<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No.__)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] 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 Section 240.14a-11(c) or Section 240.14a-12
NATIONAL ENVIRONMENTAL SERVICE CO.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] 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:
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(2) Form Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
NATIONAL ENVIRONMENTAL SERVICE CO.
12331 E. 60TH STREET, TULSA, OKLAHOMA 74146
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 21, 1998
MEETING NOTICE
The Annual Meeting of the Shareholders of National Environmental Service Co., an
Oklahoma Corporation, will be held at 12331 E. 60th St., Tulsa, Oklahoma, on May
21, 1998, at 1:00 p.m. for the purpose of considering and acting upon the
following:
(1) The election of five directors for a one year term.
(2) The ratification of the selection of Tullius Taylor Sartain & Sartain
LLP as independent auditors to audit the financial statements to be
included in the Annual Report to Shareholders for 1998.
(3) The transaction of any other matters that properly come before the
meeting or any adjournment thereof.
Shareholders entitled to vote are invited to attend the Annual Meeting.
The Board of Directors has fixed the close of business on April 17, 1998, as the
record date for the determination of shareholders entitled to notice and to vote
at the Annual Meeting.
The Company's Proxy Statement and Annual Report are included with this notice.
Dated: April 17, 1998
Larry G. Johnson
Vice President &
Secretary-Treasurer
REGARDLESS OF WHETHER YOU NOW EXPECT TO BE PRESENT PERSONALLY AT THE MEETING,
YOU ARE REQUESTED TO SIGN THE ENCLOSED PROXY CARD AND RETURN IT PROMPTLY IN THE
ENCLOSED SELF-ADDRESSED, POSTAGE PRE-PAID ENVELOPE.
<PAGE>
NATIONAL ENVIRONMENTAL SERVICE CO.
12331 E. 60th Street, Tulsa Oklahoma 74146
ANNUAL MEETING OF SHAREHOLDERS
MAY 21, 1998
PROXY STATEMENT
The Board of Directors solicits your proxy for use at the Annual Meeting of
National Environmental Service Co. (the "Company") to be held at 1:00 PM on May
21, 1998 at the corporate office located at 12331 East 60th Street, Tulsa,
Oklahoma. Proxy statements and proxies were mailed to shareholders on or about
April 20, 1998. A shareholder who signs and returns a proxy may revoke it or
give special voting specifications at any time before the proxy is exercised by
writing the Secretary of the Company at its offices at 12331 E. 60th St., Tulsa,
Oklahoma, 74146, by exercising a later-dated proxy or by attending the 1998
Annual Meeting in person and giving written notice to the Secretary of the
Company. The proxy will be voted in accordance with such specifications.
Stockholders of record at the close of business on April 17, 1998 will be
entitled to vote at the Annual Meeting. The Company had 7,876,143 outstanding
shares of common stock as of the close of business on March 31, 1998. The
Company has no other voting securities outstanding. Shareholders are entitled to
one vote per share on each matter. If the accompanying form of proxy is signed
and returned, the shares will be voted for each of the nominees named herein and
for the selection of Tullius Taylor Sartain & Sartain as independent auditors.
A shareholder may, with respect to the selection of directors (i) vote for the
election of all nominees named herein as directors, (ii) withhold authority to
vote for all such director nominees or (iii) vote for the election of all such
director nominees other than any nominee with respect to whom the shareholder
withholds authority to vote by so indicating in the appropriate space on the
proxy. Withholding authority to vote for a director nominee will not prevent
such director nominee from being elected.
A proxy submitted by a shareholder may indicate that all or a portion of the
shares represented by such proxy are not being voted by such shareholder with
respect to a particular matter. This could occur, for example, when a broker is
not permitted to vote stock held in street name on certain matters in the
absence of instructions from the beneficial owner of the stock. The shares
subject to any such proxy which are not being voted with respect to a particular
matter (the "non-voted shares") will not be considered shares present and
entitled to vote on such matter, although such shares may be considered present
and entitled to vote for purposes of determining the presence of a quorum.
