<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
OEC COMPRESSION CORPORATION
--------------------------
(Name of Registrant as specified in its Charter)
Payment of Filing Fee (check the appropriate box):
[X] No Fee Required.
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11
(Set forth the amount on which the filing fee is calculated and state how it
was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount previously paid:
-----------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------
(3) Filing party:
--------------------------------------------------
(4) Date filed:
-----------------------------------------------------
<PAGE>
OEC COMPRESSION CORPORATION
2501 CEDAR SPRINGS ROAD, SUITE 600
DALLAS, TEXAS 75201
--------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON June 11, 1998
--------------------------
TO THE STOCKHOLDERS OF OEC COMPRESSION CORPORATION (formerly known as Equity
Compression Services Corporation)
The Annual Meeting of Stockholders of OEC Compression Corporation,
formerly known as Equity Compression Services Corporation, an Oklahoma
corporation (the "Company"), will be held in the Ivory Room of The Stoneleigh
Hotel, 2927 Maple Avenue, Dallas, Texas 75201, on Thursday, June 11, 1998, at
11:00 a.m., local time, for the following purposes:
(1) To elect twelve (12) directors of the Company;
(2) To ratify the selection of Coopers & Lybrand, Tulsa, Oklahoma, as
independent auditors for the Company for its fiscal year 1998; and
(3) To transact other business as may properly come before the meeting
or any adjournment thereof.
The Board of Directors has fixed the close of business on April 20, 1998
as the record date for the determination of stockholders entitled to notice
of and to vote at the Annual Meeting or any adjournment(s) thereof. Only
stockholders of record at the close of business on the record date are
entitled to notice of and to vote at the Annual Meeting.
The Company's Proxy Statement and Annual Report are submitted herewith.
By Order of the Board of Directors
JACK D. BRANNON
SECRETARY
Dallas, Texas
April 30, 1998
YOUR VOTE IS IMPORTANT
EVEN IF YOU PLAN TO ATTEND THE ANNUAL MEETING, YOU ARE URGED TO DATE, SIGN
AND PROMPTLY RETURN YOUR ENCLOSED PROXY CARD SO THAT YOUR SHARES MAY BE VOTED
IN ACCORDANCE WITH YOUR WISH AND IN ORDER THAT THE PRESENCE OF A QUORUM MAY
BE ASSURED. THE GIVING OF SUCH PROXY DOES NOT AFFECT YOUR RIGHT TO REVOKE IT
LATER OR VOTE YOUR SHARES IN PERSON IN THE EVENT YOU SHOULD ATTEND THE
MEETING.
<PAGE>
OEC COMPRESSION CORPORATION
2501 CEDAR SPRINGS ROAD, SUITE 600
DALLAS, TEXAS 75201
----------------------------
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
JUNE 11, 1998
- --------------------------
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation of
proxies by the management and Board of Directors of OEC Compression
Corporation (formerly known as Equity Compression Services Corporation) (the
"Company") to be used at the Annual Meeting of Stockholders to be held
Thursday, June 11, 1998, at 11:00 a.m., local time, in the Ivory Room of The
Stoneleigh Hotel, 2927 Maple Avenue, Dallas, Texas 75201, and all
adjournment(s) thereof, for the purposes set forth in the attached Notice of
Annual Meeting. The Company's executive offices are located at 2501 Cedar
Springs Road, Suite 600, Dallas, Texas 75201. The approximate date upon
which this Proxy Statement and the form of proxy are being mailed to
stockholders is May 13, 1998.
EXPENSES OF SOLICITATION
The expense in connection with the solicitation of proxies, including
the cost of preparing, handling, printing and mailing the Notice of Annual
Meeting, Proxy Statement and accompanying proxy, have been or will be borne
by the Company. The Company may reimburse banks, brokerage houses and other
custodians, nominees and fiduciaries for reasonable expenses incurred in
forwarding proxy materials to beneficial owners of the Company's Common
Stock. Directors, officers and other employees of the Company may solicit
proxies personally, by telephone or telegram, from some stockholders if
proxies are not received promptly.
QUORUM AND VOTE REQUIRED
The presence, in person or by proxy, of a majority of the outstanding
shares of Common Stock of the Company is necessary to constitute a quorum at
the Annual Meeting. The affirmative vote of the holders of a majority of the
shares of Common Stock represented in person or by proxy at the Annual
Meeting is required to ratify the selection of the independent auditors.
Directors shall be elected by a plurality of the votes of the shares of
Common Stock present in person or represented by proxy at the meeting.
Abstentions from voting, which may be specified on all proposals except the
election of directors, will be treated as shares that are present for
purposes of determining a quorum and will be included for purposes of
determining whether the requisite number of affirmative votes are received on
any matters submitted to the stockholders for a vote. Accordingly, an
abstention will have the same effect as a vote against any such matters. If
a broker indicates on the proxy that it does not have discretionary authority
as to certain shares to vote on a particular matter, those shares will not be
considered as present with respect to that matter and will have no effect on
the outcome of such vote, however, they will be treated as shares that are
present for purposes of determining the presence of a quorum.
REVOCABILITY OF PROXIES
The form of proxy enclosed is for use at the Annual Meeting if a
stockholder is unable to attend or does not desire to vote in person. At any
time before the shares represented by the proxy are voted at the Annual
Meeting, the stockholder may revoke the proxy by delivering to the Secretary
of the Company a written revocation of the proxy, by delivering a later dated
proxy or by voting in person while in attendance at the Annual Meeting.
<PAGE>
MANNER OF VOTING PROXIES
The accompanying proxy card is designed to permit each stockholder of
record at the close of business on April 20, 1998, to vote on the election of
directors and the ratification of the selection of the Company's independent
auditors for 1998. With respect to the election of directors, the proxy card
provides space for stockholders to vote in favor of all nominees or withhold
their votes for any specific or all nominees for the Board of Directors.
