<PAGE>
As filed with the Securities and Exchange Commission on October 10, 1997
Registration No. 333-32361
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
_______________
AMENDMENT NO. 2
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
_______________
EASTERN ENVIRONMENTAL SERVICES, INC.
(Exact Name of Registrant as Specified in Its Charter)
_______________
DELAWARE 59-2840783
(State of Incorporation) (I.R.S. Employer Identification Number)
1000 Crawford Place, Suite 101 Louis D. Paolino, Jr.
Mt. Laurel, New Jersey 08054 Chairman And Chief Executive Officer
(609) 235-6009 1000 Crawford Place, Suite 101
Mt. Laurel, New Jersey 08054
(609) 235-6009
(Address, Including Zip Code, (Name, Address, Including Zip Code,
and Telephone Number, and Telephone Number,
Including Area Code, of Including Area Code,
Registrant's Principal of Agent for Service)
Executive Offices)
_______________________
Copy To:
H. John Michel, Jr., Esquire
Drinker Biddle & Reath LLP
1345 Chestnut Street
Philadelphia, Pennsylvania 19107-3496
(215) 988-2700
Approximate date of commencement of proposed sale to the public: From time
to time after the effective date of this Registration Statement as determined by
market conditions and other factors.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [_]
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_] ______________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_] _______________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Amount Proposed Maximum Proposed Maximum Amount of
Title of Shares to be Offering Price Aggregate Registration
to be Registered Registered/(2)/ Per Share/(1)/ Offering Price/(1)/ Fee
<S> <C> <C> <C> <C>
Common Stock, $.01 par value 6,104,394/(3)/ $22.28 $17,809,763 $1,692/(3)/
=================================================================================================================================
</TABLE>
(1) Calculated pursuant to Rule 457(c).
(2) Includes 682,214 shares issuable upon exercise of common stock purchase
warrants.
(3) The Registrant previously filed a Registration Statement with respect to
199,232 shares for which a registration fee of $1,078 was paid and Amendment No.
1 to such Registration Statement with respect to 5,305,033 shares for which a
registration fee of $31,549 was paid. Such shares have not been included for
purposes of calculating the fee for Amendment No. 2 to the Registration
Statement.
The registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
================================================================================
<PAGE>
PROSPECTUS
- ----------
6,104,394 SHARES
EASTERN ENVIRONMENTAL SERVICES, INC.
COMMON STOCK
This Prospectus relates to 5,153,846 shares of Common Stock, par value
$.01 per share (the "Common Stock"), of Eastern Environmental Services, Inc.
(the "Company") currently outstanding (the "Outstanding Shares"), 268,334 shares
of Common Stock issuable upon the excercise of stock options (the "Option
Shares") and 682,214 shares of Common Stock issuable upon exercise of common
stock purchase warrants of the Company (the "Warrant Shares") (the Outstanding
Shares, the Option Shares and the Warrant Shares are collectively referred to
herein as the "Shares"). The Shares are being offered for sale pursuant to this
Prospectus (the "Offering"), from time to time, by or for the account of the
stockholders named herein (the "Selling Stockholders"). See "Selling
Stockholders." The Company will not receive any of the proceeds of this
Offering.
Approximately 5,709,827 of the 6,104,394 Shares included in this
Prospectus were issued by the Company in connection with acquisitions of solid
waste and other businesses since June, 1996, and are included in this Prospectus
pursuant to the exercise of registration rights granted the holders thereof in
connection with such acquisitions. Of the 6,104,394 Shares included in this
Prospectus, approximately 4,767,809 are subject to lock-up agreements expiring
on October 29, 1997 and 528,924 are subject to lock-up agreements expiring on
November 28, 1997. These lock-up agreements were entered into in connection with
the Company's public offering of 5,175,000 shares of Common Stock in August,
1997 and prohibit the sale of the Shares covered thereby prior to the expiration
dates of the agreements without the consent of Smith Barney Inc., the
representative of the several underwriters in the public offering.
The Selling Stockholders, either directly, through agents designated or
to be designated from time to time by them, or through underwriters or dealers,
may sell the Shares from time to time on terms to be determined by the Selling
Stockholders at the time of sale. The Selling Stockholders may also seek, to the
extent permitted by applicable laws, to sell the Shares in transactions under
Rule 144 of the Securities Act of 1933, as amended (the "Securities Act").
All expenses of the Offering, other than commissions or discounts of
broker-dealers, will be borne by the Company. It is estimated that such expenses
to be borne by the Company will approximate $50,000.
The Selling Stockholders and any broker-dealers, agents, underwriters or
dealers that participate with the Selling Stockholders in the distribution of
the Shares may be deemed to be "underwriters" within the meaning of the
Securities Act, and any commissions received by them and any profit on the
resale of the Shares purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act.
The Common Stock is currently traded on the Nasdaq National Market under
the symbol "EESI." The closing sale price of the Common Stock on the Nasdaq
National Market on October 9, 1997 was $22 5/8 per share.
----------------------
These securities involve a high degree of risk. See "Risk Factors" beginning on
page 4 of this Prospectus for information that should be considered by
prospective purchasers.
--------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
--------------------
The date of this Prospectus is October 10, 1997
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information may be inspected and copied at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549 and at the Commission's Regional Offices at Seven World
Trade Center, Suite 1300, New York, New York 10048 and Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such material
also can be obtained from the Public Reference Section of the Commission, at 450
Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. The Commission
maintains a web site at http://www.sec.gov that contains reports, proxy and
information statements and other information regarding registrants, like the
Company, that file electronically with the Commission. The Company's Common
Stock is quoted on the Nasdaq National Market, and reports, proxy statements and
other information concerning the Company may be inspected at the National
Association of Securities Dealers, Inc. at 1735 K Street, N.W., Washington, D.C.
20006-1500.
The Company has filed with the Commission a Registration Statement on Form
S-3 (together with any amendments thereto, the "Registration Statement") under
the Securities Act with respect to the securities offered hereby. As permitted
by the rules and regulations of the Commission, this Prospectus does not contain
all of the information set forth in the Registration Statement and exhibits
thereto. Statements contained in this Prospectus or in any document incorporated
by reference in this Prospectus as to the contents of any contract or other
document referred to herein or therein are not necessarily complete, and in each
instance where such contract or document has been filed as an exhibit to the
Registration Statement, or other document incorporated by reference, reference
is made to the copy of such contract or other document, each such statement
being qualified in all respects by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents have been previously filed by the Company with the
Commission and are hereby incorporated by reference in this Prospectus as of
their respective dates:
(i) the Company's Annual Report on Form 10-K for the fiscal year ended
June 30, 1997;
(ii) the Company's Current Report on Form 8-K/A dated July 10, 1997
(amending the Company's Form 8-K dated July 2, 1996), July 10, 1997
(amending the Company's Form 8-K dated September 27, 1996), July 10, 1997
(amending the Company's Form 8-K dated December 10, 1996), July 10, 1997
(amending the Company's Form 8-K dated January 31, 1997), July 10, 1997
(amending the Company's Form 8-K dated March 31, 1997), July 11, 1997 and
July 25, 1997 (amending the Company's Form 8-K dated May 12, 1997), the
Company's Current Report on Form 8-K dated August 15, 1997 (as amended on
Form 8-K/A filed October 10, 1997), and the Company's Current Report on
Form 8-K dated August 20, 1997; and
(iii) the description of the Common Stock contained in the Registration
Statement on Form 8-A (File No. 0-16102), including all amendments and reports
filed for the purpose of updating such description prior to the termination of
the Offering.
Additionally, all documents and reports filed by the Company with the
Commission pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act
subsequent to the date of this Prospectus and prior to termination of the
Offering shall be deemed to be incorporated by reference in this Prospectus and
to be a part hereof from the date of filing of such documents or reports. Any
statement or information contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
-2-
<PAGE>
or in any subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any
statement or information so modified or superseded shall not be deemed, except
as so modified or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom a copy of
this Prospectus is delivered, upon written or oral request, a copy of any or all
of the documents that have been incorporated by reference in this Prospectus,
other than exhibits to such documents, unless such exhibits are specifically
incorporated by reference into the documents that this Prospectus incorporates.
Requests for such copies should be directed to: Investor Relations, Eastern
Environmental Services, Inc., 1000 Crawford Place, Mt. Laurel, New Jersey 08054,
(609) 235-6009.
-3-
<PAGE>
RISK FACTORS
An investment in the shares of Common Stock being offered by this
Prospectus involves a high degree of risk. In addition, this Prospectus and the
Company's reports under the Securities Exchange Act of 1934, as amended,
incorporated herein by reference (the "Incorporated Documents") contain forward-
looking statements that involve risks and uncertainties. Discussions containing
such forward-looking statements may be found under "Risk Factors," as well as in
this Prospectus and the Incorporated Documents generally. The Company's actual
results could differ materially from those anticipated in these forward-looking
statements as a result of certain factors, including those set forth in the
following risk factors and elsewhere in this Prospectus and the Incorporated
Documents. Accordingly, prospective investors should consider carefully the
following Risk Factors, in addition to the other information concerning the
Company and its business contained in this Prospectus and in the Incorporated
Documents, before purchasing the shares of Common Stock offered hereby.
HISTORY OF LOSSES; WORKING CAPITAL DEFICITS; CONTINUING CHARGES
Before reporting net income of $2.1 million (including $4.2 million of merger
costs and related tax provisions incurred as a result of acquisitions) in the
year ended June 30, 1997, the Company recorded net losses to common stockholders
of approximately $4.4 million (including $2.8 million in unusual items
principally related to the Company's June 1996 change of control) and $55,000,
during the fiscal years ended June 30, 1996 and 1995, respectively.
Additionally, the Company had working capital deficits of $852,000 and $1.9
million at June 30, 1997 and 1996, respectively. In connection with the
financing of its acquisitions and business growth, the Company has incurred, and
anticipates that it will continue to incur, significant debt and interest
charges under its revolving credit facility. In addition, the Company will
continue to recognize a significant amount of goodwill amortization charges in
connection with its acquisitions of collection and transportation businesses and
transfer stations that are accounted for under the "purchase" method of
accounting. Such goodwill is amortized over a period of 40 years depending on
the business acquired, resulting in an annual non-cash charge to earnings during
that period. As the Company continues to pursue its acquisition program, its
financial position and results of operations may fluctuate significantly from
period to period.
LIMITED OPERATING HISTORY IN REGARD TO SIGNIFICANT ASSETS
In June 1996, control of the Company was acquired by a group of investors, and
the Company appointed a new Board of Directors, hired a new management team, and
implemented an aggressive acquisition program. As a result, recently completed
acquisitions account for a substantial portion of the Company's revenues and
assets. Acquisitions completed during fiscal 1997, for example, contributed
approximately $73 million or 91.6% of the Company's revenues for the fiscal year
ended June 30, 1997 and approximately $136 million or 84.4% of the Company's
assets at June 30, 1997. Because of the Company's relatively limited operating
history with respect to acquired businesses, no assurances can be given that the
Company will be able to replicate or improve upon their historical financial
performance.
ABILITY TO MANAGE GROWTH
The Company's strategy of growing primarily through acquisitions has placed,
and is expected to continue to place, significant burdens on the Company's
management and on its operational and other resources. The Company will need to
attract, train, motivate, retain, and supervise its senior managers, technical
-4-
<PAGE>
professionals and other employees. Any failure to expand its management
information system capabilities, to implement and improve its operational and
financial systems and controls or to recruit appropriate additional personnel in
an efficient manner and at a pace consistent with the Company's business growth
could have a material adverse effect on the Company's business and results of
operations.
