<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:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
[X] Definitive Proxy Statement Commission Only (as permitted
[_] Definitive Additional Materials by Rule 14a-6(e)(2))
[_] 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] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) 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:
______________________________________________________________________________
[_] 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 ANNUAL MEETING OF STOCKHOLDERS
MARCH 31, 1997
----------------
TO THE STOCKHOLDERS:
The Annual Meeting of Stockholders of Eastern Environmental Services, Inc.
(the "Company") will be held at 1000 Crawford Place, Mt. Laurel, New Jersey on
March 31, 1997, at 8:30 a.m. local time, for the following purposes:
1. To elect three directors of the Company, each to serve until the next
annual meeting of stockholders.
2. To consider and vote upon a proposal to leave outstanding certain
shares of the Company's Common Stock issued in connection with the
acquisition of Super Kwik, to the extent the acquisition involved the
issuance of more than 20% of the Company's then outstanding Common Stock.
3. To amend the Certificate of Incorporation of the Company to delete
Article Seventh thereof.
4. To ratify the appointment of Ernst & Young, LLP as independent
accountants to examine the financial statements of the Company for the
fiscal year ending June 30, 1997.
5. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on February 21, 1997
as the record date of the Meeting. Only holders of record of Common Stock at
the close of business on that date 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
Mt. Laurel, New Jersey
February 25, 1997
<PAGE>
EASTERN ENVIRONMENTAL SERVICES, INC.
1000 CRAWFORD PLACE
MT. LAUREL, NEW JERSEY 08054
----------------
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MARCH 31, 1997
This Proxy Statement is being furnished to the stockholders of Eastern
Environmental Services, Inc. (the "Company"), a Delaware corporation, in
connection with the solicitation of proxies by the Board of Directors of the
Company for the Annual Meeting of Stockholders (the "Meeting") to be held at
8:30 a.m. on March 31, 1997, and at any adjournments or postponements thereof.
The approximate date on which this Proxy Statement and the accompanying proxy
card will be first sent or given to stockholders is February 25, 1997. The
Meeting will be held at the principal executive offices of the Company,
located at 1000 Crawford Place, Mt. Laurel, New Jersey 08054.
The record date for determining stockholders entitled to vote at the Meeting
has been fixed at the close of business on February 21, 1997 (the "Record
Date"). As of the Record Date, there were 13,244,807 shares of Common Stock,
$.01 par value per share (the "Common Stock"), outstanding and no shares of
Class A Common Stock outstanding. Each share of Common Stock entitles the
holder to one vote on each matter that may properly come before the Meeting.
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.
Directors are elected by the affirmative vote of a plurality of the votes
cast, and votes may be cast in favor of or withheld from each director
nominee. Accordingly, the three nominees who receive the largest number of
votes cast will be elected as directors. Votes may not be cumulated in the
election of directors. An affirmative vote of a majority of the votes entitled
to be cast by stockholders present in person or by proxy at the Meeting is
required for approval of Proposals 2 and 4. An affirmative vote of a majority
of the Common Stock outstanding on the Record Date is required for approval of
Proposal 3. Abstentions, votes withheld and broker non-votes (described below)
are counted in determining whether a quorum is present. Abstentions with
respect to any proposal other than the election of directors will have the
same effect as votes against the proposal, because approval requires a vote in
favor of the proposal by a specified majority. Broker non-votes 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. Broker non-votes will have no effect on the outcome of
Proposals 1, 2 and 4, and will have the same effect as votes against Proposal
3.
A form of proxy is enclosed for use at the Meeting. Proxies will be voted in
accordance with stockholders' 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)
for the election of the nominees for director, as discussed in Proposal 1,
(ii) to leave outstanding certain shares of the Company's Common Stock issued
in connection with the acquisition of Super Kwik, to the extent the
acquisition involved the issuance of more than 20% of the Company's
outstanding Common Stock, as discussed in Proposal 2, (iii) to amend the
Certificate of Incorporation to remove Article Seventh thereof, as discussed
in Proposal 3, (iv) for the ratification of the appointment of Ernst & Young,
LLP as independent accountants to examine the financial statements of the
Company for the fiscal year ended June 30, 1997, as discussed in Proposal 4
and (v) by the proxies in their discretion on any other business as may
properly come before the Meeting or any adjournment thereof. Stockholders
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
<PAGE>
owners of the shares. Any proxy given may be revoked by the stockholder
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.
Stockholders will not have appraisal rights with respect to any of the
proposals to be voted upon at the Meeting.
