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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 240.14a-11(c) or 240.14a-12
CET ENVIRONMENTAL SERVICES, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
(1) Title of each class of securities to which transaction applies:
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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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CET ENVIRONMENTAL SERVICES, INC.
7670 South Vaughn Court
Englewood, Colorado 80112
(303) 708-1360
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 15, 1997
TO THE SHAREHOLDERS OF CET ENVIRONMENTAL SERVICES, INC.:
NOTICE HEREBY IS GIVEN that the Annual Meeting of Shareholders of CET
Environmental Services, Inc., a California corporation (the "Company"), will be
held at the Holiday Inn, 7770 South Peoria Street, Englewood, Colorado, on
Thursday, May 15, 1997, at 9:00 a.m., Mountain Time, and at any and all
adjournments thereof, for the purpose of considering and acting upon the
following matters.
1. The election of seven (7) Directors of the Company to serve until the
next Annual Meeting of Shareholders and until their successors have been duly
elected and qualified;
2. The ratification of the appointment of Grant Thornton LLP, as the
Company's independent auditors; and
3. The transaction of such other business as may properly come before the
meeting or any adjournment thereof.
Only holders of the no par value common stock of the Company of record at
the close of business on April 10, 1997, will be entitled to notice of and to
vote at the Meeting or at any adjournment or adjournments thereof. The proxies
are being solicited by the Board of Directors of the Company.
All shareholders, whether or not they expect to attend the Annual Meeting
of Shareholders in person, are urged to sign and date the enclosed Proxy and
return it promptly in the enclosed postage-paid envelope which requires no
additional postage if mailed in the United States. The giving of a proxy will
not affect your right to vote in person if you attend the Meeting.
BY ORDER OF THE BOARD OF DIRECTORS
STEVEN H. DAVIS, PRESIDENT
Englewood, Colorado
April 10, 1997
<PAGE>
CET ENVIRONMENTAL SERVICES, INC.
7670 SOUTH VAUGHN COURT
ENGLEWOOD, COLORADO 80112
(303) 708-1360
------------------------------
PROXY STATEMENT
------------------------------
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 15, 1997
GENERAL INFORMATION
The enclosed Proxy is solicited by and on behalf of the Board of Directors
of CET Environmental Services, Inc., a California corporation (the "Company"),
for use at the Company's Annual Meeting of Shareholders to be held at the
Holiday Inn, 7770 South Peoria Street, Englewood, Colorado, on Thursday, May 15,
1997, at 9:00 a.m., Mountain Time, and at any adjournment thereof. It is
anticipated that this Proxy Statement and the accompanying Proxy will be mailed
to the Company's shareholders on or about April 18, 1997.
Any person signing and returning the enclosed Proxy may revoke it at any
time before it is voted by giving written notice of such revocation to the
Company, or by voting in person at the Meeting. The expense of soliciting
proxies, including the cost of preparing, assembling and mailing this proxy
material to shareholders, will be borne by the Company. It is anticipated that
solicitations of proxies for the Meeting will be made only by use of the mails;
however, the Company may use the services of its Directors, Officers and
employees to solicit proxies personally or by telephone, without additional
salary or compensation to them. Brokerage houses, custodians, nominees and
fiduciaries will be requested to forward the proxy soliciting materials to the
beneficial owners of the Company's shares held of record by such persons, and
the Company will reimburse such persons for their reasonable out-of-pocket
expenses incurred by them in that connection.
All shares represented by valid proxies will be voted in accordance
therewith at the Meeting.
The Company's Annual Report for the year ended December 31, 1996, is being
simultaneously mailed to the Company's shareholders, but does not constitute
part of these proxy soliciting materials.
SHARES OUTSTANDING AND VOTING RIGHTS
All voting rights are vested exclusively in the holders of the Company's no
par value common stock, with each share entitled to one vote. Only shareholders
of record at the close of business on April 10, 1997, are entitled to notice of
and to vote at the Meeting or any adjournment thereof. On April 18, 1997, the
Company had 5,798,585 shares of its no par value common stock outstanding, each
share of which is entitled to one vote on all matters to be voted upon at the
Meeting. Under California law, shareholders are permitted to cumulate votes for
the election of directors whose names have been placed in nomination.
