereby a portion of cash
received, under the terms of the mortgage receivables, are being
applied to interest receivable. Under this position, there are not
current principal maturities. During 1995, the Company received cash
payments of $3,242,382 and payments in the form of direct payoff of the
mortgage note due on the property of $1,710,416. During 1994, the
Company received $4,047,819 in cash payments on the mortgage
receivables. Upon collection of all unpaid interest and other
receivables the Company will apply payments to the principal and
amortization of the deferred gain.
The components of notes receivable are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------
1995 1994
----------- -----------
<S> <C> <C>
Mortgage note receivable at an interest rate of 13.25%. Annual
payments range from $891,434 in 1995 to $1,015,741 in 1997
with the remaining amount due in 1998,
secured by real estate $ -- 3,800,000
Accrued interest receivable 1,231,332 2,410,347
Other receivables related to the obligor
of the mortgage receivable 80,000 80,000
Deferred income on sale -- (1,884,357)
Realization allowance (1,311,332) --
----------- -----------
Net receivable -- 4,405,990
----------- -----------
</TABLE>
F-14
<PAGE> 36
COMMODORE ENVIRONMENTAL SERVICES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE D - RECEIVABLES - CONTINUED
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------
1995 1994
----------- -----------
<S> <C> <C>
Mortgage note receivable with interest at 6% to be paid in
monthly installments of $29,257 along with additional related
receivables including interest receivable
and management fees, unsecured 7,135,469 7,009,685
Note receivable, with interest at 10%,
in various installments through 2002, unsecured 274,517 277,300
Realization allowance (7,135,469) (7,009,685)
----------- -----------
Net receivable 274,517 277,300
----------- -----------
Other receivables 29,000 --
----------- -----------
Total mortgage and notes receivable
net of realization allowance $ 303,517 4,683,290
=========== ===========
</TABLE>
The balance due from the debtors at December 31, 1995 of
$8,750,318 is now unsecured. Management has adjusted the realization
allowance to reflect management's estimate of the net realizable value
of the receivable. On December 30, 1994, the Company entered into an
agreement with one of the debtors whereby the debtor would pay to the
Company all future proceeds from a note in the amount of $277,300 which
the debtor received as proceeds from the sale of the property.
The realization allowance for these mortgage receivables
reduced the net receivable to management's estimate of the value of the
real estate securing the receivables. In December, 1993, based upon the
poor economic conditions of the real estate industry, the Company
reevaluated the net realizable value of these receivables and increased
the realization allowance by $1,970,665. Effective in 1995, the
receivables are unsecured. Payments have been made in accordance with
the agreement on the remaining receivables and the balance appears
collectable. No additional realization allowance has been established.
F-15
<PAGE> 37
COMMODORE ENVIRONMENTAL SERVICES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE E - NON-PERFORMING ASSETS
The Company has a mortgage note receivable and other related
receivables which have an aggregate net book value of $911,862 at
December 31, 1995 and 1994, respectively, which are not performing
according to the terms of the note and receivables. The Company is in a
second position on the real estate securing the mortgage note
receivable. At December 31, 1995 and 1994, the Company has a
realization allowance of $1,481,536 and $1,321,024, respectively, on
the mortgage note receivable and related receivables based upon the
estimated recoverability of the receivables and the underlying value of
the security. The Company is not recognizing interest income on the
receivables and is applying all payments received as a reduction of
accrued interest receivable. The Company received payments of $-0- and
$37,743 relating to the nonperforming assets for the years ended
December 31, 1995 and 1994, respectively.
NOTE F - OTHER INVESTMENTS
In March, 1991, the Company invested $200,000 for a joint
ownership interest in an oil and gas field located in Oklahoma. The
Company had a 14.0625 percent working interest in the joint venture.
The investment is accounted for on the cost basis. The Blum Family
Trust (BFT), an entity in which the Company's Chairman of the Board,
Chief Executive Officer and Majority Stockholder serves as trustee, had
a majority interest in the same oil and gas field. The Field is
currently producing oil, and revenues generated are being reinvested to
further the development of the Field. The Company invested an
additional $9,375 from its portion of operating income in the venture
in 1993.
In 1994, the Company exchanged its interest in the above
property for a joint ownership interest in an oil and gas field located
in Louisiana (the Louisiana Property). The Company has a 22.67 percent
working interest in the Louisiana Property. The Louisiana Property is
approximately 10,000 acres which contain a number of producing wells.
Some wells need remedial work and other wells need minor work to be
brought back on line. In addition, a geological and geophysical study
on the Louisiana Property will be performed to recommend new drilling
locations. The Company's portion of revenues and expenses relating to
the property were $4,300 and $13,600, respectively, in 1995. The
investment is accounted for on the equity method. Condensed financial
statements are not presented as the investment and its operations are
immaterial to the Company.
In 1994, BFT exchanged its interest in the Oklahoma Field for
additional ownership interest in the Louisiana Property. BFT originally
had a 45 percent interest in the Louisiana Property and has increased
its ownership to 56.33 percent as a result of this transaction.
F-16
<PAGE> 38
COMMODORE ENVIRONMENTAL SERVICES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE G - OTHER ASSETS - CONTINUED
The Company has other assets consisting of costs incurred in
obtaining patents, acquisition costs, financing costs, and goodwill
relating to the purchase of Commodore Labs and CFCT (see notes A and
C).
The amount and accumulated amortization is as follows at
December 31, 1995:
<TABLE>
<CAPTION>
ACCUMULATED NET
ITEM AMOUNT AMORTIZATION BALANCE
---- ------ ------------ -------
<S> <C> <C> <C>
Goodwill $2,457,201 317,946 2,139,255
Deferred financing costs 480,000 192,000 288,000
Deferred acquisition costs 135,440 90,296 45,144
Patent costs 224,906 19,008 205.898
Other assets not amortizable 33,600 -- 33,600
---------- ---------- ----------
$3,331,147 619,250 2,711,897
========== ========== ==========
</TABLE>
The amount and accumulated amortization is as follows at
December 31, 1994:
<TABLE>
<CAPTION>
ACCUMULATED NET
ITEM AMOUNT AMORTIZATION BALANCE
---- ------ ------------ -------
<S> <C> <C> <C>
Goodwill $2,457,201 163,826 2,293,375
Deferred financing costs 480,000 96,000 384,000
Deferred acquisition costs 135,440 45,148 90,292
Patent costs 88,225 5,759 82,466
Other assets not amortizable 25,556 -- 25,556
---------- ---------- ----------
$3,186,422 310,733 2,875,689
========== ========== ==========
</TABLE>
F-17
<PAGE> 39
COMMODORE ENVIRONMENTAL SERVICES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE H - LONG-TERM DEBT
Long-term obligations consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1995 1994
----- ----------
<S> <C> <C>
Notes payable to financial and insurance companies:
First mortgage note payable in monthly installments of $24,946
including interest through February, 2003 with interest at 8.9
percent, secured by mortgage note receivable and the
underlying
real estate $-- 1,734,637
----- ----------
Total -- 1,734,637
Less current maturities -- (151,462)
----- ----------
Total long-term $-- 1,583,175
===== ==========
</TABLE>
NOTE I - BONDS PAYABLE
In 1993 and 1994, the Company issued convertible bonds
aggregating in the principal amount of $4,000,000, pursuant to a
private offering. The bonds carry an interest rate of 8.5 percent with
the interest payable quarterly. Maturity of the bonds is in 1998.
During 1995, the collateral agreement associated with the convertible
bonds was amended. The bonds are secured by an amount of unissued
shares of the Company's common stock such that the market price equals
125 percent of the outstanding principal amount of the bonds (8,000,000
shares at December 31, 1995), whereby if the Company defaults on
payment, the borrower has the right to have the certificates endorsed
by the Company. In addition, the Company must maintain $1,000,000 in
cash in a bank account as additional security. As partial consideration
to terminate the original collateral agreement, the Company issued
warrants to purchase 2,000,000 shares of the Company's common stock at
a price of $.68 per share through December 2000.
The bonds, at the holders option, are convertible at any time
into common stock of the Company at the rate of $1.00 of bond principal
value for each share of common stock. The Company has paid an aggregate
commission of $480,000 in cash plus 5 year warrants to purchase
2,233,332 shares upon complete issuance of the $4,000,000 in bonds, pro
rated for the principal amount of such bonds actually sold. Subsequent
to when the bid price of the Company's common stock exceeds $1.25 per
share, the bonds are redeemable and repayable by the Company at the
face amount thereof plus accrued interest. The bonds also have
detachable 5 year warrants, with an exercise price of $.10 per share,
which allow the holders to purchase one share of the Company's common
stock for every $8.00 of bond principal. As a result, the Company has
issued to bond holders warrants to purchase 500,000 of the Company's
common stock at $.10 per share. The common shares acquired upon
conversion of the bonds and exercise of the detachable warrants are
subject to "piggy back" registration rights.
F-18
<PAGE> 40
COMMODORE ENVIRONMENTAL SERVICES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE J - INCOME TAXES
The Company provides for deferred income taxes on temporary
differences which represent tax effects of transactions reported for
tax purposes in periods different than for book purposes.
The difference between the income tax (benefit) at statutory
rates for 1995 and 1994 and the amount presented in the financial
statements is the change in the tax valuation allowance which offsets
the income tax benefit of the operating loss.
Deferred tax assets at December 31, 1995 and 1994 are as
follows:
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Realization allowance $ 2,870,000 2,380,000
Insurance loss reserve 350,000 350,000
Operating loss carryforwards 4,650,000 3,580,000
----------- -----------
7,870,000 6,310,000
Valuation allowance (7,870,000) (6,310,000)
=========== ===========
-- --
=========== ===========
</TABLE>
The Company has net operating loss carryforwards of
approximately $13,672,000 which expire in the years 1996 through 2010.
The amount of net operating loss carryforward that can be used in any
one year will be limited by the applicable tax laws which are in effect
at the time such carryforward can be utilized. If certain substantial
changes in the Company's ownership should occur, there would be an
annual limitation of the amount of NOL carryforwards which could be
utilized.
F-19
<PAGE> 41
COMMODORE ENVIRONMENTAL SERVICES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE K - OPERATING LEASES
The Company is committed under noncancellable operating leases
for office space and other office equipment. Future maturities under
the leases for the next five years are as follows:
<TABLE>
<S> <C>
1996 $ 62,927
1997 64,941
1998 50,868
1999 4,140
2000 1,380
---------
$184,256
=========
</TABLE>
NOTE L - STOCKHOLDERS' EQUITY
ISSUANCE OF COMMON STOCK
During 1995, 362,266 options for the purchase of common stock
were exercised. Of the options exercised, 60,000 were at $.01 per
share, 100,000 were at $.03 per share, 2,266 were at $.05 per share and
200,000 were at $.10 per share.
During 1994, 820,000 options for the purchase of common stock
were exercised. Of the options exercised, 620,000 shares were at $.01
per share and 200,000 shares were at $.03 per share.
On February 16, 1993, Paul E. Hannesson, a former principal
shareholder, officer and director of the Company, at the time the
services were rendered, received for $75,000 in services rendered to
the Company in connection with acquisitions, including those described
below, an aggregate of 7,300,000 shares of the Company's common stock.
On December 22, 1993, in connection with the acquisition of
Commodore Labs and CFCT, the Company issued 1,000,000 shares of the
Company's common stock to the president of Commodore Labs and 750,000
shares of the Company's common stock to one of the CFCT shareholders.
F-20
<PAGE> 42
COMMODORE ENVIRONMENTAL SERVICES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE L - STOCKHOLDERS' EQUITY - CONTINUED
ISSUANCE OF PREFERRED STOCK
In December 1994, the board of directors approved the issuance
and sale of the Company's series "B" preferred stock.
The Series "B" preferred stock pays dividends quarterly at a
rate of $.08 per annum per share accruing from January 1, 1998 and is
callable at any time the bid price of the Company's common stock equals
or exceeds $3.00 per share at the call price of 110 percent of the bid
price on date of call.
In December, 1994, the Company extended an agreement with
Commodore Labs series "A" and "B" preferred stock holders to exchange
said stock for the Company's series B preferred stock. In connection
therewith, the Company desired to issue 977,000 shares of series "B" to
the holder of Commodore Labs series "A" preferred stock and 577,081
shares of series "B" to the holder of Commodore Labs series "B"
preferred stock. All but 19,372 shares of the Commodore Labs series "B"
preferred stock was exchanged.
On November 10, 1993, the board of directors approved the
issuance and sale of 3,000,000 shares of the Company's series "AA"
preferred stock with five year warrants to acquire 6,000,000 shares of
the Company's common stock at an exercise price of $.10 per share. The
series "AA" preferred stock pays dividends at a rate of $.10 per annum
per share and is callable at any time the bid price of the Company's
common stock equals or exceeds $1.25 per share, at the call price of
$1.00 per share.
In 1993, 1994, and 1995 the Company sold 3,000,000 shares of
series "AA" preferred stock for $3,000,000. In connection with the
issuance of 3,000,000 shares of the preferred stock, the Company paid
commissions of $360,000, and issued 5 year warrants to purchase 550,000
shares of its common stock of an exercise price of $.10 per share.
REDEEMABLE PREFERRED STOCK
The Company's majority stockholder owned redeemable series "A"
preferred stock of the Company at December 31, 1993. The balance of
redeemable series "A" preferred stock including dividends was $566,633
at December 31, 1993. The dividends accrue at $.15 per annum per share.
Accrued dividends were $49,500 for 1993 and $10,868 in 1994 prior to
the redeemable preferred stock being redeemed in May, 1994.
F-21
<PAGE> 43
COMMODORE ENVIRONMENTAL SERVICES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE M - STOCK OPTIONS AND STOCK WARRANTS
STOCK OPTIONS
On January 28, 1987, the Company adopted the 1987 Stock Option
Plan (the Plan), reserving 10,000,000 shares of common stock for
issuance in connection with the Plan. Adoption of the Plan was approved
at the annual meeting of shareholders on June 26, 1987. Under the Plan,
the Company can grant both incentive stock options (ISO's) and
nonqualified stock options.
The 1987 Stock Option Plan authorized the granting, to key
employees, of incentive stock options and nonqualified stock options to
purchase shares of the Company's common stock at fair market values at
dates of grant. Options generally are exercisable on a pro rata basis
over a five year period. On December 30, 1992, 300,000 options were
granted at an exercise price of $.01 per share under the Plan. During
1993 and 1994, options to purchase a total of 120,000 shares were
exercised.
On November 22, 1993, options to purchase an aggregate of
500,000 shares of common stock were granted to an employee at an
exercise price of $.03 per share, of which 200,000 were exercised in
1994. The Company also granted an option to purchase an aggregate of
100,000 shares of common stock to a non-employee at an exercise price
of $.10 per share.
In connection with the acquisition by the Company of Commodore
Labs and CFCT in 1993, the Company issued nonqualified stock options to
purchase an aggregate of 1,500,000 shares of the Company's common stock
at the rate of 20 percent per year at an exercise price of $.10 per
share.
No compensation expense was recognized by the Company relating
to the aforementioned options as the market value equalled the exercise
price at the date of grant in all situations.
In August 1994, options to purchase an aggregate of 500,000
shares of common stock were granted to a nonrelated party at an
exercise price of $.01 per share, for future services. An expense of
$10,000 was recognized by the Company as a result of this transactions
as the market value exceeded the exercise price at the date of grant by
$.02 per share. These options were exercised in 1994.
In 1995, options to purchase an aggregate if 480,000 shares of
common stock were granted to employees at an exercise price of $.50 per
share, exercisable vesting in one-third increments.
F-22
<PAGE> 44
COMMODORE ENVIRONMENTAL SERVICES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE M - STOCK OPTIONS AND STOCK WARRANTS - CONTINUED
STOCK OPTIONS - CONTINUED
No compensation expense was recognized by the Company relating
to the aforementioned options as the market value equalled the exercise
price at the date of grant in all situations.
The following table presents the outstanding options at
December 31, 1995.
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF
OPTIONS GRANTED EXERCISED OPTIONS EXERCISE EXPIRATION
1994 1995 1995 1995 PRICE DATE
---------- ------- --------- --------- -------- ----------
<S> <C> <C> <C> <C> <C>
1,600,000 -- 200,000 1,400,000 $ .10 December, 1998
180,000 -- 60,000 120,000 $ .01 December, 1997
300,000 -- 100,000 200,000 $ .03 December, 1997
-- 480,000 -- 480,000 $ .50 December, 1998
--------- --------- --------- ---------
2,080,000 480,000 360,000 2,200,000
========= ========= ========= =========
</TABLE>
STOCK WARRANTS
During 1993 and 1994, as part of its issuance of its
$4,000,000 convertible bonds, the bond holders received one warrant to
purchase one share of common stock at an exercise price of $.10 per
share for each $8 of bond principal. Attached to the Series "AA"
preferred stock sold were warrants to acquire two shares of the
Company's common stock for each share of preferred stock at an exercise
price of $.10 per share.
In addition, in connection with the bond and preferred stock
offerings, warrants to purchase 2,783,332 shares of common stock were
issued to nonrelated third parties at an exercise price of $.10 per
share.
As part of the Company's issuance of 3,000,000 shares of
series "AA" preferred stock, the Company issued five year warrants to
purchase 6,000,000 shares of the Company's common stock at an exercise
price of $.10 per share.
As part of its acquisition in 1993 of Commodore Labs and CFCT,
the Company issued warrants to acquire shares of the Company's common
stock totaling 3,000,000 shares at $.05 per share. During 1995,
warrants to acquire 2,266 shares were exercised.
F-23
<PAGE> 45
COMMODORE ENVIRONMENTAL SERVICES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE M - STOCK OPTIONS AND STOCK WARRANTS - CONTINUED
STOCK WARRANTS - CONTINUED
In October, 1994, the Company entered into an employee
agreement and issued a warrant to purchase 500,000 shares of the
Company's common stock at an exercise price of $.14 per share
exercisable 20 percent per year over a five year period ending October,
1999.
An expense of $15,000 was recognized by the Company as a
result of this transaction as the market value exceeded the exercise
price at the date of grant by $.03 per share.
Outstanding warrants at December 31, 1995 are as follows:
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF
WARRANTS GRANTED EXERCISED WARRANTS EXERCISE EXPIRATION
1994 1995 1995 1995 PRICE DATE
---------- ---------- ---------- ---------- ------- -------
<S> <C> <C> <C> <C> <C>
3,000,000 - 2,266 2,997,734 $.05 July 1, 1998
9,283,332 - - 9,283,332 $.10 1998 - 1999
500,000 - - 500,000 $.14 October, 1999
- 2,000,000 - 2,000,000 $.68 December, 2000
--------- --------- ----- ----------
12,783,332 2,000,000 2,266 14,781,066
========== ========= ===== ==========
</TABLE>
NOTE N - TRANSACTIONS WITH RELATED PARTIES
The Company had demand payables to Kraft Capital Corporation
(Kraft) of $655,964 and $859,795 as of December 31, 1995 and 1994,
respectively. Commodore's majority stockholder is the sole stockholder
of Kraft. The Company was allocated rental charges of $58,015 in 1995,
$63,184 in 1994 and $65,789 in 1993 from an affiliate of the majority
stockholder.
A subsidiary of the Company has payables to shareholders of
the Company totaling $428,677 at December 31, 1995 and 1994.
F-24
<PAGE> 46
COMMODORE ENVIRONMENTAL SERVICES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE N - TRANSACTIONS WITH RELATED PARTIES - CONTINUED
The Company has a note receivable from a stockholder of the
Company for $125,000 at December 31, 1995 and 1994. The note is
interest bearing at 6 percent and due December, 1998. The note is
secured by certain subsidiary notes and advances payable to the
individuals.
