<PAGE>
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
EASTERN ENVIRONMENTAL SERVICES, INC.
________________________________________________________________________________
(Name of Registrant as Specified In Its Charter)
________________________________________________________________________________
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or
14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
________________________________________________________________________________
(2) Aggregate number of securities to which transaction applies:
________________________________________________________________________________
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11
(Set forth the amount on which the filing fee is calculated and state how it was
determined):
________________________________________________________________________________
(4) Proposed maximum aggregate value of transaction:
________________________________________________________________________________
(5) Total fee paid: $125.00
________________________________________________________________________________
[ ] Fee paid previously with preliminary materials.
________________________________________________________________________________
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
________________________________________________________________________________
(2) Form, Schedule or Registration Statement No.:
________________________________________________________________________________
(3) Filing Party:
________________________________________________________________________________
(4) Date Filed:
________________________________________________________________________________
<PAGE>
EASTERN ENVIRONMENTAL SERVICES, INC.
1000 Crawford Place
Mt. Laurel, New Jersey 08054
------------------
Notice of Special Meeting of Shareholders
August 8, 1996
--
------------------
TO THE SHAREHOLDERS:
The Special Meeting of Shareholders of Eastern Environmental Services, Inc.
(the "Company") will be held at _______________________________________________,
on August 8, 1996, at 8:30 a.m. local time, for the following purposes:
--
1. To consider and vote upon a proposal to approve a private placement
(the "Placement") of up to 2,500,000 shares of the Company's Common Stock at the
price of $4.00 per share;
2. To consider and vote upon a proposal to amend the Certificate of
Incorporation of the Company to increase the authorized common stock of the
Company to 50,000,000;
3. To consider and vote upon a proposal to approve the Company's 1996
Stock Option Plan; and
4. To transact such other business as may properly come before the
meeting or any adjournment thereof.
Only holders of record of Common Stock at the close of business on July 11,
--
1996 are entitled to notice of and to vote at the meeting.
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE MEETING. YOU ARE
CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON. WHETHER OR NOT YOU EXPECT TO
ATTEND IN PERSON, YOU ARE URGED TO COMPLETE, SIGN AND RETURN THE ENCLOSED PROXY
CARD IN THE SELF-ADDRESSED ENVELOPE, ENCLOSED FOR YOUR CONVENIENCE, WHICH
REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. IF YOU DECIDE TO ATTEND THE
MEETING AND WISH TO VOTE IN PERSON, YOU MAY REVOKE YOUR PROXY BY WRITTEN NOTICE
AT THAT TIME.
By Order of the Board of Directors
Louis D. Paolino, Jr.
Chairman of the Board
July 22, 1996
--
<PAGE>
EASTERN ENVIRONMENTAL SERVICES, INC.
1000 Crawford Place
Mt. Laurel, New Jersey 08054
------------------
PROXY STATEMENT
for
SPECIAL MEETING OF SHAREHOLDERS
To Be Held August 8, 1996
--
The following information is furnished in connection with the solicitation
of proxies by the Board of Directors of Eastern Environmental Services, Inc., a
Delaware corporation (the "Company"), for the Special Meeting of Shareholders
(the "Meeting") to be held on August 8, 1996, and at any adjournments thereof.
The approximate date on which this Proxy Statement and the accompanying proxy
will be first sent or given to shareholders is July 22, 1996. The principal
executive offices of the Company are located at 1000 Crawford Place, Mt. Laurel,
New Jersey 08054.
The record date for determining shareholders entitled to vote at the
Meeting has been fixed at the close of business on July __, 1996. As of that
date, there were 6,165,225 shares of Common Stock, $.01 par value per share (the
"Common Stock") outstanding. The presence, in person or by proxy, of holders of
shares entitled to cast at least a majority of the votes entitled to be cast by
all outstanding shares of Common Stock will constitute a quorum for purposes of
the Meeting.
An affirmative vote of a majority of the votes entitled to be cast by
shareholders present in person or by proxy at the Meeting is required for
approval of Proposals 1 and 3. An affirmative vote of a majority of all
outstanding shares of Common Stock is required for approval of Proposal 2.
Abstentions, votes withheld and broker non-votes (described below) are counted
in determining whether a quorum is present. Abstentions with respect to any
proposal will have the same effect as votes against the proposal. Broker non-
votes, which occur when a broker or other nominee holding shares for a
beneficial owner does not vote on a proposal because the beneficial owner has
not checked one of the boxes on the proxy card, are not considered to be shares
"entitled to vote" (other than for quorum purposes), and will therefore have no
effect on the outcome of the vote upon Proposals 1 and 3, but will have the same
effect as a negative vote on Proposal 2.
A form of proxy is enclosed for use at the Meeting. Proxies will be voted
in accordance with shareholders' instructions. If no instructions are indicated
on the proxy, all shares represented by valid proxies received pursuant to this
solicitation (and not revoked before they are voted) will be voted (i) to
consider and vote upon a proposal to approve the private placement of 2,500,000
shares of Common Stock of the Company at $4 per share, (ii) to consider and vote
upon a proposal to approve an amendment to the Certificate of Incorporation of
the Company to increase the authorized Common Stock of the Company to
1
<PAGE>
50,000,000, (iii) to consider and vote upon a proposal to approve the Company's
1996 Stock Option Plan, and (iv) to transact such other business as may properly
come before the Meeting or any adjournment thereof. Shareholders whose shares
are held of record by a broker or other nominee are nevertheless encouraged to
fill in the boxes of their choice on the proxy, as brokers and other nominees
may not be permitted to vote shares with respect to certain matters for which
they have not received specific instructions from the beneficial owners of the
shares. Any proxy given may be revoked by the shareholder executing it at any
time before it is voted by a later dated proxy, written revocation sent to the
Secretary of the Company or attendance at the Meeting and voting in person.
Shareholders will not have appraisal rights with respect to any of the
Proposals to be voted upon at the Special Meeting.
The Company has been advised by its directors and officers and certain of
their affiliates that they intend to vote the 2,378,435 outstanding shares of
Common Stock which they hold or with respect to which they currently hold
proxies, representing approximately 39% of the total shares outstanding as of
the record date, in favor of the proposals presented in this Proxy Statement.
See "Beneficial Ownership of Securities."
The cost of solicitation of proxies by the Board of Directors will be borne
by the Company. Proxies may be solicited by mail, personal interview, telephone
or telegraph. Directors, officers and regular employees of the Company may
solicit proxies by such methods without additional remuneration. Banks,
brokerage houses and other institutions, nominees or fiduciaries will be
requested to forward the proxy materials to beneficial owners in order to
solicit authorizations for the execution of proxies. The Company will, upon
request, reimburse such banks, brokerage houses and other institutions, nominees
and fiduciaries for their expenses in forwarding such proxy material to the
beneficial owners of the Company's Common Stock.
