<PAGE>
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[X] Preliminary Proxy Statement [_] Confidential, for Use of the
[_] Definitive Proxy Statement Commission Only (as permitted
[_] Definitive Additional Materials by Rule 14a-6(e)(2))
[_] Soliciting Material Pursuant to
Rule 14a-11(c) or Rule 14a-12
EASTERN ENVIRONMENTAL SERVICES, INC.
______________________________________________________________________________
(Name of Registrant as Specified In Its Charter)
______________________________________________________________________________
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
______________________________________________________________________________
(2) Aggregate number of securities to which transaction applies:
______________________________________________________________________________
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
______________________________________________________________________________
(4) Proposed maximum aggregate value of transaction:
______________________________________________________________________________
(5) Total fee paid:
______________________________________________________________________________
[_] Fee paid previously with preliminary materials.
______________________________________________________________________________
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
______________________________________________________________________________
(2) Form, Schedule or Registration Statement No.:
_______________________________________________________________________________
(3) Filing Party:
______________________________________________________________________________
(4) Date Filed:
______________________________________________________________________________
<PAGE>
EASTERN ENVIRONMENTAL SERVICES, INC.
1000 Crawford Place
Mt. Laurel, New Jersey 08054
-------------------
Notice of Annual Meeting of Stockholders
March 31, 1997
-------------------
TO THE STOCKHOLDERS:
The Annual Meeting of Stockholders of Eastern Environmental Services, Inc.
(the "Company") will be held at 1000 Crawford Place, Mt. Laurel, New Jersey on
March 31, 1997, at 8:30 a.m. local time, for the following purposes:
1. To elect three directors of the Company, each to serve until the next
annual meeting of stockholders.
2. To consider and vote upon a proposal to leave outstanding certain
shares of the Company's Common Stock issued in connection with the acquisition
of Super Kwik, to the extent the acquisition involved the issuance of more than
20% of the Company's then outstanding Common Stock.
3. To amend the Certificate of Incorporation of the Company to delete
Article Seventh thereof.
4. To ratify the appointment of Ernst & Young, LLP as independent
accountants to examine the financial statements of the Company for the fiscal
year ending June 30, 1997.
5. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on February 21, 1997
as the record date of the Meeting. Only holders of record of Common Stock at
the close of business on that date are entitled to notice of and to vote at the
meeting.
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE MEETING. YOU ARE
CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON. WHETHER OR NOT YOU EXPECT TO
ATTEND IN PERSON, YOU ARE URGED TO COMPLETE, SIGN AND RETURN THE ENCLOSED PROXY
CARD IN THE SELF-ADDRESSED ENVELOPE, ENCLOSED FOR YOUR CONVENIENCE, WHICH
REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. IF YOU DECIDE TO ATTEND THE
MEETING AND WISH TO VOTE IN PERSON, YOU MAY REVOKE YOUR PROXY BY WRITTEN NOTICE
AT THAT TIME.
By Order of the Board of Directors
Louis D. Paolino, Jr.
Chairman of the Board
Mt. Laurel, New Jersey
February 25, 1997
<PAGE>
EASTERN ENVIRONMENTAL SERVICES, INC.
1000 Crawford Place
Mt. Laurel, New Jersey 08054
-----------
PROXY STATEMENT
for
ANNUAL MEETING OF STOCKHOLDERS
To Be Held March 31, 1997
This Proxy Statement is being furnished to the stockholders of Eastern
Environmental Services, Inc. (the "Company"), a Delaware corporation, in
connection with the solicitation of proxies by the Board of Directors of the
Company for the Annual Meeting of Stockholders (the "Meeting") to be held on
March 31, 1997, and at any adjournments or postponements thereof. The
approximate date on which this Proxy Statement and the accompanying proxy card
will be first sent or given to stockholders is February 25, 1997. The principal
executive offices of the Company are located at 1000 Crawford Place, Mt. Laurel,
New Jersey 08054.
The record date for determining stockholders entitled to vote at the
Meeting has been fixed at the close of business on February 21, 1997 (the
"Record Date"). As of the Record Date, there were _________ shares of Common
Stock, $.01 par value per share (the "Common Stock"), outstanding and no shares
of Class A Common Stock outstanding. Each share of Common Stock entitles the
holder to one vote on each matter that may properly come before the Meeting. The
presence, in person or by proxy, of holders of shares entitled to cast at least
a majority of the votes entitled to be cast by all outstanding shares of Common
Stock will constitute a quorum for purposes of the Meeting.
Directors are elected by the affirmative vote of a plurality of the votes
cast, and votes may be cast in favor of or withheld from each director nominee.
Accordingly, the three nominees who receive the largest number of votes cast
will be elected as directors. Votes may not be cumulated in the election of
directors. An affirmative vote of a majority of the votes entitled to be cast
by stockholders present in person or by proxy at the Meeting is required for
approval of Proposals 2 and 4. An affirmative vote of a majority of the Common
Stock outstanding on the Record Date is required for approval of Proposal 3.
Abstentions, votes withheld and broker non-votes (described below) are counted
in determining whether a quorum is present. Abstentions with respect to any
proposal other than the election of directors will have the same effect as votes
against the proposal, because approval requires a vote in favor of the proposal
by a specified majority. Broker non-votes occur when a broker or other nominee
holding shares for a beneficial owner does not vote on a proposal because the
beneficial owner has not checked one of the boxes on the proxy card. Broker
non-votes will have no effect on the outcome of Proposals 1, 2 and 4, and will
have the same effect as votes against Proposal 2.