Approval of each matter specified in the notice of the meeting requires the
affirmative vote of a majority, or in the case of the election of directors a
plurality, of the shares of common stock present in person or by proxy at the
Annual Meeting and entitled to vote on such matter. Accordingly, non-voted
shares with respect to such matters will not affect the determination of whether
such matters are approved or the outcome of the election of directors.
Abstentions from voting, which maybe specified on any proposal other than the
election of directors, will be included for purposes of determining whether the
requisite number of affirmative votes are received on any matters submitted to
the shareholders for a vote. Accordingly, an abstention will have the same
effect as a vote against any such matters.
<PAGE>
SHAREHOLDER PROPOSALS
The Company knows of no shareholder proposals to be considered at the Annual
Meeting. Shareholder proposals will be eligible for consideration for inclusion
in the Proxy Statement for the 1999 Annual Meeting if they are received by the
Secretary of the Company no later than December 18, 1998 at the address set
forth above.
ELECTION OF DIRECTORS
Proxy holders named on the proxy card will vote FOR the election of the nominees
listed below, unless otherwise instructed on the proxy cards that have been
signed and returned. If you do not wish your shares to be voted for particular
nominees, please identify the exceptions on the proxy card. If any of these
nominees should be unable to serve, the proxies will be voted by the proxy
holders for the election of such other person as they shall determine, in
accordance with their judgment. Directors are elected for one-year terms.
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Eddy L. Patterson 56 Director, President and Chief Executive Officer
Albert A. McCutchan 57 Director and Executive Vice President
E. R. Foraker 59 Director
Jerry Danielson 56 Director
W. F. Simpson 53 Director
</TABLE>
The business background of the Directors follows:
Eddy L. Patterson has served as President, Chief Executive Officer and a
Director of the Company since May 1989. Mr. Patterson also serves as Chairman
and a director of Lab One Analytical, Inc. ("Lab One") and as President and a
director of Fuel Recovery Systems, Inc.("FRS"), wholly owned subsidiaries of the
Company. Mr. Patterson was formerly the owner of an oil and gas production
company and a small manufacturing company.
Albert A. McCutchan has served as Executive Vice President and a Director
of the Company since May 1989. Mr. McCutchan also serves as a director of Lab
One, and as Vice President, Secretary and a director of FRS. Mr. McCutchan has
been employed in the underground tank service business for more than ten years.
Mr. Edward. R. Foraker has served as a Director of the Company since April
1994. Mr. Foraker is a graduate of Fresno State University and holds and MBA
from UCLA. After graduation, he taught finance at the university level and was
employed in the investment banking and brokerage industry. His entire business
experience has been in the investment and oil and gas industries. Since 1970,
Mr. Foraker has served as President and Chairman of the Board of Directors of
ECC Energy Corporation and its predecessor corporations. Mr. Foraker also served
as President and Director of WestAmerica Investment Company until the sale of
that company in June, 1997. ECC Energy Corporation engages in natural gas
exploration, development and production, and oil field service contracting out
of its Dewey, Oklahoma office.
Mr. Jerry Danielson has served as a Director of the Company since April
1994. Since November 1975, Mr. Danielson has served as Chief Executive Officer
and Chairman of the Board of Directors of Danielson Oil Company, an independent
fuel wholesale and retail company located in Ada, Oklahoma. Since January 1990,
Mr. Danielson has also served as Chief Executive Officer and Chairman of the
Board of Directors of Danco Trucking, Ltd., a petroleum products carrier located
in Ada, Oklahoma.
<PAGE>
Mr. W. F. Simpson has served as a director of the Company since January,
1997. Presently, Mr. Simpson manages personal investments. From 1985 until 1996,
Mr. Simpson was President of J P Emco, a manufacturer of plastic automotive
parts located in Ada, Oklahoma. Prior to 1985, Mr. Simpson served as plant
manager of the facility under the ownership of General Tire. Previous employment
included work for Goodyear Tire and Rubber and Merrill Lynch in Akron, Ohio.
