UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
REPORT ON FORM 10-KSB
(Mark One)
|X| Annual Report pursuant to Section 13 Or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended October 31, 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 No. 0-14443
WASTE TECHNOLOGY CORP.
(Name of small business issuer in its charter)
Delaware 13-2842053
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5400 Rio Grande Avenue, Jacksonville, Florida 32254
(Address of Principal Executive Offices) (Zip Code)
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Issuer's telephone number, including area code: (904) 355-5558.
Securities registered pursuant to Section 12(b) of the Act: None.
Securities registered pursuant to Section 12(g) of the Act: Common Stock, $.01
par value per share.
Check whether the registrant (1) 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 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 |_|
Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B is not contained in this form and no disclosure will be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. |_|
State issuer's revenues for its most recent fiscal year: $13,982,903.
State the aggregate market value of the voting stock held by nonaffiliates (based on the closing price on February 10, 1997 of $1.375): $1,802,536.
State the number of shares outstanding of the registrant's $.01 par value common stock as of the close of business on the latest practicable date (February 10, 1997): 2,431,551.
Documents Incorporated By Reference: None.
Transitional Small Business Disclosure Format (check one): Yes |_| No |X|
PART I
ITEM 1. BUSINESS.
Waste Technology Corp. ("Waste Tech") was incorporated on September 10, 1975 in the State of Delaware under the name B.W. Energy Systems, Inc. Its name was changed to Waste Technology Corp. in August 1983. Waste Tech is a holding company and maintains its executive offices at 5400 Rio Grande Avenue, Jacksonville, Florida 32254 and its telephone number is (904) 355-5558. Unless the context otherwise requires, the term "Company" as used herein, refers to Waste Tech and its subsidiaries on a consolidated basis. The Company's fiscal year end is October 31.
Subsidiaries
International Baler Corp.
International Baler Corp. ("IBC"), a non-reporting public company, has been engaged in business for over 40 years manufacturing balers under the name "International Baler". In September, 1986 Waste Tech acquired approximately 85% of the outstanding shares of IBC. IBC's office and manufacturing facility is located at 5400 Rio Grande Avenue, Jacksonville, Florida 32254 and its telephone number is (904) 358-3812.
Consolidated Baling Machine Co., Inc.
In February 1987 Waste Tech, through Consolidated Baling Machine Co., Inc., ("Consolidated") a wholly-owned subsidiary, acquired all of the assets of N&J Cavagnaro Machinery Corp., ("N&J) which, for more than 30 years, manufactured balers in Brooklyn, New York under the name of "Consolidated Baler". The acquisition also included the right to use and market products under the name "Consolidated Baler". N&J had specialized in manufacturing and selling, under the "Consolidated" name, rubber and medical waste balers which were produced by only a few other companies. Consolidated is a marketing company, which sells balers manufactured by, and purchased from, IBC.
International Press and Shear Corp.
In June 1995 the Company formed a new wholly-owned subsidiary, International Press and Shear Corp. ("IPS"), and expanded its manufacturing capacity by constructing and opening a 65,000 square foot manufacturing facility in Baxley, Georgia, where IPS will manufacture, in addition to products currently manufactured by the Company, high speed balers, two-ram presses, and scrap metal shears, products that the Company did not previously manufacture.
Solid Waste Recovery Systems, Inc.
In August 1990 Waste Tech entered into an agreement with Ted C. Flood, the President of Waste Tech, who, at the time, was a director and executive
vice-president of Waste Tech and president of IBC and Consolidated, whereby Waste Tech acquired all of the outstanding and issued stock of Solid Waste & Recovery Systems, Inc. ("SWRS"), a Florida Corporation which is engaged in Florida and Southern Georgia in the distribution of brand name waste management and recycling equipment such as garbage trucks, containers, shredders, etc. Mr. Flood is presently the President of Waste Technology.
General
Since 1986, the Company's principal business has been the manufacture and sale of balers, which are machines used to compress and compact various waste materials. The Company manufactures approximately fifty (50) different types of balers for use with municipal waste, cloth, metal drums, glass and other products. It is one of the leading makers of balers designed to compact rubber, plastic, cotton mote and textile waste products.
Since charges for transportation of waste material are generally based upon the volume of waste, balers, by reducing volume substantially, also reduce transportation costs substantially. Increases in the quantity of waste produced, government restrictions on waste disposal, reduction in the number of available landfills and mandated recycling of waste products, have greatly increased the need for transportation of waste and hence, the need for balers.
Products
Balers utilize mechanical, hydraulic, and electrical mechanisms to compress a variety of materials into bales for easier and low cost handling, shipping, disposal, storage and/or bulk sales for recycling. Materials commonly baled include scrap metal, corrugated boxes, newsprint, cans, plastic bottles and other solid waste. More sophisticated applications include baling of textile waste, radioactive and otherwise contaminated waste, drums and rubber.
The Company offers a wide variety of balers, certain of which are standardized and others of which are designed to specific customer requirements. The Company's products include (i) general purpose horizontal and vertical balers, (ii) specialty balers, such as those used for radiation waste, fifty-five gallon drums, aluminum cans, and rubber and textile waste, and (iii) accessory equipment such as conveyors, rufflers, bale tying machines and plastic bottle piercers (machines which puncture plastic bottles before compaction).
General Purpose Balers
These balers are designed for general purpose compaction of waste materials. They are manufactured in either vertical or horizontal loading models, depending on available floor space and desired capacity. Typical materials that are handled by this equipment include paper, corrugated boxes and miscellaneous solid waste materials. These balers range in bale weight capacity from approximately 300 to 1,500 pounds and range in price from approximately $5,000 to $250,000. General purpose baler sales constituted approximately 65% of
revenues on a consolidated basis for each of the fiscal years ended October 31, 1995 and 1996.
Specialty Balers
These balers are designed for specific applications which require modifications of the general baler configuration. The Company is attempting to shift the emphasis in its product composition from general purpose to specialty balers due to product profitability and broader geographic markets.
The scrap metal baler is designed to form a bale, referred to as a scrap metal "briquet" of specified size and weight. The rubber baler is designed to apply pressure in such a way as to compress the virgin rubber into a self-contained bale that does not require tying. The drum crusher baler is capable of collapsing a standard fifty-five gallon drum into a "pancake" approximately four (4) to eight (8) inches high, which also serves to contain any remaining contents. The radioactive waste baler has a self-contained ventilation system designed to filter and contain toxic dust and particles released during compaction and baling. The textile baler is capable of compressing and baling loose fibers, which do not ordinarily adhere to each other under pressure. In addition, a double chamber baler has been designed for use by the clothing and textile industries.
Specialty balers range in price from approximately $6,000 to $200,000, and are less exposed to competitive pressures than are general purpose balers. Specialty baler sales constituted approximately 35% of revenues on a consolidated basis for each of the fiscal years ended October 31, 1995 and 1996.
Accessory Equipment
The Company has commenced manufacturing and marketing a number of accessory equipment items in order to market a complete waste handling system. These include conveyors, which carry waste from floor level to the top of large horizontal balers; extended hoppers on such balers; rufflers, which break up material to improve bale compaction; electronic start/stop controls and hydraulic oil coolers and cleaners. At the present time accessory equipment does not represent a significant percentage of consolidated revenues.
Manufacturing
IBC manufactures its products, as well as products sold by Consolidated, in its facility in Jacksonville, Florida, where it maintains a fully equipped and staffed manufacturing plant. IBC purchases raw materials, such as steel sheets and beams and components such as hydraulic pumps, valves and cylinders, and certain controls and other electric equipment which are used in the fabrication of the balers. The Company has no long term supply agreements, and has not experienced unusual delay in obtaining raw materials or components.
The raw materials required by IBC to manufacture the balers, principally
steel, motors and hydraulic systems, are readily available from a number of sources and IBC is not dependent on any particular source. IBC is not dependent on any significant patents, trademarks, licenses or franchises in connection with its manufacture of balers.
In December 1995 the Company expanded its manufacturing capacity by opening a 65,000 square foot manufacturing facility in Baxley, Georgia, where IPS will manufacture extensions to the Company's product line not previously possible due to space constraints. IPS will manufacture, in addition to products currently manufactured by the Company, high speed balers, two-ram presses, and scrap metal shears. IPS uses substantially the same raw materials as IBC to manufacture its products, and like IBC, such materials are readily available from a number of sources and IPS is not dependent on any particular source. Also like IBC, IPS is not dependent on any significant patents, trademarks, licenses or franchises in connection with its manufacture of products.
While IBC maintains a large inventory of raw materials, most of it is earmarked for specific orders and inventory turnover is relatively rapid. Approximately 60% of its inventory turns over in 45 to 90 days and the balance, consisting of customized equipment, turns over in 3 to 6 months. It is anticipated that IPS will manage its inventory in substantially the same manner as IBC. This rate of turn-over is believed to be somewhat better than most manufacturers. Neither IBC's, IPS', nor Consolidated's business is seasonal.
Sales and Marketing
IBC, Consolidated and IPS sell their products throughout the United States and to some extent in Europe, the Far East and South America to manufacturers of rubber and polymers, plastic recycling facilities, power generating facilities, textile mills, paper mills, cotton gins, supermarkets and other retail outlets, paper recycling facilities and municipalities.
Most of the sales of IBC, Consolidated and IPS are made by its sales force of nine (9) employees who rely upon responses to advertising, personal visits, attendance at trade shows, referrals from existing customers and telephone calls to dealers and/or end users. Approximately fifteen (15%) percent of sales are made through manufacturer's representatives and dealers. The Company's general purpose balers are sold primarily in the eastern United States to such end users as waste producing retailers (supermarkets and liquor stores, for example), restaurants, manufacturing and fabricating plants, bulk material producers, nuclear plants and solid waste recycling facilities. Specialty balers are sold throughout the United States and to some extent in Europe, the Far East and South America, to manufacturers of rubber and polymers, plastic recycling facilities, paper recycling facilities, textile mills and power generating facilities. Both types of balers are sold abroad. During fiscal 1996 foreign sales amounted to $2,000,000 or approximately 15% of consolidated sales.
During fiscal 1996, IBC, Consolidated and IPS had baler sales to more than 250 customers, none of which accounted for more than ten percent (10%) of their
combined revenues for the year. The Company anticipates that no one customer will account for more than 10% of revenues in fiscal year ending October 31, 1997.
IBC builds only a small quantity of balers for its inventory. Generally, it builds based on booked orders. IBC's and Consolidated's backlog of firm booked orders at December 31, 1996 was $1,950,640 as compared with $4,369,030 at December 31, 1995. The Company generally delivers its orders within four (4) months of the date booked.
IBC, on a contract basis, supplies SWRS with parts and service which are provided by trained employees of IBC.
Warranties and Service
IBC, Consolidated and IPS typically warrant their products for six (6) months from the date of sale as to materials and one (1) month as to labor, and offer a service plan for other required repairs and maintenance. Service is rendered by repairing or replacing parts at IBC's Jacksonville, Florida facility, and by on-site service provided by Company personnel who are based in Jacksonville, Florida or by local service agents who are engaged as needed. Repair services and spare parts sales represented approximately 15% of fiscal 1996 consolidated revenues.
Competition
The potential market for the Company's balers is nationwide and overseas, but the majority of general purpose baler sales are in the eastern United States, primarily because of freight and
service costs. The Company competes in these markets with approximately eight
(8) companies, none of which are believed to be dominant, but some of which may
have significantly greater sales and financial resources. The Company is able to
compete with these companies due to its reputation in the market place, its
ability to service the balers it manufactures and sells, as well as its ability
to custom design balers to a customer's particular needs. The Company
experiences intense competition with respect to its lower priced or general
purpose balers, based upon price, including freight, and based on performance.
The Company experiences less competition with respect to its specialized baler
equipment such as rubber, radioactive waste, scrap metal and plastic balers.
Regulation
Machinery such as the Company's balers is subject to both Federal and state regulation relating to safe design and operation. The Company complies with design requirements and its balers include interlocks to prevent operation while the loading door is open, and also include required printed safety warnings.
Real Estate Venture
In December 1990 Waste Tech formed a wholly owned subsidiary, Waste Tech Real Estate Corp. ("WT Real Estate"), for the purpose of having that corporation enter into a joint venture with a non-affiliated company, Rock-Tech Realty Corp. ("RT") to purchase a parcel of land in Far Rockaway, Queens, New York to build residential single family homes on the property. RT had previously entered into a contract to purchase the property for $625,000, $50,000 being paid on the execution of the contract and the balance to be paid $200,000 on closing and $375,000 by a purchase money mortgage to the seller. RT has assigned the contract to the joint venture.
WT Real Estate has a twenty-one (21%) percent interest in the profits and losses of the joint venture. As of October 31, 1996, the Company had committed to fund up to $175,000 for its share of loans and loaned the sum of $166,980 to the joint venture on behalf of WT Real Estate. Management does not believe that it will be required to advance funds in excess of the amount loaned to date. WT Real Estate has a mortgage lien on the property as collateral for all sums it advances to the joint venture except that mortgage shall be subordinated to any purchase money mortgage or construction loan mortgage. The Company was to receive interest at 10% per annum, but since no interest has ever been received, accrual of interest was suspended prior to the periods covered by these financial statements. As of October 31, 1996, the total receivable balance of $218,012 has been reserved as uncollectible with related charges to income of $49,840 and $50,000 in 1996 and 1995, respectively.
Employees
As of December 31, 1996, the Company employed 108 persons as follows: 12 in management and supervision; 13 in sales and service; 73 in manufacturing; and 10 in administration and clerical.
ITEM 2. DESCRIPTION OF PROPERTIES
IBC is the owner of the building located at 5400 Rio Grande Avenue, Jacksonville, Florida which it acquired from Waste Tech in partial satisfaction of an obligation owing by Waste Tech to IBC. The building contains approximately 62,000 square feet and is situated on eight (8) acres. Prior to the opening of the Company's newest manufacturing facility in Baxley, Georgia (see below), IBC manufactured substantially all of the Company's products at this location.
In 1995 and 1996 the Company expanded its manufacturing capacity by the opening a 65,000 square foot manufacturing facility in Baxley, Georgia, where IPS will manufacture, in addition, extensions to the Company's product line not previously possible due to space constraints. The Company acquired the land for the facility for a nominal amount, and constructed the manufacturing facility for approximately $1,300,000.
