<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
----------------------------
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________________ to ___________________
Commission File Number 0-25970
EXSORBET INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
IDAHO 82-0464589
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4294 LAKELAND DRIVE, SUITE 200
FLOWOOD, MISSISSIPPI 39208
(Address of principal executive offices)
Registrant's telephone number, including area code: (601) 936-6633
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
--- ---
As of August 5, 1996, 11,163,950 shares of the registrant's common stock, $.001
par value ("Common Stock"), were outstanding.
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<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ITEM PAGE
<S> <C> <C>
PART I
------
1. Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . 3
2. Management's Discussion and Analysis of Financial Condition
and Results of Operations . . . . . . . . . . . . . . . . . . . 8
PART II
-------
1. Legal Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . 11
6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . 12
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
</TABLE>
2
<PAGE> 3
PART I
ITEM 1. FINANCIAL STATEMENTS.
EXSORBET INDUSTRIES, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
ASSETS
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
------------- --------------
(Unaudited)
<S> <C>
Current Assets
Cash and cash equivalents . . . . . . . . . . $ 2,608,706 $ 877,182
Accounts receivable - trade, net of allowances 8,793,988 4,787,962
Inventories . . . . . . . . . . . . . . . . . 552,595 835,550
Prepaid and other . . . . . . . . . . . . . . 976,156 513,877
------------- --------------
Total Current Assets . . . . . . . . . . . . . . . . . 12,931,445 7,014,571
------------- --------------
Other Assets
Intangible assets, net . . . . . . . . . . . . 10,370,086 8,704,052
Other assets . . . . . . . . . . . . . . . . . 1,699,407 502,210
------------- --------------
Total Other Assets . . . . . . . . . . . . . . . . . . 12,069,493 9,206,262
------------- --------------
Property, Plant and Equipment, net . . . . . . . . . . 14,887,168 11,504,145
------------- --------------
Total Assets . . . . . . . . . . . . . . . . . . . . . $ 39,888,106 $ 27,724,978
============= ==============
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE> 4
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
------------- ---------------
(Unaudited)
<S> <C>
Current Liabilities
Accounts payable - trade . . . . . . . . . . . . $ 1,536,849 $ 1,990,202
Notes payable and current maturities of long- 5,812,445 3,373,688
term debt . . . . . . . . . . . . . . . . . . .
Other current liabilities . . . . . . . . . . . 1,495,156 759,802
------------- ---------------
Total Current Liabilities . . . . . . . . . . . . . . . . 8,844,450 6,123,692
------------- ---------------
Long-term debt, less current maturities . . . . . . . . . 9,798,695 3,490,059
------------- ---------------
Deferred Income Taxes . . . . . . . . . . . . . . . . . . 929,149 329,087
------------- ---------------
Total Liabilities . . . . . . . . . . . . . . . . . . . . 19,572,294 9,942,838
------------- ---------------
Minority Interest . . . . . . . . . . . . . . . . . . . . - 36,574
------------- ---------------
Stockholders' Equity
Common Stock . . . . . . . . . . . . . . . . . . 10,583 10,583
Additional paid-in capital . . . . . . . . . . . 18,064,852 18,064,852
Retained earnings (deficit) . . . . . . . . . . 2,240,377 (329,869)
------------- ---------------
Total Stockholders' Equity . . . . . . . . . . . . . . . 20,315,812 17,745,566
------------- ---------------
Total Liabilities and Stockholders' Equity . . . . . . . $ 39,888,106 $ 27,724,978
============= ===============
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE> 5
EXSORBET INDUSTRIES, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
----------------------- --------------------------
1996 1995 1996 1995
----------- ---------- ------------- ------------
<S> <C> <C> <C> <C>
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7,276,802 6,491,506 $ 15,039,167 $ 11,078,050
Cost of Sales . . . . . . . . . . . . . . . . . . . . . . . . . 4,250,786 4,154,623 8,485,384 7,303,205
------------ ----------- ------------- -------------
Gross Profit . . . . . . . . . . . . . . . . . . . . . . . . . 3,026,016 2,336,883 6,553,783 3,774,845
------------ ----------- ------------- -------------
Costs and Expenses:
Selling Expenses . . . . . . . . . . . . . . . . . . . 395,816 367,881 786,842 493,065
General and Administrative . . . . . . . . . . . . . . 1,162,141 860,635 2,080,932 1,471,814
------------ ----------- ------------- -------------
Total Costs and Expenses . . . . . . . . . . . . . . . . . . . 1,557,957 1,228,516 2,867,774 1,964,879
------------ ----------- ------------- -------------
Income from Operations . . . . . . . . . . . . . . . . . . . . 1,468,059 1,108,367 3,686,009 1,809,966
Other Income (Expense), net . . . . . . . . . . . . . . . . . . (172,192) (148,669) (369,892) (237,835)
------------ ----------- ------------- -------------
Income before Income Taxes . . . . . . . . . . . . . . . . . . 1,295,867 959,698 3,316,117 1,572,131
Provision for Income Taxes . . . . . . . . . . . . . . . . . . 492,492 364,685 1,260,124 597,410
------------ ----------- ------------- -------------
Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . 803,375 595,013 2,055,993 974,721
============ =========== ============= =============
Average Shares Outstanding . . . . . . . . . . . . . . . . . . 10,634,020 10,372,898 10,634,020 10,372,898
============ =========== ============= =============
Net Income per Common Share . . . . . . . . . . . . . . . . . . .08 .06 .19 .09
============ =========== ============= =============
</TABLE>
See notes to condensed consolidated financial statements.
5
<PAGE> 6
EXSORBET INDUSTRIES, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------------ ----------------------
1996 1995 1996 1995
----------- ------------ ------------ -----------
<S> <C> <C>
Net Cash (Used) Provided by Operating Activities: . . . . . . . . . $ 8,660 $ 145,701 $(1,758,845) $ 1,182,305
----------- ---------- ----------- -----------
Cash Flows from Investing Activities:
Net purchase of property, plant and equipment
and proceeds from sale of property, plant and equipment . (3,231,644) (91,598) (4,011,611) (633,860)
Change in other assets . . . . . . . . . . . . . . . . . . (1,477,968) (492,799) (1,245,413) (258,201)
----------- -------- ---------- -----------
Net Cash Used in Investing Activities . . . . . . . . . . . . . . . (4,709.612) (584,397) (5,257,024) (892,061)
----------- ---------- ---------- -----------
Cash Flows from Financing Activities:
Proceeds from issuance of debentures . . . . . . . . . . . 5,000,000 0 5,000,000 0
Net proceeds from notes payable and long-term debt . . . . 2,072,049 283,536 3,747,393 653,701
----------- ---------- ---------- -----------
Net Cash Flows from Financing Activities . . . . . . . . . . . . . 7,072,049 283,536 8,747,393 653,701
----------- ---------- ---------- -----------
Increase (Decrease) in Cash and Cash Equivalents . . . . . . . . . 2,371,097 (155,160) 1,731,524 943,945
Cash and Cash Equivalents - Beginning of Period . . . . . . . . . . 237,609 1,485,714 877,182 386,609
----------- ---------- ---------- -----------
Cash and Cash Equivalents - End of Period . . . . . . . . . . . . . $ 2,608,706 $1,330,554 $2,608,706 $ 1,330,554
=========== ========== ========== ===========
</TABLE>
See notes to condensed consolidated financial statements.
6
<PAGE> 7
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
JUNE 30, 1996
1. Basis of Consolidations
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions
to Form 10-Q. Accordingly, they do not include all the information and
footnotes required by generally accepted accounting principles for
complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating
results for the three month and six months ended June 30, 1996, are
not necessarily indicative of the results that may be expected for the
year ended December 31, 1996.
2. Business Combinations
On June 26, 1996, the Company entered into an agreement to acquire
Larco Environmental Services, Inc., in a business combination
accounted for as a pooling of interests. On June 27, 1996, the
Company entered into an agreement to acquire KR Industrial Services,
Inc., in a business combination accounted for as a pooling of
interest. The accompanying financial statements are based on the
assumption that the companies were combined for each period presented,
and financial statements of prior periods have been restated to give
effect to the combination. Net income for the periods June 30, 1996
and 1995 have been reduced by $54,954, due to amortization of
goodwill. Retained earnings as of December 31, 1995 has been reduced
by $109,908 due to the amortization of goodwill through that date.
All material intercompany transactions have been eliminated in the
combination.
3. Issuance of Debentures
During May 1996, the Company issued $5,000,000 of 7 1/2% convertible
debentures due two years from date of issue (the "Debentures"). The
Company is obligated to pay interest on the unpaid principal amount of
the Debentures at the rate of 7 1/2% per year, payable quarterly in
arrears until the principal is paid in full or has been converted into
Common Stock. Any accrued interest on the date of conversion, minus
any required withholding, shall be added to the principal amount to be
converted. Interest shall be computed on the basis of a 360-day year
of twelve 30-day months. Payment of the principal on the Debentures
will be due two years from the date of issuance of the Debentures.
The Debentures are currently convertible at any time and to the extent
that any Debentures remain outstanding on the second anniversary of
the purchase date, the Debentures will automatically convert into
shares of Common Stock on such date. The Debentures are convertible
into shares of Common Stock at 80% of the Current Market Price (as
defined herein) of the Common Stock on the date of conversion; but in
no event shall the conversion price be less than 50% of the Current
Market Price of the Common Stock on the date of the purchase of the
Debentures nor greater than the Current Market Price of the Common
Stock on the date of the closing of Debentures.
7
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The following analysis and discussion highlights significant factors
affecting the Company's financial condition and results of operations for the
quarter and six months ended June 30, 1996. For a more complete understanding
of the following discussion, reference should be made to the Company's
Consolidated Financial Statements and the related notes thereto presented
above.
As of the beginning of the second quarter of 1996, the Company's
subsidiaries included Consolidated Environmental Services, Inc., an Arkansas
corporation ("CESI") and Eco-Systems, Inc., a Mississippi corporation ("Eco-
Systems"). On June 26 and June 27, 1996, respectively, the Company acquired
Larco Environmental Services, Inc., a Louisiana corporation ("Larco") and KR
Industrial Services of Alabama, Inc., an Alabama corporation ("KR"). Each
transaction was accounted for as a pooling of interest. The financial
statements included in this report are based on the assumption that Larco, KR
and the Company were combined for each period presented, and the financial
statements of the prior periods have been restated to give effect to the
combination.
RESULTS OF OPERATIONS
Sales. Consolidated Sales for the second quarter 1996 increased by
$785,296 (12.0%) compared to the second quarter of 1995. For the first six
months, sales increased $3,961,117 (35.7%) compared to the same period in 1995.
Sales increased during both periods at KR, Eco-Systems and CESI. Larco's sales
increased significantly for the six month period, but decreased significantly
for the second quarter of 1996.
KR's sales increased $699,561 (85.5%) and 1,365,409 (89.6%) for the
second quarter and first six months of 1996, respectively, benefitting from
increased market share developed as the result of aggressive price competition
in 1995. Eco-Systems sales increased $187,877 (24.3%) and 488,204 (32%)
resulting from an increased volume of contracts for environmental consulting
work. CESI's sales were $627,722 for the second quarter and $1,074,252 for the
first six months of 1996, a 34.7% and 35.2% increase, respectively. The
majority of CESI's increase in sales was the result of the subsidiary
beginning work pursuant to a $3,500,000 contract signed in the first quarter of
1996.
Larco's sales decreased $528,057 (29.5%) for the second quarter, but
increased $601,114 (20.1%) for the first six months of 1996. Larco, being
engaged in emergency spill response, is subject to vast variations in sales
from period to period due primarily to the presence or absence of hazardous
chemical and petroleum spills. Larco worked on such spills in the second
quarter of 1995 and the first quarter of 1996, thus boosting sales expectedly
higher in those periods and resulting in the substantial variations between the
second quarter and first six months of 1996 as compared to the same periods
last year.
Gross Profit. As a percent of sales, gross profit was 41.5% in the
second quarter of 1996 compared to 36.0% in the second quarter of 1995. For
the first six month period, gross profit as a percent of sales was 43.5%
compared to 34.1% in the same period of 1995.
KR's gross profit as a percent of sales was 38.4% in the second
quarter of 1996, compared to 10.4% in the second quarter of 1995. For the
first six months of 1996 and 1995, gross profit as a percent of sales was 58.6%
and 27.5%, respectively. The higher gross profit percent was attributable to
higher margins and increased volume. Generally, the higher margins were
achieved through a higher rate of asset utilization, which kept the increase in
costs rising at a much slower rate than sales. Whereas sales increased 85.5%
and 89.6% during the second quarter and first six months of 1996, respectively,
cost of sales rose only 27.5% and 53.8% in the same periods, respectively.
Larco's gross profit as a percent of sales decreased slightly from
35.9% in the second quarter of 1995 to 34.3% in the second quarter of this
year. For the first six months of 1996, gross profit increased to 35.8% from
29.1% for the same period in 1995. The increase was due to increased hazardous
spill response business and therefore, greater utilization of Larco's existing
hazardous spill response equipment in the first six months of 1996 than in the
same period for 1995.
8
<PAGE> 9
Eco-System's gross profit as a percent of sales was 44.8% in the second
quarter of 1996 compared to 38.6% in the second quarter of 1995. Gross profit
was approximately 46% for both the first six months of 1995 and 1996. The
increase in the second quarter of 1996 versus the second quarter of 1995 is
attributable to better management of human resources applied to the increased
volume of business.
At CESI, gross profit as a percentage of sales increased from 24.7% in
the second quarter of 1995 to 40.2% in the second quarter of 1996. For the
first six month period, gross profit increased from 27.4% in 1995 to 37.5% in
1996. During the fourth quarter of 1995, the Company purchased large amounts
of equipment to replace equipment that CESI previously rented. Owning
equipment has proven more efficient than renting. The increase in gross profit
as a percent of sales results from the leveraging of fixed costs that results
from the combination of (i) the change to a cost structure containing a greater
proportion of fixed rather than variable costs and (ii) the increased sales.
Total Selling and General and Administrative Expenses. Total selling
and general and administrative expenses ("SG&A") increased as a percent of
sales from 18.9% in the second quarter of 1995 to 21.4% in the second quarter
of 1996. For the six month period, total SG&A increased as a percent of sales
from 17.7% in 1995 to 19.1% in 1996. The increase was due primarily to an
increase in general and administrative expenses which rose 35.0% in the second
quarter of 1995 compared to the second quarter of 1996 and rose 41.4% during
the first six months of 1996 compared to the same period in 1995. The increase
in general and administrative expense is mainly attributable to the addition of
offices in Texas, Louisiana and Alabama. Additionally, selling expenses during
the six month period in 1996 rose 59.6% compared to the same period in 1995.
This increase is principally due to the hiring of additional salesmen for the
Company.
Other Expense. Other Expense was higher in both the second quarter
and first six months of 1996 as compared to the same periods in 1995. The
principal cause for the increase was additional interest expense resulting from
bank financing and the issuance of the Debentures (defined herein).
FINANCIAL CONDITION AND LIQUIDITY
The Company's current and quick ratios were 1.46 and 1.29 at the end
of the second quarter 1996 compared to 1.14 and .93 at the end of 1995. The
continued growth, including the acquisitions of Larco and KR as well as an
expansion in service territory has required significant investment in working
capital, new equipment and facilities.
Working capital needs generally have been met from cash generated from
operations with short-term borrowings used on occasion and through the issuance
the Debentures. In May 1996, the Company issued $5,000,000 of 7 1/2%
convertible debentures due two years from the date of issue (the "Debentures")
which are presently convertible into Common Stock. As of August 12, 1996,
$1,470,000 of such Debentures have been converted into a total of 680,381
shares of Common Stock, 98,983 of which have yet to be issued.
The Company issued the Debentures in a transaction exempt from the
registration requirements of the Securities Act of 1933. The Company is
obligated to pay interest on the unpaid and unconverted principal amount of the
Debentures at the rate of 7 1/2% per year, payable quarterly in arrears until
the principal is paid in full or has been converted into Common Stock. Any
accrued interest on the date of conversion, minus any required withholding,
shall be added to the principal amount to be converted. Interest shall be
computed on the basis of a 360-day year of twelve 30-day months. Payment of
the principal on the Debentures will be due two years from the date of issuance
and may be made, at the option of the Company, either (i) in United States
Dollars, or (ii) through automatic conversion as provided below. Upon
issuance, one-half of the Debentures were convertible at any time 45 days, and
the remainder, at any time 75 days, after the purchase of the Debentures and
before the due date; provided, however, that, to the extent that any Debentures
remain outstanding on the second anniversary of the purchase thereof, such
Debentures will automatically convert into shares of Common Stock on such date.
The Debentures are convertible into shares of Common Stock at 80% of the
Current Market Price (as defined below) of the Common Stock on the date of
conversion; provided, however, that in no event shall the conversion price be
less than 50% of the Current Market Price of the Common Stock on the date of
the closing of a holder's purchase of a Debenture nor greater than the Current
Market Price of the Common Stock on the date of the closing of a holder's
purchase of a Debenture. "Current Market Price" per share
9
<PAGE> 10
of Common Stock on any date is the average of the quoted bid prices of the
Common Stock for five consecutive trading days ending on the trading day before
the date in question. The quoted bid price shall mean (i) the closing bid
prices thereof on any such trading date, as reported by Bloomberg, L.P., or
(ii) in the event the Common Stock is not reported on such system, the fair
market value of the Common Stock as determined by the Board of Directors of the
Company in its good faith judgment.
Under certain limited circumstances, upon conversion of the Debentures
into Common Stock and upon demand of such holders, the Company is obligated to
file a registration statement within thirty days to register such Common Stock
for sale.
The Company has used approximately $750,000 of the proceeds from the
sale of the Debentures to retire short- term debt and used approximately
another $1,500,000 to increase working capital. The Company has used
$1,300,000 to acquire real estate related to the operations of Larco.
Net cash from operations in the first six months of 1996 was
$(1,758,845). The net outflow of cash was primarily attributable to two
factors. The Company had to pay approximately $750,000 in prepaid job costs for
CESI. Additionally, the Company's sales increased resulting in additional cash
being required for working capital to support the increased sales and increased
operations.
Accounts receivable increased $4,006,026, an 83.6% increase, in the
first six months of 1996. The increase is primarily attributable to an
increase in sales of $3,961,117 in the first six months of 1996, most of which
occurred in the first quarter. Accounts receivable also increased from the
slow pay of a large customer which decreased the inflow of cash to offset the
large cash outflow for operating activities during the first six months of
1996. That customer has signed a promissory note converting the approximately
$1,100,000 in accounts receivable to notes receivable. Such result will be
reflected in the third quarter financial statements.
Net cash from investing activities in the first six months of 1996 was
$(5,257,024), reflecting the amount used for investment activities in property,
plant and equipment and other assets. The Company financed such uses of cash
through the issuance of the Debentures and long-term bank financing.