All shares represented by valid proxies received prior to the meeting,
and not revoked, will be voted in accordance with the instructions on the
proxy. If the proxy is signed and returned to the Company, but no
instructions are given, it is intended that the proxy will be voted FOR
approval of the Board of Directors' nominees and the ratification of the
selection of the independent auditors for the Company. As to any other
business that may properly come before the meeting, including all matters
incident to the conduct of the meeting, it is intended that the proxy will be
voted in respect thereof in accordance with the judgment of the person voting
the proxies.
STOCKHOLDER PROPOSALS FOR 1999 MEETING
Under the rules of the Securities and Exchange Commission, in order to
be considered for inclusion in the Company's proxy statement relating to the
1999 Annual Meeting of Stockholders, a stockholder proposal must be received
by the Company at its principal offices, 2501 Cedar Springs, Suite 600,
Dallas, Texas 75201 addressed to the Secretary of the Company, on or before
February 11, 1999.
VOTING SECURITIES AND PRINCIPAL STOCKHOLDERS THEREOF
At the close of business on April 20, 1998, there were 29,102,144 issued
and outstanding shares of the Common Stock (exclusive of 9,067 shares held in
treasury) of the Company. Each holder of Common Stock is entitled to one
vote per share on all matters. Only stockholders of record at the close of
business on April 20, 1998, will be entitled to consent to the actions set
forth herein.
The following table sets forth certain information, as of April 20,
1998, regarding the beneficial ownership of the Company's Common Stock by (i)
all persons who were known by the Company to be beneficial owners of more
than five percent of the outstanding shares of Common Stock, (ii) each
director and nominee for director, (iii) all executive officers of the
Company and (iv) all the directors and executive officers of the Company as a
group. Unless otherwise noted, the Company believes that the beneficial
owners named below have sole voting and investment power with respect to such
shares.
<TABLE>
NAME AND ADDRESS OF PERCENT
BENEFICIAL OWNER NUMBER OF SHARES OF CLASS
- ---------------------------------- ---------------- --------
<S> <C> <C>
HACL, Ltd., ........................ 11,463,636(1) 31.23%
a Texas Limited Partnership
2838 Woodside Street,
Dallas, TX 75206
direct
Energy Investors..................... 4,136,364 14.21%
a Texas Joint Venture
2838 Woodside Street,
Dallas, TX 75206
direct
</TABLE>
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<PAGE>
<TABLE>
<S> <C> <C>
Hawkins Oil & Gas, Inc. ............. 1,296,582(2) 4.45%
400 S. Boston, Suite 800,
Tulsa, OK 74103
direct and indirect
Gregory & Cook, Inc. ................ 3,037,251 10.44%
7575 San Felipe, Suite 350,
Houston, TX 77063
direct
Charles M. Butler, III............... 152,500(3) *
direct
James D. Finley...................... 148,788(4) *
direct and indirect
Neal A. Hawthorn..................... 3,333(5) *
direct
Clifford S. Lewis.................... 86,920(6) *
direct and indirect
Jack D. Brannon...................... 263,000(7) *
Don E. Smith......................... 979,111(8) 3.35%
direct and indirect
Richard D. Brannon................... 3,280,469(9) 10.49%
direct and indirect
Ray C. Davis......................... 1,818,408(10) 6.00%
direct and indirect
Matthew S. Ramsey.................... 616,542(11) 2.09%
direct and indirect
Jon P. Stephenson.................... 1,092,378(12) 3.66%
direct and indirect
Kelcy L. Warren...................... 1,818,408(13) 6.00%
direct and indirect
Dennis W. Estis...................... 5,539,198(14) 19.03%
direct
Andy Payne........................... 181,812 *
direct
</TABLE>
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<PAGE>
<TABLE>
<S> <C> <C>
All Directors and Executive Officers
as a Group (13 Persons).............. 15,980,867(15) 45.35%
</TABLE>
- -------------------
* Less than 1%
(1) Includes 7,600,000 shares which may be acquired upon the exercise of
presently exercisable warrants. Does not include the 4,136,364 shares of
Common Stock held by Energy Investors, a Texas joint venture. HACL, Ltd. is
the managing joint venturer of Energy Investors, but is obligated to vote the
shares as directed by the other joint venturers (proportionately according to
their interests) and HACL, Ltd. is not entitled to participate in the
distribution or profits attributable to the shares until the other joint
venturers receive a specified annual return on their investment in the shares.
(2) Includes 40,319 shares attributable to Hawkins Oil & Gas, Inc.'s general
partner interest in HX 1986, 19,522 shares attributable to its general
partner interest in Hawkins Exploration and 47,393 shares attributable to the
Hawkins Oil & Gas, Inc. Profit Sharing Plan.
(3) Includes 27,500 shares which may be acquired upon the exercise of
presently exercisable options.
(4) Includes 3,333 shares which may be acquired upon the exercise of
presently exercisable options and 145,455 share attributable to Mr. Finley's
interest in Energy Investors.
(5) Includes 3,333 shares which may be acquired upon the exercise of
presently exercisable options.
(6) Includes 55,000 shares which may be acquired upon the exercise of
presently exercisable options, and 31,920 shares held by the 401(k) Plan and
allocated to the account of Mr. Lewis.
(7) Includes 23,0000 shares which may be acquired upon the exercise of
presently exercisable options and 240,000 shares which may be acquired upon
the exercise of presently exercisable warrants.
(8) Includes 60,000 shares which may be acquired upon the exercise of
presently exercisable options, and 19,718 shares held by the 401(k) Plan and
allocated to the account of Mr. Smith.
