ENVIRONMENTAL SERVICES OF AMERICA, INC.
Corporate Offices, Building #2
937 East Hazelwood Avenue
Rahway, NJ 07065
NOTICE OF ELECTION OF DIRECTORS
May 24, 1996
On May 13, 1995, by unanimous written consent of the Board of Directors
(the "Board") of Environmental Services of America, Inc. (the "Company"), a
Delaware corporation, the Board accepted the resignations of Schneur Z. Genack
and Walter H. Barandiaran from the Board; increased the number of directors on
the Board from four (4) to five (5); and appointed Joseph J. Wisneski, Robert M.
Rubin and Kathleen P. LeFevre to fill the resulting vacancies on the Board. The
new directors will assume their offices effective 10 days after filing of this
document with the Securities and Exchange Commission and its transmittal to the
stockholders of record of the Company as of the close of business on May 14,
1996 (the "Record Date"). The new directors will serve, subject to the Bylaws of
the Company, until the next annual meeting of the Company or until their
successors are elected and qualified.
VOTING SECURITIES AND PRINCIPAL HOLDERS OF THEREOF
Outstanding Shares and Voting Rights
As of the close of business on the Record Date, the Company
had outstanding 4,330,553 shares of Common Stock, $.02 par value ("Common
Stock"), 10,362.22 shares of Series B Preferred Stock, $.01 par value ("Series B
Preferred") and 3,200 shares of Series C Preferred Stock, $.01 par value
("Series C Preferred"). The Common Stock, Series B Preferred and Series C
Preferred are sometimes collectively referred to herein as the Company's "Voting
Securities".
On all matters which may be voted upon at a meeting of
stockholders, each record holder of Common Stock is entitled to one vote per
share. Record holders of 544.45 shares of Series B Preferred is entitled to 33
1/3 votes per share and record holders of 9,817.77 shares of Series B Preferred
are entitled to 41 2/3 votes per share. Holders of outstanding Series C
Preferred are entitled to 55 votes per share on all matters. The votes of all
Voting Securities are counted as though all Voting Securities constituted a
single class of stock.
Security Ownership of Certain Beneficial Owners and Management.
On May 6, 1996, ERD Waste Corp. ("ERD"), through its
wholly-owned subsidiary, ENSA Acquisition Corp. ("EAC"), completed a tender
offer to acquire all of the Company's outstanding Common Stock at a price of
$1.66 per share (the "Tender Offer") and, concurrently with closing of the
Tender Offer, pursuant to a separate Agreement with holders of the Company's
Series B and Series C Preferred Stock, acquired substantially all of the
Company's outstanding Preferred Stock. As a result of the Tender Offer and
related agreements, ERD has acquired and is the owner of approximately 93.2% of
the Common Stock, 97.4% of the Series B Preferred Stock and 100% of the Series C
Preferred Stock of the Company.
i
<PAGE>
The following table sets forth information as of the close of
business on May 14, 1996 with respect to the beneficial ownership of the
Company's securities by officers and directors of the Company, individually and
as a group, and all holders of more than 5% of the shares of any class of the
Company's Voting Securities. Calculations are based on 4,330,553 shares of
Common Stock outstanding. Unless otherwise indicated, all shares are
beneficially owned and sole investment and voting power is held by the
beneficial owners indicated.
<TABLE>
<CAPTION>
Name and Address Amount Beneficially Owned Percentage of Class
-------------------------------- ---------------------
of Beneficial Owner Series Series Common Series Series Common
B Pfd (1) C Pfd (2) Stock (3) B Pfd C Pfd Stock(3)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ERD Waste Corp. 9,991.11 3,200 4,034,922 (5) 97.4% 100% 93.2% (5)
356 Veterans Memorial Hwy,
Commack, NY (4)
Officers & Directors
Jon Colin -0- -0- -0- -0- -0- -0-
937 E. Hazelwood Avenue
Building 2
Rahway, NJ 07065
Joseph T. Jacobsen -0- -0- -0- -0- -0- -0-
6205 Route 611 North
P.O. Box 369
Plumsteadville, PA 18949
Joseph J. Wisneski (6) -0- -0- -0- -0- -0- -0-
c/o ERD Waste Corp.