The Company has been advised by its directors and officers and certain of
their affiliates that they intend to vote the 7,170,329 outstanding shares of
Common Stock which they hold or with respect to which they currently hold
proxies, representing approximately 54.1% of the total shares outstanding as
of the record date, in favor of the proposals presented in this Proxy
Statement. See "Voting Securities--Security Ownership of Certain Beneficial
Owners."
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.
ELECTION OF DIRECTORS
(Proposal 1)
The Board of Directors consists of three members. Each director is elected
to hold office until the next annual meeting of stockholders and until his
successor is elected and qualified. Unless authority to vote for any nominee
is withheld in the proxy, the persons named in the accompanying proxy intend
to vote the shares represented by the proxy for the election as directors of
the three nominees named below, all of whom are at present directors of the
Company. Although the Board of Directors does not contemplate that any of the
nominees named will be unavailable for election, in the event a vacancy in the
slate of nominees results from an unexpected occurrence, it is presently
intended that the proxy will be voted for the election of a nominee who shall
be designated by the Board.
The following biographical information is furnished as to each nominee for
election as director:
Louis D. Paolino, Jr., age 40, has been Chairman of the Board, Chief
Executive Officer and a Director since June 20, 1996 and has 14 years of
experience in the solid waste industry. From 1991 to June 1, 1996, Mr. Paolino
was President of Soil Remediation of Philadelphia, Inc. until the Company was
sold to USA Waste Services, Inc. where he also served as Vice President from
1993 to 1996. Soil Remediation of Philadelphia, Inc. is in the business of
treating contaminated soil.
George O. Moorehead, age 43, has been a Director of the Company since June
20, 1996 and has over 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
stockholder and a director of EMCO Recycling Corp. From 1990 to 1993, Mr.
Moorehead was President and Chief Executive Officer and a Director of Custom
Disposal, Inc., a Phoenix area solid waste disposal company.
Kenneth Chuan-kai Leung, age 51, has been a Director of the Company since
June 20, 1996. Mr. Leung has been a managing director of investment banking at
Sanders Morris Mundy Inc. since 1994 and Chief Investment Officer of
Environmental Opportunities Fund, L.P. and Environmental Opportunities Fund
(Cayman), L.P. since January 1, 1996. 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.
2
<PAGE>
REQUIRED VOTE
Directors are elected by the affirmative vote of a plurality of the votes
cast, and votes may be cast in favor of or withheld from each director
nominee. Accordingly, the three nominees who receive the largest number of
votes cast will be elected as directors. Votes may not be cumulated in the
election of directors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR"
ELECTION OF EACH OF THE FOREGOING NOMINEES AS DIRECTORS
MEETINGS OF THE BOARD OF DIRECTORS
The Board of Directors met 17 times during the fiscal year ended June 30,
1996. During fiscal 1996, each incumbent Board member attended at least 75% of
the Board meetings held while he was a director.
The Board of Directors has an Audit Committee. The Audit Committee is
comprised of the Company's three current directors. The functions of the Audit
Committee include the recommendation and selection of independent accountants,
the review of audit results, the review of related party transactions and the
evaluation of internal accounting procedures of the Company. The Audit
Committee, as constituted prior to the Change of Control (as defined below),
met once during the fiscal year ended June 30, 1996, prior to the time that
the current committee members were appointed.
The Board of Directors also has a Compensation Committee and a Nominating
Committee. The Compensation Committee and the Nominating Committee are each
made up of the Company's three current directors. The functions of the
Compensation Committee consist of setting cash compensation for employees
receiving base salary in excess of $50,000 per year, setting compensation
policy for other employees and approving option grants under the 1987, 1991
and 1996 Stock Option Plans. The functions of the Nominating Committee consist
of finding and recommending qualified candidates to serve on the Company's
Board of Directors. The Nominating Committee will consider director nominees
recommended by stockholders. Any such recommendation, together with the
nominee's qualifications and consent to being considered as a nominee, should
be sent in writing to the Nominating Committee in care of the Secretary of the
Company. The Compensation Committee met five times and the Nominating
Committee met once during the fiscal year ended June 30, 1996, as each
committee was constituted prior to the Change of Control.
