<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED DECEMBER 31, 1996
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 February 11, 1997 13,244,807 Shares of Common Stock
<PAGE>
Eastern Environmental Services, Inc.
Form 10-Q
Quarter Ended December 31, 1996
Index
Page
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
Consolidated Balance Sheets - December 31, 1996
and June 30, 1996 (Restated) 1
Consolidated Statements of Operations for the three
months ended December 31, 1996 and 1995 (Restated) 3
Consolidated Statements of Operations for the six
months ended December 31, 1996 and 1995 (Restated) 4
Consolidated Statement of Stockholders' Equity
for the six months ended December 31, 1996 (Restated) 5
Consolidated Statements of Cash Flows for the
six months ended December 31, 1996 and 1995 (Restated) 6
Notes to 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 18
Item 6 - Exhibits and Reports on Form 8-K 18
Signatures 20
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Eastern Environmental Services, Inc.
Consolidated Balance Sheets
(Unaudited)
<TABLE>
<CAPTION>
December 31 June 30
1996 1996
----------- ------------
(Restated)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 5,107,323 $ 440,583
Accounts receivable, less allowance for
doubtful accounts of $1,552,841
and $793,902 6,879,776 2,818,350
Deferred income taxes 442,035 372,445
Tax refund receivable 45,296 74,467
Prepaid expenses and other current assets 2,341,444 1,189,688
------------ ------------
Total current assets 14,815,874 4,895,533
Property and equipment:
Land 1,869,224 54,017
Landfill Sites 29,388,892 12,673,250
Buildings and leasehold improvements 2,756,136 1,126,148
Vehicles 9,556,470 7,895,776
Machinery and equipment 8,666,192 6,375,991
Furniture and fixtures 900,743 1,392,755
------------ ------------
Total property and equipment 53,137,657 29,517,937
Accumulated depreciation and amortization (13,781,147) (13,214,976)
------------ ------------
39,356,510 16,302,961
Assets held for resale 521,512 859,262
Excess cost over fair market value of net assets
acquired, net of $509,178 and $440,309
accumulated amortization 9,506,766 372,096
Other intangible assets, net of $3,237,483 and
$3,184,614 accumulated amortization 1,059,814 662,685
Notes receivable from shareholders/officers 432,902 432,902
Other assets, including $512,914 and $433,112
of restricted cash on deposit for landfill
closure and insurance bonding 863,181 505,173
------------ ------------
Total assets $ 66,556,559 $ 24,030,612
============ ============
</TABLE>
1
<PAGE>
<TABLE>
<CAPTION>
December 31 June 30
1996 1996
------------- ------------
(Restated)
<S> <C> <C>
Liabilities and stockholders' equity
Current liabilities:
Short-term borrowings $ -- $ 410,000
Current maturities on long-term debt 735,543 376,482
Current maturities on capital lease
obligations 1,391,283 1,412,713
Accounts payable 4,385,943 2,768,494
Accrued expenses 6,680,539 1,689,037
Income taxes payable 98,980 57,739
Current portion of accrued landfill
closure and other environmental costs 870,000 870,000
----------- -----------
Total current liabilities 14,162,288 7,584,465
Deferred income taxes 2,209,007 516,062
Long-term debt 18,444,535 2,283,686
Capital lease obligations - long-term 2,649,362 3,383,892
Accrued landfill closure and other
environmental costs 7,762,679 2,088,457
Stockholders' equity:
Common stock, $.01 par value:
Authorized shares - 50,000,000
Issued and outstanding shares -
12,091,061 and 8,385,834 120,911 83,858
Additional paid-in capital 23,023,700 9,061,216
Retained earnings (deficit) (1,739,664) (894,765)
----------- -----------
21,404,947 8,250,309
Less treasury stock at cost - 39,100
common shares (76,259) (76,259)
----------- -----------
Total stockholders' equity 21,328,688 8,174,050
----------- -----------
Total liabilities and stockholders' equity $66,556,559 $24,030,612
=========== ===========
</TABLE>
See accompanying notes.
2
<PAGE>
Eastern Environmental Services, Inc.
Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
December 31
------------------------------
1996 1995
------------- -------------
(Restated)
<S> <C> <C>
Revenues $11,399,672 $ 6,892,164
Cost of revenues 8,448,673 5,466,991
Selling, general and administrative expenses 1,705,399 1,702,460
----------- -----------
Operating income (loss) 1,245,600 (277,287)
Interest expense (237,387) (113,645)
Other income 118,409 837
----------- -----------
Income (loss) before income taxes 1,126,622 (390,095)
Income tax expense 21,561 0
----------- -----------
Net income (loss) $ 1,105,061 $ (390,095)
=========== ===========
Net income (loss) per share $ .09 $ (.05)
=========== ===========
Weighted average number of shares
outstanding 12,909,130 7,957,403
=========== ===========
</TABLE>
See accompanying notes.
3
<PAGE>
Eastern Environmental Services, Inc.
Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
December 31
------------------------------
1996 1995
------------- -------------
(Restated)
<S> <C> <C>
Revenues $21,983,649 $14,387,315
Cost of revenues 16,441,679 11,119,094
Selling, general and administrative expenses 3,657,400 3,175,283
Merger costs - See Note 2 1,856,340 0
----------- -----------
Operating income 28,230 92,938
Interest expense (385,246) (261,118)
Other income 206,678 92,277
----------- -----------
Loss before income taxes (150,338) (75,903)
Income tax expense - See Note 3 694,561 16,000
----------- -----------
Net loss $ (844,899) $ (91,903)
=========== ===========
Net loss per share $ (.08) $ (.01)
=========== ===========
Weighted average number of shares
outstanding 10,990,888 7,700,392
=========== ===========
</TABLE>
See accompanying notes.
4
<PAGE>
Eastern Environmental Services, Inc.
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) $ 83,858 $ 9,061,216 $ (894,765) $ (76,259) $ 8,174,050
Exercise of
common stock
options and warrants 3,358 262,393 0 0 265,751
Proceeds from sale
of 2,670,000 shares of
common stock, less
commissions and
issuance expenses of
$724,248 26,700 9,929,052 0 0 9,955,752
Common stock issued in
Purchase acquisitions 6,970 3,751,064 0 0 3,758,034
Common stock issued
for consulting services 25 19,975 0 0 20,000
Net loss 0 0 (844,899) 0 (844,899)
-------- ----------- ------------- ---------- -----------
Balance at
December 31, 1996 $120,911 $23,023,700 $ (1,739,664) $ (76,259) $ 21,328,688
======== =========== ============= ========== ===========
</TABLE>
See accompanying notes.
5
<PAGE>
Eastern Environmental Services, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
December 31
--------------------
1996 1995
------------- ------------
(Restated)
<S> <C> <C>
Operating activities
Net loss $ (844,899) $ (91,903)
Adjustments to reconcile net loss
to net cash provided by operating activities:
Depreciation and amortization 1,203,624 1,498,186
Provision for losses on receivables 40,000 15,000
Landfill closure costs 95,195 66,204
Deferred income taxes 651,561 (13,349)
Gain on sale of property and equipment (4,395) (3,719)
Changes in operating assets and liabilities:
Accounts receivable (1,304,308) (11,902)
Tax refund receivable 29,171 79,404
Prepaid expenses 129,884 330,641
Other assets (257,378) (109,778)
Accounts payable (597,530) (236,045)
Accrued expenses 995,282 (115,039)
Income taxes payable 41,241 12,326
Accrued environmental costs (110,974) --
------------- -----------
Net cash provided by operating activities 66,474 1,420,026
</TABLE>
See accompanying notes.
6
<PAGE>
Eastern Environmental Services, Inc.
Consolidated Statements of Cash Flows (continued)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
December 31
----------------------------------
1996 1995
-------------- --------------
(Restated)
<S> <C> <C>
Investing activities
Proceeds from sale of property and equipment 21,976 10,600
Acquisition of businesses, net of cash acquired (14,855,552) --
Development of landfill sites (713,740) (1,333,694)
Purchase of property and equipment (2,690,671) (675,624)
Landfill closure and insurance bonding deposits (79,802) 97,851
-------------- --------------
Net cash used in investing activities (18,317,789) (1,900,867)
Financing activities
Proceeds from revolving line of credit,
long-term debt and capital lease obligations 17,943,647 1,860,623
Payments on revolving line of credit,
long-term debt and capital lease obligations (5,247,095) (2,343,990)
Net payments on note payable
to shareholder/officer -- (42,457)
Net proceeds from issuance of
common stock 10,221,503 927,500
-------------- --------------
Net cash provided by financing activities 22,918,055 401,676
-------------- --------------
Net increase (decrease) in cash and
cash equivalents 4,666,740 (79,165)
Cash and cash equivalents at beginning
of period 440,583 950,514
-------------- --------------
Cash and cash equivalents at end
of period $ 5,107,323 $ 871,349
============== ==============
</TABLE>
See accompanying notes.
7
<PAGE>
Eastern Environmental Services, Inc.
Notes to Consolidated Financial Statements
(Unaudited)
1. Basis of Presentation and Principles of Consolidation
The accompanying unaudited 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 financial
statements reflect all adjustments 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 six months ended December 31, 1995 to reflect the acquisition of Super
Kwik, Inc., accounted for using the "pooling of interests" method of accounting.
The June 30, 1996 consolidated balance sheet was also restated to include the
acquisition of Super Kwik, Inc. The results of operations for the period ended
December 31, 1996 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 December 10, 1996, the Company expanded its waste
collection and hauling operations through the acquisition of seven businesses.
The aggregate of these business acquisitions are significant to the company. Six
of the seven acquisitions noted below were accounted for under 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 have
been allocated to goodwill. 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 corporation ("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.
8
<PAGE>
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.
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 by using the pooling of interests method of accounting, and
accordingly, the accompanying consolidated financial statements include the
accounts of Super Kwik, Inc. for all periods presented.
On November 8, 1996, the Company purchased the stock of Bayside of Marion, Inc.
for $518,000 in cash and 46,004 unregistered shares of the Company's common
stock. Bayside operates a construction and demolition debris landfill in Ocala,
Florida.
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.
9
<PAGE>
Combined and separate results of operations of the Company and Super Kwik, Inc.
for the restated periods included in this report are as follows (in thousands):
<TABLE>
<CAPTION>
Eastern
Environmental Super
Services, Inc. Kwik, Inc. Adjustments Combined
--------------- ---------- --------------- ---------
<S> <C> <C> <C> <C>
Six months ended
December 31, 1996
Revenues $10,492 $11,492 -- $21,984
Net income (loss) 342 1,329 (2,516)(1) (845)
Six months ended
December 31, 1995
Revenues $ 4,183 $10,204 -- $14,387
Net income (loss) (186) 94 -- (92)
</TABLE>
(1) As discussed within this report, adjustments include merger costs
relating to the acquisition of Super Kwik, Inc. of $1,856,000 and a tax
provision of $660,000 relating to the recording of a deferred tax liability
with the termination of Super Kwik, Inc. previous S corporation status at
the date of the merger.
3. Income Taxes
The Company has recorded an income tax provision of $695,000 for the six months
ended December 31, 1996. This provision is primarily related to the completion
of the merger with Super Kwik, Inc. Prior to the merger date, Super Kwik, Inc.
was an S Corporation for income tax reporting purposes. Effective as of the date
of the merger, the S Corporation election was terminated. The Company has
recorded a deferred tax liability as of the date of the merger resulting in an
income tax provision of approximately $660,000. 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.