The Company has accrued interest from a 10 percent demand note
payable to a relative of the majority stockholder. The unpaid balance
of accrued interest was $-0- and $5,508 at December 31, 1995 and 1994,
respectively.
NOTE O - COMMITMENTS AND CONTINGENCIES
EMPLOYMENT AGREEMENTS
The Company has employment agreements with six corporate
officers. Aggregate minimum payments under the employment agreements
are as follows:
<TABLE>
<CAPTION>
YEAR
----
<S> <C>
1996 $ 702,000
1997 419,000
1998 85,000
-----------
Total $ 1,206,000
===========
</TABLE>
F-25
<PAGE> 47
COMMODORE ENVIRONMENTAL SERVICES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE O - COMMITMENTS AND CONTINGENCIES - CONTINUED
LITIGATION
Harvest American
In July 1987, the Company established Harvest American
Insurance Company, a wholly-owned subsidiary of the Company, licensed
by the state of Vermont as a "captive" insurance company. Harvest
issued "occurrence" based insurance policies to each of the Company's
former asbestos abatement subsidiaries and not to any other persons or
entities. An occurrence-based policy insures against claims arising at
any time in the future based upon events which occurred while the
policy was in effect. The policies were in effect from July 1987
through January 1989. The operating subsidiaries of the Company paid
premiums to Harvest based upon a percentage of sales and had coverage
through January 1989. Beginning in January 1989, in response to greater
availability of "occurrence type" insurance, the subsidiaries obtained
third party asbestos abatement related general liability insurance from
unrelated insurance companies. Harvest no longer issues new policies.
The maximum exposure under the policy is $5,000,000 in the aggregate.
In December, 1994, the Department of Banking and Insurance in
Vermont (the Department) and the Company entered into a Settlement
Agreement with respect to an order served by the Department against
Harvest in November 1991. The Agreement requires the Company to fund
Harvest an additional $250,000. Those funds will be deposited into a
Harvest interest bearing account. As of December 31, 1995, Harvest had
$792,900 in an interest bearing account and an amended $4,514,683
intercompany demand note made to the order of Harvest by the Company.
The Department and/or Harvest have the right use proceeds from the
reserve account to purchase reinsurance in order to eliminate all or
part of the insurance risk.
In addition, the Company will indemnify and defend Harvest
against any claims made against Harvest. There is currently one claim
relating to a fire which occurred at a job site which Harvest insured.
This claim is currently being investigated by the Company.
In 1994, the Company had an independent actuary evaluate the
loss reserve required as of December 31, 1994. The actuary has
determined that a loss reserve of $994,000, which includes the cash
already on deposit with the State of Vermont and the additional cash
required to be paid, is adequate in connection with the policies issued
by Harvest. The Company thereby reduced its loss reserve to $994,000.
OTHER
The Company has several other matters of litigation arising
from operations of the Company. Management is defending these claims
and believes the outcome of these will not have a material effect on
the financial condition of the Company.
F-26
<PAGE> 48
COMMODORE ENVIRONMENTAL SERVICES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(P) GOING CONCERN
The Company has sustained significant operating losses in
1995, 1994, and 1993. In addition, the Company has significant deficits
in working capital and retained earnings. These factors create an
uncertainty about the Company's ability to continue as a going concern.
The Company intends to obtain external financing through a
public offering of a subsidiary in 1996. The ability of the company to
continue as a going concern is dependent on the Company obtaining
external financing and attaining future profitable operations. The
financial statements do not include any adjustment that might be
necessary if the Company is unable to continue as a going concern.
(Q) SUBSEQUENT EVENTS
In March 1996, the Company formed a new subsidiary which
intends to file a registration statement on Form S-1 with the
Securities and Exchange Commission in the second quarter of 1996. If
the new subsidiary is successful in completing the offering, the
Company will have sufficient working capital to continue its research
and development and commercialization of its environmental
technologies. If the offering is successful, the Company will acquire
the remaining 9.95% of all subsidiaries owned by Al Abel for a purchase
price of $3 million, of which $750,000 represents cash paid at closing
and a $2,250,000 note payable with a portion of the interest payable
quarterly and the balance along with principal payable after 10 years.
F-27
<PAGE> 49
COMMODORE ENVIRONMENTAL SERVICES, INC.
AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
ADDITIONS
BALANCE AT CHARGED TO CHARGED TO BALANCE AT
BEGINNING OF COSTS AND BAD DEBT END OF
DESCRIPTION YEAR EXPENSES(1) EXPENSE DEDUCTIONS(2) PERIOD
----------- ------------- ----------- ---------- ------------ ----------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1995: Deducted from asset accounts:
Realization allowance on receivables $ 7,009,685 1,437,116 -- -- 8,446,801
=========== =========
Realization on nonperforming assets $ 1,321,024 160,512 -- -- 1,481,536
=========== =========
Year ended December 31, 1994: Deducted from asset accounts:
Realization allowance on receivables $ 5,290,617 1,866,613 -- 147,545(2) 7,009,685
=========== =========
Realization of allowance on nonperforming assets $ 1,160,512 160,512 -- -- 1,321,024
=========== =========
Year ended December 31, 1993: Deducted from asset accounts:
Realization allowance on receivables $ 4,026,152 293,800 970,665 -- 5,290,617
=========== =========
Realization allowance on nonperforming assets $ -- -- 1,160,512 -- 1,160,512
=========== =========
Allowance on note receivable $ 125,000 -- -- 125,000(2) --
=========== =========
</TABLE>
1. The allowance is reflected as a reduction of "mortgage note and related
receivables."
2. Management determined amount was collectable.
F-28
<PAGE> 50
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The directors and executive officers of the Company are as forth below:
<TABLE>
<CAPTION>
YEAR ELECTED
OR
APPOINTED
NAME AGE DIRECTOR CAPACITIES SERVED
---- --- -------- -----------------
<S> <C> <C> <C>
Bentley J. Blum* 54 1984 Chairman of the Board
Paul E. Hannesson** 55 1993 Chief Executive Officer, President and
Director
Jerry Karlik*** 41 1985 Vice President, Treasurer and Director
Andrew P. Oddi**** 34 1989 Vice President-Finance & Administration,
Principal Financial Officer and Director
Melissa C. Berkowitz ***** 48 Secretary
</TABLE>
* Mr. Blum's current tenure as Chairman of the Board (and his
tenure as President and Chief Executive Officer through
February 1993) began in August 1990. He has been a Director of
the Company since 1984.
** Mr. Hannesson was appointed President and Chief Executive
Officer in February 1993.
*** Mr. Karlik has served as Vice President and Treasurer of the
Company since 1986.
**** Mr. Oddi has served as Vice President-Finance & Administration
of the Company since December 1988.
***** Ms. Berkowitz has served as Secretary of the Company since
July 1990.
Mr. Blum was appointed to the Board of Directors and elected Chairman
of the Board in 1984 and remained in such position until his resignation in
January 1988. Mr. Blum served solely as a Director from January 1988 until
August 1990, when he was reelected Chairman of the Board and was elected
President and Chief Executive Officer. Mr. Blum resigned as President and Chief
Executive Officer in 1993. For more than fifteen years, Mr. Blum has been
actively engaged in real estate acquisitions for his own account and currently
is the sole stockholder and director of a number of corporations which hold real
estate interests. In addition, he is the sole stockholder of Springfield Oil
19
<PAGE> 51
Services, Inc., a company providing oil field services in the United States and
North Africa. Mr. Blum is also a director and principal stockholder of a number
of other corporations engaged in various business activities, some of which are
publicly held, including Federal Resources Corporation, Specialty Retail
Services, Inc., Conquest Industries Inc. and North Valley Development
Corporation.
Mr. Hannesson was appointed President, Chief Executive Officer and
Director of Commodore in 1993 and has been affiliated with Commodore since 1983.
Mr. Hannesson had been Chief Executive Officer of Commodore from January 1987
through November 1988, serving as President from January 1987 to January 1988
and as Chairman of the Board from January 1988 to November 1988. Mr. Hannesson
has held senior operating and financial management positions in a variety of
industries. In the past 30 years, he has acquired over 35 businesses. Mr.
Hannesson was an original founder and is currently Chairman of the Board of
Lanxide Corporation, a materials research company. Mr. Hannesson is also a
Director of WICO Distribution Company, which is the leading manufacturer and
distributor of parts to the vending machine and games industries in the United
States. From 1979 to 1983, Mr. Hannesson was a Senior Vice President and Chief
Financial and Administrative Officer of Overhead Door Corporation (a New York
Stock Exchange-listed company), where he was responsible for mergers and
acquisitions, and international operations.
Mr. Karlik was a Director of the Company from 1983 through 1984, and
was reelected in 1985, at which time he was also named President. He served as
President until 1986, when he was replaced by Paul Hannesson. For more than
seven years, Mr. Karlik has been Chief Financial Officer of a number of
corporations, most of which are controlled by or affiliated with Mr. Blum.
Mr. Oddi joined the Company as Director of Accounting in June 1987 and
was appointed Vice President-Finance & Administration in December 1988. He was
elected as a Director of the Company in December 1990. Prior to joining the
Company, Mr. Oddi, a CPA, was an audit manager with the public accounting firm
of Ernst & Young.
Ms. Berkowitz has served as Secretary of the Company since July 1990.
Previously, Ms. Berkowitz served as the Company's Secretary from 1985 to 1987.
Ms. Berkowitz also serves as Vice President of North Valley Development
Corporation, a real estate company that is publicly held and controlled by Mr.
Blum, and as Secretary of Federal Resources Corporation, a public entity in
which Mr. Blum is a majority shareholder. Ms. Berkowitz has worked in various
capacities for several corporations controlled by Mr. Blum.
The directors serve until the next annual meeting of the stockholders
or until their successors are elected and qualify. All executive officers of the
Company serve at the pleasure of the Board of Directors. There are no directors'
fees paid.
20
<PAGE> 52
ITEM 11. EXECUTIVE COMPENSATION
During the last fiscal year, the Company had five executive officers,
of which three received cash compensation. All executive officers as a group
received cash compensation from the Company of $366,476 during such fiscal year.
The following table sets forth the total of all forms of compensation
received by each executive officer of the Company who earned in excess of
$100,000 in salary and bonuses during any of the fiscal years ended December 31,
1995, 1994 and 1993, and by any person who served as Chief Executive Officer of
the Company during the fiscal year ended December 31, 1995.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Annual
Compensation
(a) (b) (c) (d) (e)
NAME AND PRINCIPAL OTHER ANNUAL
POSITION Year Salary ($) Bonus COMPENSATION ($)
($)
<S> <C> <C> <C> <C>
Bentley J. Blum 1995 0 0 0
Chairman of the Board 1994 0 0 0
1993 0 0 0
Paul E. Hannesson 1995 186,476 0 96,000*
President and Chief 1994 186,476 0 24,000*
Executive Officer 1993 165,000 0 0
Andrew P. Oddi 1995 100,000 0 0
Vice President-Finance 1994 90,000 15,000 0
and Administration 1993 90,000 0 0
</TABLE>
* Represents monthly living allowance of $8,000 commencing October 1994.
21
<PAGE> 53
Aggregated Options/SAR Exercises in Last Fiscal Year and Fiscal Year-End
Option/SAR Values
The following table summarizes options and SARs exercised during 1995
and presents the value of unexercised options and SARs held by the named
executives at fiscal year-end:
<TABLE>
<CAPTION>
Number of Securities
Underlying Value of Unexecuted
Unexecuted In-The-Money
Options/SARs at Options/SARs at
Shares Value Fiscal Year-End (#) Fiscal Year-End ($)**
Acquired on Realized* Exercisable Exercisable
Name Exercise (#) ($) (E)/Unexercisable (U) (E)/Unexercisable (U)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Andrew P. Oddi 150,000 0 100,000 U $86,500 U
0 E 0 E
</TABLE>
- -------------------------
* Values are calculated by subtracting the exercise price from the fair
market value of the stock as of the exercise date.
** Assumes, for all unexercised in-the-money options, the difference
between fair market value and the exercise price is $.875.
Employment or Termination Agreements with Officers
On July 28, 1993, the Company entered into a five-year employment
agreement with Paul E. Hannesson, commencing as of January l, 1993 and
continuing through December 31, 1997. Mr Hannesson receives salary compensation
at the rate of $180,000 per year. On July 28, 1993 as part of the Commodore Labs
and CFCT acquisitions, Commodore Labs entered into five-year employment
agreements with Albert Abel and Allison Augur, in their capacities as President
and Vice President of Commodore Labs, respectively. Mr. Abel received an initial
base salary of $100,000, with annual increases to base salary thereafter of 10%
of the prior year's base salary, and Mr. Augur received an initial base salary
of $75,000, with similar 10% annual increases. In May 1995, Mr. Augur left the
Company and his employment agreement was canceled. On January 1, 1994, the
Company entered into a three-year employment agreement with James DeAngelis,
Vice President of Marketing, whereby Mr. DeAngelis receives a base salary of
$60,000 per year. In 1995, Mr. DeAngelis was appointed President of CFCT and his
base salary was increased to $96,000 for 1995 and $108,000 for 1996. On October
3, 1994, the Company entered into a three-year employment agreement with Vincent
Valeri, Vice President of Engineering and Process Technology, whereby Mr. Valeri
receives a base salary of $140,000 per annum. On June 1, 1995, the Company
entered into a two-year employment agreement with Neil Drobny, Group Vice
President, whereby Mr. Drobny will receive a base salary of $150,000 for the
first year and $180,000 for the second year of the agreement. On August 31,
1995, the Company entered into a two year employment agreement with Carl
Magnell, Vice President, whereby Mr. Magnell will receive a base salary of
22
<PAGE> 54
$150,000 for the first year and $180,000 for the second year of the agreement.
1987 Stock Option Plan
The Company's 1987 Stock Option Plan (the "1987 Plan"), authorizes the
Board of Directors to grant options for up to 10,000,000 shares of Common Stock
(subject to adjustment) to certain key employees. No options may be granted
after December 31, 1992. The 1987 Plan is administered by the Board of
Directors. Options granted under the 1987 Plan are either incentive stock
options or non-qualified stock options. The period of the option is determined
by the Board of Directors but no option may be longer than ten years. The
purchase price per share of Common Stock under incentive stock options granted
under the 1987 Plan is not less than the fair market value of the Common Stock
on the date of grant. Generally, the options vest as to twenty (20%) percent of
the options granted in each of the five years following the grant of the
options. If an optionee dies while employed by the Company or if the employee's
employment is terminated as a result of disability, his option may be exercised
by his legal representative within one year of such death or disability, but in
no event after expiration of the option. An optionee whose employment has
terminated for any reason other than death or disability may exercise his option
within three months after termination, but in no event after expiration of the
option, except that if an optionee's employment is terminated for cause, then
all of such optionee's outstanding options will terminate immediately.
Options to purchase an aggregate of 65,000 shares of common stock, of
which 40,000 had been granted to Andrew P. Oddi, a Director and Vice President,
were canceled on December 30, 1992. On December 30, 1992, options to purchase
300,000 shares were granted to two individuals at an exercise price of $.01 per
share. Options to acquire 250,000 shares were granted to Mr. Oddi and options to
acquire 50,000 shares were granted to a non-management employee. Mr Oddi
exercised 100,000 options in 1994 and 50,000 options in 1995.
No compensation expense was recognized by the Company relating to the
aforementioned options as the market value of the underlying shares equalled or
exceeded the exercise price at the date of grant in each instance.
Additional Stock Options and Warrants
On July 28, 1993, the Company granted to Messrs. Abel and Augur
five-year non-qualified options to purchase 1,000,000 shares and 500,000 shares,
respectively, of the Company's Common Stock, each vesting 20% per year, at an
exercise price of $.10 per share.
On November 22, 1993, options to purchase an aggregate of 500,000
shares of Common Stock were granted to James DeAngelis, Vice President of
Marketing, at an exercise price of $.03 per share. Mr. DeAngelis exercised
200,000 options in 1994 and 100,000 options in 1995. Additional options to
purchase an aggregate of 100,000 shares of Common Stock were granted to a
non-employee at an exercise price of $.10 per share on November 22, 1993. No
compensation expense was recognized by the Company relating to the
aforementioned options as the market value of the underlying shares
23
<PAGE> 55
equalled or exceeded the exercise price at the date of grant in each instance.
In August 1994, in consideration of future services, the Company
granted, to an unaffiliated person, options to purchase an aggregate of 500,000
shares of Common Stock at an exercise price of $.01 per share. The Company
recorded $10,000 of consulting expense in connection with the granting of such
option, as the market value of the underlying shares at the date of grant
exceeded the exercise price by $.02 per share. These options were exercised in
1994.
In October 1994, the Company entered into an employment agreement with
Mr. Valeri and issued to Mr. Valeri a warrant to purchase 500,000 shares of
Common Stock at an exercise price of $.14 per share, exercisable 20% per year
over a five-year period ending October 1999. The Company recorded $15,000 of
consulting expense in connection with the granting of such options, as the
market value of the underlying shares at the date of grant exceeded the exercise
price by $.03 per share.
In June 1995, the Company entered into an employment agreement with Mr.
Drobny and issued to Mr. Drobny options to purchase 240,000 shares of Common
Stock at an exercise price of $.50 per share, exercisable 33% per year over a
three-year period ending May 1999.
In August 1995, the Company entered into an employment agreement with
Mr. Magnell and issued to Mr. Magnell options to purchase 240,000 shares of
Common Stock at an exercise price of $.50 per share, exercisable 33% per year
over a three-year period ending August 1999.
No compensation expense was recognized by the Company relating to the
aforementioned options as the market value of the underlying shares equalled or
exceeded the exercise price at the date of grant in each instance.
Board of Directors Interlock and Inside Participation
Kraft Capital Corporation ("Kraft Capital"), a corporation wholly-owned
by Mr. Blum (the Chairman and principal stockholder of the Company), has, in the
past, advanced funds to the Company. At December 31, 1995 and 1994, the Company
owed $656,000 and $860,000, respectively, to Kraft Capital for working capital
advances evidenced by demand notes. On March 26, 1996, the balance due Kraft
Capital was approximately $1,875,000.
The Company's executive offices are located in New York City in
approximately 2,000 square feet of space leased by an affiliate of Mr. Blum. The
Company does not pay rent for the use of these premises.
The Blum Family Trust ("BFT"), an entity in which Mr. Blum serves as
trustee, paid $100,000 to acquire a 7.0313% working interest in an oil and gas
field located in Oklahoma (the "Field"), in which the Company was then a
co-owner. See "Item 2 - Properties". In addition to this working interest,
Ameritech Oil and Gas Corporation, the managing agent of the Field, agreed to
assign to BFT a 1.56% net revenue interest in the Field, in consideration for
BFT funding the Field with its $100,000 investment in October and November 1990.
The Company and the other co-owners of the Field acquired their
24
<PAGE> 56
interests in March 1991.
In 1994, BFT exchanged its interest in the Field for a joint ownership
interest in an oil and gas field in Louisiana. BFT originally had a 45% interest
in the Louisiana field and has since increased its ownership to 56.33%.
On February 16, 1993, Paul E. Hannesson purchased, for $75,000 in past
services rendered to the Company in connection with proposed acquisitions, an
aggregate of 7,300,000 shares of the Company's Common Stock. Mr. Hannesson
transferred 4,650,000 of such shares by gift to family members. At the time of
his purchase of such shares, Mr. Hannesson was also appointed to the Board of
Directors and appointed President and Chief Executive Officer, replacing Mr.