The Company's cash commitments include an obligation to pay $3,000,000
to the shareholders of 7-7, Inc., an Ohio corporation ("7-7") (discussed
below), pursuant to that certain Agreement and Plan of Merger (defined herein),
upon the closing of the Company's acquisition of 7-7. The Company is currently
negotiating a new revolving line of credit and term loan to refinance existing
debt and provide additional working capital and to insure that the Company will
have sufficient cash to meet its financial commitments. However, there can be
no assurance that such additional financing will result from the current or
future negotiations. If such additional financing cannot be obtained the
Company may have difficulty in meeting the $3,000,000 payment due to the
shareholders of 7-7. The Company believes that such financing will be
obtained, or in the alternative, shareholders of 7-7 and the Company will amend
the Agreement and Plan of Merger to extend the due date for the required
payment. However, there can be no assurance that the shareholders of 7-7 will
agree to such an amendment if the need so arises.
10
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PART II
ITEM 1. LEGAL PROCEEDINGS.
On October 28, 1994, certain former employees of the Company filed
suit against the Company in the Circuit Court of Crawford County, Arkansas
seeking $50,000 in actual damages and $2,500,000 in punitive damages for
violations of the Arkansas Civil Rights Act and for the common law tort of
outrage. The case was set for trial in June, 1996 but was continued by the
Court due to unavailability of the trial judge until November, 1996. The
plaintiffs claim that they were sexually harassed by a supervisor formerly
employed by the Company. Management believes that the suit is without merit
and any adverse judgment will not have a material adverse effect on the
Company.
On or about August 1, 1996, a current employee of CESI filed suit
against the Company in the District Court of Tulsa County, Oklahoma seeking
damages in excess of $50,000. The employee contends that she is owed $75,528
in commissions, $79,116 in penalties for failure to timely pay the commissions,
$6,240 in overtime compensation and the same amount in statutory penalties,
$940 in mileage expenses and the same amount in statutory penalties. The same
employee also contends that she was sexually harassed and discriminated against
by a former supervisor for which she seeks unspecified damages in excess of
$50,000. Management has thoroughly investigated the claims and believes that
all of the claims are without merit. Management's calculations of commissions
due to the employee, based upon all available documentation, indicate that all
commissions due to the employee have been paid. Management believes that it is
not liable for any penalty because all commissions have been paid and because
the statutory penalty applies only in cases where an employment relationship is
terminated and the current employment relationship with the individual involved
has not been terminated. Management believes that the claim for overtime
compensation is frivolous as the employee is a salaried employee believed to be
exempt from overtime compensation statutes. Management believes the claim for
mileage expenses is also frivolous as the employee has been compensated for all
mileage charges. Lastly, management believes the sexual harassment and
discrimination claims are totally without any merit. The employee involved
never made any notification of sexual discrimination or harassment to the
Company or to any federal or state administrative agency. Management intends
to defend the litigation vigorously.
ITEM 5. OTHER INFORMATION.
The Company has entered into a letter of intent, dated April 24, 1996,
that provides for the acquisition of all of the outstanding stock of
Environmetrics, Inc. in exchange for an unspecified amount of the Company's
Common Stock that is still subject to negotiation. The Company anticipated
closing the transaction by May 30, 1996. The Company continues to conduct due
diligence but cannot predict when this transaction, if ever, will be
consumated. There can be no assurance that this transaction will ever be
consummated.
The Company has entered into a letter of intent, dated May 2, 1996,
and through further negotiations, has agreed to acquire all the outstanding
stock of Chem-Bio Laboratories, Inc. and Asbestos Abatement Systems, Inc. for
$1,000,000 in cash. The Company anticipated closing the transaction by May 30,
1996. However, a definitive agreement has yet to be signed and the Company
continues to conduct due diligence. The Company cannot determine when, if
ever, this transaction will be consummated and there can be no assurance that
this transaction will ever be consumated.
The Company entered into an Agreement and Plan of Merger, dated August
5, 1996, among the Company, 7-7 Merger, Inc., an Arkansas corporation and
wholly-owned subsidiary of the Company, 7-7, Calvin F. Lowe, Sr., Calvin F.
Lowe, II, Edward Kurzenberger, G. Howard Collingwood, Gary Platek and James
Hodgson to acquire all of the outstanding stock of 7-7 in exchange for
approximately 864,000 shares of the Company's Common Stock and $3,000,000 in
cash. 7-7 is an environmental services company that provides a broad range of
services including environmental remediation, emergency response, barge
cleaning, industrial maintenance and hazardous waste recycling. 7-7 reported
$9,202,261 in total assets and $6,577,534 in total liabilities as of the end of
its fiscal year ended November 30, 1995. Gross revenue for fiscal year 1995
was $18,172,410 yielding a gross profit of $3,776,704. There can be no
assurance that this transaction will ever be consummated or, if consummated,
that the financial information presented herein in respect of 7-7 will reflect
the financial information after the date such transaction is consummated.
11
<PAGE> 12
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
* 3.1 Articles of Incorporation of Exsorbet Industries, Inc.,
dated March 14, 1930, as amended November 2, 1981,
February 19, 1988, March 9, 1988, August 5, 1988 and
December 20, 1993 (filed as Exhibit 3.1 to Form 10-QSB
dated June 30, 1995).
* 3.2 Articles of Amendment to the Articles of Incorporation
of Exsorbet Industries, Inc., dated May 9, 1996 (filed
as Exhibit 3.2 to Form 10-Q/A-1 dated June 30, 1996).
* 3.3 By-Laws of Exsorbet Industries, Inc. (filed as Exhibit
3.2 to Form 10-QSB dated June 30, 1995).
* 4.1 Form of Certificate of Exsorbet Industries, Inc.
Common Stock, $.001 par value (filed as Exhibit 3 to
Form 10-SB filed May 1, 1995).
10.1 Employment Agreement of Charles E. Chunn, Jr., dated
May 15, 1996 (filed herewith).
10.2 Employment Agreement of Dr. Edward L. Schrader, dated
May 15, 1996 (filed herewith).
10.3 Agreement, dated May 15, 1996, between Exsorbet
Industries, Inc. and Dr. Edward L. Schrader (filed
herewith).
10.4 Employment Agreement of Sam Sexton III, dated May 15,
1996 (filed herewith).
10.5 Employment Agreement of Larry Woodcock, dated June 26,
1996 (filed herewith).
10.6 Employment Agreement of Marilyn Woodcock, dated June
26, 1996 (filed herewith).
10.7 Registration Rights Agreement, dated June 26, 1996, by
and between Exsorbet Industries, Inc. and Larry and
Marilyn Woodcock (filed herewith).
10.8 Employment Agreement of Kenneth R. McDonald, dated June
27, 1996 (filed herewith).
27 Financial Data Schedule (filed herewith).
-------------------
* Incorporated by Reference
12
<PAGE> 13
(b) Reports on Form 8-K
The Company filed a Current Report on Form 8-K dated
June 26, 1996 with respect to the acquisition of Larco
Environmental Services, Inc. pursuant to an Agreement and Plan
of Reorganization among the Company, Larco Acquisition, Inc.,
Larco and Larry and Marilyn Woodcock.
The Company filed a Current Report on Form 8-K dated
June 27, 1996 with respect to the acquisition of KR Industrial
Services of Alabama, Inc. pursuant to a Stock Exchange
Agreement among the Company, KR Acquisition, Inc., KR, Kenneth
R. and Carolyn McDonald and Kenneth A. Flatt, Jr.
13
<PAGE> 14
SIGNATURES
Pursuant to the requirements 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.
EXSORBET INDUSTRIES, INC.
By: /s/ CHARLES CHUNN, JR.
--------------------------------------------------
CHARLES CHUNN, JR.
Chairman of the Board, Chief Financial Officer,
Vice President, Treasurer and Director
(Principal Executive Officer, Principal
Financial Officer and Principal Accounting Officer)
Date: August 14, 1996
14
<PAGE> 15
EXSORBET INDUSTRIES, INC.
FORM 10-Q INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Number Description
<S> <C>
10.1 Employment Agreement of Charles E. Chunn, Jr., dated May 15, 1996.
10.2 Employment Agreement of Dr. Edward L. Schrader, dated May 15, 1996.
10.3 Agreement, dated May 15, 1996, between Exsorbet Industries, Inc. and
Dr. Edward L. Schrader.
10.4 Employment Agreement of Sam Sexton III, dated May 15, 1996.
10.5 Employment Agreement of Larry Woodcock, dated June 26, 1996.
10.6 Employment Agreement of Marilyn Woodcock, dated June 26, 1996.
10.7 Registration Rights Agreement, dated June 26, 1996, by and between
Exsorbet Industries, Inc. and Larry and Marilyn Woodcock.
10.8 Employment Agreement of Kenneth R. McDonald, dated June 27, 1996.
27 Financial Data Schedule.
</TABLE>
<PAGE> 1
EXHIBIT 10.1
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is made as of the 15th day of May, 1996
(this "Agreement") between Exsorbet Industries, Inc. ("the Company") and
Charles E. Chunn, Jr. ("Employee").
WHEREAS, the Company desires to employ Employee to serve as chief
financial officer, chief accountant, and executive vice-president for the
Company, and to perform various functions and duties related thereto; and
WHEREAS, the Company recognizes that the Employee is a director of the
Company at the present time, but the terms of this agreement are fair and
reasonable and the employment of Employee is in the best interest of the
Company; and
WHEREAS, Employee has heretofore provided valuable services to the
Company and its subsidiaries; and
WHEREAS, the Company recognizes and desires to receive the benefit
that the Company and its subsidiaries will receive by virtue of the employment
of Employee; and
WHEREAS, Employee desires to be employed by the Company upon the terms
and conditions stated herein;
NOW, THEREFORE, in consideration of the mutual promises contained
herein, the Company and Employee agree as follows:
1. Recognition of Status. The Company recognizes that Employee
has been gainfully employed and/or gainfull self-employed prior to association
with the Company. Such prior employment includes a guarantee or the
substantial likelihood of substantial future income. The Company desires to
provide an incentive to induce the Employee to become employed by the Company,
while recognizing that such employment will require Employee to forego and
terminate his present earning abilities outside of the Company. The Company
recognizes the professional expertise of Employee and understands that Employee
would be unable, due to financial hardships resulting from the loss of income
guaranteed by prior employment and/or relationships, to become employed by the
Company upon terms which are less beneficial to Employee than those stated
herein.
2. Employment. The Company agrees to employ Employee for a period
of five years beginning as of the date of hereof. Employee agrees to be
employed by the Company for such
<PAGE> 2
period of time. Employee will observe all Company policies and procedures as
are applicable to similarly situated senior management employees and conduct
himself in accordance with all lawful directions from the Company. Employee
shall use his best efforts in the performance of the duties of this employment
as designated by the Company and shall, at all times, conduct himself so as to
reflect favorably upon the Company.
3. Company Benefits. Employee will be the beneficiary of and
permitted to participate in all of the Company's standard benefit plans which
are from time to time and made available to similarly situated management level
employees. Such benefits shall specifically include:
(a) four weeks of paid vacation per year at a reasonable time or
times to be selected by Employee;
(b) to the extent that any substantial portion of the full-time
employees of Exsorbet Industries, Inc. receive paid leave on any
holiday, Employee shall receive paid leave on such holiday;
(c) the opportunity to participate in any existing or future
Employee Health Plans, ERISA plans, Employee Benefit plans, pension
plans, retirement plans, life insurance plans, health and medical
insurance plans, and disability insurance plans on such terms as are
available to similarly situated management level employees;
(d) all other benefit plans presently or hereafter available to
similarly situated management and general employees of the Company;
and
(e) all other benefit plans available to employees of subsidiaries
of the Company, to the extent that such benefits can lawfully be
provided to Employee.
Notwithstanding the foregoing, the Company may make reasonable changes in any
such arrangements provided that such changes are made pursuant to a program
which is applicable to all senior management personnel of the Company and which
do not result in a substantial reduction of benefits available to Employee.
4. Duties. (A) Employee shall perform such duties and functions
and shall have such responsibilities as shall reasonably be designated by the
Company from time to time, provided that such duties are generally consistent
with the duties of Employee specified below and provided further that such
duties are imposed in good faith by the Company. The Company warrants that it
will not impose any duties upon Employee merely to inflict hardship or
punishment upon Employee or to attempt to cause Employee to breach this
contract or to resign from employment with the Company.
2
<PAGE> 3
(B) The Company desires for Employee to remain in a senior
management position with the Company. However, this Agreement shall be fully
valid and enforceable by both parties, in all regards, without respect to
whether Employee is an officer or director of the Company. The duties of
Employee shall include:
Acting in the capacity of Chief Financial Officer, Chief Accountant,
and executive vice-president; assisting in preparation of the
Company's income tax returns; assisting in preparation of the
Company's financial statements and financial data; overseeing accounts
receivables and accounts payables of the Company; and providing expert
consultation in financial matters of the Company.
5. Compensation. The Company shall pay Employee an annual salary
of $160,000 for the period beginning May 15, 1996, to be paid in equal
bi-weekly installments without a waiting period. Such amount shall be
increased annually beginning January 1, 1997, in accordance with the cost of
living index, but in no event shall the increase be less than five percent (5%)
of the salary paid for the prior year. Such salary shall be paid bi-weekly,
without any waiting period, beginning May 24, 1996.
6. Prior Agreements. (A) It is agreed that a prior agreement
between Employee and the Company dated January 1, 1996 is superseded by this
agreement except as follows:
Paragraph 4(b) concerning compensation for prior services, including
all sub-paragraphs, attachments relative to such paragraph, shall
remain in full force and effect.
(B) The Company recognizes that: (a) the compensation provided by
this paragraph was for prior services provided by Employee to the Company; (b)
Employee was not previously compensated for his services to the Company during
the time period covered by such compensation; (c) the compensation provided has
been calculated so that it is in the same amount as Employee would have
received had he been paid his current salary; (d) Employee was a key person
inside the Company during the time period of rendition of prior services; and
(e) Employee's prior services were of value to the Company and Employee could
have demanded payment at such time, but elected to waive compensation at such
time in order to act in the best interest of the Company. Therefore, and in
order to avoid any doubt, the provisions of the January 1, 1996 agreement
between Employee and the Company concerning compensation for prior services,
contained in paragraph 4(b) of such agreement, shall remain in full and
complete force and effect in all of its particulars and effects.
(C) Any compensation under the January 1, 1996 agreement for
services rendered after January 1, 1996 shall become immediately due and
payable. Any interest due under such prior agreements by reason of any loan or
otherwise is forgiven.
3
<PAGE> 4
7. Hours. The Company recognizes that the work hours of Employee
will be varied due to demands imposed by Employee's position, the industry,
various subsidiaries, stockholders and stock brokers, legal and regulatory
requirements, public relations, asset acquisition, and other factors.
Therefore, a strict hourly work schedule would be impractical and unfeasible.
Employee is expected to perform his duties in a reasonable and timely fashion.
The Company recognizes that Employee will devote more than forty (40) hours per
week to the duties of the Company on a frequent basis. Employee will be
considered as present at work and performing duties on those days when Employee
is out of his office but attending to the performing of his duties away from
the office for a period of at least seven hours. For the reasons stated above,
the Company agrees that the salary and benefits to Employee will not be reduced
by occasional absences of Employee from performing the duties of the Company,
on a basis not cumulatively exceeding five week days, which are regular work
days, per month. Such time period, if not used, may cumulate from month to
month, but may not exceed a total of sixty cumulative days. Such time period
shall not be reduced by Employee's use of any sick leave or other benefits,
which are in addition to the time period stated in this section.
8. Sick Leave. Employee shall receive two weeks of sick leave as
of the date of signing this agreement. Employee shall thereafter be entitled
to receive one day of paid sick leave benefits for each month of service to the
Company. After such sick leave is accrued, if Employee is absent from
employment due to the illness of Employee or a member of the immediate family
of Employee, the salary and benefits due to Employee shall not be reduced. The
Company may, at its option and election, increase the number of sick leave
benefit days awarded to Employee.
9. Location. Employee's duties will be provided at the offices
of Exsorbet Administration, Inc. in Fort Smith, Arkansas. The Company shall
have the following options with respect to relocation: (a) suggesting to
Employee that he relocate; (b) requesting Employee to relocate; or (c)
demanding Employee to relocate. In the event that the Company desires
Employee to relocate, the Company will provide written notice of its
suggestion, request, or demand to Employee. In no event shall the Company
suggest, request, or demand Employee to move to any location outside the
continental United States or to any location in which the Company does not
maintain a corporate office or the office of a subsidiary. The Company will
act in good faith in making any suggestion, request, or demand for a move by
Employee.
10. Suggested Relocation Benefits. In the event that the Company
suggests to Employee that he relocate, Employee may refuse. No action will be
taken against Employee as a result.
11. Requested Relocation Benefits. In the event the Company
requests Employee to relocate, Employee may refuse or elect to relocate. In
the event that Employee elects to relocate, then requested relocation benefits
shall become due and payable to Employee. The amount of such benefits shall be
equal to the sum of the following amounts:
(a) the cost of a moving service moving the personal property and
necessary items of Employee from its present location to its new
location;
4
<PAGE> 5
(b) the actual and reasonable cost of a real estate agency in
effectuating the sale of one residential property of Employee, should
such sale be necessitated by the relocation of Employee;
(c) an amount equal to the down payment and closing costs on a home
at Employee's new location, provided that such down payment shall be
limited to ten percent (10%) of the cost of a new home of 3,600 square
feet within thirty miles of Employee's new work location; and
(d) a relocation bonus equivalent to Employee's salary for a
period of one year.
12. Demanded Relocation Benefits. In the event the Company
demands Employee to relocate, Employee must relocate but shall be entitled to
demanded relocation benefits. The amount of such benefits shall be equal to
the sum of the following amounts:
(a) the cost of a moving service moving the personal property and
necessary items of Employee from its present location to its new
location;
(b) the actual and reasonable cost of a real estate agency in
effectuating the sale of one residential property of Employee, should
such sale be necessitated by the relocation of Employee;
(c) an amount equal to the down payment and closing costs on a
home at Employee's new location, provided that such down payment shall
be limited to ten percent (10%) of the cost of a new home of 3,600
square feet within thirty miles of Employee's new work location; and
(d) a relocation bonus equivalent to Employee's salary for a
period of five years.
13. Bonus Plan. (A) Employee shall receive an incentive bonus
equivalent to four percent (4.0%) of the net income of Exsorbet Industries,
Inc. The net income of the Company shall be determined by the independent
auditors retained by Exsorbet Industries, Inc. The bonus will be paid, at the
option and election of Employee, in either cash or options to acquire the
common (capital) stock of Exsorbet Industries, Inc. The options or cash
consideration will be provided to Employee no later than the 15th day of the
fourth month following the close of the Company's fiscal year, and all such
options will then be immediately exercisable. Notwithstanding any other
provision herein, the Board of Directors of Exsorbet Industries, Inc. may, at
its sole option and election, direct that all of the incentive plan bonus due
to Employee shall be paid in cash. In such event, all of such bonus shall be
paid in cash compensation on or before the same date specified for the options
to be provided.