BACKGROUND INFORMATION
CONCERNING THE COMPANY AND THE PROPOSALS
Operating History
The Company is a waste services company specializing in the disposal and
transportation of non-hazardous residential, commercial, industrial and special
waste in the eastern United States. The Company was formed as a Delaware
corporation in April 1987 and the address and telephone number of its executive
offices is 1000 Crawford Place, Mount Laurel, New Jersey, 08054, (609) 235-6009.
The Company currently owns and operates three landfills located in West
Virginia, Kentucky and South Carolina and has the right to construct and operate
a municipal solid waste landfill in Illinois under a management agreement. The
Company has recently received its permit to construct the Illinois landfill and
a draft permit to construct an expansion cell at its Kentucky landfill. The
Company's special waste hauling operation serves the eastern United States and
is a source of waste (primarily asbestos) for the
2
<PAGE>
Company's landfills. The Company also provides roll-off container services from
its West Virginia and South Carolina landfills. The Company currently has six
active operating subsidiaries. The Company's Common Stock is currently traded on
the Nasdaq National Market ("Nasdaq") under the symbol "EESI", and the Company
is subject to the informational requirements of Section 13 of the Securities
Exchange Act of 1934 ("Exchange Act"). The Company files reports, proxy
statements and other information with the Securities and Exchange Commission
("SEC").
Change of Control
On June 21, 1996, William C. Skuba, sold an aggregate of 500,000
shares (the "Shares") of the Common Stock of Eastern Environmental Services,
Inc. (the "Company") at a price of $2.00 per share to a group consisting of
George O. Moorehead, Louis D. Paolino, Jr., Environmental Opportunities Fund,
L.P., a Delaware limited partnership (the "Fund"), and Environmental
Opportunities Fund (Cayman), L.P., a Cayman Islands exempted limited partnership
(the "Cayman Fund")(Mr. Moorehead, Mr. Paolino, the Fund and the Cayman Fund
being hereinafter sometimes collectively referred to as the "Purchasers")
pursuant to a Stock Purchase Agreement dated as of May 8, 1996 by and among Mr.
Skuba and the Purchasers (the "Stock Purchase Agreement").
Pursuant to the Stock Purchase Agreement, Mr. Skuba also converted all
of his Class A Common Stock of the Company which carries four votes per share
into Common Stock which carries one vote per share. Mr Skuba also granted to
the Purchasers an irrevocable proxy over his remaining 1,111,101 million shares
of Common Stock for a period to expire on the earlier of June 21, 1997 or the
date upon which Mr. Skuba disposes of such remaining shares.
The consummation of the Stock Purchase Agreement resulted in a
change of control of the Company, with the Purchasers becoming significant
owners of the Company's Common Stock. As required by the Stock Purchase
Agreement, Mr. Skuba resigned as the Company's Chairman and Chief Executive
Officer and, along with all of the other members of the Company's Board of
Directors, resigned from the Board of Directors of the Company. Mr. Paolino,
Mr. Moorehead and Kenneth Chuan-aiLeung (a managing director of the Fund and
the Cayman Fund) were elected as members of the Company's Board of Directors.
Mr. Paolino was appointed as the Company's new Chairman and Chief Executive
Officer.
In connection with the consummation of the transactions contemplated by the
Stock Purchase Agreement, the Company entered into a series of agreements with
Mr. Skuba regarding his relationship with the Company following his resignation
as an officer, director and employee of the Company, which are described below
under the caption "Certain Relationships and Related Transactions."
3
<PAGE>
Recent Acquisitions
The Company, on July 2, 1996, acquired all of the assets of Allied
Environmental Services, Inc. and its affiliated corporations ("Allied") in
exchange for 116,667 shares of the Company's unregistered Common Stock. Allied
was founded in 1991 and is in the business of arranging for the transportation
and disposal of contaminated soils and in lesser amounts asbestos, contaminated
water and special waste products. Allied does not excavate, backfill or perform
other environmental contracting services. Allied provided its services on a
nation wide basis. The assets of Allied were acquired by a newly formed
subsidiary of the Company, Allied Waste Services, Inc. Allied Waste Services,
Inc. will use the assets of Allied to continue the business formerly conducted
by Allied. The two key employees of Allied, Stuart Berry and Alan Hershowitz,
have been hired by the Company to operate Allied Waste Services, Inc. The
Company estimates that the revenues of Allied for its fiscal year ended June 30,
1996 exceeded $12 million.
Expansion Strategy
The Company's current business plan is to expand its waste disposal
capabilities by developing its existing landfills and hauling operations and
acquiring and developing additional landfills, waste hauling operations and
other waste industry businesses. The Company intends to aggressively pursue
acquisitions of landfills and waste hauling operations through cash purchases,
purchases using the Company's common stock and/or mergers using the Company's
Common Stock in exchange for the shares of the corporations to be merged. The
Company is in discussion with two banking institutions which have indicated an
interest in extending the Company an acquisition line of credit, if the
Placement is successful. The two financial institutions the Company has had
discussions with have indicated an interest in providing a line of credit of
approximately $25,000,000. There can be no assurance that the discussions
currently taking place will result in a line of credit or other financing for
the Company.
Potential Acquisitions
Matthew Paolino (the brother of Mr. Paolino, and Donald Moorehead (the
brother of Mr. Moorehead), are the sole shareholders of Eastern Waste of
Philadelphia, Inc. ("Eastern Waste"'), a recently formed Delaware corporation.
Eastern Waste recently acquired all of the assets of Tri-County Disposal &
Recycling, Inc. ("Tri-County") and National EcoSystems, Inc. ("National"). Tri-
County and National conducted municipal solid waste collection businesses in the
Philadelphia, Pennsylvania area which Eastern Waste continues to conduct using
the acquired assets. Eastern Waste and the Company have entered in an agreement
("Eastern of Philadelphia Agreement") under which the Company will purchase the
assets of National for $165,000 (the amount Eastern Waste paid for them) and
manage the business conducted with the Tri-County assets ("Tri-County Business")
for a period of twenty years, with an option to purchase the assets for
$1,000.00. The Eastern of Philadelphia Agreement provides that the Company will
retain all revenue generated by the Tri-County Business and will pay all
expenses of the Tri-County Business.
4
<PAGE>
In exchange for the management rights and option, Company will pay Eastern
Waste a on-time payment of $1,500,000. Eastern Waste purchased the Tri-County
assets for $1,200,000 plus contingent payments of $800,000, of which $200,000
have been earned to date. Eastern Waste will be solely obligated to pay the
contingent payments. Under the Eastern of Philadelphia Agreement, the Company
has the right to cancel the management agreement and receive back the $1,500,000
consideration paid if the 1995 revenues of the Tri-County Business causes the
management agreement to be judged as by the Company's accountants requiring the
Company to file historical and pro forma financial statement for the period
ended June 30, 1995 showing the results of the Company and Tri-County.