A form of proxy is enclosed for use at the Meeting. Proxies will be voted
in accordance with stockholders' instructions. If no instructions are indicated
on the proxy, all shares represented by valid proxies received pursuant to this
solicitation (and not revoked before they are voted) will be voted (i) for the
election of the nominees for director, as discussed in Proposal 1, (ii) to leave
outstanding certain shares of the Company's Common Stock issued in connection
with the acquisition of Super Kwik, to the extent the acquisition involved the
issuance of more than 20% of the Company's outstanding Common Stock, as
discussed in Proposal 2, (iii) to
1
<PAGE>
amend the Certificate of Incorporation to remove Article Seventh thereof, as
discussed in Proposal 3, (iv) for the ratification of the appointment of Ernst &
Young, LLP as independent accountants to examine the financial statements of the
Company for the fiscal year ended June 30, 1997, as discussed in Proposal 4 and
(v) by the proxies in their discretion on any other business as may properly
come before the Meeting or any adjournment thereof. Stockholders whose shares
are held of record by a broker or other nominee are nevertheless encouraged to
fill in the boxes of their choice on the proxy, as brokers and other nominees
may not be permitted to vote shares with respect to certain matters for which
they have not received specific instructions from the beneficial owners of the
shares. Any proxy given may be revoked by the stockholder executing it at any
time before it is voted by a later dated proxy, written revocation sent to the
Secretary of the Company or attendance at the Meeting and voting in person.
Stockholders will not have appraisal rights with respect to any of the
proposals to be voted upon at the Meeting.
The Company has been advised by its directors and officers and certain of
their affiliates that they intend to vote the _________ outstanding shares of
Common Stock which they hold or with respect to which they currently hold
proxies, representing approximately ____% of the total shares outstanding as of
the record date, in favor of the proposals presented in this Proxy Statement.
See "Voting Securities - Security Ownership of Certain Beneficial Owners."
The cost of solicitation of proxies by the Board of Directors will be borne
by the Company. Proxies may be solicited by mail, personal interview, telephone
or telegraph. Directors, officers and regular employees of the Company may
solicit proxies by such methods without additional remuneration. Banks,
brokerage houses and other institutions, nominees or fiduciaries will be
requested to forward the proxy materials to beneficial owners in order to
solicit authorizations for the execution of proxies. The Company will, upon
request, reimburse such banks, brokerage houses and other institutions, nominees
and fiduciaries for their expenses in forwarding such proxy material to the
beneficial owners of the Company's Common Stock.
ELECTION OF DIRECTORS
(Proposal 1)
The Board of Directors consists of three members. Each director is elected
to hold office until the next annual meeting of stockholders and until his
successor is elected and qualified. Unless authority to vote for any nominee is
withheld in the proxy, the persons named in the accompanying proxy intend to
vote the shares represented by the proxy for the election as directors of the
three nominees named below, all of whom are at present directors of the Company.
Although the Board of Directors does not contemplate that any of the nominees
named will be unavailable for election, in the event a vacancy in the slate of
nominees results from an unexpected occurrence, it is presently intended that
the proxy will be voted for the election of a nominee who shall be designated by
the Board.
2
<PAGE>
The following biographical information is furnished as to each nominee for
election as director:
Louis D. Paolino, Jr., age 40, has been Chairman of the Board, Chief
Executive Officer and a Director since June 20, 1996 and has 14 years of
experience in the solid waste industry. From 1991 to June 1, 1996, Mr. Paolino
was President of Soil Remediation of Philadelphia, Inc. until the Company was
sold to USA Waste Services, Inc. where he also served as Vice President from
1993 to 1996. Soil Remediation of Philadelphia, Inc. is in the business of
treating contaminated soil.
George O. Moorehead, age 43, has been a Director of the Company since June
20, 1996 and has over 30 years experience in the solid waste industry. Since
February 1995, Mr. Moorehead has served as the President, Director and Chief
Executive Officer of EMCO Recycling Corp., a company engaged in the business of
metal recycling in Arizona. Since 1993, Mr. Moorehead has been a principal
stockholder and a director of EMCO Recycling Corp. From 1990 to 1993, Mr.
Moorehead was President and Chief Executive Officer and a Director of Custom
Disposal, Inc., a Phoenix area solid waste disposal company.
Kenneth Chuan-kai Leung, age 51, has been a Director of the Company since
June 20, 1996. Mr. Leung has been a managing director of investment banking at
Sanders Morris Mundy Inc. since 1994 and Chief Investment Officer of
Environmental Opportunities Fund, L.P. and Environmental Opportunities Fund
(Cayman), L.P. since January 1, 1996. From 1987 to 1994, Mr. Leung was a
managing director of Smith Barney, Inc. Mr. Leung has 23 years of experience in
the environmental services industry as a securities analyst and investment
banker.
Required Vote
Directors are elected by the affirmative vote of a plurality of the votes
cast, and votes may be cast in favor of or withheld from each director nominee.
Accordingly, the three nominees who receive the largest number of votes cast
will be elected as directors. Votes may not be cumulated in the election of
directors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR"
ELECTION OF EACH OF THE
FOREGOING NOMINEES AS DIRECTORS
Meetings of the Board of Directors
The Board of Directors met 17 times during the fiscal year ended June 30,
1996. During fiscal 1996, each incumbent Board member attended at least 75% of
the Board meetings held while he was a director.
The Board of Directors has an Audit Committee. The Audit Committee is
comprised of the Company's three current directors. The functions of the Audit
Committee include the recommendation and selection of independent accountants,
the review of audit results, the review
3
<PAGE>
of related party transactions and the evaluation of internal accounting
procedures of the Company. The Audit Committee, as constituted prior to the
Change of Control (as defined below), met once during the fiscal year ended June
30, 1996, prior to the time that the current committee members were appointed.
The Board of Directors also has a Compensation Committee and a Nominating
Committee. The Compensation Committee and the Nominating Committee are each
made up of the Company's three current directors. The functions of the
Compensation Committee consist of setting cash compensation for employees
receiving base salary in excess of $50,000 per year, setting compensation policy
for other employees and approving option grants under the 1987, 1991 and 1996
Stock Option Plans. The functions of the Nominating Committee consist of
finding and recommending qualified candidates to serve on the Company's Board of
Directors. The Nominating Committee will consider director nominees recommended
by stockholders. Any such recommendation, together with the nominee's
qualifications and consent to being considered as a nominee, should be sent in
writing to the Nominating Committee in care of the Secretary of the Company.
