<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
QUARTERLY REPORT UNDER SECTION 13 OR 15 (D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED MARCH 31, 1997
COMMISSION FILE NO. 0-16102
EASTERN ENVIRONMENTAL SERVICES, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of incorporation or organization)
59-2840783
(I.R.S. Employer Identification No.)
1000 CRAWFORD PLACE, SUITE 101, MOUNT LAUREL, NJ 08054
(Address of Principal Executive Offices)
Registrant's Telephone No., including area code: (609) 235-6009
Indicate by checkmark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such report), and (2) has been subject to such filing
requirements for the past 90 days. YES X NO
---- ----
Indicate the number of shares outstanding of each of the issuer's classes of
Common Stock:
As of May 9, 1997 14,099,929 Shares of Common Stock
<PAGE>
EASTERN ENVIRONMENTAL SERVICES, INC.
Form 10-Q
Quarter Ended March 31, 1997
INDEX
<TABLE>
<CAPTION>
PAGE
<S> <C>
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
Condensed Consolidated Balance Sheets - March 31, 1997
and June 30, 1996 (Restated) 1
Condensed Consolidated Statements of Operations for the three
months ended March 31, 1997 and 1996 (Restated) 3
Condensed Consolidated Statements of Operations for the nine
months ended March 31, 1997 and 1996 (Restated) 4
Condensed Consolidated Statement of Stockholders' Equity
for the nine months ended March 31, 1997 (Restated) 5
Condensed Consolidated Statements of Cash Flows for the
nine months ended March 31, 1997 and 1996 (Restated) 6
Notes to Condensed Consolidated Financial Statements 8
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations 12
PART II - OTHER INFORMATION
Item 2 - Changes in Securities 17
Item 4 - Submission of Matters to a Vote of Security Holders 18
Item 6 - Exhibits and Reports on Form 8-K 19
</TABLE>
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Eastern Environmental Services, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
<TABLE>
<CAPTION>
MARCH 31 JUNE 30
1997 1996
--------------- ---------------
(RESTATED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 3,906,902 $ 1,776,112
Accounts receivable, less allowance for
doubtful accounts of $ 1,519,000
and $ 604,000 7,694,765 3,349,159
Deferred income taxes 1,568,000 372,445
Tax refund receivable - 74,467
Prepaid expenses and other current assets 2,173,656 1,698,753
-------------- --------------
Total current assets 15,343,323 7,270,936
Property and equipment:
Land 4,166,178 236,517
Landfill sites 30,571,790 12,673,250
Buildings and leasehold improvements 6,441,336 2,098,512
Vehicles 15,623,804 11,806,417
Machinery and equipment 15,098,307 7,553,325
Furniture and fixtures 1,390,761 1,485,868
-------------- --------------
Total property and equipment 73,292,176 35,853,889
Accumulated depreciation and amortization (19,120,447) (17,510,520)
-------------- --------------
54,171,729 18,343,369
Assets held for resale 395,059 859,262
Excess cost over fair market value of net assets
acquired, net of $663,000 and $440,000
accumulated amortization 15,764,939 372,096
Other intangible assets, net of $3,344,000 and
$3,202,000 accumulated amortization 1,720,740 662,685
Notes receivable from shareholders/officers 463,902 432,902
Other assets, (including $538,000 and $433,000
of restricted cash on deposit for landfill
closure and insurance bonding) 1,493,005 844,837
-------------- --------------
TOTAL ASSETS $ 89,352,697 $ 28,786,087
============== ==============
</TABLE>
1
<PAGE>
<TABLE>
<CAPTION>
MARCH 31 JUNE 30
1997 1996
------------ ------------
(RESTATED)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings $ - $ 595,000
Current maturities on long-term debt 1,285,312 773,702
Current maturities on capital lease
obligations 1,445,100 1,240,358
Accounts payable 3,835,667 3,559,131
Accrued expenses 8,361,616 2,028,359
Income taxes payable 45,880 57,739
Current portion of accrued landfill
closure and other environmental costs 1,070,000 870,000
----------- -----------
Total current liabilities 16,043,575 9,124,289
Deferred income taxes 3,832,203 507,623
Long-term debt 31,736,086 3,534,716
Capital lease obligations - long-term 2,244,432 2,774,124
Accrued landfill closure and other
environmental costs 8,172,364 2,424,137
Stockholders' equity:
Common stock, $.01 par value:
Authorized shares - 50,000,000
Issued and outstanding shares -
14,095,834 and 9,523,785 140,958 95,238
Additional paid-in capital 27,927,552 10,661,427
Retained earnings (deficit) (668,214) (259,208)
----------- -----------
27,400,296 10,497,457
Less treasury stock at cost - 39,100
common shares (76,259) (76,259)
----------- -----------
Total stockholders' equity 27,324,037 10,421,198
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $89,352,697 $28,786,087
=========== ===========
</TABLE>
See accompanying notes.
2
<PAGE>
Eastern Environmental Services, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
--------------------------
1997 1996
------------ ------------
(RESTATED)
<S> <C> <C>
Revenues $19,512,498 $ 9,554,544
Cost of revenues 12,729,563 7,589,196
Selling, general and administrative expenses 4,142,032 1,949,689
Merger costs - See Note 2 1,480,452 -
----------- -----------
Operating income 1,160,451 15,659
Interest expense (746,654) (147,643)
Other income 192,823 61,948
----------- -----------
Income (loss) before income taxes 606,620 (70,036)
Income tax expense (benefit) - See Note 3 244,390 (15,449)
----------- -----------
Net income (loss) $ 362,230 $ (54,587)
=========== ===========
Net income (loss) per share $.02 $ (.01)
=========== ===========
Weighted average number of shares
outstanding 15,446,764 9,118,255
=========== ===========
</TABLE>
See accompanying notes.
3
<PAGE>
Eastern Environmental Services, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
MARCH 31
----------------------------
1997 1996
-------------- ------------
(RESTATED)
<S> <C> <C>
Revenues $ 52,409,183 $29,020,986
Cost of revenues 38,026,625 23,666,269
Selling, general and administrative expenses 9,245,947 5,665,268
Merger costs - See Note 2 3,336,792 -
------------- -----------
Operating income (loss) 1,799,819 (310,551)
Interest expense (1,525,509) (416,590)
Other income 461,089 186,538
------------- -----------
Income (loss) before income taxes 735,399 (540,603)
Income tax expense - See Note 3 940,405 -
------------- -----------
Net loss $ (205,006) $ (540,603)
============= ===========
Net loss per share $ (.02) $ (.06)
============= ===========
Weighted average number of shares
outstanding 13,316,698 8,930,968
============= ===========
</TABLE>
See accompanying notes.
4
<PAGE>
Eastern Environmental Services, Inc.
Condensed Consolidated Statement of Stockholders' Equity
(Unaudited)
<TABLE>
<CAPTION>
ADDITIONAL RETAINED
COMMON PAID-IN EARNINGS TREASURY GRAND
STOCK CAPITAL (DEFICIT) STOCK TOTAL
-------- ----------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C>
Balance at
June 30, 1996
(Restated) $ 95,238 $10,661,427 $ (259,208) $ (76,259) $10,421,198
Exercise of
common stock
options and warrants 4,055 324,004 - - 328,059
Proceeds from sale
of 2,670,000 shares of
common stock, less
commissions and
issuance expenses of
$724,248 26,700 9,929,052 - - 9,955,752
Common stock issued in
connection with
incorporation of
Apex 7,970 3,242,030 - - 3,250,000
Common stock issued in
purchase acquisitions 6,970 3,751,064 - - 3,758,034
Common stock issued
for consulting services 25 19,975 - - 20,000
Cash dividends paid to
former stockholders
of Donno Co., Inc.
and affiliates - - (204,000) - (204,000)
Net loss - - (205,006) - (205,006)
-------- ----------- ----------- ---------- ------------
Balance at
March 31, 1997 $140,958 $27,927,552 $ (668,214 ) $ (76,259) $27,324,037
======== =========== =========== ========== ============
</TABLE>
See accompanying notes.
5
<PAGE>
Eastern Environmental Services, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
MARCH 31
---------------
1997 1996
-------- --------
(RESTATED)
<S> <C> <C>
OPERATING ACTIVITIES
Net loss $ (205,006) $ (540,603)
Adjustments to reconcile net loss
to net cash provided by operating activities:
Depreciation and amortization 3,073,817 2,354,427
Provision for losses on receivables 172,834 95,908
Landfill closure costs 206,816 68,517
Deferred income taxes 904,067 (13,349)
Gain on sale of property and equipment (136,353) (428)
Changes in operating assets and liabilities:
Accounts receivable (1,992,988) 28,718
Accounts payable (1,955,278) (120,968)
Accrued expenses 2,745,026 (307,912)
Income taxes payable 62,608 75,680
Other 113,309 731,263
------------- -----------
Net cash provided by operating activities 2,988,852 2,371,253
</TABLE>
See accompanying notes.
6
<PAGE>
Eastern Environmental Services, Inc.
Condensed Consolidated Statements of Cash Flows (continued)
(Unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
MARCH 31
-------------------------------
1997 1996
--------------- --------------
(RESTATED)
<S> <C> <C>
INVESTING ACTIVITIES
Proceeds from sale of property and equipment $ 268,727 $ (2,075,914)
Acquisition of businesses, net of cash acquired (34,232,130) (122,500)
Development of landfill sites (1,857,546) (1,624,597)
Purchase of property and equipment (3,660,007) (135,037)
Landfill closure and insurance bonding deposits (53,209) 146,021
Marketable securities -- 37,383
Increase in other assets -- (66,883)
-------------- -------------
Net cash used in investing activities (39,534,165) (3,841,527)
FINANCING ACTIVITIES
Proceeds from revolving line of credit,
long-term debt and capital lease obligations 31,693,650 3,498,942
Payments on revolving line of credit,
long-term debt and capital lease obligations (6,316,358) (3,330,561)
Net payments on note payable
to shareholder/officer (31,000) (42,457)
Proceeds from the incorporation of Apex 3,250,000 --
Net proceeds from issuance of
common stock 10,283,811 861,824
Cash dividends paid to former stockholders of
Donno Company, Inc. and affiliates (204,000) (153,000)
-------------- -------------
Net cash provided by financing activities 38,676,103 834,748
Net increase (decrease) in cash and
cash equivalents 2,130,790 (635,526)
Cash and cash equivalents at beginning
of period 1,776,112 2,972,188
-------------- -------------
Cash and cash equivalents at end
of period $ 3,906,902 $ 2,336,662
============== =============
</TABLE>
See accompanying notes.
7
<PAGE>
Eastern Environmental Services, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION
The accompanying unaudited condensed consolidated financial statements include
the accounts of Eastern Environmental Services, Inc. (the "Company") and its
subsidiaries, all of which are wholly-owned. All significant inter-company
accounts and transactions have been eliminated in consolidation. These condensed
financial statements reflect all adjustments (consisting of normal recurring
accruals), which in the opinion of management, are necessary for a fair
statement of results of operations for the interim periods presented. The
Company has restated the previously issued financial statements for the nine
months ended March 31, 1996 to reflect the business combinations of Super Kwik,
Inc., and the Donno Company, Inc. and Affiliates ("Donno"), accounted for using
the "pooling of interests" method. The June 30, 1996 condensed consolidated
balance sheet was also restated to include the business combinations of Super
Kwik, Inc. and Donno. The results of operations for the period ended March 31,
1997 are not necessarily indicative of the operating results for the full year.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. These interim financial statements should be
read in conjunction with the audited financial statements and notes contained in
the Company's Annual Report on Form 10-K for the year ended June 30, 1996.
2. BUSINESS COMBINATIONS
From July 2, 1996 to March 31, 1997, the Company expanded its waste collection
and hauling operations through the acquisition of nine businesses. The
aggregate of these business acquisitions is significant to the company. Six of
the nine acquisitions noted below were accounted for using the purchase method
of accounting, accordingly, assets acquired and liabilities assumed have been
recorded at their estimated fair value at the date of acquisition and their
results of operations are included in the accompanying combined statements of
operations since the date of acquisition. The excess of purchase price over the
estimated fair market value of identifiable net tangible assets acquired is
being amortized on a straight-line basis over forty (40) years from the date of
acquisition. The purchase price allocation is based on preliminary estimates as
of the acquisition date.
On July 2, 1996, the Company acquired substantially all of the assets and
assumed certain liabilities of Allied Environmental Services, Inc. and its
affiliated corporations ("Allied") in exchange for 116,667 unregistered shares
of the Company's common stock. Allied was founded in 1991 and is in the business
of arranging for the transportation and disposal of soils and special waste
products.
On July 27, 1996, the Company purchased certain assets of K Hydraulics, Inc.
("K") in exchange for 33,333 unregistered shares of the Company's common stock.
"K" conducted a municipal solid waste collection business in Philadelphia,
Pennsylvania performing principally long-haul transportation of municipal and
other special wastes.