The Company has recently executed an Agreement of Sale with Kay Hydraulics,
Inc. ("Kay") for the purchase of all the assets of Kay. Kay conducts a municipal
solid waste collection business in Philadelphia, Pennsylvania. The purchase
price for the assets of Kay will be unregistered common stock of the Company
equaling $200,000 in fair market value, based on the average closing price of
the Company's Common Stock for the five trading days which commence five
business days prior to the date of closing of the Kay acquisition. As part of
the acquisition price, the Company will assume approximately $800,000 in Kay's
outstanding debt. The debt assumed is secured by the assets being acquired by
the Company. The Kay Agreement of Sale is contingent and may be canceled by the
Company, if the Company is not satisfied with its due diligence with respect to
Kay. Closing under the Kay Agreement of Sale may take place prior to the
completion of the Placement.
The Company has executed a Letter of Intent dated June 24, 1996 regarding
the acquisition of all the outstanding stock of two New Jersey waste collection
companies (the "collection companies")The acquisition is to be structured as a
pooling of interest merger. Based on the historical financial, information given
to the Company by the collection companies for the their fiscal year ended
December 31, 1995 the collection companies had combined gross revenues of
approximately $20,400,000 and after tax net revenues of approximately $630,000.
The Letter of Intent provides that the Company would merge the collection
companies into a wholly owned subsidiary of the Company in exchange for
2,307,692 shares of the Company's Common Stock. The Letter of Intent further
provides that the subsidiary of the Company which will survive the merger would
assume the debt of the collection companies in the approximate amount of
$5,000,000. To date, no formal merger agreement has been executed. No assurance
can be given that the Letter of Intent will result in a consummated transaction
or that the terms of the Letter of Intent will not be modified.
5
<PAGE>
The Placement
The Company intends to raise additional capital through the offering for
sale of 2,500,000 shares of its Common Stock directly and through Sanders Morris
Mundy (the "Placement Agent") at a price of $4.00 per share to qualified
subscribers. The shares subject to the Placement have not been registered under
the Securities Act or the laws of any state and will be offered and sold in
reliance on excemptions from registration. For a detailed description of the
Placement, see Proposal 1- "Private Placement of Common Stock."
The funds raised in the Placement are intended to be used primarily for
the closure and post closure requirements of existing landfills, the
construction of a landfill expansion cell in Kentucky, the construction of a
landfill in Illinois and the remainder for working capital.
MANAGEMENT
Directors and Executive Officers
The current directors and executive officers of the Company are as follows:
<TABLE>
<CAPTION>
Name Age Position
- ----------------------- --- ------------------------------------------------
<S> <C> <C>
Louis D. Paolino, Jr. 40 President, Chief Executive Officer, Director
Terry W. Patrick 49 Executive Vice President/Chief Operating Officer
Gregory Krzemien 36 Chief Financial Officer and Treasurer
Robert M. Kramer 43 General Counsel, Vice President and Secretary
George O. Moorehead 43 Director
Kenneth C. Leung 51 Director
</TABLE>
Louis D. Paolino, Jr., 40, has 14 years of experience in the solid waste
industry. From 1991 to June 1, 1996, Mr. Paolino has been president of Soil
Remediation of Philadelphia, Inc. and sold Soil Remediation of Philadelphia,
Inc. to U.S.A. Waste Services, Inc. where he also served as vice president from
1993 to 1996. Soil Remediation of Philadelphia is in the business of treating
contaminated soil.
Terry W. Patrick, 49, has over 25 years of management experience in the
waste industry, including ownership of waste collection and landfill companies;
eleven combined years experience with Waste Management and Browning Ferris
Industries, Inc. in district and regional management; Vice President of
Operations for Mid-American Waste Systems, Inc.; past president and chief
operating officer of USA Waste Services, Inc. For the past two
6
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years, Mr. Patrick has been involved with personal investments and ownership of
a chemical manufacturing and distributing company.
Gregory M. Krzemien, 36, joined the Company as chief financial officer and
treasurer in August 1992. Prior to joining the Company, Mr. Krzemien was audit
senior manager with Ernst & Young, an independent accounting firm, since October
1988. Mr. Krzemien worked for Ernst & Young for 11 years prior to joining the
Company.
Robert M. Kramer, 43, joined the Company as its general counsel and Vice
President on June 21, 1996. Prior to joining the Company, Mr. Kramer was
engaged in the private practice of law, with various firms since 1979. Since
1989, Mr. Kramer has practiced law through Robert M. Kramer & Associates P.C. a
boutique law firm specializing in commercial transactions and securities law.
In addition to his duties with the Company, Mr. Kramer will still be engaged in
the private practice of law through Robert M. Kramer & Associates, P.C.
George M. Moorehead, 43, has 30 years experience in the solid waste
industry. Since February 1995, Mr. Moorehead has served as the president,
director and chief executive officer of EMCO Recycling Corp., a company engaged
in the business of metal recycling in Arizona. Since 1993, Mr. Moorehead has
been a principal shareholder and director of EMCO Recycling Corp. From 1990 to
1993, Mr. Moorehead was the president, director and chief executive officer of
Custom Disposal, a Phoenix area solid waste disposal company.
Kenneth Chuan-Kai-Leung, 51, has been a managing director of investment
banking at Sanders, Morris, Mundy, Inc. and chief investment office of the
Environmental Opportunities Fund, L.P. and The Environmental Opportunities Fund
(Cayman), L.P. since 1994. From 1987 to 1994, Mr. Leung was a managing director
of Smith Barney, Inc. Mr. Leung has 23 years of experience in the environmental
services industry as a securities analyst and investment banker.
Director Compensation
Non-employee directors of the Company receive a fee of $1,000 per meeting
for attendance in person at each Board meeting and $250 for attendance by
telephone. In addition, each non-employee director receives warrants to purchase
shares of the Company's Common Stock. In July 1995, warrants to purchase 12,000
shares of Common Stock were granted to Timothy Sweeney and warrants to purchase
6,000 shares of Common Stock were granted to Steven Stamos and Robert Powell, in
each case at an exercise price of $1.50 per share. Messrs. Sweeney, Stamos and
Powell were directors of the Copmany until the change of control described under
the caption "Background Information Concerning the Company and the Proposals --
Change of Control." In February 1996, warrants to purchase 10,000 shares of
Common Stock were granted to Mr. Sweeney and warrants to purchase 5,000 shares
of Common Stock were granted to Messrs. Stamos and Powell, in each case at an
exercise price of $1.25 per share. In May 1996, warrants to purchase 1,800
shares of Common Stock were granted to Mr. Sweeney and warrants to purchase
1,600 shares of Common Stock were granted to Messrs. Stamos and Powell, in each
case at an exercise price of $2.00 per share.
7
<PAGE>
All expenses incurred by all directors for attendance at Board meetings are
reimbursed by the Company.