Blum. Mr. Blum remains Chairman of the Board and principal stockholder of the
Company.
The Company holds a note receivable from the President of Commodore
Labs, Albert Abel, for $125,000 in principal and accrued interest of $7,500 at
December 31, 1995. The note bears interest at the rate of 6% per annum, payable
annually. The principal is due December 22, 1998.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth certain information as of March 15, 1996
with respect to the beneficial ownership of Common Stock of the Company of (i)
each individual known to the registrant to own more than five percent of the
Company's voting securities; (ii) each director of the Company; and (iii) all
directors and officers of the Company as a group.
<TABLE>
<CAPTION>
Name And Address of Amount and Nature of Percent
Beneficial Owner Beneficial Ownership Class
- ---------------- -------------------- -----
<S> <C> <C>
Bentley J. Blum 28,224,050(1)(2) 49.2%
150 East 58th Street
34th Floor
New York, New York 10155
Credit Agricole Deux Sevres 6,000,000(3) 9.5%
4 Boulevard Louis Tardy
79000 Niort France
Paul E. Hannesson 0(4) *
150 East 58th Street
34th Floor
New York, New York 10155
</TABLE>
25
<PAGE> 57
<TABLE>
<S> <C> <C>
Melissa C. Berkowitz 200,000 *
150 East 58th Street
34th Floor
New York, New York 10155
Jerry Karlik 200,000 *
40 Cutter Mill Road
Suite 509
Great Neck, New York 11021
Andrew P. Oddi 252,000(5) *
150 East 58th Street
34th Floor
New York, New York 10155
James J. DeAngelis 580,000(6) 1.0%
150 East 58th Street
34th Floor
New York, New York 10155
All directors and officers 29,256,050(1)(2)(4)(5)(6) 50.8%
as a group (6 persons)
</TABLE>
- ------------------------------------
* Less than one percent.
(1) Includes 16,000,000 shares owned directly by the Blum Asset Trust, an
entity for which Mr. Blum serves as trustee.
(2) Includes 9,297,500 shares owned directly by the Blum Family Trust, an
entity for which Mr. Blum serves as trustee.
(3) Represents (i) the number of shares which could be acquired at any time
upon the conversion into Company Common Stock of $4,000,000 principal
of outstanding convertible bonds (4,000,000 shares) and 500,000 shares
of Series "AA" Preferred Stock (500,000 shares) and (ii) the number of
shares which could be acquired at any time upon the exercise of
outstanding warrants to acquire 1,500,000 shares of Company common
stock at $.10 per share.
(4) Does not include an aggregate of 2,650,000 shares of Commodore common
stock owned by Suzanne Hannesson, the wife of Paul Hannesson, 2,650,000
shares of Commodore common stock owned by the Hannesson Family Trust,
Suzanne Hannesson and John D. Hannesson, trustees, or 1,000,000 shares
of Commodore common stock owned by each of Jon Paul and Krista
Hannesson, the children of Paul E. Hannesson. Mr. Hannesson disclaims
any beneficial interest in such shares of Commodore common stock.
(5) Includes options to purchase 50,000 shares of common stock at an
exercise price of $.01 per share.
26
<PAGE> 58
(6) Includes options to purchase 200,000 shares of common stock at an
exercise price of $.03 per share.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
See Item 11; Executive Compensation, Board of Directors Interlock and
Inside Participation.
27
<PAGE> 59
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
(a)(1) Financial Statements and Exhibits. The following financial
statements are included in Item 8 of this report:
(i) Consolidated Balance Sheets
(ii) Consolidated Statements of Operations
(iii) Consolidated Statements of Stockholders'
Equity
(iv) Consolidated Statements of Cash Flow
(v) Notes to Consolidated Financial Statements
(a)(2) Financial Statements Schedules. The following financial
statement schedule is included in Item 8 of this report:
(i) Schedule II - Valuation and Qualifying
Accounts
(a)(3) Exhibits. The following exhibits are filed as part of this
report:
(a) Exhibit Number Pursuant to Item 601 of Regulation S-K
3 - Articles of Incorporation and By-laws of the Company.
.1 Certificate of Incorporation of Commodore
Environmental Services, Inc. (4)
.2 Certificate of Stock Designation of
Commodore Environmental Services, Inc. (9)
.3 By-Laws of Commodore Environmental Services,
Inc. (4)
4 - Instruments defining rights of security holders,
including debentures - Not applicable.
9 - Voting trust agreements - Not applicable.
10 - Material contracts.
.1 Agreement of Sale dated as of June 29, 1979
between Cary Corp. and Brunswick Associates.
(2)
28
<PAGE> 60
.2 Ground Lease dated June 29, 1979 between
Cary Corp. and Brunswick Associates. (2)
.3 Purchase Money Deed of Trust and Security
Agreement dated June 29, 1979 executed by
Brunswick Associates in favor of Cary Corp.
(2)
.4 Purchase Money Note dated June 29, 1979 from
Cary Corp. to Brunswick Associates in the
principal amount of $4,510,000. (2)
.5 Secured Split Down Payment Note dated June
29, 1979 from Cary Corp. to Brunswick
Associates in the principal amount of
$1,180,000. (2)
.6 Purchase Money Deed of Trust and Security
Agreement dated June 21, 1979 as executed by
Cary Corp. in favor of Money Mortgage
Investors. (2)
.7 Purchase Money Note dated June 21, 1979 from
Cary Corp. to Money Mortgage Investors in
the principal amount of $2,400,000. (2)
.8 Agreement dated as of January 15, 1985
between Main Street Investments Corporation
and Commodore Resources Corporation. (3)
.9 Trust Agreement, as amended, dated February
19, 1972 among LaSalle National Bank,
Teachers Insurance and Annuity Association
of America in original principal sum of
$2,750,000, Promissory Note No. 1. (3)
.10 Purchase Money Mortgage and Security
Agreement and Note dated October 29, 1985
from Commodore Resources Corporation in
favor of Main Street Investments Corporation
for $66,474. (3)
.11 Contract of Sale dated July 1, 1985 between
Commodore Resources Corporation and MGP
Associates. (3)
.12 Lease Agreement dated April 29, 1977 between
Carlton Industries, Inc. et al. and Leaseway
Warehouses, Inc. (3)
.13 Indenture of Lease dated November 1, 1985
between Mid-Warehouse Corp. and Commodore
Resources Corporation and Assignment. (3)
.14 Assignment of Lease dated October 29, 1985
by Main Street Investments Corp. to
Commodore Resources Corporation. (3)
.15 Guarantee of Rent Agreement dated as of
November 1, 1985 between Commodore Resources
Corporation and Midway Realty Associates.
(3)
29
<PAGE> 61
.16 Agreement dated as of January 15, 1985
between Commodore Resources Corporation and
Main Street Investments Corporation. (3)
.17 First Mortgage and Note dated May 1, 1978,
in favor of Chase Manhattan Bank, N.A. in
the original principal sum of $3,000,000.
(3)
.18 Second Mortgage dated September 29, 1978, in
favor of Chase Manhattan Bank, N.A. in the
original principal amount of $250,000. (3)
.19 Purchase Money Note and Mortgage dated
October 30, 1985 from Commodore Resources
Corporation in favor of Main Street
Investments Corporation for $64,033. (a)
.20 Agreement dated July 1, 1985 between
Commodore Resources Corporation and MIIGP
Association, and Assignment of Contract
dated November 1, 1985, between MIIGP
Association, Commodore Resources Corporation
and Midway Realty Associates L.P. II. (3)
.21 All Inclusive Purchase Money Wraparound Note
dated November 1, 1985 from Midway Realty
Associates L.P. II in favor of Commodore
Resources Corporation, in the principal
amount of $3,520,000. (3)
.22 Lease Agreement dated April 29, 1977 between
Carlton Industries, et al. and Leaseway
Warehouses, Inc. (3)
.23 Indenture of Lease dated November 1, 1985
between Mid-Warehouse Corp. and Commodore
Resources Corporation and Assignment. (3)
.24 Purchase Money Assignment of Lease and
Security Agreement dated October 29, 1985
between Commodore Resources Corporation and
Main Street Investments Corporation and
Mid-Warehouse Corporation. (3)
.25 Assignment of Lease dated October 29, 1986
from Main Street Investments Corporation to
Commodore Resources Corporation. (3)
.26 Guarantee of Rent Agreement dated as of
November 1, 1985 between Commodore Resources
Corporation and Midway Realty Associates
L.P. II. (3)
.27 Deferred Money Deed of Trust and Security
Agreement and Notes dated as of January 16,
1985 in favor of Main Street Associates in
the principal sum of $450,000. (3)
.28 Loan Agreement Note, Subordinated Deed of
Trust and Security
30
<PAGE> 62
Agreement and Collateral Assignment between
Commodore Resources Corporation and General
Electric Credit Corporation dated March 26,
1986 in the principal amount of $1,500,000.
(3)
.29 Subordinated Promissory Note, dated November
26, 1986 from Commodore Resources
Corporation to Samuel Blum for $250,000. (4)
.30 Certificate from the State of Vermont for
Harvest American Insurance Company. (4)
.31 1987 Stock Option Plan of Commodore
Resources Corporation. (4)
.32 Form of letter from Commodore Environmental
Services, Inc. to an employee granting an
option to purchase a set number of shares.
(4)
.33 Non-Competition Agreement, dated as of
August 9, 1990, by and among Commodore
Environmental Services, Inc., AWI
Environmental Services, Inc., AWI Services,
Inc, Allwash of Syracuse, Inc., Steven M.
Weiss, Bentley J. Blum, Joseph Angeli, Scott
Roberts, Jerry Karlik, Carl Valeri, Andrew
P. Oddi, Hesco Environmental Safety Co.,
Inc. and Hesco Acquisition Corp. (5)
.34 Non-Competition Agreement, dated as of
August 9, 1990, by and among Commodore
Environmental Services, Inc., Bentley J.
Blum, Andrew P. Oddi, Frank Weidner, Robert
Katz, Hesco Environmental Safety Co., Inc.,
Allwash Acquisition Corp., AWI Environmental
Services, Inc., AWI Services, Inc. and
Allwash of Syracuse, Inc. (5)
.35 Letter Agreement, dated March 18, 1991 with
Ameritech Oil Gas Corporation with respect
to Oklahoma oil & gas Field. (6)
.36 Operating Agreement, dated March 22, 1991
with Ameritech Oil and Gas Corporation with
respect to Oklahoma oil & gas Field. (6)
.37 Assumption Agreement, dated April 11, 1991
by and between Commodore Environmental
Services, Inc. and Harvest American
Insurance Company. (6)
.38 Option Agreement, dated March 15, 1993, and
among Commodore Environmental Services, Inc.
and the Principal Shareholders and Board of
Directors of A.L. Sandpiper Corporation and
CFC Technologies, Inc. (7)
.39 Option Agreement, dated March 15, 1993, by
and among Commodore Environmental Services,
Inc. and Paul Hannesson. (7)
31
<PAGE> 63
.40 Option Agreement, dated March 15, 1993, by
and among Commodore Environmental Services,
Inc. and the Principal Shareholders and
Board of Directors of A.L. Sandpiper
Corporation and CFC Technologies, Inc. (7)
.41 Agreement and Plan of Merger dated as of
June 24, 1993 between the Company,
Sandpiper, its principal shareholders and
ALS Acquisition Corp. (8)
.42 CFC License Agreement between Sandpiper and
the Company. (8)
.43 Employment Agreements between Sandpiper and
Abel and Augur, respectively. (8)
.44 Non-competition Agreements between Sandpiper
and Abel and Augur. (8)
.45 Form of the Company's Warrant. (8)
.46 Stock Option Agreements between the Company
and Abel and Augur, respectively. (8)
.47 Security Agreement between Sandpiper and the
Company. (8)
.48 Escrow Agreement between the Company,
Sandpiper, its principal shareholders and
counsel to the parties. (8)
.49 $125,000 Non-Recourse, Non-Negotiable,
secured Promissory Note from Albert and
Connie Abel to the Company. (8)
.50 Tax and loan Indemnity Agreement between the
Company and Albert Abel and Connie Abel. (8)
.51 Agreement and Plan of Merger dated July 28,
1993 between the Company, CFC, Abel, Augur
and CFC Acquisition Corp. (8)
.52 Sublicense Agreement between the Company and
CFC Technologies, Inc. (8)
.53 Escrow Agreement between the Company, CFC
Technologies, Inc., Abel, Augur and counsel
to the parties. (8)
.54 Securities Purchase Agreement by and between
Commodore Environmental Services, Inc. and
purchasers of Series "AA" Preferred Stock.
(9)
.55 Bond Purchase Agreement by and between
Commodore Environmental
32
<PAGE> 64
Services, Inc. and purchasers of Convertible
Bonds. (9)
.56 Stock Option Agreement, dated November 22,
1993, by and between Commodore Environmental
Services, Inc. and Jim DeAngelis. (9)
.57 Employment Agreement, dated January 1, 1994,
by and between Commodore Environmental
Services, Inc. and Jim DeAngelis. (9)
.58 Employment Agreement, dated October 3, 1994,
by and between Commodore Environmental
Services, Inc. and Vincent Valeri.
.59 Warrant, dated October 3, 1994, by and
between Commodore Environmental Services,
Inc. and Vincent Valeri.
.60 Employment Agreement, dated June 1, 1995, by
and between Commodore Environmental
Services, Inc. and Neil Drobny.
.61 Stock Option Agreement, dated June 1, 1995,
by and between Commodore Environmental
Services, Inc. and Neil Drobny.
.62 Employment Agreement, dated August 31, 1995,
by and between Commodore Environmental
Services, Inc. and Carl Magnell.
.63 Stock Option Agreement, dated August 31,
1995, by and between Commodore Environmental
Services, Inc. and Carl Magnell.
.64 Assignment of Technology Agreement, dated
December, 1995, by and between Commodore
Membrane Technologies, Inc. and Sri Kilambi.
.65 Stock Option Agreement, dated as of February
16, 1996, by and between Commodore
Environmental Services, Inc. and Paul E.
Hannesson.
22 - Subsidiaries of the registrant. (9)
-------------------------
(1) Incorporated by reference to Exhibits 3.1,
3.2, 10.1, .2, .3, .4, .5 and .6 in the
Registrant's Form 8-K dated August 23, 1983.
(2) Incorporated by reference to Exhibits
10(a)-(h) in the Registrant's Form 10-K
dated March 31, 1986.
(3) Incorporated by reference to Exhibits 10.1,
.3, .4 and .5 in the Registrant's Form 10-K
dated March 31, 1986.
33
<PAGE> 65
(4) Incorporated by reference to Exhibit 10 in
the Registrant's Form 10-K dated April 14,
1988.
(5) Incorporated by reference to Exhibits 10.1
through 10.13 to the Registrant's Form 10-Q
for the quarter ended June 30, 1990.
(6) Incorporated by reference to Exhibit 10 in
the Registrant's Form 10-K dated April 30,
1992.
(7) Incorporated by reference to Exhibit 10 in
the Registrant's Form 10-K dated March 23,
1993.
(8) Incorporated by reference to Exhibit 10 in
the Registrant's Form 8-K dated August 10,
1993.
(9) Incorporated by reference to Exhibit 10 in
the Registrant's Form 10-K dated April
14,1994.
(b) Reports on Form 8-K.
None
34
<PAGE> 66
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
COMMODORE ENVIRONMENTAL SERVICES, INC.
By: /s/ Paul E. Hannesson
-------------------------------------
Paul E. Hannesson,
Chief Executive Officer and President
Dated: April 12, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<S> <C> <C>
Dated: April 12, 1996
/s/ Bentley J. Blum Chairman of the Board
- -------------------------------------
Bentley J. Blum
Dated: April 12, 1996
/s/ Paul E. Hannesson Chief Executive Officer,
- ------------------------------------- President and Director
Paul E. Hannesson
Dated: April 12, 1996
/s/ Andrew P. Oddi Vice President Finance &
- ------------------------------------- Administration and Director
Andrew P. Oddi (Principal Financial and
Accounting Officer)
Dated: April 12, 1996
/s/ Jerry Karlik Treasurer,
- ------------------------------------- Vice President
Jerry Karlik and Director
</TABLE>
35
<PAGE> 67
EXHIBIT INDEX
Exhibit No. Description
----------- -----------
10 - Material Contracts.
.58 Employment Agreement, dated October 3, 1994,
by and between Commodore Environmental
Services, Inc. and Vincent Valeri.
.59 Warrant, dated October 3, 1994, by and
between Commodore Environmental Services,
Inc. and Vincent Valeri.
.60 Employment Agreement, dated June 1, 1995, by
and between Commodore Environmental
Services, Inc. and Neil Drobny.
.61 Stock Option Agreement, dated June 1, 1995,
by and between Commodore Environmental
Services, Inc. and Neil Drobny.
.62 Employment Agreement, dated August 31, 1995,
by and between Commodore Environmental
Services, Inc. and Carl Magnell.
.63 Stock Option Agreement, dated August 31,
1995, by and between Commodore Environmental
Services, Inc. and Carl Magnell.
.64 Assignment of Technology Agreement, dated
December, 1995, by and between Commodore
Membrane Technologies, Inc. and Sri Kilambi.
.65 Stock Option Agreement, dated as of February
16, 1996, by and between Commodore
Environmental Services, Inc. and Paul E.
Hannesson.
27 - FINANCIAL DATA SCHEDULE
<PAGE> 1
EXHIBIT 10.58
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (this "Agreement"), made and entered into
as of the 3rd day of October, 1994, by and between COMMODORE ENVIRONMENTAL
SERVICES, INC., a Delaware corporation having offices at 150 East 58th Street,
Suite 3400, New York, New York 10155 (the "Company"), and VINCENT VALERI, an
individual currently residing at 3571 Mayer Drive, Murrysville, PA 15668
(the "Employee");
W I T N E S S E T H:
WHEREAS, the Employee has heretofore rendered services as a
consultant to the Company, and the Company desires to obtain the full-time
services of the Employee to serve in a senior executive capacity with the
Company; and
WHEREAS, the Employee is willing to serve as a senior officer
of the Company, all upon the terms and subject to the conditions hereinafter set
forth.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants herein contained, the parties hereby agree as follows:
Part A. Employment.
1. Duties. Subject to the terms and conditions of
this Agreement, the Company shall employ the Employee and the
Employee shall render services to the Company and its subsidiaries
in the capacity and with the title of Senior Vice President of
Engineering and Process Technology of the Company. In addition,
<PAGE> 2
the Employee shall serve in such capacities and have such titles with such of
the Company's subsidiaries as may be requested from time to time by the Company,
without requirement of any additional compensation to the Employee. In such
capacity, the Employee shall, subject at all times to the direction of the Board
of Directors and the Chief Executive Officer of the Company, actively
participate in the technical, scientific, and research and development efforts
of the Company, with such general powers and duties in respect of such
activities of the Company as are usually vested in a senior officer of a
corporation. The Employee shall engage in such traveling as may be reasonably
required in connection with the performance of his duties.
2. Full-Time Employment. Throughout the period of his
employment hereunder, the Employee shall devote his full and entire professional
and business time, attention, knowledge and skills to faithfully, diligently and
to the best of his abilities perform his duties hereunder.
Part B. Term of Employment; Termination of Agreement.
1. Term. The term of this Agreement shall commence as of
November 1, 1994 and shall continue through and including October 31, 1997 (the
"Termination Date"), subject to the earlier termination of this Agreement in
accordance with the provisions hereof.