5
<PAGE> 6
(B) The portion of Employee's incentive plan bonus to be paid with
stock options will be paid with restricted stock of the corporation. Such
bonus shall not be a part of the Company's Incentive Bonus Plan. The bonus
will be established to provide for an exercise of stock options, without
payment by Employee, at a time to be reasonably determined by Employee after
the first date on which the stock option is exercisable.
(C) All stock issued to Employee shall be eligible for Form S-3
registration. The Company will assist in providing such information as is
necessary to effectuate such registration with the United States Securities and
Exchange Commission and shall pay the reasonably incurred costs in connection
with such registration. Provided, however, that the Company shall not be
required to effectuate more than one registration of all options exercised by
Employee per year or exercised by any other Employee entitled to the benefits
specified herein. The Company may elect to register other shares at the same
time. At any time that the Company elects to register stock entitled to be
registered under this provision or under a similar provision of the agreement
of employment with any other Employee of the Company, the Company may defer any
request for registration until it has time to notify any other Employee of the
Company which is entitled to the same benefits provided in this paragraph of
the request for stock registration.
(D) In the event that stock options are elected by Employee, the
number of stock options provided shall be calculated by taking the average
closing bid price on the common stock of Exsorbet Industries, Inc., as reported
by Bloomberg, L.P., for the five business day period immediately preceding the
date on which the stock options are actually issued and granted, or in the
event the common stock is not reported on such system, the fair market value of
the common stock as determined by the Board of Directors of Exsorbet
Industries, Inc. in its good faith judgment. The stock issued as a bonus
payment shall be stock restricted pursuant to Regulation 144 of the Securities
and Exchange Commission. Such shares may not be sold, transferred,
hypothecated, encumbered, assigned, or conveyed until after the expiration of
two years from the date of issuance of such shares by the stock transfer agent
of Exsorbet Industries, Inc. The shares of stock shall bear an appropriate
restrictive legend specifying such restrictions, and the restrictions pursuant
to Regulation 144. Such legend may specify that the stock is acquired for
investment purposes only and contain such other legend as is reasonably
required by Exsorbet Industries, Inc. or its transfer agent. Such shares of
stock shall not be registered and may not be sold, even after the expiration of
two years, without an opinion of counsel that such shares of stock may be sold
under an exemption to registration unless Employee elects to register the
shares and the shares are registered. All stock issued to employee which is
restricted stock shall be subject to the requirements of Regulation 144 and all
statutes, rules, and regulations of the state in which sale of the stock may
occur and of the United States.
14. Stock Options. Employee is granted an immediate stock option
to acquire a total of 100,000 shares of the common stock of Exsorbet
Industries, Inc. at a price of $0.25 per share. Such option is subject to the
terms and conditions of the Exsorbet Industries, Inc. stock option plan as
adopted by the Board of Directors of Exsorbet Industries, Inc. In the event of
the termination of employment of Employee for any reason, all options held by
Employee in accordance with the
6
<PAGE> 7
Incentive Plan or otherwise shall immediately vest. The Company agrees that it
will, at the option of Employee, purchase from Employee all or part of such
vested options, as determined by Employee, at the fair market value of the
Company's Common Stock as of the date of such termination. All stock options
shall, at the option of Employee, be assignable. In the event of assignment,
the holder of the options shall have all the rights and privileges that
Employee would otherwise have, to the same extent as if the stock options
remained with Employee.
15. Car Allowance. Employee shall be provided with a monthly car
allowance in the sum of Seven Hundred Dollars ($700.00). This amount will be
paid directly to Employee, without withholding for taxes. The amount shall be
reflected on Form W-2 provided to Employee or upon such other form as may be
directed by the Internal Revenue Service. Employee's gross salary shall be
adjusted to provide for the cost of any excess income tax liability resulting
from the provisions of this paragraph.
16. Automatic Renewal. This employment agreement shall
automatically renew for an additional five year period at the end of the term
unless the Company gives Employee written notice at least thirty (30) months in
advance of the expiration of the term that it does not intend to renew the
Agreement. The agreement will, thereafter, renew for the same time period
(i.e. five years) unless written notice is given during each term at least
thirty (30) months in advance of the expiration of such term. The Company
believes that the technical expertise and skill of Employee and the fact that
Employee has terminated other vested career options justify the Company in
making the provisions of this paragraph valid and effective. The Company
further believes that the provisions of this paragraph provide a level of
comfort to Employee and that Employee will be more productive with such level
of comfort being provided.
17. Country Club Benefits. During the term of this Agreement, the
Company shall provide Employee with a monthly payment of $350 for country club
dues.
18. Change in Control of the Company. A "change in control of
the Company" means a change in control of a nature that would be required to be
reported in response to item 5(f) of Schedule 14A of Regulation 14A promulgated
under the Securities Exchange Act of 1934; provided that, without limitation,
such a change in control shall be deemed to have occurred if:
(1) any "person" (as such term is used in Sections 13(d) and 14(d) of
the Securities and Exchange Act of 1934) other than the Company or any
person who on the date hereof is a director or officer of the Company
is or becomes the beneficial owner (as defined in Rule 13d-3 under the
Securities Exchange Act of 1934) directly or indirectly, of securities
of the Company representing 20 percent of the combined voting power of
the Company's then outstanding securities; or
7
<PAGE> 8
(2) during any two consecutive years during the term of this
Agreement, individuals who as of the date of this Agreement constitute
the board of directors, cease for any reason to constitute at least a
majority thereof.
In the event that the position of Employee shall be changed, even
though the compensation due to Employee shall not change, as a result of a
change in the control of the Company, Employee shall receive a sum equal to
three and one-half percent (3.5%) of the greater of the following amounts:
(a) the value of the total assets of the Company and its subsidiaries as of
the date of change of control; (b) the total amount of consideration paid for
the acquisition of stock resulting in a change of control, over the entire time
period that such acquisition occurred; or (c) the fair market value of the
stock acquired which resulted in a change of control, as of the time of
acquisition; or (d) the fair market value of the stock acquired which resulted
in a change of control, as of the time of the final events occurring which
resulted in a change of control.
19. Indemnification and Liability Insurance. The Company agrees
to provide officers liability insurance insuring Employee against liability
resulting from the actions taken by Employee, from Employee's performing of
duties, or from Employee's failure to take action provided that such insurance
shall not provide coverage against intentional misconduct. Furthermore, the
Company agrees to indemnify Employee for any liability imposed upon Employee
resulting from the actions taken by Employee, from Employee's performing of
duties, or from Employee's failure to take action provided that such
indemnification shall not be provided against intentional misconduct.
20. Disability. If Employee shall become disabled, the Company
shall continue to pay Employee's salary until such time as this Agreement is
terminated in accordance with the provisions relating to termination on account
of disability. If Employee's employment is terminated by death, the Company
shall pay to Employee's spouse, beneficiary, or his estate, his then current
salary through the last day of the month in which such death occurs and shall
continue to pay such salary for an additional three months.
21. Reimbursement of Expenses. During the term of this
Agreement, the Company will reimburse Employee for all authorized, ordinary and
necessary expenses incurred by him in connection with the business of the
Company. Reimbursement of such expenses shall be paid monthly, upon submission
by Employee to the Company of vouchers itemizing such expenses in a form
satisfactory to the Company, properly identifying the nature and business
purpose of any expenditures.
22. Continuing Education. It is understood that Employee will be
required to attend educational classes every year in an hourly amount
determined by Arkansas Board of Accounting. Such classes, termed Continuing
Professional Education are presented on such a basis as to require the
attendance of Employee during weekday periods. It is agreed that Employee will
be allowed sufficient absence, with pay, from work to attend such classes and
that the cost of attendance at such classes, including travel and lodging
expenses, shall be reimbursed by the Company.
8
<PAGE> 9
23. Noncompetition and Nondisclosure. (A) Employee acknowledges
that the Company has or will provide confidential information and trade secrets
about its business, sales policies, and manufacturing methods. Employee
understands that the nature of the business is such that the relationship
between the Company and its customers is maintained through close personal
contact with the Company Employees. Therefore, Employee agrees that during the
period of his employment and for a period of two years immediately following
termination of such employment, Employee will not, directly or indirectly, for
himself or on behalf of others, as an individual on his own account or as an
employee, agent, or Employee for any person, partnership, firm, or corporation
own, manage, control or operate any business which is in competition with the
business of the Company in the states of Alabama, Arkansas, Mississippi,
Oklahoma and Texas.
(B) Employee also agrees that during the period of his employment
and for two years thereafter he will not use, give, or divulge to any person
anywhere who is not an authorized employee of the Company, any trade secrets,
list of customers, price lists, or other specialized information which Employee
learned while with the Company.
(C) Employee further agrees that for a period of two years after
the termination of his employment with the Company, he will not:
(1) induce or attempt to induce any employee to terminate
employment with the Company;
(2) interfere with or disrupt Company's relationship with other
employees; or
(3) solicit, entice, take away, or employ any person employed
with the Company.
24. Termination. This employment agreement may be terminated at
any time:
(a) by Employee's death;
(b) by the Company for due cause as hereinafter defined;
(c) at the election of Employee by giving sixty (60) days advance
written notice to the Company.
The term "due cause" for purposes of this Section shall be defined as
(a) intentional misrepresentation by Employee to the Company's customers or
potential customers of the Company's ability to provide its products or
services; (b) a criminal act or acts by Employee which result in a material
and substantial direct financial loss to the Company, with the Employee's
intention to violate the law; (c) conviction of Employee of a felony crime; or
(d) repeated and substantial failure by Employee to comply with the provisions
of this agreement following written notice from the Company.
9
<PAGE> 10
25. Waiver. Failure of the Company to exercise any rights under
this Agreement, or to insist on full performance of all obligations hereunder
shall not be construed as waiving any such rights.
26. Entire Agreement. This Agreement is the entire agreement
between the parties. Employee agrees that no other promises or inducements
have been made to him unless contained in writing, attached hereto or
incorporated herein by reference. This Agreement shall be binding upon the
parties, their successors and assigns. This Agreement may not be modified
unless such modification is made in writing and signed by all parties.
27. Severability. The provisions of this Agreement shall be
deemed severable and the invalidity or unenforceability of any one or more of
the provisions of this Agreement shall not effect the validity or
enforceability of the other provisions.
28. Governing Law. This agreement and any amendments or addendums
thereto shall be governed by and construed in accordance with the laws of the
State of Arkansas.
29. Headings. Titles of the paragraphs are placed herein for
convenient reference only and shall not to any extent have the effect of
modifying, amending or changing the express terms and provisions of this
Agreement.
30. Counterparts. This Agreement may be executed in several
counterparts, all of which together shall constitute one agreement binding on
all parties hereto, notwithstanding that all the parties have not signed the
same counterpart.
10
<PAGE> 11
IN WITNESS WHEREOF, the undersigned have executed and delivered this
Agreement on the date first written.
EXSORBET INDUSTRIES, INC.
By: /s/ DR. EDWARD L. SCHRADER
----------------------------------
Title: President
EMPLOYEE:
/s/ CHUCK E. CHUNN, JR.
--------------------------------------
11
<PAGE> 1
EXHIBIT 10.2
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is made as of the 15th day of May, 1996
(this "Agreement") between Exsorbet Industries, Inc. ("the Company") and Edward
L. Schrader, Ph.D. ("Employee").
WHEREAS, the Company desires to employ Employee to serve as technical
consultant for and president of the Company, and to perform various functions
and duties related thereto; and
WHEREAS, the Company recognizes that the Employee is a director of the
Company at the present time, but the terms of this agreement are fair and
reasonable and the employment of Employee is in the best interest of the
Company; and
WHEREAS, Employee has heretofore provided valuable services to the
Company and its subsidiaries; and
WHEREAS, the Company recognizes and desires to receive the benefit
that the Company and its subsidiaries will receive by virtue of the employment
of Employee; and
WHEREAS, Employee desires to be employed by the Company upon the terms
and conditions stated herein;
NOW, THEREFORE, in consideration of the mutual promises contained
herein, the Company and Employee agree as follows:
1. Recognition of Status. The Company recognizes that Employee
has been gainfully employed and/or gainfull self-employed prior to association
with the Company. Such prior employment includes a guarantee or the
substantial likelihood of substantial future income. The Company desires to
provide an incentive to induce the Employee to become employed by the Company,
while recognizing that such employment will require Employee to forego and
terminate his present earning abilities outside of the Company. The Company
recognizes the professional expertise of Employee and understands that Employee
would be unable, due to financial hardships resulting from the loss of income
guaranteed by prior employment and/or relationships, to become employed by the
Company upon terms which are less beneficial to Employee than those stated
herein.
2. Employment. The Company agrees to employ Employee for a
period of five years beginning as of the date of hereof. Employee agrees to
be employed by the Company for such period of time. Employee will observe all
Company policies and procedures as are applicable to
<PAGE> 2
similarly situated senior management employees and conduct himself in
accordance with all lawful directions from the Company. Employee shall use his
best efforts in the performance of the duties of this employment as designated
by the Company and shall, at all times, conduct himself so as to reflect
favorably upon the Company.
3. Company Benefits. Employee will be the beneficiary of and
permitted to participate in all of the Company's standard benefit plans which
are from time to time and made available to similarly situated management level
employees. Such benefits shall specifically include:
(a) four weeks of paid vacation per year at a reasonable time or
times to be selected by Employee;
(b) to the extent that any substantial portion of the full-time
employees of Exsorbet Industries, Inc. receive paid leave on any
holiday, Employee shall receive paid leave on such holiday;
(c) the opportunity to participate in any existing or future
Employee Health Plans, ERISA plans, Employee Benefit plans, pension
plans, retirement plans, life insurance plans, health and medical
insurance plans, and disability insurance plans on such terms as are
available to similarly situated management level employees;
(d) all other benefit plans presently or hereafter available to
similarly situated management and general employees of the Company;
and
(e) all other benefit plans available to employees of subsidiaries
of the Company, to the extent that such benefits can lawfully be
provided to Employee.
Notwithstanding the foregoing, the Company may make reasonable changes in any
such arrangements provided that such changes are made pursuant to a program
which is applicable to all senior management personnel of the Company and which
do not result in a substantial reduction of benefits available to Employee.
4. Duties. (A) Employee shall perform such duties and functions
and shall have such responsibilities as shall reasonably be designated by the
Company from time to time, provided that such duties are generally consistent
with the duties of Employee specified below and provided further that such
duties are imposed in good faith by the Company. The Company warrants that it
will not impose any duties upon Employee merely to inflict hardship or
punishment upon Employee or to attempt to cause Employee to breach this
contract or to resign from employment with the Company.
(B) The Company desires for Employee to remain in a senior
management position with the Company. However, this Agreement shall be fully
valid and enforceable by both parties, in all
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regards, without respect to whether Employee is an officer or director of the
Company. The duties of Employee shall include:
Acting in the capacity of President and Technical Adviser; aiding and
assisting in providing technical information to the Company and its
subsidiaries; consulting with the Company and its subsidiaries in
matters involving bio-remediation; providing oversight of Company
bio-remediation projects to the extent feasible and deemed desirable
by Employee; assisting in contractual negotiations in matters
involving the Company.
5. Compensation. The Company shall pay Employee an annual salary
of $165,000 for the period beginning May 15, 1996, to be paid in equal
bi-weekly installments without a waiting period. Such amount shall be
increased annually beginning January 1, 1997, in accordance with the cost of
living index, but in no event shall the increase be less than five percent (5%)
of the salary paid for the prior year. Such salary shall be paid bi-weekly,
without any waiting period, beginning May 24, 1996.
6. Prior Agreements. It is agreed that a prior agreement between
Employee and the Company dated January 31, 1996 is superseded by this
agreement. Any compensation under such prior agreement shall become
immediately due and payable. Any interest due under such prior agreements by
reason of any loan or otherwise is forgiven.
7. Hours. (A) The Company recognizes that the work hours of
Employee will be varied due to demands imposed by Employee's position, the
industry, various subsidiaries, stockholders and stock brokers, legal and
regulatory requirements, public relations, asset acquisition, and other
factors. Therefore, a strict hourly work schedule would be impractical and
unfeasible. Employee is expected to perform his duties in a reasonable and
timely fashion. The Company recognizes that Employee will devote more than
forty (40) hours per week to the duties of the Company on a frequent basis.
Employee will be considered as present at work and performing duties on those
days when Employee is out of his office but attending to the performing of his
duties away from the office for a period of at least seven hours. For the
reasons stated above, the Company agrees that the salary and benefits to
Employee will not be reduced by occasional absences of Employee from performing
the duties of the Company, on a basis not cumulatively exceeding five week
days, which are regular work days, per month. Such time period, if not used,
may cumulate from month to month, but may not exceed a total of sixty
cumulative days. Such time period shall not be reduced by Employee's use of
any sick leave or other benefits, which are in addition to the time period
stated in this section.
(B) The parties know and understand that Employee has actively been
a teaching professor at Millsaps College. His continued association with
Millsaps College will directly benefit the Company and its subsidiaries. The
Company desires to insure that it will not lose the technical expertise that
Employee continues to gain by his association with Millsaps College and to
continue to insure that the Company has the benefit of the prestige of
association with such institution.
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Therefore, the Company knows and understands that there will be times, which
may be substantial, that Employee is required to be present in classes at
Millsaps. Employee shall be allowed and encouraged to continue such
association without reduction in pay.
8. Sick Leave. Employee shall receive two weeks of sick leave
as of the date of signing this agreement. Employee shall thereafter be entitled
to receive one day of paid sick leave benefits for each month of service to the
Company. After such sick leave is accrued, if Employee is absent from
employment due to the illness of Employee or a member of the immediate family of
Employee, the salary and benefits due to Employee shall not be reduced. The
Company may, at its option and election, increase the number of sick leave
benefit days awarded to Employee.
9. Location. Employee's duties will be provided at the corporate
offices of Exsorbet Industries, Inc. in Jackson, Mississippi. The Company shall
have the following options with respect to relocation: (a) suggesting to
Employee that he relocate; (b) requesting Employee to relocate; or (c) demanding
Employee to relocate. In the event that the Company desires Employee to
relocate, the Company will provide written notice of its suggestion, request, or
demand to Employee. In no event shall the Company suggest, request, or demand
Employee to move to any location outside the continental United States or to any
location in which the Company does not maintain a corporate office or the office
of a subsidiary. The Company will act in good faith in making any suggestion,
request, or demand for a move by Employee.
10. Suggested Relocation Benefits. In the event that the Company
suggests to Employee that he relocate, Employee may refuse. No action will be
taken against Employee as a result.