3. LEGAL PROCEEDINGS
Waste Tech Litigation
(i) Hilde Basch Fremont
The Company is a defendant in the matter entitled Hilde Basch Fremont, et al., Plaintiffs v. Urban Waste Disposal Leasing Co., et al., 88 Civ. 7579 (DNE) commenced in the United States District Court for the Southern District of New York. The eleven plaintiffs in this action are all investors in, and limited partners of, Urban Waste Disposal Leasing Co. (the "Partnership"). The former president of the Company is also a defendant in this action. The Partnership purchased certain waste disposal equipment from GGC, Inc. which did business under the name the Enterprise Company and for which the Company acted as its marketing agent. This is the only connection between the Partnership and the Company. Management is of the opinion that the claim asserted against the Company is without merit and there is no reasonable likelihood of recovery. A motion to dismiss the complaint has been denied, and discovery proceedings have commenced.
(ii) G.G.C., Inc.
The Company was prosecuting claims against GGC, Inc. and others in an action entitled Spier v. Erber, et al., 89 Civ. 1657
(HB), United States District Court, Southern District of New York, to recover approximately $1,900,000, representing the amount which it was obligated to pay pursuant to its guarantee of a non-recourse loan made to GGC, Inc., together with accrued interest from 1986. A non-jury trial was held on March 4-7, 1996. On January 20, 1997, the Court issued an opinion dismissing the Company's claims and granting judgment in favor of the defendants. The Company is now considering whether to file an appeal.
(iii) Cavagnaro v. Waste Tech
The Company was named as a defendant in a matter entitled George L. Cavagnaro, Patricia A. Cavagnaro as Executrix of the Estate of Nicholas J. Cavagnaro, Jr. and Pauline Cavagnaro, Plaintiffs, v. Waste Technology Corp., Defendants, pending in the New York State Supreme Court, New York County, Index No. 31336/91. In this action plaintiffs alleged that the Company has breached non-competition agreements it entered into with the each of the plaintiffs in connection with the Company's purchase of the assets of N.J. Cavagnaro & Sons Machine Corp. ("Cavagnaro & Sons"). The plaintiffs were the only shareholders of Cavagnaro & Sons. As a result of the Company's alleged breach of the non-competition agreements, plaintiffs George Cavagnaro and Patricia A. Cavagnaro claimed that the Company owed each of them $100,000.19 plus interest and plaintiff Pauline L. Cavagnaro claimed that she was owed $30,000 plus interest. Thus, the total amount plaintiffs claimed due to them, including accrued interest, was in excess of $295,000.
The Company and plaintiffs entered into a stipulation settling this
action. Pursuant to that stipulation, the Company paid the plaintiffs the sum of
$162,000 in full settlement of their claims. The settlement was paid as follows:
$52,000 paid upon execution of the stipulation on November 1, 1995 and the sum
of $110,000 was paid on May 29, 1996.
(iv) Feldman
On January 24, 1997, the Company, its president and one of its directors were named as defendants in the matter entitled Jerome Feldman, C. Irving Gall and Edgar Stromfeld, as shareholders of International Baler Corporation, Plaintiffs, v. Theodore C. Flood, Russell McElroy and Waste Technology Corporation, Defendants pending in the United States District Court for the Middle District of Florida, Case No. 97-51-Civ.-J-10c. The action, brought as a shareholders derivative action on behalf of International Baler Corporation, seeks damages against the defendants, including, the Company, for breaches of fiduciary duty, negligence and wrongful usurpation of a corporate opportunity. Although the action has just been commenced, management as of this time is of the opinion that
the plaintiffs' claims are without merit and the Company will be able to successfully defend this action.
IBC Litigation
(i) Arbello
IBC was a defendant in an action brought in New York Supreme Court, Kings County, Index No. 100028/95, by Nelson Arbello, an employee of M.Z. Berger Co., Inc. located in Long Island City, New York. During the course of his employment, plaintiff was injured while operating a baling machine. The complaint incorrectly alleged the baling machine at issue was designed and manufactured by IBC. The action was being defended by the Company's insurance carrier. The policy has a $2,000,000 limit. The action was dismissed in June 1996 when the Court granted IBC's motion for dismissal. No appeal was taken from the Court order dismissing the case and thus, the order of dismissal is final.
(ii) Wilson
Plaintiff, Wilson, has filed a complaint against IBC and others for damages resulting from injuries he sustained while operating a baling machine in 1991 that was originally manufactured in 1974 in an action pending in Texas State District Court, Kaufman County, 86th Judicial District, entitled, Ritchie Wilson, Plaintiff v. Acco Trading Company, et al.,Defendants, Case No. 45636. All defendants except IBC settled with plaintiff or were dismissed in 1994. The trial court granted summary judgment in favor of IBC in 1995. The Court of Appeals for the Fifth District of Texas, in Dallas, Texas, reversed the judgment and remanded the case for further proceedings in the trial court in 1996. No trial has been scheduled, and no activity has taken place in this case since it
was remanded. The Company intends to continue its vigorous defense of this case, but remains open to settlement if acceptable terms can be negotiated. Although there remains a risk that the trial will result in judgment against IBC for a substantial sum, counsel for IBC believes that IBC has at least a reasonable chance to prevail in its defense of this action.
Consolidated Litigation
(i) LaSalle
Edwin LaSalle v. Consolidated Baling Machine Company, et al., Docket No. L-12814-95, pending in the Superior Court of New Jersey, Essex County, Law Division, in which the plaintiff claims he was injured while operating a baling machine during the course of his employment with ABC Textile Company. The action is being defended by the Company's insurance carrier. The policy has a $2,000,000 limit.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
Waste Tech's common stock is presently traded on The Nasdaq Stock Market, Small Cap, under the symbol WTEK. As of December 31, 1996, the number of shareholders of record of the Company's Common Stock was 630, and management believes that there are approximately 1,800 beneficial owners of Waste Tech's common stock.
The range of high and low bid quotations for the Company's common stock during the fiscal years ended October 31, 1996 and 1995 are set forth below.
The bid price for the Common Stock shown below is reported by the National Association of Securities Dealers Automated Quotations System ("NASDAQ") represents prices between dealers without retail mark-up, mark-down or commissions, and do not necessarily reflect actual transactions.
Fiscal Year Ended October 31, 1996 First Quarter 4 3/16 2 1/4 Second Quarter 3 3/8 2 5/8 Third Quarter 3 3/16 1 15/16 Fourth Quarter 2 1/8 1 9/16 Fiscal Year Ended October 31, 1995 First Quarter 1 15/16 1 1/2 Second Quarter 2 1 1/2 Third Quarter 3 5/8 1 3/8 Fourth Quarter 3 15/16 2 1/4 |
The Company has paid no dividends since its inception. Other than the requirement of the Delaware Corporation law that dividends be paid out of capital surplus only, and that the declaration and payment of a dividend not render the Company insolvent, there are no restrictions on the Company's present or future ability to pay dividends.
The payment by the Company of dividends, if any, in the future, rests within the discretion of its Board of Directors and will depend, among other
things, upon the Company's earnings, its capital requirements, its financial condition and other relevant factors. By reason of the Company's present financial status and its contemplated financial requirements, the Company does not anticipate paying any dividends on its common stock during the foreseeable future, but intends to retain any earnings for future expansion of its business.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
Results of Operations
For fiscal 1996, consolidated sales were $13,982,901 as compared to consolidated sales of $10,329,759 for fiscal 1995, an increase of approximately 35.4%. The increase in sales was the result of sales at the International Press and Shear subsidiary in Baxley, Georgia which completed its first full year of operation. Consolidated net income for fiscal 1995 was a loss of $526,680 as compared to net income of $759,588 in fiscal 1995.
Sales in 1995 increased $1,259,288, 13.9% over 1994 due to increased economic activity in certain niche markets including textiles and rubber. Operating expenses increased $470,632, or 22.4% in 1995 due primarily to the start-up operation at IPS (production commenced in the fourth quarter), which resulted in higher advertising, commissions, and administrative expenses. Operating expenses were up by $936,442, 36.4% in 1996 due primarily to the costs at IPS.
Net income in 1995 and 1996 was affected by certain non-recurring items. In 1995 start-up costs at the new facility at Baxley, Georgia, were in excess of $300,000 in the fourth quarter of 1995, while only limited shipments were made by that facility in fiscal 1995. Second, the Company established a reserve of $162,000 for settlement of the Cavagnaro v. Waste Technology Corp. litigation. (See Item 3, "legal Proceedings -- Waste Tech Litigation"). Finally, in fiscal 1995 the Company recorded a deferred tax asset of $413,000 which was related to the Company's net operating loss carry forwards based on managements' estimate of future taxable income.
In fiscal 1996, operating losses at the IPS subsidiary were the primary cause of the loss for the year. The operations of all other subsidiaries of the Company were profitable. The Company also set up a reserve of $49,840 for the receivable related to a real estate joint venture. Based on the results of operations in 1996 and current short term expectations, The Company reversed the recognition of the deferred tax asset discussed previously, at October 31, 1996.
The losses incurred by the new subsidiary were the result of start-up costs and the significant drop in corrugated board and paper prices in the recycled products market which caused actual sales to fall short of projections. IPS operations are now running efficiently and the number of employees have been reduced to a level which is commensurate with sales levels anticipated in view of current market conditions. It is the objective of the Company to get IPS to a profitable or near break-even level by the end of 1997.
Financial Condition
Working capital has decreased from $1,772,035 at October 31, 1995 to $1,541,678 at October 31, 1996. This decrease is the result of the reversal of the deferred tax asset and an increase in current maturities of long-term debt, partially offset by a decrease in customer deposits. The decrease in cash of approximately $975,000 was used to fund higher accounts receivable and inventory required by the IPS subsidiary.
The term note with SouthTrust Bank was renewed in August 1996, increased by $375,167 and extended to August 2002. The original note balance of $418,333 at October 31, 1996 was due in November 1997. Monthly payments on the original note were $15,833 per month, plus interest at the prime rate + 1%. The new note is due in equal monthly installments of $9,028, plus interest at the prime rate.
The note payable balance of $106,878 with Barnett Banks was paid off in December 1995 as the Company sold the related land and buildings of a discontinued subsidiary.
The revolving note payable to SouthTrust Bank in the amount of $1,000,000 was renewed in July 1996 at the prime rate. Interest is payable monthly and all amounts borrowed are due in full on July 7, 1997. The balance due at October 31, 1996 was $531,652. At October 31, 1996, the Company is in violation of the covenants of the loan agreement related to minimum net worth and maximum debt to worth. As of the filing date, the lender has not waived these covenant violations nor has it demanded repayment. While no assurance can be given, management believes its available collateral to be sufficient to allow the Company to renegotiate an extension of the revolving debt and its covenant requirements prior to its expiration date or obtain alternative financing. It is anticipated that the note will be renewed in July, 1997.
The Company also entered into financing arrangements in relation to the financing of the IPS subsidiary. First, a term note for $250,000 with Appling County, Georgia was entered into in July 1996 at a rate of 4%. monthly payments of $3,417 including interest are payable for a period extending to July, 2003. Second, the Company entered into a capital lease agreement with Development
Authority of Appling County, Georgia. Payments on this lease are $6,134.87 per month through April, 2011.
For the year ended October 31, 1996 the Company had negative cash flow operations. Management has taken actions to improve cash flows from operations primarily by reducing personnel to a minimum level and cutting operating costs at the IPS subsidiary where possible. Management anticipates that the IPS subsidiary will attain or exceed the sales levels of 1996 and with the cost structure in place this subsidiary should perform substantially better in 1997 than in 1996. However, if orders at IPS are not sufficient to sustain a minimum cash outflow rate, management will take further action as necessary to maintain
the liquidity position of the entire company.
Inflation
The costs of the Company and its subsidiaries are subject to the general inflationary trends existing in the general economy. The Company believes that expected pricing by its subsidiaries for balers will be able to include sufficient increases to offset any increase in costs due to inflation.
ITEM 7. FINANCIAL STATEMENTS
The financial statements and supplementary data commence on page F-1.
ITEM 8. CHANGES IN AND DISAGREEMENT WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS PROMOTERS AND CONTROL
PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
The current executive officers and directors of the Company are as follows:
Name Position
Ted C. Flood President, Chief Executive
Officer and Director
Morton S. Robson Executive Vice President,
Secretary and Director
Russell McElroy Director
Robert Roth Director
Alan Morrison Director
William E. Nielsen Chief Financial Officer
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The Board of Directors is divided into three (3) classes of directors ("Class I", "Class II", and "Class III"), with each class having as nearly the same number of directors as practicable. Stockholders elect such class of directors, Class I, Class II, or Class III, as the case may be, to succeed such class directors whose terms are expiring, for a three (3) year term, and such class of directors shall serve until the successors are elected and qualify.
The following is the apportionment of existing directors into classes:
No. of Class Term Expires Members
Class I 1995 Annual Alan Morrison
Stockholder's Meeting Russell McElroy
(to be held in 1997)
Class II 1996 Annual Morton S. Robson
Stockholder's Meeting Ted C. Flood
(to be held in 1997)
Class III 1997 Annual Vacant/Robert Roth
Stockholder's Meeting
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Except for Mr. Flood who has an employment agreement with the Company,
officers serve at the pleasure of the Board of Directors.
Messrs. Robson and Morrison are members of the Company's audit and compensation committees.
There are no family relationships between executive officers or directors of the Company. However, Robert Roth is the husband of Patricia B. Roth, and father of Steven F. Roth, major shareholders of the Company. See Item 12, "Certain Relationships and Related Transactions".
For so long as Patricia Roth and Steven Roth are the owners of more than one percent (1%) of the number of outstanding shares of Common Stock, the Company has agreed to use its best efforts to cause the election of Robert Roth as a member of the Board of Directors.
Except as noted above, there is no understanding or arrangement between any director or any other persons pursuant to which such individual was or is to be selected as a director or nominee of the Company.
Background of Executive Officers and Directors
The following is a brief account of the experience, during the past five years, of each director and executive officer of the Company:
Ted C. Flood, age 66, was elected as the President and Chief Executive Officer of the Company on February 23, 1993. He is also the President and Chief Executive Officer of Consolidated, a wholly-owned subsidiary, and IBC, a majority-owned subsidiary of the Company. He was elected as a Director of the Company in May, 1989. From 1960 to 1972 he was president of Peabody Solid Waste Management Company (EZ Pack). From 1972 to 1975 Mr. Flood was a corporate vice-president of marketing for Browning Ferris Industries. During the period from 1977 to 1988 he was the principal shareholder and president of Solid Waste Recovery Systems.