EXECUTIVE OFFICERS
The following biographical information is furnished as to executive officers
(other than executive officers who are also nominees for election as director,
as to whom biographical information is set forth above):
Terry W. Patrick, age 50, joined the Company as Executive Vice President and
Chief Operating Officer in June 1996. Mr. Patrick has over 25 years of
management experience in the waste industry. From September 1995 to June 1996,
Mr. Patrick was involved with personal investments and ownership of a chemical
manufacturing and distributing company. He served as President and Chief
Operating Officer of USA Waste Services, Inc. from April 1990 to August 1994.
Mr. Patrick was involved in district and regional management for Browning
Ferris Industries, Inc. from October 1981 through October 1988, and he served
as Vice President of Operations at Mid-America Waste Systems, Inc. from
November 1988 to April 1990. Mr. Patrick served in various district and
regional management positions with Waste Management, Inc. from September 1979
through October 1981.
Willard Miller, age 60, joined the Company as Executive Vice President in
September 1996. In 1972, Mr. Miller founded Super Kwik, Inc. where he held the
positions of President and Chief Executive Officer for 24 years.
Glen M. Miller, age 39, joined the Company as Executive Vice President of
Collection Operations in September 1996. Prior to joining the Company, Mr.
Miller had 23 years experience in the solid waste industry, most recently as
Vice President and Chief Operating Officer of Super Kwik, Inc. since January
1980 and President of Waste Maintenance Services, Inc. from May 1987 to
September 1996, when the Company acquired that business.
3
<PAGE>
Gregory M. Krzemien, age 37, joined the Company as Chief Financial Officer
and Treasurer in August 1992. From October 1988 until joining the Company, Mr.
Krzemien was a senior audit manager with Ernst & Young, LLP, an independent
accounting firm. Mr. Krzemien worked for Ernst & Young, LLP for 11 years.
Robert M. Kramer, age 44, joined the Company as its General Counsel, Vice
President and Secretary on June 20, 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 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.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and persons who own more than ten percent of
a registered class of the Company's equity securities, to file with the
Securities and Exchange Commission ("SEC") initial reports of ownership and
reports of changes in ownership of Common Stock and other equity securities of
the Company. Officers, directors and greater than ten-percent shareholders are
required by SEC regulation to furnish the Company with copies of all Section
16(a) forms they file.
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 fiscal year ended June 30, 1996, all Section
16(a) filing requirements applicable to the Company's officers, directors and
greater than ten-percent beneficial owners were complied with, except as
follows. Robert J. Powell and Steven C. Stamos, Jr., each of whom was a
director until June 1996, each filed three reports late relating to three
warrant grant transactions. Timothy W. Sweeney, who was a director until June
1996, filed two reports late relating to two warrant grant transactions.
EXECUTIVE COMPENSATION
The following table sets forth information with respect to compensation paid
by the Company during its last three completed fiscal years to Mr. Paolino,
the Company's Chief Executive Officer and Mr. Skuba, the Company's former
Chief Executive Officer (the "Named Executive Officers"). Other than Mr.
Skuba, no other executive officer of the Company had total annual salary and
bonus exceeding $100,000 during the Company's fiscal year ended June 30, 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
-------------------- ------------
AWARDS
------------
SECURITIES
NAME AND PRINCIPAL FISCAL YEAR UNDERLYING ALL OTHER
POSITION ENDED JUNE 30, SALARY ($) BONUS ($) OPTIONS (#) COMPENSATION ($)
------------------ -------------- ---------- --------- ------------ ----------------
<S> <C> <C> <C> <C> <C>
Louis D. Paolino, Jr. .. 1996 8,192 None 250,000 None
Chief Executive Officer
June 1996--Present
William C. Skuba........ 1996 129,312 None None 151,874(1)
Chief Executive Officer 1995 124,800 None None 2,500
Until June 1996 1994 127,390 None None 2,500
</TABLE>
- --------
(1) Consists of non-cash compensation paid to Mr. Skuba under the 1996
Severance Agreement. See "Certain Relationships and Related Transactions."