356 Veterans Memorial Highway
Commack, NY 11725
Robert M. Rubin (7) -0- -0- -0- -0- -0- -0-
c/o Stanhope Capital
605 Third Avenue, 15th Floor
New York, NY 10158
Kathleen P. LeFevre -0- -0- -0- -0- -0- -0-
937 E. Hazelwood Avenue
Building 2
Rahway, NJ 07065
Officers and -0- -0- -0- -0- -0- -0-
Directors as a
Group (5 Persons)
</TABLE>
(1) Of the 10,362.22 shares of Series B Preferred outstanding, 544.45 shares
are convertible into Common Stock on the basis of 36.67 shares of Common
Stock per share of Series B Preferred, and 9,817.77 shares of Series B
Preferred (95.7% of the total outstanding) are convertible into Common
Stock on the basis of 45.83 shares of Common Stock per share of Series B
Preferred.
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<PAGE>
The differences in conversion ratios of Series B Preferred result from
adjustments made in connection with a solicitation by the Company in
June 1990 of early exercise of outstanding Common Stock Purchase
Warrants.
(2) Shares of Series C Preferred are convertible at any time into 55 shares
of Common Stock.
(3) In computing the number of shares and the percentage of outstanding
Common Stock "beneficially owned" by a person who owns shares of Series
B Preferred or Series C Preferred the shares issuable upon exercise of
such rights to acquire Common Stock owned by such person, but no other
persons, are deemed to be outstanding.
(4) Includes all Common Stock, Series B Preferred and Series C Preferred
owned by EAC. ERD owns 100% of the outstanding capital stock of EAC and
beneficially owns the shares owned of record by EAC.
(5) Does not include shares of Common Stock issuable upon conversion of
Series B Preferred and Series C Preferred.
(6) Does not include shares owned by ERD or EAC. Mr. Wisneski is the
beneficial owner of 16.5% of ERD's outstanding Common Stock and is the
President, Chief Operating Officer and a director of ERD. He is also
President, Treasurer and sole director of EAC. Mr. Wisneski disclaims
beneficial ownership of the shares owned by ERD and EAC (see Footnotes 4
and 5 above), except to the extent of his proportionate interest
therein.
(7) Does not include shares owned by ERD or EAC. Mr. Rubin is the
beneficial owner of 25.1% of ERD's outstanding Common Stock and is the
Chairman of the Board and Chief Executive Officer of ERD. He is also
Chairman of the Board of EAC. Mr. Rubin disclaims beneficial ownership
of the shares owned by ERD or EAC (see Footnotes 4 and 5 above), except
to the extent of his proportionate interest therein.
Change in Control
On May 6, 1996, ERD, as a result of the Tender Offer through EAC,
purchased 3,534,922 shares of the outstanding common stock of the Company at a
purchase price of $1.66 per share. Following this purchase, ERD owns 4,034,922
shares or approximately 93.2% of the Company's outstanding Common Stock.
Concurrently with its purchase of Common Stock, ERD acquired, in a
negotiated transaction, 9,991.11 shares of the Series B Preferred Stock of the
Company and 3,200 shares of the Series C Preferred Stock of the Company, each at
$98.22 per share. As a result of these purchases, ERD owns approximately 97.4%
of the Series B Preferred and 100% of the Series C Preferred of the Company.
Approximately $7.2 million of the funds required for ERD's purchase of
the Company's Common Stock and Preferred Stock on May 6, 1996, was provided
pursuant to a Loan Agreement between ERD and Chemical Bank, entered into on
March 29, 1996, which provided for a $7.5 million credit facility. Funds to
purchase 500,000 shares of Common Stock acquired by ERD in January 1996 were
provided from ERD cash reserves.
As a result of its purchase of shares of Common Stock and Preferred
Stock of the Company on May 6, 1996, and the purchase of 500,000 shares of
Common Stock in January 1996 which presently are held in escrow subject to the
voting control of the Company, ERD
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<PAGE>
now owns capital stock of the Company entitled to cast approximately 93.2% of
the total votes entitled to be cast by the Company's shareholders, and is in a
position to control all aspects of the Company's business.