Morton S. Robson, age 73, was elected a Director and the Secretary of the Company in 1989. On February 23, 1993, he was elected Executive Vice President of the Company. Since 1977 Mr. Robson has been the senior partner of the law firm of Robson & Miller, LLP (and its predecessor firms), which acts as general counsel to the Company. Mr. Robson obtained an LLB degree from St. John's University School of Law.
Alan Morrison, age 70, has served as a Director of the Company since January, 1986. Mr. Morrison has been a management consultant and private investor since 1971. In 1970, he was the founder of SCA
Services, Inc., a waste disposal company. For more than 25 years, he has been a director of the Dauphin Deposit Bank of Hanover, Pennsylvania. Mr. Morrison failed to file on a timely basis a Form 5 disclosing one transaction, the grant of a stock option.
Russell McElroy, age 69, was appointed by the Board Of Directors as a Director of the Company in March 1993. Mr. McElroy has been active in sales of balers, and other recycling equipment, and sales management of baler companies for the past 21 years. He has been an employee of IBC since 1986. He is currently Assistant To the Chairman of IBC and Consolidated. From 1978 to 1985, Mr. McElroy was an officer and director of Selco Products Company, Baxley, GA.
Robert Roth, age 71, is the Chairman of the Board and Treasurer of Georgetowne Electric, Ltd., and a director of Keystone Insurance Co., both publicly held companies. For more than the past five (5) years, in addition to being the Chairman of the Board and Treasurer of Georgetowne Electric, Ltd., he has also been the President and Chief Executive Officer of Browning Weldon Corp., a privately held financial company.
William E. Nielsen, age 49, joined the Company in June 1994 as its Chief Financial Officer. Prior to joining the Company, Mr. Nielsen acted as a financial consultant to Fletcher Barnun Inc., a privately held manufacturing concern, from October 1993 through June 1994. From 1980 through July 1993 he was the Vice President, Administration and Finance at Unison Industries, Inc. Mr. Nielsen received a B.B.A in Finance and an M.B.A. at Western Illinois University in 1969 and 1970, respectively.
ITEM 10. EXECUTIVE COMPENSATION
The following table sets forth a summary of all compensation awarded to, earned by or paid to, the Company's Chief Executive Officer and each of the Company's executive officers whose compensation exceeded $100,000 per annum for services rendered in all capacities to the Company and its subsidiaries during fiscal years ended October 31, 1996, October 31, 1995 and October 31, 1994(1):
SUMMARY COMPENSATION TABLE
Annual Compensation Long Term Awards
==============================================================================================
Other Annual Number
Name and Year Salary Bonus Compensation of All Other
Principal Position ($) ($) ($) Options Compensation
- ----------------------------------------------------------------------------------------------
Leslie N. Erber, 1996 -0- -0- -0- -0- -0-(3)
former Chief
Executive Officer 1995 -0- -0- -0- -0- -0-
and President of
the Company and IBC 1994 50,000(2) -0- -0- -0- -0-
- ----------------------------------------------------------------------------------------------
Ted C. Flood, 1996 190,422(4) -0- -0- -0- -0-
Chief Executive
Officer and 1995 150,034(5) -0- -0- -0- 203,125(7)
President of
Company and IBC 1994 125,134(6) -0- -0- 250,000 -0-
==============================================================================================
==============================================================================================
|
No director of the Company received remuneration for services as a director during Fiscal 1996.
(3) As of October 31, 1996, Mr. Erber owned no restricted shares of the Company's Common Stock.
(4) Ted C. Flood, President of the Company and President of the Company's subsidiaries received $164,340 in compensation from IBC and IPS during the fiscal year ended October 31, 1996 and $26,082 from Consolidated during that period.
(5) Ted C. Flood, President of the Company and President of the Company's subsidiaries received $130,501 in compensation from IBC during the fiscal year ended October 31, 1995 and $19,533 from Consolidated during that period.
(6) Ted C. Flood, President of the Company and President of the Company's subsidiaries received $103,434 in compensation from IBC during the fiscal year ended October 31, 1994 and $21,700 from Consolidated during that period.
(7) Such other compensation is equal to the difference between the fair market value of the Common Stock acquired on the date of exercise ($1.8125 on June 13, 1995) and the exercise price ($1.00) of the option. As of October 31, 1996, Mr. Flood held 309,500 shares of restricted Common Stock of Waste Tech, with an aggregate value of $619,000 based upon the average of the bid and asked price of the Common Stock of $2.00 on October 31, 1996, as reported by The Nasdaq Stock Market, Small Cap.
The following table sets forth certain information relating to stock option grants during Fiscal 1996 to the Company's Chief Executive Officer and each of the Company's most highly compensated executive officers whose compensation exceeded $100,000 for Fiscal 1996:
OPTION GRANTS IN LAST FISCAL YEAR
Individualized Grants
- --------------------------------------------------------------------------------
================================================================================
Name Number of Securities Percent of Total Exercise or Expiration
Underlying Options/SARs Base Price Date
Options/SARs Granted to ($/Sh)
Granted (#) Employees in Fiscal
1996
- --------------------------------------------------------------------------------
Ted C. Flood -0- NA NA NA
================================================================================
|
No options were exercised during Fiscal 1996 by the Company's Chief Executive Officer or any of the Company's most highly compensated executive officers whose compensation exceeded $100,000 for Fiscal 1996.
Employment and Severance Agreements
On September 15, 1996, Ted C. Flood, the President and Chief Executive officer of the Company entered into an employment agreement with the Company. The agreement is for a term of five years commencing on October 1, 1996 and terminating on September 30, 2001. Pursuant to the agreement, Mr. Flood shall receive compensation of $150,034 for the first year with increases of 5% per annum during the term of the agreement. However, in the event the Company is not profitable in any year, the Company's Board of Directors has the right to defer the 5% increase earned during that year. Such increase in income that is deferred shall be carried forward and paid in the next profitable fiscal year at the end of such fiscal year in a lump sum payment. The agreement further provides that in the event of a merger, consolidation, sale of substantially all of the Company's assets, or a sale of either a majority or plurality of the Company's stock, Mr. Flood shall have the option to allow the agreement to remain a binding obligation of the Company or the surviving or successor corporation or at such time of such event receive the balance due him under the agreement.
On June 3, 1989, IBC entered into a Severance Agreement (the "Agreement")
with Ted C. Flood, its President. The Agreement provides, among other things, that, in the event of a change in control of IBC as that term is defined in the Agreement, and the subsequent termination of Mr. Flood's employment by IBC other than for cause or by Mr. Flood for good reason, (as such terms are defined in the Agreement), IBC shall pay to Mr. Flood, in addition to his salary at the date of termination, a lump-sum severance payment equal to 2.99 times the greater of his annual salary rate in effect as of the date of termination or such rate in effect immediately prior to the change in control, together with compensation for other benefits to which he would have been entitled.
The initial term of the Agreement was from May 3, 1989 through April 30, 1991. It was, and thereafter it shall be, automatically extended for one year periods, unless IBC shall give written notice of termination, at least one year prior to the termination date, of its desire not to extend the Agreement. In the event of a change in control of the Company, however, the Agreement shall continue in effect for not less than 24 months after such change in control.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information with respect to the ownership of the Company's Common Stock as of December 31, 1996 by (i) those persons known by the Company to be the beneficial owners of more than 5% of the total number of outstanding shares of Common Stock, (ii) each director and executive officer, and (iii) all officers and directors as a group:
Amount of
Name and Address of Beneficial Approximate
Beneficial Owner Ownership(8) Percent of Class
Ted C. Flood 578,907(9) 23.8%
9448 Preston Trail West
Ponte Vedra Beach, Fla. 32082
|
(9) Consists of 309,500 shares held directly; and 269,407 shares owned by the Waste Technology Corp. Employees Profit Sharing Trust of which Messrs. Flood, Robson and Morrison are Trustees.
Morton S. Robson 293,427(10) 12.1% 666 Third Avenue--18th Fl New York, N.Y. 10017--4011 Alan Morrison 120,000(11) 4.7% 875 E. Camino Real, Apt. 10-C Boca Raton, Fla. 33432 Russell McElroy 77,960(12) 3.1% 1623 Louvre Drive Jacksonville, Fla. 32256 Robert Roth 1,650(13) Less than 1% Georgetown Electric, Ltd. Unit 17, 2501 W. Third Street Wilmington De., 19805 William E. Nielsen 96,003(14) 3.9% 5400 Rio Grande Avenue Jacksonville, Fla. 32254 All Officers and Directors As A Group (6 persons) 1,325,616(15) 54.5% |
(11) Consists of options to purchase 120,000 shares. Does not include the 269,407 shares owned by the Waste Technology Corp Employees Profit Sharing Trust of which Messrs. Flood, Robson and Morrison are trustees since these shares are included in Mr. Flood's holdings and their inclusion here would be duplicative.
(12) Consists of 17,960 shares beneficially owned as an IRA beneficiary, and options to purchase 60,000 shares.
(13) Excludes an aggregate of 157,669 shares held by family members.
(14) Consists of 71,003 shares held jointly with his spouse and options to purchase 25,000 shares.
(15) Includes shares owned by family members of Robert Roth as follows:
his wife, Patricia B. Roth (57,091), his son, Steven F. Roth (41,984), his
daughter, Kathie Cecile Roth (5,000) and his son Charles B. Roth and his wife,
Marta Roth (53,594). Also includes options to purchase 205,000 shares.
Charles B. Roth and 157,669(16) 6.5%
Marta M. Roth
1840 Spice Circle
Jacksonville, Fla. 32215
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Related Party Transactions
Loans to Officers and Directors
The Company and IBC entered into an agreement with Mr. Flood dated as of December 29, 1995 pursuant to which IBC assigned all of its interest in a life insurance policy it owned on Mr. Flood's life to Mr. Flood. In consideration for this assignment Mr. Flood agreed to pay IBC the sum of $145,727 which amount represented the cash surrender value of the policy as of the date of the agreement. This amount is to be paid out of the proceeds Mr. Flood or his Estate receives upon surrender of the policy or from the living proceeds or death benefit proceeds from the policy, whichever occurs first. Interest on Mr. Flood's obligation accrues at the rate of 6% per annum from the date of the agreement to the date of payment. The agreement further provides that no payment of principal or interest of this obligation shall be required to be made until such time that Mr. Flood or his Estate shall receive the proceeds from the policy. This obligation of Mr. Flood to IBC is evidenced by a promissory note executed by Mr. Flood to the order of IBC.
The agreement further provides that all premiums due on the policy after ownership has been transferred from IBC to Mr. Flood shall be advanced by the Company. Each time that such advance is made for a premium by the Company, Mr. Flood shall execute a promissory note to the order of the Company in the amount of such premium advanced. Such note shall accrue interest at the rate of six per cent per annum and no payment of principal or interest of such notes shall be required to be made until such time that Mr. Flood or his Estate shall receive the proceeds from the policy, either upon the surrender of the policy or from the living proceeds or death benefit proceeds, whichever occurs first. As of the date of this report, the Company had advanced funds to pay two premiums on the policy each in the amount of $20,000. Mr. Flood has executed two promissory notes, each in the amount of $20,000, to the order of the Company evidencing his obligation to repay these loans to the Company.
As of the date of this report, Morton S. Robson, the Company's Executive Vice President and Secretary and a Director and corporate counsel, was indebted to the Company. The transaction giving rise to the obligations owed to the Company by Mr. Robson is described below.
On April 12, 1990, four individuals, including Leslie N. Erber, then Chairman of the Board and President of the Company, and Morton S. Robson entered into an agreement with a group of dissident shareholders to purchase an aggregate of 294,182 shares at a purchase price of $4.00 per share. Mr. Erber and Mr. Robson each purchased 134,951 shares of stock. Such number of shares and purchase price have been adjusted to reflect the one for four (1:4) reverse stock split effected on November 13, 1991. The dissidents had previously filed Forms 14B with the Commission indicating their intention of seeking control of the Company through the solicitation of consents from shareholders to a reduction in the number of directors and the replacement of the present directors with directors nominated by the dissident group. As part of the agreement to purchase the shares, the dissident shareholders who were selling their shares agreed that, for a period of ten years, they would not seek to obtain control of the Company or solicit proxies in opposition to the Board of Directors on any matter.
Messrs. Erber and Robson and the two other persons borrowed the aggregate amount of $1,244,328 from the Company in 1990 and 1991 to purchase these shares. Most of the loan (91.5%) was made in equal amounts to the President and the Secretary. Those advances were secured by a lien on the 294,182 shares of Common Stock. In addition, Mr. Erber agreed to transfer to the Company as additional collateral, 156,000 shares of stock of the Company. Approximately one-half of this sum was advanced on April 12, 1990 and the balance during 1991. In April 1990, promissory notes evidencing the first half of the funds were executed by these persons bearing interest at the rate of 9% per annum and payable in three annual installments commencing on April 12, 1991. Thereafter, independent members of Waste Tech's Board of Directors unanimously extended the payment due date of each payment for one (1) year. New promissory notes to Waste Tech were thereafter executed for the full amount of the advance, payable in three annual installments commencing April 12, 1992. The notes were secured by a lien on all of these shares which were acquired. In June 1992, $200,000 of the principal amount of these loans was repaid to the Company through a sale of 100,000 of the acquired shares at $2.00 per share. Payment of the remainder of the principal due in 1993 and 1994, together with the accrued interest, was deferred for two years by the Company's Board of Directors, and subsequently deferred again until 1997.
Thereafter, Mr. Erber, in connection with his termination as President of the Company, turned in all of his stock in to the Company and IBC in full satisfaction of his obligation of $698,527.
In June 1995 Robson & Miller exercised a stock option to purchase 250,000 shares of Common Stock (the "250,000 Shares") at $1.00 per share, by offsetting $250,000 of the fees that were due and owing from the Company. As of the end of fiscal 1995, the Company owed Mr. Robson's law firm the sum of $160,130 for legal fees and disbursements. The Company has acquired a security interest in the 250,000 Shares held by Robson & Miller as collateral security for repayment of the outstanding loan of Mr. Robson. As of October 31, 1996 Mr. Robson still
owed the Company $448,364 together with accrued interest, and has indicated that Robson & Miller intends to commence to sell such shares to satisfy the obligation of Mr. Robson. The largest aggregate outstanding loan balance of Mr. Robson during the past two (2) fiscal years was $681,261.
