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WASTE RECOVERY, INC.
INCENTIVE STOCK OPTION AGREEMENT
THIS INCENTIVE STOCK OPTION AGREEMENT ("Agreement"), made and entered
into in Dallas, Texas, as of the 29th day of June, 1995, by and between Waste
Recovery, Inc., a corporation organized and existing under the laws of Texas
(the "Company") and _Thomas L. Earnshaw (the "Participant").
WHEREAS, Participant is now a full-time employee of the Company, and
will render faithful and efficient service to the Company; and
WHEREAS, the Company desires to continue to receive the benefit of
Participant's services and to fully identify his interests with the Company's
future and success; and
WHEREAS, the Board of Directors ("Board") of the Company and the
stockholders of the Company have heretofore approved the Company's 1989 Stock
Plan for Employees (the "Plan") providing for, among other things, the granting
of stock options under the Plan to certain employees of the Company, including
officers of the Company; and
WHEREAS, pursuant to the provisions of such Plan, the Board has
granted and authorized the terms and provisions in this Agreement pursuant to
Section 422 of the Internal Revenue Code of 1986 (the "Code"):
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, and other good and valuable consideration, it is
understood and agreed as follows:
1. OPTION TO PURCHASE.
(a) The Company hereby grants to Participant an irrevocable right
and option ("Option") to purchase from the Company One Hundred Thousand
(100,000) shares (subject, however, to adjustment as provided in Paragraph 8),
of the common stock, no par value, of the Company (the "Option Shares") upon
the terms and conditions herein contained.
(b) The purchase price payable to the Company for the shares to be
acquired pursuant to the exercise of this Option will be Ninety-Eight Cents
($0.98) per share, which shall be paid to the Company in the manner hereinafter
described at the time of exercise. Such purchase price is referred to herein
as the "Option Price".
INCENTIVE STOCK OPTION AGREEMENT PAGE 1
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2. EXERCISE OF OPTION.
(a) Vesting.
(1) Except as otherwise provided in Section 2(a)(2)
below, the Option Shares will become vested in accordance with the following
schedule, if as of each relevant date the Participant is still employed by the
Company or any of its subsidiaries:
(i) As of June 29, 1996, Participant shall vest
in 20,000 of the Option Shares;
(ii) As of June 29, 1997, Participant shall vest
in an additional 20,000 of the Option Shares;
(iii) As of June 29, 1998, Participant shall vest
in an additional 20,000 of the Option Shares;
(iv) As of June 29, 1999, Participant shall vest
in an additional 20,000 of the Option Shares;
and
(v) As of June 29, 2000, Participant shall vest
in an additional 20,000 of the Option Shares.
(2) Notwithstanding Section 2(a)(1) above, upon a merger
or dissolution in which the Company is not the surviving corporation, or a
transfer of substantially all the assets of the Company, Participant shall vest
in all of the Option Shares less any such shares as to which this Option has
been previously exercised.
(b) Exercisable Option Shares. Participant can exercise this
Option on a cumulative basis to the extent hereinafter provided with respect to
all or any part of the number of "Exercisable Option Shares" subject to this
Option, and such right shall be a continuing one during the term of the Option
as provided in paragraph 3 hereof, until this Option has been fully exercised
with respect to the number of Option Shares stated in paragraph 1.
"Exercisable Option Shares" shall be the Option Shares granted in paragraph 1
and vested in accordance with paragraph 2(a) hereof, less Option Shares
previously exercised.
(c) Exercise After Participant's Death. Upon the death of
Participant, this Option shall still be exercisable in full with respect to
Option Shares which are Exercisable Option Shares on the date of Participant's
death, and may be exercised in whole or in part by the estate of the
Participant or by such person or persons to whom this Option shall be
transferred by the Will of Participant, or by the applicable laws of descent
and distribution, but only within one hundred eighty (180) days after the
Participant's death, or within the unexpired term of this Option, whichever is
shorter, at which time
INCENTIVE STOCK OPTION AGREEMENT PAGE 2
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this Option shall lapse and become void.