(9) Includes 3,333 shares which may be acquired upon the exercise of
presently exercisable options, 1,101,136 shares attributable to Mr. Brannon's
interest in HACL, Ltd. and 2,165,999 shares which may be acquired upon the
exercise of presently exercisable warrants and which are attributable to Mr.
Brannon's interest in HACL, Ltd.
(10) Includes 3,333 shares which may be acquired upon the exercise of
presently exercisable options, 611,742 shares attributable to Mr. Davis'
interest in HACL, Ltd. and 1,203,333 shares which may be acquired upon the
exercise of presently exercisable warrants and which are attributable to Mr.
Davis' interest in HACL, Ltd.
(11) Includes 35,000 shares which may be acquired upon the exercise of
presently exercisable options, 193,182 shares attributable to Mr. Ramsey's
interest in HACL, Ltd. and 388,360 shares which may be acquired upon the
exercise of presently exercisable warrants and which are attributable to Mr.
Ramsey's interest in HACL, Ltd.
(12) Includes 3,333 shares which may be acquired upon the exercise of
presently exercisable options, 367,045 shares attributable to Mr.
Stephenson's interest in HACL, Ltd. and 721,999 shares which may be acquired
upon the exercise of presently exercisable warrants which are attributable to
Mr. Stephenson's interest in HACL, Ltd.
(13) Includes 3,333 shares which may be acquired upon the exercise of
presently exercisable options, 611,742 shares attributable to Mr. Warren's
interest in HACL, Ltd. and 1,203,333 shares which may be acquired upon the
exercise of presently exercisable warrants and which are attributable to Mr.
Warren's interest in HACL, Ltd.
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<PAGE>
(14) Excludes 1,380,675 shares which are held by the ex-wife of the Mr.
Estis. Mr. Estis disclaims beneficial ownership of such shares.
(15) Includes 217,165 shares which may be acquired upon the exercise of
presently exercisable options, 51,638 shares held by the 401(k) Plan and
allocated to the accounts of such individuals, 2,884,847 shares attributable
to such persons' interests in HACL, Ltd., 5,923,024 shares which may be
acquired upon the exercise of presently exercisable warrants and which are
attributable to such persons' interests in HACL, Ltd. and 145,455 shares
which are attributable to Mr. Finley's interest in Energy Investors.
CERTAIN RELATIONSHIPS AND INTEREST IN CERTAIN TRANSACTIONS
In December of 1997, the Company sold its Columbia, Mississippi facility
to Don Smith, a director of the Company. Such sale was in connection with
the Company's closing of its Oklahoma City and Columbia, Mississippi
facilities. The Company received approximately $316,000 in cash and realized
a $11,000 loss due to the sale of such facility.
On August 6, 1997, the Company consummated the acquisition of all of the
stock ownership of Ouachita Energy Corporation and the acquisition of
substantially all of the assets of two affiliated companies (LLC,
partnership) (collectively referred to herein as the "Ouachita Companies")
for 7.6 million shares of Common Stock and the payment in cash or assumption
of debt of $24 million. Dennis Estis was the principal stockholder of the
Ouachita Companies and Andy Payne served as chief financial officer of the
Ouachita Companies. Following the closing of such transaction, Mr. Estis and
Payne were elected to the Board of Directors of the Company. In January of
1997, the Company exchange 286,976 shares of Common Stock for the
cancellation of approximately $699,000 of indebtedness owed by the Company to
Mr. Estis and an affiliated company.
On December 19, 1996, the Company consummated the sale of 8,000,000
shares of its Common Stock, and warrants which, upon satisfying certain
vesting requirements, entitle the holder to purchase up to an additional
8,000,000 shares of Common Stock at a price of $.91 per share (the
"Warrants"). The sales of the Common Stock and Warrants were made pursuant
to the terms and conditions of the Stock Purchase Agreement dated October 16,
1996, between the Company and HACL, Ltd., a Texas limited partnership
("HACL"). All of the Warrants and 3,863,636 of the shares of Common Stock
were issued to HACL and 4,136,364 shares of Common Stock were issued to
HACL's designee, Energy Investors ("Energy Investors"), a Texas joint venture
of which HACL is the managing joint venture partner, for aggregate
consideration of $4,400,000 in cash. The general partner of HACL is
Six-Dawaco, Inc., a Texas corporation, whose directors and executive officers
are Ray C. Davis and Kelcy L. Warren. Ray C. Davis, Kelcy L. Warren, Matthew
S. Ramsey, Richard D. Brannon and Jon P. Stephenson are each limited partners
in HACL. James D. Finley is a joint venture partner in Energy Investors. In
1997, all of the Warrants vested and became exercisable.
Pursuant to the Stock Purchase Agreement, HACL was granted the right to
designate up to eight directors of the Registrant upon consummation of the
transaction. Following such consummation, John B. Hawkins, Donald C. Nejedly
and David J. Parsons resigned as directors of the Company, and HACL's
designees, Ray C. Davis, Kelcy L. Warren, Matthew S. Ramsey, Richard D.
Brannon and Jon P. Stephenson, were elected to serve as directors. Under the
terms of the Stock Purchase Agreement, the Company has agreed to hereafter
include among its nominees for the Board of Directors a sufficient number of
persons designated by HACL such that the percentage of directors proposed to
be composed of HACL's designees is approximately proportionately equal to
HACL's percentage ownership of the Company's total outstanding shares of
Common Stock.