BOARD COMPENSATION AND COMMITTEES
The Company pays each member of its Board of Directors $500 for each quarterly
Board meeting which he attends. Directors are not currently reimbursed for their
expenses incurred in attending such meetings. During 1997, Board members
attended the Board meetings as follows: Eddy Patterson, Jerry Danielson, and
Edward Foraker attended four board meetings; Albert McCutchan attended three
board meetings; and W. F. Simpson attended one board meeting. On January 23,
1997, Mr. W. F. Simpson was appointed to the Board to complete the remainder of
Mr. Jack Griffith's term. Each director received a total of $2,000 except that
Mr. Simpson received $500. Each director also participated in nine Unanimous
Consents to Action in Lieu of Board Meeting. E. R. Foraker, Jerry Danielson, and
W. F. Simpson serve on both the Audit and Compensation Committees. 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 Compensation Committee are to review and approve management's
recommendations concerning compensation of executive officers and certain other
employees and to administer the Company's 1994 Employee Stock Plan. The
Compensation 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
Compensation Committee met one time during the fiscal year ended December 31,
1997. The Company has no standing nominating committee.
EXECUTIVE OFFICERS
Executive Officers that are not Directors of the Company and their business
backgrounds are as follows:
Mr. Larry G. Johnson, Vice President, Secretary-Treasurer and Chief Financial
Officer, age 52, has served in these capacities since January 1, 1995. Mr.
Johnson also has served as the President of Lab One since March 1993. Mr.
Johnson has been employed by the Company since 1993. From April 1992 to
January 1993, Mr. Johnson served as a consultant to the Company. From 1971
to 1991, Mr. Johnson was employed by Broken Arrow Federal Savings and Loan
and served as President and Chief Executive Officer for 16 of those years.
Mr. Johnson holds an M.B.A. degree from the University of Tulsa.
Mr. James Howell, Vice President-Marketing, age 44, received a B.S. degree from
Oklahoma State University in Agricultural Engineering. Mr. Howell has held
marketing and management positions with several national companies
including Network Security and Mosler, Inc. Mr. Howell joined the Company
in 1989 as Director of Marketing. Mr. Howell has been the Vice President-
Marketing since January 1, 1995.
Mr. Chuck Nance, Vice President-Operations, age 51, has over 20 years of
experience in service station construction and underground storage tank
installation. Mr. Nance joined the Company in 1991 as a project manager and
is licensed in several states to perform all aspects of underground storage
services. Mr. Nance was named Vice President-Operations on January 1, 1995.
Prior to joining the Company , Mr. Nance was a construction manager for
over nine years with Petroleum Marketers Equipment Company, Inc.
Mr. Robert Watson, Controller, age 51 , received his degree, with honors, from
the University of Arkansas in 1969. With over 20 years experience as a CPA,
including seven years with the international firm of
<PAGE>
Arthur Young & Co. (now Ernst & Young LLP), he joined NESCO in 1996. Mr.
Watson was the Controller and Corporate Secretary-Treasurer for Lake
Country Beverage, Inc. from October 1986 to November 1995 and was a
business consultant from November 1995 to May 1996. Mr. Watson oversees all
day to day corporate accounting functions.
Executive Compensation
The following table sets forth certain information concerning the annual and
long-term compensation for the two principal executive officers of the Company.
Because no other executive officer of the Company received cash compensation
exceeding $100,000 during the year ended December 31, 1997, no disclosure
pertaining to other executives is required or provided.
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Compensation
-------------------------
Name and Other Annual All Other
Principal Position Year Salary($) Bonus Compensation Compensation
- ------------------ ---- --------- ----- ------------ ------------
<S> <C> <C> <C> <C> <C>
Eddy L. Patterson, 1997 105,042 20,484 - (1)
President & Chief 1996 61,958 7,100 - (1)
Executive Officer 1995 107,237 10,000 - (1)
Albert A. McCutchan 1997 98,286 18,435 - (1)
Executive Vice President 1996 50,981 6,400 - (1)
1995 96,921 9,000 - (1)
</TABLE>
(1) Other annual compensation did not exceed the lesser of $50,000 or 10% of
the executive's annual salary and bonus for any of the executive officers.