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.
10
<PAGE>
5. Subsequent Events
On January 31, 1997, the Company acquired all of the stock of the Donno Company,
Inc., Residential Service, Inc., Suffolk Waste Systems, Inc., and NRT Realty
Corp., (collectively referred to as "Donno") in exchange for approximately
1,138,000 shares of the Company's common stock. Donno is a group of residential
and commercial waste collection and recycling operations in Long Island, NY.
This combination is anticipated to be accounted for using the pooling of
interests method of accounting.
The following unaudited consolidated pro forma information presents the
revenues, net loss and loss per share as if the acquisition had occurred at the
beginning of the years presented. Pro forma revenues, net loss, and loss per
share are not necessarily indicative of the revenues, net loss and loss per
share that would have occurred had the merger occurred at the beginning of the
years presented or the results which may occur in the future.
<TABLE>
<CAPTION>
6 Months
Ended
Year ended June 30 December 31,
1994 1995 1996 1996
---------------------------------------------
(Unaudited)
(000's omitted)
<S> <C> <C> <C> <C>
Revenues $ 37,328 $ 40,127 $ 39,522 $ 28,507
Loss from continuing operations $ (115) $ (83) $ (4,038) $ (769)
Loss per share $ (.01) $ (.01) $ (.45) $ (.06)
</TABLE>
The preceding unaudited consolidated pro forma information does not contain any
adjustments to conform the accounting policies of Donno to that of the Company.
Donno currently uses a modified cash method of accounting for income taxes. The
Company has not completed its review of Donno's tax accounts, and therefore, is
unable to record any adjustment to income taxes for purposes of the pro forma
information. Management does not believe that amounts to record other
adjustments to conform accounting policies will be significant.
Additionally, the Company previously announced the pending acquisition of
certain assets of Waste Services, Inc. ("WSI") for approximately $26,859,000 of
common stock and assumption of debt. The acquisition has not been completed and
is still pending the issuance of a business license to the Company by the City
of New York Trash Waste Commission ("TWC") and approval of the acquisition by
the TWC.
11
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
The following table presents, for the periods indicated, the percentage that
each item in the Consolidated Statements of Operations bears to total revenues.
<TABLE>
<CAPTION>
Six Months Ended
December 31
---------------------------------
1996 1995
-------- --------
(Restated)
<S> <C> <C>
Revenues......................... 100.0 100.0
Cost of revenues................. 74.8 77.3
Selling, general and
administrative expenses......... 16.6 22.1
Merger Costs..................... 8.5 --
------ ------
Operating income................. .1 .6
Interest expense................. (1.8) (1.8)
Other income..................... 1.0 .7
------ ------
Loss before
income taxes................... (.7) (.5)
Income taxes..................... 3.2 .1
------ ------
Net loss......................... (3.9) (.6)
====== ======
Depreciation and amortization
included in above costs........ 5.5 10.4
</TABLE>
12
<PAGE>
Results of Operations for the Six Months Ended December 31, 1996 Compared to the
Six Months Ended December 31, 1995
Revenue increased 53% or $7,597,000 from $14,387,000 for the six months ended
December 31, 1995 to $21,984,000 for the six months ended December 31, 1996. The
most significant factor affecting the increase in revenues was the effect of
acquisitions including Allied Environmental Services, Inc. and K Hydraulics,
Inc., which contributed revenues of $4,257,000 and $1,831,000, respectively,
for the six months ended December 31, 1996. Additionally, the acquisitions of
Eastern Waste of Philadelphia, Inc., Olney Sanitary System, Inc., R&A Bender,
Inc., and Bayside of Marion,Inc. added $869,000 to the current six month results
as reported. Super Kwik, Inc., accounted for as a pooling of interest,
contributed revenues of $11,492,000 and $10,204,000, respectively, for the six
months ended December 31, 1996 and 1995. Revenues, net of disposal, increased
slightly at the Company's previously owned long-haul transportation operations
largely due to marketing integration with K Hydraulics in handling less seasonal
special wastes in addition to its strong presence in asbestos hauling. The
Company's West Virginia landfill's revenues increased 9% over the same period
for the prior year; however, revenue decreased at the Company's Kentucky
landfill with the cessation of operations of the Kentucky transfer station on
July 1, 1996.
Cost of revenues for the six months ending December 31, 1996 increased from the
same period in fiscal 1996 by approximately $5,323,000 or 48% to $16,442,000.
This increase in cost of revenues is primarily due to the impact of new business
acquisitions of $5,218,000 for the six months ended December 31, 1996. Cost of
revenues related to Super Kwik, Inc. were $8,829,000 and $7,977,000, for the six
months ended December 31, 1996 and 1995, respectively. Cost of revenues as a
percent of revenues was approximately 75% and 77%, respectively, for the six
months ended December 31, 1996 and 1995. An increase in the percentage of
disposal revenues to total revenues and synergies gained through continued
integration of businesses acquired contributed to this noted improvement.
Additionally, in the first quarter of fiscal 1997, the Company incurred
$1,856,000 of merger costs related to the acquisition of Super Kwik, Inc. Merger
costs include $193,000 of transaction costs, and $1,663,000 of costs related to
integrating operations.
Selling, general and administrative expenses ("SG&A") increased $482,000 or 15%
from $3,175,000 in the first six months of fiscal 1996 to $3,657,000 in the
first six months of fiscal 1997 and decreased as a percent of revenues from 22%
in fiscal 1996 to 17% in fiscal 1997. SG&A reductions as a percent of revenues
reflect certain cost savings related to economies of scale in restructuring the
Company's insurance programs and overall efficiencies gained through integrating
acquisitions. SG&A expenses include substantially all corporate overhead costs
including the costs relating to the accounting, finance, legal and engineering
departments as well as the SG&A costs specifically attributed to the landfill
waste hauling and collection operations.
13
<PAGE>
Other income increased $115,000 for the six months ended December 31, 1996
compared to the same six months of fiscal 1996. This increase in other income
included a $87,000 increase in interest income, reflecting earnings on the
private placement funds received in August of the current year. Interest expense
increased $124,000 for the six months ended December 31, 1996, compared to the
same six months of fiscal 1996. This increase is largely the result of
borrowings on the 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.
The current year tax provision principally relates to the completion of the
merger with Super Kwik, Inc. and reflects the recording of a deferred tax
liability as of the date of the merger, the date Super Kwik's S Corporation
election was terminated. An effective tax rate less than the federal and state
statutory rates in the prior year was primarily due to a valuation allowance
recorded reducing the current and prior year tax benefit of net operating loss
carryforwards.
As a result of factors discussed above, a loss of ( $844,899) or ( $.08 ) per
share was recognized for the six months ended December 31, 1996 as compared to a
loss of ($91,903) or ($.01) per share for the six months ended December 31,
1995.
Results of Operations for the Three Months Ended December 31, 1996 Compared to
the Three Months Ended December 31, 1995
Results of operations for the three months ended December 31, 1996, compared to
the three months ended December 31, 1995 reflects an increase in net sales of
$4,508,000, and an increase in net income of $1,495,000, or $.14 per share.
These changes were attributable to the same factors discussed previously with
respect to the six month periods ending December 31, 1996, and December 31,
1995.
Liquidity and Capital Resources
The Company operates in an industry that requires substantial amounts of working
capital and significant capital investment. The Company's capital requirements
include working capital needs to maintain daily operations, capital expenditures
for cell construction and expansion of its landfill sites, equipment purchases
and acquisitions. The Company plans to meet these capital needs from
internally generated funds and from various financing sources available to the
Company, including debt financing and the issuance of common stock.
As of December 31, 1996, the Company had working capital of $654,000 (a ratio of
current assets to current liabilities of 1.05:1), including cash and cash
equivalents of $5,107,000. Current liabilities of $7,584,000 exceeded current
assets of $4,896,000 at June 30, 1996. For the first six months of fiscal 1997,
net cash provided by operations was approximately $66,000, with net cash from
financing activities of approximately $22,918,000, including net proceeds of
$9,956,000
14
<PAGE>
from private placements of the Company's stock. A significant portion of working
capital expended during the period, approximately $18,261,000, was used to fund
the acquisition of property and equipment, including $714,000 related to the
permitting and development of landfill space, $2,691,000 for the purchase of
operating equipment and real estate, and $14,856,000 relating to purchase
acquisitions.
The Company's operations to date have required substantial amounts of working
capital and the Company expects to expend substantial funds to support the
expansion of its disposal and transportation operations. Significant working
capital will be required to construct initial disposal space at the Company's
Illinois landfill for which the Company received a development permit. Likewise,
capital will be required to construct initial disposal space at the Company's
Kentucky landfill for which the Company received the final construction permit
on October 16, 1996. The Company estimates that it requires approximately
$4,000,000 to construct the infrastructure and initial disposal space at the
Illinois and Kentucky sites, and expects additional capital expenditures of
approximately $6,000,000 for the Company's other operations through June 30,
1997. The Company has addressed its capital need through private placements of
the stock which generated net proceeds of $9,956,000 in the six months ended
December 31, 1996 and the securing of a $50 million revolving credit facility
with the First National Bank of Boston and Bank of America, Illinois. The
Company completed the merger with Super Kwik, Inc. and Waste Maintenance
Services, Inc. on September 27, 1996 and the acquisition of the operations of
R&A Bender, Inc. on December 10, 1996, which are anticipated to have a continued
positive impact on cash flow and liquidity in fiscal 1997.
The Company's business strategy is to grow through acquisitions of disposal and
collection operations as well as internal sales growth and improvements in waste
internalization. The Company has issued equity securities to consummate
acquisitions and expects to continue to do so in the future. The Company's
future growth will depend upon its ability to raise additional capital.
Management believes that it can arrange the necessary financing required to
accomplish its business plan; however, to the extent that the Company is not
successful in its future financing strategies the Company's growth could be
limited.
On September 25, 1996, the Company consummated a new revolving credit facility
with two major banks, the First National Bank of Boston and Bank of America,
Illinois to provide for borrowings up to $30,000,000. This revolving credit
facility, which was increased to $50,000,000 on January 27, 1997, is available
for repayment of debt, funding of acquisitions, and to provide for up to
$20,000,000 in standby letters of credit. On the date of closing, a portion of
this facility, approximately $1,500,000 was utilized to refinance the remaining
balance of the First Union term loan and the CoreStates revolving credit
facility. Additionally, net borrowings of $16,800,000 were made in the second
quarter of fiscal 1997 for the purchase of R&A Bender, Inc. and to retire
certain debt of Super Kwik, Inc. At the Company's option, the interest rate on
any loan under the revolving credit facility will be based on an adjusted prime
rate or Eurodollar rate, as defined in the agreement. The facility matures three
years from the anniversary date of its closing. The revolving credit facility,
among other conditions, requires the payment of a 3/8 of 1% commitment fee on
the 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
15
<PAGE>
ratios, leverage ratios and 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 operating landfills will be approximately
$13,893,000 of which $3,095,000 has been accrued as of December 31, 1996. The
Company estimates that the costs of post-closure monitoring of groundwater and
methane gas and other required maintenance procedures for the currently
permitted and expansion areas will approximate $27,000 - $120,000 per year for
30 years after closure at each of the Company's municipal solid waste accepting
facilities and $10,000 per year for 30 years after closure at the Company's
construction and demolition landfill sites. The Company has accrued $1,538,000
for post-closure obligations as of December 31, 1996, 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
Kentucky, West Virginia, and Pennsylvania disposal facilities. Bonds outstanding
at December 31, 1996, total $1,637,000 and $3,500,000, as closure and post-
closure financial assurance for the Company's Kentucky and Pennsylvania
landfills, respectively, and $214,000 as closure financial assurance for the
Company's West Virginia facility. The bonds are collateralized by irrevocable
letters of credit totaling $1,226,000 and trust fund deposits of $120,000.