11. Requested Relocation Benefits. In the event the Company
requests Employee to relocate, Employee may refuse or elect to relocate. In
the event that Employee elects to relocate, then requested relocation benefits
shall become due and payable to Employee. The amount of such benefits shall be
equal to the sum of the following amounts:
(a) the cost of a moving service moving the personal property and
necessary items of Employee from its present location to its new
location;
(b) the actual and reasonable cost of a real estate agency in
effectuating the sale of one residential property of Employee, should
such sale be necessitated by the relocation of Employee;
(c) an amount equal to the down payment and closing costs on a
home at Employee's new location, provided that such down payment shall
be limited to ten percent (10%) of the cost of a new home of 3,600
square feet within thirty miles of Employee's new work location; and
(d) a relocation bonus equivalent to Employee's salary for a
period of one year.
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<PAGE> 5
12. Demanded Relocation Benefits. In the event the Company
demands Employee to relocate, Employee must relocate but shall be entitled to
demanded relocation benefits. The amount of such benefits shall be equal to
the sum of the following amounts:
(a) the cost of a moving service moving the personal property and
necessary items of Employee from its present location to its new
location;
(b) the actual and reasonable cost of a real estate agency in
effectuating the sale of one residential property of Employee, should
such sale be necessitated by the relocation of Employee;
(c) an amount equal to the down payment and closing costs on a
home at Employee's new location, provided that such down payment shall
be limited to ten percent (10%) of the cost of a new home of 3,600
square feet within thirty miles of Employee's new work location; and
(d) a relocation bonus equivalent to Employee's salary for a
period of five years.
13. Bonus Plan. (A) Employee shall receive an incentive bonus
equivalent to four percent (4.0%) of the net income of Exsorbet Industries,
Inc. The net income of the Company shall be determined by the independent
auditors retained by Exsorbet Industries, Inc. The bonus will be paid, at the
option and election of Employee, in either cash or options to acquire the
common (capital) stock of Exsorbet Industries, Inc. The options or cash
consideration will be provided to Employee no later than the 15th day of the
fourth month following the close of the Company's fiscal year, and all such
options will then be immediately exercisable. Notwithstanding any other
provision herein, the Board of Directors of Exsorbet Industries, Inc. may, at
its sole option and election, direct that all of the incentive plan bonus due
to Employee shall be paid in cash. In such event, all of such bonus shall be
paid in cash compensation on or before the same date specified for the options
to be provided.
(B) The portion of Employee's incentive plan bonus to be paid with
stock options will be paid with restricted stock of the corporation. Such
bonus shall not be a part of the Company's Incentive Bonus Plan. The bonus
will be established to provide for an exercise of stock options, without
payment by Employee, at a time to be reasonably determined by Employee after
the first date on which the stock option is exercisable.
(C) All stock issued to Employee shall be eligible for Form S-3
registration. The Company will assist in providing such information as is
necessary to effectuate such registration with the United States Securities and
Exchange Commission and shall pay the reasonably incurred costs in connection
with such registration. Provided, however, that the Company shall not be
required to effectuate more than one registration of all options exercised by
Employee per year or exercised by any other Employee entitled to the benefits
specified herein. The Company may elect
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<PAGE> 6
to register other shares at the same time. At any time that the Company elects
to register stock entitled to be registered under this provision or under a
similar provision of the agreement of employment with any other Employee of the
Company, the Company may defer any request for registration until it has time to
notify any other Employee of the Company which is entitled to the same benefits
provided in this paragraph of the request for stock registration.
(D) In the event that stock options are elected by Employee, the
number of stock options provided shall be calculated by taking the average
closing bid price on the common stock of Exsorbet Industries, Inc., as reported
by Bloomberg, L.P., for the five business day period immediately preceding the
date on which the stock options are actually issued and granted, or in the
event the common stock is not reported on such system, the fair market value of
the common stock as determined by the Board of Directors of Exsorbet
Industries, Inc. in its good faith judgment. The stock issued as a bonus
payment shall be stock restricted pursuant to Regulation 144 of the Securities
and Exchange Commission. Such shares may not be sold, transferred,
hypothecated, encumbered, assigned, or conveyed until after the expiration of
two years from the date of issuance of such shares by the stock transfer agent
of Exsorbet Industries, Inc. The shares of stock shall bear an appropriate
restrictive legend specifying such restrictions, and the restrictions pursuant
to Regulation 144. Such legend may specify that the stock is acquired for
investment purposes only and contain such other legend as is reasonably
required by Exsorbet Industries, Inc. or its transfer agent. Such shares of
stock shall not be registered and may not be sold, even after the expiration of
two years, without an opinion of counsel that such shares of stock may be sold
under an exemption to registration unless Employee elects to register the
shares and the shares are registered. All stock issued to employee which is
restricted stock shall be subject to the requirements of Regulation 144 and all
statutes, rules, and regulations of the state in which sale of the stock may
occur and of the United States.
14. Stock Options. Employee is granted an immediate stock option
to acquire a total of 210,000 shares of the common stock of Exsorbet
Industries, Inc., including all share options previously provided, at a price
of $0.25 per share. Such option is subject to the terms and conditions of the
Exsorbet Industries, Inc. stock option plan as adopted by the Board of
Directors of Exsorbet Industries, Inc. In the event of the termination of
employment of Employee for any reason, all options held by Employee in
accordance with the Incentive Plan or otherwise shall immediately vest. The
Company agrees that it will, at the option of Employee, purchase from Employee
all or part of such vested options, as determined by Employee, at the fair
market value of the Company's Common Stock as of the date of such termination.
15. Car Allowance. The Company shall provide to Employee during
the term of this Agreement, a four wheel drive vehicle. The car allowance
shall be reflected on the Form W-2 provided annually to Employee by the
Company, and employee's salary to be adjusted in gross to provide for the cost
of any excess income tax liability from the provisions of this paragraph.
16. Automatic Renewal. This employment agreement shall
automatically renew for an additional five year period at the end of the term
unless the Company gives Employee written notice
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<PAGE> 7
at least thirty (30) months in advance of the expiration of the term that it
does not intend to renew the Agreement. The agreement will, thereafter, renew
for the same time period (i.e. five years) unless written notice is given
during each term at least thirty (30) months in advance of the expiration of
such term. The Company believes that the technical expertise and skill of
Employee and the fact that Employee has terminated other vested career options
justify the Company in making the provisions of this paragraph valid and
effective. The Company further believes that the provisions of this paragraph
provide a level of comfort to Employee and that Employee will be more
productive with such level of comfort being provided.
17. Change in Control of the Company. A "change in control of
the Company" means a change in control of a nature that would be required to be
reported in response to item 5(f) of Schedule 14A of Regulation 14A promulgated
under the Securities Exchange Act of 1934; provided that, without limitation,
such a change in control shall be deemed to have occurred if:
(1) any "person" (as such term is used in Sections 13(d) and 14(d) of
the Securities and Exchange Act of 1934) other than the Company or any
person who on the date hereof is a director or officer of the Company
is or becomes the beneficial owner (as defined in Rule 13d-3 under the
Securities Exchange Act of 1934) directly or indirectly, of securities
of the Company representing 20 percent of the combined voting power of
the Company's then outstanding securities; or
(2) during any two consecutive years during the term of this
Agreement, individuals who as of the date of this Agreement constitute
the board of directors, cease for any reason to constitute at least a
majority thereof.
In the event that the position of Employee shall be changed, even
though the compensation due to Employee shall not change, as a result of a
change in the control of the Company, Employee shall receive a sum equal to
three and one-half percent (3.5%) of the greater of the following amounts: (a)
the value of the total assets of the Company and its subsidiaries as of the date
of change of control; (b) the total amount of consideration paid for the
acquisition of stock resulting in a change of control, over the entire time
period that such acquisition occurred; or (c) the fair market value of the stock
acquired which resulted in a change of control, as of the time of acquisition;
or (d) the fair market value of the stock acquired which resulted in a change of
control, as of the time of the final events occurring which resulted in a change
of control.
18. Indemnification and Liability Insurance. The Company agrees
to provide officers liability insurance insuring Employee against liability
resulting from the actions taken by Employee, from Employee's performing of
duties, or from Employee's failure to take action provided that such insurance
shall not provide coverage against intentional misconduct. Furthermore, the
Company agrees to indemnify Employee for any liability imposed upon Employee
resulting from the actions taken by Employee, from Employee's performing of
duties, or from Employee's failure to take action provided that such
indemnification shall not be provided against intentional misconduct.
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<PAGE> 8
19. Disability. If Employee shall become disabled, the Company
shall continue to pay Employee's salary until such time as this Agreement is
terminated in accordance with the provisions relating to termination on account
of disability. If Employee's employment is terminated by death, the Company
shall pay to Employee's spouse, beneficiary, or his estate, his then current
salary through the last day of the month in which such death occurs and shall
continue to pay such salary for an additional three months.
20. Reimbursement of Expenses. During the term of this
Agreement, the Company will reimburse Employee for all authorized, ordinary and
necessary expenses incurred by him in connection with the business of the
Company. Reimbursement of such expenses shall be paid monthly, upon submission
by Employee to the Company of vouchers itemizing such expenses in a form
satisfactory to the Company, properly identifying the nature and business
purpose of any expenditures.
21. Noncompetition and Nondisclosure. (A) Employee acknowledges
that the Company has or will provide confidential information and trade secrets
about its business, sales policies, and manufacturing methods. Employee
understands that the nature of the business is such that the relationship
between the Company and its customers is maintained through close personal
contact with the Company Employees. Therefore, Employee agrees that during the
period of his employment and for a period of two years immediately following
termination of such employment, Employee will not, directly or indirectly, for
himself or on behalf of others, as an individual on his own account or as an
employee, agent, or Employee for any person, partnership, firm, or corporation
own, manage, control or operate any business which is in competition with the
business of the Company in the states of Alabama, Arkansas, Mississippi,
Oklahoma and Texas.
(B) Employee also agrees that during the period of his employment
and for two years thereafter he will not use, give, or divulge to any person
anywhere who is not an authorized employee of the Company, any trade secrets,
list of customers, price lists, or other specialized information which Employee
learned while with the Company.
(C) Employee further agrees that for a period of two years after
the termination of his employment with the Company, he will not:
(1) induce or attempt to induce any employee to terminate
employment with the Company;
(2) interfere with or disrupt Company's relationship with other
employees; or
(3) solicit, entice, take away, or employ any person employed with
the Company.
22. Termination. This employment agreement may be terminated at
any time:
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(a) by Employee's death;
(b) by the Company for due cause as hereinafter defined;
(c) at the election of Employee by giving sixty (60) days advance
written notice to the Company.
The term "due cause" for purposes of this Section shall be defined as
(a) intentional misrepresentation by Employee to the Company's customers or
potential customers of the Company's ability to provide its products or
services; (b) a criminal act or acts by Employee which result in a material and
substantial direct financial loss to the Company, with the Employee's intention
to violate the law; (c) conviction of Employee of a felony crime; or (d)
repeated and substantial failure by Employee to comply with the provisions of
this agreement following written notice from the Company.
23. Waiver. Failure of the Company to exercise any rights under
this Agreement, or to insist on full performance of all obligations hereunder
shall not be construed as waiving any such rights.
24. Entire Agreement. This Agreement is the entire agreement
between the parties. Employee agrees that no other promises or inducements
have been made to him unless contained in writing, attached hereto or
incorporated herein by reference. This Agreement shall be binding upon the
parties, their successors and assigns. This Agreement may not be modified
unless such modification is made in writing and signed by all parties.
25. Severability. The provisions of this Agreement shall be
deemed severable and the invalidity or unenforceability of any one or more of
the provisions of this Agreement shall not effect the validity or
enforceability of the other provisions.
26. Governing Law. This agreement and any amendments or addendums
thereto shall be governed by and construed in accordance with the laws of the
State of Arkansas.
27. Headings. Titles of the paragraphs are placed herein for
convenient reference only and shall not to any extent have the effect of
modifying, amending or changing the express terms and provisions of this
Agreement.
28. Counterparts. This Agreement may be executed in several
counterparts, all of which together shall constitute one agreement binding on
all parties hereto, notwithstanding that all the parties have not signed the
same counterpart.
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IN WITNESS WHEREOF, the undersigned have executed and delivered this
Agreement on the date first written.
EXSORBET INDUSTRIES, INC.
By: /s/ CHARLES CHUNN, JR.
-----------------------------------
Title: Vice President
EMPLOYEE:
/s/ DR. EDWARD L. SCHRADER
---------------------------------------
10
<PAGE> 1
EXHIBIT 10.3
AGREEMENT
THIS AGREEMENT is made as of the 15th day of May, 1996 (this
"Agreement") between Exsorbet Industries, Inc. ("the Company") and Edward L.
Schrader ("Employee").
WHEREAS, the Company has executed an employment agreement with
Employee of this date; and
WHEREAS, the Company desires to formalize the terms of a prior
understanding with the Employee and/or to supersede such prior terms; and
WHEREAS, the Company recognizes that the Employee is a director of the
Company at the present time, but the terms of this agreement are fair and
reasonable and the employment of Employee is in the best interest of the
Company; and
WHEREAS, the terms of this Agreement are necessary to induce Employee
to become employed by, and continue employment with, the Company;
NOW, THEREFORE, in consideration of the mutual promises contained
herein, the Company and Employee agree as follows:
1. Recognition of Status. The Company recognizes that Employee
has been gainfully employed and/or gainfull self-employed prior to association
with the Company. Such prior employment includes a guarantee or the
substantial likelihood of substantial future income. The Company desires to
provide an incentive to induce the Employee to become employed by the Company,
while recognizing that such employment will require Employee to forego and
terminate his present earning abilities outside of the Company. The Company
recognizes the professional expertise of Employee and understands that Employee
would be unable, due to financial hardships resulting from the loss of income
guaranteed by prior employment and/or relationships, to become employed by the
Company upon terms which are less beneficial to Employee than those stated
herein.
2. Inducement Payment. For the same consideration as is recited
in an employment agreement of this date, the Company agrees to pay to Employee
on a deferred basis, according to the terms and conditions stated herein, the
sum of Two Hundred Thousand Dollars ($200,000.00). Such compensation shall
vest at the time that it becomes due and payable or at such other time as is
specified herein.
<PAGE> 2
3. Security. In order to secure and collateralize the
inducement, the Company agrees to place the sum of One Hundred Thousand Dollars
($100,000.00) into an interest bearing account with Superior Federal Bank,
F.S.B. or such other banking institution as agreed between the parties.
4. Loan. The Company shall immediately loan to Employee, upon
execution of this agreement, the sum of One Hundred Thousand Dollars
($100,000.00). Such amount shall be repaid over a period of four years. All
outstanding principal shall bear interest at the rate of three and one-half
percent (3.5%) per annum.
5. Compensation Due. Unless otherwise specified herein, the
compensation due to Employee shall vest and become payable according to the
following table:
$50,000.00 plus accrued interest on funds on deposit shall be paid
between January 1, 1997 and January 15, 1997;
$50,000.00 plus accrued interest on funds on deposit shall be paid
between January 1, 1998 and January 15, 1998;
$50,000.00 plus accrued interest on funds on deposit shall be paid
between January 1, 1999 and January 15, 1999; and
$50,000.00 plus all remaining funds on deposit shall be paid between
January 1, 2000 and January 15, 2000.
At the time that such compensation vests, the Company shall be
entitled to offset Employee's loan repayment pursuant to the schedule specified
below against such amounts then due. All such sums shall, at the time they
vest, be reported on Employee's W-2 as taxable income. The Company shall
withheld all applicable state and federal taxes from sums paid or due to the
Employee.
6. Repayment. Repayment of the loan to Employee shall occur as
follows:
$25,000.00 plus accured interest shall be due and payable on January
1, 1997, and may be paid at any time between January 1, 1997 and
January 15, 1997;
$25,000.00 plus accured interest shall be due and payable on January
1, 1998, and may be paid at any time between January 1, 1998 and
January 15, 1998;
$25,000.00 plus accured interest shall be due and payable on January
1, 1999, and may be paid at any time between January 1, 1999 and
January 15, 1999; and
$25,000.00 plus accured interest shall be due and payable on January
1, 2000, and may be paid at any time between January 1, 2000 and
January 15, 2000;
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In the event of an acceleration of deferred compensation, all
outstanding principal shall accelerate and then be due and payable.
7. Intent. It is the intention of this agreement to provide for
repayment of the loan obligation to take place as a set-off of proceeds of
funds held to collateralize payment of the bonus specified herein to Employee.
All remaining funds which vest, after repayment of the loan obligation and
after withholding for taxes, shall vest in Employee and shall be immediately
due and payable by the Company to Employee.
8. Acceleration. The entire outstanding unpaid balance of the
deferred income due and payable at any time that any of the following events
shall occur:
(a) termination of the Employer-Employee relationship between the
Company and Employee due to any reason other than due to Employee's
commission of a criminal act or acts which results in a material and
substantial direct financial loss to the Company, while Employee was
aware that there had been a violation of the law, and Employee
intended to cause financial loss to the Company;
(b) if the Company suffers severe financial difficulties involving
potential litigation, as defined below;
(c) "a change in control of the Company," as defined below occurs;
or
(d) if the Company, through its Board of Directors, requires an
immediate vesting.
9. Severe Financial Difficulties Involving Potential Litigation.
In the event that the Company experiences "severe financial difficulties
involving potential litigation," the Company shall provide immediate
notification of such difficulties to Employee. All compensation which would
thereafter be due and payable shall then accelerate and be immediately due and
payable to Employee. In the event that this provision is deemed unenforceable,
then all sums advanced as a loan to Employee pursuant to the above-stated
provisions which have not been repaid shall be deemed to be compensation
accruing as of the first day of the most recent calendar year, and not a loan.
In such event, the Company shall forthwith transmit all sums due as withholding
taxes to the appropriate state and federal authorities. The source of such
funds shall be the banking account established to collateralize the deferred
compensation due to Employee. The term "severe financial difficulties
involving potential litigation" shall mean:
(a) knowledge or a belief that the Company will likely file a
voluntary petition in bankruptcy, pursuant to Title 11 United States
Code, at any time within the 180 day period immediately following such
knowledge or belief;
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(b) knowledge or a belief that the Company will likely be the debtor
in an involuntary petition in bankruptcy against the Company at any
time within the 180 day period immediately following such knowledge or
belief;
(c) the threatening of an involuntary petition in bankruptcy against
the Company;
(d) the filing of, or the receipt of a threat to file, a petition for
relief from creditors under the the laws of any State of the United
States or of the United States;
(e) the filing of, or the receipt of a threat to file, a petition for
appointment of a receiver; and
(f) knowledge that the financial condition of the Company is in such a
condition that any of the events specified in subparts (a) through (e)
of this section is likely to occur within the 180 day period
immediately following such date.