Hawkins Oil & Gas, Inc. ("Hawkins Oil & Gas") owns 4.45% of the
outstanding stock of the Company, two of the principals of Hawkins Oil & Gas,
Mr. John B. Hawkins and Mr. James F. Hawkins, Jr., served as Directors of the
Company in 1996 and Mr. Clifford S. Lewis, an officer and shareholder of
Hawkins Oil & Gas, continues to be a director of the Company. In March of
1996, the Company and Hawkins Oil & Gas, Inc. entered into an agreement
pursuant to which the sublease of office space by the Company from Hawkins
Oil & Gas was
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<PAGE>
terminated as of December 31, 1995, operations of certain oil and gas
properties owned jointly by the Company and Hawkins Oil & Gas were
transferred to the Company and the parties agreed (i) upon the method of
allocating the compensation of Mr. Lewis (who, at the time of the execution
of the agreement, was servicing as a Vice President, Treasurer and Secretary
of the Company) and other shared employees, (ii) to the joint access to
certain geologic and production data maintained by the Company (which data
the Company agreed to transfer to Hawkins Oil & Gas at no cost if the Company
should sell all or substantially all of its oil and gas assets or terminate
its active involvement in the business of oil and gas exploration,
development and production) and computer data and facilities maintained by
Hawkins Oil & Gas, (iii) to participate jointly in the administration of
their respective self-insured health plans, and (iv) that the Company would
have the right to participate in an oil and gas concession in Pakistan which
Hawkins Oil & Gas is pursuing. By a subsequent agreement with Hawkins Oil &
Gas and Messrs. John B Hawkins and James F. Hawkins, Jr., the Company agreed
to change its name from Hawkins Energy Corporation prior to January 1, 1997
and to transfer to Mr. James F. Hawkins, Jr. title to the motor vehicle that
he had been using as a company vehicle while an officer and director of the
Company.
ELECTION OF DIRECTORS
All of the persons listed under "Nominees for Directors" below, each of
whom is currently a director of the Company, have been nominated by the Board
of Directors for reelection as directors.
The Board of Directors urges you to vote FOR the Board of Directors'
nominees. Proxies solicited hereby will be so voted unless stockholders
specify otherwise in their proxies. Although the Board of Directors does not
contemplate that any of its nominees will be unavailable for election, in the
event of a vacancy in the slate of nominees it is presently intended that the
proxy will be voted for the election of a nominee who will be selected by the
Board of Directors.
NOMINEES FOR DIRECTORS
The following table sets forth information with respect to each nominee
for election to the Company's Board of Directors.
<TABLE>
Position in the Company and Principal Occupation
Nominee & Age or Employment for the Last Five Years
- --------------- -------------------------------------
<S> <C>
Richard D. Brannon Chairman of the Board; Member of Executive, Audit and Human Resources Committees
Age 39 of the Board of Directors; President of Brannon Oil & Gas, Inc.
Charles M. Butler, III Director; Member of the Audit and Human Resources Committees of the
Age 54 Board of Directors; Attorney.
Ray C. Davis Director; Member of Executive, Audit and Human Resources Committees of the Board
Age 54 of Directors; Principal of Energy Transfer Company.
James D. Finley Director; Managing Partner and Director
Age 40 of Duer Wagner & Co.
Neal A. Hawthorn Director; Vice President and Director of R. Lacy, Inc.
Age 64
Clifford S. Lewis Director; Member of the Audit and Human Resource Committees of the Board of
Age 43 Directors; Vice President and Chief Financial Officer of Hawkins Oil & Gas, Inc.
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
Matthew S. Ramsey Director; Member of Executive and Human Resources; Committees of the Board of
Age 43 Directors; President and Chief Executive Officer of Equity Compression Services
Corporation.
Don E. Smith Director; former President of Equity Compressors, Inc.;
Age 48 Cattle Rancher.
Jon P. Stephenson Director; Member of Executive and Human Resources Committees of the Board of
Age 52 Directors; President of Sandollar Oil & Gas, Inc.
Kelcy L. Warren Director; Member of Executive and Human Resources Committees of the Board of
Age 43 Directors; Principal of Energy Transfer Company.
Dennis W. Estis Director; President and Chief Operating Officer of Ouachita Energy Corporation.
Age 51
Andy Payne Director, Senior Vice President of Ouachita Energy Corporation.
Age 54
</TABLE>
Mr. Brannon became Chairman of the Board in December 1996 and is
President of Brannon Oil & Gas, Inc., an independent energy investment
company. Mr. Brannon is also an active investor in oil and gas production,
natural gas pipelines, real estate and equity investments. Mr. Brannon
served as director of Cornerstone Natural Gas, Inc., a natural gas pipeline
and processing company, until its sale to El Paso Natural Gas Company in
1996. Mr. Brannon also previously served as an Advisory Board member to
First Interstate Bank, Fort Worth. Mr. Brannon began his career in 1981 with
TXO Production Corp. as a completion and reservoir engineer. Mr. Brannon has
a B.S. degree in Petroleum Engineering from the University of Texas and is a
Certified Professional Engineer. Mr. Brannon is the brother of Jack D.
Brannon, Senior Vice President and Chief Financial Officer of the Company.
Mr. Butler has served the Company as a Director since the Company's
inception in 1989. He is presently self employed as a financial and
regulatory consultant in Houston, Texas, and previously was a Senior Vice
President of Kidder, Peabody & Co., Inc. Prior to that, he was Chairman of
the Federal Energy Regulatory Commission (1981-1983); Administrative
Assistant to Senator John Tower (1979-1981); Corporate Counsel to American
Natural Service Company (1976-1979); and he has served in several capacities
as an attorney. He holds a B.A. Degree in Economics from the University of
Houston and a J.D. from the University of Texas, where he earned Order of the
Coif Honors.