(d) Exercise After Termination of Employment. If the Participant
shall voluntarily terminate his employment without the consent of the Company
(of which the Board shall be the sole judge), his rights under any then
outstanding Options shall terminate immediately. In the event that the
Participant shall voluntarily terminate his employment with the consent of the
Company (regarding which the Board shall be the sole judge), or in the event
that the Participant's employment shall be involuntarily terminated by the
Company other than for cause (regarding which the Board shall be the sole
judge), or in the event of a Participant's retirement under any retirement plan
of the Company, its parent, or any of its subsidiaries, an Option shall be
exercisable by the Participant at any time prior to the expiration date of its
term or within three (3) months after the date of such termination of
employment, whichever is the shorter period, but only to the extent of the
accrued right to purchase at the date of such termination; otherwise, his
rights under any then outstanding Option shall terminate immediately. In the
case of a Participant who is permanently and totally disabled at the time of
leaving the Company, the above stated three (3) month period shall be increased
to one (1) year.
3. TERM OF OPTION.
Subject to the limitations contained elsewhere in this Agreement, this
Option shall remain open and exercisable for a period of ten (10) years,
through and including June 28, 2005, after which this Option shall lapse and
become void.
4. MANNER OF EXERCISE OF OPTION.
(a) This Option shall be exercised in whole or in part by written
notice to the Company addressed to the President of the Company at such place
as the Company's executive offices may then be located, such notice, in
accordance with the attached exercise form, together with payment for the
Option Price for the number of Option Shares being exercised and stated
therein, to be delivered either personally or by registered or certified mail.
Such notice, if delivered by registered or certified mail, shall be deemed to
be received by the Company at the time of receipt, provided it is received by
the Company before the expiration of the term hereof. Such notice shall state
the number of Option Shares such Participant (or other person as may be
exercising this Option) elects to exercise under this Option (such number not
to exceed the maximum number of Exercisable Option Shares).
(b) Manner of Payment. Payment for Option Shares purchased upon
exercising all or part of this Option shall be made in full at the time of
exercise, in cash, or, in the Company's discretion, in common stock of the
Company owned by the Participant, valued as of the close of business on the
immediately preceding business day, and such other forms of consideration
having a current value equal to the Option Price as may be suitable to the
Board, or in any combination of the foregoing. No Option Shares may be
delivered
INCENTIVE STOCK OPTION AGREEMENT PAGE 3
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until full payment of the Option Price thereof has been made.
5. RIGHTS AS A STOCKHOLDER.
After receipt of the notice of exercise as provided in paragraph 4
above, the Company shall cause to be issued and delivered such certificates, in
such denominations as Participant may direct, representing the number of
fully-paid, nonassessable shares of common stock which the Participant is
entitled to receive, registered in the name of Participant, but Participant
shall have no right as a stockholder with respect to any such shares until the
issuance of such stock certificates, and no adjustment shall be made for cash
dividends or other rights for which the record date is prior to the time such
stock certificates are issued, except as otherwise provided herein. The
Company agrees to issue such stock certificates with thirty (30) business days
after such receipt of notice of the exercise of this Option, along with
payment. Each certificate shall be issued in the name of Participant so
exercising this Option, or in the name of Participant and his spouse as joint
tenants, if Participant should so request.
6. RESTRICTIONS ON OPTION.
This Option shall not be transferred by Participant other than by
Will, or by the applicable laws of descent and distribution, or a qualified
domestic relations order as defined in the Code ("QUADRO"), and can be
exercised during his lifetime only by Participant, his guardian or legal
representative, or the QUADRO beneficiaries. This Option shall not be subject
to any claim of any creditor of Participant; shall not be subject to
attachment, garnishment or other legal or equitable process by or on behalf of
any such creditor; and shall not in anywise be liable for or subject to the
debts, contracts, liabilities, engagements or torts of Participant. This
Option shall not be pledged, hypothecated, or otherwise encumbered, and any
attempt to do so shall be void.