4
<PAGE>
The following table sets forth information concerning individual grants of
stock options made during fiscal year 1996 to the Company's Chief Executive
Officer.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
NUMBER OF SECURITIES PERCENT OF TOTAL OPTIONS
UNDERLYING OPTION GRANTED TO EMPLOYEES IN EXERCISE OR EXPIRATION
NAME GRANTED (#) FISCAL YEAR BASE PRICE ($/SH) DATE
---- -------------------- ------------------------ ----------------- -------------
<S> <C> <C> <C> <C>
Louis D. Paolino, Jr. .. 250,000 31.1% $6.33 June 21, 2006
William C. Skuba ....... 0 0 0 0
</TABLE>
The following table sets forth information concerning each exercise of stock
options during the Company's fiscal year 1996 by the Company's Executive
Officer.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
SHARES ACQUIRED VALUE OPTIONS AT FY-END (#) OPTIONS AT FY-END ($)
NAME ON EXERCISE (#) REALIZED ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- --------------- ------------ ------------------------- -------------------------
<S> <C> <C> <C> <C>
Louis D. Paolino, Jr. .. None None 0/250,000 0/42,500
William C. Skuba ....... None None None None
</TABLE>
DIRECTOR COMPENSATION
Prior to June 20, 1996, non-employee directors of the Company received a fee
of $1,000 per meeting for attendance in person at each Board meeting and $250
for attendance by telephone. After June 20, 1996, the Company revised its
policy and directors no longer receive any fees for attendance at the
directors' meetings. Each of the Company's directors received options or
warrants to purchase shares of the Company's Common Stock. Simultaneous with
the Change of Control, the Company's former Board of Directors was replaced
with Messrs. Paolino, Leung and Moorehead becoming directors. In July 1996,
options to purchase 10,000 shares of the Company's Common Stock at an exercise
price of $6.375 per share were issued to each of Mr. Leung, Mr. Moorehead and
Mr. Paolino, with the options becoming fully vested one year from the date of
grant. In October 1996, Messrs. Moorehead and Leung each received options to
purchase 60,834 shares of Commons Stock at a per share price of $6.63 with
50,000 options to vest immediately, one-half of the remainder to vest on
October 1, 1997 and the other half to vest on October 1, 1998. All expenses
incurred by all directors for attendance at Board Meetings are reimbursed by
the Company. Simultaneous with the Change of Control, the Company's former
Board of Directors was replaced. During fiscal year 1996, the former directors
of the Company received warrants to purchase Common Stock. Warrants to
purchase 12,000 shares were issued to Timothy W. Sweeney, and warrants to
purchase 6,000 shares to each of Mr. Stamos and Mr. Powell were issued in July
1995, all at an exercise price of $1.50. Additionally, in calendar year 1996,
warrants to purchase 11,800 shares were issued to Mr. Sweeney and Mr. Stamos
were issued at an exercise price ranging from $1.25 to $2.00. The Company's
prior Board also approved Mr. Sweeney and Mr. Stamos to provide consulting
services to the Company as requested from time to time at a rate of $100 per
hour plus expenses. The Company paid approximately $1,900 and $6,100 to Mr.
Sweeney and Mr. Stamos, respectively, for consulting services and expenses in
fiscal 1996. Neither Mr. Sweeney nor Mr. Stamos has rendered services to the
Company since the Change of Control.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
The Company has entered into an employment agreement with Louis D. Paolino,
Jr., the Company's Chief Executive Officer. Under the agreement, Mr. Paolino
is provided a base annual salary of $150,000. In addition, Mr. Paolino
received options to purchase 250,000 shares of Common Stock under the
Company's 1996 Stock Option Plan at a per share price of $6.33, vesting
ratably over a four-year period, and options to purchase an additional 161,782
shares of Common Stock at a per share price of $6.63 with 50,000 options to
vest on
5
<PAGE>
October 1, 1996, 55,891 options to vest on October 1, 1997 and the remainder
to vest on October 1, 1998. In addition, if there is an actual change in
control of 50% or more in the Company's voting power or a change in the
majority of the current Board of Directors, the Company has agreed to pay Mr.
Paolino a lump sum bonus paid in either cash or registered stock, at the
Company's option, equal to twice his then current annual salary and any
bonuses paid to him within the twelve months prior to the change of control.
The agreement also provides that during the term of Mr. Paolino's employment
and for a period of two years following the termination of such employment,
Mr. Paolino will not compete with the Company or its subsidiaries in the
business of waste hauling, waste disposal, landfilling, handling demolition
waste, handling special waste and recycling waste within a 50-mile radius of
any Company business operation.
The Company entered into a severance agreement with Mr. Skuba, the Company's
former Chief Executive Officer. See "Certain Relationships and Related
Transactions" below for further discussion relating to the severance
agreement.
CHANGE OF CONTROL
On June 20, 1996, William C. Skuba, who was then the Company's Chairman,
Chief Executive Officer and President, sold an aggregate of 500,000 shares of
the Company's Common Stock at a price of $2 per share to a group consisting of
Mr. Moorehead, Mr. Paolino, 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, 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 carried 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 shares of Common Stock (excluding any shares
thereafter acquired) 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 ("Change of Control"), 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 Mr. Leung (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."