10. Change in Control of the Company. A "change in control of
the Company" means a change in control of a nature that would be required to be
reported in response to item 5(f) of Schedule 14A of Regulation 14A promulgated
under the Securities Exchange Act of 1934; provided that, without limitation,
such a change in control shall be deemed to have occurred if:
(1) any "person" (as such term is used in Sections 13(d) and 14(d) of
the Securities and Exchange Act of 1934) other than the Company or any
person who on the date hereof is a director or officer of the Company
is or becomes the beneficial owner (as defined in Rule 13d-3 under the
Securities Exchange Act of 1934) directly or indirectly, of securities
of the Company representing 20 percent of the combined voting power of
the Company's then outstanding securities; or
(2) during any two consecutive years during the term of this
Agreement, individuals who as of the date of this Agreement constitute
the board of directors, cease for any reason to constitute at least a
majority thereof.
11. Acceleration of Debt. In the event of an acceleration of the
deferred income pursuant to the provisions of paragraph 8, above, then all
outstanding debt obligation from Employee to the Company due according to the
provisions of this Agreement shall likewise accelerate.
12. Governing Law. This agreement and any amendments or addendums
thereto shall be governed by and construed in accordance with the laws of the
State of Arkansas.
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IN WITNESS WHEREOF, the undersigned have executed and delivered this
Agreement on the date first written.
EXSORBET INDUSTRIES, INC.
By: /s/ Dr. Edward L. Schrader
-----------------------------------
Title: President
EMPLOYEE:
/s/ Charles E. Chunn, Jr.
---------------------------------------
Charles E. Chunn, Jr.
5
<PAGE> 1
EXHIBIT 10.4
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is made as of the 15th day of May, 1996
(this "Agreement") between Exsorbet Industries, Inc. ("the Company") and Sam
Sexton III ("Employee").
WHEREAS, the Company desires to employ Employee to serve as general
counsel and executive vice-president for the Company, and to perform various
functions and duties related thereto; and
WHEREAS, the Company recognizes that the Employee is a director of the
Company at the present time, but the terms of this agreement are fair and
reasonable and the employment of Employee is in the best interest of the
Company; and
WHEREAS, Employee has heretofore provided valuable services to the
Company and its subsidiaries; and
WHEREAS, the Company recognizes and desires to receive the benefit
that the Company and its subsidiaries will receive by virtue of the employment
of Employee; and
WHEREAS, Employee desires to be employed by the Company upon the terms
and conditions stated herein;
NOW, THEREFORE, in consideration of the mutual promises contained
herein, the Company and Employee agree as follows:
1. Recognition of Status. The Company recognizes that Employee
has been gainfully employed and/or gainfull self-employed prior to association
with the Company. Such prior employment includes a guarantee or the
substantial likelihood of substantial future income. The Company desires to
provide an incentive to induce the Employee to become employed by the Company,
while recognizing that such employment will require Employee to forego and
terminate his present earning abilities outside of the Company. The Company
recognizes the professional expertise of Employee and understands that Employee
would be unable, due to financial hardships resulting from the loss of income
guaranteed by prior employment and/or relationships, to become employed by the
Company upon terms which are less beneficial to Employee than those stated
herein.
2. Employment. The Company agrees to employ Employee for a
period of five years beginning as of the date of hereof. Employee agrees to
be employed by the Company for such period of time. Employee will observe all
Company policies and procedures as are applicable to
<PAGE> 2
similarly situated senior management employees and conduct himself in
accordance with all lawful directions from the Company. Employee shall use his
best efforts in the performance of the duties of this employment as designated
by the Company and shall, at all times, conduct himself so as to reflect
favorably upon the Company.
3. Company Benefits. Employee will be the beneficiary of and
permitted to participate in all of the Company's standard benefit plans which
are from time to time and made available to similarly situated management level
employees. Such benefits shall specifically include:
(a) four weeks of paid vacation per year at a reasonable time or
times to be selected by Employee;
(b) to the extent that any substantial portion of the full-time
employees of Exsorbet Industries, Inc. receive paid leave on any
holiday, Employee shall receive paid leave on such holiday;
(c) the opportunity to participate in any existing or future
Employee Health Plans, ERISA plans, Employee Benefit plans, pension
plans, retirement plans, life insurance plans, health and medical
insurance plans, and disability insurance plans on such terms as are
available to similarly situated management level employees;
(d) all other benefit plans presently or hereafter available to
similarly situated management and general employees of the Company;
and
(e) all other benefit plans available to employees of subsidiaries
of the Company, to the extent that such benefits can lawfully be
provided to Employee.
Notwithstanding the foregoing, the Company may make reasonable changes in any
such arrangements provided that such changes are made pursuant to a program
which is applicable to all senior management personnel of the Company and which
do not result in a substantial reduction of benefits available to Employee.
4. Duties. (A) Employee shall perform such duties and functions
and shall have such responsibilities as shall reasonably be designated by the
Company from time to time, provided that such duties are generally consistent
with the duties of Employee specified below and provided further that such
duties are imposed in good faith by the Company. The Company warrants that it
will not impose any duties upon Employee merely to inflict hardship or
punishment upon Employee or to attempt to cause Employee to breach this
contract or to resign from employment with the Company.
(B) The Company desires for Employee to remain in a senior
management position with the Company. However, this Agreement shall be fully
valid and enforceable by both parties, in all
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regards, without respect to whether Employee is an officer or director of the
Company. The duties of Employee shall include:
Acting in the capacity of general counsel and executive vice-president;
drafting and reviewing contracts and all legal documents; directing
litigation; engaging and cooperating with outside counsel when
required; cooperating with management level employees in all legal
matters of the Company; assisting in compliance with Securities
Regulations; pursuing Company collections; defending, or assisting in
the defense of, claims against the Company; and all other legal
business of the Company and its subsidiaries.
5. Compensation. The Company shall pay Employee an annual salary
of $94,000 for the period beginning May 15, 1996, to be paid in equal bi-weekly
installments without a waiting period. Such amount shall be increased annually
beginning January 1, 1997, in accordance with the cost of living index, but in
no event shall the increase be less than five percent (5%) of the salary paid
for the prior year. Such salary shall be paid bi-weekly, without any waiting
period, beginning May 24, 1996.
6. Prior Agreements. It is agreed that a prior agreement between
Employee and the Company dated April 1, 1996 is superseded by this agreement.
Any compensation under such prior agreement shall become immediately due and
payable. Any interest due under such prior agreements by reason of any loan or
otherwise is forgiven.
7. Hours. (A) The Company recognizes that the work hours of
Employee will be varied due to demands imposed by Employee's position, the
industry, various subsidiaries, stockholders and stock brokers, legal and
regulatory requirements, public relations, asset acquisition, and other
factors. Therefore, a strict hourly work schedule would be impractical and
unfeasible. Employee is expected to perform his duties in a reasonable and
timely fashion. The Company recognizes that Employee will devote more than
forty (40) hours per week to the duties of the Company on a frequent basis.
Employee will be considered as present at work and performing duties on those
days when Employee is out of his office but attending to the performing of his
duties away from the office for a period of at least seven hours. For the
reasons stated above, the Company agrees that the salary and benefits to
Employee will not be reduced by occasional absences of Employee from performing
the duties of the Company, on a basis not cumulatively exceeding five week
days, which are regular work days, per month. Such time period, if not used,
may cumulate from month to month, but may not exceed a total of sixty
cumulative days. Such time period shall not be reduced by Employee's use of
any sick leave or other benefits, which are in addition to the time period
stated in this section. The parties hereto agree and understand that Sam
Sexton III has been engaged in the private practice of law since April 1, 1987.
As the result of such practice, Employee will be required to "wrap up" his law
practice. Therefore, Employee will have certain periods of time in which
Employee will be required to be absent from his work with Exsorbet Industries,
Inc. Such periods of absence will not
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cause undue hardship to the Company. Employee will take such action as is
necessary to insure that such absences do not cause undue hardship.
(B) Employee has been engaged by the Company since on or about
March 1, 1996 without compensation. Therefore, any periods of absence by
Employee will not be deducted from the salary or payment due to Employee.
(C) Employee agrees as follows: (l) that he will not, during the
period of this agreement, accept any new cases in the private practice of law;
(2) that he will use his best efforts to expeditiously end his private practice
of law.
8. Sick Leave. Employee shall receive two weeks of sick leave as
of the date of signing this agreement. Employee shall thereafter be entitled
to receive one day of paid sick leave benefits for each month of service to the
Company. After such sick leave is accrued, if Employee is absent from
employment due to the illness of Employee or a member of the immediate family
of Employee, the salary and benefits due to Employee shall not be reduced. The
Company may, at its option and election, increase the number of sick leave
benefit days awarded to Employee.
9. Location. Employee's duties will be provided at the offices
of Exsorbet Administration, Inc. in Fort Smith, Arkansas. The Company shall
have the following options with respect to relocation: (a) suggesting to
Employee that he reclocate; (b) requesting Employee to relocate; or (c)
demanding Employee to relocate. In the event that the Company desires
Employee to relocate, the Company will provide written notice of its
suggestion, request, or demand to Employee. In no event shall the Company
suggest, request, or demand Employee to move to any location outside the
continental United States or to any location in which the Company does not
maintain a corporate office or the office of a subsidiary. The Company will
act in good faith in making any suggestion, request, or demand for a move by
Employee.
10. Suggested Relocation Benefits. In the event that the Company
suggests to Employee that he relocate, Employee may refuse. No action will be
taken against Employee as a result.
11. Requested Relocation Benefits. In the event the Company
requests Employee to relocate, Employee may refuse or elect to relocate. In
the event that Employee elects to relocate, then requested relocation benefits
shall become due and payable to Employee. The amount of such benefits shall be
equal to the sum of the following amounts:
(a) the cost of a moving service moving the personal property and
necessary items of Employee from its present location to its new
location;
(b) the actual and reasonable cost of a real estate agency in
effectuating the sale of one residential property of Employee, should
such sale be necessitated by the relocation of Employee;
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(c) an amount equal to the down payment and closing costs on a
home at Employee's new location, provided that such down payment shall
be limited to ten percent (10%) of the cost of a new home of 3,600
square feet within thirty miles of Employee's new work location; and
(d) a relocation bonus equivalent to Employee's salary for a
period of one year.
12. Demanded Relocation Benefits. In the event the Company
demands Employee to relocate, Employee must relocate but shall be entitled to
demanded relocation beneifts. The amount of such benefits shall be equal to
the sum of the following amounts:
(a) the cost of a moving service moving the personal property and
necessary items of Employee from its present location to its new
location;
(b) the actual and reasonable cost of a real estate agency in
effectuating the sale of one residential property of Employee, should
such sale be necessitated by the relocation of Employee;
(c) an amount equal to the down payment and closing costs on a
home at Employee's new location, provided that such down payment shall
be limited to ten percent (10%) of the cost of a new home of 3,600
square feet within thirty miles of Employee's new work location; and
(d) a relocation bonus equivalent to Employee's salary for a
period of five years.
13. Bonus Plan. (A) Employee shall receive an incentive bonus
equivalent to two (2.0%) of the net income of Exsorbet Industries, Inc. The
net income of the Company shall be determined by the independent auditors
retained by Exsorbet Industries, Inc. The bonus will be paid, at the option
and election of Employee, in either cash or options to acquire the common
(capital) stock of Exsorbet Industries, Inc. The options or cash consideration
will be provided to Employee no later than the 15th day of the fourth month
following the close of the Company's fiscal year, and all such options will
then be immediately exercisable. Notwithstanding any other provision herein,
the Board of Directors of Exsorbet Industries, Inc. may, at its sole option and
election, direct that all of the incentive plan bonus due to Employee shall be
paid in cash. In such event, all of such bonus shall be paid in cash
compensation on or before the same date specified for the options to be
provided.
(B) The portion of Employee's incentive plan bonus to be paid with
stock options will be paid with restricted stock of the corporation. Such
bonus shall not be a part of the Company's Incentive Bonus Plan. The bonus
will be established to provide for an exercise of stock options, without
payment by Employee, at a time to be reasonably determined by Employee after
the first date on which the stock option is exercisable.
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(C) All stock issued to Employee shall be eligible for Form S-3
registration. The Company will assist in providing such information as is
necessary to effectuate such registration with the United States Securities and
Exchange Commission and shall pay the reasonably incurred costs in connection
with such registration. Provided, however, that the Company shall not be
required to effectuate more than one registration of all options exercised by
Employee per year or exercised by any other Employee entitled to the benefits
specified herein. The Company may elect to register other shares at the same
time. At any time that the Company elects to register stock entitled to be
registered under this provision or under a similar provision of the agreement
of employment with any other Employee of the companyThe Company may defer any
request for registration until it has time to notify any other Employee of the
Company which is entitled to the same benefits provided in this paragraph of
the request for stock registration.
(D) In the event that stock options are elected by Employee, the
number of stock options provided shall be calculated by taking the average
closing bid price on the common stock of Exsorbet Industries, Inc., as reported
by Bloomberg, L.P., for the five business day period immediately preceding the
date on which the stock options are actually issued and granted, or in the
event the common stock is not reported on such system, the fair market value of
the common stock as determined by the Board of Directors of Exsorbet
Industries, Inc. in its good faith judgment. The stock issued as a bonus
payment shall be stock restricted pursuant to Regulation 144 of the Securities
and Exchange Commission. Such shares may not be sold, transferred,
hypothecated, encumbered, assigned, or conveyed until after the expiration of
two years from the date of issuance of such shares by the stock transfer agent
of Exsorbet Industries, Inc. The shares of stock shall bear an appropriate
restrictive legend specifying such restrictions, and the restrictions pursuant
to Regulation 144. Such legend may specify that the stock is acquired for
investment purposes only and contain such other legend as is reasonably
required by Exsorbet Industries, Inc. or its transfer agent. Such shares of
stock shall not be registered and may not be sold, even after the expiration of
two years, without an opinion of counsel that such shares of stock may be sold
under an exemption to registration unless Employee elects to register the
shares and the shares are registered.. All stock issued to employee which is
restricted stock shall be subject to the requirements of Regulation 144 and all
statutes, rules, and regulations of the state in which sale of the stock may
occur and of the United States.
14. Stock Options. Employee is granted an immediate stock option
to acquire a total of 150,000 shares of the common stock of Exsorbet
Industries, Inc. at a price of $0.25 per share. Such option is subject to the
terms and conditions of the Exsorbet Industries, Inc. stock option plan as
adopted by the Board of Directors of Exsorbet Industries, Inc. In the event of
the termination of employment of Employee for any reason, all options held by
Employee in accordance with the Incentive Plan or otherwise shall immediately
vest. The Company agrees that it will, at the option of Employee, purchase
from Employee all or part of such vested options, as determined by Employee, at
the fair market value of the Company's Common Stock as of the date of such
termination. All stock options shall, at the option of Employee, be
assignable. In the event of assignment, the holder of the options shall have
all the rights and privileges that Employee would otherwise have, to the same
extent as if the stock options remained with Employee.
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15. Car Allowance. Employee shall be provided with a monthly car
allowance in the sum of Five Hundred Dollars ($500.00). This amount will be
paid directly to Employee, without withholding for taxes. The amount shall be
reflected on Form W-2 provided to Employee or upon such other form as may be
directed by the Internal Revenue Service. Employee's gross salary shall be
adjusted to provide for the cost of any excess income tax liability resulting
from the provisions of this paragraph.
16. Automatic Renewal. This employment agreement shall
automatically renew for an additional five year period at the end of the term
unless the Company gives Employee written notice at least thirty (30) months in
advance of the expiration of the term that it does not intend to renew the
Agreement. The agreement will, thereafter, renew for the same time period
(i.e. five years) unless written notice is given during each term at least
thirty (30) months in advance of the expiration of such term. The Company
believes that the technical expertise and skill of Employee and the fact that
Employee has terminated other vested career options justify the Company in
making the provisions of this paragraph valid and effective. The Company
further believes that the provisions of this paragraph provide a level of
comfort to Employee and that Employee will be more productive with such level
of comfort being provided.
17. Change in Control of the Company. A "change in control of
the Company" means a change in control of a nature that would be required to be
reported in response to item 5(f) of Schedule 14A of Regulation 14A promulgated
under the Securities Exchange Act of 1934; provided that, without limitation,
such a change in control shall be deemed to have occurred if:
(1) any "person" (as such term is used in Sections 13(d) and 14(d) of
the Securities and Exchange Act of 1934) other than the Company or any
person who on the date hereof is a director or officer of the Company
is or becomes the beneficial owner (as defined in Rule 13d-3 under the
Securities Exchange Act of 1934) directly or indirectly, of securities
of the Company representing 20 percent of the combined voting power of
the Company's then outstanding securities; or
(2) during any two consecutive years during the term of this
Agreement, individuals who as of the date of this Agreement constitute
the board of directors, cease for any reason to constitute at least a
majority thereof.
In the event that the position of Employee shall be changed, even
though the compensation due to Employee shall not change, as a result of a
change in the control of the Company, Employee shall receive a sum equal to one
and one- half percent (1.5%) of the greater of the following amounts: (a) the
value of the total assets of the Company and its subsidiaries as of the date
of change of control; (b) the total amount of consideration paid for the
acquisition of stock resulting in a change of control, over the entire time
period that such acquisition occurred; or (c) the fair market value of the
stock acquired which resulted in a change of control, as of the time of
acquisition; or (d) the fair
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market value of the stock acquired which resulted in a change of control, as of
the time of the final events occurring which resulted in a change of control.
18. Indemnification and Liability Insurance. The Company agrees
to provide officers liability insurance insuring Employee against liability
resulting from the actions taken by Employee, from Employee's performing of
duties, or from Employee's failure to take action provided that such insurance
shall not provide coverage against intentional misconduct. Furthermore, the
Company agrees to indemnify Employee for any liability imposed upon Employee
resulting from the actions taken by Employee, from Employee's performing of
duties, or from Employee's failure to take action provided that such
indemnification shall not be provided against intentional misconduct.
19. Disability. If Employee shall become disabled, the Company
shall continue to pay Employee's salary until such time as this Agreement is
terminated in accordance with the provisions relating to termination on account
of disability. If Employee's employment is terminated by death, the Company
shall pay to Employee's spouse, beneficiary, or his estate, his then current
salary through the last day of the month in which such death occurs and shall
continue to pay such salary for an additional three months.
20. Reimbursement of Expenses. During the term of this
Agreement, the Company will reimburse Employee for all authorized, ordinary and
necessary expenses incurred by him in connection with the business of the
Company. Reimbursement of such expenses shall be paid monthly, upon submission
by Employee to the Company of vouchers itemizing such expenses in a form
satisfactory to the Company, properly identifying the nature and business
purpose of any expenditures.
21. Continuing Legal Education. It is understood that Employee
will be required to attend educational classes every year in an hourly amount
determined by the Arkansas Supreme Court and Oklahoma Bar Association. Such
classes, termed "Continuing Legal Education" are presented on such a basis as
to require the attendance of Employee during weekday periods. It is agreed
that Employee will be allowed sufficient absence, with pay, from work to attend
such classes and that the cost of attendance at such classes, including travel
and lodging expenses, shall be reimbursed by the Company.