The following table sets forth information with respect to compensation
paid by the Company during its last three completed fiscal years to Mr. Skuba,
the Company's former Chief Executive Officer and Mr. Paolino, the Company's
current Chief Executive Officer. Other than Mr. Skuba, no other executive
officer of the Company had total annual salary and bonus exceeding $100,000
during the Company's fiscal year ended June 30, 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Compensation Awards
----------------------
Name & Annual Compensation
Principal --------------------- Securities Underlying All Other
Position Year Salary ($) Bonus ($) Options (#) Compensation ($)
- ------------------- ---- ---------- --------- ---------------------- ------------------
<S> <C> <C> <C> <C> <C>
William C. FY96 129,312 None None 259,584(1)
Skuba, CEO
- --------------------------------------------------------------------------------------------
FY95 124,800 None None 2,500(2)
- --------------------------------------------------------------------------------------------
FY94 127,390 None None 2,500(2)
- --------------------------------------------------------------------------------------------
Louis D. Paolino, FY96 8,192 None 250,000 None
Jr., CEO
============================================================================================
</TABLE>
(1) Consists of non-cash compensation paid to Mr. Skuba under the 1996
Severance Agreement. See "Certain Relationships and Related Transactions."
(2) Consists solely of moving expenses.
The following table sets forth information concerning individual grants of stock
options and stock appreciation rights made during fiscal year 1996 to the
Company's Chief Executive Officer.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Percent of Total
Number of Securities Options Granted to
Underlying Options Employees in Exercise or Base Expiration
Name Granted (#) Fiscal Year Price ($/sh) Date
- --------------------------- --------------------- ------------------ ----------------- -----------
<S> <C> <C> <C> <C>
Louis D. Paolino, Jr. 250,000 31.1% $5.75 June 21, 2006
- ---------------------------------------------------------------------------------------------------------------------------
William C. Skuba 0 0 0 0
===========================================================================================================================
</TABLE>
8
<PAGE>
The following table sets forth information concerning each exercise of
stock options during the Company's fiscal year 1996 by the Company's Executive
Officer.
AGGREGATED OPTION EXERCISES AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
Value of
Unexercised In-
the-Money
Number of Securities Options/ SARs
Underlying Unexercised at FY-End
Shares Acquired Value Options/SARs at FY-End ($Exercisable/
Name on Exercise (#) Realized ($) (#Exercisable/Unexercisable) Unexercisable)
- ----------------------- ---------------- ------------ ---------------------------- ---------------
<S> <C> <C> <C> <C>
William C. Skuba None None None None
- --------------------------------------------------------------------------------------------------------
Louis D. Paolino, Jr. None None None None
========================================================================================================
</TABLE>
Employment Contracts, Termination of Employment and Change of Control
Arrangements
The Company is a party to a severance agreement with Gregory Krzemien,
the Company's Chief Financial Officer and Treasurer. Under the agreement, if
Mr. Krzemien's employment is terminated involuntarily for any reason other than
cause, the Company will pay him (or his estate) a lump sum severance benefit in
cash in the amount of his then current annual salary multiplied by 1.5 or such
larger amount as the Board may deem appropriate. In addition, if there is an
actual change in control of 20% or more in Company's voting power, a sale of
substantially all of the assets of the Company or any similar transaction,
including a change in the majority of the members of the Board the acquisition
by any person or group acting in concert of at least 30% of the voting power of
the Company, and if the executive employment is terminated voluntarily or
involuntarily within one year after such control change, the Company is
obligated to pay Mr. Krzemien a lump sum severance benefit in cash equal to his
then current annual salary multiplied by two or such larger amount as the Board
deems appropriate. The change of control of the Company described under the
caption "Background Information Concerning the Company and the Proposals --
Change of Control" constituted a control change for purposes of Mr. Krzemien
severance agreement.
Certain Relationships and Related Transactions
The Company leases from a corporation controlled by Mr. Paolino, the
Company's President and Chief Executive Officer. The Lease which was recently
entered into is for a term of five years, covers 5,000 square feet and is for a
monthly rental of $6,250, plus increases in the Consumer Price Index. The lease
is terminable at any time within the five-year term at the option of Company by
payment of a termination fee equal to one year's rent.
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<PAGE>
The lessor provided $20,000 of leasehold improvements for the premises at the
lessor's expense. The Company believes that the rental it pays is the fair
market value of the premises.
The Company has recently acquired a six month option to acquire all of
the stock of Eastern Waste, a company wholly owned by Matthew Paolino and Donald
Moorehead. See, "Background Information Concerning the Company and the
Proposals-Potential Acquisitions."
Kenneth C. Leung, a director of the Company, is one of the two
managing directors of the Fund and the Cayman Fund. The Fund and the Cayman
Fund combined are substantial owners of the Company's common stock.
Robert M. Kramer, the Company's General Counsel, Vice President and
Secretary is engaged in the private practice of law through Robert M. Kramer &
Associates, P.C., a professional corporation owned by Mr. Kramer.
The Company entered into a series of agreements with Mr. Skuba
regarding his relationship with the Company following his resignation as an
officer, director and employee of the Company. Among such agreements, the
Company and Mr. Skuba entered into a severance agreement ("1996 Severance
Agreement") which provides for Mr. Skuba to receive certain health insurance
benefits from the Company (at its cost for one year and at Mr. Skuba's cost
thereafter). Additionally, the Company sold to a company controlled by Mr.
Skuba: (i) the outstanding stock of a corporation which owns certain real
property located in Drums, Pennsylvania, which currently serves as the Company's
corporate headquarters ("Drums Real Property"), (ii) certain real and personal
property located in Jasper County, South Carolina, and (iii) certain vehicles
owned by the Company. The Company also sold to Mr. Skuba certain potential
business opportunities which the Company has decided that it has no interest in
pursuing. The Company entered into two leases with a company controlled by Mr.
Skuba under which the Company agreed to lease back a portion of the Drums Real
Property currently used in its operations.
The 1996 Severance Agreement further provides that until the earlier
of one year from the Closing Date or a change of control of the Company, Mr.
Skuba will not compete with the Company or its subsidiaries (i) in the business
of landfill operation or municipal solid waste collection within a 50-mile
radius of the Company's landfills operated in West Virginia, South Carolina,
Kentucky and Illinois, or (ii) in the business of asbestos hauling within a 90-
mile radius of the Drums Real Property. Finally, the 1996 Severance Agreement
included a mutual release of all claims each of the Company and Mr. Skuba may
have against the other and, for a six-year period, the Company's agreement to
indemnify Mr. Skuba and maintain director and officer liability insurance
coverage for Mr. Skuba.
The Company also retained Mr. Skuba as a consultant for a period of
six months with the Company having an option to retain Mr. Skuba for an
additional six months pursuant to a consulting agreement (the "Consulting
Agreement"). Under the Consulting Agreement, Mr. Skuba will serve as a general
advisor and consultant to the Company to assist the Company
10
<PAGE>
on such matters related to the transition of control of the Company and
negotiating acquisitions for the Company as the Company and Mr. Skuba may
mutually agree. In consideration for performing such services during the first
six months, the Company will provide no compensation to Mr. Skuba other than the
reimbursement of his reasonable expenses and secretarial support.