DEPENDENCE ON ACQUISITIONS FOR GROWTH
The rate of future growth and profitability of the Company is largely
dependent on its ability to identify and acquire additional solid waste
collection, transportation, and disposal businesses. This strategy involves
risks inherent in assessing the values, strengths, weaknesses, risks, and
profitability of acquisition candidates, including adverse short-term effects on
the Company's reported operating results, diversion of management's attention,
dependence on retaining, hiring and training key personnel, and risks associated
with unanticipated problems or latent liabilities. There can be no assurance
that acquisition opportunities will be available, that the Company will have
access to the capital required to finance potential acquisitions, that the
Company will continue to acquire businesses or that any business acquired by the
Company will be integrated successfully into the Company's operations or prove
profitable.
AVAILABILITY OF ACQUISITION TARGETS
Increased competition for acquisition candidates may result in fewer
acquisition opportunities being made available to the Company as well as less
advantageous acquisition terms which may increase acquisition costs to levels
that are beyond the Company's financial capability or that may have an adverse
effect on the Company's business and results of operations. Accordingly, no
assurance can be given as to the number or timing of the Company's acquisitions
or as to the availability of financing necessary to complete an acquisition. The
Company also believes that a significant factor in its ability to consummate
acquisitions following the Offering will be the attractiveness of the Common
Stock as an investment to potential acquisition candidates. Such attractiveness
may, in large part, be dependent upon the market price and capital appreciation
prospects of the Common Stock compared to the equity securities of the Company's
competitors. Many of the Company's competitors for acquisitions are larger, more
established companies with significantly greater capital resources than the
Company and whose equity securities may be more attractive than the Common
Stock. To the extent the Common Stock is less attractive to acquisition
candidates, the Company's acquisition program may be adversely affected.
ABILITY TO INTEGRATE ACQUIRED BUSINESSES AND ACHIEVE OPERATING EFFICIENCIES
The Company is in the process of combining the businesses and assets that it
has acquired since July 1996 into an integrated operating structure. This
process may require, among other things, changes in the operating methods and
strategies of these separate businesses. The future growth and profitability of
the Company will be substantially dependent upon its ability to operate recently
acquired companies, as well as additional businesses that may be acquired in the
future, and integrate them in the Company's operations. The Company's strategy
is to achieve economies of scale and operating efficiencies through increases in
its size resulting from acquisitions. There can be no assurance that the
Company's efforts to integrate acquired operations will be effective or that
expected efficiencies and economies of scale will be realized. The failure to
achieve any of these results could have a material adverse effect on the
Company's business and results of operations.
POTENTIAL LIABILITIES ASSOCIATED WITH ACQUISITIONS
The businesses acquired by the Company may have liabilities that the Company
does not discover or may be unable to discover during its pre-acquisition
investigations, including liabilities arising from environmental contamination
or non-compliance by prior owners with environmental laws or regulatory
requirements, and for which the Company, as a successor owner or operator, may
be responsible. Certain environmental liabilities, even if expressly not assumed
by the Company, may nonetheless be imposed on the Company under certain legal
-5-
<PAGE>
theories of successor liability, including the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended. The businesses
acquired by the Company handled and stored petroleum, motor oil, and other
hazardous substances at their facilities. In the past, there may have been
releases of these hazardous substances into the soil or groundwater. The Company
may be required under federal, state, or local law to investigate and remediate
this contamination, if any. Any indemnities or warranties, due to their limited
scope, amount, duration, the financial limitations of the indemnitor or
warrantor, or other reasons, may not fully cover such liabilities.
NEED FOR ADDITIONAL CAPITAL; POTENTIAL DILUTION
The Company's acquisition program required a steady increase in capital, which
is expected to continue in the future as the Company pursues its strategy. The
Company has used with respect to completed acquisitions and intends to use with
respect to future acquisitions a combination of Common Stock, cash, and the
assumption of debt as consideration. The Company anticipates filing a
registration statement covering 5 million shares of Common Stock for possible
issuance in connection with acquisitions. In the event the Company issues Common
Stock to make future acquisitions, the Company's stockholders may experience
dilution in the net tangible book value per share of Common Stock and a regular
infusion of additional Common Stock into the capital markets. To the extent the
Company is unable to use Common Stock to make future acquisitions, its ability
to grow may be adversely affected. The Company's capital requirements also
include working capital needs to maintain daily operations and significant
capital expenditures for cell construction and expansion of its landfills,
closure and post-closure care costs associated with its landfills, equipment
purchases, and debt repayment obligations and/or financial assurance
obligations. To the extent that cash available under the Company's credit
facility and internally generated cash are not sufficient to meet the Company's
capital needs, the Company will be required to raise additional funds through
significant additional equity and/or debt financing. No assurance can be given
that additional funding will be available on terms favorable to the Company.
DEPENDENCE ON KEY PERSONNEL
In June 1996, the Company appointed a new Board of Directors and hired a new
management team. The Company's operations are substantially dependent upon the
services of its executive officers, particularly Louis D. Paolino, Jr., the
Chairman of the Board and Chief Executive Officer, and President of the Company,
and Terry W. Patrick the Chief Operating Officer and an Executive Vice-President
of the Company. The loss of the services of Mr. Paolino or Mr. Patrick or one or
more of the other executive officers of the Company could have a material
adverse effect on the Company's business and results of operations. The Company
does not maintain key-man life insurance policies on its executive officers.
DEPENDENCE ON THIRD PARTY LANDFILLS
A substantial portion of the solid waste collected by the Company is delivered
to third party landfills under informal arrangements or without long-term
contracts. If these third parties increase their disposal fees and the Company
is unable to pass along the increase to its customers, or if these third
parties discontinue their arrangements with the Company and the Company is
unable to locate alternative disposal sites, the Company's business and results
of operations would be materially adversely affected.
EXTENSIVE PERMITTING AND LICENSING REQUIREMENTS
The Company is required to obtain and maintain in effect various federal,
state, and local permits and licenses in connection with its solid waste
collection and transportation operations. The Company is also required to obtain
and maintain in effect various facility permits and other governmental
approvals, including those related to zoning, environmental, and land use, in
order to develop and operate a landfill, a transfer station, or a waste hauling
operation, and is required to obtain additional permits and approvals to expand
its existing landfill operations. These permits and approvals are difficult,
time consuming, and costly to obtain, may be subject to community opposition,
opposition by various local elected officials or citizens, regulatory delays and
other uncertainties, and may be dependent upon the Company's facilities being
included in state or local solid waste management plans and the Company's
entering into satisfactory host agreements with local communities. In addition,
-6-
<PAGE>
operating permits may be subject to modification, renewal, or revocation by the
issuing agencies after issuance, which may increase the Company's obligations
and reopen opportunities for opposition relating to the permits. Moreover, from
time to time, regulatory agencies may impose moratoria on, or otherwise delay,
the review or granting of these permits or approvals or such agencies may modify
the procedures or increase the stringency of the standards applicable to the
review or granting of such permits or approvals.
There can be no assurance that the Company will be successful in obtaining and
maintaining in effect the permits and approvals required for the successful
operation and growth of its business, including permits and approvals required
for the development of additional disposal capacity needed to replace existing
capacity that becomes exhausted. The failure of the Company to obtain or
maintain in effect a permit or approval significant to its business would have a
material adverse effect on the Company's business and results of operations.
POTENTIAL PENNSYLVANIA LANDFILL RESTRICTIONS
The Company's Pennsylvania landfill operation, acquired by the Company in
December 1996, has been in existence since 1972. From 1972 to 1988, the 110-acre
area of the landfill which received waste or was authorized by state permits to
receive waste had either received all necessary local zoning approvals or was
not required by local ordinance to receive a zoning permit or other approval to
operate. In 1988, the Company received a state expansion permit for a 32-acre
lined expansion area increasing the size of the permitted disposal area to 142
acres as well as a conditional use zoning approval from the local township.
However, in 1990, the township adopted a new zoning ordinance which
limited the height of municipal waste landfills to 35 feet above the original
land contour. The landfill, as permitted in 1988 and as currently designed and
permitted, exceeds the height limit in certain areas. The Company has
maintained that the current permitted area is an existing nonconforming use and
is not subject to the 35 foot height limitation imposed by the 1990 ordinance.
If the township seeks to impose this limitation, and is successful,
the existing permitted capacity of the Company's Pennsylvania landfill would be
materially reduced.
KENTUCKY LANDFILL OBLIGATIONS
The Company ceased operations at its Kentucky landfill on June 30, 1995
because the existing permitted disposal area did not meet current state law
design requirements. From June 30, 1995 to June 30, 1996, the Company operated a
transfer station at the landfill site and disposed of waste at an alternate
location. The Company simultaneously pursued a final state permit for an
expansion area designed to meet the new state standards. The suspension of
landfill operations and the diversion of waste to an alternate location had an
adverse effect on the Company's operating results and the Company discontinued
its transfer station operation on July 1, 1996. On July 1, 1997, the Company
recommenced operation of its transfer station to fulfill the obligations of the
disposal franchise until the Company's expansion area is completed. The Company
received a final permit to construct its expansion area on October 14, 1996
(reissued February 26, 1997). The final permit issued for the Kentucky landfill
expansion area incorporated the requirements contained in an October 8, 1996
Agreed Order which settled an administrative appeal filed by the Somerset
Pulaski County Concerned Citizens Group. Prior to actual construction of the
expansion area, the Company is required to complete an additional hydrogeologic
investigation to confirm the adequacy of the groundwater monitoring program
approved in the final permit. Any negative results of this investigation could
have a material adverse effect on the permitted disposal capacity at the
Kentucky landfill expansion area and cause a delay in reopening the landfill.
The final permit issued for the Kentucky landfill expansion area also requires
closure of the original disposal area, which ceased operations on June 30, 1995,
by August 15, 1997. The Company has commenced closure of the area. The Company
has received a notice of violation and an $80,000 fine for not completing
closure by the required date. The violation could result in the assessment of
penalties and/or a forfeiture of the existing $1.3 million payment bond posted
by the Company to assure a proper closure of this area.
The Company has entered into an exclusive waste disposal franchise agreement
with Pulaski County, Kentucky to service the municipal waste needs of the county
at the Company's Kentucky landfill through the year 2002. The Company's
obligations under this franchise agreement were suspended on July 1, 1996 for a
one-year period ending July 1, 1997 due to the Company's cessation of
operations at the original permit area and delay in initiating operations at the
expansion area.
-7-
<PAGE>
GOVERNMENT REGULATION
The Company is subject to extensive and evolving federal, state, and local
environmental laws and regulations that have become increasingly stringent in
recent years as a result of greater public interest in protecting the
environment. These laws and regulations affect the Company's business in many
ways and will continue to impose substantial costs on the Company.
The design, operation, and closure of landfills is extensively regulated.
These regulations include, among others, the regulations establishing minimum
federal requirements adopted by the United States Environmental Protection
Agency (the "EPA") in October 1991 under Subtitle D (the "Subtitle D
Regulations") of the Resource Conservation and Recovery Act of 1976 ("RCRA").
The Subtitle D Regulations, which generally became effective in October 1993,
include location restrictions, facility design standards, operating criteria,
closure and post-closure requirements, financial assurance requirements,
groundwater monitoring requirements, groundwater remediation standards, and
corrective action requirements. In addition, the Subtitle D Regulations require
that new landfill units meet more stringent liner design criteria (typically,
composite soil and synthetic liners or two or more synthetic liners) designed to
keep leachate out of groundwater and have extensive collection systems to
collect leachate for treatment prior to disposal. Groundwater monitoring wells
must also be installed at virtually all landfills to monitor groundwater quality
and, indirectly, the effectiveness of the leachate collection system operation.