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information as of March 31, 1998,
regarding the ownership of the Company's common stock by (a) all persons known
by the Company to be beneficial owners of more than 5% of such stock, (b) each
director and nominee for director of the Company, (c) each of the executive
officers of the Company named in the Summary Compensation Table, and (d) all
executive officers and directors of the Company as a group. There is no other
class of securities of the Company entitled to vote at the Annual Meeting.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF AMOUNT AND NATURE
OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP PERCENT OF CLASS
- ------------------- ----------------------- ----------------
<S> <C> <C>
Eddy L. Patterson 1,793,758 shares 22.8%
12331 E. 60th St.
Tulsa, Oklahoma 74146
Albert A. McCutchan 2,052,068 shares(1) 26.1%
12331 E. 60th St.
Tulsa, Oklahoma 74146
E.R. Foraker 269,838 shares(2) 3.4%
4141 North Scottsdale Road
Suite 100
Scottsdale, Arizona 85251
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
Jerry Danielson 11,276 shares .1%
P. O. Box 1962
Ada, Oklahoma 74820
W. F. Simpson 13,806 shares .2%
201 West Kings Road
Ada, Oklahoma 74820
Dallin Bagley 1,350,000 shares 17.1%
8 Shadow Wood Lane
Salt Lake City, Utah 84103
All directors and executive
officers as a group of ten
persons 4,217,103 shares 53.5%
</TABLE>
(1) Mr. McCutchan's beneficial shares of 2,052,068 shares include 207,818
shares owned by Beverly A Ann McCutchan, his wife. Mr. McCutchan
disclaims beneficial ownership of such shares.
(2) Mr. Foraker's beneficial shares of 269,838 shares include 6,806 shares
owned by Sandra D. Foraker, his wife and 5,000 shares owned by his
children. Mr. Foraker disclaims beneficial ownership of such shares.
Except as otherwise indicated, all of the persons named above have sole voting
and investment power with respect to the shares beneficially owned by them.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the
Company's directors, executive officers and shareholders who own more than 10%
of the Company's outstanding common stock to report to the Securities and
Exchange Commission their initial ownership of the Common Stock and any
subsequent changes in that ownership and to furnish the Company with a copy of
each report. The regulations of the Securities and Exchange Commission 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 year 1997.
To the Company's knowledge, based solely on review of the copies of the reports
furnished to the Company and written representations that no other reports were
required during and with respect to fiscal 1997, all Section 16(a) filing
requirements applicable to its officers, directors and holders of more than 10%
of its outstanding shares of Common Stock were complied with.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company paid Lab One Analytical, Inc. ("Lab One") $217,000 in 1997 and
$412,000 in 1996, for analytical laboratory testing services rendered. In 1997
and 1996, the Company purchased certain insurance coverage and office supplies
on behalf of Lab One for $10,000 and $5,000, respectively. Mr. Patterson and Mr.
McCutchan, the Company's two principal shareholders, each own 50% of the capital
stock and are directors and executive officers of Lab One. Mr. Johnson, an
executive officer of the Company, is also the President of Lab One. Lab One was
acquired by the Company on January 30, 1998, for $75,000 cash and 225,000 shares
of the Company's common stock following the completion of an independent
appraisal of Lab One and the review and unanimous consent of the outside
directors of the company as to the transaction and the terms and conditions
thereof.
During 1996, the Company borrowed funds from McCutchan Patterson Partnership, a
partnership wholly-owned by Messrs Patterson and McCutchan. On June 28, 1996,
the partnership loaned $200,085 to the Company at 9.5%
<PAGE>
per annum. During 1997, the company paid $58,637 on the principal of the loan.
The balance owing on that loan on December 31, 1997 was $31,238. On November 15,
1996, the partnership loaned $200,000 to the Company at 11.0% per annum. The
loan was paid off on May 27, 1997. The Company paid the partnership interest on
these loans totaling $16,213 in 1997 and $6,883 in 1996.