Related Party Transactions
Legal Services
The law firm of Robson & Miller, LLP and its predecessors have provided legal services for the Company and its subsidiaries. Morton S. Robson, the Secretary and a Director of the Company is a partner of Robson & Miller, LLP, general counsel to the Company. During the fiscal 1996, Robson & Miller, LLP received $77,333 from Waste Tech and $37,232 from IBC as payment for legal services rendered. As of the end of fiscal 1996 accrued but unpaid legal fees due to Robson & Miller, LLP, from the Company amounted to $315,696. In fiscal 1994 Robson & Miller was granted an option to purchase 250,000 shares at $1.00 per share for a five year period, in consideration of forbearing collection of past due legal fees. As noted above, on June 13, 1995, Robson & Miller exercised a stock option to purchase the 250,000 Shares at $1.00 per share, by offsetting $250,000 of the fees that were due and owing form the Company.
Conflicts of Interest
Each of Messrs. Flood and Robson are directors of both Waste Tech and its majority owned subsidiary, IBC. Conflicts of interest may arise for Messrs. Flood and Robson in transactions between Waste Tech and IBC. Additionally, counsel to the company is Robson & Miller, LLP, of which Mr. Robson is the senior partner. Conflicts of interests may arise as the result of such relationship.
Robert Roth
Members of the immediate family of Robert Roth, one of the Directors of the Company own an aggregate of 6.5% of the Company's outstanding and issued stock. The shares of stock are owned by his wife, Patricia B. Roth (57,091), his son, Steven F. Roth (41,984), his daughter, Kathie Cecile Roth (5,000) and his son Charles B.
Roth and his wife, Marta Roth (53,594). Pursuant to the terms of an agreement dated May 11, 1993 between Patricia Roth, Steven Roth and Robert Roth so long as Patricia Roth and Steven Roth are the owners of more than one percent (1%) of the number of outstanding shares of Common Stock, the Company has agreed to use its best efforts to cause the election of Robert Roth as a member of the Board of Directors.
PART IV
ITEM 13 EXHIBITS AND REPORTS ON FORM 8-K.
1. Financial Statements:
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Stockholders' Equity
Consolidated Statements of Cash Flows
2. Financial Statement Schedules:
Schedule II - Accounts Receivable from
Related Parties,
Underwriters, Promoters
and Employees other than
Related Parties
Schedule X - Supplementary Income Statement Information
3. Exhibits.
(a) - The following documents heretofore filed by the Company with the commission are hereby incorporated by reference herein:
(i) from the Registration Statement on Form S-18 filed with the Commission in April, 1985 (Registration No. 2-97045)
Exhibit Number and Description
3.0 Articles of Incorporation and by-laws and all amendments thereto.
4.0 All instruments defining the rights of security holders submitted as exhibits therewith:
10.1 Agreement between the Company and International Baler Corp. dated September 8, 1986 relating to acquisition of assets and stock.
(ii) Annual Report on Form 10-K for fiscal year ended October 31, 1987:
Exhibit Number and Description
10.2 Agreement dated February 3, 1987 between the Company and N. J. Cavagnaro & Sons and Machine Corp., Nicholas J. Cavagnaro Jr., George L. Cavagnaro, and Pauline L. Cavagnaro together with the exhibits annexed thereto for the acquisition of N. J. Cavagnaro & Sons Machine Corp.
10.3 Non-Competition Agreement dated February 3, 1987 between the Company and N. J. Cavagnaro & Sons Machine Corp., George L. Cavagnaro, Nicholas J. Cavagnaro, Jr. and Pauline L. Cavagnaro.
(iii) Current Report on Form 8-K, Date of Report, June 1, 1989:
Exhibit Number and Description
10.6 Severance Agreement between International Baler Corporation and Ted C. Flood dated May 17, 1989 and agreed to June 3, 1989.
10.7 Waste Technology Corp. Profit Sharing Plan including Agreement of Trust.
(iv) Current Report on Form 8-K, Date of Report, March 22, 1990:
Exhibit Number and Description
10.10 Agreement between Waste Technology Corp. and U. S. Environmental, Inc. dated March 26, 1990.
(v) Current Report on Form 8-K, Date of Report, April 12, 1990:
Exhibit Number and Description
10.11 Stock Purchase Agreement dated April 12, 1990.
10.12 Standstill Agreement dated April 12, 1990.
(vi) Form 8 Amendment No. 1 to the Annual Report on Form 10-K for fiscal year ended October 31, 1989:
Exhibit Number and Description
3.3 Certificate of Incorporation of International Baler Corporation f/k/a National Compactor & Technology Systems, Inc. and all amendments thereto.
3.4 By-Laws of International Baler Corporation.
3.5 Certificate of Incorporation of Consolidated Baling Machine Company, Inc. f/k/a Solid Waste Recovery Test Center, Inc. and all amendments thereto.
3.6 By-Laws of Consolidated Baling Machine Company, Inc.
10.14 Plan and Agreement of Merger of American Baler Machine Company, Inc. into National Compactor & Technology Systems, Inc.
(vii) Annual Report on Form 10-K for fiscal year ended October 31, 1990:
Exhibit Number and Description
3.7 Certificate of Incorporation of Waste Tech Real Estate Corp.
3.8 Certificate of Incorporation of Consolidated Baler Sales & Service, Inc.
10.19 Joint Venture Agreement between Waste Tech Real Estate and Rock-Tech Corp.
(viii) Current Report on Form 8-K, Date of Report April 2, 1991:
Exhibit Number and Description
10.20 Agreement among Waste Technology Corp., Ram Industrial Coating, Inc., Charles B. Roth and David Price dated April 2, 1991.
10.21 Agreement among Waste Technology Corp., Ram Coating Technology Corp., Eagle Tank Technology Corp., Ram Industrial Coating, Inc., Eagle Tank Services, Inc. Charles B. Roth and David C. Price dated April 2, 1991.
(ix) Annual Report on Form 10K for the Fiscal Year ended October 31, 1991:
Exhibit Number and Description
3.1.1 Certificate of Amendment to Certificate of Incorporation of Waste Technology Corp. as filed on November 4, 1991.
3.1.2 Certificate of Amendment to Certificate of Incorporation of Waste Technology Corp. as filed November 21, 1991.
3.2 Revised and Restated By-Laws of Waste Technology Corp.
3.2.1 Amendment to Revised and Restated By-Laws of Waste Technology Corp.
3.11 Certificate of Incorporation of Solid Waste & Recovery Systems, Inc.
10.22 Lease for 156 6th Street and 153 7th Street, Brooklyn, New York.
10.24 Lease for 115 N. 5th Street, Brooklyn, New York.
10.25 Form of Deferred Compensation Agreement for Ted C. Flood.
10.26 Working Agreement dated June 17, 1990 for Local Union No. 164.
10.27 Industrial and Heavy Construction and Maintenance Contract dated September 1, 1990.
10.28 Amended and Restated Revolving Credit Loan and Security Agreement dated July 12, 1991.
(x) Current Report on Form 8K, Date of Report September 2, 1992:
Exhibit Number and Description
10.30 Agreement between Waste Technology Corp. and Charles B. Roth, dated June 25, 1992.
(xi) Current Report on Form 8K, Date of Report May 7, 1993:
Exhibit Number and Description
10.31 Agreement between Waste Technology Corp., International Baler Corp. and Leslie N. Erber dated February 23, 1993.
10.32 Agreement between Waste Technology Corp. and Charles Roth dated May 7, 1993.
10.33 Agreement between Waste Technology Corp., Patricia Roth, Steven Roth and Robert Roth dated May 10, 1993.
(xii) Annual Report on Form 10K for the Fiscal Year ended October 31, 1994:
Exhibit Number and Description
10.34 Employment Agreement between International Baler Corporation and Ted C. Flood dated as of September 1, 1993.
10.35.1 Term Loan and Security Agreement among International Baler Corporation, Consolidated Baling Machine Company, Inc., Waste Technology Corp. and SouthTrust Bank of Northeast Florida dated as of September 8, 1994
10.35.2 Mortgage and Security Agreement between International Baler Corporation and SouthTrust Bank of Northeast Florida dated as of September 8, 1994
10.35.3 Promissory Note among International Baler Corporation, Consolidated Baling Machine Company, Inc. and SouthTrust Bank of Northeast Florida dated as of September 8, 1994
10.35.4 Note Modification Agreement among International Baler Corporation, Consolidated Baling Machine Company, Inc. and SouthTrust Bank of Northeast Florida dated November 30, 1994
10.35.5 Unconditional Guaranty of Payment and Performance by Waste Technology Corp. dated as of September 8, 1994
10.36.1 Business Loan Agreement between Ram Coating Technology Corp. and Barnett Bank of Jacksonville, N.A., dated September 15, 1994
10.36.2 Amended and Restated Mortgage between Ram Coating Technology Corp. and
Barnett Bank of Jacksonville, N.A., dated September 15, 1994
10.36.3 Promissory Note between Ram Coating Technology Corp. and Barnett Bank of Jacksonville, N.A., dated September 15, 1994
10.36.4 Continuing Unlimited Commercial Guaranty by International Baler Corporation to Barnett Bank of Jacksonville, N.A. dated September 15, 1994
10.36.5 Continuing Unlimited Commercial Guaranty by Waste Technology Corp. to Barnett Bank of Jacksonville, N.A. dated September 15, 1994
(xiii)Annual Report on Form 10K for the Fiscal Year ended October 31, 1995:
Exhibit Number and Description
4.1 1995 Stock Option Plan
The following exhibits are filed herewith:
10.37 Employment Agreement between Waste Technology Corp. and Ted C. Flood dated as of September 15, 1996
10.38 Agreement between International Baler Corporation and Ted C. Flood dated as December 29, 1995
10.38.1 Promissory Note made by Ted C. Flood to the order of International Baler Corporation dated December 29, 1995.
10.38.2 Promissory Note made by Ted C. Flood to the order of Waste Technology Corp. dated April 5, 1996.
10.38.3 Promissory Note made by Ted C. Flood to the order of Waste Technology Corp. dated October 5, 1996.
21 List of Subsidiaries
WASTE TECHNOLOGY CORP.
AND SUBSIDIARIES
REPORT ON AUDITS OF
CONSOLIDATED FINANCIAL STATEMENTS
for the years ended October 31, 1996 and 1995
Table of Contents
Pages
Report of Independent Accountants F-1
Consolidated Financial Statements:
Consolidated Balance Sheets at October 31, 1996 and 1995 F-2
Consolidated Statements of Income for the Years Ended
October 31, 1996 and 1995 F-3
Consolidated Statements of Stockholders' Equity for the
Years Ended October 31, 1996 and 1995 F-4
Consolidated Statements of Cash Flows for the Years
Ended October 31, 1996 and 1995 F-5
Notes to Consolidated Financial Statements F-6-F-15
|
Report of Independent Accountants
To the Stockholders of
Waste Technology Corp.
We have audited the accompanying consolidated balance sheets of Waste Technology Corp. and Subsidiaries (the Company) as of October 31, 1996 and 1995 and the related consolidated statements of income, stockholders' equity and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
As more fully discussed in Note 3, the Company has significant transactions with the Company's General Counsel and a member of senior management, who are also directors of the Company.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company as of October 31, 1996 and 1995, and the consolidated results of their operations and their cash flows for each of the two years in the period then ended, in conformity with generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 8 to the financial statements, the Company is in violation of certain debt covenants, which could result in nonrenewal of the Company's revolving promissory note and acceleration of the due date of the related term note payable to bank, which raises substantial doubt about the Company's ability to continue as a going concern. Management's plans, should the lender choose to accelerate the due date or choose not to renew the revolving debt, are also described in Note 8. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ COOPERS & LYBRAND L.L.P. Jacksonville, Florida December 20, 1996, except as to Note 8, for which the date is February 13, 1997. |
WASTE TECHNOLOGY CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
as of October 31, 1996 and 1995
ASSETS 1996 1995
Current assets:
Cash $ 140,000 $ 1,114,342
Accounts receivable, net of allowance for doubtful accounts of $91,000 and $92,447 1,410,956 1,157,560
Inventories 3,162,208 2,344,686
Prepaid expenses and other current assets 43,208 57,916
Deferred income tax asset -- 413,000
------------- -------------
Total current assets 4,756,372 5,087,504
------------- -------------
Property, plant and equipment 2,528,643 1,428,018
Real estate and other property held for sale -- 204,114
------------- -------------
2,528,643 1,632,132
------------- -------------
Other assets:
Loan to joint venture, including accrued interest (Note 4) -- 49,840
Intangible assets, net 67,152 78,946
Other assets 18,049 164,580
------------- -------------
85,201 293,366
------------- -------------
Total assets $ 7,370,216 $ 7,013,002
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Revolving promissory note $ 631,944 $ 296,878
Current portion of long-term debt and capital lease obligation 577,831 --
Accounts payable 1,031,224 901,444
Accrued liabilities 498,284 483,659
Customer deposits 683,324 1,201,144
Legal settlement payable -- 162,000
------------- -------------
Total current liabilities 3,422,607 3,045,125
Accrued legal fees 315,696 270,344
Long-term debt 210,324 228,333
Obligation under capital lease, less current maturities 701,568 --
Minority interest in equity of subsidiary 509,369 481,782
------------- -------------
Total liabilities 5,159,564 4,025,584
------------- -------------
Contingent liabilities and commitments (Note 9, 10)
Stockholders' equity:
Common stock, par value $.01;25,000,000 shares authorized;
2,763,314 and 2,763,314 shares issued and outstanding 27,634 27,634
Preferred stock, par value $.0001, 10,000,000 shares authorized; none issued -- --
Additional paid-in capital 6,066,356 6,069,995
Accumulated deficit (2,588,935) (2,027,894)
------------- -------------
3,505,055 4,069,735
Less: Treasury stock, 331,763 shares, at cost 419,306 419,306
Less: Notes receivable from shareholders 875,097 663,011
------------- -------------
Total stockholders' equity 2,210,652 2,987,418
------------- -------------
Total liabilities and stockholders' equity $ 7,370,216 $ 7,013,002
============= =============
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See accompanying notes.