Pursuant to an Amended and Restated Agreement and Plan of Merger dated
April 3, 1996 (the "Merger Agreement"), among ERD, EAC and the Company, EAC is
to be merged with and into the Company (the "Merger") as soon as practicable,
with the Company being the surviving corporation. In the Merger, all outstanding
shares of the Company's Common Stock and Preferred Stock then outstanding, other
than shares owned by EAC, will be cancelled and converted into the right to
receive $1.66 per share in the case of the Common Stock, and $98.22 per share in
the case of the Preferred Stock; all shares of the Company's capital stock owned
by ERD will be cancelled; and all shares of EAC's outstanding capital stock will
be converted into the Company's Common Stock, with the result that the Company
will become a wholly-owned subsidiary of ERD. Since ERD will own in excess of
90% of each class of the Company's outstanding capital stock, shareholder
approval of the Merger, other than by ERD, is not required under the Delaware
General Corporation Law (the "DGCL"), and it is not expected that such approval
will be sought. Shareholders will have dissenter's rights afforded under
Delaware law, however, subject to compliance with the requirements for
dissenters set forth in the DGCL.
In accordance with the terms of the Merger Agreement, EAC has designated
three nominees to the Company's Board of Directors: Robert M. Rubin, Joseph J.
Wisneski and Kathleen P. LeFevre. These nominees are expected to take office ten
(10) days after the date of this Notice, and will comprise a majority of the
Company's Board. Two of the Company's present directors, Jon Colin and Joseph T.
Jacobsen, will continue as directors of the Company.
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The executive officers and directors of the Company as of the date of
this Report are as follows:
<TABLE>
<CAPTION>
Name Age Position with the Company
---- --- -------------------------
<S> <C> <C>
Jon Colin 40 Director, President, Chief
Executive Officer and
Treasurer
Joseph T. Jacobsen 38 Director, Executive Vice President
and Secretary
Kathleen P. LeFevre 41 Director, Chief Financial Officer
Robert M. Rubin 55 Director
Joseph J. Wisneski 42 Director
</TABLE>
All directors hold office until the next annual meeting of
stockholders of the Company and until their successors have been elected and
qualified. No director receives any compensation for his services in such
capacity. Officers serve at the discretion of the Board
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<PAGE>
of Directors. There are no family relationships among the directors and
officers. Mr. Colin and Mr. Jacobsen were elected to their current term as
directors on October 27, 1994.
Mr. Wisneski, Mr. Rubin and Ms. LeFevre were elected by
resolution of the Board of Directors on May 13, 1996 to serve as directors of
the Company and will take office 10 days after filing of this document with the
Securities and Exchange Commission and its transmittal to the stockholders of
record of the Company as of the Record Date. At that time, Mr. Rubin will become
Chairman of the Board of Directors and Chief Executive Officer of the Company,
Mr. Wisneski will become the President, Treasurer and Chief Operating Officer of
the Company, and Mr. Colin will become Executive Vice President. Mr. Jacobsen
will cease being a Vice President of the Company, and will continue as President
of ENSA Environmental, Inc., a wholly-owned subsidiary of the Company.
Jon Colin was named President and Chief Executive Officer of
the Company in June 1990. Mr. Colin joined the Company in September 1987, and
served, prior to June 1990, in various capacities including Executive Vice
President, Secretary, Treasurer and Chief Financial Officer. Mr. Colin has been
a director of the Company since 1988. As indicated above, Mr. Colin will become
Executive Vice President of the Company following Mr. Wisneski's assuming the
title and duties of President and Chief Operating Officer.
Joseph T. Jacobsen became Secretary of the Company in June
1990 and has been Executive Vice President of the Company since November 1989.
Mr. Jacobsen has been a director of the Company since 1988. In August 1994, Mr.
Jacobsen was named President of ENSA Environmental, Inc., a wholly-owned
subsidiary of the Company which owns and operates all consulting assets and
activities of the Company.
Kathleen P. LeFevre has been employed by the Company since
March 1991, and was named Chief Financial Officer of the Company in July 1991.