The Compensation Committee met five times and the Nominating Committee met once
during the fiscal year ended June 30, 1996, as each committee was constituted
prior to the Change of Control.
EXECUTIVE OFFICERS
The following biographical information is furnished as to executive
officers (other than executive officers who are also nominees for election as
director, as to whom biographical information is set forth above):
Terry W. Patrick, age 50, joined the Company as Executive Vice President
and Chief Operating Officer in June 1996. Mr. Patrick has over 25 years of
management experience in the waste industry. From September 1995 to June 1996,
Mr. Patrick was involved with personal investments and ownership of a chemical
manufacturing and distributing company. He served as the President and Chief
Operating Officer of USA Waste Services, Inc. from April 1990 to August 1994.
Mr. Patrick was involved in district and regional management for Browning Ferris
Industries, Inc. from October 1981 through October 1988, and he served as Vice
President of Operations at Mid-American Waste Systems, Inc. from November 1988
to April 1990. Mr. Patrick served in various district and regional management
positions with Waste Management, Inc. from September 1979 through October 1981.
Willard Miller, age 60, joined the Company as Executive Vice President in
September 1996. In 1972, Mr. Miller founded Super Kwik, Inc. where he held the
positions of President and Chief Executive Officer for 24 years.
Glen M. Miller, age 39, joined the Company as Executive Vice President of
Collection Operations in September 1996. Prior to joining the Company, Mr.
Miller had 23 years experience in the solid waste industry, most recently as
Vice President and Chief Operating
4
<PAGE>
Officer of Super Kwik, Inc. since January 1980 and President of Waste
Maintenance Services, Inc. from May 1987 to September 1996, when the Company
acquired that business.
Gregory M. Krzemien, age 37, joined the Company as Chief Financial Officer
and Treasurer in August 1992. From October 1988 until joining the Company, Mr.
Krzemien was a senior audit manager with Ernst & Young, LLP, an independent
accounting firm. Mr. Krzemien worked for Ernst & Young, LLP for 11 years.
Robert M. Kramer, age 44, joined the Company as its General Counsel, Vice
President and Secretary on June 20, 1996. Prior to joining the Company, Mr.
Kramer was engaged in the private practice of law, with various firms since
1979. Since 1989, Mr. Kramer has practiced law through Robert M. Kramer &
Associates P.C. a law firm specializing in commercial transactions and
securities law. In addition to his duties with the Company, Mr. Kramer will
still be engaged in the private practice of law through Robert M. Kramer &
Associates, P.C.
Compliance With Section 16(a) of The Securities Exchange Act of 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file with the Securities
and Exchange Commission ("SEC") initial reports of ownership and reports of
changes in ownership of Common Stock and other equity securities of the Company.
Officers, directors and greater than ten-percent shareholders are required by
SEC regulation to furnish the Company with copies of all Section 16(a) forms
they file.
To the Company's knowledge, based solely on review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended June 30, 1996, all Section
16(a) filing requirements applicable to the Company's officers, directors and
greater than ten-percent beneficial owners were complied with, except as
follows. Robert J. Powell and Steven C. Stamos, Jr., each of whom was a
director until June 1996, each filed three reports late relating to three
warrant grant transactions. Timothy W. Sweeney, who was a director until June
1996, filed two reports late relating to two warrant grant transactions.
Executive Compensation
The following table sets forth information with respect to compensation
paid by the Company during its last three completed fiscal years to Mr. Paolino,
the Company's Chief Executive Officer and Mr. Skuba, the Company's former Chief
Executive Officer (the "Named Executive Officers"). Other than Mr. Skuba, no
other executive officer of the Company had total annual salary and bonus
exceeding $100,000 during the Company's fiscal year ended June 30, 1996.
5
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
============================================================================================================
Long-Term
Annual Compensation Compensation
--------------------- --------------
- ------------------------------------------------------------------------------------------------------------
Awards
------
- ------------------------------------------------------------------------------------------------------------
Securities
Name and Principal Fiscal Year Underlying All Other
Position Ended June 30, Salary ($) Bonus ($) Options (#) Compensation ($)
------------------ ------------- --------- --------- ----------- ----------------
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Louis D. Paolino, Jr. 1996 8,192 None 250,000 None
Chief Executive Officer
June 1996 - Present
- ------------------------------------------------------------------------------------------------------------
William C. Skuba 1996 129,312 None None 151,874(1)
Chief Executive Officer
Until June 1996
- ------------------------------------------------------------------------------------------------------------
1995 124,800 None None 2,500(2)
- ------------------------------------------------------------------------------------------------------------
1994 127,390 None None 2,500(2)
============================================================================================================
</TABLE>
(1) Consists of non-cash compensation paid to Mr. Skuba under the 1996
Severance Agreement. See "Certain Relationships and Related Transactions."
(2) Consists solely of moving expenses.
The following table sets forth information concerning individual grants of
stock options made during fiscal year 1996 to the Company's Chief Executive
Officer.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
===================================================================================================================
Number of Securities Percent of Total Options
Underlying Option Granted to Employees in Exercise or Expiration
Name Granted (#) Fiscal Year Base Price ($/sh) Date
---- -------------------- ------------------------ ----------------- ----------
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Louis D. Paolino, Jr. 250,000 31.1% $6.33 June 21, 2006
- -------------------------------------------------------------------------------------------------------------------
William C. Skuba 0 0 0 0
===================================================================================================================
</TABLE>
The following table sets forth information concerning each exercise of
stock options during the Company's fiscal year 1996 by the Company's Executive
Officer.