2. Termination For Cause. Anything contained in Section 1 of
this Part B to the contrary notwithstanding, this Agreement may be terminated at
the option of the Board of Directors
- 2 -
<PAGE> 3
of the Company for "Cause" (as hereinafter defined), effective upon the giving
of written notice of termination to the Employee. As used herein, the term
"Cause" shall mean and be limited to:
(a) any act committed by the Employee against the
Company, or any of its subsidiaries or divisions, constituting: (i) fraud, (ii)
misappropriation of corporate opportunity, breach of fiduciary duty or
non-disclosure of conflict of interest, (iii) self-dealing, (iv) embezzlement of
funds, (v) felony conviction for conduct involving moral turpitude or other
criminal conduct, or (vi) the disregard by the Employee of the reasonable
directions of the Chief Executive Officer of the Company; or
(b) the breach or default by the Employee in the
performance of any material provision of this Agreement (including but not
limited to Part D below); or
(c) alcoholism or any other form of addiction which
impairs the Employee's ability to perform his duties hereunder.
3. Death or Disability. Anything contained in Section 1 of
this Part B to the contrary notwithstanding, this Agreement may be terminated by
the Company: (i) upon the death of the Employee, or (ii) on thirty (30) days'
prior written notice to the Employee, in the event that the Employee shall be
physically or mentally disabled or impaired so as to prevent him from continuing
the normal and proper performance of his duties and responsibilities hereunder
for a period of three (3) consecutive months. The initial determination as to
whether the Employee is disabled or impaired shall be made by the physician
regularly
- 3 -
<PAGE> 4
treating the condition causing the disability. The Company shall have the right
to require the Employee to be examined by a physician duly licensed to practice
medicine in the State in which the Employee has his primary residence to
determine such physician's opinion as to the Employee's disability. If such
physician's opinion differs from that of the physician treating the Employee, or
a physician thereafter retained by the Employee, they shall forthwith select a
third physician so licensed whose opinion, after examination and review of
available information, shall be conclusive and binding upon all parties hereto.
All costs of the physician regularly treating or thereafter retained by the
Employee shall be paid by the Employee. All costs of the physician retained by
the Company shall be paid by the Company. If a third physician is required, then
the costs of that physician shall be paid by the Company.
4. No Further Obligations. Upon any termination of this
Agreement by the Company for "Cause" pursuant to Section 2 of this Part B, or by
reason of the Optionee's death or disability pursuant to Section 3 of this Part
B, neither the Company nor any subsidiary or division thereof shall be liable
for or be required to pay to the Employee any further remuneration, compensation
or other benefits hereunder.
5. Unjustified Termination. If the Company terminates this
Agreement or the Employee's employment hereunder for no reason or for any reason
other than: (a) for "Cause", as provided in Section 2 of this Part B, (b) the
Employee's death or disability,
- 4 -
<PAGE> 5
as provided in Section 3 of this Part B, or (c) as a result of the Employee's
voluntary (not constituting a constructive discharge) resignation of his
employment hereunder, the Company shall be obligated to pay or shall cause to be
paid to the Employee, through the earlier of the Termination Date provided in
Section 1 of this Part B or the date of the Employee's death, in the same
periodic installments provided herein, the difference, if any, between: (i) the
"Base Salary" (as hereinafter defined) if, as, and when the same would have
otherwise become due and payable under this Agreement, and (ii) any and all
salaries, bonuses, fees or other compensation or remuneration which the Employee
earns from any other sources during the subject pay period.
Part C. Compensation; Expenses.
1. Base Salary. As compensation for his services hereunder,
the Company shall pay or cause to be paid to the Employee an annual base salary
of One Hundred Forty Thousand ($140,000) Dollars per annum (the "Base Salary"),
payable in periodic installments in accordance with the standard payroll
practices of the Company in effect from time to time. The Company is hereby
authorized to make all necessary payroll deductions, including FICA, from the
Base Salary, as are customarily made with respect to the salaries of other
senior executive officers of the Company.
2. 1995 Incentive Bonus. In addition to the Base Salary
payable during the 1995 calendar year, the Employee shall be entitled to receive
from the Company (a) a bonus in the amount of
- 5 -
<PAGE> 6
$20,000 in the event that the Company completes and places into commercial
operation, on or prior to May 31, 1995, the necessary equipment for the
commercial separation of mixed refrigerants through selective destruction, and
for the destruction of CFC refrigerants, such bonus to be paid (if earned) on or
prior to June 30, 1995, and (b) an additional bonus in the amount of $20,000 in
the event that the Company enters into, on or prior to December 31, 1995, a
written joint venture agreement with a major corporation (including, without
limitation, Westinghouse, Morrison-Knudson, or other comparably-sized company)
for the development, exploitation and/or use of the Agent 313 soil process, such
bonus to be paid (if earned) within thirty (30) days after such joint venture
agreement is executed and delivered.
3. Benefits. In addition to the foregoing Base Salary and 1995
bonuses, the Employee shall, throughout the period of his employment hereunder,
be eligible to participate in any and all group health, group life and/or other
benefit plans generally made available by the Company to its employees, provided
that nothing herein contained shall be deemed to require the Company to maintain
or continue any particular plan or policy.
4. Columbus Apartment. The Company has requested the Employee
to render a substantial portion of his services in the Columbus, Ohio area
during the initial portion of the term of this Agreement, and in order to assist
the Employee in rendering his services in such locality, the Company will pay to
the Employee the sum of $1,000 per month during the period from November 1, 1994
- 6 -
<PAGE> 7
through October 31, 1995, in respect of the rental by the Employee of a suitable
apartment in the Columbus, Ohio area.
5. Expenses. In addition to the remuneration set forth above,
throughout the period of the Employee's employment hereunder, the Company shall
also reimburse or cause to be reimbursed to the Employee, upon presentment by
the Employee to the Company of appropriate receipts and vouchers therefor, for
any reasonable business expenses (other than the rental of the Columbus
apartment, which is provided for above), including air and other travel
expenses, incurred by the Employee in connection with the performance of his
duties and responsibilities hereunder.
Part D. Confidentiality; Non-Competition. As a material inducement to
cause the Company to enter into this Employment Agreement, the Employee hereby
covenants and agrees that:
1. Confidential Information; Personal Relationships. The
Employee shall at all times during and subsequent to the term of this Agreement,
keep secret and retain in strictest confidence all confidential matters of the
Company, and the "know-how", trade secrets, technical processes, inventions,
equipment specifications, equipment designs, plans, drawings, research projects,
confidential client lists, details of client, subcontractor or consultant
contracts, pricing policies, operational methods, marketing plans and
strategies, project development, acquisition and bidding techniques and plans,
business acquisition plans, and new personnel acquisition plans of the Company
(whether now known or hereafter learned by the Employee),
- 7 -
<PAGE> 8
except to the extent that (i) such information is generally available to the
public without restriction, (ii) the Employee obtains confidentiality agreements
with respect to such confidential information, (iii) the Employee is requested
by the Board of Directors of the Company or a Committee thereof to disclose such
confidential information, (iv) such information is provided to a customer of the
Company pursuant to a request received from such customer in the ordinary course
of business, or (v) the Employee is under compulsion of either a court order or
a governmental agency's or authority's inquiry, order or request to so disclose
such information.
2. Property of the Company.
(a) Except as otherwise provided herein, all lists,
records and other non-personal documents or papers (and all copies thereof)
relating to the Company and/or any of its subsidiaries or divisions, including
such items stored in computer memories, on microfiche or by any other means,
made or compiled by or on behalf of the Employee, or made available to the
Employee, are and shall be the property of the Company, and shall be delivered
to the Company on the date of termination of the Employee's employment with the
Company.
(b) All inventions, including any procedures,
formulas, methods, processes, uses, apparatuses, patterns, designs, plans,
drawings, devices or configurations of any kind, any and all improvements to
them which are developed, discovered, made or produced, and all trade secrets
and information used by the Company
- 8 -
<PAGE> 9
(including, without limitation, any such matters created or developed by the
Employee during the term of this Agreement), shall be the exclusive property of
the Company, and shall be delivered to the Company (without the Employee
retaining any copies, components or records thereof) on the date of termination
of the Employee's employment with the Company.
3. Employees of the Company. The Employee shall not, at any
time (whether during the term of this Agreement or at any time thereafter),
directly or indirectly, solicit any employee of the Company to leave his or her
employment with the Company, or encourage any such employee to leave such
employment without the prior written approval of the Company.
4. Non-Competition. For so long as the Employee shall be
receiving any compensation or remuneration under this Agreement, and for a
further period of three (3) years thereafter, the Employee shall not, directly
or indirectly, whether individually or as an employee, stockholder (other than
the passive ownership of up to 5% of the capital stock of a publicly traded
corporation), partner, joint venturer, agent or other representative of any
other person, firm or corporation, engage or have any interest in any business
(wherever located) which is engaged in or derives any revenues from any business
competitive with or similar to that conducted by the Company or any of its
subsidiaries at the time in question.
- 9 -
<PAGE> 10
5. Severability of Covenants.
The Employee acknowledges and agrees that the provisions of
this Part D are (a) made in consideration of the premises and undertakings of
the Company set forth herein, (b) made for good, valuable and adequate
consideration received and to be received by the Employee, and (c) are
reasonable and necessary, in terms of the time, geographic scope and nature of
the restrictions, for the protection of the Company and the business and good
will thereof. It is intended that the provisions of this Part D be fully
severable, and in the event that any of the foregoing restrictions, or any
portion of the foregoing restrictions, shall be deemed contrary to law, invalid
or unenforceable in any respect by any court or tribunal of competent
jurisdiction, then such restrictions shall be deemed to be amended, modified and
reduced in scope and effect, as to duration and/or geographic area, only to that
extent necessary to render same valid and enforceable (and in such reduced form,
such provisions shall then be enforceable), and any other of the foregoing
restrictions shall be unaffected and shall remain in full force and effect.
Part E. Miscellaneous.
1. Binding Effect. All of the terms and conditions of this
Agreement shall be binding upon and inure to the benefit of the Employee, the
Company and their respective heirs, executors, administrators, personal
representatives, successors and permitted assigns.
- 10 -
<PAGE> 11
2. Notices. Except as herein provided, any notice, request,
demand or other communication required or permitted under this Agreement shall
be in writing and shall be deemed to have been given when delivered personally
or when mailed by certified mail, return receipt requested, addressed to a party
at the address of such party first set forth above, or at such other address as
such party may hereafter have designated by notice. Copies of all notices
hereunder shall simultaneously be sent by first class post-paid mail to Solomon,
Weiss & Moskowitz, P.C., 650 Fifth Avenue, New York, New York 10019, Attn:
Stephen A. Weiss, Esq.
3. Waivers. Neither this Agreement nor any of the terms or
conditions hereof may be waived, amended or modified except by means of a
written instrument duly executed by the party to be charged therewith.
4. Captions. The captions and paragraph headings used in this
Agreement are for convenience of reference only, and shall not affect the
construction or interpretation of this Agreement or any of the provisions
hereof.
5. Governing Law. This Agreement, and all matters or disputes
relating to the validity, construction, performance or enforcement hereof, shall
be governed by and construed under the laws of the State of New York.
6. Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original hereof, but all
of which together shall constitute one and the same instrument.
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<PAGE> 12
7. Arbitration. Any dispute involving the interpretation or
application of this Agreement shall be resolved by final and binding arbitration
before an arbitrator designated by and mutually acceptable to the Company and
the Employee. In the event that the parties cannot agree to the appointment of a
mutually acceptable arbitrator, such dispute shall be resolved by binding and
final arbitration before one or more arbitrators designated by the American
Arbitration Association in New York, New York, unless mutually agreed to
otherwise. The award of any of such arbitrator(s) may be enforced in any court
of competent jurisdiction.
8. Assignment.
(a) This Agreement is intended for the sole and
exclusive benefit of the parties hereto and their respective heirs, executors,
administrators, personal representatives, successors and permitted assigns, and
no other person or entity shall have any right to rely on this Agreement or to
claim or derive any benefit herefrom absent the express written consent of the
party to be charged with such reliance or benefit.
(b) The Employee may not assign or otherwise transfer
any of his obligations or duties hereunder to any other person, firm or
corporation, it being understood and agreed that this Agreement is intended to
be for the personal services of the Employee only and of no other person.
(c) The Company may assign this Agreement to any
successor-in-interest who may acquire, whether by direct purchase,
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<PAGE> 13
sale of securities, merger or consolidation, the assets, business or properties
of the Company; provided, that no such assignment shall relieve the Company of
its duties and obligations to the Employee hereunder, without the prior written
consent of the Employee.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on and as of the date first set forth above.
COMMODORE ENVIRONMENTAL SERVICES, INC.
By: /s/ Paul E. Hannesson
--------------------------------------
Paul E. Hannesson, President and CEO
/s/ Vincent Valeri
--------------------------------------
VINCENT VALERI
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<PAGE> 1
EXHIBIT 10.59
COMMODORE ENVIRONMENTAL SERVICES, INC.
COMMON STOCK PURCHASE WARRANT
Expiring October 31, 1999
Number of Warrants: 500,000 Warrant No. W-_
THIS IS TO CERTIFY that Vincent Valeri, or registered assigns, is the
owner of the number of Warrants set forth above, each of which Warrants entitles
the owner thereof to purchase from Commodore Environmental Services, Inc. a
Delaware corporation (the "Company"), at any time on and after the Date of
Issuance (as hereinafter defined) but not later than 5:00 p.m., New York City
time, on the Expiration Date (as hereinafter defined), one Stock Unit (as
hereinafter defined) at a purchase price of $.14 per Stock Unit (the "Exercise
Price"), subject to the terms and conditions herein provided.
1. Definitions.
As used in this Warrant, the following terms have the
following respective meanings:
(a) "Company" has the meaning set forth in the preamble
of this Warrant.
(b) "Date of Issuance" means the date set forth next to
the signature of the Company on the signature page hereof.
(c) "Exercise Price" has the meaning set forth in the
preamble of this Warrant.
(d) "Expiration Date" means October 31, 1999; provided,
however, that in the event of the termination of Vincent Valeri's employment
with the Company, then (i) the Expiration Date shall be the earlier of October
31, 1999 or the effective date of termination of employment if such termination
is for "cause" (or any comparable term) as provided in Mr. Valeri's employment
agreement with the Company, or is effected voluntarily by Mr. Valeri (A) other
than at the end of the stated term of his employment agreement, and (B) without
the written consent of the Company, (ii) the Expiration Date shall be the
earlier of October 31, 1999 or three (3) months after the date of termination of
employment if such termination is by reason of Mr. Valeri's permanent retirement
or under circumstances other than those specified in the foregoing clause (i)
and for reasons other than Mr. Valeri's death or disability (provided that if
Mr. Valeri dies
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<PAGE> 2
within such three (3) month period, then the following clause (iii) shall
apply), and (iii) in the event of the death or disability of Mr. Valeri prior to
or as the basis of the termination of his employment, then the Expiration Date
shall be the earlier of October 31, 1999 or the first anniversary of Mr.
Valeri's death or disability.
(e) "Holder" means any owner of all or any part of this
Warrant from time to time.
(f) "Shares" means shares of the Company's common stock,
$.01 par value per share.
(g) "Stock Unit" means one (1) Share, as same may be adjusted
from time to time in accordance with paragraph 4(a) below, and shall include any
additional securities, cash or property in respect thereof in accordance with
paragraph 4 below.
(h) "Warrant" means this Common Stock Purchase Warrant, as
same may be amended from time to time in accordance herewith.
(i) "Warrants" means, in any amount, the right to purchase
such number of Stock Units hereunder upon the exercise hereof.
(j) "Warrant Stock" means, collectively, (i) the Shares
purchasable by the Holder hereof upon the exercise of this Warrant, and (ii) any
other securities forming a part of any Stock Unit in accordance with paragraph 4
below.
2. Exercise of Warrant.
(a) In order to exercise this Warrant, in whole or in part
(but only to the extent vested in accordance with paragraph 2(b) below), the
Holder hereof shall deliver to the Company, at its office set forth in paragraph
9 below, at any time and from time to time between the Date of Issuance and the
Expiration Date, (i) a written notice of such Holder's election to exercise,
which shall specify the number of whole Stock Units to be purchased, (ii) such
Holder's check payable to the Company in an aggregate amount equal to the
aggregate Exercise Price for those Stock Units being purchased, and (iii) this
Warrant. Upon receipt thereof, the Company shall, as promptly as practicable and
in any event within fifteen (15) days thereafter, cause to be executed and
delivered to such Holder a certificate or certificates representing the
aggregate number of fully paid and nonassessable Shares and/or any other
property forming a part of the subject Stock Unit(s) issuable upon such
exercise. Such stock certificate(s) shall be in such denominations as may be
specified in the Holder's notice, and shall be registered in the name of such
Holder or such other name or names as shall be designated in such notice.
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<PAGE> 3
(b) Anything elsewhere contained in this Warrant to the
contrary notwithstanding, (i) the first twenty (20%) percent of the Warrants
shall be exercisable immediately, (ii) the next twenty (20%) percent of the
Warrants shall be exercisable commencing January 1, 1995, (iii) the next twenty
(20%) percent of the Warrants shall be exercisable commencing January 1, 1996,
(iv) the next twenty (20%) percent of the Warrants shall be exercisable
commencing January 1, 1997, and (v) the final twenty (20%) percent of the
Warrants shall be exercisable commencing January 1, 1998. No acceleration of the
Expiration Date pursuant to clauses (i), (ii) or (iii) of paragraph 1(d) above
shall serve to accelerate the vesting or exercisability of any portion of the
Warrants.
(c) All certificates representing Warrant Stock as aforesaid
shall be deemed to have been issued, and the Holder or other person designated
to be named therein shall be deemed to become a holder of record of the subject
Warrant Stock (including, to the extent permitted by law, the right to vote such
securities or grant consents or receive notices as a stockholder), as of the
time the Holder's notice and payment is received by the Company as aforesaid. If
this Warrant shall have been exercised only in part, the Company shall,
concurrently with its delivery pursuant to paragraph 2(a) above, deliver to the
subject Holder a new warrant (in substantially the form of this Warrant)
evidencing the rights of such Holder to purchase the remaining Stock Units
called for by this Warrant.
(d) All Warrant Stock issuable upon the exercise of this
Warrant in whole or in part shall, upon payment therefor in accordance herewith,
be validly issued, fully paid and nonassessable.
3. Transfer and Assignment; Lost or Stolen Warrant.
(a) Subject to paragraph 10 below, this Warrant and all rights
hereunder are transferable, in whole or in part, on the books of the Company to
be maintained for such purposes, upon surrender of this Warrant at the office of
the Company set forth in paragraph 9 below, accompanied by a written assignment
duly executed (with signature medallion guaranteed) by the Holder hereof
indicating the number of Warrants being assigned or transferred. Upon any such
delivery, the Company shall, subject to paragraph 10 below, execute and deliver
to the Holder and/or the assignee(s) (as the case may be) new warrants (in
substantially the form of this Warrant) in the appropriate denominations, and
this Warrant shall thereupon be cancelled.
(b) Upon receipt by the Company of evidence satisfactory to it
of the loss, theft, destruction or mutilation of this Warrant, and (in the case
of loss, theft or destruction) receipt of reasonably satisfactory
indemnification, and (in the case of mutilation) upon surrender and cancellation
of this Warrant, the
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<PAGE> 4
Company will execute and deliver to the Holder a new Warrant of like tenor, and
any such lost, stolen, destroyed or mutilated Warrant shall thereupon become
void.