On August 1, 1996, the Company purchased the assets of Eastern Waste of
Philadelphia, Inc. ("Eastern Waste") for 391,250 unregistered shares of the
Company's common stock. Eastern Waste conducts a municipal solid waste
collection business in Philadelphia, Pennsylvania.
8
<PAGE>
On September 17, 1996, the Company purchased certain assets of Olney Sanitary
System, Inc. ("Olney") for $410,000 in cash. Olney operates a municipal solid
waste collection business in the southeast Illinois market. The waste collected
by Olney will be disposed of at the Company's Illinois landfill upon
construction.
On September 27, 1996, the Company completed its merger with Super Kwik, Inc.
and Waste Maintenance Services, Inc., (collectively referred to as "Super Kwik,
Inc."), and approximately 2,308,176 unregistered shares of the Company's common
stock were issued in exchange for all outstanding shares of Super Kwik, Inc. and
Waste Maintenance Services, Inc. Super Kwik operates a municipal solid waste
collection business in southern New Jersey, operating over 75 collection
vehicles and serving more than 29,000 customers. The transaction has been
accounted for using the pooling of interests method; and accordingly, the
accompanying condensed consolidated financial statements include the accounts of
Super Kwik, Inc. for all periods presented.
On December 10, 1996, the Company completed the purchase of the stock of R&A
Bender, Inc. and certain real estate owned by R&A Bender Property, Ltd. ("R&A
Bender") for total consideration of approximately $17,484,000, including 106,667
unregistered shares of the Company's common stock. R&A Bender operates a 278-
acre Subtitle D municipal solid waste landfill and a waste collection business
in south central Pennsylvania. The collection operation includes over 25
collection vehicles and serves more than 24,000 customers. Waste collected by
the collection operation is disposed of in the landfill as well as a portion of
the special waste collected by the Company's existing long haul transportation
operations.
On January 31, 1997, the Company completed its merger with the Donno Company,
Inc., Suffolk Waste Systems, Inc. and Residential Services, Inc. and N.R.T.
Realty Corporation (collectively referred to as the "Donno Companies") with
1,137,951 unregistered shares of the Company's common stock issued in exchange
for all issued and outstanding shares of the Donno Companies. The Donno
Companies operate over 75 vehicles and a transfer station and service over
60,000 residential and commercial customers in Nassau and Suffolk Counties of
Long Island, New York. The transaction has been accounted for using the
pooling of interests method and; accordingly, the accompanying condensed
consolidating financial statements include the accounts of the Donno Companies
for all periods presented.
On March 31, 1997, the Company completed its merger with Apex Waste Services,
Inc. ("Apex"), with 796,927 unregistered shares of the Company's common stock,
par value $.01, (including 2,482 shares ("additional shares") representing an
adjustment for long-term debt being less than $15,000,000 at March 31, 1997, the
date of closing) issued in exchange for all issued and outstanding shares of
Apex. Apex operates over 65 collection vehicles and a transfer and processing
station and provides services to approximately 10,000 residential and 4,000
commercial customers in Northeastern Pennsylvania. The transaction has been
accounted for using the pooling of interests method. Apex was formed on
October 1, 1996 as a result of the acquisition of certain assets from Waste
Management of Pennsylvania, Incorporated. The results of operations of Apex have
been included in the Company's condensed consolidated financial statements since
the date of inception of Apex.
Combined and separate results of operations of the Company, from Super Kwik,
Inc., the Donno Companies, and Apex Waste Services, Inc. for the restated
periods included in this report are as follows (in thousands):
9
<PAGE>
<TABLE>
<CAPTION>
Eastern Super
Environmental Kwik, Donno Apex Waste
Services, Inc. Inc. Companies Services, Inc. Adjustments(1) Combined
------------------ --------- ----------- --------------- --------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Nine months ended
March 31, 1997
Revenues $ 17,265 $16,936 $ 9,564 $ 8,644 $ -- $ 52,409
Net income (loss) 26 2,846 537 627 (4,241) (205)
Nine months ended
March 31, 1996
Revenues $ 5,714 $15,154 $ 8,153 $ -- $ -- $ 29,021
Net income (loss) (483) 87 (145) -- -- (541)
- ------------------------------
</TABLE>
<TABLE>
<CAPTION>
Eastern
Environmental Donno Apex Waste
Services, Inc. Companies Services, Inc. Combined
------------------ ----------- --------------- ----------
<S> <C> <C> <C> <C>
Six months ended
December 31, 1996
Revenues $ 21,984 $ 6,537 $ 4,376 $ 32,897
Net income (loss) (845) 146 132 (567)
</TABLE>
(1) As discussed within this report, adjustments include merger costs
relating to the acquisition of Super Kwik, Inc., Donno Company, Inc.,
and Apex Waste Services, Inc. of $1,148,000, $955,000, and $1,234,000
respectively, and a tax provision of $660,000, $8,000, and $236,000
relating to the recording of a deferred tax liability with respect to
the termination of the Super Kwik, Inc., the Donno Companies, and Apex
Waste Services, Inc., respectively, on the previous S corporation
elections at the date of the merger.
3. INCOME TAXES
The Company has recorded an income tax provision of $940,405 for the nine
months ended March 31, 1997. This provision is primarily related to the
completion of the mergers with Super Kwik, Inc., the Donno Companies and Apex.
Prior to the merger date, Super Kwik, Inc., the Donno Companies and Apex were S
Corporations for income tax reporting purposes. Effective as of the date of the
merger, the S Corporation elections were terminated. The Company has recorded
net deferred tax liabilities as of the date of the mergers resulting in a
cumulative income tax provision of approximately $904,865. The Company's net
deferred tax liability is attributable primarily to the differences between the
net book and tax bases of assets held as of the merger date. The Company has
recorded a nominal current tax provision due to the realization of net operating
loss carryforwards and the reversal of related deferred tax reserves previously
recorded.
4. USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements. Actual results could
differ from those estimates. Such estimates include the Company's accounting
for closure and post-closure obligations; amortization of landfill development
costs; and estimates of reserves such as the allowance for doubtful accounts
receivable, and the Company's estimate of merger costs. The Company reduced its
estimate of accrued merger costs related to the Super Kwik business combination
by $708,000, or $.05 per share, during the three months ended March 31, 1997.
5. ACCOUNTING PRONOUNCEMENTS
In February 1997, the Financial Accounting Standards Board issued Statement No.
128, "Earnings per Share", which is required to be adopted for fiscal periods
ending after December 15, 1997 (fiscal 1998 for the Company). At that time, the
Company will be required to change the method currently used to compute earnings
per share. Under the new standard, the dilutive effect of stock options and
stock warrants will be excluded. If earnings per share had been calculated under
the new requirements, the effect would not have been material to the periods
presented.
10
<PAGE>
6. SUBSEQUENT EVENTS
On May 12, 1997, the Company completed the acquisition of Waste Services, Inc.
and affiliates, accounted for using the purchase method. Pursuant to the
Purchase Agreement, property and equipment and intangible assets were acquired
for consideration consisting of 1,159,980 unregistered shares of the Company's
common stock and the assumption of approximately $6,177,000 of debt. The Company
has accrued an obligation of $6.2 million as additional purchase which is
contingent upon the resolution of certain events and is payable in either cash
or a future maximum issuance of 357,849 shares of the Company's Common Stock. As
part of this contingency, the Company also posted a Letter of Credit in the
amount of $2,641,310 and agreed to pay up to $630,000 relating to a debt WSI
owed to one of its creditors. Such future payment is contingent upon
authorization from the New York City Trade Waste Commission or a court having
jurisdiction. The Company also closed on May 12, 1992 into Escrow the pending
acquisitions of Golden Gate Carting Co. Inc., ("Golden Gate") and Coney Island
Rubbish Removal, Inc. ("Coney Island") pending satisfaction of certain normal
conditions which the Company believes will be resolved. Estimated consideration
relating to the Golden Gate and Coney Island acquisitions consists of 288,820
unregistered shares of the Company's stock and the assumption of approximately
$3.0 million of debt. WSI, Golden Gate and Coney Island are operated under
common management control and provides principally commercial waste collection
services in Brooklyn, Queens, and Long Island, New York. The acquisitions of
Golden Gate and Coney Island will also be accounted for under the purchase
method of accounting.
Additionally, subsequent to March 31, 1997 the Company acquired the assets of
five (6) waste hauling and collecting companies and a waste transfer facilities
in separate transactions. The Company issued approximately 465,000 unregistered
shares of the Company's stock, paid cash of approximately $3.6 million to the
sellers and assumed debt of approximately $7.2 million. These transactions will
be accounted for using the purchase method of accounting.
On May 8, 1997, the Company executed the Fifth Amendment to the Revolving Credit
Agreement, which among other items, increased the Company's borrowing capacity
from $50 million to $100 million.
11
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS FOR THE NINE MONTHS
ENDED MARCH 31, 1997 COMPARED TO THE NINE MONTHS ENDED MARCH 31, 1996
Revenues
The Company is a non-hazardous solid waste management company specializing in
the collection, transportation and disposal of residential, industrial,
commercial and special waste, principally in the eastern United States. The
Company's revenues for the nine months ended March 31, 1997 were attributable
81.0% to solid waste collection and transportation operations, 7.6% to solid
waste disposal operations, and 11.4% to other waste management services.
The Company's solid waste collection operations earn revenues from fees
collected from residential, commercial, and industrial collection and transfer
station customers. Solid waste collection is provided under two primary types
of arrangements depending on the customers being served. Collection services
for commercial and industrial customers are generally performed under a one to
three year service agreement. Collection services for residential customers
generally are performed under contracts with, or franchises granted by,
municipalities or regional authorities that grant the Company rights to service
all or a portion of the residents in their jurisdictions, except in rural areas
where the Company usually contracts directly with the customer. Such contracts
or franchises generally range in duration from one to three years. Recently,
some municipalities have bid their residential collection contracts based on
the volume of waste collected. Residential collection fees are either paid by
the municipalities out of tax revenues or service charges or paid directly by
residents receiving the services.
As part of its solid waste collection operations, the Company's four owned or
operated transfer stations receive solid waste collected primarily by its
various collection operations, compact the waste and transfer it to larger
company owned vehicles for transport to landfills. This procedure reduces the
Company's costs by improving its use of collection personnel and equipment.
The Company's solid waste landfills earn revenues from disposal fees charged
to third parties. These landfills receive solid waste from its own collection
companies and transfer stations, as well as from independent collection
operators. Over the nine months ended March 31, 1997, approximately 6.0% of the
solid waste collected by the Company was delivered for disposal at its own
landfills, and approximately 29.0% of the solid waste disposed of at the
Company's landfills was delivered by the Company.
The Company's prices for solid waste collection, transportation, and disposal
services are typically determined by the volume, weight, and type of waste
collected, as well as other factors including the competitive pricing
environment. The Company's ability to pass on cost increases may be limited by
the terms of its contracts. [Solid waste collection contracts typically include
a formula adjustment to prices.]
Cost of Revenues
Cost of revenues consist primarily of tipping fees paid to third party
landfills, amortization of capitalized direct landfill development costs,
accruals for future landfill closure and post-closure costs, direct labor and
related taxes and benefits, subcontracted transportation and equipment rental
charges, maintenance and repairs of equipment and facilities, environmental
compliance costs and site maintenance costs for landfills, fuel, and landfill
assessment fees and taxes.
12
<PAGE>
Certain direct engineering, legal, permitting, construction and other costs
associated with expansion of landfills, together with related interest expense,
are capitalized over the estimated useful life of the site using the unit of
production method as airspace is consumed. Successful permitting of additional
landfill disposal capacity improves the Company's profitability by extending
the time period over which the Company may amortize capitalized costs of the
landfill. The Company's policy is to charge against net income any unamortized
capitalized expenditures and advances relating to any landfill that is
permanently closed or any landfill expansion project that is not completed.
The Company capitalizes direct incremental costs associated with acquisitions.
Indirect development and acquisition costs, such as executive and corporate
overhead, public relations and other corporate services and overhead are
expensed as incurred. The Company also charges against net income any
unamortized capitalized expenditures relating to proposed acquisitions that are
not consummated. Property and equipment is depreciated over the estimated useful
life of the assets using the straight line method.
At March 31, 1997, capitalized costs related directly to the acquisition and
expansion of existing and future landfills and cell development were $30.6
million and capitalized costs related directly to proposed acquisitions that
are not consummated were $451,000. The Company periodically reviews the future
realization of these capitalized project costs and makes provisions against
capitalized costs that are associated with projects that are not probable of
completion.
Selling, General and Administrative Expenses
Selling, general, and administrative expenses consist primarily of
management, clerical and administrative salaries and costs and overhead,
amortization expense related to intangible assets, professional services,
facility rentals and associated costs, financial insurance bonding premiums,
landfill related financial assurance bonding premiums, and costs relating to
marketing and sales.
Merger Costs
In connection with acquisitions accounted for as under the pooling of
interests method, the Company records various merger costs including
transaction-related expenses and costs to bring the acquired assets into
conformity with corporate safety and operational standards.
Other Income (Expense)
Other income and expense, which is composed primarily of interest income and
gains and losses on sales of equipment, has not historically been material to
the Company's results of operations.