6
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
===================================================================================================================
Number of Securities
Underlying Unexercised Value of Unexercised In-the-
Shares Acquired Value Options at FY-End (#) Money Options at FY-End ($)
Name on Exercise (#) Realized ($) Exercisable/Unexercisable Exercisable/Unexercisable
---- --------------- ------------ ------------------------- -------------------------
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Louis D. Paolino, Jr. None None 0/250,000 0/42,500
- -------------------------------------------------------------------------------------------------------------------
William C. Skuba None None None None
===================================================================================================================
</TABLE>
Director Compensation
Prior to June 20, 1996, non-employee directors of the Company received a
fee of $1,000 per meeting for attendance in person at each Board meeting and
$250 for attendance by telephone. After June 20, 1996, the Company revised its
policy and directors no longer receive any fees for attendance at the directors'
meetings. Each of the Company's directors received options or warrants to
purchase shares of the Company's Common Stock. Simultaneous with the Change of
Control, the Company's former Board of Directors was replaced with Messrs.
Paolino, Leung and Moorehead becoming directors. In July 1996, options to
purchase 10,000 shares of the Company's Common Stock at an exercise price of
$6.375 per share were issued to each of Mr. Leung, Mr. Moorehead and Mr.
Paolino, with the options becoming fully vested one year from the date of grant.
In October 1996, Messrs. Moorehead and Leung each received options to purchase
60,834 shares of Commons Stock at a per share price of $6.63 with 50,000 options
to vest immediately, one-half of the remainder to vest on October 1, 1997 and
the other half to vest on October 1, 1998. All expenses incurred by all
directors for attendance at Board Meetings are reimbursed by the Company.
Simultaneous with the Change of Control, the Company's former Board of Directors
was replaced. During fiscal year 1996, the former directors of the Company
received warrants to purchase Common Stock. Warrants to purchase 12,000 shares
were issued to Timothy W. Sweeney, and warrants to purchase 6,000 shares to each
of Mr. Stamos and Mr. Powell were issued in July 1995, all at an exercise price
of $1.50. Additionally, in calendar year 1996, warrants to purchase 11,800
shares were issued to Mr. Sweeney and Mr. Stamos were issued at an exercise
price ranging from $1.25 to $2.00. The Company's prior Board also approved Mr.
Sweeney and Mr. Stamos to provide consulting services to the Company as
requested from time to time at a rate of $100 per hour plus expenses. The
Company paid approximately $1,900 and $6,100 to Mr. Sweeney and Mr. Stamos,
respectively, for consulting services and expenses in fiscal 1996. Neither Mr.
Sweeney nor Mr. Stamos has rendered services to the Company since the Change of
Control.
Employment Contracts, Termination of Employment and Change-In-Control
Arrangements
The Company has entered into an employment agreement with Louis D. Paolino,
Jr., the Company's Chief Executive Officer. Under the agreement, Mr. Paolino is
provided a base annual salary of $150,000. In addition, Mr. Paolino received
options to purchase 250,000 shares of Common Stock under the Company's 1996
Stock Option Plan at a per share price of $6.33, vesting ratably over a four-
year period, and options to purchase an additional 161,782 shares of Common
7
<PAGE>
Stock at a per share price of $6.63 with 50,000 options to vest on October 1,
1996, 55,891 options to vest on October 1, 1997 and the remainder to vest on
October 1, 1998. In addition, if there is an actual change in control of 50% or
more in the Company's voting power or a change in the majority of the current
Board of Directors, the Company has agreed to pay Mr. Paolino a lump sum bonus
paid in either cash or registered stock, at the Company's option, equal to twice
his then current annual salary and any bonuses paid to him within the twelve
months prior to the change of control. The agreement also provides that during
the term of Mr. Paolino's employment and for a period of two years following the
termination of such employment, Mr. Paolino will not compete with the Company or
its subsidiaries in the business of waste hauling, waste disposal, landfilling,
handling demolition waste, handling special waste and recycling waste within a
50-mile radius of any Company business operation.
The Company entered into a severance agreement with Mr. Skuba, the
Company's former Chief Executive Officer. See "Certain Relationships and Related
Transactions" below for further discussion relating to the severance agreement.
Change of Control
On June 20, 1996, William C. Skuba, who was then the Company's Chairman,
Chief Executive Officer and President, sold an aggregate of 500,000 shares of
the Company's Common Stock at a price of $2 per share to a group consisting of
Mr. Moorehead, Mr. Paolino, Environmental Opportunities Fund, L.P., a Delaware
limited partnership (the "Fund"), and Environmental Opportunities Fund (Cayman),
L.P., a Cayman Islands exempted limited partnership (the "Cayman Fund") (Mr.
Moorehead, Mr. Paolino, the Fund and the Cayman Fund being hereinafter sometimes
collectively referred to as the "Purchasers") pursuant to a Stock Purchase
Agreement dated as of May 8, 1996, among Mr. Skuba and the Purchasers (the
"Stock Purchase Agreement"). Pursuant to the Stock Purchase Agreement, Mr. Skuba
also converted all of his Class A Common Stock of the Company (which carried
four votes per share) into Common Stock (which carries one vote per share). Mr
Skuba also granted to the Purchasers an irrevocable proxy over his remaining
1,111,101 million shares of Common Stock for a period to expire on the earlier
of June 21, 1997, or the date upon which Mr. Skuba disposes of such remaining
shares.
The consummation of the Stock Purchase Agreement resulted in a change of
control of the Company ("Change of Control"), with the Purchasers becoming
significant owners of the Company's Common Stock. As required by the Stock
Purchase Agreement, Mr. Skuba resigned as the Company's Chairman and Chief
Executive Officer and, along with all of the other members of the Company's
Board of Directors, resigned from the Board of Directors of the Company. Mr.