4. Adjustment of Stock Unit.
(a) In the event and to the extent that, at any time and from
time to time prior to the Expiration Date, there shall occur any stock split,
stock dividend, combination or subdivision of shares, recapitalization or other
such event relating to the Shares or any other securities or other property then
constituting or forming a part of a Stock Unit, then the number and type of
Shares or other securities or property constituting a Stock Unit shall be
correspondingly adjusted on and as of the date of such stock split, stock
dividend, combination or subdivision of shares, recapitalization or other such
event.
(b) Similarly, in the event of any merger or consolidation in
which the Company shall be a constituent party at any time and from time to time
prior to the Expiration Date, (i) the Holder hereof shall thereafter be entitled
to receive, upon exercise of this Warrant, such shares of stock, securities,
cash or other property as would have been received by such Holder if such Holder
had exercised this Warrant immediately prior to such merger or consolidation,
and (ii) if the surviving entity in such merger or consolidation is not the
Company, such surviving entity shall, by written instrument executed and
delivered to the Holder hereof, assure to such Holder upon exercise hereof the
delivery of such shares of stock, securities, cash or other property, and the
continuing benefits of this Warrant in respect thereof.
(c) In the event of any merger or consolidation of the Company
with or into another corporation, or the sale, lease or conveyance of all or
substantially all of the assets of the Company, or the voluntary or involuntary
dissolution, liquidation or winding up of the Company, then, and in any such
case, the Company shall mail to the Holder, at least fifteen (15) days prior
thereto, a notice stating the date or expected date on which such action is to
be taken and the expected record date for determining stockholders of record (if
required) in connection therewith. Such notice shall also specify the date or
expected date, if any is to be fixed, as of which record holders of Shares shall
be entitled to exchange their Shares for securities or other property
deliverable upon such merger, consolidation, sale, lease, conveyance,
dissolution, liquidation, winding up or other action, as the case may be.
(d) In addition to any notice pursuant to paragraph 4(c)
above, the Company shall give prompt written notice to the Holder hereof
following the occurrence of any of the events described in this paragraph 4, and
shall, as appropriate, provide such Holder
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<PAGE> 5
with a calculation in reasonable detail of any adjustment in the
composition of the Stock Units.
5. Financial Information.
The Company shall provide to each Holder, upon request
therefor from time to time, a copy of the most recent quarterly or annual report
previously filed by the Company with the Securities and Exchange Commission, or
if no such reports are then current, a copy of the most recent quarterly or
annual financial statements of the Company then available, all of which shall be
prepared in accordance with generally accepted accounting principles
consistently applied.
6. Reservation of Shares.
The Company shall at all times reserve and keep available for
issuance upon the exercise hereof such number of authorized but unissued or
treasury Shares (and/or any other securities or property forming a part of a
Stock Unit) as shall be sufficient to permit the full exercise of this Warrant.
7. Expenses.
The Company shall pay any and all expenses, transfer taxes and
other charges, including all costs associated with the preparation, issuance and
delivery of stock or warrant certificates, that may be incurred in respect of
the issuance or delivery of Warrant Stock upon any exercise of this Warrant. The
Company shall not, however, be required to pay any tax which may be payable in
respect of any transfer arising by reason of the issue and delivery of Warrant
Stock in any name other than that in which this Warrant is registered, and no
such issue or delivery shall be made unless and until the person requesting same
has paid to the Company the amount of any such tax, or has established the
payment of such tax to the Company's satisfaction.
8. Warrant Holder Not Deemed a Stockholder.
Except as provided herein, no Holder of this Warrant, as such,
shall be entitled to vote or receive dividends or be deemed the holder of shares
of the Company for any purpose, nor shall anything contained in this Warrant be
construed to confer upon the Holder hereof, as such, any of the rights of a
stockholder of the Company or any right to vote, give or withhold consent to any
corporate action (whether any reorganization, issue of stock, reclassification
of stock, consolidation, merger, conveyance or otherwise), receive notice of
meetings, receive dividends or subscription rights, or otherwise, prior to the
issuance of record to the Holder of the Shares which the Holder is then entitled
to receive upon the due exercise of this Warrant.
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<PAGE> 6
9. Notices.
Any and all notices to be given to the Company hereunder shall
be given to the Company at its offices located at 150 East 58th Street, Suite
3400, New York, New York 10155, Attention: Bentley J. Blum. Any and all notices
to be given to the Holder hereof shall be given to such Holder at its address as
same appears on the records of the Company.
10. Securities Act Restrictions.
The Holder, by its acceptance hereof, acknowledges and
confirms that neither this Warrant nor any of the Warrant Stock have been
registered under the Securities Act of 1933, as amended (the "Act"), or the
securities laws of any state, and neither this Warrant nor any Warrant Stock may
be sold, transferred, pledged or hypothecated in the absence of an effective
registration statement under the Act and any applicable state securities laws
relating to such security or an opinion of counsel (as hereinafter described)
that registration is not required under the Act and any applicable state
securities laws. Unless and until this Warrant and/or the subject Warrant Stock
(as the case may be) shall become and remain subject to an effective
registration under the Act and any applicable state securities laws, the Company
may require, as a condition to effecting any transfer or assignment hereof or
thereof on the books of the Company, a legal opinion in form and from counsel
satisfactory to the Company, to the effect that an exemption from registration
under the Act and any applicable state securities laws is available for such
proposed transfer or assignment. Each certificate representing any Warrant Stock
shall bear an appropriate legend to the foregoing effect.
11. Miscellaneous.
(a) No provision hereof, in the absence of affirmative action
by the Holder to effect any exercise hereunder, shall give rise to any liability
of such Holder for the Exercise Price or as a stockholder of the Company,
regardless of whether such liability is asserted by the Company or by any
creditor or creditors of the Company.
(b) Neither this Warrant nor any of the terms or conditions
hereof may be waived, amended or modified, except with the written consent of
the Company and the registered Holder hereof.
(c) This Warrant shall be governed by and construed in
accordance with the laws of the State of New York.
(d) The captions and paragraph headings used in this
Warrant are for convenience of reference only, and shall not be
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<PAGE> 7
referred to in connection with any interpretation or construction
hereof.
IN WITNESS WHEREOF, the Company, having validly authorized the issuance
of this Warrant and all performance hereunder, has caused this Warrant to be
executed by its duly authorized officer as of the Date of Issuance.
Date of Issuance: October 3, 1994
COMMODORE ENVIRONMENTAL SERVICES, INC.
By: /s/ Paul E. Hannesson
-------------------------------------
Paul E. Hannesson, President and CEO
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<PAGE> 1
EXHIBIT 10.60
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (this "Agreement"), made and entered into
as of the 1st day of June, 1995, by and between COMMODORE ENVIRONMENTAL
SERVICES, INC., a Delaware corporation having offices at 150 East 58th Street,
Suite 3400, New York, New York 10155 (the "Company"), and NEIL DROBNY, an
individual residing at 2391 Donna Drive, Columbus, Ohio 43220 (the "Employee");
W I T N E S S E T H:
WHEREAS, the Employee has substantial knowledge and experience
relating to soil remediation and business administration, and the Company
desires to obtain the full-time services of the Employee to serve in an
executive capacity with the Company; and
WHEREAS, the Employee is ready, willing and able to serve as
an executive officer of the Company, all upon the terms and subject to the
conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants herein contained, the parties hereby agree as follows:
Part A. Employment.
1. Duties. Subject to the terms and conditions of
this Agreement, the Company shall employ the Employee and the
Employee shall render services (a) to the Company in the capacity
and with the title of Group Vice President of the Company, and
(b) to the Company's subsidiary, Commodore Soil Services, Inc.
<PAGE> 2
("CSSI"), in the capacity and with the title of President and Chief Operating
Officer of CSSI. In addition, the Employee shall serve in such capacities and
have such titles with such of the Company's other subsidiaries as may be
requested from time to time by the Company, without requirement of any
additional compensation to the Employee. In such capacity, the Employee shall,
subject at all times to the direction of the Board of Directors and the Chief
Executive Officer of the Company, actively participate in all aspects of the
business of CSSI, including but not limited to technical, scientific, research
and development, marketing and promotional activities and functions. The
Employee shall engage in such traveling as may be reasonably required in
connection with the performance of his duties.
2. Full-Time Employment. Throughout the period of his
employment hereunder, the Employee shall devote his full and entire professional
and business time, attention, knowledge and skills to faithfully, diligently and
to the best of his abilities perform his duties hereunder; provided, however,
that nothing herein contained shall be deemed to prohibit the Employee from
serving on the Board of Directors of other companies (subject to Part D below)
or contributing to professional publications in the environmental field, so long
as same (a) is approved in writing by the Chairman, President or Chief Executive
Officer of the Company, and (b) does not interfere with the Employee's
performance of his duties hereunder.
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<PAGE> 3
Part B. Term of Employment; Termination of Agreement.
1. Term. Subject to prior termination in accordance with the
provisions hereof, the term of this Agreement shall commence on the date hereof,
shall continue through and including May 31, 1997. The Company shall have a
one-time option to renew this Agreement for an additional one year through and
including May 31, 1998, which option must be exercised (if at all) by written
notice thereof to the Employee given on or prior to February 28, 1997.
2. Termination For Cause. Anything contained in Section 1 of
this Part B to the contrary notwithstanding, this Agreement may be terminated at
the option of the Board of Directors of the Company for "Cause" (as hereinafter
defined), effective upon the giving of written notice of termination to the
Employee. As used herein, the term "Cause" shall mean and be limited to:
(a) any act committed by the Employee against the
Company, or any of its subsidiaries or divisions, constituting: (i) fraud, (ii)
misappropriation of corporate opportunity, breach of fiduciary duty or
non-disclosure of conflict of interest, (iii) self-dealing, (iv) embezzlement of
funds, (v) felony conviction for conduct involving moral turpitude or other
criminal conduct, or (vi) the disregard by the Employee of the reasonable
directions of the Chief Executive Officer of the Company; or
(b) the breach or default by the Employee in the
performance of any material provision of this Agreement (including but not
limited to Part D below); or
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<PAGE> 4
(c) alcoholism or any other form of addiction which
impairs the Employee's ability to perform his duties hereunder.
3. Death or Disability. Anything contained in Section 1 of
this Part B to the contrary notwithstanding, this Agreement may be terminated by
the Company: (i) upon the death of the Employee, or (ii) on thirty (30) days'
prior written notice to the Employee, in the event that the Employee shall be
physically or mentally disabled or impaired so as to prevent him from continuing
the normal and proper performance of his duties and responsibilities hereunder
for a period of three (3) consecutive months. The initial determination as to
whether the Employee is disabled or impaired shall be made by the physician
regularly treating the condition causing the disability. The Company shall have
the right to require the Employee to be examined by a physician duly licensed to
practice medicine in the State in which the Employee has his primary residence
to determine such physician's opinion as to the Employee's disability. If such
physician's opinion differs from that of the physician treating the Employee, or
a physician thereafter retained by the Employee, they shall forthwith select a
third physician so licensed whose opinion, after examination and review of
available information, shall be conclusive and binding upon all parties hereto.
All costs of the physician regularly treating or thereafter retained by the
Employee shall be paid by the Employee. All costs of the physician retained by
the Company shall be paid by the Company. If a third physician
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<PAGE> 5
is required, then the costs of that physician shall be paid by the
Company.
4. Optional Termination. Anything elsewhere contained in this
Agreement to the contrary notwithstanding, the Company may, at any time,
terminate this Agreement upon written notice given to the Employee not less than
two (2) months prior to the proposed date of termination.
5. No Further Obligations. Upon any termination of this
Agreement by the Company for "Cause" pursuant to Section 2 of this Part B, or by
reason of the Employee's death or disability pursuant to Section 3 of this Part
B, neither the Company nor any subsidiary or division thereof shall be liable
for or be required to pay to the Employee any further remuneration, compensation
or other benefits hereunder. In the event of any optional termination pursuant
to Section 4 of this Part B, the Company shall continue to provide to the
Employee his Base Salary (as such term is hereinafter defined) and benefits, as
would otherwise be in effect, for a period of (4) months following the Company's
notice of termination.
Part C. Compensation; Expenses.
1. Base Salary. As compensation for his services hereunder,
the Company shall pay or cause to be paid to the Employee (a) during the period
from the date hereof through May 31, 1996, an annual base salary of One Hundred
Fifty Thousand ($150,000) Dollars per annum, and (b) from and after June 1,
1996, an annual base salary of One Hundred Eighty Thousand ($180,000)
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<PAGE> 6
Dollars per annum. Such base salary (the "Base Salary") shall be payable in
periodic installments in accordance with the standard payroll practices of the
Company in effect from time to time. The Company is hereby authorized to make
all necessary payroll deductions, including FICA, from the Base Salary, as are
customarily made with respect to the salaries of other executive officers of the
Company.
2. Commission. In addition to the foregoing Base Salary, the
Company shall pay to the Employee, within thirty (30) days after the close of
each calendar quarter during the period of the Employee's employment hereunder,
a commission (the "Commission") equal to one-quarter of one (0.25%) percent of
all amounts collected by CSSI during such calendar quarter from the sale of
goods or rendering of services (regardless of when such goods were sold or such
services were rendered). Each payment of Commission hereunder shall be
accompanied by a written statement setting forth, in reasonable detail, the
calculation of the subject Commission.
3. Bonus. At the discretion of the Board of Directors of the
Company, the Employee may be awarded bonuses from time to time, up to $20,000
for each twelve-month period commencing on the date hereof. Any and all such
bonuses (collectively, the "Bonuses") shall be in the sole and absolute
discretion of the Board of Directors of the Company.
4. Benefits. In addition to the foregoing Base Salary,
Commission and Bonuses, the Employee shall, throughout the period
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<PAGE> 7
of his employment hereunder, be eligible to participate in any and all group
health, group life and/or other benefit plans generally made available by the
Company's subsidiary, Commodore Laboratories, Inc. ("CLI"), to its employees,
provided that nothing herein contained shall be deemed to require CLI to
maintain or continue any particular plan or policy.
5. Vacation. The Employee shall be entitled to up to four (4)
weeks of vacation per year, to be taken at such times as shall be mutually
agreeable to the Company and the Employee, and so as not to unduly interfere
with the business of the Company and CSSI. The Employee may carry over, to the
next annual period hereunder, up to two (2) weeks of unused vacation time as at
the end of each year of the term of this Agreement.
6. Expenses. In addition to the remuneration set forth above,
throughout the period of the Employee's employment hereunder, the Company shall
also reimburse or cause to be reimbursed to the Employee, upon presentment by
the Employee to the Company of appropriate receipts and vouchers therefor, for
any reasonable business expenses incurred by the Employee in connection with the
performance of his duties and responsibilities hereunder; provided, however,
that in order to be reimbursable hereunder, any such expense must be deductible
(in whole or in part) by the Company for federal income tax purposes.
Part D. Confidentiality; Non-Competition. As a material inducement to
cause the Company to enter into this Agreement, the Employee hereby covenants
and agrees that:
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<PAGE> 8
1. Confidential Information; Personal Relationships. The
Employee shall, at all times during and subsequent to the term of this
Agreement, keep secret and retain in strictest confidence all confidential
matters of the Company, and the "know-how", trade secrets, technical processes,
inventions, equipment specifications, equipment designs, plans, drawings,
research projects, confidential client lists, details of client, subcontractor
or consultant contracts, pricing policies, operational methods, marketing plans
and strategies, project development, acquisition and bidding techniques and
plans, business acquisition plans, and new personnel acquisition plans of the
Company (whether now known or hereafter learned by the Employee), except to the
extent that (i) such information is generally available to the public without
restriction, (ii) the Employee obtains confidentiality agreements with respect
to such confidential information, (iii) the Employee is requested by the Board
of Directors of the Company or a Committee thereof, or by the Chairman,
President or Chief Executive Officer of the Company, to disclose such
confidential information, (iv) such information is provided to a customer of the
Company pursuant to a request received from such customer in the ordinary course
of business, or (v) the Employee is under compulsion of either a court order or
a governmental agency's or authority's inquiry, order or request to so disclose
such information.
2. Property of the Company.
(a) Except as otherwise provided herein, all lists,
records and other non-personal documents or papers (and all copies
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<PAGE> 9
thereof) relating to the Company and/or any of its subsidiaries or divisions,
including such items stored in computer memories, on microfiche or by any other
means, made or compiled by or on behalf of the Employee, or made available to
the Employee, are and shall be the property of the Company, and shall be
delivered to the Company on the date of termination of the Employee's employment
with the Company, or sooner upon request of the Company at any time or from time
to time.
(b) All inventions, including any procedures,
formulas, methods, processes, uses, apparatuses, patterns, designs, plans,
drawings, devices or configurations of any kind, any and all improvements to
them which are developed, discovered, made or produced, and all trade secrets
and information used by the Company (including, without limitation, any such
matters created or developed by the Employee during the term of this Agreement),
shall be the exclusive property of the Company, and shall be delivered to the
Company (without the Employee retaining any copies, components or records
thereof) on the date of termination of the Employee's employment with the
Company; provided, however, that nothing herein contained shall be deemed to
grant to the Company any property rights in any inventions or other intellectual
property which may at any time be developed by the Employee which is wholly
unrelated to environmental services, environmental remediation or any other
business then engaged in or under development by the Company.
3. Employees of the Company. The Employee shall not, at any
time (whether during the term of this Agreement or at any
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<PAGE> 10
time thereafter), directly or indirectly, solicit any employee of the Company to
leave his or her employment with the Company, or encourage any such employee to
leave such employment without the prior written approval of the Company.
4. Non-Competition. For so long as the Employee shall be
receiving any compensation or remuneration under this Agreement, and for a
further period of three (3) years thereafter, the Employee shall not, directly
or indirectly, whether individually or as an employee, stockholder (other than
the passive ownership of up to 5% of the capital stock of a publicly traded
corporation), partner, joint venturer, agent or other representative of any
other person, firm or corporation, engage or have any interest in any business
(wherever located) which is engaged in or derives any revenues from performing
any functionally equivalent services or marketing any functionally equivalent
products as those services provided and products marketed by the Company or any
of its subsidiaries at the time in question.
5. Severability of Covenants. The Employee acknowledges and
agrees that the provisions of this Part D are (a) made in consideration of the
premises and undertakings of the Company set forth herein, (b) made for good,
valuable and adequate consideration received and to be received by the Employee,
and (c) are reasonable and necessary, in terms of the time, geographic scope and
nature of the restrictions, for the protection of the Company and the business
and good will thereof. It is intended that the provisions of this Part D be
fully severable, and in the
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<PAGE> 11
event that any of the foregoing restrictions, or any portion of the foregoing
restrictions, shall be deemed contrary to law, invalid or unenforceable in any
respect by any court or tribunal of competent jurisdiction, then such
restrictions shall be deemed to be amended, modified and reduced in scope and
effect, as to duration and/or geographic area, only to that extent necessary to
render same valid and enforceable (and in such reduced form, such provisions
shall then be enforceable), and any other of the foregoing restrictions shall be
unaffected and shall remain in full force and effect.
6. Equitable Remedies. The parties hereby acknowledge that, in
the event of any breach or threatened breach by the Employee of the provisions
of this Part D, the Company will suffer irreparable harm and will not have an
adequate remedy at law. Accordingly, in the event of any such breach or
threatened breach, the Company may seek and obtain appropriate equitable relief
to restrain or enjoin such breach or threatened breach and/or to compel
compliance herewith.
Part E. Miscellaneous.
1. Binding Effect. All of the terms and conditions of this
Agreement shall be binding upon and inure to the benefit of the Employee, the
Company and their respective heirs, executors, administrators, personal
representatives, successors and permitted assigns.