Therefore, in voting for directors, each outstanding share of Common Stock would
be entitled to seven votes which may be cast for one candidate or distributed in
any manner among the nominees for director. However, the right to cumulate
votes in favor of one or more candidates may not be exercised until the
candidate or candidates have been nominated and any shareholder has given notice
at the Annual Meeting of the intention to cumulate votes.
<PAGE>
The proxy holders (if authority to vote for one or more nominees is not
withheld) will have full discretion and authority to vote cumulatively and to
allocate votes among any or all of the Board of Directors nominees as they may
determine or, if authority to vote for a specified candidate or candidates has
been withheld, among those candidates for whom authority to vote has not been
withheld.
A majority of the Company's outstanding common stock represented in person
or by proxy shall constitute a quorum at the Meeting.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the number and percentage of shares of the
Company's no par value common stock owned beneficially, as of April 10, 1997, by
any person, who is known to the Company to be the beneficial owner of 5% or more
of such common stock, and, in addition, by each Director of the Company, and
Nominee for Director, and by all Directors, Nominees for Director and Officers
of the Company as a group. Information as to beneficial ownership is based upon
statements furnished to the Company by such persons.
Name and Address Amount and Nature of Percent
of Beneficial Owners Beneficial Ownership of Class
-------------------- -------------------- --------
Craig C. Barto 703,554 12.1%
2440 Bayshore Drive
Newport Beach, CA 92663
Douglas W. Cotton 662,314 (1) 11.4%
Four Bowditch
Irvine, CA 92720
Steven H. Davis 1,290,563 (2) 22.3%
7625 S. Yampa Street
Aurora, CO 80016
John G. L. Hopkins 608,025 10.5%
120 West Dayton #A-7
Edmonds, WA 98020
Robert S. Coldren -0- --
200 East Sandpoint, 4th Floor
Santa Ana, CA 92707
Robert A. Taylor 10,496 0.2%
9870 East Alameda
Denver, CO 80231
Rick C. Townsend -0- --
10816 Eagle Crest Court
Parker, CO 80134
All directors, nominees for
director and executive officers
as a group (7 persons) 3,306,920 57.0%
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(1) Includes 2,000 shares underlying stock options exercisable within 60 days
held by Mr. Cotton's wife.
(2) Includes 1,000 shares held by the wife of Mr. Davis. Also includes 73,656
shares held by relatives of Mr. Davis of which he disclaims beneficial
ownership.
There are no known agreements, the operation of which may at a subsequent
date result in a change in control of the Company.
ELECTION OF DIRECTORS
The Company's Bylaws have been amended to provide that effective at the
Annual Meeting of Shareholders that the Board of Directors will consist of four
to seven members. The Board of Directors recommends the election as Directors
of the seven (7) nominees listed below, to hold office until the next Annual
Meeting of Shareholders and until their successors are elected and qualified or
until their earlier death, resignation or removal. Each of the current members
of the present Board of Directors has been nominated for reelection. The
persons named as "Proxies" in the enclosed form of Proxy will vote the shares
represented by all valid returned proxies in accordance with the specifications
of the shareholders returning such proxies. If at the time of the Meeting any
of the nominees named below should be unable to serve, which event is not
expected to occur, the discretionary authority provided in the Proxy will be
exercised to vote for such substitute nominee or nominees, if any, as shall be
designated by the Board of Directors.
The following table sets forth the name and age of each nominee for
Director, indicating all positions and offices with the Company presently held,
and the period during which each person has served as a Director:
Positions and Offices
Name Age Held and Term as a Director
---- --- ---------------------------
Craig C. Barto 38 Director since 1991
Douglas W. Cotton 45 Executive Vice President, Chief Operating
Officer, Secretary and Director since 1991
Steven H. Davis 43 Chief Executive Officer, President
and Director since 1991
John G. L. Hopkins 48 Senior Vice President and Director
since 1991
Robert S. Coldren 43 Director since 1996
Robert A. Taylor 51 Director since 1996
Rick C. Townsend 46 Executive Vice President, Chief Financial
Officer and Nominee for Director
There is no family relationship between any Director, Nominee for Director
or Executive Officer of the Company.