Additionally, the Company has on deposit $196,000 and $80,000 as financial
assurance for landfill closure and post-closure for the closed disposal area at
its West Virginia and Florida disposal facility, respectively. 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 as the State's solid
waste program is approved by the federal government. Financial assurance
requirements could increase to approximately $3,000,000 for closure and
$3,600,000 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. Additionally, the Company anticipates that issuance of
the final Kentucky expansion permit, additional closure and post-closure
financial assurance mechanisms will be required. The amounts are estimated at
$3,300,000 for closure and $300,000 for post-closure. Proposed changes to the
current Kentucky post-closure financial assurance regulations are pending and
the post-closure requirements could increase to $3,000,000. Under the current
financial assurance program, incremental posting of financial assurance over the
life of the facility as disposal cells are constructed and certified for
acceptance of waste is allowed. The Company's inability to obtain necessary
bonds or letters of credit in sufficient amounts or at acceptable rates would
have a material adverse impact on the Company's business and may preclude it
from obtaining or retaining landfill operating permits.
Seasonality and Inflation
16
<PAGE>
The Company experiences seasonal variations in its revenues because the volumes
of certain types of wastes handled by the Company, such as asbestos and
construction debris, tend to be higher in the spring and summer. In addition,
during the winter, harsh weather conditions often temporarily affect the
Company's ability to collect, transport, and dispose of waste, especially with
the Company's West Virginia landfill and long haul transportation company.
The Company believes that inflation and changing prices have not had, and are
not expected to have, any material adverse effect on the results of operations
in the near future.
Factors Influencing Future Results and Accuracy of Forward-Looking Statements
In the normal course of its business, the Company, in an effort to help keep its
shareholders and the public informed about the Company's operations, may from
time to time issue certain statements that contain or may contain forward-
looking information. Generally, these statements relate to business plans or
strategies, projected or anticipated benefits or other consequences of such
plans or strategies , projected or anticipated benefits from acquisitions made
by or to be made by the Company, or projections involving anticipated revenues,
earnings or other aspects of operating results. Such statements are subject to a
number of factors that tend to influence the accuracy of the statements and the
projections upon which the statements are based. As noted elsewhere in this
report, all phases of the company's operations are subject to a number of
uncertainties, risks and other influences, many of which, could materially
affect the results of the Company's operations and whether forward-looking
statements made by the Company ultimately prove to be accurate.
17
<PAGE>
PART II
OTHER INFORMATION
Item 2. Changes in Securities
(c) Private Placements:
October 8, 1996, Eastern Environmental Services, Inc. ("the Company")
completed a private placement of 45,000 shares of its common stock at
$4.00 per share to William C. Skuba the Company's previous Chief
Executive Officer.
On November 5, 1996, Eastern Environmental Services of Florida, Inc.,
a wholly owned subsidiary of the Company, acquired Bayside of Marion,
Inc., a Florida based construction and demolition debris landfill,
pursuant to a merger. Consideration for the acquisition included
cash of $518,000 and 46,004 shares of common stock of the Company,
par value $.01 per share, to certain of the sellers.
On December 10, 1996, the Company consummated the acquisition of R&A
Bender, Inc. and certain real estate owned by R&A Bender Property,
Ltd., pursuant to the terms of an Agreement for the Sale and Purchase
of Stock and Real Estate. Consideration for the acquisition was
approximately $17,484,000 including the issuance of 106,667 shares of
common stock of the Company, par value $.01 per share, to the
sellers. The selling shareholders were also issued five year stock
warrants for 50,000 shares of common stock of the Registrant at a per
share exercise price of $9.375.
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 form such
registration requirements.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
10.40 First Amendment dated November 14, 1996 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
18
<PAGE>
10.41 Second Amendment dated November 26, 1996 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
10.42 Employment Agreement between the Company and Willard Miller dated
September 27, 1996.
10.43 Employment Agreement between the Company and Glen Miller dated
September 27, 1996.
10.44 Warrant Agreement dated September 27, 1996, between Eastern
Environmental Services, Inc. and Willard Miller for 281,907 shares.
(Pursuant to instruction 2 to Item 601 of Regulation S-K, the
Warrant Agreement, which is substantially identical in all material
respects except as to the party thereto between the Registrant and
Glen Miller has not been filed.)
27 Financial Data Schedule
(b) Current Reports on Form 8-K or 8-K/A:
1. On December 9, 1996, the Company filed a report on Form 8-K/A,
Amendment No. 1, dated September 27, 1996, under Item 7, to provide
historical audited financial statements of the business acquired,
Super Kwik, Inc. and Waste Maintenance Services, Inc., for the three
years ended June 30, 1996 and unaudited pro forma financial
information for the Company for the three years ended June 30, 1996
and the three months ended September 30, 1996 with respect to its
acquisition and merger of Super Kwik, Inc. and Waste Maintenance
Services, Inc. into a wholly owned subsidiary of the Company.
2. The Company filed a report on Form 8-K, dated December 10, 1996,
under Item 2, to report the acquisition of the stock of R&A Bender,
Inc. and certain real estate of R&A Bender Property, Ltd..
Historical financial statements of R&A Bender, Inc. and R&A Bender
Property, Ltd. 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 February 11, 1997.
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: February 14, 1997
20
<PAGE>
Exhibit 10.40
FIRST AMENDMENT TO
REVOLVING CREDIT AGREEMENT
--------------------------
THIS FIRST AMENDMENT TO REVOLVING CREDIT AGREEMENT (this "First Amendment")
is made and entered into as of the 14th day of November, 1996, 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 (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.
2. 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:
"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), but excluding one-time
charges of not more than $1,857,000 for the fiscal quarter ended September
30, 1996."
"Consolidated Earnings Before Interest, Taxes, Depreciation and
--------------------------------------------------------------
Amortization or EBITDA. For any period, the Consolidated Net Income (or
----------------------
<PAGE>
-2-
Deficit) of the Borrowers determined in accordance with GAAP, 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), but
excluding one-time charges of not more than (i) $2,820,000 for the fiscal
quarter ended June 30, 1996 and (ii) $1,857,000 for the fiscal quarter
ended September 30, 1996."
"Proforma EBITDA. For any twelve month period, the Consolidated Net
---------------
Income (or Deficit) of the Borrowers and any Subsidiaries acquired within
the past twelve months or to be acquired as if the Subsidiaries had been
owned for those twelve months, determined in accordance with GAAP and, with
respect to a Subsidiary to be acquired or Subsidiary acquired within the
last twelve months, by reference to such Subsidiary's 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, 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), but excluding
one-time charges of not more than (i) $2,820,000 for the fiscal quarter
ended June 30, 1996 and (ii) $1,857,000 for the fiscal quarter ended
September 30, 1996."
3. 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 in connection with the
acquisition after the date hereof of any real or personal property by the
Borrowers, provided that the aggregate principal amount of such
Indebtedness of the Borrowers shall not exceed (i) $6,500,000 at any one
time on or before November 30, 1996 or (ii) $5,000,000 at any one time
thereafter; and"
4. 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 First 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 First Amendment.
5. GOVERNING LAW. THIS FIRST 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.
<PAGE>
-3-
6. Counterparts. This First 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.
7. Effectiveness. This First Amendment shall become effective upon its
-------------
execution and delivery by the respective parties hereto.
8. Entire Agreement. THE CREDIT AGREEMENT 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>
-4-
IN WITNESS WHEREOF, the undersigned have duly executed this First Amendment
under seal as of the date first set forth above.
THE BORROWERS:
--------------
EASTERN ENVIRONMENTAL SERVICES, INC.
By: /s/ Gregory M. Krzemien
----------------------------
Title: Treasurer
-------------------------
NHD, INC.
By: /s/ Gregory M. Krzemien
----------------------------
Title: Treasurer
-------------------------
PULAKSI GRADING, INC.
By: /s/ Gregory M. Krzemien
----------------------------
Title: Treasurer
-------------------------
CAROLINA GRADING, INC.
By: /s/ Gregory M. Krzemien
----------------------------
Title: Treasurer
-------------------------
S&S GRADING, INC.
By: /s/ Gregory M. Krzemien
----------------------------
Title: Treasurer
-------------------------
ALLIED WASTE SERVICES, INC.
By: /s/ Gregory M. Krzemien
----------------------------
Title: Treasurer
-------------------------
<PAGE>
-5-
OLNEY SANITARY SYSTEM, INC.
By: /s/ Gregory M. Krzemien
-----------------------------
Title: Treasurer
-------------------------
EASTERN WASTE OF NEW YORK, INC.
By: /s/ Gregory M. Krzemien
------------------------------
Title: Treasurer
-------------------------
THE BANKS:
---------
BANK OF AMERICA ILLINOIS
By: /s/ Robert P. Rospierski
-----------------------------
Title: Vice-President
-------------------------
THE FIRST NATIONAL BANK OF BOSTON,
individually and as Agent
By: /s/ Ann E. Howard
-----------------------------
Title: Division Executive
-------------------------
<PAGE>
Exhibit 10.41
SECOND AMENDMENT TO
REVOLVING CREDIT AGREEMENT
--------------------------
THIS SECOND AMENDMENT TO REVOLVING CREDIT AGREEMENT (this "Second
Amendment") is made and entered into as of the 26th day of November, 1996, 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 (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.
2. 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")) 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 acquistion may include reference to such
Subsidiary's historical financial statements (which have been reviewed and
analyzed by the Parent in
<PAGE>
-2-
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 four fiscal
quarters ending December 31, 1996, (f) $3,200,000 for the fiscal quarter
ending March 31, 1996, (g) $2,000,000 for the fiscal quarter ending June
30, 1997 included in such calculation of EBITDA, and (h) $800,000 for the
fiscal quarter ending September 30, 1997, but excluding one-time charges of
not more than (i) $2,820,000 for the fiscal quarter ended June 30, 1996 and
(ii) $1,857,000 for the fiscal quarter ended September 30, 1996.
3. 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 in connection with the
acquisition after the date hereof of any real or personal property by the
Borrowers, provided that the aggregate principal amount of such
Indebtedness of the Borrowers shall not exceed (i) $6,500,000 at any one
time on or before January 1, 1997 or (ii) $5,000,000 at any one time
thereafter; and"
4. Consent to Bender 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 10/18/96 draft of Agreement for the
Sale and Purchase of the Stock of R & A Bender, Inc. and Real Estate Owned by R
& A Bender Property, Ltd. known as the Bender Landfill (the "Purchase
Agreement") is hereby waived, provided that (a) the aggregate purchase price
paid in connection therewith shall not exceed (i) $1,000,000 in common stock of
Parent, (ii) warrants for 50,000 shares of common stock of Parent, and (iii) an
aggregate of $18,000,000 in cash, Indebtedness incurred in connection therewith
and purchase price adjustments, and (b) the Borrowers shall comply with all
other provisions of (S)7.4 of the Credit Agreement.
5. 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 Second 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 Second Amendment.