Taxes
The Company had a net operating loss carryforward for federal income tax
purposes of approximately $4.3 million at June 30, 1996 of which $900,000 was
utilized through March 31, 1997. The Company anticipates utilizing the
remaining net operating loss carryforward during fiscal 1998. Thereafter, the
Company will record a provision for taxes at statutory rates.
ACQUISITION PROGRAM
The Company has implemented an aggressive acquisition program to expand its
operations by acquiring solid waste collection, transportation, and disposal
companies, principally in the eastern United States. Approximately $47.4
million or 90.0% of the Company's revenues for the nine months ended March 31,
1997 and approximately $72.5 million or 82.0% of the Company's assets at March
31, 1997 resulted from the 11 acquisitions consummated by the Company between
July 1996 and March 1997. Of the 11 acquisitions (of its 23 acquisitions in
total), eight have been accounted for under the purchase method of accounting
and three have been accounted for under the pooling of interests method of
accounting.
With respect to the eight acquisitions that have been accounted for under the
purchase method of accounting, goodwill is amortized over a period of 40 years,
resulting in an annual non-cash charge to
13
<PAGE>
earnings during the amortization period. Accordingly, if the Company completes
additional acquisitions which are accounted for under the purchase method of
accounting, its financial position and results of operations may fluctuate
significantly from period to period, as a result of additional non-cash charges
relating to goodwill.
In connection with each of its acquisitions, the Company attempts to
implement a number of cost saving measures, including reductions (in certain
instances) in, in certain instances, management levels and other personnel, the
imposition of centralized management and cost controls, and the elimination of
duplicative collection routes.
Because of the relative importance of acquired businesses and assets to the
Company's financial performance, the Company does not believe that its
historical financial statements are necessarily indicative of future
performance.
Results of Operations for the Nine Months Ended March 31, 1997 Compared to the
Nine Months Ended March 31, 1996.
The following table presents the percentage each item in the consolidated
statements of income bears to total revenues relating to continuing operations.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
MARCH 31,
-------------------
1996 1997
-------- --------
<S> <C> <C>
Revenues............................................. 100.0% 100.0%
Cost of revenues..................................... 81.6 72.6
Selling, general, and administrative expenses........ 19.5 17.6
Merger costs......................................... -- 6.4
-------- --------
Operating income (loss).............................. (1.1) 3.4
Interest expense..................................... (1.4) (2.9)
Other income (expense)............................... .6 .9
-------- --------
Income (loss) before income taxes.................... (1.9) 1.4
Income taxes......................................... -- 1.8
-------- --------
Net income (loss) from continuing operations......... (1.9)% (.4)%
======== ========
Depreciation and amortization included in above
costs............................................... 8.1% 5.9%
</TABLE>
Revenues for the nine months ended March 31, 1997 were $52.4 million compared
to $29.0 million for the nine months ended March 31, 1996, an increase of $23.4
million or 80.7%. The principal factor affecting the increase in revenues was
the impact of acquisitions, primarily of Allied Waste Services, Inc., K
Hydraulic Truck Services, Inc., R & A Bender, Inc., Bayside of Marion, Inc.,
Olney Sanitary Systems, Inc., and their respective affiliates, which contributed
aggregate revenues of $12.5 million for the nine months ended March 31, 1997.
The acquisition of Super-Kwik, Inc. and Donno Company, Inc., which have been
accounted for as poolings of interests, contributed revenue of $26.5 million for
the nine months ended March 31, 1997 compared to $23.4 million for the nine
months ended March 31, 1996, an increase of $3.1 million. Additionally, Apex
Waste Services, Inc., accounted for under the pooling of interests method,
contributed revenues of $8.6 million since its inception of operations on
October 1, 1996.
Cost of revenues for the nine months ended March 31, 1997 were $38.0 million
compared to $23.7 million for the nine months ended March 31, 1996, an increase
of $14.3 million. Cost of revenues as a
14
<PAGE>
percentage of revenues for the nine months ended March 31, 1997 was 72.6%
compared to 81.6% for the same period in fiscal 1996. Cost of revenues as a
percentage of revenues decreased during this period primarily due to the
acquisition by the Company of two landfills, which operated at relatively
higher margins than the Company's other operations and to the operating
efficiencies imposed on previously private acquired companies. A portion of the
decrease was also attributable to economies of scale relating to the Company's
increase in size over the period.
Selling, general and administrative expenses for the nine months ended March
31, 1997 were $9.3 million compared to $5.8 million for the nine months ended
March 31, 1996, an increase of $3.5 million or 38.7%. These expenses as a
percentage of revenues for the nine months ended March 31, 1997 was 17.6%
compared to 19.5% for the same period in fiscal 1996. These reductions as a
percentage of revenue reflect certain cost savings related to economies of
scale in restructuring the Company's insurance programs and overall
efficiencies gained through integrating acquisitions partially offset by
increases in corporate functions, including accounting, finance, legal and
administration, in connection with providing these services.
Merger costs incurred during the nine months ended March 31, 1997 were a total
of $3.3 million relating to the acquisitions of Super Kwik, Inc., Donno Company,
Inc., and Apex Waste Services, Inc. Merger costs include $734,000 of
transactions costs and $2.6 million of costs related to integrating operations.
Interest expense for the nine months ended March 31, 1997 was $1.5 million
compared to $417,000 for the nine months ended March 31, 1996, an increase of
$1.1 million. This increase is principally the result of borrowings under the
Company's credit facility for the purchase of R&A Bender, Inc. and increased
interest expense related to Super Kwik, Inc. for the purchase of real estate and
an increase in equipment financing over the prior year.
Other income for the nine months ended March 31, 1997 was $461,000 compared to
$187,000 for the nine months ended March 31, 1996, an increase of $274,000. This
increase in other income included a $140,000 increase in interest income,
reflecting earnings on the net proceeds from private placements of Common Stock
in the summer of 1996, and a $126,000 increase in gains from dispositions of
fixed assets.
The tax provision for the nine months ended March 31, 1997 included $904,000
relating principally to the completion of the mergers with Super Kwik, Inc.,
Donno Company, Inc. and Apex Waste Services, Inc. and their respective
affiliates. The provision reflects the recording of a deferred tax provision as
of the date of the respective mergers, at which time the pooled entities'
S corporation elections were terminated. The remainder of the tax provision
relates to state income taxes. An effective tax rate lower than the federal and
state statutory rates in the year is primarily due to the use of net operating
loss carryforwards and the reversal of a previously recorded valuation
allowance.
RESULT OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1997 COMPARED TO THE
THREE MONTHS ENDED MARCH 31, 1996.
As a result of factors discussed above the results of operations for the three
months ended March 31, 1997, compared to the three months ended March 31, 1996
reflects an increase in net sales of $10.0 million. Additionally, the Company
recorded net income of $.4 million for the three months ended March 31, 1997, as
compared to a net loss of $.1 million for the same period in fiscal 1996, an
improvement of $.03 per share.
LIQUIDITY AND CAPITAL RESOURCES
The Company's business requires substantial amounts of capital. The Company's
capital requirements include acquisitions, equipment purchases and capital
expenditures for cell construction and expansion of its landfills. The Company
plans to meet these capital needs from various financing sources, including
borrowings, internally generated funds and the issuance of Common Stock.
As of March 31, 1997, the Company had working capital deficit of $700,000,
including cash and cash equivalents of $3.9 million. Current liabilities of
$16.0 million exceeded current assets of $15.3 million at March 31, 1997. For
the first nine months of fiscal 1997, net cash provided by operations was
approximately $3.0 million, with net cash from financing activities of
approximately $38.7 million, including net proceeds of $10.0 million from
private placements of Common Stock. A significant portion of capital expended
during the period, approximately $39.8 million, was used to fund the acquisition
of property and equipment, including $34.2 million relating to acquisitions
of businesses, $3.7 million for the purchase of operating equipment and real
estate, and $1.9 million related to the permitting and development of landfill
space.
15
<PAGE>
The Company to date has required substantial amounts of capital and continues
to expend substantial amounts to support its acquisition program and
the expansion of its disposal and transportation operations. The Company
estimates aggregate capital expenditures of approximately $8.4 million for the
year ended June 30, 1997 and $14.9 million for the year ended June 30, 1998.
The Company has addressed its capital need through private placements of Common
Stock which generated net proceeds of $10.0 million in the nine months ended
March 31, 1997 and by establishing a revolving credit facility.
On September 25, 1996, the Company entered into a revolving credit facility
with First National Bank of Boston and Bank of America Illinois to provide for
borrowings up to $30.0 million (the "Credit Facility"). The Credit Facility,
which was increased to $50.0 million on January 27, 1997 and to $100.0 million
on May 8, 1997, is available for repayment of debt, funding of acquisitions,
working capital, and for up to $20.0 million in standby letters of credit. As
of May 12, 1997, $51.9 million and $1.4 million in letters of credit were
outstanding under the Credit Facility. The net proceeds of the Offering will be
used to reduce outstanding indebtedness under the Credit Facility.
At the Company's option, the interest rate on any loan under the Credit
Facility may be based on an adjusted prime rate or Eurodollar rate, as defined
in the agreement. The facility expires on April 30, 2000. The Credit Facility
requires the payment of a 3/8 of 1% commitment fee on any unused balance,
payable in arrears, and provides for certain restrictions on the ability of the
Company to incur borrowings, sell assets, or pay cash dividends. The facility
also requires the maintenance of certain financial ratios, including interest
coverage ratios and leverage ratios, and requires profitable operations. The
facility is collateralized by all the stock of the Company's subsidiaries,
whether now owned or hereafter acquired.
The Company will have financial obligations related to closure and post-
closure monitoring and maintenance of the currently permitted and operating
landfills. While the exact amount of future closure obligations cannot be
determined, the Company estimates that the costs of final closure of the
currently permitted and operating areas at the Company's five landfills will be
approximately $14.2 million, of which $3.2 million has been accrued as of March
31, 1997. The Company has accrued $1.5 million for post-closure obligations as
of March 31, 1997, representing approximately 20% of the present value of such
future cash outlays. The Company maintains a bonding facility pursuant to
certain statutory requirements regarding financial assurance for the closure
and post-closure monitoring cost requirements for its West Virginia and
Pennsylvania disposal facilities. Bonds outstanding at March 31, 1997 were
$214,000 and $1.6 million for the West Virginia and Pennsylvania landfills,
respectively. The bonds are collateralized by irrevocable letters of credit and
trust fund deposits. Additionally, the Company has on deposit $408,000 as
financial assurance for landfill closure and post-closure for closed disposal
areas. The trust fund and the certificates of deposit are restricted from
current operations and are included within other noncurrent assets. The Company
anticipates that the West Virginia bonding requirements will substantially
increase when West Virginia's solid waste program is approved by the federal
government. Financial assurance requirements could increase to approximately
$3.1 million for closure and $3.7 million for post-closure monitoring and care.
Additional collateral requirements will be imposed upon the Company which will
affect profitability of the Company. The Company anticipates providing
financial assurance incrementally over the life of the facility as disposal
cells are constructed and certified for acceptance of waste.
SEASONALITY AND INFLATION
The Company's revenues tend to be somewhat lower in the winter months. This
is primarily attributable to the fact that the volume of industrial and
residential waste in the regions in which the Company operates tends to
decrease during the winter months. In addition, particularly harsh weather
conditions may affect the Company's operations by interfering with collection,
transportation, and disposal operations, delaying the development of landfill
capacity, and/or reducing the volume of waste generated by the Company's
customers.
The Company believes that inflation and changing prices have not had, and are
not expected to have, any material adverse effect on its results of operations
in the near future.
16
<PAGE>
PART II
OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES
(C) Private Placements:
On January 31, 1997, the Company completed its merger with the Donno
Company, Inc., Suffolk Waste Systems, Inc. and Residential Services,
Inc. and N.R.T. Realty Corporation (collectively referred to as the
"Donno Companies") with 1,137,951 shares of common stock of the
Company, par value $.01 per share, issued in exchange for all issued
and outstanding shares of the Donno Companies. The shareholders of the
Donno Companies were also issued ten year stock options totaling
142,800 shares of common stock of the Registrant, at a per share
exercise price of $10.88.
On March 31, 1997, the Company completed its merger with Apex Waste
Services, Inc. ("Apex") with 796,927 shares of the Company's common
stock, par value $.01 per share, (including 2,482 shares ("additional
shares") representing an adjustment for long-term debt being less than
$15,000,000 at March 31, 1997, the date of closing) issued in exchange
for all issued and outstanding shares of Apex.
Under all of the private placements described above, the Company has
agreed to register the Shares for resale under the Securities Act of
1933 (the "Act") under certain conditions. The sale of the Shares was
exempt from the registration provisions of the Act pursuant to Section
4(2) of the Act and/or Regulation D promulgated under the Act for
transactions not involving a public offering, based on the fact that
the private placements were made to accredited investors who had
access to financial and other relevant data concerning the Company,
its financial condition, business and assets. The securities sold in
the private placements may not be reoffered or resold absent
registration under the Act or available exemptions from such
registration requirements.