2. Notices. Except as herein provided, any notice, request,
demand or other communication required or permitted under this Agreement shall
be in writing and shall be deemed to have been
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<PAGE> 12
given when delivered personally or when mailed by certified mail, return receipt
requested, addressed to a party at the address of such party first set forth
above, or at such other address as such party may hereafter have designated by
notice. Copies of all notices hereunder shall simultaneously be sent by first
class post-paid mail to Solomon, Fornari, Weiss & Moskowitz, P.C., 650 Fifth
Avenue, New York, New York 10019, Attn: Stephen A. Weiss, Esq.
3. Waivers. Neither this Agreement nor any of the terms or
conditions hereof may be waived, amended or modified except by means of a
written instrument duly executed by the party to be charged therewith.
4. Captions. The captions and paragraph headings used in this
Agreement are for convenience of reference only, and shall not affect the
construction or interpretation of this Agreement or any of the provisions
hereof.
5. Governing Law. This Agreement, and all matters or disputes
relating to the validity, construction, performance or enforcement hereof, shall
be governed by and construed under the laws of the State of New York.
6. Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original hereof, but all
of which together shall constitute one and the same instrument.
7. Arbitration. Except for any court action or proceedings to
obtain equitable relief in respect of the provisions of Part D above, any
dispute involving the interpretation or
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<PAGE> 13
application of this Agreement shall be resolved by final and binding arbitration
before an arbitrator designated by and mutually acceptable to the Company and
the Employee. In the event that the parties cannot agree to the appointment of a
mutually acceptable arbitrator, the subject dispute shall be resolved by final
and binding arbitration before one or more arbitrators designated by the
American Arbitration Association in New York, New York, unless mutually agreed
to otherwise. The award of any of such arbitrator(s) may be enforced in any
court of competent jurisdiction.
8. Assignment.
(a) This Agreement is intended for the sole and
exclusive benefit of the parties hereto and their respective heirs, executors,
administrators, personal representatives, successors and permitted assigns, and
no other person or entity shall have any right to rely on this Agreement or to
claim or derive any benefit herefrom absent the express written consent of the
party to be charged with such reliance or benefit.
(b) The Employee may not assign or otherwise transfer
any of his obligations or duties hereunder to any other person, firm or
corporation, it being understood and agreed that this Agreement is intended to
be for the personal services of the Employee only and of no other person.
(c) The Company shall have the right, at any time and
from time to time, to cause any payments required hereunder to be made by any
subsidiary of the Company (including, without
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<PAGE> 14
limitation, CLI and/or CSSI). Furthermore, the Company may assign this Agreement
to any successor-in-interest who may acquire, whether by direct purchase, sale
of securities, merger or consolidation, the assets, business or properties of
the Company; provided, that no such assignment shall relieve the Company of its
duties and obligations to the Employee hereunder, without the prior written
consent of the Employee.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on and as of the date first set forth above.
COMMODORE ENVIRONMENTAL SERVICES, INC.
By: /s/ Paul E. Hannesson
-------------------------------------
Paul E. Hannesson, President
/s/ Neil Drobny
-------------------------------------
NEIL DROBNY
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<PAGE> 1
EXHIBIT 10.61
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT (this "Agreement"), dated as of June 1, 1995, is
made by and between COMMODORE ENVIRONMENTAL SERVICES, INC., a Delaware
corporation having offices at 150 East 58th Street, Suite 3400, New York, New
York 10155 (the "Company") , and NEIL DROBNY, an individual residing at 2391
Donna Drive, Columbus, Ohio 43220 (the "Optionee").
W I T N E S S E T H :
WHEREAS, in order to induce the Optionee to enter into the employ of
the Company and its subsidiaries, the Company has agreed to grant to the
Optionee the option, subject to the terms and conditions of this Agreement, to
purchase up to 240,000 shares of common stock of the Company ("Common Stock");
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the Company and the
Optionee hereby agree as follows:
1. THE OPTION.
(a) Subject to the terms and conditions of this
Agreement, the Company hereby grants to the Optionee the right and option (the
"Option") to purchase from the Company up to 240,000 shares of Common Stock (the
"Full Exercise Amount") at any time and from time to time during the period
commencing on the date hereof and terminating on May 31, 1999 (the "Exercise
Period"), at the exercise price of Fifty Cents ($.50) per share, subject to
adjustment as hereinbelow set forth (the "Option Exercise Price").
<PAGE> 2
Subject to prior termination in accordance with Section 5 below, the option
shall expire and all rights to purchase Common Stock pursuant thereto (to the
extent not previously exercised) shall cease at 5:00 p.m., New York City time,
on the last day of the Exercise Period (the "Expiration Date").
(b) The Option is designated a "Nonqualified Option,"
which term, as used herein, shall mean an option not intended to be an
"incentive stock option" within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code").
2. VESTING OF OPTION.
(a) Anything elsewhere contained in this Agreement to
the contrary notwithstanding, the Option may not be exercised unless, and then
only to the extent that, it has vested in accordance with the provisions of this
Section 2.
(b) The Option shall vest, as to one-twelfth of the
Full Exercise Amount, on each September 1, December 1, March 1 and June 1 after
the date hereof, commencing September 1, 1995. That portion of the Full Exercise
Amount which is vested at any time in accordance with this Section 2 (b) is
referred to in this Agreement as the "Vested Shares".
(c) No early termination of the Option pursuant to
Section 5 below shall serve to accelerate the vesting of any portion of the
Option.
3. EXERCISE OF OPTION. In order to exercise the option (to the
extent vested in accordance with Section 2 above and
2
<PAGE> 3
exercisable in accordance with Section 1(a) above and Section 5 below), the
Optionee shall give written notice to the Company specifying the number of
Vested Shares with respect to which the Option is being exercised, which notice
shall be accompanied by payment in full of the Option Exercise Price for such
Vested Shares (in each instance, an "Option Exercise"). Such payment shall be
made by certified or bank check drawn on a bank which is a member of the Federal
Reserve and payable to the order of the Company.
4. NON-TRANSFERABILITY. The Option shall not be transferable
other than by will or the laws of descent and distribution, and may not be
exercised by anyone other than the Optionee; provided, that if the Optionee dies
or becomes incapacitated, the Option may be exercised by the Optionee's estate,
legal representative or beneficiary, as the case may be, subject to all other
terms and conditions contained in this Agreement.
5. TERMINATION OF ASSOCIATION. The following shall apply in
the event of the termination of the Optionee's employment with the Company or
any subsidiary of the Company (in either case, a "Termination"):
(a) In the event of Termination either (i) by the
Company or any of its subsidiaries for "cause" (or any comparable term) or for
any competitive business activity as provided in any employment agreement
between the Optionee and the Company or any of its subsidiaries, or (in the
absence of such an agreement) for fraud, dishonesty, habitual drunkenness or
drug use, engaging or
3
<PAGE> 4
being interested in any competitive or similar business, or willful disregard of
assigned duties by the Optionee, or (ii) by the Optionee voluntarily other than
at the end of any applicable employment agreement and without the written
consent of the Company, then the Option shall immediately terminate and not be
exercisable.
(b) In the event of Termination by reason of the
Optionee's permanent retirement or under circumstances other than those
specified in Section 5(a) above and for reasons other than the Optionee's death
or disability, the Option shall terminate three (3) months after the date of
such Termination or on the Expiration Date, whichever shall first occur;
provided, however, that if the Optionee dies within such 3-month period, the
time period set forth in Section 5(c) below shall apply.
(c) In the event of the death or disability of the
Optionee prior to or as the basis of Termination, the Option shall terminate on
the first anniversary of the Optionee's death or disability, as the case may be,
or on the Expiration Date, whichever shall first occur.
(d) The Optionee's transfer between the Company and
any of its subsidiaries or between subsidiaries shall not constitute a
Termination, and the Board of Directors shall determine in each case whether an
authorized leave of absence for military service or otherwise shall constitute a
Termination for purposes hereof.
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<PAGE> 5
6. ADJUSTMENTS TO SHARES SUBJECT TO OPTION. The number of
shares of Common Stock covered by the Option, the Option Exercise Price, and the
type of securities subject to the Option, shall be proportionately and equitably
adjusted from time to time for any increase or decrease in the number of issued
shares of Common Stock, or any change in the type of Company securities held by
the holders of outstanding Common Stock, resulting from a stock split or other
subdivision respecting the Common Stock, any consolidation of shares of the
Common Stock, any other capital adjustment of the shares of Common Stock, any
exchange or conversion of the Common Stock for other securities, or the payment
of a stock dividend upon the Common Stock.
7. NO RIGHTS AS STOCKHOLDER OR TO CONTINUED EMPLOYMENT. The
Optionee shall not have any rights as a stockholder of the Company with respect
to any shares covered by the Option prior to the date of issuance to the
Optionee of the certificate or certificates for such shares, and neither this
Agreement nor the Option shall be deemed to confer upon the Optionee any right
to continued employment with the Company or any of its subsidiaries or interfere
in any way with the right of the Company or its subsidiaries to terminate the
employment of the Optionee, subject to any applicable employment agreement.
8. ISSUANCE OF SHARES; RESTRICTIONS.
(a) Subject to the conditions and restrictions
provided in this Section 8, the Company shall, within twenty (20) business days
after the Option has been duly exercised in whole or
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<PAGE> 6
in part, deliver to the Optionee one or more certificates, registered in the
name of the Optionee, for the number of Vested Shares with respect to which the
Option has been exercised. The Company may legend any stock certificate issued
hereunder to reflect any restrictions provided under applicable state securities
or other laws as determined by counsel to the Company, as well as any other
restrictions provided for in this Section 8.
(b) All shares of Common Stock issued to the Optionee
pursuant to any Option Exercise shall bear a legend to the following effect:
"The shares evidenced by this certificate have been acquired for
investment and have not been registered under the Securities Act of 1933 or
applicable state securities laws, and may not be offered, sold or otherwise
transferred, pledged or hypothecated unless and until registered under the
Securities Act of 1933 or applicable state securities laws, or unless, in the
opinion of counsel satisfactory to the Corporation, in form and substance
satisfactory to the Corporation, such offer, sale, transfer, pledge or
hypothecation is exempt from registration or is otherwise in compliance with
such laws."
(c) Anything contained herein to the contrary
notwithstanding, the Company shall not be obligated to sell or issue any shares
of Common Stock pursuant to any exercise of the Option unless and until the
Company is satisfied that such sale or issuance complies with all applicable
provisions of the Securities Act of 1933 and all other laws or regulations by
which the Company is bound or to which the Company or such shares are subject
(including all applicable state securities or other laws).
9. COMPLETE AGREEMENT; AMENDMENTS. This Agreement
constitutes the complete understanding and agreement between the
parties hereto, and no waiver, amendment or modification of any of
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<PAGE> 7
the terms or provisions hereof shall be valid unless made pursuant to an
instrument in writing signed by both parties. This Agreement supersedes and
terminates any and all prior agreements and understandings between the parties
hereto relating to the subject matter hereof.
10. SEVERABILITY. In the event that any provision of this
Agreement shall hereafter be declared to be invalid or unenforceable in whole or
in part, such invalidity or unenforceability shall not affect any provisions of
this Agreement or portions of such provisions not rendered invalid or
unenforceable, which provisions or portions of such provisions shall continue in
full force and effect.
11. SUCCESSORS AND ASSIGNS. All of the terms and provisions of
this Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective heirs, executors, administrators, personal
representatives, successors and permitted assigns.
12. GOVERNING LAW. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of New York,
without giving effect to the choice of law principles thereunder.
13. NOTICES. All notices, offers, acceptances and
communications to be made, served or given under or pursuant to this Agreement
shall be in writing and shall be deemed given when personally delivered or when
sent by registered or certified mail, return receipt requested, postage prepaid,
addressed to the party
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<PAGE> 8
being notified at such party's address first set forth above. Any party may
change the address to which notices or communications shall be sent by giving
written notice to the other party of such changed address, provided that any
such notice of change of address shall not be effective until received by the
party being notified.
14. HEADINGS. The captions and Section headings in this
Agreement are intended solely for ease of reference and shall be given no effect
in the construction or interpretation of this Agreement.
15. COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which shall be an original, but all of which together
shall constitute one and the same instrument.
COMMODORE ENVIRONMENTAL SERVICES, INC.
By: /s/ Paul E. Hannesson
------------------------------------
Paul E. Hannesson, President
/s/ Neil Drobny
------------------------------------
Neil Drobny
8
<PAGE> 1
EXHIBIT 10.62
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (this "Agreement"), made and entered into
as of the ___ day of August, 1995, by and between COMMODORE ENVIRONMENTAL
SERVICES, INC., a Delaware corporation having offices at 150 East 58th Street,
Suite 3400, New York, New York 10155 (the "Company"), and CARL MAGNELL, an
individual residing at 3709 Beaver Ford Road, Lake Ridge, Virgina 22192 (the
"Employee");
W I T N E S S E T H:
WHEREAS, the Employee has substantial knowledge and experience
relating to dealings with the federal government and in the international arena
in environmental and other innovative technology-related business matters, and
the Company desires to obtain the full-time services of the Employee to serve in
an executive capacity with the Company; and
WHEREAS, the Employee is ready, willing and able to serve as
an executive officer of the Company, all upon the terms and subject to the
conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants herein contained, the parties hereby agree as follows:
Part A. Employment.
1. Duties. Subject to the terms and conditions of this
Agreement, the Company shall employ the Employee and the Employee shall render
services to the Company in the capacity and with the title of Vice President of
the Company. In addition, the
<PAGE> 2
Employee shall serve in such capacities and have such titles with such of the
Company's subsidiaries as may be requested from time to time by the Company,
without requirement of any additional compensation to the Employee; and, without
limitation of the foregoing, the Employee shall also serve as President of a
subsidiary proposed to be formed by the Company for the purpose of servicing
environmental and other innovative technology-related business from governmental
agencies, the branches of the military, and in the international arena (the "New
Subsidiary"). In such capacity, the Employee shall, subject at all times to the
direction of the Board of Directors and the Chief Executive Officer of the
Company, have primary responsibility for (a) soliciting and obtaining new
business for the Company from governmental agencies (federal, state and local),
the branches of the military and in the international arena (subject to approval
of any material commitments by the Board of Directors or the Chief Executive
Officer of the Company), and (b) supervising environmental compliance matters
relating to the Company.
2. Full-Time Employment. Throughout the period of his
employment hereunder, the Employee shall devote his full and entire professional
and business time, attention, knowledge and skills to faithfully, diligently and
to the best of his abilities perform his duties hereunder; provided, however,
that the Employee may devote a portion of his time to service as a non-salaried
Senior Fellow at the Civil Engineering Research Foundation, and to other
professional-related affiliations, provided that same do not
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<PAGE> 3
materially interfere with the Employee's performance of his duties hereunder. It
is expected that the Employee will render his services primarily from his
residence in the Washington, D.C. area (unless and until the Company determines,
in its sole discretion, that it is economically feasible to establish an office
in the Washington, D.C. area, in which case and at which time the Employee will
render his services primarily from such office), provided that the Employee will
engage in such travelling as may be reasonably required in connection with the
performance of his duties hereunder.
Part B. Term of Employment; Termination of Agreement.
1. Term. Subject to prior termination in accordance with the
provisions hereof, the term of this Agreement shall commence on September 1,
1995, and shall continue through and including August 31, 1997. The Company
shall have a one-time option to renew this Agreement for an additional one year
through and including August 31, 1998, which option must be exercised (if at
all) by written notice thereof to the Employee given on or prior to May 31,
1997.
2. Termination For Cause. Anything contained in Section 1 of
this Part B to the contrary notwithstanding, this Agreement may be terminated at
the option of the Board of Directors of the Company for "Cause" (as hereinafter
defined), effective upon the giving of written notice of termination to the
Employee. As used herein, the term "Cause" shall mean and be limited to:
(a) any act committed by the Employee against the
Company, or any of its subsidiaries or divisions, constituting:
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<PAGE> 4
(i) fraud, (ii) misappropriation of corporate opportunity, breach of fiduciary
duty or non-disclosure of conflict of interest, (iii) self-dealing, (iv)
embezzlement of funds, (v) felony conviction for conduct involving moral
turpitude or other criminal conduct, or (vi) the disregard by the Employee of
the reasonable directions of the Chief Executive Officer of the Company; or
(b) the breach or default by the Employee in the
performance of any material provision of this Agreement (including but not
limited to Part D below); or
(c) alcoholism or any other form of addiction which
impairs the Employee's ability to perform his duties hereunder.
3. Death or Disability. Anything contained in Section 1 of
this Part B to the contrary notwithstanding, this Agreement may be terminated by
the Company: (i) upon the death of the Employee, or (ii) on thirty (30) days'
prior written notice to the Employee, in the event that the Employee shall be
physically or mentally disabled or impaired so as to prevent him from continuing
the normal and proper performance of his duties and responsibilities hereunder
for a period of three (3) consecutive months. The initial determination as to
whether the Employee is disabled or impaired shall be made by the physician
regularly treating the condition causing the disability. The Company shall have
the right to require the Employee to be examined by a physician duly licensed to
practice medicine in the State in which the Employee has his primary residence
to determine such physician's opinion as to the Employee's disability. If such
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<PAGE> 5
physician's opinion differs from that of the physician treating the Employee, or
a physician thereafter retained by the Employee, they shall forthwith select a
third physician so licensed whose opinion, after examination and review of
available information, shall be conclusive and binding upon all parties hereto.
All costs of the physician regularly treating or thereafter retained by the
Employee shall be paid by the Employee. All costs of the physician retained by
the Company shall be paid by the Company. If a third physician is required, then
the costs of that physician shall be paid by the Company.
4. Optional Termination. Anything elsewhere contained in this
Agreement to the contrary notwithstanding, the Company may, at any time,
terminate this Agreement upon written notice given to the Employee not less than
two (2) months prior to the proposed date of termination.
5. No Further Obligations. Upon any termination of this
Agreement by the Company for "Cause" pursuant to Section 2 of this Part B, or by
reason of the Employee's death or disability pursuant to Section 3 of this Part
B, neither the Company nor any subsidiary or division thereof shall be liable
for or be required to pay to the Employee any further remuneration, compensation
or other benefits hereunder. In the event of any optional termination pursuant
to Section 4 of this Part B, the Company shall continue to provide to the
Employee his Base Salary (as such term is hereinafter defined) and benefits, as
would otherwise be in effect,
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<PAGE> 6
for a period of four (4) months following the Company's notice of
termination.
Part C. Compensation; Expenses.
1. Base Salary. As compensation for his services hereunder,
the Company shall pay or cause to be paid to the Employee (a) during the period
from the date hereof through August 31, 1996, an annual base salary of One
Hundred Fifty Thousand ($150,000) Dollars per annum, and (b) from and after
September 1, 1996, an annual base salary of One Hundred Eighty Thousand
($180,000) Dollars per annum. Such base salary (the "Base Salary") shall be
payable in periodic installments in accordance with the standard payroll
practices of the Company in effect from time to time. The Company is hereby
authorized to make all necessary payroll deductions, including FICA, from the
Base Salary, as are customarily made with respect to the salaries of other
executive officers of the Company.
2. Commission. In addition to the foregoing Base Salary, the
Company shall pay to the Employee, within thirty (30) days after the close of
each calendar quarter during the period of the Employee's employment hereunder,
a commission (the "Commission") equal to one-quarter of one (0.25%) percent of
all amounts collected by the Company or its wholly-owned subsidiaries during
such calendar quarter from the sale of goods or rendering of services to or on
behalf of customers originated or first introduced by the Employee (regardless
of when such goods were sold or such services were rendered); and, from and
after the formation
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<PAGE> 7
of the New Subsidiary, such commission shall extend to all collections of the
New Subsidiary during the period of the Employee's employment hereunder from the
sale of goods or rendering of services. Each payment of Commission hereunder
shall be accompanied by a written statement setting forth, in reasonable detail,
the calculation of the subject Commission.