22. Professional Liability Insurance. The Company will also pay
the cost of Employee's legal malpractice insurance with CNA Insurance Company,
or a company operated by CNA Insurance Company, Continental Casualty Company,
or St. Paul Fire & Marine Insurance Company, with liability limits of
$2,000,000 per occurrence and a deductible amount of $1,000 per occurrence.
The Company may, with the consent of Employee, provide malpractice insurance
through another carrier provided however that the limits of liability shall not
be less than those stated above, the deductible amount shall not be greater,
and the effective coverage date of such policy shall not be later than April
29, 1992. The Company shall indemnify Employee for any liability, costs, and
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attorney's fees in excess of applicable insurance limits insofar as Employee
may incur liability as a result of the practice of law on behalf of the Company
or any of its subsidiaries.
23. Noncompetition and Nondisclosure. (A) Employee acknowledges
that the Company has or will provide confidential information and trade secrets
about its business, sales policies, and manufacturing methods. Employee
understands that the nature of the business is such that the relationship
between the Company and its customers is maintained through close personal
contact with the Company Employees. Therefore, Employee agrees that during the
period of his employment and for a period of two years immediately following
termination of such employment, Employee will not, directly or indirectly, for
himself or on behalf of others, as an individual on his own account or as an
employee, agent, or Employee for any person, partnership, firm, or corporation
own, manage, control or operate any business which is in competition with the
business of the Company in the states of Alabama, Arkansas, Mississippi,
Oklahoma and Texas.
(B) Employee also agrees that during the period of his employment
and for two years thereafter he will not use, give, or divulge to any person
anywhere who is not an authorized employee of the Company, any trade secrets,
list of customers, price lists, or other specialized information which Employee
learned while with the Company.
(C) Employee further agrees that for a period of two years after
the termination of his employment with the Company, he will not:
(1) induce or attempt to induce any employee to terminate
employment with the Company;
(2) interfere with or disrupt Company's relationship with other
employees; or
(3) solicit, entice, take away, or employ any person employed with
the Company.
24. Termination. This employment agreement may be terminated at
any time:
(a) by Employee's death;
(b) by the Company for due cause as hereinafter defined;
(c) at the election of Employee by giving sixty (60) days advance
written notice to the Company.
The term "due cause" for purposes of this Section shall be defined as
(a) intentional misrepresentation by Employee to the Company's customers or
potential customers of the Company's ability to provide its products or
services; (b) a criminal act or acts by Employee which result in a material
and substantial direct financial loss to the Company, with the Employee's
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intention to violate the law; (c) conviction of Employee of a felony crime; or
(d) repeated and substantial failure by Employee to comply with the provisions
of this agreement following written notice from the Company.
25. Waiver. Failure of the Company to exercise any rights under
this Agreement, or to insist on full performance of all obligations hereunder
shall not be construed as waiving any such rights.
26. Entire Agreement. This Agreement is the entire agreement
between the parties. Employee agrees that no other promises or inducements
have been made to him unless contained in writing, attached hereto or
incorporated herein by reference. This Agreement shall be binding upon the
parties, their successors and assigns. This Agreement may not be modified
unless such modification is made in writing and signed by all parties.
27. Severability. The provisions of this Agreement shall be
deemed severable and the invalidity or unenforceability of any one or more of
the provisions of this Agreement shall not effect the validity or
enforceability of the other provisions.
28. Governing Law. This agreement and any amendments or addendums
thereto shall be governed by and construed in accordance with the laws of the
State of Arkansas.
29. Headings. Titles of the paragraphs are placed herein for
convenient reference only and shall not to any extent have the effect of
modifying, amending or changing the express terms and provisions of this
Agreement.
30. Counterparts. This Agreement may be executed in several
counterparts, all of which together shall constitute one agreement binding on
all parties hereto, notwithstanding that all the parties have not signed the
same counterpart.
IN WITNESS WHEREOF, the undersigned have executed and delivered this
Agreement on the date first written.
EXSORBET INDUSTRIES, INC.
By: /s/ Dr. Edward L. Schrader
-----------------------------------
Title: President
EMPLOYEE:
/s/ Sam Sexton III
---------------------------------------
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EXHIBIT 10.5
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is made as of the 26th day of June, 1996
(this "Agreement") between Exsorbet Industries, Inc., an Idaho corporation
("the Company"), Larco Environmental Services, Inc. ("Larco") and Larry
Woodcock ("Employee").
WHEREAS, Larco is a wholly owned subsidiary of the Company; and
WHEREAS, Larco desires to employ Employee to serve as a technical
consultant and to perform various functions and duties related thereto; and
WHEREAS, the Company desires to employ Employee to serve as a
technical and public relations consultant and as a vice-president in charge of
its emergency response sector and to perform various functions and duties
related thereto; and
WHEREAS, Employee desires to be employed by the Company and Larco upon
the terms and conditions stated herein;
NOW, THEREFORE, in consideration of the mutual promises contained
herein, the Company, Larco and Employee agree as follows:
1. Definition of Employer. As used herein, the term "Employer,"
shall collectively refer to Exsorbet Industries, Inc., an Idaho corporation,
and Larco Environmental Services, Inc., a Louisiana corporation, or the
successor corporations of both such corporations. Any obligations imposed upon
the employer herein shall be jointly and severally imposed upon both the
Company and Larco. However, the Company shall be vested with total discretion
in determining whether the obligations shall be met by the Company or Larco,
provided that the obligations of the Employer shall be fully met.
2. Employment. The Employer agrees to employ Employee for a
period of five years beginning as of the date of hereof. Employee agrees to
be employed by the Employer for such period of time. Employee will observe all
policies and procedures of the Company and Larco as are applicable to
similarly situated senior management employees and conduct himself in
accordance with all lawful directions from the Employer. Employee shall use
his best efforts in the performance of the duties of this employment as
designated by the Employer and shall, at all times, conduct himself so as to
reflect favorably upon the Employer. After the expiration of four years, this
Agreement shall automatically renew for an additional five year period unless
written notice of the intent not to renew is given, in writing, by either party
prior to the expiration of such four year period.
<PAGE> 2
3. Company Benefits. Employee will be the beneficiary of and
permitted to participate in all of the Employer's standard benefit plans which
are from time to time and made available to similarly situated management level
employees. Such benefits may, from time to time, be changed or modified,
provided that such modification is applicable to all similarly situated
management level employees. The provisions of all benefit plans of the
Employer shall conform to the provisions of the Employment Retirement Income
Security Act ("ERISA").
4. Signing Bonus. The Company recognizes the status of Employee,
the contribution of Employee to Larco, and the extensive efforts of Employee in
the industry. As a bonus and inducement to Employee, the Company agrees to pay
to Employee, as a signing bonus, the sum of $________ as a signing bonus. Such
sum shall be paid within 90 days from the date of signing this Agreement.
5. Specific Benefits. Employer benefits shall specifically
provide for:
(a) a reasonable period of annual vacation leave to be determined
by the President of the Company;
(b) paid holiday leave on any holiday which the regularly
employed, full-time employees of the Company, receive payment without
being present on a national holiday; and
(c) all other benefit plans presently or hereafter available to
similarly situated management level employees of the Company.
6. Duties. Employee shall perform such duties and functions and
shall have such responsibilities as shall reasonably be designated by the
Employer from time to time, provided that such duties are generally consistent
with the duties of Employee specified below. All duties imposed by the Company
will be imposed in good faith. Such duties shall include the following:
(a) acting in the capacity as a technical consultant to Larco
Acquisition, Inc., or its successor, and generally performing such
duties as have been performed by Employee in connection with
Employee's operation of Larco Environmental Services, Inc., a
Louisiana corporation, and its subsidiaries during the two year period
immediately prior to acquisition of Larco Environmental Services, Inc.
by Larco Acquisition, Inc.; (b) acting in the capacity as a technical
and human relations consultant to Exsorbet Industries, Inc., or its
successor; (c) acting in the capacity as the vice-president of the
emergency response and industrial service sector of Exsorbet
Industries, Inc., or its successor; (d) performing such management
level duties as are reasonably imposed by the president or Board of
Directors of Exsorbet Industries, Inc., or its successor; and (e)
performing such duties as are reasonably imposed by the Employer in
connection with the duties identified above.
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Employee shall act in the capacity as an executive vice-president on behalf of
Exsorbet Industries, Inc. He shall report solely to: (i) the president of
Exsorbet Industries, Inc.; and (ii) the board of directors of Exsorbet
Industries, Inc.
7. Compensation. The Employer, or one of them, shall pay
Employee an annual salary of $125,000.00 beginning on the date of execution of
this Agreement, to be paid in bi-weekly installments. Such amount shall
increase annually by the cost of living adjustment (COLA), as determined by the
Company's accountants, but such amount shall not be less than five percent (5%)
annually. The Employer may change the frequency with which payment of
compensation occurs but such frequency shall never be less than one time per
month.
8. Hours. The Employer recognizes that the work hours of
Employee will be varied due to demands imposed by Employee's position, the
industry, various subsidiaries, stockholders and stock brokers, legal and
regulatory requirements, public relations, asset acquisition, and other
factors. Therefore, a strict hourly work schedule would be impractical and
unfeasible. Employee is expected to perform his duties in a reasonable and
timely fashion. If, at any time, the Employer determines that the hours being
maintained by Employee are unreasonable, the Company shall provide written
notice to Employee along with a request for a specific work schedule consisting
of approximately forty (40) hours per week to be performed between Monday and
Friday of each week, during normal business hours.
9. Bonus Plan. Employee shall be eligible to participate in the
1995 employee incentive plan of Exsorbet Industries, Inc. All benefits
received from such plan shall be determined, in good faith, by a compensation
committee appointed by the Board of Directors of Exsorbet Industries, Inc. All
bonus from such plan are provided in options to acquire stock of Exsorbet
Industries, Inc. which are restricted pursuant to the terms of the plan and the
requirements of law.
10. Employee Incentive. As an inducement to Employee to enter
this Agreement, Employee shall be granted options to acquire stock of Exsorbet
Industries, Inc. pursuant to the 1995 employee incentive plan, all of which is
restricted pursuant to Rule 144 of the United States Securities and Exchange
Commission. Employee shall be given an option to immediately acquire 100,000
shares of stock of Exsorbet Industries, Inc. at $0.25 per share, with no charge
for any fees, brokerage charges, or other charges. Employee shall be given an
additional option to acquire 100,000 additional shares of stock of Exsorbet
Industries, Inc. at $0.25 per share, with no charge for any fees, brokerage
charges, or other charges, exercisable on and after June 26, 1997. Employee
shall be given an additional option to acquire 100,000 additional shares of
stock of Exsorbet Industries, Inc. at $0.25 per share, with no charge for any
fees, brokerage charges, or other charges, exercisable on and after June 26,
1998. All stock options shall be subject to all benefits available in the 1995
employee incentive plan, including that the options shall be exercisable for up
to ten years contingent upon the continued employment of Employee and that all
options shall be exercisable for a minimum period of 90 days following the
termination of employment by Employee. Furthermore, the Company has
represented that the stock options are not immediately subject to income tax to
the Employee, that the stock itself issued upon exercise of the options is not
immediately
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subject to income tax to the Employee, and that the stock is not subject to any
form of tax to the Employee until a sale of the stock occurs. The Company will
indemnify Employee for any tax liability of the Employee which results prior to
sale of the stock. However, Employee will reimburse the Company for any tax
savings which result to the Employee at the time of sale of the stock which
directly result from the Company's prior indemnification, if any, under the
terms of this paragraph. Each option shall be fully exercisable by the heirs,
legatees, successors or assigns of Employee notwithstanding Employee's death or
disability during the term of this Agreement prior to the exercise of one or
more such options.
11. Car Allowance. Employee shall be provided with a monthly car
allowance in an amount equal to the amount necessary to provide an utility
vehicle, acceptable to Employee, along with insurance coverage on such vehicle.
The Company may elect to purchase a vehicle for Employee and to provide such
vehicle directly to Employee.
12. Indemnification and Liability Insurance. As a condition
precedent to Employee becoming an officer of the Company, the Company will
provide officers and directors liability insurance (to be provided within seven
days from the date of this Agreement) insuring Employee with reasonable limits
of liability against liability resulting from the actions taken by Employee,
from Employee's performing of duties, or from Employee's failure to take action
provided that such insurance shall not provide coverage against intentional
misconduct. Furthermore, the Company agrees to indemnify Employee for any
liability imposed upon Employee resulting from the actions taken by Employee,
from Employee's performing of duties, or from Employee's failure to take action
provided that such indemnification shall not be provided against intentional
misconduct.
13. Reimbursement of Expenses. During the term of this
Agreement, the Company will reimburse Employee for all authorized, ordinary and
necessary expenses incurred by him in connection with the business of the
Company. Reimbursement of such expenses shall be paid monthly, upon submission
by Employee to the Company of vouchers itemizing such expenses in a form
satisfactory to the Company, properly identifying the nature and business
purpose of any expenditures.
14. Noncompetition and Nondisclosure. Employee acknowledges that
the Employer has or will provide confidential information and trade secrets
about its business, sales policies, and manufacturing methods. Employee
understands that the nature of the business is such that the relationship
between the Employer and its customers is maintained through close personal
contact with the Employer's employees. Therefore, Employee agrees that during
the period of his employment, Employee will not compete in any way with the
Company or Larco. For a period of two years following the termination of
Employee's employment, Employee will not solicit any clients or customers of
the Company or Larco, as of the date of the termination of employment, to do
business with any competitor of the Company or Larco.
4
<PAGE> 5
15. Divulging Confidential Information. Employee also agrees that
during the period of his employment and for two years thereafter he will not
use, give, or divulge to any person anywhere who is not an authorized employee
of the Employer, any trade secrets, list of customers, price lists, or other
specialized information which Employee learned while with the Employer.
16. Inducing Other Employees. Employee agrees that for a period
of two years after the termination of his employment with the Employer, he will
not:
(a) induce or attempt to induce any employee to terminate
employment with the Employer or any subsidiary of Exsorbet
Industries, Inc.;
(b) interfere with or disrupt Employer's relationship with other
employees; or
(c) solicit, entice, take away, or employ any person employed with
the Employer or any subsidiary of Exsorbet Industries, Inc.
Provided however, the provisions of this paragraph shall have no effect with
respect to good faith actions taken by Employee as a management level employee,
officer, or director of the Employer. Such provisions shall not be construed
as limiting the right and obligation of Employee to make decisions and take
actions with respect to employees under his supervision.
17. Termination. This employment agreement may be terminated at
any time:
(a) by Employee's death;
(b) by disability (physical or mental) of the Employee rendering
Employee unable to perform a substantial portion of his duties
as set forth in section 6, above;
(c) mutual consent of all parties, in writing; or
(d) by the Company for due cause as defined below.
The term "due cause" for purposes of this Section shall be defined as
(a) intentional or reckless misrepresentation by Employee to the Employer's
customers or potential customers of the Company's ability to provide its
products or services; (b) a criminally wrongful act or acts, committed with the
intent to violate the law, by Employee which results in a material and direct
financial loss to the Employer or any subsidiary of Exsorbet Industries, Inc.;
(c) conviction of Employee of a felony crime; or (d) repeated failure by
Employee to comply with the material provisions of this Agreement or reasonably
imposed material policies of the Employer following written notice from the
Company or Larco of future action demanded by the Employee.
5
<PAGE> 6
18. Waiver. Failure of any party to exercise any rights under
this Agreement, or to insist on full performance of all obligations hereunder
shall not be construed as waiving any such rights.
19. Entire Agreement. This Agreement is the entire agreement
between the parties. Employee agrees that no other promises or inducements
have been made to him unless contained in writing, attached hereto or
incorporated herein by reference. This Agreement shall be binding upon the
parties, their successors and assigns. This Agreement may not be modified
unless such modification is made in writing and signed by all parties.
20. Severability. The provisions of this Agreement shall be
deemed severable and the invalidity or unenforceability of any one or more of
the provisions of this Agreement shall not effect the validity or
enforceability of the other provisions.
21. Headings. Titles of the paragraphs are placed herein for
convenient reference only and shall not to any extent have the effect of
modifying, amending or changing the express terms and provisions of this
Agreement.
22. No Third Party Rights. None of the provisions contained in
this Agreement shall be for the benefit of or enforceable by any third parties.
Provided, however, that any rights which might accrue to the benefit of the
Employee herein shall accrue to the benefit of the Employees heirs or estate.
6
<PAGE> 7
23. Binding Effect. This agreement shall be binding upon the
parties, their successors and assigns. It is specifically understood that all
rights, duties, and obligations of the Company and/or Larco shall bind and
inure to the benefit of any successor corporations.
24. Counterparts. This Agreement may be executed in several
counterparts, all of which together shall constitute one agreement binding on
all parties hereto, notwithstanding that all the parties have not signed the
same counterpart.
25. Governing Law. This Agreement shall be construed in
accordance with the laws and statutes of the State of Louisiana without regard
to any applicable principles of conflicts of law.
26. Attorney's Fees. In the event of litigation resulting under
the terms of this Agreement, the prevailing party shall be entitled to recover
his reasonably incurred attorney's fees and costs of suit, in addition to any
other relief awarded to such party.
IN WITNESS WHEREOF, the undersigned have executed and delivered this
Agreement on the date first written.
EXSORBET INDUSTRIES, INC.,
an Idaho corporation
By: /s/ Dr. Edward L. Schrader
-----------------------------------
Authorized Officer
LARCO ENVIRONMENTAL SERVICES, INC.,
a Louisiana corporation
By: /s/ Dr. Edward L. Schrader
-----------------------------------
Authorized Officer
EMPLOYEE:
/s/ Larry Woodcock
---------------------------------------
Larry Woodcock
7
<PAGE> 1
EXHIBIT 10.6
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is made as of the 26th day of June, 1996
(this "Agreement") between Exsorbet Industries, Inc., an Idaho corporation
("the Company"), Larco Environmental Services, Inc. ("Larco") and Marilyn
Woodcock ("Employee").
WHEREAS, Larco is a wholly owned subsidiary of the Company; and
WHEREAS, Larco desires to employ Employee to serve as a technical
consultant and to perform various functions and duties related thereto; and
WHEREAS, the Company desires to employ Employee to serve as a business
manager for its emergency response sector and to perform various functions and
duties related thereto and to perform various functions and duties for Larco;
and
WHEREAS, Employee desires to be employed by the Company and Larco upon
the terms and conditions stated herein;
NOW, THEREFORE, in consideration of the mutual promises contained
herein, the Company, Larco and Employee agree as follows:
1. Definition of Employer. As used herein, the term "Employer,"
shall collectively refer to Exsorbet Industries, Inc., an Idaho corporation,
and Larco Environmental Services, Inc., a Louisiana corporation, or the
successor corporations of both such corporations. Any obligations imposed upon
the employer herein shall be jointly and severally imposed upon both the
Company and Larco. However, the Company shall be vested with total discretion
in determining whether the obligations shall be met by the Company or Larco,
provided that the obligations of the Employer shall be fully met.