7. HOLDING PERIODS.
(a) With respect to Participants who are also executive officers,
directors or ten percent shareholders of the Company, the Option Shares
received upon exercise of this Option shall not be sold or disposed of within
six (6) months from the date of this Agreement.
(b) With respect to all Participants, the Option Shares received
by the Participant upon exercise of this Option shall not be sold or disposed
of within one (1) year after their acquisition by exercise of this Option, nor
within two (2) years from granting of this Option. Should Participant dispose
of Option Shares received before the expiration of either of such holding
periods, such disposition shall be a "disqualifying disposition" of an
"incentive stock option" and any gain realized by Participant on such
disposition for federal income tax purposes will be taxable as ordinary income
in accordance with the Code.
INCENTIVE STOCK OPTION AGREEMENT PAGE 4
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8. CAPITAL ADJUSTMENTS AND REORGANIZATIONS.
(a) The Option Shares covered by this Option, and the Option
Price, shall be adjusted to reflect any stock dividend, stock split, share
combination, exchange of shares, recapitalization, merger, consolidation,
separation, reorganization, liquidation or the like, of or by the Company, in
accordance with the Plan.
(b) Nothing in this paragraph 8 shall in any way extend the time
within which this Option must be exercised as provided in paragraph 3 above.
9. DISSOLUTION OR MERGER.
In the event that, prior to the delivery by the Company of all the
Option Shares pursuant to this Option, a merger or dissolution in which the
Company is not the surviving corporation shall occur, or a transfer of
substantially all the assets of the Company shall occur:
(a) If provision is made in writing in connection with such
transaction for the assumption and continuance of the Option hereby granted, or
the substitution for such Option of a new option covering the shares of the
successor corporation, with appropriate adjustment as to the number and kind of
shares and prices, this Option, or the new option substituted therefore, as the
case may be, shall continue in the same manner and under the terms provided.
(b) In the event provision is not made in such transaction for the
continuance and assumption of this Option or for the substitution of an option
covering the shares of the successor corporation, then Participant shall be
entitled within a reasonable period of time, prior to the effective date of any
such transaction, to purchase the full number of Exercisable Option Shares,
failing which purchase, any unexercised portion thereof shall be deemed
cancelled as of such effective transaction date.
10. WITHHOLDING TAX.
Should the Company be required to withhold any tax pursuant to the
exercise of this Option by Participant, Participant agrees to make arrangements
satisfactory to the Board to ensure that the amount required to be withheld is
made available to the Company for timely payment. If agreeable to the Board,
Participant shall be allowed to deliver shares of the Company's common stock
previously owned by Participant, or Option Shares from the exercise of this
Option, for the payment of such withholding tax.
11. CONTINUED EMPLOYMENT.
By acceptance of this Option and in consideration thereof, and subject to the
INCENTIVE STOCK OPTION AGREEMENT PAGE 5
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qualifications and exceptions contained in paragraph 2 above, this Option may
be exercised only while Participant remains in the continuous employ of the
Company; provided, however, that this Option does not confer upon the
Participant any right to continue in the employ of the Company, nor does it
interfere in any way with the right of the Company to terminate the employment
of the Participant at any time.
12. PLAN.
The Option provided for in this Agreement is granted pursuant to the
Plan, as amended, which was adopted by the Board on March 6, 1989, and approved
by the Shareholders on May 22, 1989. The terms and provisions of the Plan are
incorporated by reference herein, and in case of conflict between the terms and
conditions of this Agreement, and those of the Plan, those of the Plan shall
prevail and be controlling.
13. GENDER AND NUMBER.
Whenever the masculine, feminine, or neuter gender, or the singular or
plural number, is used herein, the application of one shall include the
application of the other as the context so indicates.
14. NOTICES.
Any notice relating to this Agreement shall be in writing and
delivered in person or by certified mail to the Company at its principal place
of business, to the attention of the President. All notices to the Participant
or other person or persons then entitled to exercise the Option, shall be
delivered to the Participant or such other person or persons at the
Participant's address below specified.