The Company has no Nominating or Compensation Committee, but does have an
Audit Committee and an Executive Committee.
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The Audit Committee presently consists of Craig C. Barto, Robert S. Coldren
and Robert A. Taylor. The Audit Committee reviews financial statements and data
with the Company's independent accountants before the information and data are
released to the public. During 1996, the Audit Committee met one(1) time.
The Executive Committee consists of Steven H. Davis, John G.L. Hopkins and
Douglas W. Cotton. The Executive Committee has authority, during the intervals
between the meetings of the Board of Directors, in the management of the
business and affairs of the Company not contrary to the specific direction of
the Board of Directors and except as provided by the Company's Bylaws. During
1996, the Executive Committee held in excess of ten(10) meetings.
Rick C. Townsend currently serves as an ex-officio member of both
committees.
Set forth below are the names of all directors, nominees for director and
executive officers of the Company, all positions and offices with the Company
held by each such person, the period during which he has served as such, and the
principal occupations and employment of such persons during at least the last
five years:
CRAIG C. BARTO has been a director of the Company since 1991. He is also
the President and Chairman of the Board of Directors of Signal Hill
Petroleum, Inc., Barto/Signal Petroleum, Inc., Signal Hill Operating, Inc., and
Signal Oil and Refining, Inc., which operate businesses such as Paramount and
Fletcher oil refineries. A graduate of UCLA with a degree in Economics,
Mr. Barto was instrumental in the growth of the Signal Hill Petroleum companies
in the oil business in 1979 with the reclamation of a marginal operation in the
West Newport Oil Field in Orange County, California. In addition to the oil and
gas operations, Mr. Barto is also responsible for the commercial and residential
development of over 100 acres of some of the last undeveloped hilltop property
in Southern California.
DOUGLAS W. COTTON has served as the Company's Executive Vice President and
a director since 1991 and is responsible for all aspects of the Company's
operations in the Southwest, and provides guidance for marketing and sales to
commercial clients nationwide. He was appointed Chief Operating Officer in
October, 1996. Prior to joining the Company, Mr. Cotton served as Vice
President of Ecova Corporation and worked for 13 years at IT Corporation where
he held various positions culminating in serving as General Manager for the Gulf
Coast Region. He has more than 20 years of experience managing on-site
biological, chemical and physical remediation of hazardous wastes in sludge,
soil and groundwater using a variety of innovative technologies. His knowledge
of the industry has been gained at more than 100 remediation projects ranging
from $100,000 to $45 million, including Superfund sites, emergency response
cleanups and large excavation/on-site treatment projects.
STEVEN H. DAVIS has served as the Company's Chief Executive Officer,
President and a director since 1991. Prior to that time he was operating partner
of Lincoln Property Company which developed over 3 million square feet of
buildings in California, Nevada and Colorado. He has almost 20 years of
experience in construction, financing and developing industrial real estate.
Mr. Davis graduated from Brown University with an emphasis in Economics and
obtained an MBA from the University of Southern California. As President,
Mr. Davis manages the Company's business affairs and has been instrumental in
securing financing, negotiating bonding agreements, projecting and analyzing the
feasibility of expansion, mergers and acquisitions, and formulating business
relationships with customers, financial entities and the legal community.
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<PAGE>
JOHN G.L. HOPKINS served as the Company's Senior Vice President and General
Manager since 1990 and as a director since 1991. From 1990 to October 1996, he
was also Chief Operating Officer. Since October 1996 he has been Senior Vice
President - Federal Programs. With more than 20 years of experience in managing
large-scale hazardous waste remediation projects, Mr. Hopkins is presently
responsible for the Company's operations in the Northwest and all Federal
government programs. Previously, he held senior management positions with
Hydro-Search, Inc., Riedel Environmental Services, Inc. and IT Corporation.
Mr. Hopkins has managed more than 500 remedial action projects in 24 states and
has negotiated and managed three large multi-year indefinite delivery contracts
with the EPA totaling more than $350 million. Mr. Hopkins graduated from the
University of Southern California in 1973 with a Bachelor of Science degree in
Chemistry and Biological Sciences. His publications include work involving
sampling protocols and emergency response.