2. Employment. The Employer agrees to employ Employee for a
period of five years beginning as of the date of hereof. Employee agrees to
be employed by the Employer for such period of time. Employee will observe all
policies and procedures of the Company and Larco as are applicable to
similarly situated management employees and conduct herself in accordance with
all lawful directions from the Employer. Employee shall use her best efforts
in the performance of the duties of this employment as designated by the
Employer and shall, at all times, conduct herself so as to reflect favorably
upon the Employer. After the expiration of four years, this Agreement shall
automatically renew for an additional five year period unless written notice of
the intent not to renew is given, in writing, by either party prior to the
expiration of such four year period.
<PAGE> 2
3. Company Benefits. Employee will be the beneficiary of and
permitted to participate in all of the Employer's standard benefit plans which
are from time to time and made available to similarly situated management level
employees. Such benefits may, from time to time, be changed or modified,
provided that such modification is applicable to all similarly situated
management level employees. The provisions of all benefit plans of the
Employer shall conform to the provisions of the Employment Retirement Income
Security Act ("ERISA").
4. Specific Benefits. Employer benefits shall specifically
provide for:
(a) a reasonable period of annual vacation leave to be determined
by the President of the Company;
(b) paid holiday leave on any holiday which the regularly
employed, full-time employees of the Company, receive payment without
being present on a national holiday; and
(c) all other benefit plans presently or hereafter available to
similarly situated management level employees of the Company.
5. Duties. Employee shall perform such duties and functions and
shall have such responsibilities as shall reasonably be designated by the
Employer from time to time, provided that such duties are generally consistent
with the duties of Employee specified below. All duties imposed by the Company
will be imposed in good faith. Such duties shall include the following:
(a) business manager of emergency response and industrial services
sector of the Company; (b) performing various duties for Larco; (c)
such other duties as are directed by the president or Board of
Directors of the Company; and (d) performing such duties as are
reasonably imposed by the Employer in connection with the duties
identified above.
6. Compensation. The Employer, or one of them, shall pay
Employee an annual salary of $60,000.00 beginning on the date of execution of
this Agreement, to be paid in bi-weekly installments. Such amount shall
increase annually by the cost of living adjustment (COLA), as determined by the
Company's accountants, but such amount shall not be less than five percent (5%)
annually. The Employer may change the frequency with which payment of
compensation occurs but such frequency shall never be less than one time per
month. Additionally, the Employer shall provide Employee a car or automobile
allowance in the sum of $500.00 per month. Such amount shall be reported on
Employee's Form W-2 reported to the Internal Revenue Service.
7. Hours. The Employer recognizes that the work hours of
Employee will be varied due to demands imposed by Employee's position, the
industry, various subsidiaries, stockholders and stock brokers, legal and
regulatory requirements, public relations, asset acquisition, and other
factors.
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<PAGE> 3
Therefore, a strict hourly work schedule would be impractical and unfeasible.
Employee is expected to perform her duties in a reasonable and timely fashion.
If, at any time, the Employer determines that the hours being maintained by
Employee are unreasonable, the Company shall provide written notice to Employee
along with a request for a specific work schedule consisting of approximately
forty (40) hours per week to be performed between Monday and Friday of each
week, during normal business hours.
8. Bonus Plan. Employee shall be eligible to participate in the
1995 employee incentive plan of Exsorbet Industries, Inc. All benefits
received from such plan shall be determined, in good faith, by a compensation
committee appointed by the Board of Directors of Exsorbet Industries, Inc. All
bonus from such plan are provided in options to acquire stock of Exsorbet
Industries, Inc. which are restricted pursuant to the terms of the plan and the
requirements of law.
9. Employee Incentive. As an inducement to Employee to enter
this Agreement, Employee shall be granted options to acquire stock of Exsorbet
Industries, Inc. pursuant to the 1995 employee incentive plan, all of which is
restricted pursuant to Rule 144 of the United States Securities and Exchange
Commission. Employee shall be given an option to immediately acquire 100,000
shares of stock of Exsorbet Industries, Inc. at $0.25 per share, with no charge
for any fees, brokerage charges, or other charges. Employee shall be given an
additional option to acquire 100,000 additional shares of stock of Exsorbet
Industries, Inc. at $0.25 per share, with no charge for any fees, brokerage
charges, or other charges, exercisable on and after June 26, 1997. Employee
shall be given an additional option to acquire 100,000 additional shares of
stock of Exsorbet Industries, Inc. at $0.25 per share, with no charge for any
fees, brokerage charges, or other charges, exercisable on and after June 26,
1998. All stock options shall be subject to all benefits available in the 1995
employee incentive plan, including that the options shall be exercisable for up
to ten years contingent upon the continued employment of Employee and that all
options shall be exercisable for a minimum period of 90 days following the
termination of employment by Employee. Furthermore, the Company has
represented that the stock options are not immediately subject to income tax to
the Employee, that the stock itself issued upon exercise of the options is not
immediately subject to income tax to the Employee, and that the stock is not
subject to any form of tax to the Employee until a sale of the stock occurs.
The Company will indemnify Employee for any tax liability of the Employee which
results prior to sale of the stock. However, Employee will reimburse the
Company for any tax savings which result to the Employee at the time of sale of
the stock which directly result from the Company's prior indemnification, if
any, under the terms of this paragraph.
10. Indemnification and Liability Insurance. As a condition
precedent to Employee becoming an officer of the Company, the Company will
provide officers and directors liability insurance (to be provided within seven
days from the date of this Agreement) insuring Employee with reasonable limits
of liability against liability resulting from the actions taken by Employee,
from Employee's performing of duties, or from Employee's failure to take action
provided that such insurance shall not provide coverage against intentional
misconduct. Furthermore, the Company
3
<PAGE> 4
agrees to indemnify Employee for any liability imposed upon Employee resulting
from the actions taken by Employee, from Employee's performing of duties, or
from Employee's failure to take action provided that such indemnification shall
not be provided against intentional misconduct.
11. Reimbursement of Expenses. During the term of this
Agreement, the Company will reimburse Employee for all authorized, ordinary and
necessary expenses incurred by him in connection with the business of the
Company. Reimbursement of such expenses shall be paid monthly, upon submission
by Employee to the Company of vouchers itemizing such expenses in a form
satisfactory to the Company, properly identifying the nature and business
purpose of any expenditures.
12. Noncompetition and Nondisclosure. Employee acknowledges that
the Employer has or will provide confidential information and trade secrets
about its business, sales policies, and manufacturing methods. Employee
understands that the nature of the business is such that the relationship
between the Employer and its customers is maintained through close personal
contact with the Employer's employees. Therefore, Employee agrees that during
the period of his employment, Employee will not compete in any way with the
Company or Larco. For a period of two years following the termination of
Employee's employment, Employee will not solicit any clients or customers of
the Company or Larco, as of the date of the termination of employment, to do
business with any competitor of the Company or Larco.
13. Divulging Confidential Information. Employee also agrees that
during the period of his employment and for two years thereafter she will not
use, give, or divulge to any person anywhere who is not an authorized employee
of the Employer, any trade secrets, list of customers, price lists, or other
specialized information which Employee learned while with the Employer.
14. Inducing Other Employees. Employee agrees that for a period
of two years after the termination of her employment with the Employer, she
will not:
(a) induce or attempt to induce any employee to terminate
employment with the Employer or any subsidiary of Exsorbet
Industries, Inc.;
(b) interfere with or disrupt Employer's relationship with other
employees; or
(c) solicit, entice, take away, or employ any person employed with
the Employer or any subsidiary of Exsorbet Industries, Inc.
Provided however, the provisions of this paragraph shall have no effect with
respect to good faith actions taken by Employee as a management level employee,
officer, or director of the Employer. Such provisions shall not be construed
as limiting the right and obligation of Employee to make decisions and take
actions with respect to employees under her supervision.
4
<PAGE> 5
15. Termination. This employment agreement may be terminated at
any time:
(a) by Employee's death;
(b) by disability (physical or mental) of the Employee rendering
Employee unable to perform a substantial portion of her duties
as set forth in section 6, above;
(c) mutual consent of all parties, in writing; or
(d) by the Company for due cause as defined below.
The term "due cause" for purposes of this Section shall be defined as
(a) intentional or reckless misrepresentation by Employee to the Employer's
customers or potential customers of the Company's ability to provide its
products or services; (b) a criminally wrongful act or acts, committed with the
intent to violate the law, by Employee which results in a material and direct
financial loss to the Employer or any subsidiary of Exsorbet Industries, Inc.;
(c) conviction of Employee of a felony crime; or (d) repeated failure by
Employee to comply with the material provisions of this Agreement or reasonably
imposed material policies of the Employer following written notice from the
Company or Larco of future action demanded by the Employee.
16. Waiver. Failure of any party to exercise any rights under
this Agreement, or to insist on full performance of all obligations hereunder
shall not be construed as waiving any such rights.
17. Entire Agreement. This Agreement is the entire agreement
between the parties. Employee agrees that no other promises or inducements
have been made to him unless contained in writing, attached hereto or
incorporated herein by reference. This Agreement shall be binding upon the
parties, their successors and assigns. This Agreement may not be modified
unless such modification is made in writing and signed by all parties.
18. Severability. The provisions of this Agreement shall be
deemed severable and the invalidity or unenforceability of any one or more of
the provisions of this Agreement shall not effect the validity or
enforceability of the other provisions.
19. Headings. Titles of the paragraphs are placed herein for
convenient reference only and shall not to any extent have the effect of
modifying, amending or changing the express terms and provisions of this
Agreement.
20. No Third Party Rights. None of the provisions contained in
this Agreement shall be for the benefit of or enforceable by any third parties.
Provided, however, that any rights which might accrue to the benefit of the
Employee herein shall accrue to the benefit of the Employees heirs or estate.
5
<PAGE> 6
21. Binding Effect. This agreement shall be binding upon the
parties, their successors and assigns. It is specifically understood that all
rights, duties, and obligations of the Company and/or Larco shall bind and
inure to the benefit of any successor corporations.
22. Counterparts. This Agreement may be executed in several
counterparts, all of which together shall constitute one agreement binding on
all parties hereto, notwithstanding that all the parties have not signed the
same counterpart.
23. Governing Law. This Agreement shall be construed in
accordance with the laws and statutes of the State of Louisiana without regard
to any applicable principles of conflicts of law.
24. Attorney's Fees. In the event of litigation resulting under
the terms of this Agreement, the prevailing party shall be entitled to recover
her reasonably incurred attorney's fees and costs of suit, in addition to any
other relief awarded to such party.
6
<PAGE> 7
IN WITNESS WHEREOF, the undersigned have executed and delivered this
Agreement on the date first written.
EXSORBET INDUSTRIES, INC.,
an Idaho corporation
By: /s/ Dr. Edward L. Schrader
-----------------------------------
Authorized Officer
LARCO ENVIRONMENTAL SERVICES, INC.,
a Louisiana corporation
By: /s/ Dr. Edward L. Schrader
-----------------------------------
Authorized Officer
EMPLOYEE:
/s/ Marilyn Woodcock
---------------------------------------
Marilyn Woodcock
7
<PAGE> 1
EXHIBIT 10.7
REGISTRATION RIGHTS AGREEMENT
EXSORBET INDUSTRIES, INC.
1401 S. Waldron Suite 201
Fort Smith, Arkansas 72903
June 26, 1996
Mr. and Mrs. Larry Woodcock
650 Esplanade
Lake Charles, LA 70605
Dear Larry and Marilyn:
This will confirm your rights to have the 1,152,021 shares to be
received by you pursuant to the Agreement and Plan of Reorganization of even
date among our corporation ("Exsorbet"), Larco Acquisition, Inc., Larco
Environmental Services, Inc. and you (the "Agreement"), and the 300,000 shares
to be received by each of you pursuant to your respective employment
agreements, registered under the Securities Act.
1. Certain Definitions. As used herein, the following terms
shall have the following respective meanings:
"Registration Expenses" means the expenses so described in
Section 6.
"Restricted Stock" means shares of Common Stock of Exsorbet
issued to you on even date herewith and to be received by you pursuant to your
employment agreements, the certificates for which are required to bear the
legend set forth in Section 2, excluding shares which may at the time be sold
pursuant to Rule 144 under the Securities Act or which may be otherwise sold
without registration under the Securities Act.
"Securities Act" means the Securities Act of 1933, as amended,
or any similar Federal statute, and the rules and regulations of the Securities
and Exchange Commission thereunder, all as the same shall be in effect at the
time.
2. Restrictive Legend. Each Certificate representing shares
issued to you on even date herewith and to be issued pursuant to your
employment agreements, and, except as otherwise provided in Section 3, each
certificate issued upon exchange or registration of transfer of any such shares
shall be stamped or otherwise imprinted with a legend substantially in the
following form:
<PAGE> 2
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 (THE "1933 ACT") OR APPLICABLE STATE SECURITIES
LAWS AND MAY NOT BE TRANSFERRED OR OTHERWISE DISPOSED OF
UNLESS IT HAS BEEN REGISTERED UNDER THE 1933 ACT AND SUCH LAWS
OR AN EXEMPTION FROM REGISTRATION IS AVAILABLE."
Additionally, such other legend as Exsorbet's transfer agent may reasonably
request to indicate that the stock is restricted subject to Rule 144 of the
United States Securities and Exchange Commission may be contained.
3. Notice of Proposed Transfer. Prior to any proposed transfer
of any Restricted Stock (other than under the circumstances escribed in Section
4 and 5), the holder thereof shall give written notice to Exsorbet of such
holder's intention to effect such transfer. Each such notice shall describe
the manner and circumstances of the proposed transfer and, if requested by
Exsorbet, shall be accompanied by an opinion of the stockholder's counsel
reasonably satisfactory to Exsorbet to the effect that the proposed transfer
may be effected without registration under the Securities Act, whereupon the
holder of such Restricted Stock shall be entitled to transfer such Restricted
Stock in accordance with the terms of its notice if such opinion of counsel is
satisfactory in form and substance to counsel for Exsorbet. Each certificate
approved for transfer as above provided shall bear the legend set forth in
Section 2, except that such certificate shall not bear such legend if (i) such
transfer is made, in the opinion of Exsorbet's counsel, pursuant to an
effective registration statement (or pursuant to any statutory provisions or
rule permitting public sale without registration under the Securities Act) or
(ii) the opinion of counsel which is satisfactory in form and substance to
Exsorbet's counsel is to the further effect that the transferee and any
subsequent transferee (other than an affiliate of Exsorbet) would be entitled
to transfer such securities in a public sale without registration under the
Securities Act.
4. Demand Registration. At any time after the Closing (as
defined in Section 1.5 of the Agreement), you may demand that Exsorbet register
under the Securities Act all, but not less than all, of the Restricted Stock.
In such event, Exsorbet shall immediately proceed with the registration of the
Restricted Stock in such a manner that will permit you to sell the Restricted
Stock under the particular registration statement used over the longest period
of time permitted by the rules and regulations of the Securities and Exchange
Commission in effect at the date of such registration. You agree, however,
that after the effective date of such registration statement (the "Effective
Date") you will not sell more than one-third (1/3) of the Restricted Stock
during the first twelve months after the Effective Date, not more than an
additional one-third (1/3) of the Restricted Stock during the next twelve month
period, and not more than the remaining one-third (1/3) of the Restricted Stock
during the following twelve month period.
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<PAGE> 3
5. Incidental Registration. If Exsorbet at any time proposes to
register any of its securities, which are of the same type and class as the
Restricted Stock, under the Securities Act for sale to the public, whether for
its own account or for the account of other security holders or both (except
with respect to registration statements on Forms S- 8, S-4 or another form not
available for registering the Restricted Stock for sale to the public), each
such time it will give written notice to all holders of outstanding Restricted
Stock of its intention so to do. Upon the written request of any such holder,
given within 20 days after receipt of any such notice, to register any of its
Restricted Stock (which request shall state the intended method of disposition
thereof), Exsorbet will use cause the Restricted Stock as to which registration
shall have been so requested to be included in the securities to be covered by
the registration statement proposed to be filed by Exsorbet. Alternatively,
Exsorbet may, in its sole discretion, file a separate registration statement
covering the Restricted Stock as to which registration shall have been
requested. In the event that any registration pursuant to this Section 5 shall
be, in whole or in part, an underwritten public offering of Common Stock, the
Restricted Stock to be registered must be sold through the underwriters.
6. Registration Procedures and Expenses. If and whenever
Exsorbet is required by the provisions of Section 4 to register the Restricted
Stock upon demand, or by the provisions of Section 5 to offer incidental
registration rights to the holders of Restricted Stock, and such offer is
accepted by any such holder in accordance with the requirements of this
Agreement, Exsorbet will:
(a) furnish to each seller and to each underwriter such
number of copies of the registration statement and the prospectus included
therein (including each preliminary prospectus) as such persons reasonably may
request in order to facilitate the public sale or other disposition of the
Restricted Stock covered by such registration statement;
(b) use its good faith efforts to register or qualify the
Restricted Stock covered by such registration statement under the securities or
blue sky laws of such jurisdictions as the sellers of Restricted Stock or the
managing underwriter reasonably shall request; provided, however, that Exsorbet
shall not for any such purpose be required to qualify generally to transact,
business as a foreign corporation in any jurisdiction where it is not so
qualified or to consent to general service of process or taxation in any such
jurisdiction;
(c) immediately notify each seller of Restricted Stock
under such registration statement and each underwriter, at any time when a
prospectus relating thereto is required to be delivered under the Securities
Act, of the happening of any event of which Exsorbet has knowledge as a result
of which the prospectus contained in such registration statement, as then in
effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing; upon
receipt of such notice, the holder of registered shares will discontinue any
sales of registered stock; upon giving of such notice Exsorbet will file such
amendments or supplements to the registration statement promptly to eliminate
such mistatement or omission and will advise the
3
<PAGE> 4
holder of the registered shares that it has done so, whereupon the holder may
recommence its sale of registered stock; and
(d) make available for inspection by each seller, any
underwriter participating in any distribution pursuant to such registration
statement, and any attorney, accountant or other agent retained by such seller
or underwriter, all financial and other records, pertinent corporate documents
and properties of Exsorbet, and cause Exsorbet's officers, directors and
employees to supply all information reasonably requested by any such seller,
underwriter, attorney, accountant or agent in connection with such registration
statement.
In connection with each registration hereunder, the selling
holders of Restricted Stock will furnish to Exsorbet in writing such
information with respect to themselves and the proposed distribution by them as
reasonably shall be necessary in order to assure compliance with federal and
applicable state securities laws.
Exsorbet and each seller of Restricted Stock agree to enter
into a written agreement with any managing underwriter selected in the manner
herein provided in such form and containing such provisions as are reasonably
satisfactory to Exsorbet and such seller of Restricted Stock and as are
customary in the securities business for such an arrangement between such
underwriter, such seller and companies of Exsorbet's size and investment
stature. However, this provision shall not obligate Exsorbet to pay any fees,
costs, or expenses to the managing underwriter.