The Subtitle D Regulations also require, where threshold test levels are
present, that methane gas generated at landfills be controlled in a manner that
protects human health and the environment. Each state is required to revise its
landfill regulations to meet these requirements or such requirements will be
automatically imposed upon it by the EPA. Each state is also required to adopt
and implement a permit program or other appropriate system to ensure that
landfills within the state comply with Subtitle D Regulation criteria. Most
states have adopted extensive landfill regulations that have been updated or
replaced with new regulations consistent with, or more stringent than, the
Subtitle D Regulations. Failure to comply with these regulations could require
the Company to undertake investigatory or remedial activities, to curtail or
modify operations, or to close a landfill temporarily or permanently. Future
changes in federal or state regulations may require the Company to modify,
supplement, or replace equipment or facilities at costs that may be substantial.
The failure of regulatory agencies to enforce these regulations vigorously or
consistently may give an advantage to competitors of the Company whose
facilities do not comply with the Subtitle D Regulations or its state
counterparts. The Company's ultimate financial obligations related to any
failure to comply with these regulations could have a material adverse effect on
the Company's business and results of operations.
The Company is also regulated under the Federal Water Pollution Control Act of
1972 (the "Clean Water Act"), and the Clean Air Act, as amended in 1990 (the
"Clean Air Act"). The Clean Water Act regulates the discharge of pollutants from
a variety of sources, including landfills, into streams or other surface waters.
If runoff or collected leachate from the Company's landfills or transfer
stations is discharged into surface waters, the Clean Water Act would require
the Company to apply for and obtain a discharge permit, conduct sampling and
monitoring and, under certain circumstances, reduce the quantity of pollutants
in such discharge. Also, virtually all landfills are required to comply with
federal storm water regulations issued in November 1990, which are designed to
prevent contaminated landfill storm water runoff from flowing into surface
waters. The Clean Air Act, including the 1990 amendments, provides for federal,
state, and local regulation of emissions of air pollutants into the atmosphere,
including emissions resulting from landfill operations. The EPA recently
promulgated new standards regulating air emissions of certain regulated
pollutants from municipal solid waste landfills. These standards, combined with
the new permitting programs established under the 1990 Clean Air Act amendments,
likely will subject many of the Company's landfills to new permitting
requirements and may require the installation of gas recovery systems. The EPA
has recently promulgated new standards regulating air emissions of certain
regulated pollutants (methane and non-methane organic compounds) from municipal
solid waste landfills. Landfills located in areas with air pollution problems
may be subject to even more extensive air pollution controls and emissions
limitations. The EPA and the states in which the Company operated also have
adopted regulations under Title V of the Clean Air Act requiring permits for
certain disposal facilities. The Company's continued compliance with these
existing and future regulations may impose a significant expense upon the
Company which could have a material adverse effect on the Company's business and
results of operations.
The Occupational Safety and Health Act of 1970, as amended ("OSHA"),
authorizes the Occupational Safety and Health Administration to promulgate
occupational safety and health standards. Various of those promulgated
standards, including standards for notices of hazards, safety in excavation and
the handling of asbestos, may apply to certain of the Company's operations. OSHA
regulations set forth requirements for the training of employees handling, or
who may be exposed in the work place to, concentrations of asbestos-containing
materials that exceed specified action levels. The OSHA regulations also set
standards for employee protection, including medical surveillance, the use of
respirators, protective clothing and decontamination units, during asbestos
demolition, removal, or encapsulation as well as its storage, transportation,
and disposal. In addition, OSHA specifies a maximum permissable exposure level
for airborne asbestos in the workplace. The Company has no direct involvement is
asbestos removal or abatement projects. However, asbestos-containing waste
materials are accepted at certain of the Company's landfills that are authorized
to accept such materials, and some of the Company's coolection businesses
receive asbestos-containing waste materials which have already been packaged and
labeled. These packages are loaded onto the Company's vehicles by employees of
the asbestos abatement contractors for transportation to and disposal at the
Company's authorized landfills. Accordingly, OSHA regulations designed to
minimize employees' exposure to airborne asbestos fibers and provide employees
with proper training and protection generally apply to the Company's operations
in the transportation, handling, and disposal of the asbestos waste.
In addition, most states and municipalities in which the Company operates or
may operate have adopted laws or requirements which limit or ban certain
categories of waste or mandate the disposal or recycling of local refuse. These
recycling laws and requirements have the effect of reducing landfill disposal
tonnage. Additionally, certain permits and approvals, as well as state and local
regulations, may seek to limit a landfill to accepting waste that originates
from specified geographic areas or seek to restrict the importation of out-of-
state waste. Generally, such legislative or regulatory restrictions have not
withstood judicial challenges. However, from time to time, federal legislation
is proposed which would allow individual states to prohibit the disposal of out-
of-state waste or to limit the amount that could be imported for disposal. This
legislation would also authorize in certain instances local governmental units
-8-
<PAGE>
to mandate the flow of waste to certain designated facilities or impose other
flow control restrictions. Although, to date, no such federal legislation has
been enacted, if such federal legislation should be enacted in the future,
states in which the Company operates landfills could act to limit or prohibit
the importation of out-of-state waste or require the Company's collection
operations to utilize certain designated sites. Such federal or state actions
could have an adverse effect on the Company's landfills that receive a
significant portion of waste originating from other states and on the Company's
collection operations. Further, restrictions on out-of-state waste could result
in higher disposal costs for the Company's collection operations. If the Company
were unable to pass such higher costs through to its customers, the Company's
business and results of operations could be adversely affected.
Each state in which the Company currently operates, or may operate in the
future, also has laws and regulations governing the generation, storage,
treatment, handling, transportation, and disposal of solid waste, water and air
pollution and, in most cases, the siting, design, operation, maintenance,
closure and post-closure maintenance of landfills and other solid waste
management facilities. Many states also have programs that require investigation
and clean up of sites containing hazardous materials in a manner comparable to
or more stringent than CERCLA. These statutes impose requirements for
investigation and cleanup of contaminated sites and liability for costs and
damages associated with such sites. Some of the state laws provide for the
imposition of liens on property owned by responsible parties. Many
municipalities also have ordinances, local laws, and regulations affecting the
Company's operations. These include zoning and health measures that limit solid
waste management activities to specified sites or activities.
REGULATION BY NEW YORK CITY TRADE WASTE COMMISSION
In 1996, the New York City Council enacted Local Law 42 ("Local Law 42") in
order to control the corrupting influence of organized crime on the waste
hauling industry. Local Law 42 created the Trade Waste Commission (the "TWC")
and established rules for licensing and regulating the operations of the
commercial and industrial waste industry in New York City. The law prohibits the
collection, disposal, or transfer of commercial and industrial waste without a
license issued by the TWC and requires TWC approval of all acquisitions or other
business combinations proposed by all licensees. Each acquisition, sale, or
merger transaction generally must be submitted for review by the TWC 30 days
before the transaction takes effect, although the amount of time required for
review depends on the complexity of the transaction and the need to investigate
the background of the principals involved. One of the Company's subsidiaries has
received a license from the TWC which enables it to conduct New York City
collections operations. The license, as all TWC licenses, has a term of two
years. The TWC also sets maximum rates for the industry and establishes
operational requirements. In May 1997, the TWC lowered the maximum collection
rates that may be charged by licensed companies. The Company's New York City
collection operations are subject to Local Law 42, which could preclude or
materially impact the Company's operations in this region, the time and cost of
completing future acquisitions in this region, and the rates which may be
charged for collection services.
PUBLIC UTILITY REGULATION
The rates that the Company may charge at its West Virginia landfill for the
disposal of municipal solid waste are regulated by the West Virginia Public
Service Commisssion ("PSC"). Effective June 30, 1994, the Company received
authorization from the PSC based on a revised tariff to increase its municipal
waste disposal rate from $22.50 per tom to $28.25 per ton (net of taxes) upon
receipt of waste on its composite lined disposal area. Pursuant to this same
tariff, the rate for municipal solid waste disposal may be increased to $38.93
per ton. The adoption of rate regulation in other states in which the Company
owns landfills could have an adverse effect on the Company's business and
results of operations.
POSSIBLE SOUTH CAROLINA REGULATION
In 1996, the South Carolina Department of Health and Environmental Control
proposed new regulations governing industrial waste landfills. If passed in
proposed form, these regulations would impose additional operating, reporting,
record-keeping requirements and new closure, post-closure and design
requirements on the Company's South Carolina landfill. To operate after the
effective date of the proposed regulations, the Company may need to upgrade the
landfill's design. The type of upgrades required would depend on the types of
industrial waste the Company would choose to accept for disposal. If the Company
would continue to accept the limited classes of waste it currently accepts at
its South Carolina landfill (referred to in the proposed regulations as "Class
1" wastes), the Company would only need to design and install a ground water
monitoring system. If the Company were to accept a broader class of industrial
wastes (referred to as "Class 2" or "Class 3" wastes), it would need to install
a clay liner ("Class 2"), or a clay and synthetic liner ("Class 3") including
a leachate collection system. If the regulations are finalized in substantially
the form proposed, the Company will determine the projected costs and benefit of
being able to accept Class 1, Class 2, or Class 3 wastes, and choose the
appropriate design for the facility, which may include separate disposal areas
for separate classes of wastes. These regulations are only in draft form, and
final regulations expected to become effective in 1997 may have additional or
substantially different requirements that could have a material adverse effect
on the Company's business and results of operations.
POSSIBLE LEGAL ACTION
Companies in the solid waste management business, including the Company, are
frequently subject in the normal course of business to judicial and
administrative proceedings involving federal, state, or local agencies or
citizen groups. These governmental agencies may seek to impose fines or
penalties on the Company or to revoke or deny renewal of the Company's operating
permits or licenses for violations or alleged violations of environmental laws
or regulations or require that the Company make expenditures to remediate
potential environmental problems relating to waste disposed of or stored by the
Company or its predecessors, or resulting from its or its predecessors'
transportation and collection operations. Any adverse outcome in these
proceedings could have an adverse effect on the Company's business and results
of operations and may subject the Company to adverse publicity. The Company may
also be subject to actions brought by local governments, individuals, or
community groups in connection with the permitting or licensing of its
operations, any alleged violation of such permits or licenses, or other matters.
POTENTIAL ENVIRONMENTAL LIABILITY
GENERAL. The Company is subject to liability for any environmental damage
that its solid waste facilities may cause to neighboring landowners,
particularly as a result of the contamination of drinking water sources or soil,
including damage resulting from the conditions existing prior to the acquisition
of such facilities by the Company. The Company also may be subject to liability
from any off-site environmental contamination caused by pollutants or hazardous
substances whose transportation, treatment, or disposal was arranged by the
Company or its predecessors. Any substantial liability for environmental damage
incurred by the Company could have a material adverse effect on the Company's
business and results of operations.