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company leases its executive offices at 1000 Crawford Place, Mt. Laurel,
New Jersey from Bluepointe, Inc., a corporation controlled by Mr. Paolino. The
lease, which was entered into in July 1996, is for a term of five years,
covers 5,000 square feet and is for a monthly rental of $6,250 plus increases
resulting from 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. 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.
6
<PAGE>
On August 1, 1996, the Company acquired all of the assets of Eastern Waste,
Inc. for a purchase price consisting of 391,250 unregistered shares of the
Company's Common Stock. The shareholders of Eastern Waste, Inc. are Matthew
Paolino and Donald Moorehead, brothers of Louis Paolino and George Moorehead.
In October 1996, the Company hired Premier Concrete, Inc. ("Premier") to
excavate the Company's landfill cell under construction in West Virginia.
Premier is a contractor which is owned by Matthew Paolino. Premier, the lowest
responsible bidder for the job, is being paid $3.75 per cubic yard of
excavated material. The Company estimates that the total amount to be paid to
Premier for the job will be $480,000, based on current conditions.
Mr. 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, which renders legal
services to the Company.
In 1987, the Company entered into an agreement with Thomas M. Yanette, a
former director and officer of the Company. Pursuant to such agreement, in
exchange for the surrender by Mr. Yanette of an equity interest he owned in a
predecessor of the Company and the agreement of Mr. Yanette not to compete
with the Company and to provide consulting services to the Company, the
Company has agreed to pay to Mr. Yanette or his surviving spouse $48,000 per
year. Such payments began in September 1987 and will continue until August
1997.
Robert J. Powell, a former director of the Company, is the sole shareholder
of The Law Offices of Robert J. Powell, Hazelton, Pennsylvania, which provided
legal services to the Company from fiscal 1994 to fiscal July 1996. The
Company paid approximately $78,000 for such legal services in fiscal 1996.
In connection with the consummation of the transaction 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. 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, in payment of a severance
obligation of the Company to Mr. Skuba pursuant to a separate severance
agreement entered into in 1993, as subsequently amended in 1995, the Company
conveyed to a company controlled by Mr. Skuba: (i) the outstanding stock of a
corporation which owns certain real property located in Drums, Pennsylvania,
("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 decided that it had 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. In October, 1996, one of the leases
was terminated.
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 on such matters related to the
transition of control of the Company and
7
<PAGE>
negotiating acquisitions for the Company as the Company and Mr. Skuba may
mutually agree. In consideration for performing such services during the term,
the Company will provide no compensation to Mr. Skuba other than the
reimbursement of his reasonable expenses and secretarial support. The term of
the Consulting Agreement has been extended through June 20, 1997.
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 were not 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.
In connection with the acquisition of Super Kwik, Inc., the Company entered
into several agreements with Willard and Glen Miller which are more fully
described in Proposal 2.
VOTING SECURITIES
DESCRIPTION OF CAPITAL STOCK
The Company's authorized capital stock consists of 50,000,000 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 February 21, 1997, there were
13,244,807 shares of Common Stock outstanding and no shares of Class A Common
Stock outstanding. The Company currently has no intention of issuing any Class
A Common Stock. 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 stockholders of the Company.
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
and nominees for directorships, by each of the Named Executive Officers, by
all of the officers and directors of the Company as a group, 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 January 31, 1997.
Unless otherwise indicated, the stockholders listed possess sole voting power
and investment power with respect to the shares listed.