Prior to her association with the Company she was, from October 1989, Controller
of Scott Environmental Technology, Inc. ("Scott"), Plumsteadville, Pennsylvania,
a position she continued to hold, following the Company's acquisition of Scott,
until July 1991.
Joseph J. Wisneski has been President, Chief Operating
Officer, and a Director of ERD since February 1983, was Vice President of ERD
from November 1992 through January 1993, and was one of ERD's founding
stockholders. From April 1990 to November 1992, Mr. Wisneski served as a senior
manager for Superior Contractors Network, Inc., a private service broker in the
general construction fields. From January 1987 to April 1990, he served as
President of Asbestos Services of America, a private marketing company, and from
July 1986 to January 1987, he served as President of National Asbestos Removal
Corporation, a private asbestos removal company. From 1979 to 1986, Mr. Wisneski
was a Vice President in the lending divisions of a number of commercial banks,
including European American Bank, Chase Manhattan Bank, and National Westminster
Bank. Mr. Wisneski holds a B.B.A. degree from Pace University and an M.B.A.
degree from Fordham University.
Robert M. Rubin has served as the Chairman of the Board and
Chief Executive Officer of ERD since February 1993. Mr. Rubin has served since
May 1991 as the Chairman of the Board and a director of Universal Self Care,
Inc., a public company engaged in the distribution of diabetic health products.
Between October 1990 and January 1, 1994, he served as the Chairman of the Board
and Chief Executive Officer of American United Global, Inc. ("AUG"), a public
company engaged in the manufacture and distribution of sealing devices for
automotive, aerospace and general industrial applications and a distributor of
Case
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<PAGE>
construction equipment. From January 1, 1994 to January 19, 1996, he served as
Chairman of the Board of AUG and its subsidiaries. Mr. Rubin was the founder,
President, Chief Executive Officer, and a director of Superior Care, Inc.
("SCI") from its inception in 1976 until May 1986 and continued as a director of
SCI (now known as Olsten Corporation ("Olsten")) until the latter part of 1987.
Olsten, a New York Stock Exchange listed company, is engaged in providing home
care and institutional staffing services and health care management services.
Mr. Rubin is a former director and Vice-Chairman, and currently a minority
stockholder of American Complex Care, Incorporated ("ACC") (formerly Legend
Foods, Inc.), a public company formerly engaged in the provision of on-site
health care services, including intro-dermal infusion therapies. In April 1995,
ACC's operating subsidiaries made assignments of their assets for the benefit of
creditors without resort to bankruptcy proceedings. Mr. Rubin is also the
Chairman of the Board of Western Power & Equipment Corp. ("Western"), a public
company engaged in the distribution of construction equipment, principally
manufactured by Case Corporation. Mr. Rubin is also a director and minority
stockholder of Response USA, Inc., a public company engaged in the sale and
distribution of personal emergency response systems; Diplomat Corporation, a
public company engaged in the manufacture and distribution of baby products;
Help at Home, Inc., a public company which provides home health care personnel;
Arzan International (1991) Ltd., a publicly held food distribution business; and
Kay Kotts Associates, Inc., a public company engaged in providing tax
preparation and assistance services.
To the Company's knowledge, based solely on review of the
copies of such reports furnished to the Company and written representations that
no other reports were required, during the two fiscal years ended December 31,
1994, all Section 16(a) filing requirements applicable to its officers,
directors and greater-than-ten-percent beneficial owners were complied with.
Certain Relationships and Related Transactions.
(a) Transactions with Management and Others:
In January, 1996, the Company agreed to pay The Argentum Group a
$100,000 investment banking fee for services rendered in connection with the
proposed acquisition of the Company by ERD Waste Corp., contingent upon
completion of that acquisition. Walter H. Barandiaran, who then was a director
of the Company, is a General Partner of The Argentum Group. The Company believes
that the terms of this transaction were as favorable to the Company as would
have been obtained by the Company in arms-length negotiation with non-affiliated
entities.
(b) Certain Business Relationships:
None.