Paolino, Mr. Moorehead and Mr. Leung (a managing director of the Fund and the
Cayman Fund) were elected as members of the Company's Board of Directors. Mr.
Paolino was appointed as the Company's new Chairman and Chief Executive Officer.
In connection with the consummation of the transactions contemplated by the
Stock Purchase Agreement, the Company entered into a series of agreements with
Mr. Skuba regarding his relationship with the Company following his resignation
as an officer, director and employee of the
8
<PAGE>
Company, which are described below under the caption "Certain Relationships and
Related Transactions."
Certain Relationships and Related Transactions
The Company leases its executive offices at 1000 Crawford Place, Mt.
Laurel, New Jersey from Bluepointe, Inc., a corporation controlled by Mr.
Paolino. The lease which was recently entered into in July of 1996 is for a term
of five years, covers 5,000 square feet and is for a monthly rental of $6,250
plus increases resulting from increases in the Consumer Price Index. The lease
is terminable at any time within the five-year term at the option of Company by
payment of a termination fee equal to one year's rent. The lessor provided
$20,000 of leasehold improvements for the premises at the lessor's expense. The
Company believes that the rental it pays is the fair market value of the
premises.
On August 1, 1996, the Company acquired all of the assets of Eastern Waste,
Inc. for a purchase price consisting of 391,250 unregistered shares of the
Company's Common Stock. The shareholders of Eastern Waste, Inc. are Matthew
Paolino and Donald Moorehead, brothers of Louis Paolino and George Moorehead.
In October 1996, the Company hired Premier Concrete, Inc. ("Premier") to
excavate the Company's landfill cell under construction in West Virginia.
Premier is a contractor which is owned by Matthew Paolino, Premier, the lowest
responsible bidder for the job, is being paid $3.75 per cubic yard of excavated
material. The Company estimates that the total amount to be paid to Premier for
the job will be $480,000, based on current conditions.
Mr. Kramer, the Company's General Counsel, Vice President and Secretary is
engaged in the private practice of law through Robert M. Kramer & Associates,
P.C., a professional corporation owned by Mr. Kramer which renders legal
services to the company.
In 1987, the Company entered into an agreement with Thomas M. Yanette, a
former director and officer of the Company. Pursuant to such agreement, in
exchange for the surrender by Mr. Yanette of an equity interest he owned in a
predecessor of the Company and the agreement of Mr. Yanette not to compete with
the Company and to provide consulting services to the Company, the Company has
agreed to pay to Mr. Yanette or his surviving spouse $48,000 per year. Such
payments began in September 1987 and will continue until August 1997.
Robert J. Powell, a former director of the Company, is the sole shareholder
of The Law Offices of Robert J. Powell, Hazelton, Pennsylvania, which provided
legal services to the Company from fiscal 1994 to fiscal July 1996. The Company
paid approximately $78,000 for such legal services in fiscal 1996.
In connection with the consummation of the transaction contemplated by the
Stock Purchase Agreement, the Company entered into a series of agreements with
Mr. Skuba regarding his relationship with the Company following his resignation
as an officer, director and employee of the Company. Among such agreements, the
Company and Mr. Skuba entered into a severance
9
<PAGE>
agreement ("1996 Severance Agreement") which provides for Mr. Skuba to receive
certain health insurance benefits from the Company (at its cost for one year and
at Mr. Skuba's cost thereafter). Additionally, in payment of a severance
obligation of the Company to Mr. Skuba pursuant to a separate severance
agreement entered into in 1993, as subsequently amended in 1995, the Company
conveyed to a company controlled by Mr. Skuba: (i) the outstanding stock of a
corporation which owns certain real property located in Drums, Pennsylvania,
("Drums Real Property"), (ii) certain real and personal property located in
Jasper County, South Carolina, and (iii) certain vehicles owned by the Company.
The Company also sold to Mr. Skuba certain potential business opportunities
which the Company decided that it had no interest in pursuing. The Company
entered into two leases with a company controlled by Mr. Skuba under which the
Company agreed to lease back a portion of the Drums Real Property currently used
in its operations. In October, 1996, one of the leases was terminated.
The 1996 Severance Agreement further provides that until the earlier of one
year from the Closing Date or a change of control of the Company, Mr. Skuba will
not compete with the Company or its subsidiaries (i) in the business of landfill
operation or municipal solid waste collection within a 50-mile radius of the
Company's landfills operated in West Virginia, South Carolina, Kentucky and
Illinois or (ii) in the business of asbestos hauling within a 90-mile radius of
the Drums Real Property. Finally, the 1996 Severance Agreement included a mutual
release of all claims each of the Company and Mr. Skuba may have against the
other and, for a six-year period, the Company's agreement to indemnify Mr. Skuba
and maintain director and officer liability insurance coverage for Mr. Skuba.
The Company also retained Mr. Skuba as a consultant for a period of six
months with the Company having an option to retain Mr. Skuba for an additional
six months pursuant to a consulting agreement (the "Consulting Agreement").
Under the Consulting Agreement, Mr. Skuba will serve as a general advisor and
consultant to the Company to assist the Company on such matters related to the
transition of control of the Company and negotiating acquisitions for the
Company as the Company and Mr. Skuba may mutually agree. In consideration for
performing such services during the first six months, the Company will provide
no compensation to Mr. Skuba other than the reimbursement of his reasonable
expenses and secretarial support.
Additionally, the Company entered into a registration rights agreement with
Mr. Skuba ("Registration Rights Agreement") providing for the registration of
the remainder of Mr. Skuba's shares of Common Stock which were not sold pursuant
to the Stock Purchase Agreement and which are not yet registered under the
Securities Act of 1933 (the "Securities Act"). Pursuant to the Registration
Rights Agreement, the Company also agreed to register Mr. Skuba's unregistered
Common Stock under the Securities Act in the event that the Company proposes to
register any of its Common Stock under the Securities Act.