CERCLA imposes strict, joint, and several liability on the present owners and
operators of facilities from which a release of hazardous substances into the
environment has occurred, as well as any party that owned or operated the
facility at the time of disposal of the hazardous substances regardless of when
-9-
<PAGE>
the hazardous substance was first detected. Similar liability is imposed upon
the generators of waste that contains hazardous substances and hazardous
substance transporters that select the treatment, storage, or disposal site. All
such persons, who are referred to as potentially responsible parties ("PRPs"),
generally are jointly and severally liable for the expense of investigation,
cleanup, and natural resource damages relating to environmental contamination,
regardless of whether they exercised due care and complied with all relevant
laws and regulations. These costs can be substantial. Liability can be based
upon the existence of even very small amounts of the more than 700 "hazardous
substances" listed by the EPA and is not limited to the disposal of "hazardous
wastes," as statutorily defined. It is likely that hazardous substances have in
the past come to be located in landfills which the Company has been associated
as an owner or operator or as a result of its solid waste collection operations.
Moreover, the Company's solid waste collection operations may have transported
hazardous substances in the past and may do so on occasion in the future.
The National Emission Standards for Hazardous Air Pollutants ("NESHAPs")
regulate the collection, packaging, transportation, and disposal of asbestos-
containing material. NESHAPs regulate visible emissions of asbestos fibers to
outside air and require emissions controls and appropriate work practices.
Asbestos is listed as a hazardous substance under CERCLA. A few states have
classified asbestos as hazardous waste and require appropriate handling and
disposal practices. The Company transports and disposes of asbestos-containing
materials. There can be no assurance that the Company will not face claims
resulting from environmental liabilities relating to these and other materials
in its solid waste management operations.
PENNSYLVANIA LANDFILL. Prior to 1990, the Company's Pennsylvania landfill
disposed of municipal solid waste in an unlined disposal area. This unlined area
was operated by the former owner and has caused localized groundwater
contamination. As a condition to a recent permit modification, the Company has
agreed to remove all waste from unlined areas to remove the source of
contamination and relocate the waste to a Subtitle D approved disposal area at
the landfill. For the period of trash relocation, the Company will operate a
groundwater removal and treatment system which has received a permit for the
associated surface water discharge. Relocation of trash began in April 1997, is
coordinated with new pad construction, and is scheduled to be completed in
fiscal year 2008. At June 30, 1997, the Company had accrued approximately $4.0
million for such relocation and removal costs. An additional condition of the
permit modification requires groundwater monitoring of five private water supply
wells off-site. Low levels of volatile organic compounds have been detected in
two of these private water supply wells. The Company has not established a
specific financial reserve for potential costs relating to this remediation or
any additional potential liabilities associated with this contamination. The
Company currently believes that ultimate resolution of these matters should not
have a material adverse effect on the Company's business or results of
operations. However, there can be no assurance that the Company's ultimate
financial obligations related to these matters will not have a material adverse
effect on the Company's business and results of operations.
KENTUCKY LANDFILL. The permit issued for the Company's Kentucky landfill
approved corrective action measures to abate a ground water discharge containing
vinyl chloride at an off-site spring. The corrective action requires the
installation of three vertical gas wells. This corrective action has been
completed by the Company and the Company is monitoring the spring on a quarterly
basis. The planned development of the expansion area is currently expected to
begin in the spring of 1998. The initial capital costs required to meet the new
state requirements are anticipated to be approximately $3.3 million. On December
30, 1994, the Company received a notice of intent to sue from a neighbor of the
Kentucky landfill for an alleged unauthorized discharge of hazardous substances
resulting in damage to the neighboring property. No lawsuit has been initiated.
The Company believes any lawsuit by this neighboring landowner would lack merit
and vigorously would defend such a lawsuit. The Company currently believes that
ultimate resolution of these matters should not have a material adverse effect
on the Company's business or results of operations. However, there can be no
assurance that the Company's ultimate financial obligations related to these
matters will not have a material adverse effect on the Company's business and
results of operations.
ILLINOIS LANDFILL. The Company has received all required permits to construct
the new Illinois landfill, but delayed such construction until a closure permit
for an adjacent unlined landfill
-10-
<PAGE>
was issued, which occurred on July 17, 1997. The Company currently anticipates
commencement of construction of the new landfill in the fall of 1997 and
commencement of operations in the spring of 1998 upon issuance of an operating
permit. The Company estimates that the cost of construction of the initial
landfill area will be $1.7 million.
Although the Company is not the owner or operator of the adjacent unlined
landfill and therefore disclaims financial responsibility for its closure and
any other potential liability associated therewith, the Company has contracted
with the owner to facilitate and partially fund closure. As part of the
Company's Landfill Management Agreement to operate the Illinois landfill, the
Company agreed to contribute up to a maximum of $365,000 towards closure of the
adjacent unlined landfill. In addition, the Company has entered into an
agreement with a surety providing financial assurance for the closure and post-
closure care requirements for the adjacent unlined landfill pursuant to which
the Company agreed to indemnify the surety in the amount of $646,000 in the
event the owner of the adjacent landfill defaults on its closure and/or post-
closure care obligations. The Company believes that the ultimate resolution of
this matter should not have a material adverse effect on its business and
results of operations. However, there can be no assurance that the Company's
ultimate financial obligations related to these matters, including a significant
delay in commencement of operations of the new landfill area, will not have a
material adverse effect on the Company's business and results of operations.
WEST VIRGINIA LANDFILL. The Company has been advised by the State regulatory
agency that the Company's West Virginia landfill is in violation of regulatory
requirements and its permit relating to stabilization of a slope area and
closure of a portion of the landfill. The State regulatory agency has not issued
a formal notice of violation. The Company submitted a schedule on July 1, 1997
for a phased closure which the Company believes is in compliance with and will
submit a slope stabilization plan by October 1, 1997. Although the State could
assess penalties and/or cause a forfeiture of the Company's closure bond, the
Company believes that such activities are unlikely. While no assurance can be
given, the Company believes that the ultimate resolution of this matter will not
have a material adverse effect on the Company's business or results of
operations.
MARYLAND LANDFILL. Lead has been detected in a few of the site groundwater
monitoring wells of the Maryland landfill. The Company and the State regulatory
agency have agreed on an action plan to identify potential sources of lead
detected above action levels in a few of the sites' groundwater monitoring wells
at the Maryland rubble landfill which involves continued well monitoring. The
Company has agreed to prepare a contingency plan to identify what actions need
to be taken, if after four quarters of monitoring, the regulatory authority
determines that the landfill is contaminating the groundwater with lead. The
Company believes that the ultimate resolution of this matter will not have a
material adverse effect on the Company's business or results of operations.
However, there can be no assurance that the Company's ultimate financial
obligations related to this matter will not have a material adverse effect on
the Company's business and results of operations.
SUPERFUND LIABILITY. One of the Company's solid waste collection
subsidiaries, is a defendant, along with approximately 350 other defendants, in
a private cost recovery action under various state statutory and common law
theories for allegedly sending waste to a landfill now undergoing a remedial
clean-up. The suit seeks reimbursement of an unspecified amount for soil and
groundwater remediation. The case is in the early stages of discovery and
neither the total potential remediation costs nor the Company's allocable share
of liability has been quantified. Based on information available to the Company,
the subsidiary did not contribute a significant proportion of the waste to the
site and any waste that was transported by the subsidiary to the site appears to
have been construction and demolition waste and municipal solid waste. To date,
one of the Company's insurance carriers has agreed to provide defense up to the
policy limits of $70,000, which the Company expects will be sufficient to cover
its liability, and four other carriers are expected to be placed on notice.
Given the limited quantities of waste potentially transported to the landfill,
the nature of the waste sent to the site, the availability of insurance
-11-
<PAGE>
coverage, and other potential defenses, the resolution of the action should not
have a material adverse effect on the Company's business and results of
operations. No assurance can be given, however, that the Company's ultimate
financial obligations related to this matter will not have a material adverse
effect on the Company's business and results of operations.
The same subsidiary is also a party to a Superfund litigation, which has been
settled by substantially all of the defendants. The Company is being defended in
this action by one of its insurance carriers, which did not accept a $13,000
settlement offer. Because the settlement offer was not accepted, the Company
could be subject to claims for any deficiency between the amount contributed by
all settling parties and the actual costs of remediating the site. While the
Company has no reason to believe that any such claims will be asserted and no
meaningful basis to estimate the amount of such claims, no assurances can be
given that they would not be brought or that the amount claimed would not be
substantial. Were any such claim to be asserted, the Company would expect to
vigorously assert all available defenses and believes that its liability, if
any, would either be covered by insurance or, under applicable law, the
responsibility of the carrier because of its failure to accept settlement.
However, no assurances can be given that insurance proceeds would cover the
entire amount of the claim or that the Company would prevail in any action
against the carrier. Accordingly, there can be no assurance that the Company's
ultimate financial obligations related to this matter will not have a material
adverse effect on the Company's business and results of operations.
POTENTIAL INADEQUACY OF ACCRUALS FOR CLOSURE AND POST-CLOSURE COSTS
The Company has material financial obligations relating to closure and post-
closure costs of the landfills it operates. While the precise amounts of these
future obligations cannot be determined, at June 30, 1997 the Company estimated
the total costs (on a current dollar as opposed to a discounted present value
basis) to be approximately $13.6 million for final closure of its landfills, of
which $3.2 million has been accrued as of June 30, 1997. The Company makes an
accrual for these costs based on consumed airspace in relation to Management's
estimate of total available airspace of the landfills. Post-closure monitoring
costs pursuant to applicable regulations (generally for a term of 30 to 40 years
after final closure) are estimated at $7.5 million. At June 30, 1997, the
Company had accrued $1.5 million for such projected post-closure costs. The
Company will provide additional accruals based on engineering estimates of
consumption of permitted landfill airspace over the useful lives of its
landfills. There can be no assurance that the Company's ultimate financial
obligations for actual closing or post-closing costs will not exceed the amount
then accrued and reserved or amounts otherwise receivable pursuant to insurance
policies or trust funds. Such a circumstance could have a material adverse
effect on the Company's business and results of operations.
ABILITY TO MEET BONDING REQUIREMENTS
The Company is required to post a form of financial assurance at its landfills
to ensure proper closure and post-closure monitoring and maintenance.
Additionally, some of the Company's collection and transportation contracts
require performance and payment bonds to guarantee project completion and
certain states may require collateral bonds to secure compliance with hazardous
waste transportation requirements. The Company's ability to meet these bonding
requirements is contingent upon the Company's performance record and
creditworthiness. Any inability by the Company to maintain bonding capacity or a
sizable increase in payment could have a material adverse impact on the
Company's business and results of operations.
LIMITS ON INSURANCE COVERAGE
The Company carries insurance covering its assets and operations, including
pollution liability coverage. Specifically, each of the Company's landfills has
pollution liability coverage of $5.0 million per occurrence or $5.0 million in
the aggregate subject to a $500,000 deductible per occurrence. Nevertheless,
there can be no assurance that the Company's insurance will provide sufficient
coverage in the event an environmental claim is made against the Company or that
the Company will be able to maintain in place such insurance at reasonable
costs. An uninsured or underinsured claim against the Company of sufficient
magnitude could have a material adverse effect on the Company's business and
results of operations. The Company also is subject to the risk of claims by
employees and others made after the expiration of the policy coverage period,
including asbestos-related illnesses (such as asbestosis, lung cancer,
mesothelioma, and other cancers), which may not become apparent until many years
after exposure. From May 15, 1985 through April 28, 1988, the Company carried
claims-made general liability coverage. Any claims presented on the basis of
-12-
<PAGE>
exposure during that period may not be covered by insurance and any liability
resulting therefrom could, consequently, have an adverse effect on the Company's
business and results of operations.