WASTE TECHNOLOGY CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
for the years ended October 31, 1996 and 1995
1996 1995
Net sales $ 13,982,903 $ 10,329,759
Cost of sales 10,502,750 7,061,919
--------------- ----------------
Gross profit 3,480,153 3,267,840
--------------- ----------------
Operating expenses:
Selling 1,573,593 948,530
General and administrative 1,859,629 1,515,350
Provision for doubtful accounts and loan to joint venture 73,100 106,000
--------------- ----------------
3,506,322 2,569,880
--------------- ----------------
Operating income (26,169) 697,960
--------------- ----------------
Other income (expenses):
Interest 63,645 58,335
Net gain (loss) on disposal of fixed assets 24,985 1,994
Other (8,531) 67,383
Interest expense (150,023) (184,986)
Provision for legal settlement -- (162,000)
--------------- ----------------
(69,924) (219,274)
--------------- ----------------
(96,093) 478,686
Minority interest in income of consolidated subsidiary (27,587) (52,098)
--------------- ----------------
(Loss) income before income taxes (123,680) 426,588
--------------- ----------------
Income tax provision (benefit):
Current 29,000 44,000
Deferred 413,000 (413,000)
--------------- ----------------
442,000 (369,000)
--------------- ----------------
Net (loss) income $ (565,680) $ 795,588
=============== ================
Earnings (loss) per share $ (.21) $ .33
=============== ================
Weighted average number of common and common equivalent
shares outstanding
2,655,161 2,430,732
=============== ================
|
See accompanying notes.
WASTE TECHNOLOGY CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
for the years ended October 31, 1996 and 1995
Common Stock
Par Value $.01
Authorized
25,000,000 Shares Treasury Stock
----------------- ----------------- Notes Total
Number Additional Number Receivable Stock-
of Shares Par Paid-In Accumulated of From holders'
Issued Value Capital Deficit Shares Cost Stockholder Equity
--------- ------- ---------- ----------- ------- --------- ----------- ----------
Balance at October 31, 1994 2,263,314 $22,634 $5,574,995 $(2,823,482) 331,763 $(419,306) $(622,656) $1,732,185
Issuance of 500,000 shares of common stock 500,000 5,000 495,000 -- -- -- -- 500,000
Adjustment of note receivable from
shareholder as a reduction of
stockholders' equity -- -- -- -- -- -- (40,355) (40,355)
Net income -- -- -- 795,588 -- -- -- 795,588
--------- ------- ---------- ----------- ------- --------- -------- ---------
Balance at October 31, 1995 2,763,314 27,634 6,069,995 (2,027,894) 331,763 (419,306) (663,011) 2,987,418
Adjustment of notes receivable from
shareholders as a reduction of
stockholders' equity -- -- -- -- -- -- (212,086) (212,086)
Other -- -- (3,639) 4,639 -- -- -- 1,000
Net loss -- -- -- (565,680) -- -- -- (565,680)
--------- ------- ---------- ----------- ------- --------- --------- ----------
Balance at October 31, 1996 2,763,314 $27,634 $6,066,356 $(2,588,935) 331,763 $(419,306) $(875,097) $2,210,652
========= ======= ========== =========== ======= ========= ========= ==========
|
See accompanying notes.
WASTE TECHNOLOGY CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the years ended October 31, 1996 and 1995
1996 1995
Cash flows from operating activities:
Net (loss) income $ (565,680) $ 795,588
------------- --------------
Adjustments to reconcile net income to net cash (used in) provided by
operating activities:
Writedown on land and building held for sale -- 10,775
Writedown on investment in joint venture 49,840 --
Loss on disposal of property held for sale 9,648 --
Gain from sale of equipment (1,200) (1,994)
Gain from sale of equity securities -- (12,101)
Dissolution of non-operating subsidiaries 1,000 --
Depreciation and amortization 270,270 125,820
Provision for doubtful accounts 23,260 106,000
Increase in cash surrender value of key man life insurance policy -- (37,450)
Insurance premiums paid on behalf of Company president, plus interest (47,181) --
Minority interest in income of subsidiary 27,587 52,098
Deferred income taxes 413,000 (413,000)
Increase (decrease) from changes in:
Accounts receivable (276,656) 7,603
Inventories (817,522) (1,025,560)
Prepaid expenses and other current assets 14,708 24,674
Other assets (125) 5,658
Accounts payable 129,780 637,889
Accrued liabilities and legal fees 59,977 126,888
Customer deposits (517,820) 1,143,511
Reserve for legal settlement (162,000) 162,000
------------- --------------
Total adjustments (823,434) 912,811
------------- --------------
Net cash (used in) provided by operating activities (1,389,114) 1,708,399
------------- --------------
Cash flows from investing activities:
Increase in notes receivable from shareholders (18,250) (40,355)
Repayment of notes payable--other -- (50,000)
Purchase of property and equipment (639,100) (960,233)
Proceeds from sale of marketable securities -- 37,101
Proceeds from sale of property held for resale 194,466 --
Proceeds from sale of equipment 1,200 2,181
------------- --------------
Net cash used in investing activities (461,684) (1,011,306)
------------- --------------
Cash flows from financing activities:
Proceeds from debt 2,589,167 --
Issuance of common stock -- 250,000
Principal payments of long-term debt agreements and capital leases (1,712,711) (332,557)
------------- --------------
Cash flows used in financing activities 876,456 (82,557)
------------- --------------
Net (decrease) increase in cash (974,342) 614,536
Cash at beginning of period 1,114,342 499,806
------------- --------------
Cash at end of period $ 140,000 $ 1,114,342
============= ==============
Supplemental Schedule of Disclosure of Cash Flow Information
Cash paid during period for:
Interest $ 132,740 $ 85,665
============= ==============
Income taxes $ 39,500 $ 9,586
============= ==============
|
Supplemental Disclosures of Non-Cash Transactions During 1996, the Company transferred a life insurance policy to its president, who is also a director, in exchange for a note receivable of $193,836, which represents the cash surrender value of the policy at date of transfer, plus premiums paid and interest.
During 1996, the Company entered into a capital lease agreement in the amount of $720,000 relating to a new manufacturing facility.
The General Counsel, who is also a director, exercised $250,000 of options during 1995 and the Company reduced the liability for legal fees payable to the director by $250,000.
See accompanying notes.
WASTE TECHNOLOGY CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Nature of Business:
The Company is a manufacturer of baling machines which utilize mechanical, hydraulic and electrical mechanisms to compress a variety of materials into bales. The Company's customers include plastic recycling facilities, paper mills, textile mills and paper recycling facilities throughout the United States, the Far East and South America. The Company has two manufacturing subsidiaries, International Baler Corp. (IBC), located in Jacksonville, Florida, and International Press and Shear, Corp. (IPS), located in Baxley, Georgia. The IPS subsidiary was formed in the second quarter of fiscal 1995 and greatly expanded the manufacturing capacity of the Company.
2. Accounting Policies:
Principles of Consolidation - The accompanying consolidated financial statements include the accounts of Waste Technology and all of its wholly owned and majority owned subsidiaries (Company). Intercompany balances and material intercompany transactions have been eliminated in consolidation.
Minority Interest - Minority interest represents the minority stockholders' proportionate share of the equity of International Baler Corp. (IBC). The Company owns 85.8% of the outstanding shares of IBC, its primary operating subsidiary, at October 31, 1996 and 1995.
Pervasiveness of Estimates - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Inventories - Inventories are stated at the lower of cost or market. Cost is determined by the first-in, first-out method.
Depreciation - The cost of property, plant and equipment is depreciated over the estimated useful lives of the related assets. Depreciation is computed on the double-declining balance and straight line methods for financial reporting and other accelerated methods for income tax purposes. Gain or loss upon retirement or disposal of property, plant and equipment is recorded as income or expense.
Intangibles - The cost over fair value of net tangible assets of an acquired business is amortized on the straight-line method over a period of 20 years. Other intangible assets, primarily patents and a covenant not to compete, are amortized on the straight-line basis over their estimated lives of six to seventeen years. The Company periodically
reviews intangibles to assess recoverability, and impairments would be recognized in operating results if a permanent decline in value were to occur. Accumulated amortization was $90,900 and $79,105 at October 31, 1996 and 1995, respectively. Amortization expense related to intangibles was $11,795 and $14,600 for the years ended October 31, 1996 and 1995, respectively.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
2. Accounting Policies, Continued:
Income Taxes - The Company accounts for income taxes under the provisions of Statement of Financial Accounting Standards No. 109 "Accounting for Income Taxes" ("SFAS No. 109"), which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statement or tax returns. Under this method of deferred tax, assets and liabilities are determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the years in which the differences are expected to reverse.
Stock-Based Compensation - In 1997, the Company will adopt SFAS No. 123, "Accounting for Stock-Based Compensation." This standard establishes a fair value method for accounting for stock-based compensation plans either through recognition or disclosure. The Company intends to adopt this standard by disclosing the pro forma net income and earnings per share amounts assuming the fair value method was adopted on November 1, 1996. The adoption of this standard will not impact its results of operations, financial position or cash flows.
3. Loan and Notes Receivable--Officers and Directors:
On April 12, 1990, four individuals, including the former Chairman of the Board, and the Executive Vice President, General Counsel, Secretary and Director of the Company, entered into an agreement with a group of dissident shareholders to purchase an aggregate of 294,182 shares of the Company at a purchase price of $4 per share. The former Chairman and the General Counsel each purchased 134,591 shares of common stock and the other two individuals purchased an aggregate of 25,000 shares.
On July 15, 1991, the purchase of shares was finalized by the payment to the selling shareholders of the balance of the purchase price plus accrued interest. The financing of the transactions was paid with funds borrowed from the Company with the unanimous approval of the Company's Board of Directors. The four individuals executed promissory notes in favor of the Company, originally payable in three annual installments due July 15, 1992-94 plus accrued interest from July 15, 1991 at the rate of 9% per annum. The former Chairman's promissory note was satisfied in 1993. The Company has extended the initial installment date
for the General Counsel to begin on July 15, 1997. The debt is collateralized by a lien on the 104,591 shares of the Company's common stock and a personal guarantee of each borrower to the extent of his loan and the guarantee of General Counsel's law firm to the extent of his loan. The Company expects that a primary source for repayment of the notes will be from the sale of the collateralized shares of the Company stock. The notes receivable from the General Counsel, who is also a major stockholder of the Company, is presented as a reduction of stockholders' equity.
On June 13, 1995 the General Counsel and his law firm exercised their option to purchase 250,000 shares of Waste Technology Corporation common stock at $1.00 per share, whereby, the Company reduced the legal fees payable to the law firm in lieu of cash. These shares are also being held as collateral for the note receivable from the General Counsel.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
3. Loan and Notes Receivable--Officers and Directors, Continued:
On December 29, 1995, the Company transferred a life insurance policy on the life of its president to the president in exchange for a note receivable. The amount of the note receivable is equal to the amount of the cash surrender value of the policy at the time of the transfer. Interest accrues at the rate of 6% per annum. No principal or interest is due until proceeds from the policy are realized. The note receivable from the president, who is also a major stockholder of the Company, is presented as a reduction of stockholders' equity.
The following is an analysis of the notes receivable and accrued interest at October 31, 1996:
Accrued Total Net
Principal Interest Note Reserve Total
---------- ---------- ---------- ---------- ----------
General Counsel $ 427,364 $ 253,897 $ 681,261 $ -- $ 681,261
President 185,727 8,109 193,836 -- 193,836
Others 50,000 34,188 84,188 84,188 --
---------- ---------- ---------- ---------- ----------
$ 663,091 $ 296,194 $ 959,285 $ 84,188 $ 875,097
========== ========== ========== ========== ==========
|
The income statement includes interest income on officer and director notes receivable of $47,359 and $44,855 for 1996 and 1995, respectively.
An officer and director is a partner in the law firm providing legal
services to the Company and as of October 31, 1996 the Company is indebted in the amount of $315,695 to this firm.
Legal expenses to the General Counsel and his law firm were $105,231 and $113,347 for fiscal 1996 and 1995, respectively.
4. Inventories:
Inventories consisted of the following:
1996 1995
Finished products $ 326,358 $ 262,528
Work in process 1,347,229 574,528
Raw materials 1,488,621 1,507,630
------------- -------------
$ 3,162,208 $ 2,344,686
============= =============
|
5. Real Estate Venture:
In December 1990, the Company formed a wholly owned subsidiary, Waste Tech Real Estate Corp. ("WT Real Estate"), for the purpose of having that corporation enter into a joint venture with a non-affiliated company, Rock-Tech Realty Corp. ("RT"), to purchase a parcel of land in Far Rockaway, Queens, New York and to build residential single family homes on the property. RT had previously entered into a contract to purchase the property for $625,000, $50,000 being paid on the execution of the contract and the balance to be paid $200,000 on closing and $375,000 by a purchase money mortgage to the seller. RT has assigned the contract to the joint venture.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
5. Real Estate Venture, Continued:
WT Real Estate has a 21% interest in the profits and losses of the joint venture. As of October 31, 1996, the Company had committed to fund up to $175,000 for its share of loans and loaned the sum of $166,980 to the joint venture on behalf of WT Real Estate. Management does not believe that it will be required to advance funds in excess of the amount loaned to date. WT Real Estate has a mortgage lien on the property as collateral for all sums it advances to the joint venture except that mortgage shall be subordinated to any purchase money mortgage or construction loan mortgage. The Company was to receive interest at 10% per annum, but since no interest has ever been received, accrual of interest was suspended prior to the periods covered by these financial statements. As of October 31, 1996, the total receivable balance of $218,012 has been reserved as uncollectible with related charges to income of $49,840 and $50,000 in 1996 and 1995, respectively.
6. Property, Plant and Equipment:
The following is a summary of property, plant and equipment, at cost, less accumulated depreciation:
1996 1995
Land $ 75,000 $ 75,000
Buildings and improvements 2,264,675 1,274,339
Machinery and equipment 1,112,161 743,452
Vehicles 181,330 217,582
------------- -------------
3,633,166 2,310,373
Less: accumulated depreciation and amortization 1,104,523 882,355
------------- -------------
$ 2,528,643 $ 1,428,018
============= =============
|
Depreciation expense was $258,475 and $111,219 in 1996 and 1995, respectively. Included in buildings and improvements are assets recorded under a capital lease in the amount of $1,359,189. Amortization of the assets under capital lease in the amount of $43,647 is included in depreciation expense.