In connection with the acquisition of Super Kwik, Inc., the Company entered
into several agreements with Willard and Glen Miller which are more fully
described in Proposal 2.
10
<PAGE>
VOTING SECURITIES
Description of Capital Stock
The Company's authorized capital stock consists of 50,000,000 shares of
Common Stock, par value $.01 per share, and 10,000,000 shares of Class A Common
Stock, par value $.01 per share. As of February 21, 1997, there were ___________
shares of Common Stock outstanding and no shares of Class A Common Stock
outstanding. The Company currently has no intention of issuing any Class A
Common Stock. Each share of Common Stock entitles the holder to one vote, and
each share of Class A Common Stock entitles the holder to four votes, on each
matter submitted to a vote of the stockholders of the Company.
Security Ownership of Certain Beneficial Owners
The following table sets forth certain information regarding beneficial
ownership of the Company's capital stock by each of the Company's directors and
nominees for directorships, by each of the Named Executive Officers, by all of
the officers and directors of the Company as a group, and by all persons known
to the Company to be the beneficial owner of more than five percent of the
Company's outstanding Common Stock as of January 29, 1997. Unless otherwise
indicated, the stockholders listed possess sole voting power and investment
power with respect to the shares listed.
<TABLE>
<CAPTION>
Common Stock
Amount and Nature
of Beneficial Percent of
Name of Beneficial Owner/1/ Ownership Class
- --------------------------- ----------------- ----------
<S> <C> <C>
Louis D. Paolino, Jr./2/ 2,155,008 17.8%
George Moorehead/3/ 1,496,101 12.3%
3700 West Lower Buckeye
Phoenix, AZ 85009
Kenneth Chuan-kai Leung/4/ 2,161,101 17.8%
126 East 56th Street
24th Floor
New York, NY 10022
</TABLE>
- ---------------------------
1. Unless otherwise noted, the business address of the person and entity is
1000 Crawford Place, Mt. Laurel, NJ 08054.
2. Mr. Paolino is the holder of record of 782,741 shares and may be deemed to
own beneficially (i) 10,000 shares to be held of record by Wenonah Holdings,
Inc., (ii) 171,166 shares held by family members over which he has the right to
vote, (iii) 5,000 shares held of record by his minor child, (iv) 25,000 shares
held of record by a partnership consisting of trusts of which he is sole
trustee, (v) 50,000 shares as to which he has an option to purchase within 60
days and (vi) 1,111,101 shares held of record by Mr. Skuba with respect to which
Mr. Paolino, Mr. Moorehead, and the Fund hold a joint proxy. Mr. Paolino is the
President and Chairman of the Board of Directors of the Company.
3. Mr. Moorehead is the holder of record of 335,000 shares and may be deemed to
own beneficially (i) 50,000 shares as to which he possesses an option to
purchase within 60 days and (ii) 1,111,101 held of record by Mr. Skuba with
respect to which Mr. Paolino, Mr. Moorehead and the Fund hold a joint proxy.
4. As a managing director of the Fund and the Cayman Fund, Mr. Leung may be
deemed to own beneficially the shares held by the Fund and the Cayman Fund. He
may also be deemed to own beneficially 50,000 shares as to which he possesses an
option to purchase within 60 days.
11
<PAGE>
<TABLE>
<S> <C> <C>
Environmental 2,000,798 16.5%
Opportunities Fund, L.P./5/
126 East 56th Street
24th Floor
New York, NY 10022
Environmental
Opportunities
Fund (Cayman)/6/ 1,221,404 10.1%
126 East 56th Street
24th Floor
New York, NY 10022
William Skuba/7/ 1,231,101 10.2%
RR #4, Box 4452
Drums, PA
Willard Miller/8/ 1,365,688 11.2%
230 Orono Place
Sommerdale, NJ 08083
Glen Miller/8/ 1,111,302 9.1%
429 Ocean Avenue
Ocean City, NJ 08226
All officers and directors 6,529,990 51.5%
as a group (8 persons)/9/
</TABLE>
- ------------------------
5. The Fund is the holder of record of 889,697 shares and may be deemed to own
beneficially 1,111,101 shares held of record by Mr. Skuba with respect to which
Mr. Paolino, Mr. Moorehead and the Fund hold a joint proxy. Mr. Leung is the
managing director of the Fund.
6. The Cayman Fund is the holder of record of 110,303 shares and may be deemed
to own beneficially 1,111,101 shares held of record by Mr. Skuba as to which Mr.
Paolino, Mr. Moorehead and the Fund hold a joint proxy. Mr. Leung is the
managing director of the Cayman Fund.
7. Mr. Skuba is the holder of record of 1,231,101 shares with respect to
1,111,101 of which he has granted a joint proxy to Mr. Paolino, Mr. Moorehead,
and the Fund.
8. Willard and Glen Miller, the former stockholders of Super Kwik, acquired an
aggregate of 2,308,176 unregistered shares of Common Stock of the Company in
connection with the Company's acquisition of Super Kwik. Each of the Millers may
also be deemed to own beneficially an additional 81,907 shares purchasable upon
exercise of vested Warrants. The Millers and the Company have entered into an
agreement with the Company pursuant to which the Millers may be required to sell
certain of their shares to the Company depending on whether or not Proposal 2 is
approved at the Meeting. See "Proposal 2" below.
9. Includes a total of 596,806 shares as to which officers and directors have
options which are exercisable within 60 days.