3. Bonus. At the discretion of the Board of Directors of the
Company, the Employee may be awarded bonuses from time to time, based on profits
of the Company. Any and all such bonuses (collectively, the "Bonuses") shall be
in the sole and absolute discretion of the Board of Directors of the Company.
4. Benefits. In addition to the foregoing Base Salary,
Commission and Bonuses, the Employee shall, throughout the period of his
employment hereunder, be eligible to participate in any and all group health,
group life and/or other benefit plans generally made available by the Company's
subsidiary, Commodore Laboratories, Inc. ("CLI"), to its employees, provided
that nothing herein contained shall be deemed to require CLI to maintain or
continue any particular plan or policy.
5. Vacation. The Employee shall be entitled to up to four (4)
weeks of vacation per year, to be taken at such times as shall be mutually
agreeable to the Company and the Employee, and so as not to unduly interfere
with the business of the Company. The Employee may carry over, to the next
annual period hereunder, up to two (2) weeks of unused vacation time as at the
end of each year of the term of this Agreement.
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<PAGE> 8
6. Expenses. In addition to the remuneration set forth above,
throughout the period of the Employee's employment hereunder, the Company shall
also reimburse or cause to be reimbursed to the Employee, upon presentment by
the Employee to the Company of appropriate receipts and vouchers therefor, for
any reasonable business expenses incurred by the Employee in connection with the
performance of his duties and responsibilities hereunder; provided, however,
that in order to be reimbursable hereunder, any such expense must be deductible
(in whole or in part) by the Company for federal income tax purposes.
Part D. Confidentiality; Non-Competition. As a material inducement to
cause the Company to enter into this Agreement, the Employee hereby covenants
and agrees that:
1. Confidential Information; Personal Relationships. The
Employee shall, at all times during and subsequent to the term of this
Agreement, keep secret and retain in strictest confidence all confidential
matters of the Company, and the "know-how", trade secrets, technical processes,
inventions, equipment specifications, equipment designs, plans, drawings,
research projects, confidential client lists, details of client, subcontractor
or consultant contracts, pricing policies, operational methods, marketing plans
and strategies, project development, acquisition and bidding techniques and
plans, business acquisition plans, and new personnel acquisition plans of the
Company (whether now known or hereafter learned by the Employee), except to the
extent that (i) such information is generally available to the public without
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<PAGE> 9
restriction, (ii) the Employee obtains confidentiality agreements with respect
to such confidential information, (iii) the Employee is requested by the Board
of Directors of the Company or a Committee thereof, or by the Chairman,
President or Chief Executive Officer of the Company, to disclose such
confidential information, (iv) such information is provided to a customer of the
Company pursuant to a request received from such customer in the ordinary course
of business, or (v) the Employee is under compulsion of either a court order or
a governmental agency's or authority's inquiry, order or request to so disclose
such information.
2. Property of the Company.
(a) Except as otherwise provided herein, all lists,
records and other non-personal documents or papers (and all copies thereof)
relating to the Company and/or any of its subsidiaries or divisions, including
such items stored in computer memories, on microfiche or by any other means,
made or compiled by or on behalf of the Employee, or made available to the
Employee, are and shall be the property of the Company, and shall be delivered
to the Company on the date of termination of the Employee's employment with the
Company, or sooner upon request of the Company at any time or from time to time.
(b) All inventions, including any procedures,
formulas, methods, processes, uses, apparatuses, patterns, designs, plans,
drawings, devices or configurations of any kind, any and all improvements to
them which are developed, discovered, made or produced, and all trade secrets
and information used by the Company
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<PAGE> 10
(including, without limitation, any such matters created or developed by the
Employee during the term of this Agreement), shall be the exclusive property of
the Company, and shall be delivered to the Company (without the Employee
retaining any copies, components or records thereof) on the date of termination
of the Employee's employment with the Company; provided, however, that nothing
herein contained shall be deemed to grant to the Company any property rights in
any inventions or other intellectual property which may at any time be developed
by the Employee which is wholly unrelated to environmental services,
environmental remediation or any other business then engaged in or under
development by the Company.
3. Employees of the Company. The Employee shall not, at any
time (whether during the term of this Agreement or at any time thereafter),
directly or indirectly, solicit any employee of the Company to leave his or her
employment with the Company, or encourage any such employee to leave such
employment without the prior written approval of the Company.
4. Non-Competition. For so long as the Employee shall be
receiving any compensation or remuneration under this Agreement, and for a
further period of three (3) years thereafter, the Employee shall not, directly
or indirectly, whether individually or as an employee, stockholder (other than
the passive ownership of up to 5% of the capital stock of a publicly traded
corporation), partner, joint venturer, agent or other representative of any
other person, firm or corporation, engage or have any interest in any business
(wherever located) which is engaged in or derives any
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<PAGE> 11
revenues from performing any functionally equivalent services or marketing any
functionally equivalent products as those services provided and products
marketed by the Company or any of its subsidiaries at the time in question.
5. Severability of Covenants. The Employee acknowledges and
agrees that the provisions of this Part D are (a) made in consideration of the
premises and undertakings of the Company set forth herein, (b) made for good,
valuable and adequate consideration received and to be received by the Employee,
and (c) are reasonable and necessary, in terms of the time, geographic scope and
nature of the restrictions, for the protection of the Company and the business
and good will thereof. It is intended that the provisions of this Part D be
fully severable, and in the event that any of the foregoing restrictions, or any
portion of the foregoing restrictions, shall be deemed contrary to law, invalid
or unenforceable in any respect by any court or tribunal of competent
jurisdiction, then such restrictions shall be deemed to be amended, modified and
reduced in scope and effect, as to duration and/or geographic area, only to that
extent necessary to render same valid and enforceable (and in such reduced form,
such provisions shall then be enforceable), and any other of the foregoing
restrictions shall be unaffected and shall remain in full force and effect.
6. Equitable Remedies. The parties hereby acknowledge that, in
the event of any breach or threatened breach by the Employee of the provisions
of this Part D, the Company will suffer irreparable harm and will not have an
adequate remedy at law.
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<PAGE> 12
Accordingly, in the event of any such breach or threatened breach, the Company
may seek and obtain appropriate equitable relief to restrain or enjoin such
breach or threatened breach and/or to compel compliance herewith.
Part E. Miscellaneous.
1. Binding Effect. All of the terms and conditions of this
Agreement shall be binding upon and inure to the benefit of the Employee, the
Company and their respective heirs, executors, administrators, personal
representatives, successors and permitted assigns.
2. Notices. Except as herein provided, any notice, request,
demand or other communication required or permitted under this Agreement shall
be in writing and shall be deemed to have been given when delivered personally
or when mailed by certified mail, return receipt requested, addressed to a party
at the address of such party first set forth above, or at such other address as
such party may hereafter have designated by notice. Copies of all notices
hereunder shall simultaneously be sent by first class post-paid mail to Solomon,
Fornari, Weiss & Moskowitz, P.C., 650 Fifth Avenue, New York, New York 10019,
Attn: Stephen A. Weiss, Esq.
3. Waivers. Neither this Agreement nor any of the terms or
conditions hereof may be waived, amended or modified except by means of a
written instrument duly executed by the party to be charged therewith.
4. Captions. The captions and paragraph headings used in this
Agreement are for convenience of reference only, and shall
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<PAGE> 13
not affect the construction or interpretation of this Agreement or
any of the provisions hereof.
5. Governing Law. This Agreement, and all matters or disputes
relating to the validity, construction, performance or enforcement hereof, shall
be governed by and construed under the laws of the State of New York.
6. Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original hereof, but all
of which together shall constitute one and the same instrument.
7. Arbitration. Except for any court action or proceedings to
obtain equitable relief in respect of the provisions of Part D above, any
dispute involving the interpretation or application of this Agreement shall be
resolved by final and binding arbitration before an arbitrator designated by and
mutually acceptable to the Company and the Employee. In the event that the
parties cannot agree to the appointment of a mutually acceptable arbitrator, the
subject dispute shall be resolved by final and binding arbitration before one or
more arbitrators designated by the American Arbitration Association in New York,
New York, unless mutually agreed to otherwise. The award of any of such
arbitrator(s) may be enforced in any court of competent jurisdiction.
8. Assignment.
(a) This Agreement is intended for the sole and
exclusive benefit of the parties hereto and their respective heirs,
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<PAGE> 14
executors, administrators, personal representatives, successors and permitted
assigns, and no other person or entity shall have any right to rely on this
Agreement or to claim or derive any benefit herefrom absent the express written
consent of the party to be charged with such reliance or benefit.
(b) The Employee may not assign or otherwise transfer
any of his obligations or duties hereunder to any other person, firm or
corporation, it being understood and agreed that this Agreement is intended to
be for the personal services of the Employee only and of no other person.
(c) The Company shall have the right, at any time and
from time to time, to cause any payments required hereunder to be made by any
subsidiary of the Company. Furthermore, the Company may assign this Agreement to
any successor-in-interest who may acquire, whether by direct purchase, sale of
securities, merger or consolidation, the assets, business or properties of the
Company; provided, that no such assignment shall relieve the Company of its
duties and obligations to the Employee hereunder, without the prior written
consent of the Employee.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on and as of the date first set forth above.
COMMODORE ENVIRONMENTAL SERVICES, INC.
By: /s/ Paul E. Hannesson
------------------------------------
Paul E. Hannesson, President
/s/ Carl Magnell
------------------------------------
CARL MAGNELL
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<PAGE> 1
EXHIBIT 10.63
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT (this "Agreement"), dated as of August __, 1995,
is made by and between COMMODORE ENVIRONMENTAL SERVICES, INC., a Delaware
corporation having offices at 150 East 58th Street, Suite 3400, New York, New
York 10155 (the "Company"), and CARL MAGNELL, an individual residing at 3709
Beaver Ford Road, Lake Ridge, Virginia 22192 (the "Optionee").
W I T N E S S E T H :
WHEREAS, in order to induce the Optionee to enter into an Employment
Agreement of even date herewith with the Company, the Company has agreed to
grant to the Optionee the option, subject to the terms and conditions of this
Agreement, to purchase up to 240,000 shares of common stock of the Company
("Common Stock");
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the Company and the
Optionee hereby agree as follows:
1. THE OPTION.
(a) Subject to the terms and conditions of this
Agreement, the Company hereby grants to the Optionee the right and option (the
"Option") to purchase from the Company up to 240,000 shares of Common Stock (the
"Full Exercise Amount") at any time and from time to time during the period
commencing on the date hereof and terminating on August 31, 1999 (the "Exercise
Period"), at the exercise price of Fifty Cents ($.50) per share, subject to
adjustment as hereinbelow set forth (the "Option Exercise Price").
<PAGE> 2
Subject to prior termination in accordance with Section 5 below, the option
shall expire and all rights to purchase Common Stock pursuant thereto (to the
extent not previously exercised) shall cease at 5:00 p.m., New York City time,
on the last day of the Exercise Period (the "Expiration Date").
(b) The Option is designated a "Nonqualified
Option," which term, as used herein, shall mean an option not intended to be an
"incentive stock option" within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code").
2. VESTING OF OPTION.
(a) Anything elsewhere contained in this Agreement to
the contrary notwithstanding, the Option may not be exercised unless, and then
only to the extent that, it has vested in accordance with the provisions of this
Section 2.
(b) The Option shall vest, as to one-twelfth of the
Full Exercise Amount, on each December 1, March 1, June 1 and September 1 after
the date hereof, commencing December 1, 1995. That portion of the Full Exercise
Amount which is vested at any time in accordance with this Section 2(b) is
referred to in this Agreement as the "Vested Shares".
(c) No early termination of the Option pursuant to
Section 5 below shall serve to accelerate the vesting of any portion of the
Option.
3. EXERCISE OF OPTION. In order to exercise the option (to the
extent vested in accordance with Section 2 above and
2
<PAGE> 3
exercisable in accordance with Section 1(a) above and Section 5 below), the
Optionee shall give written notice to the Company specifying the number of
Vested Shares with respect to which the Option is being exercised, which notice
shall be accompanied by payment in full of the Option Exercise Price for such
Vested Shares (in each instance, an "Option Exercise"). Such payment shall be
made by certified or bank check drawn on a bank which is a member of the Federal
Reserve and payable to the order of the Company.
4. NON-TRANSFERABILITY. The Option shall not be transferable
other than by will or the laws of descent and distribution, and may not be
exercised by anyone other than the Optionee; provided, that if the Optionee dies
or becomes incapacitated, the Option may be exercised by the Optionee's estate,
legal representative or beneficiary, as the case may be, subject to all other
terms and conditions contained in this Agreement.
5. TERMINATION OF ASSOCIATION. The following shall apply in
the event of the termination of the Optionee's employment with the Company or
any subsidiary of the Company (in either case, a "Termination"):
(a) In the event of Termination either (i) by the
Company or any of its subsidiaries for "cause" (or any comparable term) or for
any competitive business activity as provided in any employment agreement
between the Optionee and the Company or any of its subsidiaries, or (in the
absence of such an agreement) for fraud, dishonesty, habitual drunkenness or
drug use, engaging or
3
<PAGE> 4
being interested in any competitive or similar business, or willful disregard of
assigned duties by the Optionee, or (ii) by the Optionee voluntarily other than
at the end of any applicable employment agreement and without the written
consent of the Company, then the Option shall immediately terminate and not be
exercisable.
(b) In the event of Termination by reason of the
Optionee's permanent retirement or under circumstances other than those
specified in Section 5(a) above and for reasons other than the Optionee's death
or disability, the Option shall terminate three (3) months after the date of
such Termination or on the Expiration Date, whichever shall first occur;
provided, however, that if the Optionee dies within such 3-month period, the
time period set forth in Section 5(c) below shall apply.
(c) In the event of the death or disability of the
Optionee prior to or as the basis of Termination, the Option shall terminate on
the first anniversary of the Optionee's death or disability, as the case may be,
or on the Expiration Date, whichever shall first occur.
(d) The Optionee's transfer between the Company and
any of its subsidiaries or between subsidiaries shall not constitute a
Termination, and the Board of Directors shall determine in each case whether an
authorized leave of absence for military service or otherwise shall constitute a
Termination for purposes hereof.
4
<PAGE> 5
6. ADJUSTMENTS TO SHARES SUBJECT TO OPTION. The number of
shares of Common Stock covered by the Option, the Option Exercise Price, and the
type of securities subject to the Option, shall be proportionately and equitably
adjusted from time to time for any increase or decrease in the number of issued
shares of Common Stock, or any change in the type of Company securities held by
the holders of outstanding Common Stock, resulting from a stock split or other
subdivision respecting the Common Stock, any consolidation of shares of the
Common Stock, any other capital adjustment of the shares of Common Stock, any
exchange or conversion of the Common Stock for other securities, or the payment
of a stock dividend upon the Common Stock.
7. NO RIGHTS AS STOCKHOLDER OR TO CONTINUED EMPLOYMENT. The
Optionee shall not have any rights as a stockholder of the Company with respect
to any shares covered by the Option prior to the date of issuance to the
Optionee of the certificate or certificates for such shares, and neither this
Agreement nor the Option shall be deemed to confer upon the Optionee any right
to continued employment with the Company or any of its subsidiaries or interfere
in any way with the right of the Company or its subsidiaries to terminate the
employment of the Optionee, subject to any applicable employment agreement.
8. ISSUANCE OF SHARES; RESTRICTIONS.
(a) Subject to the conditions and restrictions
provided in this Section 8, the Company shall, within twenty (20) business days
after the Option has been duly exercised in whole or
5
<PAGE> 6
in part, deliver to the Optionee one or more certificates, registered in the
name of the Optionee, for the number of Vested Shares with respect to which the
Option has been exercised. The Company may legend any stock certificate issued
hereunder to reflect any restrictions provided under applicable state securities
or other laws as determined by counsel to the Company, as well as any other
restrictions provided for in this Section 8.
(b) All shares of Common Stock issued to the Optionee
pursuant to any Option Exercise shall bear a legend to the following effect:
"The shares evidenced by this certificate have been acquired for
investment and have not been registered under the Securities Act of 1933 or
applicable state securities laws, and may not be offered, sold or otherwise
transferred, pledged or hypothecated unless and until registered under the
Securities Act of 1933 or applicable state securities laws, or unless, in the
opinion of counsel satisfactory to the Corporation, in form and substance
satisfactory to the Corporation, such offer, sale, transfer, pledge or
hypothecation is exempt from registration or is otherwise in compliance with
such laws."
(c) Anything contained herein to the contrary
notwithstanding, the Company shall not be obligated to sell or issue any shares
of Common Stock pursuant to any exercise of the Option unless and until the
Company is satisfied that such sale or issuance complies with all applicable
provisions of the Securities Act of 1933 and all other laws or regulations by
which the Company is bound or to which the Company or such shares are subject
(including all applicable state securities or other laws).
9. COMPLETE AGREEMENT; AMENDMENTS. This Agreement constitutes
the complete understanding and agreement between the parties hereto, and no
waiver, amendment or modification of any of
6
<PAGE> 7
the terms or provisions hereof shall be valid unless made pursuant to an
instrument in writing signed by both parties. This Agreement supersedes and
terminates any and all prior agreements and understandings between the parties
hereto relating to the subject matter hereof.
10. SEVERABILITY. In the event that any provision of this
Agreement shall hereafter be declared to be invalid or unenforceable in whole or
in part, such invalidity or unenforceability shall not affect any provisions of
this Agreement or portions of such provisions not rendered invalid or
unenforceable, which provisions or portions of such provisions shall continue in
full force and effect.
11. SUCCESSORS AND ASSIGNS. All of the terms and provisions of
this Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective heirs, executors, administrators, personal
representatives, successors and permitted assigns.
12. GOVERNING LAW. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of New York,
without giving effect to the choice of law principles thereunder.
13. NOTICES. All notices, offers, acceptances and
communications to be made, served or given under or pursuant to this Agreement
shall be in writing and shall be deemed given when personally delivered or when
sent by registered or certified mail, return receipt requested, postage prepaid,
addressed to the party
7
<PAGE> 8
being notified at such party's address first set forth above. Any party may
change the address to which notices or communications shall be sent by giving
written notice to the other party of such changed address, provided that any
such notice of change of address shall not be effective until received by the
party being notified.
14. HEADINGS. The captions and Section headings in this
Agreement are intended solely for ease of reference and shall be given no effect
in the construction or interpretation of this Agreement.
15. COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which shall be an original, but all of which together
shall constitute one and the same instrument.
COMMODORE ENVIRONMENTAL SERVICES, INC.
By: /s/ Paul E. Hannesson
------------------------------------
Paul E. Hannesson, President
/s/ Carl Magnell
-----------------------------------
Carl Magnell
8
<PAGE> 1
Exhibit 10.64
ASSIGNMENT OF TECHNOLOGY AGREEMENT
THIS ASSIGNMENT OF TECHNOLOGY AGREEMENT (this "Agreement"), dated as
of December , 1995, is made by and between COMMODORE MEMBRANE
TECHNOLOGIES, INC. (the "Company"), a Delaware corporation having an office at
1487 Delashmut Avenue, Columbus, Ohio 43212, and SRI KILAMBI, an individual
residing at 3700 Sutherland Avenue, Apartment 0-11, Knoxville, Tennessee 37919
(the "Employee").