17
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of the shareholders of Eastern Environmental
Services, Inc. was held on March 31, 1997. The following proposals
were submitted to a vote: (i) to approve for a one-year term for the
Election of Directors, expiring at the next Annual Meeting to be held
following the end of fiscal 1997, (ii) to leave outstanding certain
shares of the Company's common stock issued in connection with the
acquisition of Super Kwik, Inc., (iii) to amend the Certificate of
Incorporation of the Company to delete Article Seventh, and (iv) to
ratify the appoint of Ernst & Young, LLP as independent accountants to
examine the financial statements of the Company for the fiscal year
ending June 30, 1997. All proposals were adopted by the shareholders.
The voting was as follows:
<TABLE>
<CAPTION>
Votes Votes Broker
For Against Abstentions Non-Votes
------------ ----------- --------------- -----------
<S> <C> <C> <C> <C>
Directors:
- ---------
Louis D. Paolino, Jr. 9,645,192 14,363 -- --
George Moorehead 9,645,192 14,363 -- --
Kenneth Chuan-kai Leung 9,644,992 14,563 -- --
Leave outstanding Super Kwik shares 6,957,691 7,600 92,665 2,611,206
Amend Articles of Incorporation 7,383,518 27,827 69,620 2,188,197
Ratify appointment of Ernst & Young 9,646,375 3,640 9,540 --
</TABLE>
18
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
10.45 Third Amendment dated January 27, 1997 to the Revolving Credit
Agreement dated September 25, 1996, between the Company, its
subsidiaries, the First National Bank of Boston and Bank of
America, Illinois
10.46 Fourth Amendment dated March 31, 1997 to the Revolving Credit
Agreement dated September 25, 1996, between the Company, its
subsidiaries, the First National Bank of Boston and Bank of
America, Illinois
10.47 Fifth Amendment dated May 8, 1997 to the Revolving Credit
Agreement dated September 25, 1996, between the Company, its
subsidiaries, the First National Bank of Boston and Bank of
America, Illinois
27 Financial Data Schedule
(b) Current Reports on Form 8-K or 8-K/A:
1. The Company filed a report on Form 8-K, dated January 31, 1997,
under Item 2, to report the acquisition and merger with the
Donno Company, Inc., Suffolk Waste Systems, Inc. and
Residential Services, Inc. and N.R.T. Realty Corporation
(collectively the "Donno Companies".) Historical financial
statements of the Donno Companies and pro forma financial
information of the Company required under "Item 7. Financial
Statements and Exhibits" was filed on Form 8-K/A Amendment No.
1 on April 15, 1997.
2. On February 11, 1997, the Company filed a report on Form 8-K/A,
Amendment No. 1, dated December 10, 1996, under Item 7, to
provide historical audited financial statements of the business
acquired, R & A Bender, Inc. and R & A Bender Property, Ltd.,
for the year ended December 31, 1996, and unaudited pro forma
financial information for the Company for the year ended June
30, 1996 and the nine months ended September 30, 1996 with
respect to its acquisition of R & A Bender, Inc. and R & A
Bender Property, Ltd.
19
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereto duly authorized.
EASTERN ENVIRONMENTAL SERVICES, INC.
BY: /s/ Louis D. Paolino, Jr.
--------------------------------------
Louis D. Paolino, Jr.
Chairman
BY: /s/ Gregory M. Krzemien
--------------------------------------
Gregory M. Krzemien
Chief Financial Officer
DATE: May 16, 1997
20
<PAGE>
EXHIBIT INDEX
10.45 Third Amendment dated January 27, 1997 to the Revolving Credit
Agreement dated September 25, 1996, between the Company, its
subsidiaries, the First National Bank of Boston and Bank of
America, Illinois
10.46 Fourth Amendment dated March 31, 1997 to the Revolving Credit
Agreement dated September 25, 1996, between the Company, its
subsidiaries, the First National Bank of Boston and Bank of
America, Illinois
10.47 Fifth Amendment dated May 8, 1997 to the Revolving Credit
Agreement dated September 25, 1996, between the Company, its
subsidiaries, the First National Bank of Boston and Bank of
America, Illinois
27 Financial Data Schedule
<PAGE>
EXHIBIT 10.45
THIRD AMENDMENT TO
REVOLVING CREDIT AGREEMENT
AND
FIRST AMENDMENT TO PLEDGE AGREEMENT
-----------------------------------
THIS THIRD AMENDMENT TO REVOLVING CREDIT AGREEMENT (this "Third Amendment")
is made and entered into as of the 27th day of January, 1997, by and among
EASTERN ENVIRONMENTAL SERVICES, INC., a Delaware corporation (the "Parent"), its
Subsidiaries listed on the signature pages hereto (the Parent and such
Subsidiaries herein collectively referred to as the "Borrowers" and,
individually, as a "Borrower"), each of which Borrowers having its principal
place of business at 1000 Crawford Place, Mount Laurel, New Jersey 08054 and THE
FIRST NATIONAL BANK OF BOSTON ("FNBB"), a national banking association having
its principal place of business at 100 Federal Street, Boston, Massachusetts
02110, BANK OF AMERICA ILLINOIS, an Illinois banking corporation having its head
office at 231 South LaSalle Street, Chicago, Illinois 60697 ("B of A") and such
banks or other financial institutions which become a party hereto (each a
"Bank," and, collectively, the "Banks"), and FNBB as Agent for the Banks (the
"Agent").
WHEREAS, the Borrowers, the Banks and the Agent have entered into a
Revolving Credit Agreement dated as of September 25, 1996 and amended by a First
Amendment to Revolving Credit Agreement dated as of November 14, 1996 and a
Second Amendment to Revolving Credit Agreement dated as of November 26, 1996 (as
further amended and in effect from time to time, the "Credit Agreement")
pursuant to which the Banks extended credit to the Borrowers on the terms set
forth therein;
WHEREAS, the Banks and the Borrowers have agreed to amend the Credit
Agreement as hereinafter set forth;
NOW, THEREFORE, for good and valuable consideration the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. DEFINITIONS. Capitalized terms used herein without definition have
-----------
the meanings ascribed to them in the Credit Agreement.
<PAGE>
-2-
2. AMENDMENT TO SCHEDULE 1 OF THE CREDIT AGREEMENT. SCHEDULE 1 to the
--------- -- -------- - -- --- ------ ---------
Credit Agreement is hereby amended to add R&A Bender, Inc. ("Bender") Bayside of
Marion, Inc. ("Bayside"), Eastern Waste of L.I., ("Eastern L.I."), and Eastern
Container Corporation ("ECC") each as a Subsidiary of the Parent and as a
Borrower. An amended and restated SCHEDULE 1 is attached to this Third
Amendment. The Borrowers represent and warrant that the entities listed on
SCHEDULE 1 hereto are all of the Subsidiaries of the Parent, and that each such
Subsidiary which is not identified as an inactive Subsidiary is a Borrower.
3. AMENDMENT TO (S)1.1 OF THE CREDIT AGREEMENT. The following definitions
--------- -- ------ -- --- ------ ---------
appearing in (S)1.1 of the Credit Agreement are hereby deleted in their entirety
and the following substituted in place thereof:
"COMMITMENT PERCENTAGE. With respect to each Bank, the percentage set
---------- ----------
forth beside its name below (subject to adjustment upon any assignments
pursuant to (S)18):
Bank Percentage
---- ----------
FNBB 60%
B of A 40%."
"Performa EBITDA. For any twelve month period, the Consolidated Net
-------- ------
Income (or Deficit) of the Borrowers determined in accordance with GAAP,
provided that, with respect to any Subsidiary (other than R & A Bender,
Inc. ("Bender") or the Waste Services Companies (as defined in (S)7 of the
Third Amendment to the Credit Agreement) acquired within the past twelve
months or to be acquired, the calculation of Consolidated Net Income (or
Deficit) for the period prior to such Subsidiary's acquisition may include
reference to such Subsidiary's historical financial statements (which have
been reviewed and analyzed by the Parent in accordance with its standard
due diligence practices and which are in form and substance satisfactory to
the Banks) as such statements may be adjusted by agreement between the
Banks and the Borrowers as if such Subsidiary had been owned for those
twelve months, plus (a) interest expense, (b) income taxes, (c)
depreciation and landfill depletion expense, and (d) amortization expense,
to the extent that each of the same has been deducted in calculating such
Consolidated Net Income (or Deficit), plus the following amounts relating
to Bender (e) $4,400,000 for the fiscal quarter ending December 31, 1996,
(f) $3,200,000 for the fiscal quarter ending March 31, 1997, (g) $2,000,000
for the fiscal quarter ending June
<PAGE>
-3-
30, 1997, and (h) $800,000 for the fiscal quarter ending September 30,
1997, plus the following amounts relating to the Waste Services Companies;
(i) $3,150,000 for the fiscal quarter ending March 31, 1997, (j) $2,100,000
for the fiscal quarter ending June 30, 1997, and (k) $1,050,000 for the
fiscal quarter ending September 30, 1997, but excluding onetime charges of
not more than (x) $2,820,000 relating to the change of control onetime
charges taken in the fiscal quarter ended June 30, 1996 and (y) $1,857,000
relating to pooling charges for the acquisition of Super Kwik taken in the
fiscal quarter ended September 30, 1996."
4. AMENDMENT TO (S)2.1 OF THE CREDIT AGREEMENT. Section 2.1 of the Credit
--------- -- ------ -- --- ------ ---------
Agreement is hereby amended to delete the amount "$30,000,000" appearing in the
first sentence thereof and to substitute the amount "$50,000,000" in place
thereof.
5. AMENDMENT TO (S)7.1(F) OF THE CREDIT AGREEMENT. Section 7.1(f) of the
--------- -- --------- -- --- ------ ---------
Credit Agreement is hereby deleted in its entirety and the following
substituted in place thereof:
"(f) Indebtedness of the Borrowers incurred after September 25, 1996,
provided that the aggregate principal amount of such Indebtedness of the
Borrowers shall not exceed $10,000,000 at any one time; and"
6. FIRST AMENDMENT TO PLEDGE AGREEMENT. By executing this Third Amendment
----- --------- -- ------ ---------
where indicated below, each of Bender, Bayside, Eastern L.I., and ECC (i) hereby
grants to the Agent for the benefit of the Banks, to secure the payment and
performance of the Obligations, all of such Borrower's right title and interest
in all Collateral (as defined in the Pledge Agreement), and (ii) agrees to be
bound by the terms and conditions of the Pledge Agreement as if it were an
original party thereto.
7. CONSENT TO WASTE SERVICES INC. ACQUISITION. Any Event of Default which
------- -- ----- -------- ---- -----------
would otherwise occur under subclause (e) of (S)7.4 of the Credit Agreement as a
result of the transaction described in the Agreement and Plan of Reorganization
(the "Plan of Reorganization") dated as of 23 October, 1996 by and among Waste
Services, Inc., N.Y. Waste Services, Inc., L.I. Waste Services, Inc., KC Waste
Services, Inc., Curbside Leasing, Inc., (collectively, the "Waste Services
Companies") Eastern Environmental Services, Inc., Eastern Waste of New York,
Inc., Eastern L.I. and ECC and the individuals and entities set forth on the
signature page thereto under the heading "Shareholders", is hereby waived,
provided that (a) the aggregate purcha se price paid in connection
<PAGE>
-4-
therewith shall not exceed $27,000,000, and (b) the Borrowers shall comply with
all other provisions of (S)7.4 of the Credit Agreement.
8. RATIFICATION, ETC. Except as expressly amended hereby, the Credit
------------- ----
Agreement, the other Loan Documents and all documents, instruments and
agreements related thereto are hereby ratified and confirmed in all respects and
shall continue in full force and effect. This Third Amendment and the Credit
Agreement shall hereafter be read and construed together as a single document,
and all references in the Credit Agreement or any related agreement or
instrument to the Credit Agreement shall hereafter refer to the Credit Agreement
as amended by this Third Amendment. This Third Amendment and the Pledge
Agreement shall hereafter be read and construed together as a single document,
and all references in the Pledge Agreement or any related agreement or
instrument to the Pledge Agreement shall hereafter refer to the Pledge Agreement
as amended by this Third Amendment.
9. GOVERNING LAW. THIS THIRD AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED
--------- ---
IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS AND SHALL TAKE
EFFECT AS A SEALED INSTRUMENT IN ACCORDANCE WITH SUCH LAWS.
10. COUNTERPARTS. This Third Amendment may be executed in any number of
------------
counterparts and by different parties hereto on separate counterparts, each of
which when so executed and delivered shall be an original, but all of which
counterparts taken together shall be deemed to constitute one and the same
instrument. Complete sets of counterparts shall be lodged with the Banks.