12
<PAGE>
PROPOSAL TO LEAVE OUTSTANDING CERTAIN SHARES ISSUED
IN CONNECTION WITH THE ACQUISITION OF SUPER KWIK
(Proposal 2)
On September 27, 1996, the Company acquired all of the outstanding stock of
Super Kwik, Inc. and Waste Maintenance, Inc. (collectively, "Super Kwik")
pursuant to the terms of an Agreement of Merger dated July 29, 1996, among the
Company, Super Kwik, Waste Maintenance Services, Inc., and Willard and Glen
Miller (the "Acquisition"). Pursuant to the Agreement of Merger, Super Kwik was
merged into NHD, Inc. ("NHD") (which has subsequently changed its name to Super
Kwik, Inc.), a wholly owned subsidiary of the Company, resulting in Willard
Miller and Glen Miller receiving an aggregate of 2,308,176 shares of the
Company's Common Stock (the "Shares") in exchange for all issued and outstanding
shares of Super Kwik. The Shares were valued at $6.50 per share (the closing
price of the Common Stock on the business day five days prior to the closing
date), representing total consideration of approximately $15,000,000. No cash
was paid to the Millers in connection with the Acquisition, in which NHD assumed
approximately $5,000,000 of outstanding indebtedness of Super Kwik. The
Acquisition has been accounted for using the "pooling of interest" method of
accounting.
Super Kwik's waste collection and recycling operations are located in
Voorhees, New Jersey and consist of over 60 collection vehicles service more
than 25,000 residential customers and 4,500 commercial customers in nine
southern and central New Jersey counties and Philadelphia, Pennsylvania. The
Company has consolidated its three Philadelphia area hauling companies into
Super Kwik's operations.
In connection with the Acquisition, the Company entered into a series of
agreements with Willard and Glen Miller to continue their relationships with the
Company. Both Willard and Glen Miller have entered into employment agreements
with the Company whereby each was hired as an Executive Vice President of NHD in
charge of its southern New Jersey waste collection operations for a term of four
years unless earlier terminated. As compensation, each executive will receive an
annual salary of $150,000 and certain health and other employee benefits. The
agreements also provide that during the term of employment, and for a period of
one year thereafter, the executive will not compete with the Company or its
subsidiaries in the business of waste hauling, waste disposal, land filling,
handling demolition waste, handling special waste, collecting or disposing of
municipal special waste in an area which includes southern New Jersey and
Philadelphia, Pennsylvania. Pursuant to the employment agreements, Willard and
Glen Miller each also received warrants to purchase 281,907 unregistered shares
of the Company's Common Stock at an exercise price of $6.75 per share (the
"Warrants"). The Warrants vest over a four year period and expire ten years
after the date of grant. In addition, the Warrants vest immediately upon a
change of control of the Company (as defined in the Warrants).
Additionally, the Company entered into registration rights agreements with
Willard and Glen Miller pursuant to which the Company agreed to register all of
their Shares for resale under the Securities Act within 90 days following the
Acquisition. The Company has agreed to bear all
13
<PAGE>
registration expenses (except underwriting discounts or commissions) related to
the registration of the Shares. The Millers have agreed to defer the Company's
registration obligation until after the Meeting.
Under the rules of the Nasdaq National Market ("Nasdaq"), stockholder
approval is required when more than 20% of the outstanding Common Stock of the
Company is issuable by the Company in connection with an acquisition. In the
Acquisition, 2,308,176 shares of Common Stock were issued, which represents
464,136 shares (the "Excess Shares") more than 20% of the Common Stock then
outstanding. In order to bring the Company into compliance with applicable
Nasdaq rules, the Company has agreed to submit this Proposal 2 to the Company's
stockholders to allow the stockholders to determine whether or not to leave the
Excess Shares outstanding.
Pursuant to an agreement entered into among the Company and Willard and
Glen Miller, if the stockholders vote in favor of this Proposal 2 to leave the
Excess Shares outstanding, the Excess Shares will remain outstanding. If the
stockholders vote against this Proposal 2, the Company will purchase the Excess
Shares and will be required to pay the Millers cash in the amount of $3,016,884,
amounting to $6.50 per share, the price at which the shares were valued when
issued to the Millers in the Acquisition.
The Company has been advised by its officers and directors and their
affiliates, holding an aggregate _________ shares of Common Stock as of the
Record Date (____% of the Common Stock outstanding as of the Record Date) that
they intend to vote in favor of this Proposal 2 to leave the Excess Shares
outstanding. The Millers have agreed to vote 1,844,040 of the Shares,
representing all of the Shares other than the Excess Shares, in favor of this
Proposal 2. The Millers have agreed not to vote the Excess Shares on any of the
proposals being voted on at the Meeting.
Required Vote
The affirmative vote of the holders of a majority of the shares present in
person or represented by proxy at the Annual Meeting is required to approve this
Proposal 2 and leave the Excess Shares outstanding. The status of the Common
Stock as a Nasdaq National Market traded security will not be affected by the
outcome of the vote on this Proposal 2.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR"
PROPOSAL 2
14
<PAGE>
AMENDMENT OF THE COMPANY'S CERTIFICATE OF INCORPORATION
TO DELETE ARTICLE SEVENTH
(Proposal 3)
The Company has entered into a Revolving Credit Agreement (the "Credit
Agreement") with The First National Bank of Boston and Bank America Illinois
(the "Lenders") pursuant to which the Lenders have provided the Company with a
$50,000,000 revolving credit facility. Under the terms of the Credit Agreement,
the Company has agreed to recommend to its stockholders that the Company's
Certificate of Incorporation be amended to remove Article Seventh therefrom.
Article Seventh provides that the Chancery Court of Delaware is authorized to
compromise the debts of the Company upon the agreement of the Company and three
fourths of the Company's creditor classes. The Company does not believe that
Article Seventh is of any material practical benefit and such provision has the
disadvantage of making it difficult for the Company to receive financing on
favorable terms. Federal Bankruptcy law would provide a comparable means for
the Company to make creditor arrangements.