Additionally, the Company entered into a registration rights agreement
with Mr. Skuba ("Registration Rights Agreement") providing for the registration
of the remainder of Mr. Skuba's shares of Common Stock which are not being sold
pursuant to the Stock Purchase Agreement and which are not yet registered under
the Securities Act of 1933 (the "Securities Act"). Pursuant to the Registration
Rights Agreement, the Company also agreed to register Mr. Skuba's unregistered
Common Stock under the Securities Act in the event that the Company proposes to
register any of its Common Stock under the Securities Act.
The Company paid approximately $13,000 and $15,900 to Mr. Sweeney and
Mr. Stamos, respectively, for consulting services and expenses in fiscal 1995.
VOTING SECURITIES
Description of Capital Stock
The Company's authorized capital stock consists of 20,000,000 shares
of Common Stock, par value $.01 per share, and 20,000,000 shares of Class A
Common Stock, par value $1.00 per share. As of July 12, 1996, there were
6,038,558 shares of Common Stock outstanding and Company currently has no
intention of issuing any Class A Common Stocks no shares of Class A Common Stock
outstanding. Each share of Common Stock entitles the holder to one vote, and
each share of Class A Common Stock entitles the holder to four votes, on each
matter submitted to a vote of the shareholders of the Company.
11
<PAGE>
Security Ownership of Certain Beneficial Owners
The following table sets forth certain information regarding
beneficial ownership of the Company's capital stock by each of the Company's
directors, by each of the Named Executive Officers and by all persons known to
the Company to be the beneficial owner of more than five percent of the
Company's outstanding Common Stock as of July __, 1996. Unless otherwise
indicated, the shareholders listed possess sole voting power and investment
power with respect to the shares listed.
<TABLE>
<CAPTION>
Common Stock
Amount and Nature
of Beneficial Percent of
Name of Beneficial Owner(1) Ownership Class Outstanding
- ----------------------------- ----------------- -----------------
<S> <C> <C>
Louis D. Paolino(2).......... 2,318,435 38.4%
Terry Patrick................ 130,000 *
George Moorehead(3).......... 2,268,438 37.6%
5100 Buckeye
Phoenix, AZ 85009
Kenneth Chuan-Kai-Leung...... -- *
126 East 56th Street
24th Floor
New York, NY 10022
Environmental 2,258,435 37.4%
Opportunities Fund, L.P.(4)..
126 East 56th Street
24th Floor
New York, NY 10022
Environmental
Opportunities
Fund (Cayman), L.P.(5)....... 1,417,334 19%
126 East 56th Street
24th Floor
New York, NY 10022
William Skuba(6)............. 1,111,101 18.4%
RR #4, Box 4452
Drums, PA
All officers and directors 4,828,123 79.9%
as a group (6 persons)
</TABLE>
- ----------------------------
* Less than one percent.
(1) Unless otherwise noted, the business address of the person and entity is
1000 Crawford Place, Mt. Laurel, NJ 08054.
(2) Mr. Paolino is the holder of record of 627,334 shares and may be deemed to
beneficially own (i) 10,000 shares to be held of recorded by Wenonah
Holdings, Inc., (ii) 510,000 shares to be held of record by Mr. Moorehead,
the Fund and the Cayman Fund, and (iii) 1,111,101 shares to be held of
record by Mr. Skuba with respect to which Mr. Paolino, Mr. Moorehead, and
the Fund hold a proxy.
12
<PAGE>
(3) Mr. Moorehead is the holder of record of 260,000 shares and may be deemed
to beneficially own (i) 887,334 shares held of record by Mr. Paolino, the
Fund and the Cayman Fund, (ii) 1,111,101 owned of record by Mr. Skuba over
which shares Mr. Moorehead holds a joint proxy with Louis D. Paolino, Jr.
and the Fund and (iii) 10,000 shares over which Mr. Moorehead has received
vested option to purchase from the Company.
(4) The Environmental Opportunities Fund, L.P. is the holder of record of
222,422 shares and may be deemed to beneficially own (i) 924,912 shares
held of record by Mr. Paolino, Mr. Moorehead and The Environmental
Opportunities Fund, L.P., (ii) 1,111,101 shares held of record by Mr. Skuba
with respect to which Louis Paolino, Jr., George Moorehead and the
Environmental Opportunities Fund, L.P. holds a joint proxy.
(5) The Environmental Opportunities (Cayman) L.P. is the holder of record of
27,578 shares and may be deemed to beneficially own 1,119,756 shares to be
held of record by Mr. Paolino, Mr. Moorehead and the Environmental
Opportunities Fund, L.P.
(6) Mr. Skuba holds of record 1,111,101 shares over which Mr. Skuba has granted
a proxy to Mr. Paolino, Mr. Moorehead and The Environmental Opportunities
Fund L.P.
13
<PAGE>
Market Prices and Dividend Policy
The Company's Common Stock is traded in the over-the-counter market and
quoted on the Nasdaq National Market under the trading symbol "EESI".
The following table sets forth, for the fiscal quarters indicated, the high
and low sale prices per share for the Company's Common Stock, as reported on the
Nasdaq National Market. The bid prices reflect inter-dealer quotations, do not
necessarily represent actual transactions.
<TABLE>
<CAPTION>
HIGH LOW
------ -----
<S> <C> <C>
Fiscal year Ended June 30, 1995
First Quarter............... 1 7/16 1
Second Quarter.............. 1 5/16 3/4
Third Quarter............... 1 1/2 7/8
Fourth Quarter.............. 1 3/4 7/8
Fiscal Year Ended June 30, 1996
First Quarter............... 2 1/4 1 1/4
Second Quarter.............. 2 1/4 1 1/2
Third Quarter............... 1 3/4 1
Fourth Quarter.............. 7 1/8 1 1/4
</TABLE>
These prices do not reflect commission. As of July 11, 1996, the Company
had 250 holders of record of its Common Stock.
The Company has never paid dividends to its stockholders. The Company
intends to continue to follow a policy of retaining earnings to finance future
growth and does not anticipate the payment of any dividends in the foreseeable
future. Payment of dividends is also restricted by the Company's loan
agreements with its primary lender.
PRIVATE PLACEMENT OF COMMON STOCK
(Proposal 1)
General
The Board of Directors of the Company has approved subject to the approval
of the shareholders the offering for sale of 2,500,000 shares of its Common
Stock at a price of $4.00 a share (the "Shares"). The Board has also approved
the payment of a fee to the Placement Agent which includes an amount equal to
6.5% of the offering price of the Shares sold ($650,000) and all costs and
expenses incurred in connection with the Placement as well as a warrant
convertible into a number of shares of Common Stock equal to 6.25% of the shares
offered in the Placement (156,250) at a price per share of $5.00.
The Shares will not be registered under the Securities Act or under the
securities laws of any state or foreign country. The Shares will be offered and
sold in reliance on Sections 3(b), 4(2) and 4(6) of the Securities Act,
including reliance on Rules 505 and 506 of Regulation D promulgated by the SEC
and exemptions from registration under applicable state securities laws.