6. GOVERNING LAW. THIS SECOND AMENDMENT SHALL BE GOVERNED BY AND
-------------
CONSTRUED IN ACCORDANCE WITH THE LAWS OF
<PAGE>
-3-
THE COMMONWEALTH OF MASSACHUSETTS AND SHALL TAKE EFFECT AS A SEALED INSTRUMENT
IN ACCORDANCE WITH SUCH LAWS.
7. Counterparts. This Second 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.
8. Effectiveness. This Second Amendment shall become effective upon its
-------------
execution and delivery by the respective parties hereto.
9. Entire Agreement. THE CREDIT AGREEMENT 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>
-4-
IN WITNESS WHEREOF, the undersigned have duly executed this Second
Amendment under seal as of the date first set forth above.
THE BORROWERS:
--------------
EASTERN ENVIRONMENTAL SERVICES, INC.
By: /s/ Gregory M. Krzemien
---------------------------------
Title: Treasurer
-----------------------------
NHD, INC.
By: /s/ Gregory M. Krzemien
---------------------------------
Title: Treasurer
------------------------------
PULAKSI GRADING, INC.
By: /s/ Gregory M. Krzemien
---------------------------------
Title: Treasurer
-----------------------------
CAROLINA GRADING, INC.
By: /s/ Gregory M.Krzemien
---------------------------------
Title: Treasurer
-----------------------------
S&S GRADING, INC.
By: /s/ Gregory M. Krzemien
---------------------------------
Title: Treasurer
-----------------------------
ALLIED WASTE SERVICES, INC.
By: /s/ Gregory M. Krzemien
---------------------------------
Title: Treasurer
-----------------------------
<PAGE>
-5-
OLNEY SANITARY SYSTEM, INC.
By: /s/ Gregory M. Krzemien
---------------------------------
Title: Treasurer
-----------------------------
EASTERN WASTE OF NEW YORK, INC.
By: /s/ Gregory M. Krzemien
---------------------------------
Title: Treasurer
-----------------------------
THE BANKS:
---------
BANK OF AMERICA ILLINOIS
By: /s/ Robert P. Rospierski
---------------------------------
Title: Vice - President
-----------------------------
THE FIRST NATIONAL BANK OF BOSTON,
individually and as Agent
By: /s/ Ann E. Howard
---------------------------------
Title: Divison Executive
-----------------------------
<PAGE>
Exhibit 10.42
EMPLOYMENT AGREEMENT
--------------------
This Employment Agreement ("Agreement") is executed and delivered as of
September 27, 1996, by and between Eastern Environmental Services, Inc., a
Delaware corporation ("Company"), and Willard Miller, an individual
("Employee").
RECITALS
--------
The Company conducts a diversified waste management business, including,
without limitation, waste hauling operations, landfills and other waste
management, recycling and waste testing operations ("Business"). The Employee
is the sole shareholder of Super Kwik, Inc. ("Super Kwik"), a New Jersey
corporation which is a party to an Agreement of Merger by and between the
Company, Waste Maintenance Services, Inc. and Super Kwik ("Merger Agreement").
In accordance with the Merger Agreement, Super Kwik will be merged into a
subsidiary of the Company on the closing date of the Merger Agreement. The
Employee is an executive with extensive experience in the waste industry.
Commencing on the date the Merger Agreement closes, the Company desires to hire
Employee as its Executive Vice President and the Employee desires to accept the
position offered.
The position of the Employee with the Company will give the Employee access
to and familiarity with confidential information and business methods used in
the operation of the Business. During the course of Employee's employment,
Employee will become familiar with and aware of information as to the specific
manner of doing
-1-
<PAGE>
business and the customers of the Company and the Company's future plans.
Employee has and will have knowledge of trade secrets of the Company which are
valuable assets of the Company.
Employee recognizes that the business of the Company is dependent upon a
number of trade secrets and confidential business information, including
customer lists, customer data and operational information. The protection of
these trade secrets is of critical importance to the Company. The Company will
sustain great loss and damage if, for whatever reason, Employee should violate
the provisions of paragraph 4 of this Agreement. Further, Employee acknowledges
that any such violation would cause irreparable harm to Company and that Company
would be entitled, without limitation, to injunctive relief to remedy such
violation.
NOW, THEREFORE, in consideration of Ten Dollars ($10), and the mutual
promises, terms and conditions set forth herein and the performance of each, the
parties hereby agree as follows:
1. Services.
--------
(a) Company hereby employs Employee as its Executive Vice President in
charge of Southern New Jersey waste collection operations. Employee shall also
have the title of Executive Vice President of the subsidiary created by the
merger set forth in the Merger Agreement. For purposes of this Agreement, the
term "Territory" shall mean Trenton, New Jersey and all parts of New Jersey
south of Trenton, New Jersey, Philadelphia, Pennsylvania and such other areas
agreed upon by Company and Employee. Additional
-2-
<PAGE>
or different duties, titles or positions may be assigned to Employee or may be
taken from Employee from time to time by the Company's President; provided, that
the Employee consents to such changes. The Company shall not change Employee's
Territory without Employee's consent.
(b) Employee hereby accepts employment upon the terms and conditions
contained in this Agreement. Employee shall faithfully adhere to, execute and
fulfill all directions and policies established by the Board, to the extent such
instructions do not violate applicable laws.
(c) Employee is being employed as a full time employee and Employee agrees
to devote his full efforts and attention to his duties to the Company.
2. Compensation.
------------
(a) For all services to be rendered by Employee to Company, Company shall
pay Employee an annual salary at the rate of One Hundred Fifty Thousand
($150,000) Dollars per year, payable in accordance with Company's normal payroll
procedures. The Company, at its discretion, may from time to time grant bonuses
and raises to the Employee.
(b) Effective on the commencement of this Agreement's term the Employee
shall be given a warrant ("Warrant") convertible into Two Hundred Thousand
(200,000) shares of the Company's common stock at a per share exercise price
equal to the closing sale price of the Company's common stock on July 29, 1996.
The Warrant shall be
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convertible over a period of four years. The Warrant shall be convertible into
shares in blocks of 50,000 shares. The first conversion of the Warrant may not
take place until one year from the date the term of this Agreement commences and
a further block of 50,000 shares may be converted on each subsequent anniversary
date of this Agreement's term. Notwithstanding the prior sentence the Warrant
may be converted to all 200,000 shares immediately, upon a Change of Control, as
hereafter defined in Paragraph 2(e) below. The term of the Warrant shall be ten
years. If this Agreement is terminated, the Warrant shall not be effected and
shall remain in full force and effect.
(c) To the extent that Company, from time to time in its sole discretion,
offers or provides any of the following to its employees, then Employee, on an
equal basis with such other employees, shall be entitled to: (i) participation
in all, if any, life, health, medical, hospital, accident and disability
insurance programs of Company in existence for the benefit of the Company's
executives and for which Employee qualifies; (ii) participation in all, if any,
pension, retirement, profit sharing or stock purchase plans for which Employee
qualifies; and (iii) participation in any other employee benefits which Company
accords to its employees.
(d) During the term of Employee's employment with Company, Employee shall
be entitled to reimbursement for reasonable business expenses incurred on behalf
of Company. Employee shall be paid a monthly car allowance of Five Hundred
($500) Dollars a month.
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<PAGE>
(e) For purposes of this Agreement, a "Change of Control" shall mean the
occurrence of the events set forth in items (i) and (ii).
(i) The acquisition in one or more transactions by any "Person", (as
the term "Person" is used for purposes of Sections 13(d) or 14(d) of the
Securities Exchange Act of 1934, as amended (the 1934 Act")) of "Beneficial
Ownership" (as the term beneficial ownership is used for purposes of Rule 13d-3
promulgated under the 1934 Act) of fifty percent (50%) or more of the combined
voting power of the Company's then outstanding voting securities (the "Voting
Securities"). For purposes of this Paragraph 2(e), the Voting Securities
acquired directly from the Company by any Person shall be excluded from the
determination of such Person's Beneficial Ownership of Voting Securities (but
such Voting Securities shall be included in the calculation of the total number
of Voting Securities then outstanding). For purposes of this Paragraph 2(e) the
acquisition of Employee of the Beneficial Ownership of 50% percent or more of
the Voting Securities shall not be a Change of Control.
(ii) The current directors of the Company no longer constitute a
majority of the Company's Board of Directors.
3. Term. The term of this Agreement shall begin on the date that closing
----
under the Merger Agreement occurs and that Super Kwik is merged into a
subsidiary of the Company and shall continue for a term of four (4) years
thereafter. Employee's employment under this Agreement may be terminated during
the term hereof only as set
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<PAGE>
forth in Paragraph 7 of this Agreement.
4. Noncompetition Covenants.
------------------------
(a) Employee agrees that the noncompetition covenants contained in this
Paragraph 4 are a material and substantial part of this Agreement.
(b) Employee covenants that during Employee's employment with Company and
for one year following the termination of Employee's employment (regardless of
the reason for the termination) the Employee shall not, directly or indirectly,
without the prior express written consent of Company, do any of the things set
forth in item (i) through (v) below.
(i) engage, as an officer, director, shareholder, owner, partner,
joint venturer, agent, or in a managerial capacity, whether as an employee,
independent contractor, consultant or advisor, or as a sales representative, in
the waste disposal industry, including, without limitation, waste hauling, waste
disposal, land filling, handling demolition waste, handling special waste,
collecting or disposing of municipal special waste, and recycling waste, in each
case within the Territory, as defined in Paragraph 1(a);
(ii) call upon any person who is, at the time of the contact, an
employee of Company or its affiliates within the Territory, if the employee
serves the Company in a managerial capacity and if the purpose and intent of the
contact is to entice such employee away from or out of the employ of Company or
its affiliates;
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(iii) call upon any person or entity, which is, at the time of the
contact, a customer of the Company or its affiliates within the Territory, for
the purpose of soliciting or selling any of the services which are the services
offered by the Company within the Territory;
(iv) disclose the identity of the customers of Company or its
affiliates, whether in existence or proposed, to any person, firm, partnership,
corporation or other entity whatsoever, for any reason or purpose whatsoever,
except if approved by the Board or if compelled to do so by a governmental
agency, Court Order or subpoena; or
(v) promote, or assist, financially or otherwise, any person, firm,
partnership, corporation or other entity whatsoever to do any of the above.
Notwithstanding the above, the foregoing covenant shall not be deemed to
prohibit Employee from acquiring as an investment not more than ten percent of
the capital stock of a competing business, the stock of which is traded on a
national securities exchange or over-the-counter.
For the purposes of this Agreement, the term "affiliates" shall mean one or
more of: (a) each subsidiary of Company, and (B) each other entity under the
direct or indirect control of the Company.
(c) The Company will sustain significant losses and damages, if Employee
breaches the covenants in this Paragraph 4. There is
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<PAGE>
no adequate monetary remedy for the immediate and irreparable damage that would
be caused to Company by Employee's breach of its non-competition covenants.
Employee agrees that, in the event of a breach by him of the foregoing
covenants, such covenants may be enforced by Company by, without limitation,
injunctions and restraining orders.
(d) It is agreed by the parties that the covenants in this Paragraph 4
impose a reasonable restraint on Employee in light of the activities and
business of Company on the date of the execution of this Agreement and the
future plans of Company.