7. Notes Payable--Other:
In August 1991, a note was issued by the Company to the father of the former owner of Ram Industrial Coating, Inc., a former subsidiary of the Company, in consideration of a loan in the amount of $150,000 carrying interest at 10 1/2% per annum. The remaining balance of the note payable of $50,000 was repaid in fiscal 1995.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
8. Long-Term Debt:
Long-term debt consists of the following:
1996 1995
Term note payable to bank, at prime rate, due in equal monthly
installments of $9,028, plus interest, through August 2002. $ 631,944 $ 418,333
Note payable to bank, at prime rate plus 2.5%, due in equal monthly
installments of $4,000, including interest, with the remaining
balance due in January 1996, collateralized by real estate with a
net book value of $204,114. -- 106,878
Revolving promissory note payable to bank in the amount of $1,000,000.
Interest at prime payable monthly. All amounts borrowed are due in
full on May 30, 1997. 531,652 --
Term note payable to Appling County, Georgia at 4.0%, due in monthly
installments of $3,417, including interest through July 2003. 242,222 --
------------- -------------
1,405,818 525,211
Amounts classified as current 1,195,494 296,878
------------- -------------
$ 210,324 $ 228,333
============= =============
|
The bank's prime rate at October 31, 1996 was 8.25%. The carrying value of the Company's debt approximates fair value.
The term note payable to bank and the revolving promissory note contain certain covenants, whereby the Company must maintain, among other things, specified levels of minimum net worth and working capital, and maintain a specified ratio of maximum debt to worth, and current ratio. The term note payable contains cross default provisions as related to the revolving promissory note and other debt agreements.
The Company is in violation of the covenants related to minimum net worth and maximum debt to worth. As of the date of issuance of these financial statements, the lender has not waived these covenant violations nor has it demanded repayment. While no assurance can be given, management believes its available collateral to be sufficient to allow the Company to renegotiate an extension of the revolving debt and covenant requirements prior to the expiration date of the debt or obtain alternative financing.
The Company has pledged substantially all of its assets as collateral under the term loan and revolving loan agreement.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
8. Long-Term Debt, Continued:
Contractural maturities are as follows:
Period ending October 31:
1997 $ 671,883
1998 141,531
1999 142,883
2000 144,291
2001 145,756
Beyond 159,474
------------
$ 1,405,818
============
|
9. Capital Lease:
During 1996, the International Press and Shear (IPS) subsidiary entered into a lease agreement for its manufacturing facility, which has been accounted for as a capital lease, as the ownership of the facility is transferred to IPS when the lease obligation is satisfied.
The following schedule provides for the minimum future lease payments and the present value of the commitment for the capital lease as of October 31, 1996:
1997 $ 73,618
1998 73,619
1999 73,618
2000 73,619
2001-2011 677,983
------------
Total net minimum lease payments 972,457
Less: Amounts representing interest (256,608)
------------
Present value of net minimum obligations 715,849
Less current portion (14,281)
------------
Long-term obligations $ 701,568
============
|
The present value of minimum future obligations shown above are calculated based on an 8.25% interest rate determined to be applicable at the inception of the lease. Interest expense on the outstanding obligations under capital leases was $32,658 for the period ending October 31, 1996.
The cost, accumulated amortization and net book value of equipment under capital lease at October 31, 1996 are shown below. Cost represents the Company's direct investment in the facility.
Cost $ 1,359,189
Accumulated amortization (43,647)
-------------
Net book value $ 1,315,542
=============
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
10. Contingent Liabilities and Commitments:
Litigation - The Company is subject to legal proceedings and claims which arise in the ordinary course of business. While any litigation contains an element of uncertainty, management, based upon the opinion of the Company's General Counsel and other attorneys acting on behalf of the Company, presently believes that the outcome of each such proceeding or claim which is pending or threatened will not have a material adverse effect on the Company's financial condition, results of operations or cash flows.
Other - The Company had an employment agreement with its president for a term of five years commencing on August 1, 1993 and ending August 1, 1998. Annual compensation pursuant to the contract was $100,627, increased 5% per year for the years 1996 to 1998. Effective October 1, 1996, the Company has amended its employment agreement with its president. The new agreement has a term of five years and the annual compensation is $150,034 in year one with a 5% increase each year in the term. In the event of a change in ownership of the Company and the president is not retained, he shall receive as a lump sum the compensation owed for the remaining term of the agreement.
Additionally, the Company has a severance agreement with its president, whereby in the event of change of control of IBC and the subsequent termination of employment of him for any reason other than cause, IBC shall be required to pay to him an amount equal to 2.99 times his salary at IBC prior to any change in control.
The Company has also committed to pay premiums on a life insurance policy owed by its president to keep the policy in force. Annual premiums approximate $40,000.
11. Income Taxes:
The differences between the federal statutory tax rate and the Company's effective rate are as follows:
Fiscal 1996 Fiscal 1995
------------------------ -------------------------
Amount Percentage Amount Percentage
----------- ---------- ------------ ----------
Federal income tax at statutory rate $ (43,600) (34)% $ 145,000 34%
State income taxes (benefit), net of
federal income tax effect (3,000) (2) 15,000 4
Non-utililization of operating losses 43,600 34
Benefit of operating loss carryforwards (145,000) (34)
Alternative minimum taxes -- -- 7,000 2
Other 32,000 25 22,000 5
Change in valuation allowance 413,000 -- (413,000) (97)
----------- --------- ------------ ----------
Provision (benefit) for income taxes $ 442,000 23% $ (369,000) (86)%
=========== ========= ============ ==========
|
The Company files consolidated federal income tax returns with its subsidiaries and separate corporate state income tax returns.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
11. Income Taxes, Continued:
The net change in the total valuation allowance for the year ended October 31, 1996 was an increase of $493,000. Realization of net deferred tax assets is dependent on generating sufficient taxable income in the future. Based on current and anticipated future economic condition, management cannot ascertain that it is more likely than not that any portion of the net deferred tax asset will be realized.
The significant components of the net deferred tax asset at October 31, 1996 are as follows:
1996 1995
Reserves and allowances $ 242,000 $ 254,000
Property, Plant and equipment 60,000 52,000
General business credit carryforward 41,000 40,000
Net operating loss carryforward 578,000 516,000
Other 94,000 73,000
---------------- ---------------
1,015,000 935,000
Valuation allowance 1,015,000 522,000
---------------- ---------------
$ -- $ 413,000
================ ===============
|
Net operating loss carryforwards for tax purposes are $1,401,000, which expire in years 2005 through 2007. The difference in net operating losses results primarily from recognition of bad debt expense and accrued expenses for financial reporting purposes, not recognized for tax purposes. IBC has general business credit carryforwards of approximately $41,000, which expire in the years 1997 through 2000. The
Company has an Alternative Minimum Tax Credit of approximately $15,000.
12. Earnings (Loss) Per Common and Common Equivalent Share:
Earnings (loss) per common and common equivalent share are calculated using the weighted average number of common shares outstanding during each year and on the net additional number of shares which would be issuable upon the exercise of stock options, assuming that the Company used the proceeds received to purchase additional shares at market value.
13. Stock Options:
Effective in fiscal 1995, the Board of Directors of the Company adopted the 1995 Stock Option Plan ("1995 Plan"). Under the 1995 Plan, incentive stock options within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended, may be granted to key employees, including officers, and/or stock appreciation rights ("SARs") may be granted to key employees, officers, directors and consultants of the Company and its present and future subsidiaries to purchase an aggregate of 1,000,000 shares of the Company's common stock (the "Common Stock").
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
13. Stock Options, Continued:
The purpose of the 1995 Plan is to aid the Company in attracting and retaining key employees, officers, directors and consultants and to secure for the Company the benefits of the incentive inherent in equity ownership by such persons who are responsible for causing the Company's growth and success.
The maximum number of shares as to which options may be granted under the 1995 Plan (subject to adjustment as described below) is 1,000,000 shares of Common Stock. Upon expiration, cancellation or termination of unexercised options, the shares with respect to which such options shall have been granted will again be available for grant under the 1995 Plan.
The 1995 Plan is administered by the Board of Directors, or if appointed, by a stock option committee consisting of at least two members of the Board of Directors, none of whom is eligible to participate under the 1995 Plan. (The group administering the 1995 Plan is referred to as the "Committee").
The Committee has the authority under the 1995 Plan to determine the terms of options and/or SARs granted under the 1995 Plan, including, among other things, whether an option shall be an incentive or a nonqualified stock option, the individuals who shall receive them, whether a SAR shall be granted separately, in tandem with or in addition to options, the number of shares to be subject to each option and/or
SAR, the date or dates each option or SAR shall become exercisable and the exercise price or base price of each option and SAR; provided, however, that the exercise price of an incentive stock option may not be less than 100% of the fair market value of the Common Stock on the date of grant and not less than 110% of the fair market value in the case of an optionee who at the time of grant owns more than ten percent of the total combined voting power of the Company, or of any subsidiary or parent of the Company.
During 1995, the Board of Directors issued 880,000 non-qualified stock options to purchase 880,000 shares of the Company's common stock at prices ranging from $1.50 to $2.00 per share, respectively. The stock options granted are not to be subject to the Company's stock option plan. The options were issued to key employees. The options grant the right to purchase shares of the Company's common stock at the date of the grant. The options have anti-dilutive rights in the event of a split, reverse split, or recapitalization and are exercisable in whole or in part through 2005. The options or shares purchased thereunder may be registered pursuant to the Securities Act of 1933.
In March 1994 and February 1993, the Board of Directors issued 275,000 and 350,000 non-qualified stock options, respectively, to purchase 275,000 and 350,000 shares, respectively, of the Company's common stock at $1 per share. The options have anti-dilutive rights in the event of a split, reverse split or recapitalization and are exercisable in whole or in part through March 2004 and September 1, 2002, respectively. The options or shares purchased thereunder may be registered pursuant to the Securities Act of 1933. Options outstanding as of October 31, 1996 are 25,000 and 100,000, respectively.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
13. Stock Options, Continued:
In 1993, the board of directors granted 65,000 options to a creditor in satisfaction of a liability. The options are exercisable at $1 5/8, the market value of the Company's stock at the date of the grant, and vested upon issuance. The options have anti-dilutive rights in the event of a split, reverse split or recapitalization and are exercisable in whole or in part through December 1998.
Stock option activity is shown below:
Option Price
Shares Per Share
------------ ------------
Outstanding, October 31, 1994 690,000 $1.00-$1.625
Granted 880,000 $1.50-$2.00
Exercised (500,000) $1.00
Canceled or surrendered --
------------
Outstanding, October 31, 1995 1,070,000
Granted --
Exercised --
Canceled or surrendered --
------------
Outstanding, October 31, 1996 1,070,000
============
Shares exercisable 710,000 $1.00-$2.00
============
|
14. Employees' Benefit Plan:
The Company instituted a profit sharing plan for its employees in 1989 by contributing 375,000 shares of its stock to the trust, having a fair market value of $165,000 on the transfer date. The Company contributed $50,000 to the plan in fiscal 1995 and no contributions were made in fiscal 1996.
15. Export Sales:
Export sales were approximately 15% for each of the years ended October 31, 1996 and 1995. The principal international markets served by the Company, among others include Canada, India, Japan, China and Korea.
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
WASTE TECHNOLOGY CORP.
(Registrant)
By: /s/ Ted C. Flood
------------------------
Ted C. Flood, President
Dated: February 6, 1997
|
Pursuant to the requirements of the Securities and Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in their capacities and on the dates indicated.
Signature Title Date /s/ Ted C. Flood Chief Executive February 6, 1997 - ---------------------- Officer, and Director Ted C. Flood /s/ Morton S. Robson Director February 7, 1997 - ---------------------- Morton S. Robson ______________________ Director February__, 1997 Alan Morrison /s/ Russell McElroy Director February 6, 1997 - ---------------------- Russell McElroy ______________________ Director February__, 1997 Robert Roth /s/ William E. Nielsen Principal February 6, 1997 - ---------------------- Financial and William E. Nielsen Accounting Officer |
Exhibit Index to
Report on Form 10-KSB
Waste Technology Corp.
|
Exhibits.
(a) - The following documents heretofore filed by the Company with the commission are hereby incorporated by reference herein:
(i) from the Registration Statement on Form S-18 filed with the Commission in April, 1985 (Registration No. 2-97045)
Exhibit Number and Description
3.0 Articles of Incorporation and by-laws and all amendments thereto.
4.0 All instruments defining the rights of security holders submitted as exhibits therewith:
10.1 Agreement between the Company and International Baler Corp. dated September 8, 1986 relating to acquisition of assets and stock.
(ii) Annual Report on Form 10-K for fiscal year ended October 31, 1987:
Exhibit Number and Description
10.2 Agreement dated February 3, 1987 between the Company and N. J. Cavagnaro & Sons and Machine Corp., Nicholas J. Cavagnaro Jr., George L. Cavagnaro, and Pauline L. Cavagnaro together with the exhibits annexed thereto for the acquisition of N. J. Cavagnaro & Sons Machine Corp.
10.3 Non-Competition Agreement dated February 3, 1987 between the Company and N. J. Cavagnaro & Sons Machine Corp., George L. Cavagnaro, Nicholas J. Cavagnaro, Jr. and Pauline L. Cavagnaro.
(iii) Current Report on Form 8-K, Date of Report, June 1, 1989:
Exhibit Number and Description
10.6 Severance Agreement between International Baler Corporation and Ted C. Flood dated May 17, 1989 and agreed to June 3, 1989.
10.7 Waste Technology Corp. Profit Sharing Plan including Agreement of Trust.
(iv) Current Report on Form 8-K, Date of Report, March 22, 1990:
Exhibit Number and Description
10.10 Agreement between Waste Technology Corp. and U. S. Environmental, Inc. dated March 26, 1990.
(v) Current Report on Form 8-K, Date of Report, April 12, 1990:
Exhibit Number and Description
10.11 Stock Purchase Agreement dated April 12, 1990.
10.12 Standstill Agreement dated April 12, 1990.
(vi) Form 8 Amendment No. 1 to the Annual Report on Form 10-K for fiscal year ended October 31, 1989:
Exhibit Number and Description
3.3 Certificate of Incorporation of International Baler Corporation f/k/a National Compactor & Technology Systems, Inc. and all amendments thereto.
3.4 By-Laws of International Baler Corporation.
3.5 Certificate of Incorporation of Consolidated Baling Machine Company, Inc. f/k/a Solid Waste Recovery Test Center, Inc. and all amendments thereto.