WASTE REDUCTION PROGRAMS
Alternatives to landfill disposal, such as recycling, incineration, and
composting, are increasingly being used. There also has been an increasing trend
at the state and local levels to mandate recycling and waste reduction at the
source and to prohibit the disposal of certain types of wastes at landfills.
Many states (including states in which the Company operates) have enacted laws
that require counties to adopt comprehensive plans to reduce the volume of solid
waste deposited in landfills through waste planning, composting, recycling, or
other programs. Some states (including Florida, Illinois, Kentucky, Maryland,
Pennsylvania, South Carolina, and West Virginia) have adopted legislation that
prohibits the disposal of yard waste, tires, and other items in landfills. These
developments could result in a reduction in the volume of waste destined for
landfills in certain areas, which may affect the Company's ability to operate
its landfills at their full capacity and/or affect the prices that can be
charged for landfill disposal services. Such effects could have a material
adverse effect on the Company's business and results of operations.
COMPETITION
The solid waste management industry is highly competitive and the Company
believes that industry consolidation will increase competitive pressures. The
Company competes with several large national waste management companies,
including Waste Management, Inc. (formerly WMX Technologies, Inc.), Browning-
Ferris Industries, Inc., U.S.A. Waste Services, Inc., and Allied Waste
Industries, Inc. A number of these competitors have significantly greater
financial, technical, marketing, and other resources than the Company. The
Company also competes with numerous well-established smaller, local, or regional
firms, some of which have accumulated substantial goodwill. In addition,
municipalities that operate their own waste collection and disposal facilities
often enjoy the benefits of tax-exempt financing and may control the disposal of
waste collected within their jurisdictions. Increased competition from these
companies or municipalities could have a material adverse effect on the
Company's business and results of operations.
The Company provides residential collection services under municipal contracts
with terms ranging between one to five years. As is customary in the waste
management industry, such contracts come up for competitive bidding periodically
and there is no assurance that the Company will be the successful bidder and
will be able to retain such contracts. If the Company is unable to replace any
contract lost through the competitive bidding process with a comparable contract
within a reasonable time period or to use any surplus equipment in other service
areas, the Company's business and results of operations could be adversely
affected.
SEASONALITY; ECONOMIC CONDITIONS
The Company's revenues tend to be somewhat lower in the winter months. This is
primarily attributable to the fact that (i) the volume of waste relating to
construction and demolition activities tends to increase in the spring and
summer months and (ii) the volume of industrial and residential waste in the
regions in which the Company operates tends to decrease during the winter
months. In addition, particularly harsh weather conditions may affect the
Company's operations by interfering with collection, transportation, and
disposal operations, delaying the development of landfill capacity, and/or
reducing the volume of waste generated by the Company's customers which could
have a material adverse effect on the Company's business and results of
operations.
The Company's business is affected by general economic conditions, both
nationally and in the geographic regions in which the Company's operations are
currently located. There can be no assurance that a national or local economic
downturn will not result in a reduction in the volume of waste being collected,
-13-
<PAGE>
transported, and disposed of by the Company and/or the prices that the Company
can charge for its services.
ANTI-TAKEOVER PROVISIONS; SEVERANCE AGREEMENTS
The Company is considering adopting a charter amendment to provide for an
undesignated class of preferred stock. It is not possible to state the precise
effect of preferred stock upon the rights of the holders of the Company's Common
Stock until the Board of Directors determines the respective preferences,
limitations and relative rights of the holders of one or more series or classes
of the Preferred Stock. However, such effect might include: (a) reduction of the
amount otherwise available for payment payment of dividends on Common Stock, to
the extent dividends are payable on any issued shares of preferred stock, and
restrictions on dividends on Common Stock if dividends on the preferred stock
are in arrears; (b) dilution of the voting power of the Common Stock to the
extent that the preferred stock had voting rights; and (c) the holders of Common
Stock not being entitled to share in the Company's assets upon liquidation until
satisfaction of any liquidation preference granted to the preferred stock.
The creation of preferred stock may be viewed as having the effect of
discouraging an unsolicited attempt by another person or entity to acquire
control of the Company and may therefore have an anti-takeover effect. Issuances
of authorized preferred shares can be implemented, and have been implemented by
some companies in recent years, with voting or conversion privileges intended to
make acquisition of the Company more difficult or costly. Such an issuance could
discourage or limit the stockholders' participation in certain types of
transactions that might be proposed (such as a tender offer), whether or not
such transactions were favored by the majority of the stockholders, and could
enhance the ability of officers and directors to retain their positions.
In addition, certain of the Company's executive officers that have entered
into employment agreements with the Company will be entitled to receive certain
bonuses in cash or Common Stock upon a change in control of the Company in such
amounts that, in the aggregate, could have an adverse effect on the Company's
liquidity and capital resources. Accordingly, such provisions could discourage
or prevent bids to takeover the Company and decrease values that would otherwise
be obtained by stockholders for their Common Stock.
The Company is subject to the anti-takeover provisions of Section 203 of the
Delaware General Corporation Law, which prohibits the Company from engaging in a
"business combination" with an "interested stockholder" for a period of three
years after the date of the transaction in which the person became an interested
stockholder, unless the business combination is approved in a prescribed manner.
The application of Section 203 also could have the effect of delaying or
preventing a change in control of the Company without further action by the
stockholders.
CONTROL BY MANAGEMENT
Executive officers and directors of the Company as a group beneficially own a
significant amount of the outstanding Common Stock. As a result, these existing
stockholders, if acting together, will be able to influence significantly the
election of individuals to the Board of Directors and the outcome of other
matters submitted for stockholder consideration.
VOLATILITY OF STOCK PRICE
The market price of the Common Stock has been and is likely to continue to be
highly volatile. Factors such as fluctuations in the Company's quarterly
revenues and operating results, the Company's on-going acquisition program,
governmental regulations, market conditions for waste management stocks in
general, and economic conditions generally may have a significant impact on the
market price of the Common Stock. In addition, as the Company pursues its
acquisition program, it may agree to issue shares of Common Stock that will
generally become available for resale which may have an impact on the market
price of the Common Stock.
ADDITIONAL RISKS
In addition to the Risk Factors set forth above, prospective investors in the
Common Stock should review the Company's Incorporated Documents, which may
contain, in certain instances and from time to time, additional and supplemental
information relating to the risks set forth above and/or additional risks to be
considered by investors in the Common Stock, including, without limitation,
information relating to losses experienced by the Company in particular
historical periods, working capital deficits of the Company at particular dates,
information relating to pending and recently completed acquisitions,
descriptions of new or changed federal or state regulations applicable to the
Company, data relating to remediation and other actions taken by the Company,
and estimates at various times of the Company's potential liabilities for
compliance with environmental laws or in connection with pending litigation,
including estimates of closure and post-closure costs.
LACK OF CASH DIVIDENDS ON COMMON STOCK
The Company does not expect to pay any cash dividends on the Common Stock in
the foreseeable future. Any cash otherwise available for such dividends will be
reinvested in the Company's business. In addition, the Company's current credit
facility agreement prohibits the payment of cash dividends without prior bank
approval.
-14-
<PAGE>
USE OF PROCEEDS
All of the shares offered hereby are being offered for the account of the
Selling Stockholders. The Company will not receive any of the proceeds of this
Offering.
THE COMPANY
Eastern Environmental Services, Inc. is a non-hazardous solid waste
management company specializing in the collection, transportation, and disposal
of residential, industrial, commercial, and special waste, principally in the
eastern United States. In June 1996, control of the Company was acquired by a
group of investors who repositioned the Company for the purpose of implementing
an aggressive acquisition program in the solid waste industry.
The Company believes that significant opportunities exist to acquire solid
waste collection, transportation, and disposal businesses in the eastern United
States and to develop within its existing markets. As part of its acquisition
program, the Company reviews acquisition opportunities on an ongoing basis and
is currently in various stages of negotiating the acquisition of additional
solid waste management businesses. There can be no assurance that any of such
acquisition negotiations will result in the actual acquisition of additional
solid waste management businesses.
The Company's principal executive offices are located at 1000 Crawford
Place, Suite 101, Mt. Laurel, New Jersey 08054, and its telephone number is
(609) 235-6009.
-15-
<PAGE>
SELLING STOCKHOLDERS
Approximately 5,709,827 of the 6,104,394 Shares included in this
Prospectus were issued by the Company in connection with acquisitions of solid
waste and other businesses since June, 1996, and are included in this Prospectus
pursuant to the exercise of registration rights granted the holders thereof in
connection with such acquisitions. Of the 6,104,394 Shares included in this
Prospectus, approximately 4,767,809 are subject to lock-up agreements expiring
on October 29, 1997 and 528,924 are subject to lock-up agreements expiring on
November 28, 1997. These lock-up agreements were entered into in connection with
the Company's public offering of 5,175,000 shares of Common Stock in August,
1997 and prohibit the sale of the Shares covered thereby prior to the expiration
dates of the agreements without the consent of Smith Barney., the representative
of the several underwriters in the public offering.
The following table lists the names of the persons whose Shares are covered
by this Prospectus (the "Selling Stockholders"), and for each, the number of
Shares beneficially owned at the commencement of the Offering, the number of
Shares being offered for sale and the number of Shares and percentage interest
of the Company to be beneficially owned after the Offering.
<TABLE>
<CAPTION>
NUMBER OF SHARES NUMBER OF NUMBER OF SHARES OWNED
BENEFICIALLY OWNED OUTSTANDING WARRANT SHARES AFTER OFFERING
AT COMMENCEMENT SHARES BEING BEING ----------------
SELLING STOCKHOLDERS OF OFFERING OFFERED OFFERED NUMBER PERCENT
- -------------------- ------------------ --------------- -------------- ------ -------
<S> <C> <C> <C> <C> <C>
George Agramonte 2,000 2,000/(4)/ -- 0 *
Ameri Carting, Inc. 430,817/(3)/ 165,102/(1)(2)/ -- 265,715 1.2%
M. Beckman 20,000 20,000/(4)/ -- 0 *
Alice Field Bender 23,124/(5)/ 15,744/(1)/ 7,380/(1)/ 0 *
Douglas R. Bender 8,397/(6)/ 5,717/(1)/ 2,680/(1)/ 0 *
Jeffrey L. Bender 20,758/(7)/ 14,133/(1)/ 6,625/(1)/ 0 *
Karen L. Bender 28,107/(8)/ 19,137/(1)/ 8,970/(1)/ 0 *
Richard G. Bender, Jr. 20,868/(9)/ 14,208/(1)/ 6,660/(1)/ 0 *
Richard G. Bender, Sr. 12,236/(10)/ 8,331/(1)/ 3,905/(1)/ 0 *
Stephen R. Bender 20,758/(11)/ 14,133/(1)/ 6,625/(1)/ 0 *
C&R Waste Removal, Inc. 29,347 10,397/(1)(2)/ -- 18,950 *
Albert Casagrande 14,096 14,096/(4)/ -- 0 *
Carl M. Casagrande, Jr. 12,000 8,000/(4)/ -- 4,000 *
Daniel Albert Casagrande 9,595 8,000/(4)/ -- 1,595 *
Jack Casagrande 1,000 1,000/(4)/ -- 0 *
Nicholas Robert Casagrande 10,500 8,000/(4)/ -- 2,500 *
John Cinelli 8,000 8,000/(4)/ -- 0 *
Victor Cinelli 8,000 8,000/(4)/ -- 0 *
Scott Cook 67,167 17,167/(4)/ -- 50,000 *
Curbside Leasing, Inc. 102,061 23,732/(1)(2)/ -- 78,329 *
Robert Donno 379,317 379,317/(1)(2)/ -- 0 *
</TABLE>
-16-
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF SHARES NUMBER OF NUMBER OF SHARES OWNED
BENEFICIALLY OWNED OUTSTANDING WARRANT SHARES AFTER OFFERING
AT COMMENCEMENT SHARES BEING BEING ----------------
SELLING STOCKHOLDERS OF OFFERING OFFERED OFFERED NUMBER PERCENT
- -------------------- ------------------ --------------- -------------- ------ -------
<S> <C> <C> <C> <C> <C>
Environmental
Opportunities
Fund, L.P. 889,699/(12)/ 61,750 -- 827,949 3.8%
Environmental
Opportunities
Fund (Cayman),
L.P. 110,303/(12)/ 7,750 -- 102,553 *
Founders Equity Group, Inc. 35,167/(13)/ 1,167 25,000/(2)/ 9,000 *
Dennis M. Grimm 278,924/(14)/ 278,924/(1)/ -- 0 *
William and Barbara
Henderson 36,004 36,004/(1)/ -- 0 *
William H. Holbrook 172,039/(15)/ 119,539/(1)/ -- 52,500/(15)/ *
K.C. Waste Services, Inc. 2,307 536/(1)(2)/ -- 1,771 *
Thomas J. King 379,317 379,317/(1)(2)/ -- 0 *
Robert A. Kinsley 199,232 199,232/(1)/ -- 0 *
LH Properties, Inc. 25,000/(16)/ -- 25,000/(2)/ 0 *
L.I. Waste Services, Inc. 221,150 51,423/(1)(2)/ -- 169,727 *
Glen Miller 1,311,302/(17)/ 1,028,395/(2)/ 281,907/(2)/ 1,000 *
Teresa Bender Miller 8,397/(18)/ 5,717/(1)/ 2,680/(1)/ 0 *
W&G Miller Family
Limited Partnership 301,322/(19)/ 19,415/(2)(4)/ 281,907/(2)(4)/ 0 *
Willard Miller 1,264,366/(20)/ 1,260,366/(2)/ -- 4,000 *
George O.