Investors will be required to (a) represent and warrant that they are
accredited investors as defined by Rule 501(a) of Regulation D and (b) upon the
Company's request, provide additional evidence satisfactory to the Company to
verify that they are accredited investors.
Commencing two years after the Placement closes and expiring one year
thereafter, if the Company proposes to register any of its securities under the
Securities Act, other than securities issuable in acquisitions or under employee
stock option plans, either for its own account or for the account of other
shareholders, the holders of the Shares are entitled to notice of such
registration and are further entitled, subject to certain restrictions and
14
<PAGE>
limitations, including a "stand-back" provision, to include the Shares. The
holders of Shares also have the right to require the Company to register the
Shares commencing two years from the date the Placement closes. The Company will
bear all registration expenses (except underwriting discounts or commissions)
related to the registration of the Shares, unless otherwise prohibited.
The Shares are offered for sale by the Placement Agent which as agreed with
the Company to use its best efforts to sell the Shares. There is, however, no
firm commitment on the part of the Placement Agent to purchase any of the
Shares.
The per share offering price was negotiated by and between the Company and
the Placement Agent based on a discount to the market price of the Company's
shares as traded on Nasdaq. The discount was agreed to by the Company due to the
fact that the Shares have not been registered under the Securities Act and the
holders' registration rights do not commence, until two years from the date the
Placement is completed.
The Company's Common Stock is traded on the Nasdaq. Pursuant to the rules
of Nasdaq, shareholder approval is required for the Company's Common Stock to
remain traded on Nasdaq, as more than 20% of the outstanding Common Stock is
being offered in the Placement at a discount the greater of the book value or
market value. If the shareholders do not approve the issuance of the Shares
pursuant to the Placement by a majority vote of shareholders attending the
Special Meeting by proxy or in person, the Shares will not be issued and the
Placement will be canceled.
As a result of the Placement, described below, up to 2,500,000 shares of
Common Stock will be issuable. This potential increase is greater than 20% of
presently outstanding stock. The tangible book value of the Company's Common
Stock at March 31, 1996 was $1.48 per share. On July 11, 1996, the closing
sales price of the Company's Common Stock as reported by Nasdaq was $6.125.
15
<PAGE>
The Placement will continue until 30 days from the date of its
commencement, unless extended by the Company and the Placement Agent for an
additional 30 days. If the shareholders do not approve the Placement, the
Placement will be terminated and all funds subscribers tendered will be
returned.
The Company has been advised by certain of its officers and directors as
well as certain affilitates and other holders of more than 5% of the outstanding
Common Stock that they intend to purchase Shares in the Placement. The Company
expects such purchases will not be less than 1,400,000 Shares. Shares purchases
by such persons will be on terms and conditions identical to those made
available to other purchasers of Shares.
Use of Proceeds
The net proceeds from the sale of 2,500,000 Shares being offered, after
deducting selling commissions to the Placement Agent and offering expenses,
estimated to be $700,000 will be approximately $9,300,000. The Company intends
to apply the net proceeds of the Placement as follows:
<TABLE>
<S> <C>
Closure and Post Closure Requirements
of Existing Landfills(1)........... $1,575,000
Construction of Kentucky Landfill
Expansion Cell(2).................. $2,650,000
Construction of Illinois Landfill.. $2,390,000
Working Capital ................... $2,685,000
Total.............................. $9,300,000
</TABLE>
(1) Represents the total anticipated expenses for the closure of the filled
portion of the Company's Kentucky landfill in the amount of $855,000
and the closed
16
<PAGE>
disposal area at the Company's West Virginia landfill in the amount of
$720,000.
(2) If the Company receives the final permit for the construction of the
expansion cell at its Kentucky landfill.
Reasons for the Placement; Recommendations
Management believes that the completion of the Placement is necessary in
order to allow the Company to proceed with its plans for further expansion. See
"Background Information Concerning the Company and the Proposals-" For these
reasons, the Board of Directors of the Company believes that the issuance of
additional shares of Common Stock in the Placement is in the best interests of
the present shareholders and should be approved.
Effect of the Placement upon the Existing Shareholders
As of March 31, 1996, the net tangible book value (total tangible assets
minus total liabilities) of the Company was $8,420,186 or $1.48 per share of
outstanding Common Stock on such date. Net tangible book value per share
represents the Company's tangible assets less liabilities, divided by the number
of shares of Common stock outstanding. The pro forma net tangible book value per
share gives effect to the net tangible book value per share for the Allied
business acquired on July 2, 1996. After giving effect to the Placement (at an
assumed offering price of $4.00 per share) and the application of the net
proceeds therefrom (after payment of expenses and the underwriting discounts
and commissions), the as adjusted net tangible book value of the Company as of
March 3, 1996 would have been $17,975,186, or $2.17 per share, representing an
immediate increase in net tangible book value of $0.69 per share to existing
shareholders and an immediate dilution of $1.83 per
17
<PAGE>
share to persons purchasing shares at the assumed offering price. The following
table illustrates this per share dilution:
<TABLE>
<S> <C>
Placement price per share.................... $4.00
Net tangible book value
at March 31, 1996...................... 1.48
Increase attributable to placement
investors.............................. .69
Net tangible book value per share after the
offering................................ 2.17
Dilution to placement investors.............. $1.83
</TABLE>
Rights of Dissenting Shareholders
Neither the Certificate of Incorporation or Bylaws of the Company nor the
laws of the State of Delaware require that appraisal rights be available to
dissenting shareholders under this Proposal 1.
Required Vote
In order to comply with the applicable rules of Nasdaq, the affirmative
vote of the holders of a majority of shares present in person or represented by
proxy at the Special Meeting is required to approve the Placement, provided that
a quorum is present at the Special Meeting.
The Board Of Directors Recommends A Vote "FOR"
Proposal 1
18
<PAGE>
AMENDMENT TO ARTICLES OF INCORPORATION
TO INCREASE AUTHORIZED COMMON STOCK
(Proposal 2)
General
The Company's Board has approved and subject to the approval of
shareholders, unanimously adopted a resolution amending the Company's
Certificate of Incorporation to increase the number of shares of authorized
Common Stock, $.01 par value per share, from 20,000,000 shares to 50,000,000
shares (the "Increased Authorization").
The purpose of the Increased Authorization is to assure that a sufficient
number of authorized shares of Common Stock would be available for issuance in
possible future financing transactions, asset purchases, stock dividends or
splits, issuances under the Company's other stock option plan and for other
general corporate purposes. The Increase Authorization is not required in order
to carry out the Placement or the 1996 Stock Option Plan.
Purposes and Effects of the Increased Authorization
The authorized capital stock of the Company presently consists of
20,000,000 shares of Common Stock, par value $.01 per share, and 10,000,000
shares of Class A Common Stock, par value $.01 per share. As of the Record Date,
there were respectively 6,038,558 and no shares of Common Stock and Common Stock
issued and outstanding.