8
<PAGE>
<TABLE>
<CAPTION>
COMMON STOCK
AMOUNT AND NATURE
OF BENEFICIAL PERCENT OF
NAME OF BENEFICIAL OWNER (1) OWNERSHIP CLASS
---------------------------- ----------------- ----------
<S> <C> <C>
Louis D. Paolino, Jr.(2).......................... 2,055,008 15.5%
George Moorehead(3)............................... 1,396,101 10.5%
3700 West Lower Buckeye
Phoenix, AZ 85009
Kenneth Chuan-kai Leung(4)........................ 2,061,101 15.5%
126 East 56th Street
24th Floor
New York, NY 10022
Environmental Opportunities Fund, L.P.(5)......... 1,900,798 14.4%
126 East 56th Street
24th Floor
New York, NY 10022
Environmental Opportunities Fund (Cayman)(6) ..... 1,121,404 8.5%
126 East 56th Street
24th Floor
New York, NY 10022
Robert M. Kramer(7)............................... 1,197,951 9.0%
William C. Skuba(8)............................... 1,136,726 8.6%
RR #4, Box 4452
Drums, PA
Willard Miller(9)................................. 1,365,688 10.2%
230 Orono Place
Sommerdale, NJ 08083
Glen Miller(9).................................... 1,111,302 8.2%
429 Ocean Avenue
Ocean City, NJ 08226
All officers and directors as a group (8 per-
sons)(10)........................................ 7,567,941 54.7%
</TABLE>
- --------
(1) Unless otherwise noted, the business address of the person and entity is
1000 Crawford Place, Mt. Laurel, NJ 08054.
(2) Of the shares indicated, 35,000 shares are held of record by entities
controlled by Mr. Paolino, 176,166 shares are held by family members,
50,000 shares are purchasable under an option exercisable within 60 days
and 1,011,101 shares are held of record by Mr. Skuba with respect to
which Mr. Paolino, Mr. Moorehead, and the Fund hold a joint proxy (the
"Skuba Proxy"). Mr. Paolino is the President and Chairman of the Board of
Directors of the Company.
(3) Of the shares indicated, 50,000 shares are purchasable under an option
exercisable within 60 days and 1,011,101 shares are subject to the Skuba
Proxy.
(4) Of the shares indicated, 50,000 shares are purchasable under an option
exercisable within 60 days. As a managing director of the Fund and the
Cayman Fund, Mr. Leung may be deemed to own beneficially the shares held
by the Fund and the Cayman Fund.
(5) The Fund is the holder of record of 889,697 shares and may be deemed to
own beneficially 1,011,101 shares by reason of the Skuba Proxy. Mr. Leung
is the managing director of the Fund.
(6) The Cayman Fund is the holder of record of 110,303 shares and may be
deemed to own beneficially 1,011,101 shares by reason of the Skuba Proxy.
Mr. Leung is the managing director of the Cayman Fund.
9
<PAGE>
(7) Of the shares indicated, 50,000 are purchasable under options exercisable
within 60 days and 1,137,951 shares are subject to proxies granted to Mr.
Kramer in connection with the Company's January 1997 acquisition of Donno
Company, Inc., Residential Service, Inc., Suffolk Waste Systems, Inc. and
NRT Realty Corp. Mr. Kramer is the General Counsel, Vice President and
Secretary of the Company.
(8) Of the shares indicated, 1,011,101 are subject to the Skuba Proxy.
(9) Willard and Glen Miller, the former stockholders of Super Kwik, acquired
an aggregate of 2,308,176 unregistered shares of Common Stock of the
Company in connection with the Company's acquisition of Super Kwik. Each
of the Millers may also be deemed to own beneficially an additional
81,907 shares purchasable under Warrants exercisable within 60 days. The
Millers and the Company have entered into an agreement with the Company
pursuant to which the Millers may be required to sell certain of their
shares to the Company depending on whether or not Proposal 2 is approved
at the Meeting. See "Proposal 2" below.
(10) Includes a total of 596,806 shares purchasable under options exercisable
within 60 days and 1,137,951 shares subject to proxies held by an
officer.
PROPOSAL TO LEAVE OUTSTANDING CERTAIN SHARES ISSUED
IN CONNECTION WITH THE ACQUISITION OF SUPER KWIK
(Proposal 2)
On September 27, 1996, the Company acquired all of the outstanding stock of
Super Kwik, Inc. and Waste Maintenance, Inc. (collectively, "Super Kwik")
pursuant to the terms of an Agreement of Merger dated July 29, 1996, among the
Company, Super Kwik, Waste Maintenance Services, Inc., and Willard and Glen
Miller (the "Acquisition"). Pursuant to the Agreement of Merger, Super Kwik
was merged into NHD, Inc. ("NHD") (which has subsequently changed its name to
Super Kwik, Inc.), a wholly owned subsidiary of the Company, resulting in
Willard Miller and Glen Miller receiving an aggregate of 2,308,176 shares of
the Company's Common Stock (the "Shares") in exchange for all issued and
outstanding shares of Super Kwik. The Shares were valued at $6.50 per share
(the closing price of the Common Stock on the business day five days prior to
the closing date), representing total consideration of approximately
$15,000,000. No cash was paid to the Millers in connection with the
Acquisition, in which NHD assumed approximately $5,000,000 of outstanding
indebtedness of Super Kwik. The Acquisition has been accounted for using the
"pooling of interest" method of accounting.