Moorehead 428,131/(21)/ 62,500 -- 365,631 1.7%
Lynette Bender Mowery 14,022/(22)/ 9,547/(1)/ 4,475/(1)/ 0 *
N.Y. Waste Services, Inc. 576,385 179,281/(1)(2)/ -- 397,104 1.8%
Joseph M. Paolino III 60,833/(23)/ 25,000 -- 35,833 *
Louis D. Paolino, Jr. 1,186,407/(24)/ 118,000 -- 1,068,407 4.9%
Louis D. Paolino, Sr. 48,000 25,000 -- 23,000 *
</TABLE>
-17-
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF SHARES NUMBER OF NUMBER OF SHARES OWNED
BENEFICIALLY OWNED OUTSTANDING WARRANT SHARES AFTER OFFERING
AT COMMENCEMENT SHARES BEING BEING -----------------
SELLING STOCKHOLDERS OF OFFERING OFFERED OFFERED NUMBER PERCENT
- -------------------- ------------------ --------------- -------------- ------ -------
<S> <C> <C> <C> <C> <C>
Matthew J. Paolino 139,333/(2)(25)/ 25,000 -- 114,333 *
Frances Pasquale 13,973 13,973/(1)(2)/ -- 0 *
Carlo J. Piccinonna 8,163 8,163/(1)(2)/ -- 0 *
Anna Russo 5,000 5,000/(4)/ -- 0 *
Daniel Sementilli 9,000 9,000/(4)/ -- 0 *
Stephen C. Stamos 6,600/(26)/ -- 6,600 0 *
Timothy W. Sweeney 11,800/(27)/ -- 11,800 0 *
Norman Taylor 379,317 379,317/(1)(2)/ -- 0 *
Beatrice Tolin 24,490 24,490/(1)/ -- 0 *
Pietro Tomassi 9,000 9,000/(4)/ -- 0 *
Scott R. Wagner 199,232 199,232/(1)/ -- 0 *
Waste Services, Inc. 258,079 60,010/(1)(2)/ -- 198,069 *
Matthew Wittkin 22,000 1,600/(4)(28)/ -- 20,400 *
Terry Wittkin &
Chester Wittkin Jt Ten 114,768 54,318/(4)(28)/ -- 60,450 *
</TABLE>
_______________________________
* Less than 1%
(1) The shares were acquired by the Selling Stockholder in connection with an
acquisition by the Company.
(2) The shares are subject to a lock-up agreement that expires on October 29,
1997.
(3) Includes 20,000 shares of Common Stock issuable upon exercise of warrants,
all of which have vested.
(4) The shares were originally acquired in connection with an acquisition by the
Company and were subsequently transferred to the Selling Stockholder.
(5) Includes 7,380 shares of Common Stock issuable upon exercise of warrants,
all of which have vested.
-18-
<PAGE>
(6) Includes 2,680 shares of Common Stock issuable upon
exercise of warrants, all of which have vested.
(7) Includes 6,625 shares of Common Stock issuable upon
exercise of warrants, all of which have vested.
(8) Includes 8,970 shares of Common Stock issuable upon
exercise of warrants, all of which have vested. Ms.
Bender is the Vice President and General Manager of R. &
A. Bender, Inc., a subsidiary of the Company.
(9) Includes 6,660 shares of Common Stock issuable upon
exercise of warrants, all of which have vested.
(10) Includes 3,905 shares of Common Stock issuable upon
exercise of warrants, all of which have vested.
(11) Includes 6,625 shares of Common Stock issuable upon
exercise of warrants, all of which have vested.
(12) Kenneth Chuan-kai Leung, a director of the Company,
serves as Chief Investment Officer for the fund. All of
such shares are subject to a lock-up agreement that
expires on November 28, 1997.
(13) Includes 25,000 shares of Common Stock issuable upon the
exercise of warrants, all of which have vested and which
are subject to a lock-up agreement that expires on
October 29, 1997.
(14) All of such shares are subject to a lock-up agreement
that expires on November 28, 1997. Mr. Grimm is currently
Vice President of Operations of the Company.
(15) Includes 52,500 shares of Common Stock issuable upon
exercise of warrants. Mr. Holbrook is a consultant to
the Company.
(16) Represents 25,000 shares of Common Stock issuable upon
exercise of warrants, all of which have vested.
(17) Includes 131,907 shares of Common Stock issuable upon the
exercise of warrants held by Mr. Miller, all of which
are currently vested. Also includes an additional 150,000
shares of Common Stock issuable upon exercise of warrants
that are not presently exercisable. Mr. Miller is the
Executive Vice President of the Company. He acquired all
but 1,000 of the shares beneficially owned by him in
connection with an acquisition by the Company.
(18) Includes 2,680 shares of Common Stock issuable upon
exercise of warrants held by Ms. Miller, all of which
have vested.
(19) Includes 131,907 shares of Common Stock issuable upon the
exercise of warrants held by the W&G Miller Family
Partnership, all of which are currently vested. Includes
an additional 150,000 shares of Common Stock issuable
upon exercise of warrants that are not presently
exercisable.
-19-
<PAGE>
(20) Does not include 19,415 shares of Common Stock held of
record by W&G Miller Family Limited Partnership, of which
Mr. Miller serves as a general partner, or 131,907 shares
of Common Stock purchasable under currently exercisable
warrants held by such partnership. Mr. Miller is
Executive Vice President of the Company. He acquired all
but 4,000 of the shares beneficially owned by him in
connection with an acquisition by the Company.
(21) Mr. Moorehead is a director of the Company. The number
of shares held includes 70,834 shares purchasable under
currently exercisable stock options. All of such shares
are subject to a lock-up agreement that expires on
November 28, 1997.
(22) Includes 4,475 shares of Common Stock issuable upon the
exercise of warrants, all of which have vested.
(23) Joseph M. Paolino III is the manager of a subsidiary of
the Company.
(24) Louis D. Paolino, Jr. is the Chairman of the Board and
Chief Executive Officer of the Company. Such shares
include 35,000 shares held of record by entities
controlled by Mr. Paolino, 171,166 shares held by family
members and 122,500 shares purchasable under currently
exercisable stock options. All of such shares are subject
to a lock-up agreement that expires on November 28, 1997.
(25) Matthew J. Paolino is a Vice President of the Company.
Such shares include 75,000 shares purchasable under stock
options, 25% of which are currently exercisable.
(26) Represents 6,600 shares of Common Stock issuable upon
exercise of warrants, all of which have vested. Mr.
Stamos is a former director of the Company.
(27) Represents 11,800 shares of Common Stock issuable upon
exercise of warrants, all of which have vested. Mr.
Sweeney is a former member of the Board of Directors.
(28) The Company anticipates that these shares will be subject
to a lock-up agreement that will expire on October 29,
1997.
PLAN OF DISTRIBUTION
The Shares may be sold from time to time to purchasers directly by any of
the Selling Stockholders, or, alternatively, any of the Selling Stockholders may
from time to time offer the Shares through dealers or agents, who may receive
compensation in the form of underwriting discounts, concessions or commissions
from a Selling Stockholder and/or the purchasers of the Shares for whom they may
act as agent. Any discounts, commissions or concessions received by any such
dealers or agents and any profits on the sale of Shares by them may be deemed to
be underwriting discounts and commissions under the Securities Act.
The Shares may be sold from time to time in one or more transactions at a
fixed offering price, which may be changed, at varying prices determined at the
time of sale, or at negotiated prices. Such prices will be determined by a
Selling Stockholder or by agreement between a Selling Stockholder and/or
dealers. The Shares are listed on the Nasdaq National Market and may be sold in
transactions on the Nasdaq National Market. In addition, the Shares may be sold,
to the extent permitted, from time to time in transactions effected in
accordance with the provisions of Rule 144 under the Securities Act.
Pursuant to lock-up agreements, approximately 4,767,809 shares of Common
Stock covered by this Prospectus are subject to lock-ups that expire on October
29, 1997. In addition, approximately 528,924 shares of Common Stock covered by
this Prospectus are subject to lock-ups that expire on November 28, 1997.
In connection with the offer and sale of the Shares, various state
securities laws and regulations require that any such offer and sale should be
made only through the use of a broker-dealer registered as such in any state
-20-
<PAGE>
where a Selling Stockholder engages such broker-dealer and in any state where
such broker-dealer intends to offer and sell the Shares.
Under applicable rules and regulations under the Exchange Act, any person
engaged in a distribution of the Shares may not bid for or purchase the Shares
until after such person has completed his or her participation in such
distribution, including the period of five business days prior to the
commencement of such distribution. In addition to and without limiting the
foregoing, the Selling Stockholders and any other person participating in such
distribution will be subject to other applicable provisions of the Exchange Act
and the rules and regulations thereunder, including without limitation
Regulation M, which provisions may affect the timing of purchases and sales of
any of the Shares by the Selling Stockholders and any such other person. All of
the foregoing may affect the marketability of the Shares and the ability of any
person or entity to engage in market making activities with respect to the
Shares.
LEGAL MATTERS
The validity of the securities offered hereby will be passed upon for the
Company by Drinker Biddle & Reath LLP, Philadelphia, Pennsylvania, counsel for
the Company.
EXPERTS
The consolidated financial statements of the Company as of June 30, 1997
and 1996 and for each of the three years in the period ended June 30, 1997
appearing in the Company's Annual Report on Form 10-K for the year ended June
30, 1997, which are incorporated by reference herein, have been audited by Ernst
& Young LLP, independent auditors, as set forth in their report thereon included
therein and incorporated by reference herein which, as to each of the two years
in the period ended June 30, 1996, is based in part on the reports of Bardall,
Weintraub P.C. and Paternostro, Callahan & DeFreitas, LLP, independent auditors.