Required Vote
The affirmative vote of the holders of a majority of the Common Stock
outstanding on the Record Date is required to approve this Proposal 3 to amend
the Company's Certificate of Incorporation to delete Article Seventh.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR"
PROPOSAL 3
APPOINTMENT OF INDEPENDENT ACCOUNTANTS
(Proposal 4)
The Board of Directors of the Company has appointed Ernst & Young, LLP as
independent public accountants to examine the financial statements of the
Company for the year ending June 30, 1997. Ernst & Young, LLP has served as
accountants for the Company since October 1990. A representative of Ernst &
Young, LLP is expected to be present at the Meeting and will be given an
opportunity to make a statement if he desires to do so and to respond to
appropriate questions.
Required Vote
To be ratified, the appointment must be approved by a majority of the
shares present in person or represented by proxy at the Annual Meeting.
Although the submission of the appointment of Ernst & Young, LLP is not
required by law or the By-laws of the Company, the Board of Directors is
submitting it to the stockholders to ascertain their views. If the stockholders
do not ratify the appointment, the Board of Directors will not be bound to seek
other independent accountants for fiscal year 1997, but the selection of other
15
<PAGE>
independent accountants will be considered in future years. If Ernst & Young,
LLP shall decline to accept or become incapable of accepting its appointment, or
if its appointment is otherwise discontinued, the Board of Directors will
appoint other independent public accountants.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR"
PROPOSAL 4
STOCKHOLDER PROPOSALS
Any stockholder proposal intended to be presented at the next annual
meeting of stockholders must be received by the Company by October 28, 1997, in
order to be considered for inclusion in the Company's proxy material for such
meeting.
OTHER MATTERS
As of the date of this Proxy Statement, the Company does not intend to
present and has not been informed that any other person intends to present any
appropriate business not specified in this Proxy Statement for action at the
meeting. However, if other matters should properly come before the meeting or
any adjournment thereof, it is the intention of the persons named in the
accompanying proxy, or their substitutes, to vote the proxy in accordance with
their judgment in such matters.
By Order of the Board of Directors
Louis D. Paolino, Jr.,
Chairman of the Board
Mt. Laurel, New Jersey
February 25, 1997
16
<PAGE>
EASTERN ENVIRONMENTAL SERVICES, INC.
Proxy Solicited On Behalf Of The Board of Directors
The undersigned, revoking all previous proxies, hereby appoints Louis D.
Paolino, Jr., Terry W. Patrick and Robert M. Kramer, and each of them acting
individually, as the attorney and proxy of the undersigned, with full power of
substitution, to vote, as indicated below and in their discretion upon such
other matters as may properly come before the meeting, all shares which the
undersigned would be entitled to vote at the Annual Meeting of Stockholders of
the Company to be held on March 31, 1997, and at any adjournment or postponement
thereof.
1. Election of Directors:
[_] For the nominees listed below [_] Withhold Authority to vote for
the nominees listed below
Nominees: For a one-year term expiring at the next Annual Meeting to be held
following the end of fiscal 1997: Louis D. Paolino, Jr., George
Moorehead and Kenneth Chuan-kai Leung
(Instruction: To withhold authority to vote for any nominee(s), write the
name(s) of such nominee(s) on the line below.)
----------------------------------
2. To leave outstanding certain shares of the Company's Common Stock issued in
connection with the acquisition of Super Kwik, as described in the Proxy
Statement:
[_] For [_] Against [_] Abstain
3. To amend the Certificate of Incorporation of the Company to delete Article
Seventh thereof, as described in the Proxy Statement:
[_] For [_] Against [_] Abstain
4. To ratify the appointment of Ernst & Young, LLP as independent accountants
to examine the financial statements of the Company for the fiscal year
ending June 30, 1997:
[_] For [_] Against [_] Abstain
Please date and sign your Proxy on the reverse side and return it promptly.
<PAGE>
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. UNLESS
OTHERWISE SPECIFIED, THE SHARES WILL BE VOTED THE SHARES WILL BE VOTED "FOR" THE
ELECTION OF THE NOMINEES FOR DIRECTOR LISTED ON THE REVERSE SIDE HEREOF, FOR THE
PROPOSAL TO LEAVE OUTSTANDING CERTAIN SHARES OF THE COMPANY'S COMMON STOCK
ISSUED IN CONNECTION WITH THE ACQUISITION OF SUPER KWIK, AS DESCRIBED IN THE
PROXY STATEMENT, FOR THE PROPOSAL TO AMEND THE CERTIFICATE OF INCORPORATION OF
THE COMPANY TO DELETE ARTICLE SEVENTH THEREOF, AND "FOR" RATIFICATION OF
APPOINTMENT OF ERNST & YOUNG LLP AS THE COMPANY'S INDEPENDENT AUDITORS FOR THE
FISCAL YEAR ENDING JUNE 30, 1997. THIS PROXY ALSO DELEGATES DISCRETIONARY
AUTHORITY WITH RESPECT TO ANY OTHER BUSINESS WHICH MAY PROPERLY COME BEFORE THE
MEETING OR ANY ADJOURNMENT OR POSTPONEMENT THEREOF.
THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF THE NOTICE OF SPECIAL
MEETING AND PROXY STATEMENT.
__________________________________________________
Signature of Stockholder
__________________________________________________
Signature of Shareholder
Date:_____________________________, 1997
NOTE: PLEASE SIGN THIS PROXY EXACTLY AS NAME(S)
APPEAR ON YOUR STOCK CERTIFICATE. WHEN SIGNING AS
ATTORNEY-IN-FACT, EXECUTOR, ADMINISTRATOR, TRUSTEE
OR GUARDIAN, PLEASE ADD YOUR TITLE AS SUCH, AND IF
SIGNER IS A CORPORATION, PLEASE SIGN WITH FULL
CORPORATE NAME BY A DULY AUTHORIZED OFFICER OR
OFFICERS AND AFFIX THE CORPORATE SEAL. WHERE STOCK
IS ISSUED IN THE NAME OF TWO (2) OR MORE PERSONS,
ALL SUCH PERSONS SHOULD SIGN.