Super Kwik's waste collection and recycling operations are located in
Voorhees, New Jersey and consist of over 60 collection vehicles servicing more
than 25,000 residential customers and 4,500 commercial customers in nine
southern and central New Jersey counties and Philadelphia, Pennsylvania. The
Company has consolidated its three Philadelphia area hauling companies into
Super Kwik's operations.
In connection with the Acquisition, the Company entered into a series of
agreements with Willard and Glen Miller to continue their relationships with
the Company. Both Willard and Glen Miller have entered into employment
agreements with the Company whereby each was hired as an Executive Vice
President of NHD in charge of its southern New Jersey waste collection
operations for a term of four years unless earlier terminated. As
compensation, each executive will receive an annual salary of $150,000 and
certain health and other employee benefits. The agreements also provide that
during the term of employment, and for a period of one year thereafter, the
executive will not compete with the Company or its subsidiaries in the
business of waste hauling, waste disposal, land filling, handling demolition
waste, handling special waste, collecting or disposing of municipal special
waste in an area which includes southern New Jersey and Philadelphia,
Pennsylvania. Pursuant to the employment agreements, Willard and Glen Miller
each also received warrants to purchase 281,907 unregistered shares of the
Company's Common Stock at an exercise price of $6.75 per share (the
"Warrants"). The Warrants vest over a four year period and expire ten years
after the date of grant. In addition, the Warrants vest immediately upon a
change of control of the Company (as defined in the Warrants).
Additionally, the Company entered into registration rights agreements with
Willard and Glen Miller pursuant to which the Company agreed to register all
of their Shares for resale under the Securities Act within
10
<PAGE>
90 days following the Acquisition. The Company has agreed to bear all
registration expenses (except underwriting discounts or commissions) related
to the registration of the Shares. The Millers have agreed to defer the
Company's registration obligation until after the Meeting.
Under the rules of the Nasdaq National Market ("Nasdaq"), stockholder
approval is required when more than 20% of the outstanding Common Stock of the
Company is issuable by the Company in connection with an acquisition. In the
Acquisition, 2,308,176 shares of Common Stock were issued, which represents
464,136 shares (the "Excess Shares") more than 20% of the Common Stock then
outstanding. In order to bring the Company into compliance with applicable
Nasdaq rules, the Company has agreed to submit this Proposal 2 to the
Company's stockholders to allow the stockholders to determine whether or not
to leave the Excess Shares outstanding.
Pursuant to an agreement entered into among the Company and Willard and Glen
Miller, if the stockholders vote in favor of this Proposal 2 to leave the
Excess Shares outstanding, the Excess Shares will remain outstanding. If the
stockholders vote against this Proposal 2, the Company will purchase the
Excess Shares and will be required to pay the Millers cash in the amount of
$3,016,884, amounting to $6.50 per share, the price at which the shares were
valued when issued to the Millers in the Acquisition.
The Company has been advised by its officers and directors and their
affiliates, holding an aggregate 7,170,329 shares of Common Stock as of the
Record Date (54.1% of the Common Stock outstanding as of the Record Date) that
they intend to vote in favor of this Proposal 2 to leave the Excess Shares
outstanding. The Millers have agreed to vote 1,844,040 of the Shares,
representing all of the Shares other than the Excess Shares, in favor of this
Proposal 2. The Millers have agreed not to vote the Excess Shares on any of
the proposals being voted on at the Meeting.
REQUIRED VOTE
The affirmative vote of the holders of a majority of the shares present in
person or represented by proxy at the Annual Meeting is required to approve
this Proposal 2 and leave the Excess Shares outstanding. The status of the
Common Stock as a Nasdaq National Market traded security will not be affected
by the outcome of the vote on this Proposal 2.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL 2.
AMENDMENT OF THE COMPANY'S CERTIFICATE OF INCORPORATION
TO DELETE ARTICLE SEVENTH
(Proposal 3)
The Company has entered into a Revolving Credit Agreement (the "Credit
Agreement") with The First National Bank of Boston and Bank America Illinois
(the "Lenders") pursuant to which the Lenders have provided the Company with a
$50,000,000 revolving credit facility. Under the terms of the Credit
Agreement, the Company has agreed to recommend to its stockholders that the
Company's Certificate of Incorporation be amended to remove Article Seventh
therefrom. Article Seventh provides that the Chancery Court of Delaware is
authorized to compromise the debts of the Company upon the agreement of the
Company and three fourths of the Company's creditor classes. The Company does
not believe that Article Seventh is of any material practical benefit and such
provision has the disadvantage of making it difficult for the Company to
receive financing on favorable terms. Federal Bankruptcy law would provide a
comparable means for the Company to make creditor arrangements.