ROBERT S. COLDREN has been a Director of the Company since 1996. He is
President of the law firm of Hart, King & Coldren in Santa Ana, California,
which he co-founded in 1982. Hart, King & Coldren currently employs
approximately 50 persons. Mr. Coldren received B.A. degrees in Political
Science and Philosophy from the University of Denver in 1975, and a J.D. degree
from Loyola Marymount University in 1978, and was admitted as an attorney in
California in 1978.
ROBERT A. TAYLOR has been a Director of the Company since 1996. He is a
veterinarian and manages the Alameda East Veterinary Hospital in Denver,
Colorado which he started in 1971. Currently, Alameda East Veterinary Hospital
employs 55 persons and provides a small animal practice specializing in
orthopedic and rehabilitation services. Dr. Taylor received a B.S. degree in
Animal Science from Texas A&M University in 1969, a D.V.M. degree from Texas A&M
University in 1970, and a M.S. degree in Veterinary Surgery from Colorado State
University in 1978.
RICK C. TOWNSEND has been Executive Vice President and Chief Financial
Officer of the Company since November 1996. From 1992 until October 1996, Mr.
Townsend held the position of Vice President and Chief Financial Officer for the
international operations of CH2M HILL, a major environmental consulting and
engineering firm. In that role, Mr. Townsend managed all financial and
administrative affairs for the unit. He also assisted in securing financing for
international environmental and infrastructure projects, including water and
wastewater treatment systems in Brazil and Canada. From 1990 until 1992, Mr.
Townsend served as Vice President for The Futures Corporation, a business
development and management services company. From 1974 until 1988, Mr. Townsend
was employed by Morrison Knudsen Corporation where he held several positions
including General Director and Group Business Manager of Morrison Knudsen
Technologies. In these positions, he was exposed to several business sectors
relevant to the Company's environmental contracting operations. Mr. Townsend
received a degree in Economics from the University of California at Los Angeles
in 1973.
The Company's Board of Directors held two (2) meetings during the year
ended December 31, 1996. Each Director attended at least 75% of the aggregate
number of meetings held by the Board of Directors and its Committees during the
time each such Director was a member of the Board or of any Committee of the
Board.
The Company's executive officers hold office until the next annual meeting
of directors of the Company, which currently is scheduled for May 15, 1997.
There are no known arrangements or understandings between any director or
executive officer and any other person pursuant to which any of the above-named
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<PAGE>
executive officers or directors was selected as an officer or director of the
Company.
No event occurred during the past five years which is material to an
evaluation of the ability or integrity of any Director or person nominated to be
Director or Executive Officer of the Company.
SECTION 16(a) BENEFICIAL REPORTING COMPLIANCE
Based solely on a review of Forms 3 and 4 and amendments thereto furnished
to the Company during its most recent fiscal year, and Forms 5 and amendments
thereto furnished to the Company with respect to its most recent fiscal year and
certain written representations, four persons who were officers and directors of
the Company failed to file on a timely basis reports required by Section 16(a)
of the Exchange Act during the most recent fiscal year. Steven H. Davis, John
G. L. Hopkins and Craig C. Barto each filed one late report which reported one
transaction, and Douglas W. Cotton filed two late reports each of which reported
one transaction.
COMPENSATION
The following table sets forth information concerning the compensation
received for services rendered in all capacities to the Company for the years
ended December 31, 1996, 1995 and 1994, by Mr. Davis, the Company's President,
Mr. Hopkins and Mr. Cotton. No other executive officer's compensation exceeded
$100,000 during such years. No restricted stock awards, stock options, long-term
incentive plan payouts or stock appreciation rights were granted to the named
executives for the years ended December 31, 1996, 1995 and 1994.
SUMMARY COMPENSATION TABLE
Other Annual
Name and Principal Position Year Salary Bonus Compensation(1)
- --------------------------- ---- ------ ----- ---------------
Steven H. Davis, 1996 $ 79,150 $0 $ 951
Chief Executive Officer 1995 $126,160 $0 $1,027
1994 $118,702 $0 $4,638
John G.L. Hopkins, 1996 $125,000 $0 $0
Senior Vice President - 1995 $124,923 $0 $0
Federal Programs 1994 $118,821 $0 $5,538
Douglas W. Cotton, 1996 $ 63,831 $0 $1,038
Executive Vice President 1995 $124,000 $5,652 $1,873
and Chief Operating Officer 1994 $118,702 $0 $ 896
- -----------------
(1) Includes matching 401K contributions by the Company and automobile
expenses.