15. APPLICATION.
If any provision of this Agreement, or the application to any entity,
individual or circumstance shall be invalid or unenforceable to any extent,
such provision shall be modified to the minimum extent necessary to make it or
its application valid and enforceable. The remainder of this Agreement, and
the application of such provision to other entities, persons or circumstances,
shall not be affected thereby, and shall be enforced to the greatest extent
permitted by law.
16. BOARD OF DIRECTORS.
The term "Board", or "Board of Directors", means the Board of
Directors of the Company, or its properly authorized committee or
representative.
INCENTIVE STOCK OPTION AGREEMENT PAGE 6
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17. LAW GOVERNING; VENUE.
THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY
THE LAWS OF THE STATE OF TEXAS AND APPLICABLE FEDERAL LAW. VENUE SHALL LIE IN
DALLAS, TEXAS.
IN WITNESS WHEREOF, this Agreement is executed in duplicate originals
as of the date and year first above shown.
ATTEST: WASTE RECOVERY, INC.
By:________________________ By:_____________________________
John E. Cockrum Allan Shivers, Jr. Secretary
Secretary Chairman
309 South Pearl Expressway
Dallas, Texas 75201
PARTICIPANT:
________________________________
(signature)
________________________________
(printed name)
________________________________
________________________________
(address)
INCENTIVE STOCK OPTION AGREEMENT PAGE 7
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EXERCISE FORM
(To be executed by the registered owner to purchase Common Stock
pursuant to the Incentive Stock Option Agreement)
Waste Recovery, Inc.
309 South Pearl Expressway
Dallas, Texas 75201
Attention: President
The undersigned hereby: (1) irrevocably subscribes for __________
shares of your Common Stock pursuant to his or her Incentive Stock Option
granted June 29, 1995, and encloses payment of $____________ therefor, or other
sufficient consideration agreed to by the Company in writing; (2) requests that
a certificate for the shares by issued in the name of the undersigned and
delivered to the undersigned at the address below; (3) requests that if such
number of shares is not all of the shares purchasable hereunder, a new Option
of like tenor for the balance of the remaining shares purchasable hereunder be
issued in the name of the undersigned and delivered to the undersigned at the
address below; (4) agrees that if they have not been registered under the
Securities Act of 1933, the certificate(s) for shares of Common Stock may bear
a legend in substantially this form:
THESE SHARES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, OR UNDER ANY APPLICABLE STATE LAW. THEY MAY NOT BE OFFERED
FOR SALE, SOLD, TRANSFERRED OR PLEDGED WITHOUT (1) REGISTRATION UNDER
THE SECURITIES ACT OF 1933 AND ANY APPLICABLE STATE LAW OR (2) AN
OPINION (SATISFACTORY TO THE COMPANY) OF COUNSEL (SATISFACTORY TO THE
COMPANY) THAT REGISTRATION IS NOT REQUIRED;
(5) acknowledges that I have received the Company's: annual report for its last
fiscal year (including financial statements prepared by independent certified
public accountants); most recent definitive proxy statement filed therewith;
all interim quarterly reports on Form 10-Q filed since such annual report; and
information on the use of proceeds from this sale. I have requested and been
advised of any material changes in the Company's affairs since the date of such
documents; and have received or had made available to me all financial or other
information which I consider necessary to an informed judgment as to the
investment merits of this exercise of Option; and (6) represents and warrants
to the Company that with respect to legended shares, I am acquiring the shares
pursuant to this
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Option for my own account for investment; I am not acquiring such shares with a
view to, or in connection with, any offering or distribution; and I have no
present intention of selling or otherwise disposing of any of such shares.
Date:___________________ ____________________________________
(Please sign exactly as name appears
on Option)
____________________________________
Printed Name
____________________________________
Address
___________________________________
Address
___________________________________
Taxpayer ID No.