11. EFFECTIVENESS. This Third Amendment shall become effective upon the
-------------
satisfaction of each of the following conditions:
(i) This Third Amendment shall have been executed and delivered by
the respective parties hereto;
(ii) Each of the Banks shall have received and executed original
amendment and restatement of such Bank's Revolving Credit Note in form and
substance satisfactory to such Bank;
(iii) The Agent shall have received the certified directors'
resolutions of each of the Borrowers satisfactory to the Agent authorizing
the execution and delivery of the amended and restated
<PAGE>
-5-
Notes and this Third Amendment, and otherwise authorizing this Third
Amendment and all related documents;
(iv) The Banks shall have received opinions of counsel to the
Borrowers as to the due authorization and enforceability of this Third
Amendment, the amended and restated Notes to be issued to the Banks
pursuant to (S)7(ii) hereof, the due organization, legal existence, and
good standing of Bender, Bayside, Eastern L.I., and ECC, and all other
matters as the Banks may reasonably request;
(v) The Agent shall have received a certificate of the Secretary or
Assistant Secretary of each of Bender, Bayside, Eastern L.I., and ECC
regarding the charter documents of such Borrower and the incumbency of the
officers of such Borrower;
(vi) The Agent shall have received the certificates for all of the
issued and outstanding shares of each of Bender, Bayside, Eastern L.I., and
ECC, together with stock powers endorsed in blank;
(vii) The Agent shall have received an amendment fee of $50,000,
$25,000 of which shall be payable to each Bank;
12. ENTIRE AGREEMENT. THE CREDIT AGREEMENT AND THE OTHER LOAN DOCUMENTS AS
------ ---------
AMENDED REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE
PARTIES.
[The rest of this page is intentionally left blank]
<PAGE>
-6-
IN WITNESS WHEREOF, the undersigned have duly executed this Third Amendment
under seal as of the date first set forth above.
THE BORROWERS:
-------------
EASTERN ENVIRONMENTAL SERVICES, INC.
By: /s/ Gregory M. Krzemien
--------------------------------------------
Title: Chief Financial Officer and Treasurer
------------------------------------------
SUPER KWIK, INC.
By: /s/ Gregory M. Krzemien
--------------------------------------------
Title: Chief Financial Officer and Treasurer
------------------------------------------
PULAKSI GRADING, INC.
By: /s/ Gregory M. Krzemien
--------------------------------------------
Title: Chief Financial Officer and Treasurer
------------------------------------------
CAROLINA GRADING, INC.
By: /s/ Gregory M. Krzemien
--------------------------------------------
Title: Chief Financial Officer and Treasurer
------------------------------------------
S&S GRADING, INC.
By: /s/ Gregory M. Krzemien
--------------------------------------------
Title: Chief Financial Officer and Treasurer
------------------------------------------
ALLIED WASTE SERVICES, INC.
By: /s/ Gregory M. Krzemien
--------------------------------------------
Title: Chief Financial Officer and Treasurer
------------------------------------------
<PAGE>
-7-
OLNEY SANITARY SYSTEM, INC.
By: /s/ Gregory M. Krzemien
--------------------------------------------
Title: Chief Financial Officer and Treasurer
------------------------------------------
EASTERN WASTE OF NEW YORK, INC.
By: /s/ Gregory M. Krzemien
--------------------------------------------
Title: Chief Financial Officer and Treasurer
------------------------------------------
R&A BENDER, INC.
By: /s/ Gregory M. Krzemien
--------------------------------------------
Title: Chief Financial Officer and Treasurer
------------------------------------------
BAYSIDE OF MARION, INC.
By: /s/ Gregory M. Krzemien
--------------------------------------------
Title: Chief Financial Officer and Treasurer
------------------------------------------
EASTERN WASTE OF L.I., INC.
By: /s/ Gregory M. Krzemien
--------------------------------------------
Title: Chief Financial Officer and Treasurer
------------------------------------------
EASTERN CONTAINER CORPORATION
By: /s/ Gregory M. Krzemien
--------------------------------------------
Title: Chief Financial Officer and Treasurer
------------------------------------------
<PAGE>
-8-
THE BANKS:
----------
BANK OF AMERICA ILLINOIS
/s/ Bruce A. Simons
By: _______________________________________
Senior Vice President
Title: ____________________________________
THE FIRST NATIONAL BANK OF BOSTON,
INDIVIDUALLY AND AS AGENT
/s/ Ann E. Howard
By: _______________________________________
Division Executive
Title: ____________________________________
<PAGE>
Exhibit 10.46
FOURTH AMENDMENT TO
REVOLVING CREDIT AGREEMENT
AND
SECOND AMENDMENT TO PLEDGE AGREEMENT
------------------------------------
THIS FOURTH AMENDMENT TO REVOLVING CREDIT AGREEMENT and SECOND AMENDMENT TO
PLEDGE AGREEMENT (this "Fourth Amendment") is made and entered into as of the
31st day of March, 1997, by and among EASTERN ENVIRONMENTAL SERVICES, INC., a
Delaware corporation (the "Parent"), its Subsidiaries listed on the signature
pages hereto (the Parent and such Subsidiaries herein collectively referred to
as the "Borrowers" and, individually, as a "Borrower"), each of which Borrowers
having its principal place of business at 1000 Crawford Place, Mount Laurel,
New Jersey 08054 and THE FIRST NATIONAL BANK OF BOSTON ("FNBB"), a national
banking association having its principal place of business at 100 Federal
Street, Boston, Massachusetts 02110, BANK OF AMERICA ILLINOIS, an Illinois
banking corporation having its head office at 231 South LaSalle Street, Chicago,
Illinois 60697 ("B of A") and such banks or other financial institutions which
become a party hereto (each a "Bank," and, collectively, the "Banks"), and FNBB
as Agent for the Banks (the "Agent").
WHEREAS, the Borrowers, the Banks and the Agent have entered into a
Revolving Credit Agreement dated as of September 25, 1996 and amended by a First
Amendment to Revolving Credit Agreement dated as of November 14, 1996, a Second
Amendment to Revolving Credit Agreement dated as of November 26, 1996, and a
Third Amendment to Revolving Credit Agreement and First Amendment to Pledge
Agreement dated as of January 27, 1997 (as further amended and in effect from
time to time, the "Credit Agreement") pursuant to which the Banks extended
credit to the Borrowers on the terms set forth therein;
WHEREAS, the Banks and the Borrowers have agreed to amend the Credit
Agreement as hereinafter set forth;
NOW, THEREFORE, for good and valuable consideration the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
<PAGE>
-2-
1. DEFINITIONS. Capitalized terms used herein without definition have the
-----------
meanings ascribed to them in the Credit Agreement.
2. AMENDMENT TO SCHEDULE 1 OF THE CREDIT AGREEMENT. SCHEDULE 1 to the
--------- -- -------- - -- --- ------ ---------
Credit Agreement is hereby amended to add Apex Waste Services, Inc. ("Apex"),
Donno Company, Inc. ("Donno"), Residential Service, Inc. ("RSI"), Suffolk Waste
Systems, Inc. ("Suffolk"), and NRT Realty Corp. ("NRT") each as a Subsidiary of
the Parent and as a Borrower. An amended and restated SCHEDULE 1 is attached to
this Fourth Amendment. The Borrowers represent and warrant that the entities
listed on SCHEDULE 1 hereto are all of the Subsidiaries of the Parent, and that
each such Subsidiary which is not identified as an inactive Subsidiary is a
Borrower.
3. AMENDMENT TO (S)1.1 OF THE CREDIT AGREEMENT. The following definition
--------- -- ------ -- --- ------ ---------
appearing in (S)1.1 of the Credit Agreement is hereby deleted in its entirety
and the following substituted in place thereof:
"Proforma EBITDA. For any twelve month period, the Consolidated Net
-------- ------
Income (or Deficit) of the Borrowers determined in accordance with GAAP,
provided that, with respect to any Subsidiary (other than R & A Bender, Inc.
("Bender"), the Waste Services Companies (as defined in (S)7 of the Third
Amendment to the Credit Agreement), or Apex) acquired within the past twelve
months or to be acquired, the calculation of Consolidated Net Income (or
Deficit) for the period prior to such Subsidiary's acquisition may include
reference to such Subsidiary's historical financial statements (which have been
reviewed and analyzed by the Parent in accordance with its standard due
diligence practices and which are in form and substance satisfactory to the
Banks) as such statements may be adjusted by agreement between the Banks and the
Borrowers as if such Subsidiary had been owned for those twelve months, plus (a)
interest expense, (b) income taxes, (c) depreciation and landfill depletion
expenses, and (d) amortization expense, to the extent that each of the same has
been deducted in calculating such Consolidated Net Income (or Deficit), plus the
following amounts relating to Bender: (e) $4,400,000 for the fiscal quarter
ending December 31, 1996, (f) $3,200,000 for the fiscal quarter ending March 31,
1997, (g) $2,000,000 for the fiscal quarter ending June 30, 1997, and (h)
$800,000 for the fiscal quarter ending September 30, 1997, plus the following
amounts relating to the Waste Services Companies: (i) $3,150,000 for the fiscal
quarter ending March 31, 1997, (j) $2,100,000 for the fiscal quarter ending June
30, 1997, and (k) $1,050,000 for the fiscal quarter ending
<PAGE>
-3-
September 30, 1997, plus the following amounts relating to Apex: (1)
$2,490,000 for the fiscal quarter ending March 31, 1997, and (m) $1,245,000
for the fiscal quarter ending June 30, 1997, but excluding onetime charges
of not more than (x) $2,820,000 relating to the change of control onetime
charges taken in the fiscal quarter ended June 30, 1996 and (y) $1,857,000
relating to pooling charges for the acquisition of Super Kwik taken in the
fiscal quarter ended September 30, 1996."
5. AMENDMENT TO PLEDGE AGREEMENT. By executing this Fourth Amendment
--------- -- ------ ---------
where indicated below, each of Apex, Donno, RSI, Suffolk, and NRT (i) hereby
grants to the Agent for the benefit of the Banks, to secure the payment and
performance of the Obligations, all of such Borrower's right title and interest
in all Collateral (as defined in the Pledge Agreement), and (ii) agrees to be
bound by the terms and conditions of the Pledge Agreement as if it were an
original party thereto.
6. CONSENT TO APEX ACQUISITION. Any Event of Default which would
------- -- ---- -----------
otherwise occur under subclause (e) of (S)7.4 of the Credit Agreement as a
result of the transaction described in the draft Reorganization Plan and
Agreement (the "Reorganization Plan") dated March 24, 1997 by and among Apex
Waste Services, Inc., Robert A. Kinsley, Scott R. Wagner, Dennis M. Grimm,
William J. Holbrook, and Eastern Environmental Services, Inc. is hereby waived,
provided that (a) the aggregate cash purchase price paid in connection therewith
(including the amount of all Indebtedness assumed) shall not exceed $16,000,000,
and (b) the Borrowers shall comply with all other provisions of (S)7.4 of the
Credit Agreement and with (S)7.1 thereof.
7. RATIFICATION, ETC. Except as expressly amended hereby, the Credit
------------ ---
Agreement, the other Loan Documents and all documents, instruments and
agreements related thereto are hereby ratified and confirmed in all respects and
shall continue in full force and effect. This Fourth Amendment and the Credit
Agreement shall hereafter be read and construed together as a single document,
and all references in the Credit Agreement or any related agreement or
instrument to the Credit Agreement shall hereafter refer to the Credit Agreement
as amended by this Fourth Amendment. This Fourth Amendment and the Pledge
Agreement shall hereafter be read and construed together as a single document,
and all references in the Pledge Agreement or any related agreement or
instrument to the Pledge Agreement shall hereafter refer to the Pledge Agreement
as amended by this Fourth Amendment.
<PAGE>
-4-
8. GOVERNING LAW. THIS FOURTH AMENDMENT SHALL BE GOVERNED BY AND
--------- ---
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS AND
SHALL TAKE EFFECT AS A SEALED INSTRUMENT IN ACCORDANCE WITH SUCH LAWS.
9. COUNTERPARTS. This Fourth Amendment may be executed in any number of
------------
counterparts and by different parties hereto on separate counterparts, each of
which when so executed and delivered shall be an original, but all of which
counterparts taken together shall be deemed to constitute one and the same
instrument. Complete sets of counterparts shall be lodged with the Banks.
10. EFFECTIVENESS. This Fourth Amendment shall become effective upon the
-------------
satisfaction of each of the following conditions:
(a) This Fourth Amendment shall have been executed and delivered by
the respective parties hereto; and
(b) Each of the Banks shall have received an executed allonge to such
Bank's Revolving Credit Note adding each of Apex, Donno, RSI, Suffolk, and
NRT as a Borrower in form and substance satisfactory to such Bank.