(c) Indebtedness of Management:
None.
vi
<PAGE>
EXECUTIVE COMPENSATION
(a) Summary Compensation Table
The following table sets forth the cash compensation paid to
the Company's chief executive officer and to each other executive officer whose
aggregate remuneration exceeded $100,000 for services rendered to the Company
for the fiscal years ended December 31, 1995, 1994, and 1993:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term Compensation
----------------------
Annual Compensation Awards Payouts
- -----------------------------------------------------------------------------------------------------------------------------------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Other
Name Annual Restricted Securities All Other
and Compen- Stock Underlying LTIP Compen-
Principal sation (1) Award(s) Options/ Payout sation (2)
Position Year Salary($) Bonus($) ($) ($) SARs (#) ($) ($)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Jon Colin 1995 $150,500 -- $ 9,000 -- -- -- $ --
President & Chief 1994 $157,910 -- $ 9,700 -- -- -- $ --
Executive Officer 1993 $139,050 -- $ 9,700 65,000(3) $ 1,746
Joseph T. Jacobsen 1995 $112,310 -- $ 7,600 -- -- -- $ --
Executive Vice 1994 $104,400 -- $ 6,600 -- -- -- $ --
President & 1993 $102,207 -- $ 6,600 -- 50,000(3) -- $ 1,466
Secretary
</TABLE>
(1) Use of or reimbursement for the costs of automobiles.
(2) Employer matching contribution pursuant to the Company's Salary Savings
Plan.
(3) Options granted to Messrs. Colin and Jacobsen in June, 1993 at an exercise
price of $2.00 per share; simultaneously an equal number of options with an
exercise price of $3.25 per share, previously held by Messrs. Colin and Jacobsen
were cancelled.
In addition, in August, 1994, the Company secured whole life
policies for (i) Jon Colin in the amount of $400,000 and (ii) Joseph T. Jacobsen
in the amount of $200,000. Annual premiums for Mr. Colin's policy are $5,483;
annual premiums for Mr. Jacobsen's policy are $2,692. In January 1996, the Board
of Directors agreed that the insurance policies would be assigned to Mr. Colin
and Mr. Jacobsen. In consideration of the assignment, and the agreement of the
Company to pay the premiums on the policies for one year (which amounts to
approximately $10,000), Mr. Colin and Mr. Jacobsen agreed to forego irrevocably
their 1996 salary deferrals.
Following the date of this Notice, Jon Colin, President, Chief
Executive Officer and a director of the Company, will enter into a three year
employment agreement with EAC pursuant to which he will receive an annual salary
of $225,000 as Executive Vice President of the Company. Mr. Colin's present
employment agreement with the Company provides for
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<PAGE>
a current base annual salary of $180,400. Mr. Colin will receive a $400,000
severance payment from the Company in connection with the termination of his
existing employment contract with the Company. Mr. Colin also will receive
incentive stock options to purchase 300,000 shares of ERD common stock at a
price of $8.625 per share, which was the closing price of ERD Common Stock in
The NASDAQ Stock Market on May 3, 1996, which was the last trading day
immediately preceding the closing of ERD's purchase of the Company's Common
Stock in the Tender Offer. Mr. Colin's existing options to purchase 65,000
shares of the Company's Common Stock at a price of $2.00 per share will be
cancelled.
Following the date of this Notice, Joseph T. Jacobsen,
presently the Executive Vice President and a director of the Company, will enter
into a three year Employment Agreement with EAC pursuant to which he will
receive an annual salary of $125,000 as President of ENSA Environmental, Inc.,
the Company's air and consulting group, a position presently held by Mr.
Jacobsen. Mr. Jacobsen's base annual salary pursuant to his present Employment
Agreement with the Company is $109,710. Mr. Jacobsen also will receive incentive
stock options to purchase 50,000 shares of ERD common stock at a price of $8.625
per share. Mr. Jacobsen's existing options to purchase 50,000 shares of the
Company's Common Stock at a price of $2.00 per share will be cancelled.
(b) Options/SAR Grants
There were no options or SAR grants in 1995.