(e) The covenants in this Paragraph 4 are severable and separate, and the
unenforceability of any specific covenant shall not affect the provisions of any
other covenant. If any court of competent jurisdiction shall determine that the
scope, time or territorial restrictions set forth are unreasonable, then it is
the intention of the parties that such restrictions be enforced to the fullest
extent which the court deems reasonable, and the Agreement shall thereby be
reformed.
(f) The covenants in this Paragraph 4 shall be construed as independent of
any other provision of this Agreement and the existence of any claim or cause of
action of Employee against Company whether predicated on this Agreement, or
otherwise, shall not constitute a defense to the enforcement by Company of such
covenants. It is specifically agreed that the duration of the noncompetition
covenants stated above shall be computed by
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<PAGE>
excluding from such computation all time during which Employee is in violation
of any provision of this Paragraph 4 and all time during which there is pending
in any court of competent jurisdiction any action (including any appeal from any
judgment) brought by any person, whether or not a party to this Agreement, in
which action Company seeks to enforce the agreements and covenants of Employee
or in which any person contests the validity of such agreements and covenants or
their enforceability or seeks to avoid their performance or enforcement.
Provided that, no such exclusion shall include the period of time within which
Employee has ceased violating this paragraph, whether or not as a result of
being in compliance with Court injunction or doing so voluntarily, and whether
or not any action is pending against Employee.
5. Return of Company Property. All correspondence, reports, charts,
--------------------------
products, records, designs, patents, plans, manuals, "field guides," memoranda,
advertising materials, lists and other data or property collected by or
delivered to Employee by or on behalf of the Company or its representatives,
customers and government entities (including, without limitation, customers
obtained for Company by Employee), and all other materials compiled by Employee
which pertain to the business of Company shall be and shall remain the property
of Company, shall be subject at all times to the Company's discretion and
control and shall be delivered promptly to Company upon request at any time and
without request upon completion or other termination of Employee's employment
hereunder.
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<PAGE>
6. Inventions. Employee shall disclose promptly to Company any and all
----------
conceptions and ideas for inventions, improvements, and valuable discoveries,
whether patentable or not, which are conceived or made by Employee solely or
jointly with another during the period of employment which are related to the
business or activities of the Company. Employee hereby assigns and agrees to
assign all his interests therein to Company or its nominee. Whenever requested
to do so by Company, Employee shall execute any and all applications,
assignments or other instruments that Company shall deem necessary to apply for
and obtain Letters Patent of the United States or any foreign country or to
otherwise protect Company's interest therein. These obligations shall continue
beyond the termination of employment with respect to inventions, improvements
and valuable discoveries, whether patentable or not, conceived, made or acquired
by Employee during the period of employment, and shall be binding upon
Employee's heirs, assigns, executors, administrators and other legal
representatives.
7. Termination; Rights of Termination.
----------------------------------
(a) Employee's employment under this Agreement may be terminated during
the term hereof upon the occurrence of any of the items set forth below. If
Employee's employment under this Agreement is terminated for any of the reasons
set forth below, Employee shall be entitled to receive, and shall immediately be
paid in full, one months annual salary that would have been paid under Paragraph
2(a) above, if this Agreement had not been
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<PAGE>
terminated. If in any one or more of the following items occur this Agreement
shall be terminated as follows:
(i) Automatically upon the death of Employee.
(ii) Automatically upon the resignation of the Employee, occurring
when no Change of Control occurred or if the Change of Control occurred more
than three months after the resignation.
(iii) By Company upon written notice to Employee in the event of:
(A) Employee's inability to perform his duties under this
Agreement because of illness or physical or mental disability or other
incapacity which continues for a period of 90 days; or
(B) Employee's theft or fraud with respect to the business or
affairs of Company or if Employee is convicted of a crime involving
fraud or theft.
If the Agreement is terminated by the Company, the Employee shall be
provided with a written notice of termination which shall state the reason for
Employee's termination .
(b) The Company may terminate the Employee's employment under this
Agreement, ninety (90) days after providing written notice that one of the
events set forth in items (i) or (ii) below has occurred, if within the ninety
(90) day period after the notice was given, the Employee has not remedied the
action or omission which was specified in the written notice. If Employee's
employment under this Agreement is terminated for the reasons set
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<PAGE>
forth in item (i) or (ii) below, Employee shall be entitled to receive, and
shall immediately be paid in full, six months annual salary that would have been
paid under Paragraph 2(a) above, if this Agreement had not been terminated. The
items allowing the Company to terminate the Employee, as set forth in this
Paragraph 7(b) are as follows:
(i) Employee's breach of this Agreement; or
(ii) Employee's unsatisfactory performance of his duties and/or
obligations to the Company, as determined in good faith by the Company.
The written notice of to be provided to Employee by Company under this
Paragraph 7(b) shall specifically state the action or inaction of Employee which
in the Company's opinion caused item (i) or (ii) above to exist.
(c) Employee's employment under this Agreement may be terminated during
the term hereof upon the occupance of any of the items set forth below. If
Employee's employment under this Agreement is terminated for any of the reasons
set forth below, Employee shall be entitled to receive, and shall immediately be
paid in full, two years annual salary that would have been paid under Paragraph
2(a) above, if this Agreement had not been terminated. If in any one or more of
the following items occur this Agreement shall be terminated as follows:
(i) Automatically upon the resignation of the Employee, within three
months of a Change of Control; or
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<PAGE>
(ii) By Company upon written notice to Employee in the event of the
Company's merger, consolidation, or other business combination with another
entity where the Company is not the surviving entity or the Company's sale
of substantially all its assets.
If the Agreement is terminated by the Company, the Employee shall be
provided with a written notice of termination which shall state the reason for
Employee's termination.
(d) In the event of termination of Employee's employment under this
Agreement for any reason provided in paragraph 7(a), 7(b) or 7(c), all rights
and obligations of Company and Employee under this Agreement shall cease
immediately, except that Employee's obligations under this subparagraph and
paragraphs 4, 5, 6, and 9 herein and Company's obligations to pay the amounts to
be paid under Paragraph 7(a), 7(b) or 7(c),as applicable, shall survive such
termination. After such termination Employee shall have no right to receive any
compensation hereunder, except as set forth in Paragraph 7(a), 7(b) or 7(b).
8. Authority. Employee shall be authorized to obligate the Company in
---------
accordance with the Company's policies and procedures from time to time in
effect.
9. Representations of Employee. Employee represents and warrants to
---------------------------
Company that he is not subject to any restriction or noncompetition covenant in
favor of a former employer or any other person or entity, and that the execution
of this Agreement by
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<PAGE>
Employee and his provision of services to Company and the performance of his
obligations hereunder will not violate or be a breach of any agreement with a
former employer or any other person or entity. Further, Employee agrees to
indemnify Company for any claim, including, but not limited to, attorneys' fees
and expenses of investigation, by any such third party that such third party may
now have or may hereafter come to have against Company based upon or arising out
of any noncompetition agreement or invention and secrecy agreement between
Employee and such third party.
10. Complete Agreement. This Agreement is the final, complete and
------------------
exclusive statement and expression of the agreement between Company and
employee, it being understood that there are no oral representations,
understandings or agreements covering the same subject matter as this Agreement.
This Agreement supersedes, and cannot be varied, contradicted or supplemented by
evidence of any prior or contemporaneous discussions, correspondence, or oral or
written agreements of any kind. This Agreement may be modified, altered or
otherwise amended only by a written instrument executed by both Company and
Employee.
11. No Waiver; Remedies Cumulative. No waiver by the parties hereto of
------------------------------
any default or breach of any term, condition or covenant of this Agreement shall
be deemed to e a waiver of any subsequent default or breach of the same or any
other term, condition or covenant contained herein. No right, remedy or election
given by any term of this Agreement shall be deemed exclusive but each shall
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<PAGE>
be cumulative with all other rights, remedies and elections available at law or
in equity.
12. Assignment; Binding Effect. Employee understands that he has been
--------------------------
selected by Company on the basis of his personal qualifications, experience and
skills. This Agreement is not assignable. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and Company's successors.
13. Notice. All notices or other communications required or permitted
------
hereunder shall be in writing and may be given by depositing the same in the
United States mail, addressed to the party to be notified, postage prepaid and
registered or certified with return receipt requested, by overnight courier or
by delivering the same in person to such party.
To Company: President
1000 Crawford Place
Mt. Laurel, N.J. 08054
with a copy to:
Robert M. Kramer & Assoc., P.C.
1150 First Avenue, Suite 900
King of Prussia, PA 19406
To Employee: Willard Miller
230 Orono Place
Somerdale, N.J. 08083
Notice shall be deemed given and effective the day personally delivered, the day
after being sent by overnight courier and three days after the deposit in the
U.S. mail of a writing addressed as
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<PAGE>
above and sent first class mail, certified, return receipt requested, or when
actually received, if earlier. Either party may change the address for notice
by notifying the other party of such change in accordance with this paragraph
14.
14. Severability; Headings. If any portion of this Agreement is held
----------------------
invalid or inoperative, the other portions of this Agreement shall be deemed
valid and operative and, so far as is reasonable and possible, effect shall be
given to the intent manifested by the portion held invalid or inoperative. The
paragraph headings herein are for reference purposes only and are not intended
in nay way to describe, interpret, define or limit the extent or intent of this
Agreement or of any part hereof.
15. Governing Law. This Agreement shall in all respects be construed in
-------------
accordance with the laws of the State of New Jersey.
EASTERN ENVIRONMENTAL SERVICES, INC.
By: /s/Louis D. Paolino, Jr.
--------------------------
Louis D. Paolino, Jr.
/s/Willard Miller
-----------------------------
Willard Miller
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<PAGE>
Exhibit 10.43
EMPLOYMENT AGREEMENT
--------------------
This Employment Agreement ("Agreement") is executed and delivered as of
September 27, 1996, by and between Eastern Environmental Services, Inc., a
Delaware corporation ("Company"), and Glen Miller, an individual ("Employee").
RECITALS
--------
The Company conducts a diversified waste management business, including,
without limitation, waste hauling operations, landfills and other waste
management, recycling and waste testing operations ("Business"). The Employee
is the sole shareholder of Waste Maintenance Services, Inc. ("Waste
Maintenance"), a New Jersey corporation which is a party to an Agreement of
Merger by and between the Company, Waste Maintenance, and Super Kwik, Inc.
("Merger Agreement"). In accordance with the Merger Agreement, Waste
Maintenance will be merged into a subsidiary of the Company on the closing date
of the Merger Agreement. The Employee is an executive with extensive experience
in the waste industry. Commencing on the date the Merger Agreement closes, the
Company desires to hire Employee as its Executive Vice President and the
Employee desires to accept the position offered.
The position of the Employee with the Company will give the Employee access
to and familiarity with confidential information and business methods used in
the operation of the Business. During the course of Employee's employment,
Employee will become familiar
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with and aware of information as to the specific manner of doing business and
the customers of the Company and the Company's future plans. Employee has and
will have knowledge of trade secrets of the Company which are valuable assets of
the Company.
Employee recognizes that the business of the Company is dependent upon a
number of trade secrets and confidential business information, including
customer lists, customer data and operational information. The protection of
these trade secrets is of critical importance to the Company. The Company will
sustain great loss and damage if, for whatever reason, Employee should violate
the provisions of paragraph 4 of this Agreement. Further, Employee acknowledges
that any such violation would cause irreparable harm to Company and that Company
would be entitled, without limitation, to injunctive relief to remedy such
violation.