3.6 By-Laws of Consolidated Baling Machine Company, Inc.
10.14 Plan and Agreement of Merger of American Baler Machine Company, Inc. into National Compactor & Technology Systems, Inc.
(vii) Annual Report on Form 10-K for fiscal year ended October 31, 1990:
Exhibit Number and Description
3.7 Certificate of Incorporation of Waste Tech Real Estate Corp.
3.8 Certificate of Incorporation of Consolidated Baler Sales & Service, Inc.
10.19 Joint Venture Agreement between Waste Tech Real Estate and Rock-Tech Corp.
(viii) Current Report on Form 8-K, Date of Report April 2, 1991:
Exhibit Number and Description
10.20 Agreement among Waste Technology Corp., Ram Industrial Coating, Inc., Charles B. Roth and David Price dated April 2, 1991.
10.21 Agreement among Waste Technology Corp., Ram Coating Technology Corp., Eagle Tank Technology Corp., Ram Industrial Coating, Inc., Eagle Tank Services, Inc. Charles B. Roth and David C. Price dated April 2, 1991.
(ix) Annual Report on Form 10K for the Fiscal Year ended October 31, 1991:
Exhibit Number and Description
3.1.1 Certificate of Amendment to Certificate of Incorporation of Waste Technology Corp. as filed on November 4, 1991.
3.1.2 Certificate of Amendment to Certificate of Incorporation of Waste Technology Corp. as filed November 21, 1991.
3.2 Revised and Restated By-Laws of Waste Technology Corp.
3.2.1 Amendment to Revised and Restated By-Laws of Waste Technology Corp.
3.11 Certificate of Incorporation of Solid Waste & Recovery Systems, Inc.
10.22 Lease for 156 6th Street and 153 7th Street, Brooklyn, New York.
10.24 Lease for 115 N. 5th Street, Brooklyn, New York.
10.25 Form of Deferred Compensation Agreement for Ted C. Flood.
10.26 Working Agreement dated June 17, 1990 for Local Union No. 164.
10.27 Industrial and Heavy Construction and Maintenance Contract dated September 1, 1990.
10.28 Amended and Restated Revolving Credit Loan and Security Agreement dated July 12, 1991.
(x) Current Report on Form 8K, Date of Report September 2, 1992:
Exhibit Number and Description
10.30 Agreement between Waste Technology Corp. and Charles B. Roth, dated June 25, 1992.
(xi) Current Report on Form 8K, Date of Report May 7, 1993:
Exhibit Number and Description
10.31 Agreement between Waste Technology Corp., International Baler Corp. and Leslie N. Erber dated February 23, 1993.
10.32 Agreement between Waste Technology Corp. and Charles Roth dated May 7, 1993.
10.33 Agreement between Waste Technology Corp., Patricia Roth, Steven Roth and Robert Roth dated May 10, 1993.
(xii) Annual Report on Form 10K for the Fiscal Year ended October 31, 1994:
Exhibit Number and Description
10.34 Employment Agreement between International Baler Corporation and Ted C. Flood dated as of September 1, 1993.
10.35.1 Term Loan and Security Agreement among International Baler Corporation, Consolidated Baling Machine Company, Inc., Waste Technology Corp. and SouthTrust Bank of Northeast Florida dated as of September 8, 1994
10.35.2 Mortgage and Security Agreement between International Baler Corporation and SouthTrust Bank of Northeast Florida dated as of September 8, 1994
10.35.3 Promissory Note among International Baler Corporation, Consolidated Baling Machine Company, Inc. and SouthTrust Bank of Northeast Florida dated as of September 8, 1994
10.35.4 Note Modification Agreement among International Baler Corporation, Consolidated Baling Machine Company, Inc. and SouthTrust Bank of Northeast Florida dated November 30, 1994
10.35.5 Unconditional Guaranty of Payment and Performance by Waste Technology Corp. dated as of September 8, 1994
10.36.1 Business Loan Agreement between Ram Coating Technology Corp. and Barnett Bank of Jacksonville, N.A., dated September 15, 1994
10.36.2 Amended and Restated Mortgage between Ram Coating Technology Corp. and Barnett Bank of Jacksonville, N.A., dated September 15, 1994
10.36.3 Promissory Note between Ram Coating Technology Corp. and Barnett Bank of Jacksonville, N.A., dated September 15, 1994
10.36.4 Continuing Unlimited Commercial Guaranty by International Baler Corporation to Barnett Bank of Jacksonville, N.A. dated September 15, 1994
10.36.5 Continuing Unlimited Commercial Guaranty by Waste Technology Corp. to Barnett Bank of Jacksonville, N.A. dated September 15, 1994
(xiii)Annual Report on Form 10K for the Fiscal Year ended October 31, 1995:
Exhibit Number and Description
4.1 1995 Stock Option Plan
The following exhibits are filed herewith:
Page no.
21 List of Subsidiaries 40
10.37 Employment Agreement between 42
Waste Technology Corp. and
Ted C. Flood dated as of
September 15, 1996
10.38 Agreement between International 49
Baler Corporation, Waste Technology
Corp. and Ted C. Flood
dated as December 29, 1995
10.38.1 Promissory Note made by 56
Ted C. Flood to the order of
International Baler Corporation
dated December 29, 1995.
10.38.2 Promissory Note made by 60
Ted C. Flood to the order of Waste
Technology Corp. dated April 5, 1996.
10.38.3 Promissory Note made by 63
Ted C. Flood to the order of Waste
Technology Corp. dated October 5, 1996.
|
EXHIBIT 21.0
Exhibit 21 List of Subsidiaries Name State Of Incorporation - ---- ---------------------- International Baler Corp. Delaware Waste Technology Leasing Corp. Delaware Waste Technology Acquisitions Corp. Delaware Consolidated Baling Machine Co., Inc. Florida Solid Waste & Recovery Systems, Inc. Florida Waste Tech Real Estate Corp. New York Consolidated Baler Sales & Service Inc. New York International Press and Shear Corp. Georgia |
EXHIBIT 10.37
EMPLOYMENT AGREEMENT
AGREEMENT, dated as of September 15, 1996 by and between Waste Technology Corp., a Florida Corporation with offices at 5400 Rio Grande Avenue, Jacksonville, Florida 32254 ("Employer") and Theodore Flood ("Employee"). The term of employment shall commence on the 1st day of October, 1996 and shall end on the 30th day of September, 2001.
RECITALS
WHEREAS, Employer desires to retain the services of Employee upon the terms and conditions stated herein; and
WHEREAS, Employee desires to be employed by Employer upon the terms and conditions stated herein;
NOW, therefore, in consideration of the mutual promises and covenants contained herein, the parties agree as follows:
1. Employment Term. Employer herewith employs Employee as President and Chief Executive Officer of Employer for a period of five years from the date hereof.
2. Duties. Employee's duties shall involve the supervision and operation of the Employer's business and such other executive duties as may be determined by the Employer's Board of Directors.
3. Compensation. Employee shall receive as compensation per annum $150,034 for the first year. Such compensation shall be increased by 5% over the previous year's compensation as follows: the second year's compensation shall be $157,536, the third year's compensation shall
be $165,413, the fourth year's compensation shall be $173,684, and the fifth year's compensation shall be $182,368. In the event the company is not profitable in any year, the Board of Directors shall have the right, in its discretion, to defer the 5% increase earned during that year. Any increase in income which has been deferred shall be carried forward and paid in the next profitable fiscal year, and paid at the end of such fiscal year in lump sum. Compensation payable to the Employee shall be paid in weekly installments or as the parties may hereafter mutually agree in writing. In addition to the aforesaid compensation, the Employee shall be included in the major medical
insurance program maintained by the Employer, and the Employer shall continue funding the deferred compensation agreement for the Employee which is now in full force and effect.
4. Reimbursement of Expenses. Employee shall be entitled to reimbursement for all reasonable actual out-of-pocket expense related to Employer's business, including costs associated with the operation and maintenance of an automobile leased for the benefit of the Employee. All such expenses shall be substantiated.
5. Takeover, mergers, etc. In the event of a mercer, consolidation, sale of substantially all of the assets of the Employer, or a sale of either majority or plurality control of the stock in the Employer, the Employee shall have the option to allow this Agreement to remain a binding obligation of the Employer and the surviving or successor corporation, or, receive at the time of merger, consolidation, or sale a sum equal to the compensation set forth in paragraph 3 of this Agreement for the remainder of the Employee's term of employment as provided in paragraph 1 hereof, together with prepayment of insurance premiums for a policy of health and disability insurance for the benefit of the Employee and his wife for the unexpired portion of the Employee term of employment, which policy shall provide benefits equal to, or greater than, those which now
protect the Employee and his wife.
7. Disability. In the event that Employee should become permanently disabled as that term is hereinafter defined, and such disability shall continue for a period in excess of ninety consecutive business days, Employee's compensation shall be reduced to fifty percent of his regular compensation until such time as he resumes regular employment. In the event such disability shall continue for a period in excess of one year, this Agreement shall terminate. The term "permanently disabled" shall mean the inability of the Employee to perform substantially all of his regular duties as an Employee of the Employer. Employer shall provide Employee with the highest amount of disability insurance to the extent available. Termination of the Employee's employment hereunder shall be equivalent to retirement for all purposes.
8. Discharge. Employee may not be discharged except for cause. In the event of a dismissal for cause, Employee shall be entitled to a statement setting forth the nature of the cause alleged and the facts which constitute the cause. For purpose of this Paragraph, the term "cause" shall mean either a failure of Employee to perform his regular duties, without reasonable cause for a substantial period of time (other than because of Employee's disability) or the Employee's breach of his fiduciary obligation to the Employer or of the provisions of this Agreement. Not withstanding anything to the contrary hereinabove contained, the Employee shall not be discharged for cause unless the Employer shall give the Employee written notice of the act or omission constituting the cause, and the Employee shall not have rectified same within ten (10) days after the receipt thereof, and if such cause can not be reasonably rectified within ten (10) days of the receipt of such notice, if the Employee
has not substantially initiated the cure thereof and thereafter diligently pursues and completes the cure of same.
9. Non-Competition. During the term of this Agreement and for a period of two years after the termination thereof, Employee agrees that he will not engage in a similar business to the business then being conducted by the Employer, either directly or indirectly, as owner, shareholder, partner, joint venturer, employee, officer, director or consultant, within the eastern half of the United States, east of the Mississippi River. The Employee recognizes that damages may be difficult to establish and accordingly consents to the entry of an injunction preventing him from violating the provisions of this Paragraph. In the event that a Court of competent jurisdiction should determine that the restrictions proved in this paragraph are unreasonably broad, this Paragraph shall be modified to restrict the area to which, and the period for which this Paragraph shall be applicable to such area and such period as such court shall deem to be reasonable. This paragraph shall be inapplicable if Employer terminates this Agreement without cause of if the Employer breaches this Agreement.
10. No Waiver. The failure of the parties here to enforce any provision hereof on any occasion shall not be deemed to be a waiver of any preceding or succeeding breach of such provisions or of any other provision.
11. Entire Agreement. This Agreement constitutes the entire agreement and understanding of the parties hereto and no amendment, modification or waiver of any provision herein shall be effective unless in writing, executed by the party to be charge therewith.
12. Notices. Any notice given pursuant to the terms of this Agreement shall be given by registered or certified mail, return receipt requested, directed to the addresses set forth above, unless notice of a new address has been sent pursuant to the terms of the Partnership.
13. Unenforceability; severability. If any provision of this Agreement is found void
or unenforceable by a court of competent jurisdiction, the remaining provisions of this Agreement shall nevertheless be binding upon the parties with the same force and effect as though the unenforceable part has been severed and deleted.
14. Governing Law. This Agreement shall be construed, interpreted and enforced in accordance with and shall be governed by the laws of the State of Florida applicable to agreement to be wholly performed therein.
15. Binding Effect. This Agreement shall bind and inure to the benefit of
the partied, their successors and assigns.
16. Assignment and Delegation of Duties. This Agreement may not be assigned by the parties hereto. This Agreement is in the nature of a personal services contract and the duties imposed hereby are non-delegable.
17. Attorney's Fees. In the event of litigation between the parties, the prevailing party shall recover its reasonable court costs and attorney's fees from the other, including but not limited to reasonable attorney's fees and costs on appeal.
18. Paragraph Headings. The paragraph headings herein have been inserted for convenience of reference only, and shall in no way modify or restrict any of the terms or provisions hereof.
19. Notice. Whenever notice is required to be given to the Employee, same shall be given in writing and delivered to the employee by certified mail, return receipt requested, postage prepaid, at P.O. Box 6922, Jacksonville, Florida 32236, or at such other address as the Employee shall designate to the Employer in writing.
20. This agreement supersedes and negates any prior Employment Agreement between Employer and Employee and Employer's subsidiaries including International Baler Corporation. As of October 1, 1996 the employment agreement between Employee and International Baler Corporation dated September 1, 1993 is void and is of no force and effect.
IN WITNESS WHEREOF, the parties have executed this Agreement the 15th day of September, 1996.
WASTE TECHNOLOGY CORPORATION
By: /s/ Morton S. Robson
-----------------------------------
Morton S. Robson
Exec. V.P. Secretary and Counsel
/s/ Theodore C. Flood
-----------------------------------
Theodore C. Flood
President & Chief Executive Officer
|
EXHIBIT 10.38
AGREEMENT
Agreement made as of the 29th day of December, 1995 by and between International Baler Corporation, a Delaware corporation with its principal place of business at 5400 Rio Grande Avenue, Jacksonville, Florida 32205 (hereinafter the "Corporation"), Waste Technology Corp., a Delaware corporation with its principal place of business at 5400 Rio Grande Avenue, Jacksonville, Florida 32205 (hereinafter "Waste Tech") and Ted C. Flood who resides at 7972 Los Robles Court, Jacksonville, Florida 32256 (hereinafter the "Assignee").
W I T N E S S E T H:
WHEREAS, the Corporation is the owner of a life insurance policy issued on Assignee's life by Columbian Mutual Life Insurance Company, Policy no. A010108387 (the "Policy"); and
WHEREAS, the parties desire to transfer ownership of the Policy from the Corporation to Assignee;
NOW THEREFORE, in consideration of the mutual covenants, conditions and promises contained herein, the parties hereto hereby agree as follows:
1. Ownership of the Policy. The Corporation hereby agrees that it will assign and transfer the Policy and any supplementary
contracts issued in connection therewith along with all claims, options, privileges, rights, title and interests therein and thereunder subject to all terms and conditions of the Policy to the Assignee. The Corporation shall take all steps necessary required by Columbian Mutual Life Insurance Company to assign ownership of the Policy to the Assignee. The Assignee by the acceptance of this assignment agrees to and accepts the assignment and all the terms and conditions and provisions herein set forth.