REQUIRED VOTE
The affirmative vote of the holders of a majority of the Common Stock
outstanding on the Record Date is required to approve this Proposal 3 to amend
the Company's Certificate of Incorporation to delete Article Seventh.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL 3.
11
<PAGE>
APPOINTMENT OF INDEPENDENT ACCOUNTANTS
(Proposal 4)
The Board of Directors of the Company has appointed Ernst & Young, LLP as
independent public accountants to examine the financial statements of the
Company for the year ending June 30, 1997. Ernst & Young, LLP has served as
accountants for the Company since October 1990. A representative of Ernst &
Young, LLP is expected to be present at the Meeting and will be given an
opportunity to make a statement if he desires to do so and to respond to
appropriate questions.
REQUIRED VOTE
To be ratified, the appointment must be approved by a majority of the shares
present in person or represented by proxy at the Annual Meeting.
Although the submission of the appointment of Ernst & Young, LLP is not
required by law or the By-laws of the Company, the Board of Directors is
submitting it to the stockholders to ascertain their views. If the
stockholders do not ratify the appointment, the Board of Directors will not be
bound to seek other independent accountants for fiscal year 1997, but the
selection of other independent accountants will be considered in future years.
If Ernst & Young, LLP shall decline to accept or become incapable of accepting
its appointment, or if its appointment is otherwise discontinued, the Board of
Directors will appoint other independent public accountants.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL 4.
STOCKHOLDER PROPOSALS
Any stockholder proposal intended to be presented at the next annual meeting
of stockholders must be received by the Company by October 28, 1997, 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
February 25, 1997
12
<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 Annual Meeting of Stockholders of
the Company to be held on March 31, 1997, and at any adjournment or
postponement thereof.
(PLEASE DATE AND SIGN YOUR PROXY ON THE REVERSE SIDE AND RETURN IT PROMPTLY.)
SEE REVERSE
SIDE
<PAGE>
- -------------------------------------------------------------------------------
[X] PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. UNLESS OTHERWISE
SPECIFIED, THE SHARES WILL BE VOTED "FOR" THE ELECTION OF THE NOMINEES FOR
DIRECTOR LISTED BELOW, FOR THE PROPOSAL TO LEAVE OUTSTANDING CERTAIN SHARES OF
THE COMPANY'S COMMON STOCK ISSUED IN CONNECTION WITH THE ACQUISITION OF SUPER
KWIK, AS DESCRIBED IN THE PROXY STATEMENT, FOR THE PROPOSAL TO AMEND THE
CERTIFICATE OF INCORPORATION OF THE COMPANY TO DELETE ARTICLE SEVENTH THEREOF,
AND "FOR" RATIFICATION OF APPOINTMENT OF ERNST & YOUNG LLP AS THE COMPANY'S
INDEPENDENT AUDITORS FOR THE FISCAL YEAR ENDING JUNE 30, 1997. 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.
1. Election of For the listed Withhold Authority
Directors: nominees to vote for the
listed nominees
[_] [_]
NOMINEES: For a one-year term expiring at the next Annual Meeting to be held
following the end of fiscal 1997: Louis D. Paolino, Jr., George
Moorehead and Kenneth Chuan-kai Leung
(Instruction: To withhold authority to vote for any nominee(s), write the
name(s) of such nominee(s) on the line below.)
- -------------------------------------
2. To leave outstanding certain shares of the Company's Common Stock issued in
connection with the acquisition of Super Kwik, as described in the Proxy
Statement:
FOR AGAINST ABSTAIN
[_] [_] [_]
3. To amend the Certificate of Incorporation of the Company to delete Article
Seventh thereof, as described in the Proxy Statement:
FOR AGAINST ABSTAIN
[_] [_] [_]
4. To ratify the appointment of Ernst & Young, LLP as independent accountants
to examine the financial statements of the Company for the fiscal year
ending June 30, 1997:
FOR AGAINST ABSTAIN
[_] [_] [_]
THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF THE NOTICE OF SPECIAL MEETING AND
PROXY STATEMENT.
Signature of Stockholder_______________________, Date:_________________1997
Signature of Stockholder_______________________, Date:_________________1997
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.