11. COVENANT REGARDING NEW BORROWERS. The Borrowers agree to deliver on or
-------- --------- --- ---------
before April 11, 1997 each of the following, in form and substance satisfactory
to the Agent or the Banks, as the case may be:
(a) The Borrowers shall deliver to the Agent the certified directors'
resolutions of each Apex, Donno, RSI, Suffolk, and NRT satisfactory to the
Agent authorizing the execution and delivery of the allonges to the Notes
and this Fourth Amendment, and otherwise authorizing this Fourth Amendment
and all related documents;
(b) The Borrowers shall deliver to the Banks an opinion of counsel to
the Borrowers as to the due authorization and enforceability of this Fourth
Amendment as it relates to Apex, Donno, RSI, Suffolk, and NRT, the allonges
to the Notes to be issued to the Banks pursuant to (S)10(ii) hereof, the
due organization, legal existence, and good standing of Apex, Donno, RSI
Suffolk, and NRT and all other matters as the Banks may reasonably request;
<PAGE>
-5-
(c) The Borrowers shall deliver to the Agent a certificate of the
Secretary or Assistant Secretary of Apex, Donno, RSI, Suffolk, and NRT
regarding the charter documents of each such Borrower and the incumbency of
the officers of each such Borrower; and
(d) The Borrowers shall deliver to the Agent the certificates for all
of the issued and outstanding shares of Apex, Donno, RSI, Suffolk, and NRT
together with stock powers endorsed in blank.
Failure to deliver each of such items on or before April 11, 1997 shall
constitute an Event of Default under the Credit Agreement.
12. ENTIRE AGREEMENT. THE CREDIT AGREEMENT AND THE OTHER LOAN DOCUMENTS
----------------
AS AMENDED REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE
PARTIES.
[The remainder of this page is intentionally left blank.]
<PAGE>
IN WITNESS WHEREOF, the undersigned have duly executed this Fourth
Amendment under seal as of the date first set forth above.
THE BORROWERS:
-------------
EASTERN ENVIRONMENTAL SERVICES,
INC.
By: /s/ Gregory M. Krzemien
------------------------------------------
Title: Chief Financial Officer and Treasurer
------------------------------------------
SUPER KWIK, INC.
By: /s/ Gregory M. Krzemien
------------------------------------------
Title: Chief Financial Officer and Treasurer
------------------------------------------
PULAKSI GRADING, INC.
By: /s/ Gregory M. Krzemien
------------------------------------------
Title: Chief Financial Officer and Treasurer
------------------------------------------
CAROLINA GRADING, INC.
By: /s/ Gregory M. Krzemien
------------------------------------------
Title: Chief Financial Officer and Treasurer
------------------------------------------
S&S GRADING, INC.
By: /s/ Gregory M. Krzemien
------------------------------------------
Title: Chief Financial Officer and Treasurer
------------------------------------------
<PAGE>
-7-
ALLIED WASTE SERVICES, INC.
By: /s/ Gregory M. Krzemien
------------------------------------------
Title: Chief Financial Officer and Treasurer
------------------------------------------
OLNEY SANITARY SYSTEM, INC.
By: /s/ Gregory M. Krzemien
------------------------------------------
Title: Chief Financial Officer and Treasurer
------------------------------------------
EASTERN WASTE OF NEW YORK, INC.
By: /s/ Gregory M. Krzemien
------------------------------------------
Title: Chief Financial Officer and Treasurer
------------------------------------------
R&A BENDER, INC.
By: /s/ Gregory M. Krzemien
------------------------------------------
Title: Chief Financial Officer and Treasurer
------------------------------------------
BAYSIDE OF MARION, INC.
By: /s/ Gregory M. Krzemien
------------------------------------------
Title: Chief Financial Officer and Treasurer
------------------------------------------
EASTERN WASTE OF L.I., INC.
By: /s/ Gregory M. Krzemien
------------------------------------------
Title: Chief Financial Officer and Treasurer
------------------------------------------
<PAGE>
-8-
EASTERN CONTAINER CORPORATION
By: /s/ Gregory M. Krzemien
------------------------------------------
Title: Chief Financial Officer and Treasurer
------------------------------------------
APEX WASTE SERVICES, INC.
By: /s/ Gregory M. Krzemien
------------------------------------------
Title: Chief Financial Officer and Treasurer
------------------------------------------
DONNO COMPANY, INC.
By: /s/ Gregory M. Krzemien
------------------------------------------
Title: Chief Financial Officer and Treasurer
------------------------------------------
By: /s/ Gregory M. Krzemien
------------------------------------------
Title: Chief Financial Officer and Treasurer
------------------------------------------
RESIDENTIAL SERVICE, INC.
By: /s/ Gregory M. Krzemien
------------------------------------------
Title: Chief Financial Officer and Treasurer
------------------------------------------
SUFFOLK WASTE SYSTEMS, INC.
By: /s/ Gregory M. Krzemien
------------------------------------------
Title: Chief Financial Officer and Treasurer
------------------------------------------
NRT REALTY CORP.
By: /s/ Gregory M. Krzemien
------------------------------------------
Title: Chief Financial Officer and Treasurer
------------------------------------------
<PAGE>
-9-
THE BANKS:
----------
BANK OF AMERICA ILLINOIS
/s/ Timothy J. Pepawski
By: _______________________________________
Senior Vice President
Title: ____________________________________
THE FIRST NATIONAL BANK OF BOSTON,
INDIVIDUALLY AND AS AGENT
/s/ Ann E. Howard
By: _______________________________________
Group Executive
Title: ____________________________________
<PAGE>
Exhibit 10.47
FIFTH AMENDMENT TO
REVOLVING CREDIT AGREEMENT
THIS FIFTH AMENDMENT TO REVOLVING CREDIT AGREEMENT (this "Fifth Amendment")
is made and entered into as of the 8th day of May, 1997, by and among EASTERN
ENVIRONMENTAL SERVICES, INC., a Delaware corporation (the "Parent"), its
Subsidiaries listed on the signature pages hereto (the Parent and such
Subsidiaries herein collectively referred to as the "Borrowers" and,
individually, as a "Borrower"), each of which Borrowers having its principal
place of business at 1000 Crawford Place, Mount Laurel, New Jersey 08054 and
BANKBOSTON, N.A. ("BKB" F/K/A THE FIRST NATIONAL BANK OF BOSTON), a national
banking association having its principal place of business at 100 Federal
Street, Boston, Massachusetts 02110, BANK OF AMERICA ILLINOIS, an Illinois
banking corporation having its head office at 231 South LaSalle Street, Chicago,
Illinois 60697 ("B of A") and such banks or other financial institutions which
become a party hereto (each a "Bank," and, collectively, the "Banks"), and BKB
as Agent for the Banks (the "Agent").
WHEREAS, the Borrowers, the Banks and the Agent have entered into a
Revolving Credit Agreement dated as of September 25, 1996 and amended by a First
Amendment to Revolving Credit Agreement dated as of November 14, 1996, a Second
Amendment to Revolving Credit Agreement dated as of November 26, 1996, a Third
Amendment to Revolving Credit Agreement and First Amendment to Pledge Agreement
dated as of January 27, 1997 and a Fourth Amendment to Revolving Credit
Agreement and Second Amendment to Pledge Agreement dated as of March 31, 1997
(as further amended and in effect from time to time, the "Credit Agreement")
pursuant to which the Banks extended credit to the Borrowers on the terms set
forth therein;
WHEREAS, the Banks and the Borrowers have agreed to amend the Credit
Agreement as hereinafter set forth;
NOW, THEREFORE, for good and valuable consideration the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. DEFINITIONS. Capitalized terms used herein without definition have
-----------
the meanings ascribed to them in the Credit Agreement.
<PAGE>
-2-
2. AMENDMENT TO SCHEDULE 1 OF THE CREDIT AGREEMENT. SCHEDULE 1 to the
--------- -- -------- - -- --- ------ ---------
Credit Agreement is hereby amended to add Eastern Environmental Services of
Indiana, Inc. ("Eastern Indiana"), Eastern Environmental Services of Florida,
Inc. ("Eastern Florida") and Waste Services of South Florida, Inc. ("WSSF") each
as a Subsidiary of the Parent and as a Borrower. An amended and restated
SCHEDULE 1 is attached to this Fifth Amendment. The Borrowers represent and
warrant that the entities listed on SCHEDULE 1 hereto are all of the
Subsidiaries of the Parent, and that each such Subsidiary which is not
identified as an inactive Subsidiary is a Borrower.
3. AMENDMENT TO (S)1.1 OF THE CREDIT AGREEMENT. The following new
--------- -- --- -- --- ------ ---------
definitions are hereby added in their proper place to (S)1.1 of the Credit
Agreement:
"Applicable Commitment Fee Rate. The Applicable Commitment Fee Rate
---------- ---------- --- ----
shall be as set forth in the definition of Applicable Rate."
"Applicable L/C Fee Rate. The Applicable L/C Fee Rate shall be as set
---------- --- --- ----
forth in the definition of Applicable Rate."
4. AMENDMENT TO (S)1.1 OF THE CREDIT AGREEMENT. The following definitions
--------- -- ------ -- --- ------ ---------
appearing in (S)1.1 of the Credit Agreement are hereby deleted in their entirety
and the following substituted in place thereof:
"Applicable Rate. The applicable rate per annum of interest on the
---------- ----
Loans and the applicable rate per annum for Commitment Fees and Letter of Credit
Fees as set forth in the following table, provided, however, that the Applicable
Rate for Eurodollar Loans shall be reduced by 0.25% if (a) EBITDA for the period
of four fiscal quarters ending on the relevant date exceeds $30,000,000 or (b)
the aggregate net cash proceeds received in connection with the issuance of
common stock of the Parent after the date of the Fifth Amendment exceeds
$40,000,000:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
PRICING RATIO APPLICABLE APPLICABLE RATE APPLICABLE APPLICABLE
RATE FOR BASE FOR COMMITMENT L/C FEE
RATE LOANS EURODOLLAR LOANS FEE RATE RATE
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
less than 1.50:1 Base Rate Eurodollar Rate 0.25% 1.25%
plus 1.50%
- -------------------------------------------------------------------------------------------
greater than or Base Rate Eurodollar Rate 0.375% 1.50%
equal to 1.50:1, but plus 1.75%
less than 2.00:1
- -------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
-3-
<TABLE>
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------
greater than or Base Rate Eurodollar Rate 0.375% 1.75%
equal to 2.00:1, but plus 2.00%
less than 2.50:1
- -------------------------------------------------------------------------------
greater than or Base Rate Eurodollar Rate 0.375% 1.75%
equal to 2.50:1, but plus 2.25%
less than 3.00:1
- -------------------------------------------------------------------------------
greater than or Base Rate Eurodollar Rate 0.375% 2.00%
equal to 3.00:1, but plus 2.50%
less than 3.50:1
- -------------------------------------------------------------------------------
greater than or Base Rate Eurodollar Rate 0.50% 2.25%
equal to 3.50:1, but plus 0.25% plus 2.75%
- -------------------------------------------------------------------------------
</TABLE>
"Consolidated Earnings Before Interest and Taxes or EBIT. For
------------ -------- ------ -------- --- ----- -- ----
any period, the Consolidated Net Income (or Deficit) of the Borrowers
determined in accordance with GAAP, plus (a) interest expense, and
(b) income tax expense, to the extent that each of the same has been
deducted in calculating Consolidated Net Income (or Deficit).
"Consolidated Earnings Before Interest, Taxes, Depreciation and
------------ -------- ------ --------- ------ ------------ ---
Amortization or EBITDA. For any period, the Consolidated Net Income
------------ -- ------
(or Deficit) of the Borrowers determined in accordance with GAPP, plus
(a) interest expense, (b) income taxes (c) depreciation and landfill
depletion expense, and (d) amortization expense, to the extent that
each of the same has been deducted in calculating Consolidated Net
Income (or Deficit)"
"Consolidated Net Income (or Deficit). The consolidated net
------------ --- ------ -- -------
income (or deficit) of the Borrowers after deduction of all expenses,
taxes, and other proper charges, determined in accordance with GAAP,
but excluding one-time charges relating to pooling costs for
acquisitions after April 1, 1997 and one-time charges of not more than
(a) $2,820,000 relating to the change of control taken in the fiscal
quarter ended June 30, 1996, (b) $1,857,000 relating to pooling costs
for the acquisition of Super Kwik, Inc, taken in the fiscal quarter
ended September 30, 1996, (c) $1,410,000 relating to pooling costs for
the acquisition of Apex (defined in (S)2 of the Fourth Amendment)
taken in the fiscal quarter ended March 31, 1997, and (d) $955,000 relating
to pooling costs for the acquisition of Donno, RSI, Suffolk and NTR (all
defined in (S)2 of the Fourth Amendment)taken in the fiscal quarter ended
March 31, 1997."
"Employee Benefit Plan. Any employee benefit plan within the
-------- ------- ----
meaning of (S)3(3) of ERISA maintained or contributed to by any
<PAGE>
-4-
Borrower, other than a Guaranteed Pension Plan or a Multiemployer Plan."
"Maturity Date. April 30, 2000."