NOW, THEREFORE, in consideration of Ten Dollars ($10), and the mutual
promises, terms and conditions set forth herein and the performance of each, the
parties hereby agree as follows:
1. Services.
--------
(a) Company hereby employs Employee as its Executive Vice President in
charge of Southern New Jersey waste collection operations. Employee shall also
have the title of Executive Vice President of the subsidiary created by the
merger set forth in the Merger Agreement. For purposes of this Agreement, the
term "Territory" shall mean Trenton, New Jersey and all parts of New
Jersey south of Trenton, New Jersey, Philadelphia, Pennsylvania and
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<PAGE>
such other areas agreed upon by Company and Employee. Additional or different
duties, titles or positions may be assigned to Employee or may be taken from
Employee from time to time by the Company's President; provided, that the
Employee consents to such changes. The Company shall not change Employee's
Territory without Employee's consent.
(b) Employee hereby accepts employment upon the terms and conditions
contained in this Agreement. Employee shall faithfully adhere to, execute and
fulfill all directions and policies established by the Board, to the extent such
instructions do not violate applicable laws.
(c) Employee is being employed as a full time employee and Employee agrees
to devote his full efforts and attention to his duties to the Company.
2. Compensation.
------------
(a) For all services to be rendered by Employee to Company, Company shall
pay Employee an annual salary at the rate of One Hundred Fifty Thousand
($150,000) Dollars per year, payable in accordance with Company's normal payroll
procedures. The Company, at its discretion, may from time to time grant bonuses
and raises to the Employee.
(b) Effective on the commencement of this Agreement's term the Employee
shall be given a warrant ("Warrant") convertible into Two Hundred Thousand
(200,000) shares of the Company's common stock
-3-
<PAGE>
the Company's common stock on July 29, 1996. The Warrant shall be convertible
over a period of four years. The Warrant shall be convertible into shares in
blocks of 50,000 shares. The first conversion of the Warrant may not take place
until one year from the date the term of this Agreement commences and a further
block of 50,000 shares may be converted on each subsequent anniversary date of
this Agreement's term. Notwithstanding the prior sentence the Warrant may be
converted to all 200,000 shares immediately, upon a Change of Control, as
hereafter defined in Paragraph 2(e) below. The term of the Warrant shall be ten
years. If this Agreement is terminated, the Warrant shall not be effected and
shall remain in full force and effect.
(c) To the extent that Company, from time to time in its sole discretion,
offers or provides any of the following to its employees, then Employee, on an
equal basis with such other employees, shall be entitled to: (i) participation
in all, if any, life, health, medical, hospital, accident and disability
insurance programs of Company in existence for the benefit of the Company's
executives and for which Employee qualifies; (ii) participation in all, if any,
pension, retirement, profit sharing or stock purchase plans for which Employee
qualifies; and (iii) participation in any other employee benefits which Company
accords to its employees.
(d) During the term of Employee's employment with Company, Employee shall
be entitled to reimbursement for reasonable business expenses incurred on behalf
of Company. Employee shall be paid a
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<PAGE>
monthly car allowance of Five Hundred ($500) Dollars a month.
(e) For purposes of this Agreement, a "Change of Control" shall mean the
occurrence of the events set forth in items (i) and (ii).
(i) The acquisition in one or more transactions by any "Person", (as
the term "Person" is used for purposes of Sections 13(d) or 14(d) of the
Securities Exchange Act of 1934, as amended (the 1934 Act")) of "Beneficial
Ownership" (as the term beneficial ownership is used for purposes of Rule 13d-3
promulgated under the 1934 Act) of fifty percent (50%) or more of the combined
voting power of the Company's then outstanding voting securities (the "Voting
Securities"). For purposes of this Paragraph 2(e), the Voting Securities
acquired directly from the Company by any Person shall be excluded from the
determination of such Person's Beneficial Ownership of Voting Securities (but
such Voting Securities shall be included in the calculation of the total number
of Voting Securities then outstanding). For purposes of this Paragraph 2(e) the
acquisition of Employee of the Beneficial Ownership of 50% percent or more of
the Voting Securities shall not be a Change of Control.
(ii) The current directors of the Company no longer constitute a
majority of the Company's Board of Directors.
3. Term. The term of this Agreement shall begin on the date that closing
----
under the Merger Agreement occurs and that Waste Maintenance is merged into a
subsidiary of the Company and shall
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<PAGE>
continue for a term of four (4) years thereafter. Employee's employment under
this Agreement may be terminated during the term hereof only as set forth in
Paragraph 7 of this Agreement.
4. Noncompetition Covenants.
------------------------
(a) Employee agrees that the noncompetition covenants contained in this
Paragraph 4 are a material and substantial part of this Agreement.
(b) Employee covenants that during Employee's employment with Company and
for one year following the termination of Employee's employment (regardless of
the reason for the termination) the Employee shall not, directly or indirectly,
without the prior express written consent of Company, do any of the things set
forth in item (i) through (v) below.
(i) engage, as an officer, director, shareholder, owner, partner,
joint venturer, agent, or in a managerial capacity, whether as an employee,
independent contractor, consultant or advisor, or as a sales representative, in
the waste disposal industry, including, without limitation, waste hauling, waste
disposal, land filling, handling demolition waste, handling special waste,
collecting or disposing of municipal special waste, and recycling waste, in each
case within the Territory, as defined in Paragraph 1(a);
(ii) call upon any person who is, at the time of the contact, an
employee of Company or its affiliates within the Territory, if the employee
serves the Company in a managerial
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<PAGE>
capacity and if the purpose and intent of the contact is to entice such employee
away from or out of the employ of Company or its affiliates;
(iii) call upon any person or entity, which is, at the time of the
contact, a customer of the Company or its affiliates within the Territory, for
the purpose of soliciting or selling any of the services which are the services
offered by the Company within the Territory;
(iv) disclose the identity of the customers of Company or its
affiliates, whether in existence or proposed, to any person, firm, partnership,
corporation or other entity whatsoever, for any reason or purpose whatsoever,
except if approved by the Board or if compelled to do so by a governmental
agency, Court Order or subpoena; or
(v) promote, or assist, financially or otherwise, any person, firm,
partnership, corporation or other entity whatsoever to do any of the above.
Notwithstanding the above, the foregoing covenant shall not be deemed to
prohibit Employee from acquiring as an investment not more than ten percent of
the capital stock of a competing business, the stock of which is traded on a
national securities exchange or over-the-counter.
For the purposes of this Agreement, the term "affiliates" shall mean one or
more of: (a) each subsidiary of Company, and (B) each other entity under the
direct or indirect control of the Company.
-7-
<PAGE>
(c) The Company will sustain significant losses and damages, if Employee
breaches the covenants in this Paragraph 4. There is no adequate monetary
remedy for the immediate and irreparable damage that would be caused to Company
by Employee's breach of its non-competition covenants. Employee agrees that, in
the event of a breach by him of the foregoing covenants, such covenants may be
enforced by Company by, without limitation, injunctions and restraining orders.
(d) It is agreed by the parties that the covenants in this Paragraph 4
impose a reasonable restraint on Employee in light of the activities and
business of Company on the date of the execution of this Agreement and the
future plans of Company.
(e) The covenants in this Paragraph 4 are severable and separate, and the
unenforceability of any specific covenant shall not affect the provisions of any
other covenant. If any court of competent jurisdiction shall determine that the
scope, time or territorial restrictions set forth are unreasonable, then it is
the intention of the parties that such restrictions be enforced to the fullest
extent which the court deems reasonable, and the Agreement shall thereby be
reformed.
(f) The covenants in this Paragraph 4 shall be construed as independent of
any other provision of this Agreement and the existence of any claim or cause of
action of Employee against Company whether predicated on this Agreement, or
otherwise, shall not constitute a defense to the enforcement by Company of such
covenants. It is specifically agreed that the duration of the
-8-
<PAGE>
noncompetition covenants stated above shall be computed by excluding from such
computation all time during which Employee is in violation of any provision of
this Paragraph 4 and all time during which there is pending in any court of
competent jurisdiction any action (including any appeal from any judgment)
brought by any person, whether or not a party to this Agreement, in which action
Company seeks to enforce the agreements and covenants of Employee or in which
any person contests the validity of such agreements and covenants or their
enforceability or seeks to avoid their performance or enforcement. Provided
that, no such exclusion shall include the period of time within which Employee
has ceased violating this paragraph, whether or not as a result of being in
compliance with Court injunction or doing so voluntarily, and whether or not any
action is pending against Employee.
5. Return of Company Property. All correspondence, reports, charts,
--------------------------
products, records, designs, patents, plans, manuals, "field guides," memoranda,
advertising materials, lists and other data or property collected by or
delivered to Employee by or on behalf of the Company or its representatives,
customers and government entities (including, without limitation, customers
obtained for Company by Employee), and all other materials compiled by Employee
which pertain to the business of Company shall be and shall remain the property
of Company, shall be subject at all times to the Company's discretion and
control and shall be delivered promptly to Company upon request at any time and
without request upon completion or other termination of Employee's employment
hereunder.
-9-
<PAGE>
6. Inventions. Employee shall disclose promptly to Company any and all
----------
conceptions and ideas for inventions, improvements, and valuable discoveries,
whether patentable or not, which are conceived or made by Employee solely or
jointly with another during the period of employment which are related to the
business or activities of the Company. Employee hereby assigns and agrees to
assign all his interests therein to Company or its nominee. Whenever requested
to do so by Company, Employee shall execute any and all applications,
assignments or other instruments that Company shall deem necessary to apply for
and obtain Letters Patent of the United States or any foreign country or to
otherwise protect Company's interest therein. These obligations shall continue
beyond the termination of employment with respect to inventions, improvements
and valuable discoveries, whether patentable or not, conceived, made or acquired
by Employee during the period of employment, and shall be binding upon
Employee's heirs, assigns, executors, administrators and other legal
representatives.
7. Termination; Rights of Termination.
----------------------------------
(a) Employee's employment under this Agreement may be terminated during the
term hereof upon the occurrence of any of the items set forth below. If
Employee's employment under this Agreement is terminated for any of the reasons
set forth below, Employee shall be entitled to receive, and shall immediately be
paid in full, one months annual salary that would have been paid under Paragraph
2(a) above, if this Agreement had not been terminated. If in any one or more of
the following items occur
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<PAGE>
this Agreement shall be terminated as follows:
(i) Automatically upon the death of Employee.
(ii) Automatically upon the resignation of the Employee, occurring
when no Change of Control occurred or if the Change of Control occurred more
than three months after the resignation.
(iii) By Company upon written notice to Employee in the event of:
(A) Employee's inability to perform his duties under this
Agreement because of illness or physical or mental disability or other
incapacity which continues for a period of 90 days; or
(B) Employee's theft or fraud with respect to the business or
affairs of Company or if Employee is convicted of a crime involving fraud or
theft. If the Agreement is terminated by the Company, the Employee shall be
provided with a written notice of termination which shall state the reason for
Employee's termination.
(b) The Company may terminate the Employee's employment under this
Agreement, ninety (90) days after providing written notice that one of the
events set forth in items (i) or (ii) below has occurred, if within the ninety
(90) day period after the notice was given, the Employee has not remedied the
action or omission which was specified in the written notice. If Employee's
employment under this Agreement is terminated for the reasons set forth in item
(i) or (ii) below, Employee shall be entitled to receive, and shall immediately
be paid in full, six months annual
-11-
<PAGE>
salary that would have been paid under Paragraph 2(a) above, if this Agreement
had not been terminated. The items allowing the Company to terminate the
Employee, as set forth in this Paragraph 7(b) are as follows:
(i) Employee's breach of this Agreement; or
(ii) Employee's unsatisfactory performance of his duties and/or
obligations to the Company, as determined in good faith by the Company.