Mr. Davis became a Director in December 1996. He is a founding
principal of Energy Transfer Company, an energy investment firm, which was
formed in 1996. Mr. Davis founded Capstone Partners in 1988, a buy out firm
formed to acquire under-performing companies. He served as Chairman and CEO
of several companies acquired by Capstone Partners, including Healthco
International Inc., a $500 million a year dental supply company, HPSC, an
equipment leasing company quoted on the Nasdaq system and Cornerstone Natural
Gas, Inc., a natural gas pipeline and processing company listed on the
American Stock Exchange. Mr. Davis served as Director and General Partner of
Hydro Environmental Services, Inc. from 1989 to 1992, and as Chief Executive
Officer of Healthco International, Inc. from June 1991 to August 1992. He
was also Chairman of the Board of HPSC, Inc. from 1991 to 1992. On June 9,
1993, Healthco International, Inc. filed for protection under Chapter 11 in
the U.S. Bankruptcy Court in the Western District of Massachusetts, Western
Division, Case No. 93-41604-JFQ. In connection with Mr. Davis' and a group
of investors' initial acquisition of an interest in Cornerstone Natural Gas,
Inc. and as part of a pre-packaged plan, Cornerstone's predecessor and
certain of its subsidiaries filed voluntary petitions under Chapter 11 of the
Bankruptcy Code with the U.S. Bankruptcy Court for the Eastern District of
Texas, Sherman Division. On November 2, 1993, Cornerstone emerged from such
pre-packaged plan and Mr. Davis and the investor group acquired their
interest in Cornerstone. From 1983 to 1988, he shared the operating
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<PAGE>
duties of Colt Industries, a Fortune 200 diversified manufacturer. Mr. Davis
was last responsible for two groups of companies with operations in 15
countries and sales in excess of $1 billion. Mr. Davis held several
executive positions in Colt Industries and, prior to that, held several
management positions at Mobil Chemical, a division of Mobil Oil.
Mr. Finley became a Director in April of 1997. He is an independent oil
and gas producer and is Managing Partner and Director of Duer Wagner & Co.,
an independent oil and gas operator with operations in Alabama, Louisiana,
Mississippi, Oklahoma, Texas and Wyoming. Mr. Finley was Chief Financial
Officer of Duer Wagner & Co. from 1982 until 1996 when he became Managing
Partner. Mr. Finley is an active investor in oil and gas production, natural
gas pipelines and real estate investments. Mr. Finley has a broad range of
experience in the management of oil and gas operations and the acquisition
and financing of oil and gas properties. Mr. Finley began his career at
Arthur Andersen & Co. as a member of the Dallas/Fort Worth oil and gas
industry team. Mr. Finley received a Bachelor of Business Administration from
the University of Texas at Austin in 1979.
Mr. Hawthorn became a Director in April of 1997. He is a Vice President
and Director of R. Lacy, Inc., an independent oil and gas company in
Longview, Texas. Prior to joining R. Lacy, Inc. in 1978, he was a partner of
the law firm of Kenley, Boyland, Hawthorn, Starr and Coghlan in Longview,
Texas. Mr. Hawthorn is a member of the Texas Mid-Continent Oil and Gas
Association. Mr. Hawthorn holds a B.B.A. Degree from the University of Texas
at Austin and a J.D. from the University of Texas Law School.
Mr. Lewis has served the Company as a Director since its inception in
1989. He also served as the Company's Vice President, Secretary and Treasurer
from the Company's inception through April 5, 1996. Mr. Lewis has served as
Vice President and Chief Financial Officer of Hawkins Oil & Gas, Inc. from
1988 to present. Previously, he was employed by Hawkins Oil & Gas as
Controller (1986 to 1988), as Manager of Financial Accounting (1984 to 1986),
Senior Financial Accountant (1981 to 1984) and by Arthur Young & Company (now
Ernst & Young) as Senior Accountant. He holds a B.S. Degree in Accounting
and an M.B.A. Degree from Kansas State University.
Mr. Ramsey became Chief Executive Officer and a Director in December
1996 and became President in February 1997. Mr. Ramsey served as Vice
President of Nuevo Energy Company, an independent energy company, from 1990
to 1996. From 1990 to 1996, he was employed by Torch Energy Advisors
Incorporated, a company providing management and operations services to
energy companies including Nuevo Energy Company, last serving as a director
and Executive Vice President. Mr. Ramsey joined Torch Energy as Vice
President of Land and was named Senior Vice President of Land in 1992. Prior
to joining Torch Energy, Mr. Ramsey was self-employed for eleven years. Mr.
Ramsey holds a B.B.A. in Marketing from the University of Texas at Austin and
a J.D. from South Texas College of Law. Mr. Ramsey is a graduate of Harvard
Business School's Advanced Management Program. He is licensed to practice law
in the State of Texas.
Mr. Smith has served as Director since June 1993. He founded and was
President of Mid-South Compressors, Inc. and its successor in Columbia,
Mississippi from 1985 to 1996. Mid-South Compressors, Inc. became a wholly
owned subsidiary of the Company in 1993 and was merged into Equity
Compressors, Inc. another wholly owned subsidiary of the Company in 1995.
From 1981 to 1985, he was the Branch Manager of Compressor Systems, Inc.
Previously, he was the founder and President of Oilfield Maintenance Service,
Inc. from 1974 to 1981, and Division Compressor Mechanic of Shell Oil Company
from 1967 to 1974.
Mr. Stephenson became a Director in December of 1996. He is President
and owner of Sandollar Oil & Gas, Inc., an independent exploration and
production company located in Longview, Texas. Prior to forming Sandollar in
1981, Mr. Stephenson was employed from 1971 to 1980 by Ensearch Exploration,
Inc. in Dallas, Texas, in various engineering capacities, with his last
assignment being Vice President of Production. He began his career in 1968
as an engineer with Shell Oil Company in New Orleans, Louisiana. Mr.
Stephenson received his B.S. degree in Petroleum Engineering from Louisiana
Tech University in 1968. He is a Certified Professional Engineer in the
State of Texas.