(c) Aggregated Option/SAR Exercises and Fiscal Year-End
Option/SAR Value
During 1995, no executive officer of the Company exercised any
options. The following table indicates the options outstanding and unexercised
as of December 31, 1995:
AGGREGATED OPTIONS/SAR EXERCISES IN 1995 AND
OPTIONS/SAR VALUES AS OF DECEMBER, 1995
<TABLE>
<CAPTION>
(a) (b) (c) (d) (e)
Number of Value of
Unexercised Unexercised
Options/SARs In-the-Money
at FY-End (#) Options/SARs
Shares Acquired Value Exercisable/ at FY-END ($)(1)
Name on Exercise (#) Realized ($) Unexercisable Exercisable/
Unexercisable
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Jon Colin - - - - 65,000 - -
exercisable exercisable
Joseph T. - - - - 50,000 - -
Jacobsen exercisable exercisable
</TABLE>
(1) Based upon market closing price of $1 1/2 per share at December 31, 1995.
viii
<PAGE>
(d) Long-Term Incentive Plan Awards
None.
(e) Defined Benefit or Actual Plan Disclosure
None.
(f) Compensation of Directors
During the fiscal year ended December 31, 1995, no director of
the Company received any compensation for his services in such capacity. Outside
directors are reimbursed for expenses incurred by them in connection with their
activities on behalf of the Company.
(g) Employment Contracts and Termination of Employment and Change-in-Control
Arrangements
Mr. Colin is employed as President and Chief Executive Officer
of the Company under a written employment agreement that has a "rolling" three
year term, i.e. a three year employment term is extended automatically for one
year on each anniversary date of the agreement, subject to termination by Mr.
Colin or the Company. Upon termination of his employment without cause or upon
acquisition of the Company following which Mr. Colin is not the President and
Chief Executive Officer of the Acquiror, Mr. Colin is entitled to severance
compensation from the Company equal to $400,000. Mr. Colin's base salary
(presently $180,400) is subject to annual cost of living adjustments beginning
in 1995. As indicated above, following the date of this Notice, Mr. Colin's
present employment agreement will be terminated, and he will be replaced by Mr.
Rubin as Chief Executive Officer, and by Mr. Wisneski as President of the
Company.
Mr. Jacobsen is employed as Executive Vice President of the
Company and as President and Chief Executive Officer of ENSA Environmental, Inc.
under a written employment contract expiring on December 31, 1996. Mr.
Jacobsen's employment thereunder shall be extended for one additional year if,
no later than ninety days prior to the expiration of the then current term, Mr.
Jacobsen gives the Company written notice of his election to so extend the term,
unless the Company, within 30 days from Mr. Jacobsen's giving of such notice,
notifies Mr. Jacobsen that it elects not to extend such term. Mr. Jacobsen's
base salary (presently $109,710) is subject to annual cost of living adjustments
beginning in 1995. As indicated above, following the date of this Notice, Mr.
Jacobsen's present employment agreement will be terminated.
(h) Compensation Committee Interlocks and Insider Participation
The Company does not have a standing compensation committee.
There were no changes to executive compensation in fiscal year 1995.
(i) Board Compensation Committee Report on Executive Compensation
The Company does not have a standing compensation committee. There were
no changes to executive compensation in fiscal year 1995. Compensation to Mr.
Colin and Mr. Jacobsen in fiscal year 1995 was paid pursuant to existing
employment contracts. No incentive or bonus compensation was paid.
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<PAGE>
(j) Performance Graph
STOCK PERFORMANCE GRAPH
The following chart compares the cumulative total stockholder return on
the Company's Common Stock for the period December 31, 1990 through December 31,
1995 with the cumulative total return on the NASDAQ Index and the cumulative
total return for a peer group (SIC Code 8711 -- Services - Engineering Services,
the primary industry in which the Company is operating) index for the same
period:
[GRAPHIC]
In the printed document there appears a line graph depicting the following:
1991 1992 1993 1994 1995
---- ---- ---- ---- ----
ENSA 100.00 57.14 78.57 42.86 33.93
Peer Group 100.00 82.95 78.69 55.36 69.37
NASDAQ 100.00 100.98 121.13 127.17 164.96
The above chart assumes that $100 was invested on December 31, 1989 in the
Company's Common Stock and in each of the comparison groups, and assumes
reinvestment of dividends.
BY ORDER OF THE BOARD OF DIRECTORS
OF
ENVIRONMENTAL SERVICES OF AMERICA, INC.