Exsorbet will give the selling holders of Restricted Stock two
days' advance notice of its anticipated filing date of the registration
statement and amendments thereto.
7. Expenses. All expenses incurred by Exsorbet in complying with
Section 5 hereof, including without limitation all registration and filing
fees, printing expense, fees and disbursements of counsel and independent
public accountants for Exsorbet, fees and expenses (including counsel fees)
incurred in connection with complying with state securities or "blue sky" laws
(other than those which by law must be paid by the selling security holders),
fees of the National Association of Securities Dealers, Inc., fees of transfer
agents and registrars, but excluding any Selling Expenses, are called
"Registration Expenses."
Exsorbet will pay all Registration Expenses.
8. Indemnification.
(a) In the event of a registration of any of the
Restricted Stock under the Securities Act pursuant hereto, Exsorbet will
indemnify and hold harmless each seller of such Restricted Stock thereunder and
each other person, if any, who controls such seller within the meaning of the
Securities Act, against any losses, claims, damages or liabilities, joint or
several, to which such seller or controlling person may become subject under
the Securities Act or otherwise,
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<PAGE> 5
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in any registration statement under
which such Restricted Stock was registered under the Securities Act, any
preliminary prospectus or final prospectus contained therein, or any amendment
or supplement thereof, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, or any violation by
Exsorbet of any rule or regulation promulgated under the Securities Act
applicable to the Company and relating to action or inaction required of the
Company in connection with any such registration qualification or compliance
and will reimburse each such seller and each such controlling person for any
legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or action.
(b) Promptly after receipt by an indemnified party
hereunder of notice of the intended or actual commencement of any action, such
indemnified party, if a claim in respect thereof is to be made against the
indemnifying party hereunder, will notify the indemnifying party in writing
thereof, but the omission so to notify the indemnifying party shall not relieve
it from any liability that it may have to any indemnified party under this
Section 8, except to the extent of actual prejudice. In case any such action
shall be brought against any indemnified party, the indemnified party shall
notify the indemnifying party of the commencement thereof and the indemnifying
party shall be entitled to participate in and, to the extent it shall wish, to
assume and undertake the defense thereof with counsel reasonably satisfactory
to such indemnified party. After notice from the indemnifying party to such
indemnified party of its election so to assume and undertake the defense
thereof, the indemnifying party shall not be liable to such indemnified party
under this Section 8 for any legal expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation and of liaison with counsel so selected; provided,
however, that if the defendants in any such action include both the indemnified
party and the indemnifying party and the indemnified party shall have
reasonably concluded that there may be reasonable defenses available to it that
are different from or additional to those available to the indemnifying party
or if the interests of the indemnified party reasonably may be deemed to
conflict with the interests of the indemnifying party, the indemnified party
shall have the right to select a separate counsel and to assume such legal
defenses and otherwise to participate in the defense of such action, with the
expenses and fees of such separate counsel and other expenses related to such
participation to be reimbursed by the indemnifying party as incurred.
(c) No indemnifying party shall be liable for any amounts
paid in a settlement effected without the consent of the indemnifying party,
which consent shall not be withheld unreasonably.
(d) No indemnifying party, in the defense of any such
claim or litigation, shall, except with the consent of each indemnified party,
consent to entry of any judgment or enter into any settlement which does not
include as an unconditional term thereof the giving by the claimant or
plaintiff to such indemnified party of a release from all liability in respect
to such claim or litigation.
5
<PAGE> 6
9. Miscellaneous.
(a) All covenants and agreements contained in this
Agreement by or on behalf of any of the parties hereto shall bind and inure to
the benefit of the holders of Restricted Stock. Without limiting the
generality of the foregoing, the registration rights conferred herein on the
holders of Restricted Stock shall, with your concurrence, inure to the benefit
of any and all proper subsequent holders from time to time of the Restricted
Stock.
(b) All notices, requests, consents and other
communications hereunder shall be in writing and shall be mailed by first class
registered mail, postage prepaid, addressed as follows:
if to the Company, to it at its office at:
1401 South Waldron Road, Suite 201
Fort Smith, Arkansas 72903
Attention: Chief Financial Officer
if to you, at the addressed stated in this letter;
if to a subsequent holder of Restricted Stock, to it
at such address as may have been furnished to
Exsorbet in writing by such holder;
or, in any case, at such other address or addresses
as shall have been furnished in writing to Exsorbet
(in your case or other holder of Restricted Stock) or
to the holders of Restricted Stock or you (in the
case of Exsorbet).
(c) This Agreement shall be governed by and construed in
accordance with the laws of the State of Louisiana.
(d) This Agreement may not be amended or modified, and no
provision hereof may be waived, without the written consent of the holders of
at least a majority in interest of the outstanding shares of Restricted Stock
treated as a single class.
(e) This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(f) Notwithstanding anything herein to the contrary,
Exsorbet shall not be obligated to include any Restricted Stock in a
registration statement unless the stock has been issued to the person
requesting registration prior to the time the registration statement is
initially filed with the Commission. Exsorbet will use reasonable efforts to
advise the person requesting registration of the anticipated filing and
effective dates of the registration statement.
6
<PAGE> 7
(g) Notwithstanding anything herein to the contrary, the
holder of any Restricted Stock will delay any registered or other sales of
Restricted Stock to the extent required by the managing underwriter of any
underwritten sale of Exsorbet Common Stock, for a period of up to 120 days. No
Restricted Stock may be transferred except to a person who undertakes, by a
written instrument satisfactory in form and substance to Exsorbet, to be bound
by this Agreement.
7
<PAGE> 8
Please indicate your acceptance of the foregoing by signing
and returning the enclosed counterpart of this letter, whereupon this Agreement
shall be a binding agreement between Exsorbet and you.
Very truly yours,
EXSORBET INDUSTRIES, INC.
By: /s/ Dr. Edward L. Schrader
-----------------------------------
Name: Dr. Edward L. Schrader
Title: President
AGREED TO AND ACCEPTED
as of the date first above written.
/s/ Larry Woodcock
- -------------------------
Larry Woodcock
/s/ Marilyn Woodcock
- -------------------------
Marilyn Woodcock
8
<PAGE> 1
EXHIBIT 10.8
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is made as of the 27th day of June, 1996
(this "Agreement") between Exsorbet Industries, Inc., an Idaho corporation
("the Company"), KR Acquisition, Inc. (the "Acquiring Company") and Kenneth
R. McDonald ("Employee").
WHEREAS, the Acquiring Company is a wholly owned subsidiary of the
Company; and
WHEREAS, the Acquiring Company desires to employ Employee to serve as
a technical consultant and to perform various functions and duties related
thereto; and
WHEREAS, the Company desires to employ Employee to serve as a
technical and public relations consultant and as a vice-president and to
perform various functions and duties related thereto; and
WHEREAS, Employee desires to be employed by the Company and Acquiring
company upon the terms and conditions stated herein;
NOW, THEREFORE, in consideration of the mutual promises contained
herein, the Company, the Acquiring Company and Employee agree as follows:
1. Definition of Employer. As used herein, the term "Employer,"
shall collectively refer to Exsorbet Industries, Inc., an Idaho corporation,
and KR Acquisition, Inc., an Arkansas corporation, or the successor
corporations of both such corporations. Any obligations imposed upon the
employer herein shall be jointly and severally imposed upon both the Company
and the Acquiring Company. However, the Company shall be vested with total
discretion in determining whether the obligations shall be met by the Company
or the Acquiring Company, provided that the obligations of the Employer shall
be fully met.
2. Employment. The Employer agrees to employ Employee for a
period of five years beginning as of the date of hereof. Employee agrees to
be employed by the Employer for such period of time. Employee will observe all
policies and procedures of the Company and the Acquiring Company as are
applicable to similarly situated senior management employees and conduct
himself in accordance with all lawful directions from the Employer. Employee
shall use his best efforts in the performance of the duties of this employment
as designated by the Employer and shall, at all times, conduct himself so as to
reflect favorably upon the Employer.
3. Company Benefits. Employee will be the beneficiary of and
permitted to participate in all of the Employer's standard benefit plans which
are from time to time and made available to
<PAGE> 2
similarly situated management level employees. Such benefits may, from time to
time, be changed or modified, provided that such modification is applicable to
all similarly situated management level employees. The provisions of all
benefit plans of the Employer shall conform to the provisions of the Employment
Retirement Income Security Act ("ERISA").
4. Specific Benefits. Employer benefits shall specifically
provide for:
(a) a reasonable period of annual vacation leave to be determined
by the President of the Company;
(b) paid holiday leave on any holiday which the regularly
employed, full-time employees of the Company, receive payment without
being present on a national holiday; and
(c) all other benefit plans presently or hereafter available to
similarly situated management level employees of the Company.
5. Duties. Employee shall perform such duties and functions and
shall have such responsibilities as shall reasonably be designated by the
Employer from time to time, provided that such duties are generally consistent
with the duties of Employee specified below. All duties imposed by the Company
will be imposed in good faith. Such duties shall include the following:
(a) acting in the capacity as a technical consultant to KR
Acquisition, Inc., or its successor, and generally performing such
duties as have been performed by Employee in connection with
Employee's operation of KR Industrial Services of Alabama, Inc., an
Alabama corporation, during the two year period immediately prior to
acquisition of KR Industrial Services of Alabama, Inc. by KR
Acquisition, Inc.; (b) acting in the capacity as a technical and human
relations consultant to Exsorbet Industries, Inc., or its successor;
(c) acting in the capacity as a vice-president of Exsorbet Industries,
Inc. or its successor; (d) performing such management level duties as
are reasonably imposed by the president or Board of Directors of
Exsorbet Industries, Inc., or its successor; and (e) performing such
duties as are reasonably imposed by the Employer in connection with
the duties identified above.
6. Compensation. The Employer, or one of them, shall pay
Employee an annual salary of $100,000.00, to be paid in bi-weekly. Provided
however, that the Employer, or one of them, may change the frequency with
which payment of compensation occurs but such frequency shall never be less
than one time per month.
7. Hours. The Employer recognizes that the work hours of
Employee will be varied due to demands imposed by Employee's position, the
industry, various subsidiaries, stockholders and
2
<PAGE> 3
stock brokers, legal and regulatory requirements, public relations, asset
acquisition, and other factors. Therefore, a strict hourly work schedule would
be impractical and unfeasible. Employee is expected to perform his duties in a
reasonable and timely fashion. If, at any time, the Employer determines that
the hours being maintained by Employee are unreasonable, the Company shall
provide written notice to Employee along with a request for a specific work
schedule consisting of approximately forty (40) hours per week to be performed
between Monday and Friday of each week, during normal business hours.
8. Bonus Plan. (A) Employee shall be eligible to acquire
additional stock of Exsorbet Industries, Inc. pursuant to the 1995 Employee
Incentive Plan of Exsorbet Industries, Inc. All stock issued pursuant to the
plan is restricted pursuant to Rule 144 of the United States Securities &
Exchange Commission. For purposes of this section, the value of each stock
option to acquire one share of restricted Exsorbet Industries, Inc. stock shall
be computed by taking the five day average closing price of the common stock of
Exsorbet Industries, Inc., as reported by Bloomberg, L.P., for the five day
period immediately prior to issuance of the stock options.
(B) Based on the achievement of successful sales goals by Employee
(which will include sales by Carolyn McDonald as well), Employee shall be given
options to acquire stock entitled to acquire restricted common stock of
Exsorbet Industries, Inc. in the following number of shares: (i) 192,926
shares on June 27, 1997; (ii) 192,926 shares on June 27, 1998; and (iii)
128,617 shares on June 27,1999. All stock options issued pursuant to this
subparagraph (B) shall be exercisable at $0.25 per share. The options will be
subject to the standard terms of all options issued pursuant to the 1995
Employee Incentive Plan of Exsorbet Industries, Inc. ("the plan"), without
regard to whether such shares are issued pursuant to the plan. The successful
sales goals, referred to above, will be determined by Larry Woodcock or his
successor, with the approval of the Board of Directors of Exsorbet Industries,
Inc. Should Employee fail to be employed by Employer for a period of three
years due to either his death or disability, any stock option rights pursuant
to this subparagraph which had already vested would then become the right and
property of Carolyn McDonald. Under the specified circumstances, Carolyn
McDonald would also be entitled to attempt to meet the acceptable sales goals
referred to in this paragraph and determined by Larry Woodcock, with approval
of the Board of Directors of Exsorbet Industries, Inc., and upon meeting such
goals, the stock option rights specified in this paragraph would become the
right of Carolyn McDonald. Notwithstanding any other provision herein, Carolyn
McDonald is a third party beneficiary of this Agreement for this limited
purpose as specified in this subparagraph.
9. Car Allowance. Employee shall be provided with a monthly car
allowance in the amount of $500.00 per month. Such amount shall be reported on
Form W-2 provided to the United States Internal Revenue Service.
10. Indemnification and Liability Insurance. The Company agrees
to attempt to provide officers liability insurance insuring Employee against
liability resulting from the actions taken by Employee, from Employee's
performing of duties, or from Employee's failure to take action provided
3
<PAGE> 4
that such insurance shall not provide coverage against intentional misconduct.
Furthermore, the Company agrees to indemnify Employee for any liability imposed
upon Employee resulting from the actions taken by Employee, from Employee's
performing of duties, or from Employee's failure to take action provided that
such indemnification shall not be provided against intentional misconduct.
11. Reimbursement of Expenses. During the term of this
Agreement, the Company will reimburse Employee for all authorized, ordinary and
necessary expenses incurred by him in connection with the business of the
Company. Reimbursement of such expenses shall be paid monthly, upon submission
by Employee to the Company of vouchers itemizing such expenses in a form
satisfactory to the Company, properly identifying the nature and business
purpose of any expenditures.
12. Noncompetition and Nondisclosure. Employee acknowledges that
the Employee has or will provide confidential information and trade secrets
about its business, sales policies, and manufacturing methods. Employee
understands that the nature of the business is such that the relationship
between the Employer and its customers is maintained through close personal
contact with the Employer's employees. Therefore, Employee agrees that during
the period of his employment and for a period of two years immediately
following termination of such employment, Employee will not, directly or
indirectly, for himself or on behalf of others, as an individual on his own
account or as an employee, agent, or Employee for any person, partnership,
firm, or corporation own, manage, control or operate any business which is in
competition with the business of the Company or the Acquiring Company in the
states of Alabama, Arkansas, Mississippi, Louisiana, Oklahoma, or Texas.
13. Divulging Confidential Information. Employee also agrees that
during the period of his employment and for two years thereafter he will not
use, give, or divulge to any person anywhere who is not an authorized employee
of the Employer, any trade secrets, list of customers, price lists, or other
specialized information which Employee learned while with the Employer.
14. Inducing Other Employees. Employee agrees that for a period
of two years after the termination of his employment with the Employer, he will
not:
(a) induce or attempt to induce any employee to terminate
employment with the Employer or any subsidiary of Exsorbet
Industries, Inc.;
(b) interfere with or disrupt Employer's relationship with other
employees; or
(c) solicit, entice, take away, or employ any person employed with
the Employer or any subsidiary of Exsorbet Industries, Inc.
4
<PAGE> 5
Provided however, the provisions of this paragraph shall have no effect with
respect to good faith actions taken by Employee as a management level employee,
officer, or director of the Employer. Such provisions shall not be construed
as limiting the right and obligation of Employee to make decisions and take
actions with respect to employees under his supervision.
15. Termination. This employment agreement may be terminated at
any time:
(a) by Employee's death; or
(b) by the Company for due cause as defined below.
The term "due cause" for purposes of this Section shall be defined as
(a) intentional or reckless misrepresentation by Employee to the Employer's
customers or potential customers of the Company's ability to provide its
products or services; (b) a wrongful act or acts by Employee which results in a
direct financial loss to the Employer or any subsidiary of Exsorbet Industries,
Inc.; (c) conviction of Employee of a felony crime; or (d) repeated failure by
Employee to comply with the provisions of this agreement or reasonably imposed
policies of the Employer following written notice from the Company or Acquiring
Company of future action demanded by the Employee..
16. Waiver. Failure of any party to exercise any rights under
this Agreement, or to insist on full performance of all obligations hereunder
shall not be construed as waiving any such rights.
17. Entire Agreement. This Agreement is the entire agreement
between the parties. Employee agrees that no other promises or inducements
have been made to him unless contained in writing, attached hereto or
incorporated herein by reference. This Agreement shall be binding upon the
parties, their successors and assigns. This Agreement may not be modified
unless such modification is made in writing and signed by all parties.
18. Severability. The provisions of this Agreement shall be
deemed severable and the invalidity or unenforceability of any one or more of
the provisions of this Agreement shall not effect the validity or
enforceability of the other provisions.
19. Headings. Titles of the paragraphs are placed herein for
convenient reference only and shall not to any extent have the effect of
modifying, amending or changing the express terms and provisions of this
Agreement.
20. No Third Party Rights. None of the provisions contained in
this Agreement shall be for the benefit of or enforceable by any third parties.
Provided, however, that any rights which might accrue to the benefit of the
Employee herein shall accrue to the benefit of the Employees heirs or estate.
5
<PAGE> 6
21. Binding Effect. This agreement shall be binding upon the
parties, their successors and assigns. It is specifically understood that all
rights, duties, and obligations of the Company and/or the Acquiring Company
shall bind and inure to the benefit of any successor corporations.
22. Counterparts. This Agreement may be executed in several
counterparts, all of which together shall constitute one agreement binding on
all parties hereto, notwithstanding that all the parties have not signed the
same counterpart.
IN WITNESS WHEREOF, the undersigned have executed and delivered this
Agreement on the date first written.
EXSORBET INDUSTRIES, INC.,
an Idaho corporation
By: /s/ Edward L. Schrader,Ph.D.
-----------------------------------
Authorized Officer
KR ACQUISITION, INC.,
an Arkansas corporation
By: /s/ Dr. Edward L. Schrader
-----------------------------------
Authorized Officer
EMPLOYEE:
/s/ Kenneth R. McDonald
---------------------------------------
Kenneth R. McDonald
6
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 2,608,706
<SECURITIES> 0
<RECEIVABLES> 8,793,988
<ALLOWANCES> 0
<INVENTORY> 552,595
<CURRENT-ASSETS> 12,931,445
<PP&E> 14,887,168
<DEPRECIATION> 0
<TOTAL-ASSETS> 39,888,106
<CURRENT-LIABILITIES> 8,844,450
<BONDS> 9,798,695
<COMMON> 0
0
10,583
<OTHER-SE> 20,305,229
<TOTAL-LIABILITY-AND-EQUITY> 39,888,106
<SALES> 15,039,167
<TOTAL-REVENUES> 15,039,167
<CGS> 8,485,384
<TOTAL-COSTS> 8,485,384
<OTHER-EXPENSES> 369,892
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 3,316,117
<INCOME-TAX> 1,260,124
<INCOME-CONTINUING> 3,686,009
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,055,993
<EPS-PRIMARY> .08
<EPS-DILUTED> .08
</TABLE>