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<PAGE>
Mr. Warren became a Director in December of 1996. He is a founding
principal of Energy Transfer Company, an energy investment firm, which was
formed in 1996. Prior to forming Energy Transfer Company, he was employed by
Endevco, Inc., a natural gas pipeline and processing company and predecessor
of Cornerstone Natural Gas, Inc., from 1981 to 1992. At Endevco, Mr. Warren
served in many capacities, including President, Chief Operating Officer and
Director. He and a group of investors acquired controlling interest of
Cornerstone Natural Gas, Inc. in 1993 as part of a pre-packaged plan, whereby
Endevco and certain of its subsidiaries filed voluntary petitions under
Chapter 11 of the Bankruptcy Code with the U.S. Bankruptcy Court for the
Eastern District of Texas, Sherman Division. On November 2, 1993,
Cornerstone Natural Gas, Inc. emerged from such pre-packaged plan and Mr.
Warren and the investor group acquired their interest in Cornerstone. Mr.
Warren served as President, Chief Operating Officer and a director of
Cornerstone unit its sale to El Paso Natural Gas Company in 1996. Prior to
joining Endevco, Mr. Warren was employed by Lone Star Gas Company.
Dennis W. Estis became a director of the Company in August of 1997 in
connection with the Company's acquisition of Ouachita Energy Corporation. Mr.
Estis is the President and Chief Operating Officer of such subsidiary. Mr.
Estis founded Ouachita Energy Corporation in 1976. Mr. Estis holds a
Bachelor of Science in Chemical Engineering and a M.B.A. Degree from
Louisiana State University.
Andy Payne became a Director of the Company and a Senior Vice President
of the Company's wholly owned subsidiary, Ouachita Energy Corporation in
August of 1997 in connection with the Company's acquisition of Ouachita
Energy Corporation. Mr. Payne had served as Executive Vice President and
Chief Financial Officer of Ouachita Energy Corporation from September 1995 to
July 1997 and before that, he was a Vice President and Chief Financial
Officer of Weatherford Compression. Mr. Payne holds a Bachelor of Arts in
Accounting from Texas Tech University.
COMMITTEES OF THE BOARD OF DIRECTORS AND MEETINGS
The Company has standing Executive, Audit and Human Resources Committees
of the Board of Directors. Presently, the members of the Executive Committee
are Richard D. Brannon, Charles M. Butler, III, Ray C. Davis, Matthew S.
Ramsey, Dennis W. Estis and Kelcy L. Warren, the members of the Audit
Committee are Richard D. Brannon, Ray C. Davis, Clifford S. Lewis, Neal A.
Hawthorne and James D. Finley, and the members of the Human Resources
Committee are Richard D. Brannon, Charles M. Butler, III, Clifford S. Lewis,
Matthew S. Ramsey, Jon P. Stephenson and Kelcy L. Warren. The function of
the Executive Committee is to act for the Board between Board meetings. The
Executive Committee was formed on December 16, 1997 and held 1 meeting during
1997. The primary functions of the Audit Committee are to monitor the
Company's internal accounting controls, review quarterly and annual financial
information and review the services and fees of the independent auditors.
The Audit Committee met one time during the fiscal year ended December 31,
1997. The primary functions of the Human Resources Committee are to review
and approve management's recommendations concerning compensation of executive
officers and certain other employees and to administer the Company Employee
Stock Option Plan. The Human Resources Committee has the authority, in its
discretion, to select the eligible officers and employees to whom options
shall be granted and the number of shares of the Company's Common Stock to be
subject to such options. The Human Resources Committee also serves to
evaluate top management and their successors within the Company. The Human
Resources Committee met four times during the fiscal year ended December 31,
1997.
The Board of Directors met eight times during fiscal 1997. All
directors were present for at least 75% of the aggregate of the meetings of
the Board of Directors and of the committees of the Board on which each
director served.
DIRECTOR COMPENSATION
Directors of the Company who are not also employees of the Company are
paid an annual retainer fee of $6,000, payable quarterly, plus an additional
payment of $500 for each directors' and committee meeting attended
-9-
<PAGE>
in person or held by means of conference telephone calls. Options to
purchase 100,000 shares of Common Stock were issued to Andy Payne in August
of 1997.
Upon joining the board of Directors on April 21, 1997, Neil A. Hawthorne
and James D. Finley were each granted options to purchase 10,000 shares of
Common Stock. With reelection to the Board of Directors on May 21, 19987,
Don Smith was issued options on 10,000 shares of Common Stock. On May 21,
1997, all non-officer Directors were each issued options to purchase 5,000
shares of Common Stock. The exercise price of all options granted in 1997
was equal to the fair market value of the Common Stock on the date of grant.
The options were granted for a term of 40 years.
The Company entered into an agreement with Richard D. Brannon whereby he
was paid $10,000 per month for the first three months of 1997 for his efforts
in developing business opportunities for the Company's compressor leasing
business. Commencing June 1997, Mr. Brannon was retained as a business
development consultant for which he is paid $5,000 per month.
EMPLOYMENT AGREEMENT
Matthew S. Ramsey and Jack D. Brannon are each parties to Amended and
Restated Change of Control Agreements pursuant to which such executive
officers are entitled to payments equal to the sum of (i) one years' salary
plus (ii) the greater of such executive's last year bonus or the bonus such
executive would had earned for the current fiscal year under any bonus plan
in effect for the Company at the time of such termination if such executive
is terminated without cause following a change of control. Such amount shall
be paid to the terminated executive in either a lump sum or in monthly
installments over 12 months at the election of the terminated employee. Such
executive shall be entitled to such severance pay if following a change of
control of the Company, the executive is asked to relocate or his salary and
bonus is reduced.