401K PLAN
The Company has a Non-standardized Cash or Deferred Profit Sharing Plan
pursuant to which all eligible employees may contribute a portion of their
income. Company contributions to the Profit Sharing Plan are discretionary. The
Company does, however, make a matching contribution in the amount of 25 percent
of the first six percent of all elective deferrals.
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<PAGE>
STOCK OPTION PLAN
On March 1, 1995, the Company adopted an Incentive Stock Option Plan (the
"Plan") for key personnel. A total of 550,000 shares of Common Stock are
reserved for issuance pursuant to the exercise of stock options (the "Options")
which may be granted to full-time employees of the Company. The Plan is
currently administered by the Board of Directors. In addition to determining
who will be granted Options, the Board of Directors has the authority and
discretion to determine when Options will be granted and the number of Options
to be granted. The Board of Directors may grant Options intended to qualify for
special treatment under the Internal Revenue Code of 1986, as amended
("Incentive Stock Options") and may determine when each Option becomes
exercisable, the duration of the exercise period for Options and the form of the
instruments evidencing Options granted under the Plan. The Board of Directors
may adopt, amend and rescind such rules and regulations as in its opinion may be
advisable for the administration of the Plan. The Board of Directors may also
construe the Plan and the provisions in the instruments evidencing the Options
granted under the Plan and make all other determinations deemed necessary or
advisable for the administration of the Plan.
The Board of Directors has broad discretion to determine the number of
shares with respect to which Options may be granted to participants. The maximum
aggregate fair market value (determined as of the date of grant) of the shares
as to which the Incentive Stock Options become exercisable for the first time
during any calendar year may not exceed $100,000. The Plan provides that the
purchase price per share for each Incentive Stock Option on the date of grant
may not be less than 100 percent of the fair market value of the Common Stock on
the date of grant. However, any Option granted under the Plan to a person owning
more than 10 percent of the Common Stock shall be at a price of at least 110
percent of such fair market value. During May 1995, options for 181,000 shares
of Common Stock had been granted under the Plan, at an exercise price of $3.50
per share, of which options for 90,500 shares will vest over a five-year period
commencing May 1, 1996 and the remaining options for 90,500 shares will vest
over a five-year period only upon the occurrence of certain circumstances. On
December 31, 1995, 13,500 of such remaining options were granted and immediately
vested for two employees terminated in October, 1995. The Company recorded
compensation expense of $20,356 and $36,596 in 1996 and 1995, respectively,
relating to these options. Compensation expense of $22,361 will be recorded in
future periods as these options vest over a five-year period commencing December
31, 1996. During 1996, options totaling 77,000 shares of those originally
granted in May, 1995, were cancelled because the events upon which they were
contingent did not occur.
Options to purchase 5,000 shares of common stock at $3.50 per share,
granted in May 1995, were canceled prior to December 31, 1995, due to the
termination of the employment of one employee.
Prior to January 1, 1996, no options were granted to any executive officer
of the Company except Kathleen V. Dunlap, a former Treasurer and Chief Financial
Officer. Ms. Dunlap received options for 20,000 shares in the aggregate, of
which options for 10,000 shares vested during December 1995. The remaining
10,000 options, originally scheduled to vest over a five year period only upon
the occurrence of certain circumstances, were cancelled because the events upon
which they were contingent did not occur.
On January 8, 1996, the Board of Directors granted options to seven
employees to purchase an aggregate of 45,000 shares. Options as to 30,000
shares vest over a five-year period commencing on the date of grant and are
exercisable at $9.00 per share until 10 years after the date of grant. Options
as to 10,000
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<PAGE>
shares vest over a five-year period commencing on April 10, 1997. The Options
as to the remaining 5,000 shares were issued to an employee who is the wife of
Douglas W. Cotton, an Officer and Director of the Company, and vest 20%
immediately with the remainder vesting over a four-year period commencing on the
date of grant and are exercisable at $9.90 per share until five years after the
date of grant. On February 29, 1996, options to purchase 10,000 shares granted
on January 8, 1996, with an exercise price of $9.00 per share were cancelled
upon the termination of an employee.