This amend the Certificate of Incorporation is approved by the
shareholders, the number of the Company's authorized shares of Common Stock
would be increased to 50,000,000 from 20,000,000. Additional authorized shares
of Common Stock would be identical in all respects to presently authorized and
issued shares of Common Stock. No holders of shares of the Company's Common
Stock are entitled to any preemptive rights.
The Board deems it in the best interests of the Company to have a
sufficient number of shares of Common Stock authorized and available for
19
<PAGE>
future financing and acquisition transactions, raising capital, declaring stock
dividends, establishing additional stock option or stock purchase plans,
providing for settlement of litigation, and for other corporate purposes. In the
recent past, the sale of shares of Common Stock (or issuance of shares of Common
Stock in lieu of cash payment) has been of vital importance as a source of
capital to the Company. The availability of shares resulting from the Increased
Authorization will give the Company greater flexibility in meeting future
business opportunities.
The Company does not have any specific plan, understanding or agreement for
the issuance or sale of any of the shares of Common Stock to be authorized by
this resolution. However, if this proposal is approved by the shareholders, the
additional shares of authorized Common Stock would be available for issuance
from time to time by action of the Board, and for such consideration as the
Board may determine, without further authorization by shareholders. To the
extent required by Delaware law, shareholder approval will be solicited in the
event shares of Common Stock are to be issued in any merger or other fundamental
transaction which requires shareholder approval.
Anti-Takeover Effects
Although it is not intended to be an anti-takeover measure, the additional
shares of Common Stock could be used to dilute the stock ownership of persons
seeking to obtain control of the Company, and, together with the authorized but
unissued Class A Common Stock, may provide the Company with additional means of
discouraging any such attempt. Shares of Common Stock could be sold in a
private placement to one or more persons or organizations sympathetic to
management and opposed to any takeover bid, or under other circumstances that
could make more difficult, and thereby discourage, attempts to gain control of
the Company.
The amendment to the Certificate of Incorporation, if approved by the
shareholders, will become effective upon the filing of a certificate of
amendment with the Department of State of the State of Delaware, which is
expected to be accomplished within three business days after the Meeting. The
affirmative vote of a majority of the votes cast at the Meeting is required to
approve the amendment to the Company's Certificate of Incorporation to increase
the number of shares of authorized Common Stock. If such approval
20
<PAGE>
is not received, the amendment to the Certificate of Incorporation will not
become effective.
Required Vote
In accordance with the DGCL, the vote required to approve the amendment to the
Certificate of Incorporation to effect the Increased Authorization is the
affirmative vote of the holders of a majority of all outstanding shares of
Common Stock.
The Board of Directors Recommends A Vote "FOR"
Proposal 2
1996 STOCK OPTION PLAN
(Proposal 3)
General
The Board has adopted the 1996 Stock Option and Stock Option Plan (the
"Plan"), subject to shareholder approval. The purpose of the Plan is to assist
the Company in attracting and retaining personnel and to provide additional
incentive to such personnel to increase their stock ownership in the
Corporation. If this Proposal No. 3 is approved, the stock subject to the stock
options under the Plan shall be shares of Common Stock, which shares may be, in
whole or in part, either authorized but unissued shares or issued shares held in
the treasury. The aggregate number of shares that may be issued upon the
exercise of stock options granted under the Plan shall not exceed 2,500,000
shares of Common Stock, which limitation shall be subject to adjusted under the
Plan. The Plan will not be implemented if this Proposal No. 3 is not approved
by the shareholders.
21
<PAGE>
Provisions of Plan
The Plan provides for the grant of incentive stock options (collectively,
"ISOs") (as such term is defined in the Internal Revenue Code of 1986, as
amended (the "Code")) and non-qualified stock options (which are options that do
not qualify as Incentive Stock Options) (collectively, "Discretionary Options")
to regularly compensated employees of the Company and its subsidiaries and
consultants ("Employees") selected by the Board of Directors. The Board of
Directors who in turn may delegate such authority to the Committee appointed by
the Board of Directors ("Committee") in its discretion. The PLan will expire ten
years from the date of approval by the stockholders.
The Committee will determine the price of Options provided that with
respect to an ISO the price may not be less than (i) 100% of the fair market
value of the shares of Common Stock (as determined under of the Plan) on the
date of the granting of the ISO, or, (ii) in the case of an individual who owns
more than 10% of the total combined voting power of all classes of stock of the
Company or subsidiary corporation (a "10% stockholder"), than 110% of such fair
market value.
No ISO is exercisable either in whole or in part prior to 12 months from
the date it is granted, after the expiration of ten 10 years from the date it is
granted. In the case the granting of an ISO to a 10% stockholder, after the
expiration of 5 years from the date it is granted. Not less than 100 shares may
be exercised at any one time unless the number exercised is the total number at
the time exercisable under the ISO. Within the limits described above, the
Committee may impose additional requirements on the exercise of options,
including, but without limitation, the number of shares covered by the options
that become eligible to be exercised in any year and the expiration date of the
option. Subject to the provisions of the Plan and any of the terms and
conditions the Committee deems appropriate, the Committee in its discretion also
may accelerate the time at which an options may be exercised if, under
previously established exercise terms, such options was not immediately
exercisable in full.
An optionee may hold and exercise more than one option, but only on the
terms and subject to certain restrictions. The aggregate fair market value
22
<PAGE>
(determined as of the time an option is granted) of the Common Stock with
respect to which options are exercisable for the first time by any employee in
any calendar year under the Plan and under all other incentive stock option
plans of the Company and any parent and subsidiary corporations of the Company
(as those terms are defined in the Code) shall not exceed $100,000.
Under the Plan, Options are exercisable prior to their expiration until
three (3) months after the termination of employment to the extent his right to
exercise such Option had accrued at the date of such termination and had not
previously been exercised; and such three-month limit increased to one year for
any optionee who ceases to be employed by the Company or a subsidiary because he
is disabled (within the meaning of the Code) or who dies during the three-month
period.
No Option shall be transferable by the optionee otherwise than by will or
the laws of descent and distribution. During the lifetime of the optionee, an
Option is exercisable only by him and shall not be assignable or transferable
and no other person shall acquire any rights therein, except pursuant to a
domestic relationship order as defined by the Code.
The Board of Directors of the Corporation may, insofar as permitted by law,
from time to time, with respect to any shares at the time not subject to stock
options, suspend, discontinue or terminate the Plan or revise or amend it in any
respect whatsoever. However, the Plan may not, without the approval of the
shareholders, be amended in any manner that will cause incentive stock options
issued under it to fail to meet the requirements of incentive stock options as
defined in the Code. Subject to the terms and conditions and within the
limitations of the Plan, the Committee may modify, extend or renew outstanding
Options granted under the Plan, or accept the surrender of outstanding Options
(to the extent not theretofore exercised) and authorize the granting of new
options in substitution therefor (to the extent not theretofore exercised).
Notwithstanding the foregoing, however, no modification of any Option shall,
without consent of the optionee, alter or impair any of the rights or
obligations under any Option theretofore granted under the Plan.