2. Consideration. In consideration of the assignment of the Policy, Assignee will pay to the Corporation the sum of $145,727.00 which amount is equal to the cash surrender value of the Policy as of the date of this Agreement. This sum shall be payable out of the proceeds Assignee or his Estate receives upon the surrender of the Policy or from the living proceeds or death benefit proceeds from the Policy, whichever occurs first. Interest will accrue on this obligation at the rate of six (6%) percent per annum from the date of this Agreement until the date of payment. No payment of principal or interest shall be required to be made until such time that Assignee or his Estate shall receive the proceeds from the Policy. Assignee's obligation hereunder will be evidenced by a promissory note (the Note") executed by Assignee to the order of the Corporation. A copy of the Note is annexed hereto as Exhibit "A".
3. Future Premiums on the Policy. All premiums that are
due and payable on the Policy after ownership of the Policy has been transferred to the Assignee shall be paid by Waste Tech advancing such funds necessary to pay the premium to the Assignee. At such time that each such premium is paid by Waste Tech, the Assignee shall execute and deliver to the Corporation a promissory note (the "Premium Note") in the form annexed hereto as Exhibit B for the amount of such funds advanced by Waste Tech to pay the premium on the Policy. The Premium Note shall accrue interest at the rate of six (6%) percent per annum from the date of the Premium Note until the date of payment. No payment of principal or interest of a Premium Note shall be required to be made until such time that Assignee or his Estate shall receive the proceeds from the Policy either upon the surrender of the Policy or from the living proceeds or death benefit proceeds, whichever occurs first.
4. Security. In order to induce the Corporation to assign the Policy to the Assignee and to secure the payments provided to the Corporation and Waste Tech in paragraphs 2 and 3 hereunder, the Assignee hereby grants the Corporation and Waste Tech each a security interest in the proceeds to be received by Assignee or his Estate from the Policy with the Corporation's interest to have priority. Upon payment in full of the Note and all Premium Notes, the security interest granted hereunder shall be vacated and of no further force and effect.
5. Assignee's Representations and Warranties. Assignee
represents and warrants that:
(a) he has the authority to enter into this Agreement;
(b) the consummation of this transaction contemplated hereby and the performance of this Agreement, the Note and the Premium Notes have not and will not result in any breach of, or constitute a default under, any mortgage, deed of trust, lease, bank loan or credit agreement, corporate charter, bylaws or other agreement or instrument to which Assignee is a party or by which Assignee may be bound or affected;
(c) there are no actions, suits or proceedings pending or to the knowledge of Assignee threatened against or affecting Assignee;
(d) Assignee to his knowledge is not in default with respect to any order, writ, injunction, decree or demand of any court or Governmental Authority; and
(e) until such time that the Note and all Premium Notes are repaid in full, Assignee will not further assign his interests, claims, privileges, options and rights in the Policy.
6. Miscellaneous.
(a) No Waiver. The failure of any of the parties hereto to enforce any provision hereof on any occasion shall not be deemed to be a waiver of any preceding or succeeding breach of such provision or of any other provision.
(b) Entire Agreement. This Agreement constitutes the entire agreement and understanding of the parties hereto and no
amendment, modification or waiver of any provision herein shall be effective unless in writing, executed by the party charged therewith.
(c) Governing Law. This Agreement shall be construed, interpreted and enforced in accordance with and shall be governed by the laws of the State of Florida, without regard to the principles of conflicts of laws.
(d) Binding Effect. This Agreement shall be binding upon, and inure to the benefit of, the parties hereto and their respective heirs, legal representatives, successors and assigns.
(e) Assignment and Delegation of Duties. Assignee shall not assign or delegate its obligations hereunder without the written consent of the Corporation, and any attempt to effect such an assignment or delegation without such written consent shall be in all respects null and void.
(f) Article Headings. The article headings herein have been inserted for convenience of reference only, and shall in no way modify or restrict any of the terms or provisions hereof.
(g) Notices. All notices sent pursuant to this Agreement shall be sent via fax transmission and certified mail, return receipt requested, or via a reputable overnight carrier, to the other party at the addresses indicated hereinabove (or to any new address of which any party hereto shall have informed the others by the giving of notice in the manner provided herein).
(h) Unenforceability; Severability. If any term or condition of this Agreement shall be illegal, invalid or
unenforceable, all other provisions hereof shall continue in full force and
effect as if the illegal, invalid or unenforceable provision was not a part hereof. This Agreement constitutes the entire agreement between the parties and may not be amended, altered or modified unless in writing signed by the parties.
(i) Execution of Documents. At any time and from time to time hereafter, the parties hereto will execute and deliver such further conveyances, assignments and other written assurances as shall reasonably be required in order to carry out the transaction contemplated under this Agreement, the Note and the Premium Notes.
IN WITNESS WHEREOF, the parties hereto have executed this instrument as of the date first above written.
International Baler Corporation
By: /s/Morton S. Robson
---------------------------------------
Morton S. Robson, Secretary
|
Waste Technology Corp.
By: /s/Morton S. Robson
---------------------------------------
Morton S. Robson, Executive
Vice-President, Secretary
/s/Ted C. Flood
---------------------------------------
Ted C. Flood
|
EXHIBIT 10.38.1
PROMISSORY NOTE
December 29, 1995
FOR VALUE RECEIVED, the undersigned, Ted C. Flood ("Maker"), promises to pay to the order of International Baler Corporation ("Payee") the principal amount of ONE HUNDERED FORTY FIVE THOUSAND SEVEN HUNDRED TWENTY SEVEN DOLLARS ($145,727.00), together with interest at the rate of six (6%) percent per annum from the date hereof to the date of payment. Payment of principal and interest shall be payable by Maker or his Estate solely from the living or death proceeds received from the insuance policy issued on Maker's life by Columbian Mutual Life Insurance Company, Policy no. A010108387 (the "Policy") or any proceeds received by Maker upon surrender of the Policy.
No payment of principal or interest shall be required to be made until such time that Maker or his Estate shall receive the proceeds from the Policy, however, Maker, shall have the right to prepay the amount of this note at any time without penalty.
The Maker waives presentment, demand for payment, notice of dishonor, notice of protest, and all other notices or demands in connection with the delivery, acceptance, performance, default, endorsement or guarantee of this Note, and all other requirements necessary to hold Maker liable hereunder. The Maker also waives the right to assert any counterclaim, set-off or any claim or cause of action arising directly or indirectly out of this Note or the underlying transaction out of which this Note arose.
In the event Maker shall enter into an assignment for the benefit of creditors, admit in writing its inability to pay its debts as they become due, shall file a voluntary petition in bankruptcy or be adjudicated a bankrupt or insolvent, shall file a petition or answer seeking an any arrangement, composition, readjustment, dissolution or similar relief under any present or future statute, law or regulation, file any answer admitting or shall fail to deny the material allegations of any petition filed against it for such relief, or shall seek or consent to or acquiesce in the appointment of a trustee or receiver for itself or any substantial part of its property, then, and in any such event (an "event of default"), the holder of this Note at its option may (unless such event of default shall have been remedied) by written notice to Maker declare this note due and payable in full, whereupon the outstanding balance of the Note shall immediately be due and payable without presentment, protest or other notice of demand, all of which are hereby expressly waived by the undersigned.
In the event this Note shall not be paid promptly in accordance with its terms, Maker shall pay all costs of enforcement and collection thereof, including but not limited to, reasonable
attorneys' fees and expenses.
This Note shall be governed by, and construed in accordance with, the laws of the State of New York, and may not be changed orally, but only by an agreement in writing signed by the party against whom enforcement of any waiver, change, modification or discharge is sought.
Maker:
/s/Ted C. Flood
----------------------------
Ted C. Flood
|
EXHIBIT 10.38.2
PROMISSORY NOTE
April 5, 1996
FOR VALUE RECEIVED, the undersigned, Ted C. Flood ("Maker"), promises to pay to the order of Waste Technology Corp. ("Payee") the principal amount of TWENTY THOUSAND DOLLARS ($20,000), together with interest at the rate of six (6%) percent per annum from the date hereof to the date of payment. Payment of principal and interest shall be payable by Maker or his Estate solely from the living or death proceeds received from the insuance policy issued on Maker's life by Columbian Mutual Life Insurance Company, Policy no. A010108387 (the "Policy") or from any proceeds received by Maker upon surrender of the Policy.
No payment of principal or interest shall be required to be made until such time that Maker or his Estate shall receive the proceeds from the Policy, however, Maker, shall have the right to prepay the amount of this note at any time without penalty.
The Maker waives presentment, demand for payment, notice of dishonor, notice of protest, and all other notices or demands in connection with the delivery, acceptance, performance, default, endorsement or guarantee of this Note, and all other requirements necessary to hold Maker liable hereunder. The Maker also waives the right to assert any counterclaim, set-off or any claim or cause of action arising directly or indirectly out of this Note or the underlying transaction out of which this Note arose.
In the event Maker shall enter into an assignment for the benefit of creditors, admit in writing its inability to pay its debts as they become due, shall file a voluntary petition in bankruptcy or be adjudicated a bankrupt or insolvent, shall file a petition or answer seeking an any arrangement, composition, readjustment, dissolution or similar relief under any present or future statute, law or regulation, file any answer admitting or shall fail to deny the material allegations of any petition filed against it for such relief, or shall seek or consent to or acquiesce in the appointment of a trustee or receiver for itself or any substantial part of its property, then, and in any such event (an "event of default"), the holder of this Note at its option may (unless such event of default shall have been remedied) by written notice to Maker declare this note due and payable in full, whereupon the outstanding balance of the Note shall immediately be due and payable without presentment, protest or other notice of demand, all of which are hereby expressly waived by the undersigned.
In the event this Note shall not be paid promptly in accordance with its terms, Maker shall pay all costs of enforcement and collection thereof, including but not limited to, reasonable
attorneys' fees and expenses.
This Note shall be governed by, and construed in accordance with, the laws of the State of Florida, and may not be changed orally, but only by an agreement in writing signed by the party against whom enforcement of any waiver, change, modification or discharge is sought.
Maker:
/s/Ted C. Flood
----------------------------
Ted C. Flood
|
EXHIBIT 10.38.3
PROMISSORY NOTE
October 5, 1996
FOR VALUE RECEIVED, the undersigned, Ted C. Flood ("Maker"), promises to pay to the order of Waste Technology Corp. ("Payee") the principal amount of TWENTY THOUSAND DOLLARS ($20,000), together with interest at the rate of six (6%) percent per annum from the date hereof to the date of payment. Payment of principal and interest shall be payable by Maker or his Estate solely from the living or death proceeds received from the insuance policy issued on Maker's life by Columbian Mutual Life Insurance Company, Policy no. A010108387 (the "Policy") or from any proceeds received by Maker upon surrender of the Policy.
No payment of principal or interest shall be required to be made until such time that Maker or his Estate shall receive the proceeds from the Policy, however, Maker, shall have the right to prepay the amount of this note at any time without penalty.
The Maker waives presentment, demand for payment, notice of dishonor, notice of protest, and all other notices or demands in connection with the delivery, acceptance, performance, default, endorsement or guarantee of this Note, and all other requirements necessary to hold Maker liable hereunder. The Maker also waives the right to assert any counterclaim, set-off or any claim or cause of action arising directly or indirectly out of this Note or the underlying transaction out of which this Note arose.
In the event Maker shall enter into an assignment for the benefit of creditors, admit in writing its inability to pay its debts as they become due, shall file a voluntary petition in bankruptcy or be adjudicated a bankrupt or insolvent, shall file a petition or answer seeking an any arrangement, composition, readjustment, dissolution or similar relief under any present or future statute, law or regulation, file any answer admitting or shall fail to deny the material allegations of any petition filed against it for such relief, or shall seek or consent to or acquiesce in the appointment of a trustee or receiver for itself or any substantial part of its property, then, and in any such event (an "event of default"), the holder of this Note at its option may (unless such event of default shall have been remedied) by written notice to Maker declare this note due and payable in full, whereupon the outstanding balance of the Note shall immediately be due and payable without presentment, protest or other notice of demand, all of which are hereby expressly waived by the undersigned.
In the event this Note shall not be paid promptly in accordance with its terms, Maker shall pay all costs of enforcement and collection thereof, including but not limited to, reasonable
attorneys' fees and expenses.
This Note shall be governed by, and construed in accordance with, the laws of the State of Florida, and may not be changed orally, but only by an agreement in writing signed by the party against whom enforcement of any waiver, change, modification or discharge is sought.
Maker:
/s/Ted C. Flood
----------------------------
Ted C. Flood
|
| ARTICLE 5 |
| MULTIPLIER: 1000 |
| PERIOD TYPE | YEAR |
| FISCAL YEAR END | OCT 31 1996 |
| PERIOD END | OCT 31 1996 |
| CASH | 140,000 |
| SECURITIES | 0 |
| RECEIVABLES | 1,501,936 |
| ALLOWANCES | 91,000 |
| INVENTORY | 3,162,208 |
| CURRENT ASSETS | 4,756,372 |
| PP&E | 3,633,166 |
| DEPRECIATION | 1,104,523 |
| TOTAL ASSETS | 7,370,216 |
| CURRENT LIABILITIES | 2,898,996 |
| BONDS | 0 |
| PREFERRED MANDATORY | 0 |
| PREFERRED | 0 |
| COMMON | 27,634 |
| OTHER SE | 2,183,018 |
| TOTAL LIABILITY AND EQUITY | 7,330,216 |
| SALES | 13,982,903 |
| TOTAL REVENUES | 13,982,903 |
| CGS | 10,502,750 |
| TOTAL COSTS | 14,009,072 |
| OTHER EXPENSES | (52,512) |
| LOSS PROVISION | 0 |
| INTEREST EXPENSE | 150,023 |
| INCOME PRETAX | (123,680) |
| INCOME TAX | 442,000 |
| INCOME CONTINUING | (565,680) |
| DISCONTINUED | 0 |
| EXTRAORDINARY | 0 |
| CHANGES | 0 |
| NET INCOME | (565,680) |
| EPS PRIMARY | (0.21) |
| EPS DILUTED | (0.21) |