-------- ----
"Proforma EBITDA. For any twelve month period, the Consolidated Net
-------- ------
Income (or Deficit) of the Borrowers determined in accordance with GAAP,
provided that, with respect to any Subsidiary (other than R & A Bender,
Inc. ("Bender") or Apex, acquired within the past twelve months or to be
acquired, the calculation of Consolidated Net Income (or Deficit) for the
period prior to such Subsidiary's acquisition may include reference to such
Subsidiary's historical financial statements as if such Subsidiary had been
owned for those twelve months (provided that such statements have been
reviewed and analyzed by the Parent in accordance with its standard due
diligence practices and the Banks have received appropriate documentation
thereof) and in the case of acquisitions occurring after May 1, 1997, may
be further adjusted to add back non-recurring private company expenses
which are discontinued upon such acquisitions, plus (a) interest expense,
(b) income taxes, (c) depreciation and landfill depletion expense, and (d)
amortization expense, to the extent that each of the same has been
deducted in calculating such Consolidated Net Income (or Deficit), plus
the following amounts relating to Bender: (e) $4,400,000 for the fiscal
quarter ending December 31, 1996, (f) $3,200,000 for the fiscal quarter
ending March 31, 1997, (g) $2,000,000 for the fiscal quarter ending June
30, 1997, and (h) $800,000 for the fiscal quarter ending September 30,
1997, plus the following amounts relating to Apex: (i) $2,490,000 for the
fiscal quarter ending March 31, 1997, and (j) $1,245,000 for the fiscal
quarter ending June 30 1997; all as certified by the CFO in the Compliance
Certificate delivered to the Banks pursuant to (S)6.4 hereof."
5. AMENDMENT TO (S)2.1 OF THE CREDIT AGREEMENT. Section 2.1 of the Credit
--------- -- ------ -- --- ------ ---------
Agreement is hereby amended to delete the amount "$50,000,000" appearing in the
first sentence thereof and to substitute the amount "$100,000,000" in place
hereof."
6. AMENDMENT TO (S)3.1 OF THE CREDIT AGREEMENT. Section 3.1 of the Credit
--------- -- ------ -- --- ------ ---------
Agreement is hereby amended to delete the amount "$10,000,000" appearing in
clause (a) thereof and to substitute the amount "$15,000,000" in place thereof.
<PAGE>
-5-
7. AMENDMENT TO (S)4.1 OF THE CREDIT AGREEMENT. Section 4.1 of the Credit
--------- -- ------ -- --- ------ ---------
Agreement is hereby amended to delete clauses (a) and (b) thereof in their
entirety and to substitute the following new clauses (a) and (b) in place
thereof:
"(a) COMMITMENT FEE. The Borrowers agree to pay to the Banks a
---------- ---
commitment fee (the "Commitment Fee") equal to the Applicable Commitment
Fee Rate multiplied by the amount of the unused portion of the Total
Commitment during each fiscal quarter or portion thereof from the Closing
Date to the Maturity Date (or to the date of termination in full of the
Total Commitment, if earlier). This Commitment Fee shall be payable
quarterly in arrears on the last day of each fiscal quarter for the fiscal
quarter then ended commencing on the last day of the calendar month in
which the conditions set forth in (S)9 hereof are first satisfied, with a
final payment on the Maturity Date. The Commitment Fee shall be shared pro-
rata by the Banks in accordance with their respective Commitment
Percentages.
(b) LETTER OF CREDIT FEE. The Borrowers shall pay a fee (the "Letter
------ -- ------ ---
of Credit Fee") to the Agent equal to the Applicable L/C Fee Rate
multiplied by the average Maximum Drawing Amount of Letters of Credit
outstanding during each fiscal quarter, payable quarterly in arrears on the
last day of each fiscal quarter for the fiscal quarter then ended. The
Borrowers shall also pay in advance on the date of issuance of each Letter
of Credit an issuance fee to the Agent for its account equal to one eighth
of one percent (1/8%) per annum on the Maximum Drawing Amount of each
Letter of Credit (the "Issuance Fee"). The Letter of Credit Fee (but not
the Issuance Fee) shall be shared pro-rata by each of the Banks in
accordance with their respective Commitment Percentages. The Borrowers
shall also pay the customary administrative fees of the Agent with respect
to the Letters of Credit, including, without limitation, fees for modifying
such Letters of Credit."
8. AMENDMENT TO (S)5.14 OF THE CREDIT AGREEMENT. Section 5.14 of the
--------- -- ------- -- --- ------ ---------
Credit Agreement is hereby deleted in its entirety and the following new (S)5.14
is substituted in place thereof:
"(S)5.14. EMPLOYEE BENEFIT PLANS.
-------- ------- -----
(a) In General. Each Employee Benefit Plan and each Guaranteed
-- -------
Pension Plan has been maintained and operated in compliance in all material
respects with the provisions of ERISA
<PAGE>
-6-
and, to the extent applicable, the Code, including but not limited to the
provisions thereunder respecting prohibited transactions and the bonding of
fiduciaries and other persons handling plan funds as required by (S)412 of
ERISA. The Borrowers have heretofore delivered to the Agent the most
recently completed annual report, Form 5500, with all required attachments,
and actuarial statement required to be submitted under (S)103(d) of ERISA,
with respect to each Guaranteed Pension Plan.
(b) Terminability of Welfare Plans. No Employee Benefit Plan which is
------------- -- ------- -----
an employee welfare benefit plan within the meaning of (S)3(1) or
(S)3(2)(B) of ERISA, provides benefit coverage subsequent to termination of
employment except as required by Title I, Part 6 of ERISA or applicable
state insurance laws. Any Borrower may terminate each such Plan at any time
(or at any time subsequent to the expiration of any applicable bargaining
agreement) in the discretion of such Borrower without liability to any
Person other than for claims arising prior to termination.
(c) Guaranteed Pension Plans. Each contribution required to be made
---------- ------- -----
made to a Guaranteed Pension Plan, whether required to be made to avoid the
incurrence of an accumulated funding deficiency, the notice or lien
provisions of (S)302(f) of ERISA, or otherwise, has been timely made. No
waiver of an accumulated funding deficiency or extension of amortization
periods has been received with respect to any Guaranteed Pension Plan, and
neither any of the Borrowers nor any ERISA Affiliate is obligated to or has
posted security in connection with an amendment of a Guaranteed Pension
Plan pursuant to (S)307 of ERISA or (S)401(a)(29) of the Code. No liability
to the PBGC (other than required insurance premiums, all of which have been
paid) has been incurred by any Borrower or any ERISA Affiliate with respect
to any Guaranteed Pension Plan and there has not been any
ERISA Reportable Event, or any other event or condition which presents a
material risk of termination of any Guaranteed Pension Plan by the PBGC.
Based on the latest valuation of each Guaranteed Pension Plan (which in
each case occurred within twelve months of the date of this
representation), and on the actuarial methods and assumptions employed for
that valuation, the aggregate benefit liabilities of all such Guaranteed
Pension Plans within the meaning of (S)4001 of ERISA did not exceed the
aggregate value of the assets of all such Guaranteed Pension Plans,
disregarding for this purpose the benefit liabilities and assets of any
Guaranteed Pension Plan with assets in excess of benefit liabilities.
<PAGE>
-7-
(d) Multiemployer Plans. None of the Borrowers nor any ERISA
------------- -----
Affiliate has incurred any material liability (including secondary
liability) to any Multiemployer Plan as a result of a complete or partial
withdrawal from such Multiemployer Plan under (S)4201 of ERISA or as a
result of a sale of assets described in (S)4204 of ERISA. None of the
Borrowers nor any ERISA Affiliate has been notified that any Multiemployer
Plan is in reorganization or is insolvent under and within the meaning of
(S)4241 or (S)4245 of ERISA or is at risk of entering reorganization or
becoming insolvent, or that any Multiemployer Plan intends to terminate or
has been terminated under (S)4041A of ERISA."
9. AMENDMENT TO EXHIBIT C OF THE CREDIT AGREEMENT. EXHIBIT C of the
--------- -- ------- - -- --- ------ ---------
Credit Agreement is hereby deleted in its entirety and the new EXHIBIT C
attached hereto is substituted in place thereof.
10. AMENDMENT TO (S)6.18 OF THE CREDIT AGREEMENT. Section 6.18 of
--------- -- ------- -- --- ------ ---------
the Credit Agreement is hereby amended to delete the date "March 31, 1997" in
the second sentence thereof and to substitute the date "August 31, 1997" in
place thereof.
11. AMENDMENT TO (S)7.1 OF THE CREDIT AGREEMENT. Section 7.1 of the Credit
--------- -- ------ -- --- ------ ---------
Agreement is hereby amended to delete clauses (f) and (g) thereof in their
entirety and to substitute the following new clauses (f) and (g) in place
thereof:
"(f) Indebtedness of the Borrowers incurred in connection with
acquisitions pursuant to (S)7.4 hereof and the acquisition of any real or
personal property by the Borrowers, provided that the aggregate principal
amount of such Indebtedness of the Borrowers, including Indebtedness listed
on SCHEDULE 7.1(F) hereto, shall not exceed the aggregate amount of
$15,000,000 at any one time; and
(g) Indebtedness of the Borrowers incurred with respect to landfill
closure bonds, including such bonds listed on SCHEDULE 7.1(G) hereto,
jointly not to exceed an aggregate amount of $10,000,000 outstanding at any
time."
12. AMENDMENT TO (S)7.3 OF THE CREDIT AGREEMENT. Section 7.3 of the Credit
--------- -- ------ -- --- ------ ---------
Agreement is hereby amended to delete the amount "$1,000,000" in clause (g)
thereof and to substitute the amount "$2,000,000" in place thereof.
<PAGE>
-8-
13. AMENDMENT TO (S)7.4 OF THE CREDIT AGREEMENT. Section 7.4 of the Credit
--------- -- ------ -- --- ------ ---------
Agreement is hereby amended to delete clauses (e) and (f) of the second sentence
thereof in their entirety and to substitute the following new clauses (e) and
(f) in place thereof:
"(e) the aggregate cash consideration to be paid by the Borrowers in
connection with any such acquisition (including the aggregate amount of all
Indebtedness assumed but excluding landfill closure and post-closure bonds)
shall not exceed $10,000,000 without the consent of the Majority Banks; and
(f) in the case of an acquisition for which the sum of the value of the
Stock given by the Borrowers in consideration for the acquisition plus the
cash paid and Indebtedness assumed or incurred (excluding landfill closure
and post-closure bonds) is $15,000,000 or more (a "Material Acquisition"),
the Banks shall have been provided with (i) a Compliance Certificate
demonstrating that the Borrowers are in current compliance with and, giving
effect to the proposed acquisition (including any borrowings made or to be
made in connection therewith), will continue to be in compliance with, all
of the covenants in (S)8 hereof, (ii) a copy of the purchase agreement,
together with audited (if available, or otherwise unaudited) financial
statements for any business to be acquired for the preceding two (2) fiscal
years, and (iii) a summary of the results of the Borrower's due diligence
investigations."
14. AMENDMENT TO (S)7.6 OF THE CREDIT AGREEMENT. Section 7.6 of the Credit
--------- -- ------ -- --- ------ ---------
Agreement is hereby amended to delete the amount "$500,000" appearing in the
fifth sentence thereof and to substitute the amount "$1,000,000" in place
thereof.
15. AMENDMENT TO (S)7.7 OF THE CREDIT AGREEMENT. Section 7.7 of the
--------- -- ------ -- --- ------ ---------
Credit Agreement is hereby amended to delete clause (d) and final sentence
thereof in their entirety and to substitute the following new clauses (d), (e)
and final sentence in place thereof:
"(d) amend any Guaranteed Pension Plan in circumstances requiring the
posting of security pursuant to (S)307 of ERISA or (S)401(a)(29) of the
Code; or
(e) permit or take any action which would result in the aggregate
benefit liabilities (within the meaning of (S)4001 of ERISA) of all
Guaranteed Pension Plans exceeding the value of the aggregate assets of
such Plans, disregarding for this purpose the
<PAGE>
-9-
benefit liabilities and assets of any such Plan with assets in excess of
benefit liabilities.
The Borrowers will (i) promptly upon filing the same with the Department of
Labor or Internal Revenue Service, furnish to the Banks a copy of the most
recent actuarial statement required to be submitted under (S)103(d) of
ERISA and Annual Report, Form 5500, with all required attachments, in
respect of each Guaranteed Pension Plan and (ii) promptly upon receipt or
dispatch, furnish to the Banks any notice, report or demand sent or
received in respect of a Guaranteed Pension Plan under (S)(S)302, 4041,
4042, 4043, 4063, 4066 and 4068 of ERISA, or in respect of a Multiemployer
Plan, under (S)(S)4041A, 4202, 4219, 4242, or 4245 of ERISA."
16. AMENDMENT TO (S)7 OF THE CREDIT AGREEMENT. The following new (S)7.10
--------- -- ---- -- --- ------ ---------
is hereby added in its proper place to (S)7 of the Credit Agreement:
"(S)7.10 NEGATIVE PLEDGES. No Borrower will pledge any of its assets
-------- -------
to any Person other than to the Agent for the benefit of the Banks, nor
will any Borrower grant any negative pledges on their assets to any Person
other than hereunder."