The written notice of to be provided to Employee by Company under this
Paragraph 7(b) shall specifically state the action or inaction of Employee which
in the Company's opinion caused item (i) or (ii) above to exist.
(c) Employee's employment under this Agreement may be terminated during
the term hereof upon the occupance of any of the items set forth below. If
Employee's employment under this Agreement is terminated for any of the reasons
set forth below, Employee shall be entitled to receive, and shall immediately be
paid in full, two years annual salary that would have been paid under Paragraph
2(a) above, if this Agreement had not been terminated. If in any one or more of
the following items occur this Agreement shall be terminated as follows:
(i) Automatically upon the resignation of the Employee, within three
months of a Change of Control; or
(ii) By Company upon written notice to Employee in the event of the
Company's merger, consolidation, or other business combination with another
entity where the Company is
-12-
<PAGE>
not the surviving entity or the Company's sale of substantially all its
assets.
If the Agreement is terminated by the Company, the Employee shall be
provided with a written notice of termination which shall state the reason for
Employee's termination.
(d) In the event of termination of Employee's employment under this
Agreement for any reason provided in paragraph 7(a), 7(b) or 7(c), all rights
and obligations of Company and Employee under this Agreement shall cease
immediately, except that Employee's obligations under this subparagraph and
paragraphs 4, 5, 6, and 9 herein and Company's obligations to pay the amounts to
be paid under Paragraph 7(a), 7(b) or 7(c),as applicable, shall survive such
termination. After such termination Employee shall have no right to receive any
compensation hereunder, except as set forth in Paragraph 7(a), 7(b) or 7(b).
8. Authority. Employee shall be authorized to obligate the Company in
---------
accordance with the Company's policies and procedures from time to time in
effect.
9. Representations of Employee. Employee represents and warrants to
---------------------------
Company that he is not subject to any restriction or noncompetition covenant in
favor of a former employer or any other person or entity, and that the execution
of this Agreement by Employee and his provision of services to Company and the
performance of his obligations hereunder will not violate or be a breach of any
agreement with a former employer or any other person or entity. Further,
Employee agrees to indemnify Company for any
-13-
<PAGE>
claim, including, but not limited to, attorneys' fees and expenses of
investigation, by any such third party that such third party may now have or may
hereafter come to have against Company based upon or arising out of any
noncompetition agreement or invention and secrecy agreement between Employee and
such third party.
10. Complete Agreement. This Agreement is the final, complete and
------------------
exclusive statement and expression of the agreement between Company and
employee, it being understood that there are no oral representations,
understandings or agreements covering the same subject matter as this Agreement.
This Agreement supersedes, and cannot be varied, contradicted or supplemented by
evidence of any prior or contemporaneous discussions, correspondence, or oral or
written agreements of any kind. This Agreement may be modified, altered or
otherwise amended only by a written instrument executed by both Company and
Employee.
11. No Waiver; Remedies Cumulative. No waiver by the parties hereto of
------------------------------
any default or breach of any term, condition or covenant of this Agreement shall
be deemed to e a waiver of any subsequent default or breach of the same or any
other term, condition or covenant contained herein. No right, remedy or
election given by any term of this Agreement shall be deemed exclusive but each
shall be cumulative with all other rights, remedies and elections available at
law or in equity.
12. Assignment; Binding Effect. Employee understands that he has been
--------------------------
selected by Company on the basis of his personal qualifications, experience and
skills. This Agreement is not
-14-
<PAGE>
assignable. This Agreement shall be binding upon and inure to the benefit of
the parties hereto and Company's successors.
13. Notice. All notices or other communications required or permitted
------
hereunder shall be in writing and may be given by depositing the same in the
United States mail, addressed to the party to be notified, postage prepaid and
registered or certified with return receipt requested, by overnight courier or
by delivering the same in person to such party.
To Company: President
1000 Crawford Place
Mt. Laurel, N.J. 08054
with a copy to:
Robert M. Kramer & Assoc., P.C.
1150 First Avenue, Suite 900
King of Prussia, PA 19406
To Employee: Glen Miller
429 Ocean Avenue
Ocean, N.J. 08226
Notice shall be deemed given and effective the day personally delivered, the day
after being sent by overnight courier and three days after the deposit in the U.
S. mail of a writing addressed as above and sent first class mail, certified,
return receipt requested, or when actually received, if earlier. Either party
may change the address for notice by notifying the other party of such change in
accordance with this paragraph 14.
14. Severability; Headings. If any portion of this Agreement is held
----------------------
invalid or inoperative, the other portions of this Agreement shall be deemed
valid and operative and, so far as is
-15-
<PAGE>
reasonable and possible, effect shall be given to the intent manifested by the
portion held invalid or inoperative. The paragraph headings herein are for
reference purposes only and are not intended in any way to describe, interpret,
define or limit the extent or intent of this Agreement or of any part hereof.
15. Governing Law. This Agreement shall in all respects be construed in
-------------
accordance with the laws of the State of New Jersey.
EASTERN ENVIRONMENTAL SERVICES, INC.
By: /s/ Louis D. Paolino, Jr.
-----------------------------------
Louis D. Paolino, Jr.
/s/ Glen Miller
--------------------------------------
Glen Miller
-16-
<PAGE>
Exhibit 10.44
Warrant No. 96-13
NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE
OF THIS WARRANT HAVE BEEN REGISTERED UNDER EITHER THE SECURITIES ACT OF 1933, AS
AMENDED, OR UNDER ANY STATE SECURITIES LAWS, AND THIS WARRANT CANNOT BE
EXERCISED, SOLD OR TRANSFERRED, AND THE SHARES OF COMMON STOCK ISSUABLE UPON
EXERCISE OF THIS WARRANT CANNOT BE SOLD OR TRANSFERRED, UNLESS AND UNTIL THEY
ARE SO REGISTERED OR UNLESS AN EXEMPTION IS THEN AVAILABLE.
Dated: September 27, 1996 Warrant to Subscribe
for 281,907 Shares
EASTERN ENVIRONMENTAL SERVICES, INC.
Warrant
To Subscribe for and Purchase
Common Stock of
EASTERN ENVIRONMENTAL SERVICES, INC.
THIS CERTIFIES that, for value received, Willard Miller or his registered
assigns ("Holder"), is entitled to subscribe for and purchase from EASTERN
ENVIRONMENTAL SERVICES, INC., a Delaware corporation ("Company"), at an exercise
price per share of $6.75 (initially and as adjusted, if at all, pursuant to the
terms and conditions of this Warrant, the "Exercise Price"), 281,907 fully paid
--------------
and nonassessable shares of Company's common stock, par value $.01 per share
(the "Common Stock"). This Warrant may be exercised, in whole or in part, in
------------
six (6) blocks consisting of one (1) block of 46,168 shares, one (1) block of
35,739 shares and four (4) blocks of 50,000 shares (individually a "Block" and
collectively the "Blocks"). The Block of 46,168 may be exercised on and after
October 27, 1996. The Block of 35,739 may be exercised on and after December
27, 1996. The first Block of 50,000 may be exercised on or after September 27,
1997, with an additional Block of 50,000 being exercisable on September 27 of
each successive calendar year with the final Block of 50,000 being exercisable
on and after September 27, 2000. Notwithstanding the prior sentence, all Blocks
shall be exercisable upon a Change of Control, as hereinafter defined.
For purposes of this Warrant, a "Change of Control" shall mean the
occurrence of the following events: (i) the acquisition in one or more
transactions by any "Person", (as the term "Person" is used for purposes of
Sections 13(d) or 14(d) of the Securities Exchange Act of 1934, as amended ("the
1934 Act")) of "Beneficial Ownership" (as the term beneficial ownership is used
for purposes of Rule 13d-3 promulgated under the 1934 Act) of fifty percent
(50%) or more of the combined voting power of the Company's then outstanding
voting securities (the "Voting Securities"). For purposes of this
<PAGE>
paragraph, the Voting Securities acquired directly from the Company by any
Person shall be excluded from the determination of such Person's Beneficial
Ownership of Voting Securities (but such Voting Securities shall be included in
the calculation of the total number of Voting Securities then outstanding). For
purposes of this paragraph, the acquisition of the holder of this Warrant of the
Beneficial Ownership of 50% percent or more of the Voting Securities shall not
be a Change of Control; or (ii) the current directors of the Company, Louis D.
Paolino, Jr., Kenneth Leung and George Moorehead, no longer constitute a
majority of the Company's Board of Directors. No exercise of any Blocks may
occur after 5:00 p.m. Eastern time on the tenth anniversary of the date hereof.
This Warrant is subject to the following provisions, terms and conditions:
1. Exercise; Payment. The rights represented by this Warrant may be
-----------------
exercised by Holder, in whole or in part, by the surrender of this Warrant at
the principal office of Company properly endorsed and accompanied by payment to
Company of the Exercise Price for that number of shares of Common Stock sought
to be purchased (the "Exercised Shares"), in the manner provided below. Company
----------------
agrees that (a) shares purchased upon exercise of this Warrant shall be and are
deemed to be issued to Holder as the record owner of such shares as of the close
of business on the date on which this Warrant shall have been surrendered and
payment made for such shares as provided herein, and (b) certificates for the
shares of stock so purchased shall be delivered to Holder as promptly as
reasonably practicable following any exercise of this Warrant, and unless this
Warrant shall have been exercised in full, or shall have expired, a new Warrant
representing the number of shares with respect to which this Warrant shall not
yet have been exercised, shall also be delivered to Holder.
Holder may pay the Exercise Price for any Exercised shares in one or a
combination of the following methods:
(a) By delivering cash, check, money order or wire transfer of funds to the
Company in the amount of the Exercise Price of the Exercised Shares; or
(b) By surrendering to the Company shares of Common Stock having a Fair
Market Value (as measured on the date of exercise of the Exercised Shares) equal
to the Exercise Price of the Exercised Shares.
2. Shares to be Fully Paid; Reservation. Company covenants and agrees
------------------------------------
that all shares which may be issued upon the exercise of the rights represented
by this Warrant will, upon issuance and payment therefor in accordance with
Section 1 above, be fully paid and nonassessable and free from all taxes, liens
and charges with respect to the issue thereof; and without limiting the
generality of the foregoing, Company covenants and agrees that it will from
2
<PAGE>
time to time take all such action as may be required to assure that the par
value per share of the Common Stock is at all times equal to or less than the
then effective Exercise Price per share of Common Stock issuable pursuant to
this Warrant. Company further covenants and agrees that when the rights
represented by this Warrant may be exercised, Company will at all times
thereafter have authorized, and reserved for the purpose of issue or transfer
upon exercise of the subscription rights evidenced by this Warrant, a sufficient
number of shares of its Common Stock to provide for the exercise of the rights
represented by this Warrant.