Such financial statements are incorporated by reference herein in reliance upon
such reports given upon the authority of such firms as experts in accounting and
auditing.
The combined financial statements of Allied Environmental Services, Inc.
and affiliates as of and for the period ended June 30, 1996 and 1995 and at and
for the years then ended appearing in the Company's Current Report on Form 8-K
dated July 2, 1996, as amended by its Form 8-K/A dated July 10, 1997, which are
incorporated by reference herein, have been audited by BDO Seidman LLP,
independent auditors, as set forth in their report thereon included therein and
incorporated by reference herein. Such financial statements are incorporated by
reference herein in reliance upon such report given upon the authority of such
firm as experts in accounting and auditing.
The combined financial statements of Allied Environmental Services, Inc.,
Allied Environmental Services, West, Inc., Allied Mid-Atlantic, Inc., and Allied
Waste Management, Inc. as of and for the period ended June 30, 1994 and at and
for the year then ended appearing in the Company's Current Report on Form 8-K
dated July 2, 1996, as amended by its Form 8-K/A dated July 10, 1997, which are
incorporated by reference herein, have been audited by B.J. Klinger & Co., P.C.,
independent auditors, as set forth in their report thereon included therein and
incorporated by reference herein. Such financial statements are incorporated by
reference herein in reliance upon such report given upon the authority of such
firm as experts in accounting and auditing.
The combined financial statements of Super Kwik, Inc. and Waste Maintenance
Services, Inc. appearing in the Company's Current Report on Form 8-K dated
September 27, 1996, as amended by its Form 8-K/A dated July 10, 1997, which are
incorporated by reference herein, have been audited by Bardall, Weintraub P.C.,
independent auditors, as set forth
-21-
<PAGE>
in their report thereon included therein and incorporated by reference herein.
Such financial statements are incorporated by reference herein in reliance upon
such report given upon the authority of such firm as experts in accounting and
auditing.
The financial statements of R&A Bender, Inc. and R&A Property, Ltd.
appearing in the Company's Current Report on Form 8-K dated December 10, 1996,
as amended by its Form 8-K/A dated July 10, 1997, which are incorporated by
reference herein, have been audited by Boyer & Ritter, CPAs, independent
auditors, as set forth in their reports thereon included therein and
incorporated by reference herein. Such financial statements are incorporated by
reference herein in reliance upon such reports given upon the authority of such
firm as experts in accounting and auditing.
The combined financial statements of Donno Company, Inc. and affiliates
appearing in the Company's Current Report on Form 8-K dated January 31, 1997, as
amended by its Form 8-K/A dated July 10, 1997, which are incorporated by
reference herein, have been audited by Paternostro, Callahan & DeFreitas, LLP,
independent auditors, as set forth in their report thereon included therein and
incorporated by reference herein. Such financial statements are incorporated by
reference herein in reliance upon such report given upon the authority of such
firm as experts in accounting and auditing.
The financial statements of Apex Waste Services, Inc. appearing in the
Company's Current Report on Form 8-K dated March 31, 1997, as amended by its
Form 8-K/A dated July 10, 1997, which are incorporated by reference herein, have
been audited by Daniel P. Irwin & Associates, P.C., independent auditors, as set
forth in their report thereon included therein and incorporated by reference
herein. Such financial statements are incorporated by reference herein in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
The combined financial statements of Waste Services, Inc. and affiliates at
December 31, 1996 and for the year then ended appearing in the Company's Current
Report on Form 8-K dated May 12, 1997, as amended by its Forms 8-K/A dated July
11, 1997 and July 25, 1997, which are incorporated by reference herein, have
been audited by Ernst & Young LLP, independent auditors, as set forth in their
report thereon included therein and incorporated herein by reference. Such
financial statements are incorporated herein by reference in reliance upon such
report given upon the authority of such firm as experts in accounting and
auditing.
The financial statements of Pappy, Inc. as of October 31, 1996 and 1995 and
for the years then ended appearing in the Company's Current Report on Form 8-K
dated August 15, 1997, as amended by its Form 8-K/A filed October 10, 1997,
which are incorporated by reference herein, have been audited by Ernst & Young
LLP, independent auditors, as set forth in their report thereon included therein
and incorporated by reference herein. Such financial statements are incorporated
by reference herein in reliance upon such report given upon the authority of
such firm as experts in accounting and auditing.
_______________________
-22-
<PAGE>
================================================================================
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY,
THE SELLING STOCKHOLDERS OR ANY OTHER PERSON. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE
SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH AN OFFER IN SUCH JURISDICTION. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE ANY IMPLICATION THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF OR THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF
THE COMPANY SINCE SUCH DATE.
---------------------
TABLE OF CONTENTS
Page
----
Available Information................................................... 2
Incorporation of Certain Documents by Reference......................... 2
Risk Factors............................................................ 4
Use of Proceeds......................................................... 15
The Company............................................................. 15
Selling Stockholders.................................................... 16
Plan of Distribution.................................................... 20
Legal Matters........................................................... 21
Experts................................................................. 21
6,104,394
Common Stock
Eastern Environmental Services, Inc.
---------------------
PROSPECTUS
October 10, 1997
---------------------
================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the estimated expenses payable by the
Registrant in connection with this Registration Statement.
Securities and Exchange Commission Registration Fee.. $ 1,692
Legal Fees and Expenses.............................. 15,000
Miscellaneous Expenses............................... 3,451
Total................................................ $50,000
=======
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the General Corporation Law of the State of Delaware (the
"DGCL") provides, in general, that a corporation incorporated under the laws of
the State of Delaware, such as the Company, may indemnify any person who was or
is a party or is threatened to be made a party to any threatened, pending, or
completed action, suit, or proceeding (other than an action by or in the right
of the corporation) by reason of the fact that such person is or was a director,
officer, employee, or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee, or agent of another
enterprise, against expenses (including attorneys' fees), judgments, fines, and
amounts paid in settlement actually and reasonably incurred by such person in
connection with such action, suit, or proceeding if such person acted in good
faith and in a manner such person reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe such person's conduct was
unlawful. In the case of an action by or in the right of the corporation, a
Delaware corporation may indemnify any such person against expenses (including
attorneys' fees) actually and reasonably incurred by such person in connection
with the defense or settlement of such action or suit if such person acted in
good faith and in a manner such person reasonably believed to be in or not
opposed to the best interests of the corporation, except that no indemnification
shall be made in respect of any claim, issue or matter as to which such person
shall have been adjudged to be liable to the corporation unless and only to the
extent that the court determines upon application that, despite the adjudication
of liability but in view of all circumstances of the case, such person is fairly
and reasonable entitled to indemnity for such expenses.
Article Tenth, Paragraph (a) of the Certificate of Incorporation of the
Company provides that each person who was or is made a party or is threatened to
be made a party to or is involved in any action, suit, or proceeding, whether
civil, criminal, administrative or investigative (hereinafter a "proceeding"),
by reason of the fact that he or she, or a person of whom he or she is the legal
representative, is or was a director or officer of the Company or is or was
serving at the request of the Company as a director, officer, employee, or agent
of another company or of a partnership, joint venture, trust or other
enterprise, including service with respect to employee benefit plans, whether or
not the basis of such proceeding is alleged action in an official capacity as a
director, officer, employee, or agent, or in any other capacity while serving as
a director, officer, employee, or agent, shall be indemnified and held harmless
by the Company to the fullest extent authorized by the DGCL, as the same exists
or may hereafter be amended (but, in the case of any such amendment, only to the
extent that such amendment permits the Company to provide broader
II-1
<PAGE>
indemnification rights than said law permitted the Company to provide prior to
such amendment), against all expense, liability, and loss (including attorneys'
fees, judgments, fines, ERISA excise taxes or penalties and amounts paid or to
be paid in settlement) reasonably incurred or suffered by such person in
connection therewith. Such indemnification continues as to a person who has
ceased to be a director, officer, employee, or agent or in any other capacity
while serving as a director, officer, employee, or agent and inures to the
benefit of his or her heirs, executors, and administrators; provided, however,
that except as provided in Paragraph (b) of the Article Tenth (described below),
the Company shall indemnify any such person seeking indemnification in
connection with a proceeding (or part thereof) initiated by such person only if
such proceeding (or part thereof) was authorized by the board of directors of
the Company. Article Tenth, Paragraph (a) further provides that such right to
indemnification shall be a contract right and shall include the right to be paid
by the Company the expenses incurred in defending any such proceeding in advance
of its final disposition; provided, however, that if the DGCL requires, the
payment of such expenses incurred by a director or officer (in his or her
capacity as a director or officer and not in any other capacity in which service
was or is rendered by such person while a director or officer, including,
without limitation, service to an employee benefit plan) in advance of the final
disposition of a proceeding shall be made only upon delivery to the Company of
an undertaking, by or on behalf of such director or officer, to repay all
amounts so advanced if it shall ultimately be determined that such director or
officer is not entitled to be indemnified under the Certificate of Incorporation
or otherwise. The Company may, by action of its Board of Directors, provide
indemnification to employees and agents of the Company with the same scope and
effect as the foregoing indemnification of directors and officers. The foregoing
right to indemnification and advancement of expenses is not exclusive.
Article Tenth, Paragraph (b) of the Certificate of Incorporation provides
further that if a claim described under Paragraph (a) of Article Tenth is not
paid in full by the Company within thirty (30) days after a written claim has
been received by the Company, the claimant may at any time thereafter bring suit
against the Company to recover the unpaid amount of the claim and, if
successful, in whole or in part, the claimant shall be entitled to be paid also
the expense of prosecuting such claim. It shall be a defense to any such action
(other than an action brought to enforce a claim for expenses incurred in
defending any proceeding in advance of its final disposition where the required
undertaking, if any is required, has been tendered to the Company) that the
claimant has not met the standards of conduct which make it permissible under
the DGCL for the Company to indemnify the claimant for the amount claimed, but
the burden of providing such defense shall be on the Company. Neither the
failure of the Company (including its Board of Directors, independent legal
counsel, or its stockholders) to have made a determination prior to the
commencement of such action that indemnification of the claimant is proper in
the circumstances because he or she has met the applicable standard of conduct
set forth in the DGCL, nor an actual determination by the Company (including its
Board of Directors, independent legal counsel, or its stockholders) that the
claimant has not met such applicable standard or conduct, shall be a defense to
the action or create a presumption that the claimant has not met the applicable
standard of conduct.
As permitted by Article Eleventh of the Certificate of Incorporation and
Section 145(g) of the DGCL, the directors and officers of the Company and its
subsidiaries are covered by policies of insurance under which they are insured,
within limits and subject to certain limitations, against certain expenses in
connection with the defense of actions, suits or proceedings, and certain
liabilities which might be imposed as a result of such actions, suits or
proceedings, in which they are parties by reason of being or having been
directors or officers; the Company is similarly insured, with respect to certain
payments it might be required to make to its directors or officers under the
applicable statutes and its charter provisions. The Company has also entered
into indemnification agreements with certain of its directors and officers.