17. AMENDMENT TO (S)8 OF THE CREDIT AGREEMENT. Section 8 of the Credit
------------ ---- -- --- ------ ---------
Agreement is hereby deleted in its entirety and the following new (S)8 is
substituted in place thereof:
"(S)8. FINANCIAL COVENANTS OF THE BORROWERS. The Borrowers agree
that, so long as any Loan or any Note is outstanding or the Banks have any
obligation to make Loans or the Agent has any obligation to issue, extend
or renew any Letters of Credit hereunder:
(S)8.1 INTEREST COVERAGE RATIO. Commencing with the fiscal quarter
-------- -------- -----
ending September 30, 1996, the ratio of (a) EBIT to (b) Consolidated Total
Interest Expense as at the end of any fiscal quarter (i) on a cumulative
basis with respect to fiscal quarters ending September 30, 1996 through
March 31, 1997, and (ii) with respect to any fiscal quarter ending after
March 31, 1997, for the prior four (4) consecutive fiscal quarters ending
on such date shall not be less than 2.00:1.
(S)8.2 BALANCE SHEET LEVERAGE RATIO. The ratio of (a) Funded Debt
------- ----- -------- -----
to (b) the sum of (i) the excess of Consolidated Total
<PAGE>
-10-
Assets over Consolidated Total Liabilities plus (ii) Funded Debt shall not
exceed 0.60:1 at any time.
(S)8.3 PROFITABLE OPERATIONS. The Borrowers will not permit
---------- ----------
Consolidated Net Income to be less than $0 for any fiscal quarter other
than the fiscal quarter ending March 31 in any year.
(S)8.4 CASH FLOW LEVERAGE RATIO. At the time of the making of any
---- ---- -------- -----
Material Acquisition and at the end of any fiscal quarter, the ratio of (a)
Funded Debt to (b) Proforma EBITDA shall not exceed the stated ratio for
the respective periods set forth below:
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
Closing through 06/30/98 4.00:1
07/01/98 through 06/30/99 3.75:1
Thereafter 3.50:1"
</TABLE>
18. AMENDMENT TO (S)12.1 OF THE CREDIT AGREEMENT. Section 12.1 of the
--------- -- ------- -- --- ------ ---------
Credit Agreement is hereby amended to delete clause (j) thereof in its entirety
and to substitute the following new clause (j) in place thereof:
"(j) any Borrower or any ERISA Affiliate incurs any liability to the
PBGC or a Guaranteed Pension Plan pursuant to Title IV of ERISA in an
aggregate amount exceeding $250,000; any Borrower or any ERISA Affiliate is
assessed withdrawal liability pursuant to Title IV or ERISA by a
Multiemployer Plan requiring aggregate annual payments exceeding $250,000,
or any of the following occurs with respect to a Guaranteed Pension Plan:
(i) an ERISA Reportable Event, or a failure to make a required installment
or other payment (within the meaning of (S)302(f)(1) of ERISA) provided the
Agent determines in its reasonable discretion that such event (A) could be
expected to result in liability of such Borrower to the PBGC or the Plan
in an aggregate amount exceeding $250,000 and (B) could constitute grounds
for the termination of such Plan by the PBGC, for the appointment by the
appropriate United States District Court of a trustee to administer such
Plan or for the imposition of a lien in favor of the Guaranteed Pension
Plan; (ii) the appointment by a United States District Court of a trustee
to administer such Plan; or (iii) the institution by the PBGC of
proceedings to terminate such Plan;"
19. AMENDMENT TO (S)18 OF THE CREDIT AGREEMENT. Section 18 of the Credit
--------- -- ----- -- --- ------ ---------
Agreement is hereby amended to delete the amount "$2,500"
<PAGE>
-11-
appearing in the third sentence thereof and to substitute the amount "$3,500" in
place thereof.
20. RATIFICATION, ETC. Except as expressly amended hereby, the Credit
------------ ---
Agreement, the other Loan Documents and all documents, instruments and
agreements related thereto are hereby ratified and confirmed in all respects and
shall continue in full force and effect. This Fifth Amendment and the Credit
Agreement shall hereafter be read and construed together as a single document,
and all references in the Credit Agreement or any related agreement or
instrument to the Credit Agreement shall hereafter refer to the Credit Agreement
as amended by this Fifth Amendment.
21. GOVERNING LAW. THIS FIFTH AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED
--------- ---
IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS (EXCLUDING THE
LAWS APPLICABLE TO CONFLICTS OR CHOICE OF LAW) AND SHALL TAKE EFFECT AS A SEALED
INSTRUMENT IN ACCORDANCE WITH SUCH LAWS.
22. COUNTERPARTS. This Fifth Amendment may be executed in any number of
------------
counterparts and by different parties hereto on separate counterparts, each of
which when so executed and delivered shall be an original, but all of which
counterparts taken together shall be deemed to constitute one and the same
instrument. Complete sets of counterparts shall be lodged with the Banks.
23. EFFECTIVENESS. This Fifth Amendment shall become effective upon the
-------------
satisfaction of each of the following conditions:
(i) This Fifth Amendment shall have been executed and delivered by
the respective parties hereto;
(ii) Each of the Banks shall have received an executed original
amendment and restatement of such Banks' Revolving Credit Note in form and
substance satisfactory to such Bank;
(iii) The Agent shall have received the certified directors'
resolutions of each of the Borrowers satisfactory to the Agent authorizing
the execution and delivery of the amended and restated Notes and this Fifth
Amendment, and otherwise authorizing this Fifth Amendment and all related
documents;
<PAGE>
-12-
(iv) The Banks shall have received opinions of counsel to the
Borrowers as to the due authorization and enforceability of this Fifth
Amendment, the amended and restated Notes to be issued to the Banks
pursuant to (S)23(ii) of this Fifth Amendment, the due organization, legal
existence, and good standing of the Borrowers, and all other matters as the
Banks may reasonably request;
(v) The Banks shall have received an opinion of counsel to the
Borrowers, in form and substance satisfactory to the Agent, stating that
(a) Eastern Waste of New York, Inc. has received temporary permission to
operate without a license in New York City from the New York City Trade
Waste Commission, a copy of which is attached hereto as Exhibit A, and (b)
once the New York City Trade Waste Commission grants permission to proceed
with the acquisition described in the Plan of Reorganization (defined in
(S)7 of the Third Amendment to the Credit Agreement), such temporary
permission will allow Eastern Waste of New York, Inc. to operate legally,
in full compliance with law, the assets being acquired under the Plan of
Reorganization;
(vi) The Agent shall have received a certificate of the Secretary or
Assistant Secretary of each of the Borrowers certifying that there has
been no change in any of the charter documents of such Borrower or the
incumbency of the officers of such Borrower since such charter documents or
a certificate of such incumbency were last delivered to the Agent;
(vii) The Borrowers and the Agent shall have executed a letter
agreement regarding payment of an underwriting fee; and
(viii) The Agent shall have received an amended and restated SCHEDULE
1 pursuant to (S)2 of this Fifth Amendment as well as SCHEDULE 7.1(F) and
SCHEDULE 7.1(G) pursuant to (S)11 of this Fifth Amendment.
24. COVENANT REGARDING NEW BORROWERS. The Borrowers agree to deliver on
-------- --------- --- ---------
or before May 20, 1997 each of the following, in form and substance satisfactory
to the Agent:
(a) The Borrowers shall deliver to the Agent copies of the charter
and other incorporation documents (including certificates of merger and
name change) of Eastern Indiana, Eastern Florida and WSSF, certified by the
Secretary of State of each of their jurisdictions of incorporation;
<PAGE>
-13-
(b) The Borrowers shall deliver to the Agent certificates of the
legal existence/good standing of Eastern Indiana, Eastern Florida and WSSF,
certified by the Secretary of State of each of their jurisdictions of
incorporation;
(c) The Borrowers shall deliver to the Agent certificates of foreign
qualification for each jurisdiction in which Eastern Indiana, Eastern
Florida or WSSF is required to qualify to do business, certified by the
Secretary of State of such jurisdiction;
(d) The Borrowers shall deliver to the Agent a certificate of the
Secretary or Assistant Secretary of Eastern Indiana, Eastern Florida and
WSSF regarding the by-laws and the incumbency of the officers of such
Borrowers (with copies of such by-laws attached); and
(e) The Borrowers shall deliver to the Agent the certificates for all
of the issued and outstanding shares of Eastern Indiana, Eastern Florida
and WSSF, together with stock powers endorsed in blank.
Failure to deliver each of such items on or before May 20, 1997 shall
constitute an Event of Default under the Credit Agreement.
25. COVENANT REGARDING DONNO COMPANY, INC. The Parent agrees to make the
-------- --------- ----- -------- ---
following amendments to the Certificate of Incorporation and by-laws of Donno
Company, Inc. and to deliver certified copies of such amendments on or before
June 15, 1997, in form and substance satisfactory to the Agent:
(a) The Parent shall amend the Certificate of Incorporation of Donno
Company, Inc. (formerly Gold Coast Service, Inc.) to remove Article Ninth
thereof; and
(b) The Parent shall amend and restate the by-laws of Donno Company,
Inc. (formerly Gold Coast Service, Inc.) in their entirety to remove the
provision in Article VII, Section 1 thereof that all bills payable, notes,
checks, drafts, warrants or other negotiable instruments of such
corporation shall be countersigned by the President or Vice-President
thereof.
<PAGE>
-4-
Failure to deliver certified copies of such amendments on or before June
15, 1997 shall constitute an Event of Default under the Credit Agreement.
26. ENTIRE AGREEMENT. THE CREDIT AGREEMENT AND THE OTHER LOAN DOCUMENTS AS
------ ---------
AMENDED REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE
PARTIES.
[The remainder of this page is intentionally left blank.]
<PAGE>
-15-
IN WITNESS WHEREOF, the undersigned have duly executed this Fifth Amendment
under seal as of the date first set forth above.
THE BORROWERS:
-------------
EASTERN ENVIRONMENTAL SERVICES, INC.
By: /s/ Gregory M. Krzemien
----------------------------
Title: Chief Financial Officer
---------------------------
SUPER KWIK, INC.
PULAKSI GRADING, INC.
CAROLINA GRADING, INC.
S&S GRADING, INC.
ALLIED WASTE SERVICES, INC.
OLNEY SANITARY SYSTEM, INC.
EASTERN WASTE OR NEW YORK, INC.
R&A BENDER, INC.
BAYSIDE OF MARION, INC.
EASTERN WASTE OF L.I., INC.
EASTERN CONTAINER CORPORATION
APEX WASTE SERVICES, INC.
DONNO COMPANY, INC.
RESIDENTIAL SERVICES, INC.
SUFFOLK WASTE SYSTEMS, INC.
N.R.T. REALTY CORP.
EASTERN ENVIRONMENTAL SERVICES
OF INDIANA, INC.
EASTERN ENVIRONMENTAL SERVICES
OF FLORIDA, INC.
WASTE SERVICES OF FLORIDA, INC.
By: /s/ Gregory M. Krzemien
----------------------------
Title: Chief Financial Officer
---------------------------
<PAGE>
-16-
THE BANKS:
---------
BANK OF AMERICA ILLINOIS
By: /s/ Robert P. Rospierski
-------------------------
Title: Vice President
--------------------
BANKBOSTON, N.A. (F/K/A THE FIRST
NATIONAL BANK OF BOSTON),
INDIVIDUALLY AND AS AGENT
By /s/ Charles C. Woodard
-------------------------
Title: Managing Director
---------------------
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C> <C>
<PERIOD-TYPE> 3-MOS 9-MOS 12-mos
<FISCAL-YEAR-END> JUN-30-1997 JUN-30-1997 Jun-30-1997
<PERIOD-START> JAN-01-1997 JUL-01-1996 Jul-01-1995
<PERIOD-END> MAR-31-1997 MAR-31-1997 Jun-30-1996
<CASH> 0 3,906,902 1,776,112
<SECURITIES> 0 0 0
<RECEIVABLES> 0 9,213,765 3,953,159
<ALLOWANCES> 0 1,519,000 604,000
<INVENTORY> 0 0 0
<CURRENT-ASSETS> 0 15,343,323 7,270,936
<PP&E> 0 73,292,176 35,853,889
<DEPRECIATION> 0 19,120,447 17,510,520
<TOTAL-ASSETS> 0 89,352,697 28,786,087
<CURRENT-LIABILITIES> 0 16,043,575 9,124,289
<BONDS> 0 33,980,518 6,308,840
0 0 0
0 0 0
<COMMON> 0 140,958 95,238
<OTHER-SE> 0 27,183,079 10,325,960
<TOTAL-LIABILITY-AND-EQUITY> 0 89,352,697 28,786,087
<SALES> 19,512,498 52,409,183 0
<TOTAL-REVENUES> 19,512,498 52,409,183 0
<CGS> 12,729,563 38,026,625 0
<TOTAL-COSTS> 12,729,563 38,026,625 0
<OTHER-EXPENSES> 5,429,661 12,121,650 0
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 746,654 1,525,509 0
<INCOME-PRETAX> 606,620 735,399 0
<INCOME-TAX> 244,390 940,405 0
<INCOME-CONTINUING> 362,230 (205,006) 0
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 362,230 (205,006) 0
<EPS-PRIMARY> .02 (.02) 0
<EPS-DILUTED> 0 0 0
</TABLE>