3. Reorganization. In case of any reorganization of Company, or any other
--------------
corporation the stock or securities of which are at the time deliverable on the
exercise of this Warrant, or in case Company or such other corporation shall
consolidate with or merge into another corporation, or convey all or
substantially all of its assets to another corporation, or liquidate, Holder,
upon the exercise hereof and upon the payment of the Exercise Price provided
above, shall be entitled to receive, in lieu of the shares called for under this
Warrant, the stock or other securities or property to which Holder would have
been entitled upon the consummation of such reorganization, consolidation,
merger, conveyance, or liquidation if Holder had purchased the shares called for
hereby immediately prior thereto; and in such case, the provisions of this
Warrant shall be applicable to the shares of stock or other securities or
property thereafter deliverable upon the exercise of this Warrant. In the case
of the partial exercise of this Warrant under such circumstances, the number of
shares of stock or other securities or property which would have been receivable
upon the full exercise of this Warrant, and the Exercise Price payable therefor,
shall be proportionately reduced.
4. No Rights as Shareholder. Until the valid exercise of this Warrant,
------------------------
the holder hereof shall not be entitled to any voting right or other rights as a
shareholder of Company with respect to this Warrant.
5. Transfer of Warrants. Subject to Section 7 hereof, this Warrant and
--------------------
all rights hereunder are transferable, in whole or in part, without charge to
the Holder, at the office or agency of Company referred to in Section 1 by the
Holder in person or by duly authorized attorney, upon surrender of this Warrant
properly endorsed. Each taker and holder of this Warrant, by taking or holding
the same, consents and agrees that this Warrant, when endorsed in blank, shall
be deemed negotiable, and that the holder hereof, when this Warrant shall have
been so endorsed, may be treated by Company and all other persons dealing with
this Warrant as the absolute owner hereof for any purpose and as the person
entitled to exercise the rights represented by this Warrant, or to the transfer
hereof on the books of Company, any notice to the contrary notwithstanding; but
until such transfer on such books, Company may treat the registered holder
hereof as the owner for all purposes.
3
<PAGE>
6. Fractional Interests. Company shall not be required to issue
--------------------
fractional shares of Common Stock upon the exercise of this Warrant. If any
fraction of a share of Common Stock would, except for the provisions of this
Section 6, be issuable upon the exercise of this Warrant (or specified portion
thereof), Company shall pay an amount in cash equal to the Fair Market Value (as
defined below) of such fraction of a Common Share on the business day prior to
the date of such exercise. As used in this Agreement, the "Fair Market Value"
-----------------
of the Common Stock shall be the closing price of the Common Stock on the date
of determination on the principal stock market or quotation system on which the
Common Stock is then traded; provided, however, if the Common Stock is not, as
-------- -------
of the date of determination of the Fair Market Value, traded on a recognized
public trading market or quoted on a recognized quotation system, then the Fair
Market Value shall be determined by Company on the basis of such valuation as
it considers appropriate.
7. Compliance With Securities Laws. By acquiring this Warrant from
-------------------------------
Company on the date hereof, the Holder hereby agrees, acknowledges, covenants,
represents and warrants as follows:
(a) This Warrant and the shares of Common Stock issuable upon exercise
hereof have not been registered under the Securities Act of 1933, as amended
(the "Securities Act"), or qualified or registered under any state securities
laws which may be applicable. Holder understands that this Warrant and such
shares of Common Stock have been and will be issued and sold hereunder in
transactions exempt from the registration or qualification requirements of the
Securities Act and applicable state securities laws and Holder acknowledges that
reliance on and the availability of said exemptions is predicated in part on the
accuracy of Holder's representations and warranties herein.
(b) Holder represents and warrants that it is acquiring this Warrant
for its own account, for purposes of investment, and not with a view to, or for
sale in connection with, any distribution thereof within the meaning of the
Securities Act and the rules and regulations promulgated thereunder. Holder
represents, warrants and agrees that it will not sell, exercise, transfer or
otherwise dispose of this Warrant (or any interest therein) or any of the Common
Stock purchasable upon exercise hereof, except pursuant to (i) an effective
registration statement under the Securities Act and applicable state securities
laws or (ii) an opinion of counsel, satisfactory to Company, that an exemption
from registration under the Securities Act and such laws is available. Holder
further acknowledges and agrees that Company is not required, legally or
contractually, so to register or qualify the Warrant or such Common Stock or to
take any action to make such an exemption available. Holder understands that
Company will be relying upon the truth and accuracy of the representations and
warranties contained in this Section 7 in issuing this Warrant and such Common
Stock without first registering the issuance thereof under the Securities Act or
qualifying or registering the
4
<PAGE>
issuance thereof under any state securities laws that may be applicable.
(c) Holder acknowledges that (i) there is not now, and there will not be
in the future, any public market for the Warrant, (ii) although there currently
is a public trading market for the Common Stock, there can be no assurance that
any such market will be sustained, and (iii) there can be no assurance that
Holder will be able to liquidate its investment in Company. Holder represents
and warrants that it is familiar with and understands the terms and conditions
of Rule 144 promulgated under the Securities Act.
(d) Holder represents and warrants to Company that (i) it has such
knowledge and experience in financial and business matters as is necessary to
enable it to evaluate the merits and risks of any investments in Company and is
not utilizing any other person to be a purchaser representative in connection
with evaluation of such merits and risks; and (ii) it has no need for liquidity
in an investment in Company and is able to bear the risk of that investment for
an indefinite period and to afford a complete loss thereof.
(e) Holder represents and warrants that it has had access to, and has been
furnished with, all of the information it has requested from Company and has had
an opportunity to review the books and records of Company and to discuss with
management and members of the board of directors of Company the business and
financial affairs of Company.
(f) Holder agrees that at the time of each exercise of this Warrant,
unless the issuance of shares of Common Stock issuable thereupon is pursuant to
an effective registration statement under the Securities Act, Holder will
provide Company with a letter embodying the representations and warranties set
forth in subsections (b) through (e), in form and substance satisfactory to
Company, and agrees that the certificate(s) representing any shares issued to it
upon any exercise of this Warrant may bear such restrictive legend as Company
may deem necessary to reflect the restricted status of such shares under the
Securities Act unless Company shall have received from Holder an opinion of
counsel to Holder, reasonably satisfactory in form and substance to Company,
that such restrictive legend is not required. If such legend is placed on such
certificate(s), before consenting to the removal of such legend and the transfer
of such shares, unless the request to remove such legend is made in connection
with a sale or transfer of the shares represented by such certificate in a
transaction registered under Section 5 of the Securities Act, Company may insist
upon the delivery to it of an opinion from counsel to Holder, reasonably
satisfactory in form and substance to Company, that the contemplated transfer
does not constitute a violation of the Securities Act.
5
<PAGE>
8. Notice. Company covenants and agrees to give notice in writing to
------
Holder at least 10 days prior to (or, if later, then as soon as reasonably
practicable prior to) any action contemplated which would affect the per share
Exercise Price, or number of shares purchasable upon exercise of this Warrant;
provided, however, any failure of Company to provide such notice shall not
- -------- -------
affect the validity of any action by Company. Any notice, request or other
communication provided for under this Warrant shall be given in writing,
delivered by hand, by overnight United States Mail, return receipt requested,
postage prepaid, or through a reputable courier service (such as Federal
Express) and shall be addressed to Company or to the Holder at the address shown
below, unless notice of a change in address is furnished in accordance with this
paragraph:
If to Company:
Eastern Environmental Services, Inc.
1000 Crawford Place
Suite 101
Mt. Laurel, NJ 08054
Attn: Chief Financial Officer
If to Holder:
Willard Miller
230 Orono Place
Sommerdale, NJ 08083
9. Descriptive Headings and Governing Law. The descriptive headings of
--------------------------------------
the several paragraphs of this Warrant are inserted for convenience only and do
not constitute a part of this Warrant. This Warrant is being delivered and is
intended to be performed in the Commonwealth of Pennsylvania and shall be
construed and enforced in accordance with, and the rights of the parties shall
be governed by, the law of such state.
IN WITNESS WHEREOF, Eastern Environmental Services, Inc. has caused this
Warrant to be signed by its duly authorized officers under its corporate seal,
this 27th day of September, 1996.
EASTERN ENVIRONMENTAL SERVICES, INC.
By: /s/ Robert M. Kramer
----------------------------------
Title: Vice President
------------------------------
Print Name: Robert M. Kramer
-------------------------
6
<PAGE>
ELECTION TO PURCHASE
--------------------
The undersigned Holder hereby irrevocable elects to exercise the within
Warrant to purchase (___________)* Shares of Common Stock issuable upon exercise
thereof to and requests that certificates for such Shares be issued in
his/her/its name and delivered to him/her/it at the following
address:________________________________________________________________________
________________________________________________________________________________
_______________________________________________________________________________.
Date:_________________
________________________________________________________________________________
Signature(s)**
____________________________
* If the Warrant is to be exercised or transferred in its entirety, insert the
word "All" before "Shares"; otherwise insert the number of shares then
purchasable on the exercise thereof as to which transferred or exercised. If
such Warrants shall not be transferred or exercised to purchase all shares
purchasable upon exercise thereof, that a new Warrant to purchase the balance of
such shares be issued in the name of, and delivered to, the Holder at the
address stated below.
** Signature(s) must conform exactly to the name(s) of the Holder as set forth
on the first page of this Warrant.
<PAGE>
ASSIGNMENT
----------
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers the
within Warrant to the extent of (________)* Shares purchasable upon exercise
thereof to ____________________________, whose address is ______________________
______________________________________________ and hereby irrevocably constitute
and appoint ____________________ his/her/its Attorney to transfer said Warrant
on the book of the Company, with full power of substitution.
Date:_______________________
________________________________________________________________________________
Signature(s)**
__________________________
* If the Warrant is to be exercised or transferred in its entirety, insert the
word "All" before "Shares"; otherwise insert the number of shares then
purchasable on the exercise thereof as to which transferred or exercised. If
such Warrants shall not be transferred or exercised to purchase all shares
purchasable upon exercise thereof, that a new Warrant to purchase the balance of
such shares be issued in the name of, and delivered to, the Holder at the
address stated below.
** Signature(s) must conform exactly to the name(s) of the Holder as set forth
on the first page of this Warrant.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> JUN-30-1997 JUN-30-1997
<PERIOD-START> OCT-01-1997 JUL-01-1996
<PERIOD-END> DEC-31-1996 DEC-31-1996
<CASH> 0 5,107,323
<SECURITIES> 0 0
<RECEIVABLES> 0 8,432,617
<ALLOWANCES> 0 1,552,841
<INVENTORY> 0 0
<CURRENT-ASSETS> 0 14,815,874
<PP&E> 0 53,137,657
<DEPRECIATION> 0 13,781,147
<TOTAL-ASSETS> 0 66,556,559
<CURRENT-LIABILITIES> 0 14,162,288
<BONDS> 0 21,093,897
0 0
0 0
<COMMON> 0 120,911
<OTHER-SE> 0 21,207,777
<TOTAL-LIABILITY-AND-EQUITY> 0 66,556,559
<SALES> 11,399,672 21,983,649
<TOTAL-REVENUES> 11,399,672 21,983,649
<CGS> 8,448,673 16,441,679
<TOTAL-COSTS> 8,448,673 16,441,679
<OTHER-EXPENSES> 1,586,990 5,307,062
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 237,387 385,246
<INCOME-PRETAX> 1,126,622 (150,338)
<INCOME-TAX> 21,561 694,561
<INCOME-CONTINUING> 1,105,061 (844,899)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 1,105,061 (844,899)
<EPS-PRIMARY> .09 (.08)
<EPS-DILUTED> 0 0
</TABLE>