The Company leases its Tulsa office and warehouse space from McCutchan-Patterson
Partnership, a partnership wholly-owned by Messrs. Patterson and McCutchan. The
lease ran from July 1, 1995 through December 31, 1997 and called for monthly
lease payments by the Company of $5,500. On February 28, 1998, the Company
acquired the office building, warehouse, and lot on which the Company's
corporate office is located. The purchase price of $600,000 was established by
an independent appraisal of the property. The acquisition was approved by
unanimous consent of the outside directors of the Company after a review of the
appraisal and the terms and conditions of the purchase.
The Company performed various environmental services related to underground
storage tanks for Danielson Oil for which it received $86,000 in 1997 and
$87,000 in 1996. Danielson Oil is principally owned by Jerry Danielson, a
Director of the Company.
INDEPENDENT AUDITORS
Tullius Taylor Sartain & Sartain LLP served as the Company's independent
auditors during 1997 and have been chosen for that capacity for 1998.
Representatives of Tullius Taylor Sartain and Sartain LLP will be present at the
Annual Meeting to respond to appropriate questions from stockholders and to make
a statement if they desire to do so.
OTHER MATTERS
The Company will bear the cost of the proxy solicitation. In addition to
solicitation by mail, the Company will request banks, brokers and other
custodian nominees and fiduciaries to supply solicitation materials by mail to
the beneficial owners of the Company's common stock of whom they have knowledge,
and will reimburse them for their expenses in so doing; and certain directors,
officers and employees of the Company, not employed for the purpose, may solicit
proxies, without additional remuneration therefore, by personal interview, mail,
telephone or telegraph.
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.
<PAGE>
NATIONAL ENVIRONMENTAL SERVICE CO.
12331 E. 60TH STREET, TULSA, OKLAHOMA 74146
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Eddy L. Patterson and Albert A. McCutchan,
and each of them, with power of substitution, as proxies, to vote all shares of
National Environmental Service Co. (the "Company") which the undersigned is
entitled to vote at the Annual Meeting of the Shareholders on May 21, 1998, at
the company's offices at 12331 E. 60th Street, Tulsa, Oklahoma at 1:00 p.m., or
any adjournment thereof, with all the powers the undersigned would have if
personally present as specified, respecting the following matters described in
the accompanying Proxy Statement and, in their discretion, on matters which come
before the meeting.
1. To elect the following nominees as directors for a one year term: Eddy L.
Patterson, Albert A. McCutchan, E. R. Foraker, Jerry Danielson, W. F.
Simpson.
<TABLE>
<S> <C> <C>
FOR all nominees (except as marked WITHHOLD AUTHORITY to vote (INSTRUCTION: To withhold authority
to the contrary at right) For all nominees to vote for any individual nominee, write
(_) (_) that nominee's name on the space below.)
</TABLE>
2. To ratify the selection of Tullius Taylor Sartain & Sartain as independent
auditors for the Company for 1998.
FOR AGAINST ABSTAIN
(_) (_) (_)
3. To transact such other business as may properly come before the meeting or
any adjournment thereof.
(CONTINUED AND TO BE SIGNED AND DATED ON THE REVERSE SIDE.)
This proxy will be voted in accordance with shareholder specifications.
Unless directed to the contrary, this proxy will be voted FOR Items 1 and 2.
Receipt of accompanying Notice of the meeting and Proxy Statement is hereby
acknowledged.
Date:_________________________________, 1998
____________________________________________
(Signature)
____________________________________________
____________________________________________
(Please Print Your Name)
(Please sign name as fully and exactly as it
appears opposite. When Signing in a
fiduciary or representative capacity, please
give full title as such. When more than one
owner, each owner should sign. Proxies
executed by a corporation should be signed
in full corporate name by duly authorized
officer.)
PLEASE MARK, SIGN, DATE AND MAIL TO THE COMPANY AT THE ADDRESS STATED ABOVE.