W I T N E S S E T H:
WHEREAS, simultaneously herewith the Company and the Employee have
entered into a certain Employment Agreement dated of even date herewith
relating to the employment by the Company of the Employee as Program Director
in charge of membrane separation technology (the "Employment Agreement"); and
WHEREAS, in connection with the execution of the Employment Agreement,
the Employee has agreed to assign to the Company all of the Employee's rights
in certain technology which is proprietary to the Employee and which is more
particularly hereinafter described and in connection therewith and in
consideration therefor, the Company has agreed to cause there to be awarded to
the Employee shares of common stock in the Company's parent corporation,
Commodore Environmental Services, Inc. ("CESI"), and the Company has agreed to
pay certain royalties to the Employee.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained and for other good and valuable consideration, the
receipt and sufficiency of which is hereby
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<PAGE> 2
acknowledged, the Company and the Employee hereby agrees as follows:
1. Certain Definitions. As used in this Agreement, the following
terms shall have the respective meanings set forth below:
(a) The term "Confidential Know-How" shall mean information
relating to the conception, design, development and exploitation of certain
processes, equipment and technologies known as Universal Membrane Separation
Technology and any other product or development resulting from the Patent
Rights, whether now existing or hereafter created.
(b) The term "Patent Rights" shall mean (a) the unexpired term of
all patent rights, including patent applications, continuations, continuations
in part, divisions, reissue applications and revision applications, in the
United States of America or in any other country in the world owned by the
Employee as of the date hereof and at any time during the term of this
Agreement, including, without limitation, all registered patents and pending
applications set forth on Exhibit A (as same may be supplemented from time to
time during the term of this Agreement), and (b) the unexpired term of all
patent rights, including patent applications, continuations, continuations in
part, divisions, reissue applications and revision applications, in the United
States of America or in any other country in the world hereafter acquired by
the Employee.
-2-
<PAGE> 3
(c) The term "Membrane Technology" shall mean all technologies, letters
patent, patent applications, trade secrets, formula, inventions, drawings,
schematics, plans, technology descriptions, mathematical models, supporting
data, and other intellectual property, including without limitation, the Patent
Rights, Confidential Know-How or other property rights created or obtained by
the Employee, whether now existing or hereafter created relating to the
conception, design, development and exploitation of certain processes, equipment
and technologies known as Universal Membrane Separation Technology and any other
product or development resulting from the Patent Rights, whether now existing or
hereafter created.
2. Assignment of Technology.
(a) The Employee hereby assigns, transfers, conveys and delivers to the
Company all right, title and interest of the Employee in the Membrane
Technology, the Confidential Know-How and the Patent Rights, excluding, however,
applications involving the separation of technicium. The Company shall have the
absolute right to use the Membrane Technology, the Patent Rights and the
Confidential Know-How for any purpose, including, the further transfer thereof
to third parties. The effective date of the within assignment shall be the date
on which the Employee begins employment under the Employment Agreement. At the
option of the Company, it shall have the right to accelerate such effective date
to the date of payment by the Company to the Employee of a fee of $10,000.
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<PAGE> 4
(b) The Employee covenants and agrees not to enter into any other
agreement for the Membrane Technology, the Patent Rights or the Confidential
Know-How with any person or entity other than the Company.
(c) The Employee covenants and agrees that he will, commencing
immediately upon his execution and delivery of this Agreement, cooperate with
the Company in the preparation and filing of all relevant patent applications
relating to the Membrane Technology. The Company covenants and agrees that the
Employee's name will appear on any patents authored or co-authored by the
Employee.
3. Grant of Stock Options. In consideration for the transfer hereunder
by the Employee of the Membrane Technology, the Patent Rights and the
Confidential Know-How, the Company hereby agrees to cause CESI to award to the
Employee 200,000 shares of its common stock (the "CESI Stock").
4. Conditions to the Release of Stock. Intentionally deleted.
5. Tax Liability. In addition to release of the CESI Stock to the
Employee, the Company shall pay to the Employee in cash an amount equal to the
Employee's liability for federal and state income taxes incurred in connection
with the award of the CESI Stock, when and if such tax liabilities are actually
incurred. Payment of such taxes shall be made by reimbursement to the Employee
upon presentation of signed income tax returns prepared by
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<PAGE> 5
a certified public accountant indicating that such tax liability is due and
payable by the Employee.
6. Royalties. (a) For the period commencing on the date hereof through
the seventh anniversary of the date hereof (the "Term"), the Company shall pay
to the Employee annually during the Term a royalty equal to two percent (2%) of
revenues actually received and attributable to the commercial application of
the Membrane Technology (the "Revenue"), such amount to be payable within 30
days of the end of each calendar quarter during the Term.
(b) Within sixty (60) days after the end of each 12 month period during
the Term, the Company shall furnish to the Employee a complete, detailed and
accurate statement, certified as accurate by the chief financial officer of the
Company, setting forth the Revenue and the basis on which the Revenue is
calculated. The provisions of this Paragraph 6 shall survive the termination of
this Agreement and shall continue for the entire Term whether or not the
Employee is then still employed by the Company.
7. Representations and Warranties. The Employee represents and warrants
to the Company as follows, the continuing veracity of each of which
representation and warranty shall be deemed a condition precedent to the
obligations of the Company hereunder:
(a) The Employee has the full and unrestricted right, power and
authority to enter into and perform the terms, covenants and conditions of this
Agreement and to be bound thereby. This Agreement constitutes a legal, valid
and binding obligation of
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<PAGE> 6
the Employee enforceable against the Employee in accordance with its terms.
(b) No consent, approval or authorization of or filing or registration
with, any governmental entity or other party is required in connection with the
execution, delivery and performance of this Agreement by the Employee.
(c) No representations or warranties of the Employee contained in this
Agreement, and no other information provided by the Employee to the Company
contains an untrue statement of material fact, or omits to state a material
fact, necessary to make the statements herein or therein not misleading.
(d) Except for applications involving the separation of technicium
which is not being assigned, the Employee is the sole and exclusive owner of the
Membrane Technology, all Confidential Know-How and all Patent Rights relating
thereto and no other individual or entity has any right to or interest to or in
the Membrane Technology, the Confidential Know-How, the Patent Rights and any
work derivative therefrom, or any profits therefrom and the Employee has not
heretofore assigned, pledged or otherwise encumbered the Membrane Technology,
the Confidential Know-How or the Patent Rights.
(e) The Membrane Technology, Confidential Know-How and Patent Rights
were created entirely by the Employee and neither the Membrane Technology, the
Confidential Know-How nor the Patent Rights infringe upon any patent,
trademark, copyright or other intellectual property or any common law right,
proprietary right or
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<PAGE> 7
other right of any other person or entity. To the best of the Employee's
knowledge, no other party has ownership or rights of any kind in and to the
Membrane Technology. In furtherance of the foregoing, the Employee covenants and
agrees that if and when he learns of any infringing technical claim relating to
the Membrane Technology, he will promptly notify the Company of same.
(f) None of the Employee, the Membrane Technology, Confidential Know-How
or the Patent Rights is subject to any contract or any other agreement (written
or oral) which restricts or limits the ability of the Employee to assign and
transfer the Membrane Technology, Confidential Know-How or Patent Rights
pursuant to this Agreement.
(g) Exhibit A annexed hereto is a true and complete list of all Patent
Rights registered and patent applications pending with the United States Patent
and Trademark Office and the patent registration office of any other country
owned by the Employee with respect to the Membrane Technology. Exhibit A will be
supplemented from time to time to reflect any and all Patent Rights created or
arising during the term of this Agreement.
8. Binding Effect. All of the terms and conditions of this Agreement shall
be binding upon and inure to the benefit of the Employee, the Company and their
respective heirs, executors, administrators, personal representatives,
successors and permitted assigns.
9. Notices. Except as herein provided, any notice, request, demand or other
communication required or permitted under
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<PAGE> 8
this Agreement shall be in writing and shall be deemed to have been given when
delivered personally or when mailed by certified mail, return receipt
requested, addressed to a party at the address of such party first set forth
above, or at such other address as such party may hereafter have designated by
notice. Copies of all notices hereunder shall simultaneously be sent by first
class post-paid mail to Solomon, Fornari, Weiss & Moskowitz, P.C., 650 Fifth
Avenue, New York, New York 10019, Attn: Stephen A. Weiss, Esq.
10. Waivers. Neither this Agreement nor any of the terms or
conditions hereof may be waived, amended or modified except by means of a
written instrument duly executed by the party to be charged therewith.
11. Captions. The captions and paragraph headings used in this
Agreement are for convenience of reference only, and shall not affect the
construction or interpretation of this Agreement or any of the provisions
hereof.
12. Governing Law. This Agreement, and all matters or disputes
relating to the validity, construction, performance or enforcement hereof,
shall be governed by and construed under the laws of the State of New York.
13. Arbitration. Any dispute involving the interpretation or
application of this Agreement shall be resolved by final and binding
arbitration before an arbitrator designated by and mutually acceptable to the
Company and the Employee. In the event that the parties cannot agree to the
appointment of a mutually acceptable arbitrator, the subject dispute shall be
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<PAGE> 9
revolved by final and binding arbitration before one or more arbitrators
designated by the American Arbitration Association in New York, New York,
unless mutually agreed to otherwise. The award of any of such arbitrator(s) may
be enforced in any court of competent jurisdiction.
14. Assignment.
This Agreement is intended for the sole and exclusive benefit of the
parties hereto and their respective heirs, executors, administrators, personal
representatives, successors and permitted assigns, and no other person or entity
shall have any right to rely on this Agreement or to claim or derive any
benefit herefrom absent the express written consent of the party to be charged
with such reliance or benefit.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first set forth above.
COMMODORE MEMBRANE TECHNOLOGIES, INC.
By: /s/ Carl O. Magnell
---------------------------------
Carl O. Magnell,
President
/s/ Sri Kilambi
---------------------------------
SRI KILAMBI
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<PAGE> 10
EXHIBIT A
None as of the date of this Agreement.
-10-
<PAGE> 1
EXHIBIT 10.65
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT (this "Agreement"), dated as of February 16,
1996 (the "Date of Grant"), is made by and between COMMODORE ENVIRONMENTAL
SERVICES, INC., a Delaware corporation having offices at 150 East 58th Street,
Suite 3400, New York, New York 10155 (the "Company"), and PAUL E. HANNESSON, an
individual residing at 2361 Golf Brook Drive, West Palm Beach, Florida 33414
(the "Optionee").
W I T N E S S E T H :
WHEREAS, in consideration of services previously rendered, and in order
to induce the Optionee to enter into an Employment Agreement with the Company's
to-be-formed subsidiary Commodore Applied Technologies, Inc. ("CATI"), the
Company has agreed to grant to the Optionee the option, subject to the terms and
conditions of this Agreement, to purchase up to 500,000 shares of the common
stock, $.01 par value per share, of the Company ("Common Stock");
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants herein contained, and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
Company and the Optionee hereby agree as follows:
<PAGE> 2
1. THE OPTION.
(a) Subject to the terms and conditions of this
Agreement, the Company hereby grants to the Optionee the right and option (the
"Option") to purchase from the Company up to an aggregate of 500,000 shares of
Common Stock (the "Full Exercise Amount"). Subject to the limitations set forth
in Section 2 of this Agreement, the Option will be exercisable at any time and
from time to time during the period commencing on the first anniversary of the
Date of Grant and terminating on the tenth anniversary of the Date of Grant (the
"Exercise Period"), at the exercise price of Fifty-Three Cents ($0.53) per
share, subject to adjustment as hereinbelow set forth (the "Option Exercise
Price"). Subject to prior termination in accordance with Section 5 below, the
option shall expire and all rights to purchase Common Stock pursuant thereto (to
the extent not previously exercised) shall cease at 5:00 p.m., New York City
time, on the last day of the Exercise Period (the "Expiration Date").
(b) The Option is designated a "Nonqualified Option,"
which term, as used herein, shall mean an option not intended to be an
"incentive stock option" within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code").
2. VESTING OF OPTION.
(a) Anything elsewhere contained in this Agreement to
the contrary notwithstanding, the Option may not be exercised
2
<PAGE> 3
unless, and then only to the extent that, it has vested in accordance with the
provisions of this Section 2.
(b) The Option shall vest, as to one-fifth of
the Full Exercise Amount, on each of the first, second, third, fourth and fifth
anniversaries of the Date of Grant. That portion of the Full Exercise Amount
which is vested at any time in accordance with this Section 2(b) is referred to
in this Agreement as the "Vested Shares".
(c) No early termination of the Option pursuant to
Section 5 below shall serve to accelerate the vesting of any portion of the
Option.
3. EXERCISE OF OPTION. In order to exercise the option (to the
extent vested in accordance with Section 2 above and exercisable in accordance
with Section 1(a) above and Section 5 below), the Optionee shall give written
notice to the Company specifying the number of Vested Shares with respect to
which the Option is being exercised, which notice shall be accompanied by
payment in full of the Option Exercise Price for such Vested Shares (in each
instance, an "Option Exercise"). Such payment shall be made by certified or bank
check drawn on a bank which is a member of the Federal Reserve and payable to
the order of the Company.
4. NON-TRANSFERABILITY. The Option shall not be transferable
other than by will or the laws of descent and distribution, and may not be
exercised by anyone other than the
3
<PAGE> 4
Optionee; provided, that if the Optionee dies or becomes incapacitated, the
Option may be exercised by the Optionee's estate, legal representative or
beneficiary, as the case may be, subject to all other terms and conditions
contained in this Agreement.
5. TERMINATION OF ASSOCIATION. The following shall apply in
the event of the termination of the Optionee's employment with the Company,
CATI, or any subsidiary of the Company or CATI (in any case, a "Termination"):
(a) In the event of Termination either (i) by the
Company, CATI, or any subsidiary thereof for "cause" (or any comparable term) or
for any competitive business activity as provided in any employment agreement
between the Optionee and the Company, CATI or any subsidiary thereof, or (in the
absence of such an agreement) for fraud, dishonesty, habitual drunkenness or
drug use, engaging or being interested in any competitive or similar business,
or willful disregard of assigned duties by the Optionee, or (ii) by the Optionee
voluntarily other than at the end of any applicable employment agreement and
without the written consent of the Company, CATI or any subsidiary thereof (as
the case may be), then the Option shall immediately terminate and not be
exercisable.
(b) In the event of Termination by reason of the
Optionee's permanent retirement or under circumstances other than those
specified in Section 5(a) above and for reasons other than the Optionee's death
or disability, the Option shall terminate
4
<PAGE> 5
three (3) months after the date of such Termination or on the Expiration Date,
whichever shall first occur; provided, however, that if the Optionee dies within
such 3-month period, the time period set forth in Section 5(c) below shall
apply.
(c) In the event of the death or disability of the
Optionee prior to or as the basis of Termination, the Option shall terminate on
the first anniversary of the Optionee's death or disability, as the case may be,
or on the Expiration Date, whichever shall first occur.
(d) The Optionee's transfer between the Company,
CATI and any of the subsidiaries thereof or between such subsidiaries shall not
constitute a Termination, and the Board of Directors of the Company shall
determine in each case whether an authorized leave of absence for military
service or otherwise shall constitute a Termination for purposes hereof.
6. ADJUSTMENTS TO SHARES SUBJECT TO OPTION. The number of
shares of Common Stock covered by the Option, the Option Exercise Price, and the
type of securities subject to the Option, shall be proportionately and equitably
adjusted from time to time for any increase or decrease in the number of
outstanding shares of Common Stock, or any change in the type of Company
securities held by the holders of outstanding Common Stock, resulting from a
stock split or other subdivision respecting the Common Stock, any consolidation
of shares of the Common Stock, any other capital adjustment of the shares of
Common Stock, any exchange or
5
<PAGE> 6
conversion of the Common Stock for other securities, or the payment of a stock
dividend upon the Common Stock.
7. NO RIGHTS AS STOCKHOLDER OR TO CONTINUED EMPLOYMENT. The
Optionee shall not have any rights as a stockholder of the Company with respect
to any shares covered by the Option prior to the date of issuance to the
Optionee of the certificate or certificates for such shares, and neither this
Agreement nor the Option shall be deemed to confer upon the Optionee any right
to continued employment with the Company, CATI or any subsidiary thereof or
interfere in any way with the right of the Company, CATI or the subsidiaries
thereof to terminate the employment of the Optionee, subject to any applicable
employment agreement.
8. ISSUANCE OF SHARES; RESTRICTIONS.
(a) Subject to the conditions and restrictions
provided in this Section 8, the Company shall, within twenty (20) business days
after the Option has been duly exercised in whole or in part, deliver to the
Optionee one or more certificates, registered in the name of the Optionee, for
the number of Vested Shares with respect to which the Option has been exercised.
The Company may legend any stock certificate issued hereunder to reflect any
restrictions provided under applicable state securities or other laws as
determined by counsel to the Company, as well as any other restrictions provided
for in this Section 8.
6
<PAGE> 7
(b) All shares of Common Stock issued to the Optionee
pursuant to any Option Exercise shall bear a legend to the following effect:
"The shares evidenced by this certificate have been acquired for
investment and have not been registered under the Securities Act of 1933 or
applicable state securities laws, and may not be offered, sold or otherwise
transferred, pledged or hypothecated unless and until registered under the
Securities Act of 1933 or applicable state securities laws, or unless, in the
opinion of counsel satisfactory to the Corporation, in form and substance
satisfactory to the Corporation, such offer, sale, transfer, pledge or
hypothecation is exempt from registration or is otherwise in compliance with
such laws."
(c) Anything contained herein to the contrary
notwithstanding, the Company shall not be obligated to sell or issue any shares
of Common Stock pursuant to any exercise of the Option unless and until the
Company is satisfied that such sale or issuance complies with all applicable
provisions of the Securities Act of 1933 and all other laws or regulations by
which the Company is bound or to which the Company or such shares are subject
(including all applicable state securities or other laws).
9. COMPLETE AGREEMENT; AMENDMENTS. This Agreement constitutes
the complete understanding and agreement between the parties hereto, and no
waiver, amendment or modification of any of the terms or provisions hereof shall
be valid unless made pursuant to an instrument in writing signed by both
parties. This Agreement supersedes and terminates any and all prior agreements
and understandings between the parties hereto relating to the subject matter
hereof.
7
<PAGE> 8
10. SEVERABILITY. In the event that any provision of this
Agreement shall hereafter be declared to be invalid or unenforceable in whole or
in part, such invalidity or unenforceability shall not affect any provisions of
this Agreement or portions of such provisions not rendered invalid or
unenforceable, which provisions or portions of such provisions shall continue in
full force and effect.
11. SUCCESSORS AND ASSIGNS. All of the terms and provisions of
this Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective heirs, executors, administrators, personal
representatives, successors and permitted assigns.
12. GOVERNING LAW. This Agreement shall be governed by, and
construed and enforced in accordance with, the laws of the State of New York,
without giving effect to the choice of law principles thereunder.
13. NOTICES. All notices, offers, acceptances and
communications to be made, served or given under or pursuant to this Agreement
shall be in writing and shall be deemed given when personally delivered or when
sent by registered or certified mail, return receipt requested, postage prepaid,
addressed to the party being notified at such party's address first set forth
above. Any party may change the address to which notices or communications shall
be sent by giving written notice to the other party of such
8
<PAGE> 9
changed address, provided that any such notice of change of address shall not be
effective until received by the party being notified.
14. HEADINGS. The captions and Section headings in this
Agreement are intended solely for ease of reference and shall be given no effect
in the construction or interpretation of this Agreement.
15. COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which shall be an original, but all of which together
shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
COMMODORE ENVIRONMENTAL SERVICES, INC.
By:
-------------------------------------
Name:
Title:
-------------------------------------
PAUL E. HANNESSON
9
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<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
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