In connection with the acquisition of Ouachita Energy Corporation,
Dennis W. Estis, Andy Payne and Dan McCormick each entered into employment
agreements with the Company and its wholly owned subsidiary Ouachita Energy
Corporation. The employment agreement with Mr. Estis had an initial term of
five years with automatic one year extensions at the end of such initial term
unless either the Company or Mr. Estis elects not to extend the term of such
agreement. Mr. Estis is entitled to (i) a base salary of $175,000 per year,
(ii) a guaranteed minimum bonus of $65,000 during the term of his employment
agreement and (iii) such bonus as may be determined by the Board of
Directors. Such Agreement also provides that in the event of a change of
control of the Company, Mr. Estis is entitled to terminate his employment
agreement and receive a lump sum payment equal to the sum of (1) Mr. Estis'
accrued salary through the date of termination and (2) a prorata share of any
bonus that Mr. Estis is entitled to under the bonus plans in effect at the
time of such termination including a prorata amount of the guaranteed bonus
described above. Such employment agreement restricts Mr. Estis from
competing against the Company or soliciting the Company's employees or
customers for a period of 36 months following termination of his employment.
Mr. Payne's employment contract has a two year term subject to automatic
one year extensions unless either the Company or Mr. Payne elects not to
extend the term of such agreement. Under such Employment Agreement, Mr.
Payne is entitled (i) a base salary of $115,000, (ii) during the first two
years of the term of such agreement, a minimum bonus of $35,000 per year and
(iii) such other bonus as may be determined by the Board of Directors of the
Company. In connection with the execution of such agreement, Mr. Payne
received stock options under the Company Employee Stock Option Plan to
purchase 100,000 shares of common stock. Mr. Payne's employment contract
provides that following a change of control of the Company and reduction of
Mr. Payne's salary or relocation, then Mr. Payne may terminate his Employment
Agreement and receive a lump sum payment equal to (1) one years' salary and
(2) an amount equal to the bonus that Mr. Payne would have earned over the
fiscal year during which such termination occurred. Mr. Payne's employment
agreement restricts him from competing against the Company or its
subsidiaries or soliciting the Company's or its subsidiaries' customers or
employees for an one year period following the termination of his employment.
-10-
<PAGE>
Mr. McCormick's employment contract has a two year term subject to
automatic one year extensions unless either the Company or Mr. McCormick
elects not to extend the term of such agreement. Under such Employment
Agreement, Mr. McCormick is entitled (i) a base salary of $115,000, (ii)
during the first two years of the term of such agreement, a minimum bonus of
$27,000 per year and (iii) such other bonus as may be determined by the Board
of Directors of the Company. In connection with the execution of such
agreement, Mr. McCormick received stock options under the Company Employee
Stock Option Plan to purchase 100,000 shares of common stock. Mr.
McCormick's employment contract provides that following a change of control
of the Company and reduction of Mr. McCormick's salary or relocation, then
Mr. McCormick may terminate his Employment Agreement and receive a lump sum
payment equal to (1) one years' salary and (2) an amount equal to the bonus
that Mr. McCormick would have earned over the fiscal year for which such
termination occurred. Mr. McCormick's employment agreement restricts him
from competing against the Company or its subsidiaries or soliciting the
Company's or its subsidiaries' customers or employees for an one year period
following the termination of his employment.
PROPOSAL TWO
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board of Directors has unanimously selected Coopers & Lybrand as the
independent auditors for the Company for its 1998 fiscal year. Although the
Board is not required to submit its selection of auditors for stockholder
approval, the Board has elected to seek ratification by the stockholders at
the Annual Meeting. A representative of Coopers & Lybrand, who will attend
the Annual Meeting, will have the opportunity to make a statement if he or
she desires to do so and will be available to answer appropriate questions.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
Certain information with respect to the following table sets forth all
compensation paid for services rendered in all capacities to the Company and
its subsidiaries during the fiscal years ended December 31, 1996, 1995 and
1994 to (a) each person serving as the Company's chief executive officer
during fiscal 1996 and (b) each of the Company's most highly compensated
executive officers whose aggregate compensation during fiscal 1996 exceeded
$100,000.
<TABLE>
Long Term Compensation Awards
Annual Compensation Number of Shares
Other Securities All Other
Name and Principal Fiscal Annual Underlying Compensation
Position Year Salary(1) Bonus Compensation Options (2)
---- --------- ----- ------------ ------- ---
<S> <C> <C> <C> <C> <C> <C>
Matthew S. Ramsey 1997 175,000 87,500 0 213,890 $1,010
Chief Executive 1996 $ 6,731 $ 0 0 0 $ 0
Officer
Jack D. Brannon 1997 $115,000 $57,500 0 130,560 0
Dennis W. Estis 1997 75,059 32,813 0 0 $1,351
</TABLE>
(1) Includes all before-tax contributions to the Employee 401(k) Plan.
-11-
<PAGE>
(2) Other compensation consists solely of employer contributions to the
Employee 401(k) Plan. Does not include the value of any perquisites because
the aggregate amount of such compensation does not exceed the lesser of
$50,000 or 10% of the total amount of annual salary and bonus for any named
individual.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information with respect to
options granted to the named executive officers of the Company during fiscal
1997. The Company has never granted any stock appreciation rights.
<TABLE>
% of Total
Number of Options/SARs
Securities Granted to
Underlying Options/ Employees in Exercise or
Name SARs Granted (f) Fiscal Year Base Price ($/Sh) Expiration Date
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Matthew S. Ramsey 175,000 12.46% $1.3125 2/24/2037
Matthew S. Ramsey 38,890 2.77% $2.2500 12/29/2037
Jack D. Brannon 115,000 8.19% $1.3125 2/24/2037
Jack D. Brannon 25,560 1.82% $2.2500 12/29/2037
Dennis W. Estis 38,890 2.77% $2.2500 12/29/2037
Andy Payne 100,000 7.12% $2.0600 8/6/2037
25,560 1.82% $2.2500 12/29/2037
</TABLE>
- --------------------
(1) Consists solely of options to acquire shares of Common Stock. The
options were granted for a term of 40 years, subject to earlier termination
in certain events related to the termination of employment. The options
become exercisable in five equal annual installments commencing on the
anniversary date of the date of grant.