The proceeds received by the Company from the sale of Common Stock pursuant
to Options will be used for general corporate purposes.
23
<PAGE>
A recipient of an ISO will not recognize taxable income upon the grant or
exercise thereof, however, the amount by which the fair market value of the
underlying Common Stock exceeds the exercise price on the date of exercise will
be treated as an item of tax preference and included in the computation of the
optionee's alternative minimum taxable income in the year of exercise. An
optionee will recognize long term capital gain or loss upon the disposition of
Common Stock acquired upon the exercise of an ISO provided that the optionee
does not dispose of such Common Stock within two years of the granting of such
ISO, or within one year after the exercise of such ISO. If such holding periods
are satisfied, the Company will not be allowed a deduction by reason of the
grant or exercise of the ISO. If an optionee does not satisfy these holding
period requirements, a "disqualifying disposition" occurs and the optionee will
recognize ordinary income in the year of the disposition of the shares of Common
Stock in an amount equal to the excess of the fair market value of the shares at
the time the ISO was exercised over the exercise price of the ISO. The balance
of gain realized, if any, will be long-term or short-term capital gain,
depending upon whether or not the shares were sold more than one year after the
ISO was exercised. If an optionee sells the shares prior to the satisfaction of
the holding period requirements but at a price below the fair market value of
the shares at the time the ISO was exercised, the amount of ordinary income will
be limited to the amount realized on the sale in excess of the exercise price of
the ISO. The Company and its subsidiaries will generally be allowed a deduction
to the extent the optionee recognizes ordinary income.
Generally, recipients of non-qualified Options (which are not intended to
qualify as ISOs under the Code) will not recognize taxable income at the time of
grant but will recognize ordinary income upon exercise in an amount equal to the
difference between the fair market value of the shares of Common Stock acquired
and the aggregate exercise price. The Company will receive a deduction at that
time in a like amount and should not be limited by the provisions of Section
162(m) of the Code which restricts a corporation's compensation deduction in
certain circumstances. Upon the disposition of shares of Common Stock acquired
upon the exercise of a non-qualified Option, the optionee will recognize long-
term or short-term capital gain or loss in an amount equal to the difference
between the amount realized and such optionee's basis in the shares sold. Such
basis will generally be the fair market value of the shares sold on the date it
was acquired through option exercise.
24
<PAGE>
Options Awarded
The table below summarizes the number of Options that have been awarded
under the Plan to each of the Named Officers, all current executive officers as
a group, all current directors who, subject to shareholder approval, are not
executive officers as a group, and all non-executive employees as a group, to
the extent determinable, if the Plan is approved by shareholders at the Meeting.
NEW PLAN BENEFITS
-----------------
<TABLE>
<CAPTION>
NAME AND POSITION NUMBER OF SHARES (1)
- ----------------- --------------------
<S> <C>
Louis D. Paolino, Jr., 210,000
Chief Executive Officer (until June 1996)..
William C. Skuba,
Chief Executive Officer (until June 1996).. ----
Current Executive Officers as a Group........ 535,000
Current Non-Employee Directors as a Group.... 20,000
Non-Executive Employees as a Group........... 150,000
</TABLE>
Required Vote
The affirmative vote of a majority of the votes shares present in person or
represented by proxy at the Meeting and entitled to vote on Proposal 3 is
required to approve the adoption of the Plan and the grants made thereunder. If
such approval is not received, the Plan will not become effective have been made
under the Plan will become void.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR"
PROPOSAL 3
25
<PAGE>
SHAREHOLDER PROPOSALS
Any shareholder proposal intended to be presented at the next meeting
of shareholders must be received by the Company by October 1, 1996, in order to
be considered for inclusion in the Company's proxy material for such meeting.
OTHER MATTERS
As of the date of this Proxy Statement, the Company does not intend to
present and has not been informed that any other person intends to present any
appropriate business not specified in this Proxy Statement for action at the
meeting. However, if other matters should properly come before the meeting or
any adjournment thereof, it is the intention of the persons named in the
accompanying proxy, or their substitutes, to vote the proxy in accordance with
their judgment in such matters.
By Order of the Board of Directors
Louis D. Paolino, Jr.,
Chairman of the Board
Mt. Laurel, New Jersey
[July _____, 1996]
26
<PAGE>
EASTERN ENVIRONMENTAL SERVICES, INC.
Proxy Solicited On Behalf Of The Board of Directors
The undersigned, revoking all previous proxies, hereby appoints Louis D.
Paolino, Jr., Terry W. Patrick and Robert M. Kramer, and each of them acting
individually, as the attorney and proxy of the undersigned, with full power of
substitution, to vote, as indicated below and in their discretion upon such
other matters as may properly come before the meeting, all shares which the
undersigned would be entitled to vote at the Special Meeting of Stockholders of
the Company to be held on August ____, 1996, and at any adjournment or
postponement thereof.
1. To approve the Private Placement as described in the Proxy Statement:
[_] For [_] Against [_] Abstain
2. To approve the increase in the Company's authorized Common Stock to
50,000,000 shares as described in the Proxy Statement:
[_] For [_] Against [_] Abstain
3. To approve the 1996 Stock Option Plan as described in the Proxy Statement:
[_] For [_] Against [_] Abstain
Please date and sign your Proxy on the reverse side and return it promptly.
<PAGE>
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. UNLESS
OTHERWISE SPECIFIED, THE SHARES WILL BE VOTED "FOR" THE APPROVAL OF THE PRIVATE
PLACEMENT, "FOR" THE APPROVAL OF THE INCREASE IN THE COMPANY'S AUTHORIZED COMMON
STOCK AND "FOR" THE APPROVAL OF THE 1996 STOCK OPTION PLAN. THIS PROXY ALSO
DELEGATES DISCRETIONARY AUTHORITY WITH RESPECT TO ANY OTHER BUSINESS WHICH MAY
PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENT OR POSTPONEMENT THEREOF.
THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF THE NOTICE OF SPECIAL
MEETING AND PROXY STATEMENT.
--------------------------------------------------
Signature of Shareholder
--------------------------------------------------
Signature of Shareholder
Date:-----------------------------, 1996
NOTE: PLEASE SIGN THIS PROXY EXACTLY AS NAME(S) APPEAR
ON YOUR STOCK CERTIFICATE. WHEN SIGNING AS ATTORNEY-
IN-FACT, EXECUTOR, ADMINISTRATOR, TRUSTEE OR GUARDIAN,
PLEASE ADD YOUR TITLE AS SUCH, AND IF SIGNER IS A
CORPORATION, PLEASE SIGN WITH FULL CORPORATE NAME BY A
DULY AUTHORIZED OFFICER OR OFFICERS AND AFFIX THE
CORPORATE SEAL. WHERE STOCK IS ISSUED IN THE NAME OF
TWO (2) OR MORE PERSONS, ALL SUCH PERSONS SHOULD SIGN.