II-2
<PAGE>
The Company is also indemnified against certain liabilities, including
liabilities under the Securities Exchange Act of 1934, or will contribute
payments that the certain underwriters may be required to make in respect
thereof, in an underwriting agreement executed in connection with the public
offering of 4.5 million shares of Common Stock of the Company under a
Registration Statement on Form S-3 (File No. 333-27245) filed by the Company.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) EXHIBITS:
Exhibit
Number Description
- ------- -----------
5 Opinion of Drinker Biddle & Reath LLP
23.1 Consent of Ernst & Young LLP
23.2 Consent of B.J. Klinger & Co., P.C.
23.3 Consent of BDO Seidman, LLP
23.4 Consent of Bardall, Weintraub P.C.
23.5 Consent of Boyer & Ritter
23.6 Consent of Paternostro, Callahan & DeFreitas, LLP
23.7 Consent of Daniel P. Irwin and Associates P.C.
23.8 Consent of Drinker Biddle & Reath LLP (included in Exhibit 5)
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate, represent
a fundamental change in the information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in the volume of
securities offered (if the total dollar value of securities offered would not
exceed that which was registered) and any deviation from the low or high and of
the estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20 percent change in the
maximum aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement.
II-3
<PAGE>
(iii) to include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if
the registration statement is on Form S-3, and the information required to be
included in a post-effective amendment by those paragraphs is contained in
periodic reports filed by the registrant pursuant to Section 13 or Section 15(d)
of the Exchange Act that are incorporated by reference in the registration
statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Exchange
Act (and, where applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Exchange Act) that is incorporated by
reference in the registration statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3, and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in Mt. Laurel, New Jersey on October 8, 1997.
EASTERN ENVIRONMENTAL SERVICES,INC.
By: /s/Louis D. Paolino, Jr.
---------------------------------------
Louis D. Paolino, Jr.
Chairman of the Board and Chief Executive Officer
POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons, in the
capacities indicated, on October 8, 1997.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- -------------------------- ----------------------------- ----
<S> <C> <C>
/s/Louis D. Paolino, Jr. Chairman of the October 8, 1997
- -------------------------- Board and Chief
Louis D. Paolino, Jr. Executive Officer
(Principal Executive Officer)
/s/Gregory M. Krzemien Chief Financial October 8, 1997
- -------------------------- Officer and
Gregory M. Krzemien Treasurer
(Principal Financial and
Accounting Officer)
George O. Moorehead* Director October 8, 1997
- --------------------------
George O. Moorehead
Kenneth C. Leung* Director October 8, 1997
- --------------------------
Kenneth C. Leung
</TABLE>
*Gregory M. Krzemien, pursuant to a Power of Attorney executed by each of the
directors and officers noted above and included in the signature page of the
initial filing of this Registration Statement, by signing his name hereto, does
hereby sign and execute this Amendment No. 2 to Registration Statement on
behalf of each of the persons noted above, in the capacities indicated, and does
hereby sign and execute this Amendment No. 2 to Registration Statement on his
own behalf, in the capacity indicated.
II-5
<PAGE>
EXHIBIT INDEX
-------------
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
5 Opinion of Drinker Biddle & Reath LLP
23.1 Consent of Ernst & Young LLP
23.2 Consent of B.J. Klinger & Co., P.C.
23.3 Consent of BDO Seidman, LLP
23.4 Consent of Bardall, Weintraub P.C.
23.5 Consent of Boyer & Ritter
23.6 Consent of Paternostro, Callahan & Defreitas, LLP
23.7 Consent of Daniel P. Irwin and Associates P.C.
23.8 Consent of Drinker Biddle & Reath LLP (included in Exhibit 5)
II-6
<PAGE>
Exhibit 5
---------
DRINKER BIDDLE & REATH LLP
1345 Chestnut Street
Philadelphia, PA 19107-3496
Phone: (215) 988-2700
October 10, 1997
Eastern Environmental Services, Inc.
1000 Crawford Place, Suite 101
Mt. Laurel, New Jersey 08054
Re: Registration Statement on Form S-3
----------------------------------
Ladies and Gentlemen:
We have acted as counsel to Eastern Environmental Services, Inc., a
Delaware corporation (the "Company"), in connection with the preparation and
filing with the Securities and Exchange Commission of a Registration Statement
on Form S-3 (the "Registration Statement") under the Securities Act of 1933, as
amended (the "Securities Act"), relating to the public offering of up to an
aggregate of 6,104,394 shares of the Company's Common Stock, par value $.01 per
share (the "Shares"), 5,153,846 of which are currently issued and outstanding
(the "Outstanding Shares") and 950,548 of which are issuable upon the exercise
of warrants or options (the "Option Shares").
In this connection, we have examined the originals or copies, certified or
otherwise identified to our satisfaction, of the Certificate of Incorporation
and the By-laws of the Company, resolutions of the Company's Board of Directors,
and such other documents and corporate records relating to the Company and the
issuance and sale of the Outstanding Shares and the Option Shares as we have
deemed appropriate. This opinion is based exclusively on the General Corporation
Law of the State of Delaware.
In all cases, we have assumed the legal capacity of each natural person
signing any of the documents and corporate records relating to the Company, the
genuineness of signatures, the authenticity of documents submitted to us as
originals, the conformity to authentic original documents of documents submitted
to us as copies and the accuracy and completeness of all corporate records and
other information made available to us by the Company.
On the basis of the foregoing, we are of the opinion that the Outstanding
Shares have been validly issued and are fully paid and non-assessable by the
Company, and that the Option Shares, upon exercise of the warrants or options
and payment therefor in accordance with the terms thereof, will be validly
issued, fully paid and non-assessable by the Company.
We hereby consent to the reference to our firm under the caption "Legal
Matters" in the prospectus included in the Registration Statement and to the
filing of this opinion as an exhibit to the Registration Statement. In giving
this consent, we do not admit that we come within the categories of persons
whose consent is required under Section 7 of the Securities Act.
Very truly yours,
/s/ DRINKER BIDDLE & REATH LLP
DRINKER BIDDLE & REATH LLP
<PAGE>
Exhibit 23.1
------------
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in
Amendment No. 2 to this Registration Statement on Form S-3 and related
Prospectus of Eastern Environmental Services, Inc. for the registration of its
common stock, and to the incorporation by reference therein of our reports dated
June 19, 1997, with respect to the combined financial statements of Waste
Services, Inc. and Affiliates, included in Eastern Environmental Services,
Inc.'s Current Report on Form 8-K dated May 12, 1997 (as amended July 11, 1997
and July 25, 1997), August 29, 1997, with respect to the consolidated financial
statements of Eastern Environmental Services, Inc. included in Eastern
Environmental Services, Inc.'s Annual Report (Form 10-K) for the year ended June
30, 1997, and September 12, 1997, with respect to the financial statements of
Pappy, Inc. included in Eastern Environmental Services, Inc.'s Current Report on
Form 8-K dated August 15, 1997 (as amended October 10, 1997 on Form 8-K/A), all
filed with the Securities and Exchange Commission.
/s/ Ernst & Young LLP
Philadelphia, Pennsylvania
October 10, 1997
<PAGE>
Exhibit 23.2
------------
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to
the incorporation by reference in this Registration Statement on Form S-3 and
related Prospectus of Eastern Environmental Services, Inc. of our report dated
August 19, 1996, with respect to the combined financial statements of Allied
Environmental Services, Inc., Allied Environmental Services West, Inc., Allied
Mid-Atlantic, Inc. and Allied Waste Management, Inc. included in Eastern
Environmental Services, Inc.'s Current Report on Form 8-K dated July 2, 1996 (as
amended on Form 8-K/A dated September 16, 1996, May 13, 1997, June 6, 1997 and
July 10, 1997) filed with the Securities And Exchange Commission.
/s/ B.J. Klinger & Co., P.C.
--------------------------
B.J. Klinger & Co., P.C.
Great Neck, N.Y.
October 6, 1997
<PAGE>
Exhibit 23.3
------------
CONSENT OF INDEPENDENT AUDITORS
Allied Environmental Services, Inc. and Affiliates
Merrick, New York
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-3 and related Prospectus of Eastern Environmental Services,
Inc., of our reports relating to the combined financial statements of Allied
Environmental Services, Inc. and affiliates dated October 12, 1995 (except Notes
1 and 7 which are June 25, 1996) for the five month period ended November 30,
1994 and seven month period ended June 30, 1995 and November 12, 1996 for the
year ended June 30, 1996, included in Eastern Environmental Services, Inc.'s
Form 8-K dated July 2, 1996 (as amended on Form 8-K/A dated September 16, 1996,
May 13, 1997, June 6, 1997 and July 10, 1997).
We also consent to the reference to us under the caption "Experts" in the
Prospectus constituting a part of this Registration Statement on Form S-3.
/s/ BDO Seidman, LLP
--------------------
BDO SEIDMAN, LLP
Philadelphia, Pennsylvania
October 8, 1997
<PAGE>
Exhibit 23.4
------------
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to the
incorporation by reference in this Registration Statement on Form S-3 and
related Prospectus of Eastern Environmental Services, Inc., of our reports dated
September 30, 1996, with respect to the combined comparative financial
statements of Super Kwik, Inc. and Waste Maintenance Services, Inc. included in
Eastern Environmental Services, Inc.'s Current Report on Form 8-K dated
September 27, 1996 (as amended on Form 8-K/A filed December 9, 1996, June 6,
1997 and July 10, 1997), filed with the Securities And Exchange Commission.
/s/ Bardall, Weintraub P.C.
---------------------------
BARDALL, WEINTRAUB P.C.
Turnersville, New Jersey
October 6, 1997
<PAGE>
Exhibit 23.5
------------
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to the
incorporation by reference in this Registration Statement on Form S-3 and
related Prospectus of Eastern Environmental Services, Inc., of our reports dated
December 27, 1996, with respect to the audited financial statements of R & A
Bender, Inc., and R & A Bender Property, Ltd., included in Eastern Environmental
Services, Inc.'s Current Report on Form 8-K dated December 10, 1996 (as amended
on Forms 8-K/A filed February 11, 1997, June 6, 1997, and July 10, 1997), filed
with the Securities and Exchange Commission.
/s/ Boyer & Ritter
------------------
Chambersburg, Pennsylvania
October 8, 1997
<PAGE>
Exhibit 23.6
------------
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to the
incorporation by reference in this Registration Statement on Form S-3 and
related Prospectus of Eastern Environmental Services, Inc. of our report dated
March 3, 1997, with respect to the combined financial statements of Donno
Company, Inc. and affiliates included in Eastern Environmental Services, Inc.'s
Current Report on Form 8-K/A dated July 10, 1997 (amending the Company's Form 8-
K dated January 31, 1997), both filed with the Securities and Exchange
Commission.
/s/ Paternostro, Callahan & Defreitas, LLP
------------------------------------------
PATERNOSTRO, CALLAHAN & DEFREITAS, LLP
Mineola, New York
October 8, 1997
<PAGE>
Exhibit 23.7
------------
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to the
incorporation by reference in this Registration Statement on Form S-3 and
related Prospectus of Eastern Environmental Services, Inc., of our report dated
April 30, 1997, with respect to the financial statements of Apex Waste Services,
Inc. and Waste Management of Pennsylvania, Inc., Northeast Pennsylvania
Division, included in Eastern Environmental Services, Inc.'s Current Report on
Form 8-K dated March 31, 1997 (as amended on Form 8-K/A filed May 15, 1997 and
July 10, 1997) filed with the Securities and Exchange Commission.
/s/ Daniel P. Irwin and Associates P.C.
---------------------------------------
Daniel P. Irwin and Associates P.c.
Strafford-Wayne, Pennsylvania
October 6, 1997