(2) The exercise price of the options is equal to the fair market value of
the Common Stock on the date of grant.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table sets forth certain information with respect to
options exercised by the named executive officers of the Company during
fiscal 1997, and the number and value of unexercised options held by such
executive officers at the end of the fiscal year.
-12-
<PAGE>
<TABLE>
Number of Securities Value of Unexercised
Underlying Unexercised In-The-Money Options
at December 31, 1997 at December 31, 1997
Shares ---------------------------- ----------------------------
Acquired Value
Name on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ---------------- ----------- -------- ----------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Jack Brannon 0 $0 0 140,560 0 $107,813
Matthew Ramsey 0 $0 0 213,890 $164,063
Andy Payne 0 $0 0 125,560 0 $ 19,000
Dennis Estis 0 $0 0 38,890 0 0
</TABLE>
- -------------------
(1) Market value of the underlying shares of Common Stock at the date of
exercise or fiscal year-end, as the case may be, minus the option exercise
price and multiplied by the applicable number of shares. The last sale price
for the Company's Common Stock as quoted on the Nasdaq Small Cap Market on
December 31, 1997, the last trading day of the fiscal year, was $2.25.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's directors and executive officers, and persons who own
more than ten percent of the Common Stock, to report their initial ownership
of the Common Stock and any subsequent changes in that ownership to the SEC,
and to furnish the Company with a copy of each such report. SEC regulations
impose specific due dates for such reports, and the Company is required to
disclose in this Proxy Statement any failure to file by these dates during
and with respect to fiscal 1997.
To the Company's knowledge, based solely on review of the copies of such
reports furnished to the Company and written representations that no reports
were required, during and with respect to fiscal 1997, all Section 16(a)
filing requirements applicable to its officers, directors and more than ten
percent stockholders were complied with, except that Frank Gagliardi, Vice
President, inadvertently failed to file a Form 3 in connection with his
election as an officer in May of 1997.
OTHER MATTERS
MATTERS WHICH MAY COME BEFORE THE MEETING
The Board of Directors does not intend to bring any other matters before
the meeting, nor does the Board of Directors know of any matters which other
persons intend to bring before the meeting. If, however, other matters not
mentioned in this Proxy Statement properly come before the meeting, the
persons named in the accompanying Proxy Card will vote thereon in accordance
with the recommendation of the Board of Directors.
REMINDER: PLEASE SIGN, DATE AND RETURN YOUR PROXY CARD TO ASSURE THAT
ALL OF YOUR SHARES WILL BE VOTED.
-13-
<PAGE>
[FORM OF PROXY - FRONT SIDE]
OEC COMPRESSION CORPORATION
BOARD OF DIRECTORS PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD AT
11:00 A.M. LOCAL TIME ON JUNE 11, 1998, AT THE IVORY ROOM OF THE STONELEIGH
HOTEL, 2927 MAPLE AVENUE, DALLAS, TEXAS 75201
The undersigned stockholder(s) of OEC Compression Corporation (the
"Corporation") do(es) hereby nominate, constitute and appoint JACK D.
BRANNON, as proxy of the undersigned, with full powers of substitution and
resubstitution, to represent and vote the shares of capital stock of the
Corporation held of record by the undersigned on the record date for the
above-described annual meeting, at such meeting and at any adjournment
thereof as follows:
PROPOSAL ONE: TO ELECT DIRECTORS OF THE COMPANY:
Charles M. Butler, III, James D. Finley, Neal A. Hawthorn, Clifford S.
Lewis, Don E. Smith, Richard D. Brannon, Ray C. Davis, Matthew S. Ramsey,
Jon P. Stephenson, Kelcy L. Warren, Dennis W. Estis and Andy Payne.
[ ] FOR listed nominees [ ] WITHHOLD AUTHORITY
(except do not vote for to vote for
the nominee(s) whose name(s)
I have written below).
---------------------------------------------
PROPOSAL TWO: TO RATIFY THE SELECTION OF COOPERS & LYBRAND, TULSA, OKLAHOMA,
AS INDEPENDENT AUDITOR FOR THE COMPANY FOR ITS FISCAL YEAR
1998; AND
[ ] FOR [ ] AGAINST [ ] ABSTAIN
TO TRANSACT SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING OR
ANY ADJOURNMENT THEREOF.
[FORM OF PROXY - REVERSE SIDE]
(continued from other side)
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS AND WILL BE
VOTED IN ACCORDANCE WITH THE SPECIFICATIONS MADE ABOVE. IF A CHOICE IS NOT
INDICATED WITH RESPECT TO ANY OF THE ABOVE PROPOSALS, THIS PROXY WILL BE
VOTED "FOR" SAID PROPOSAL. IF ANY OTHER MATTERS SHOULD BE BROUGHT BEFORE THE
MEETING, THE PROXY WILL VOTE ON SUCH MATTERS IN ACCORDANCE WITH HIS BEST
JUDGMENT. THIS PROXY IS REVOCABLE AT ANY TIME BEFORE IT IS EXERCISED.
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<PAGE>
DATED this ____ day of __________, 1998.
-------------------------------------------
Signature(s) of Stockholder(s)
Joint owners must EACH sign. Please sign EXACTLY as your name(s) appear(s)
on this card. When signing as attorney, trustee, executor, administrator,
guardian or corporate officer, please give your FULL title.
PLEASE SIGN, DATE AND MAIL TODAY.
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