On February 21, 1996, the Board of Directors granted options to an employee
to purchase up to 5,000 shares of Common Stock. These options vest over a
five-year period commencing on the date of grant and are exercisable at $9.70
per share until ten years after the date of grant.
On May 1, 1996, the Board of Directors granted an option to Keith Conti,
who was then the Company's principal financial officer, to purchase 10,000
shares of Common Stock at $10.625 per share. On March 28, 1997, these options
were cancelled in conjunction with the termination of Mr. Conti's employment.
On May 14, 1996, the Board of Directors granted options to seven employees
to purchase an aggregate of 22,500 shares of Common Stock at $11.875 per share.
These options vest over a five year period commencing on the date of grant, and
are exercisable until ten years after the date of grant.
On November 14, 1996, the Board of Directors granted an option to Rick C.
Townsend, the Company's Executive Vice President and Chief Financial Officer to
purchase 60,000 shares of Common Stock at $4.25 per share. This option vests as
to 20,000 shares on each anniversary of the date of grant and expires on
November 4, 2001.
On December 2, 1996, the Board of Directors granted an option to an
employee to purchase 7,500 shares of Common Stock at $5.00 per share. This
option vests as to 1,875 shares on each anniversary of the date of grant and
expires on December 2, 2001.
During 1996, unvested options totaling an aggregate amount of 24,100 shares
with an average exercise price of $7.39 were cancelled due to the termination of
seven employees. In addition, vested options totaling 900 shares with an
exercise price of $3.50 were cancelled due to a terminated employee not
exercising the options prior to the expiration date stipulated in the option
agreement.
On August 13, 1996, the Company filed a registration statement on Form S-8
to register the 550,000 shares of the Company's Common Stock reserved for the
Company's Incentive Stock Option Plan.
As of December 31, 1996, options for 41,600 shares were exercisable at
prices ranging from $3.50 to $9.90 per share. In January, 1997, options
totaling 2,800 shares were exercised at a price of $3.50 per share, yielding
$9,800 in proceeds to the Company.
If an optionee ceases to be employed by the Company for any reason other
than death or disability, the optionee may exercise all Options within three
months following such cessation to the extent exercisable on the date of
cessation. If an optionee dies while employed by the Company, or during the
three-month period following termination of the optionee's employment, or if the
optionee becomes disabled, the optionee's Options, unless previously terminated,
may be exercised, whether or not otherwise exercisable, by the optionee or his
legal representative or the person who acquires the Options by bequest or
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<PAGE>
inheritance at any time within one year following the date of death or
disability of the optionee.
An Option granted under the Plan is not transferable by the optionee other
than by will or by the laws of descent and distribution and, during the lifetime
of the optionee, may be exercised only by the optionee, his guardian or legal
representative.
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation", which requires entities to calculate the fair value of stock
awards granted to employees. This statement provides entities with the option
of either electing to expense the fair value of employee stock-based
compensation or continuing to recognize compensation expense under existing
accounting pronouncements and to provide proforma disclosures of net income and,
if presented, income per share, as if the above-mentioned fair market value
method of accounting was used in determining compensation expense.
Additionally, the statement requires that all equity awards granted to
nonemployees such as suppliers of goods and services be recognized based on fair
value.
The Company has elected the proforma method of disclosure. Under this
method, the fair value of each option grant is estimated on the date of grant
using the Black-Scholes options-pricing model with the following
weighted-average assumptions for grants used in 1996 and 1995: no expected
dividends; expected volatility of 50%; risk free interest rate of 5.5%; and
expected lives of 6 years.
Using these assumptions, the Company's net income(loss) and earnings(loss)
per common share would have been:
1996 1995
------------ ----------
Net income(loss)
As reported $(3,756,450) $1,809,251
Pro Forma (3,854,017) 1,781,220
Earnings(loss) per common share
As reported $ (0.74) $ 0.44
Pro Forma (0.76) 0.43
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Since July 1992, the Company has relied upon financing from the Birnie
Trust. The mother-in-law of Steven Davis, the Company's President, is trustee of
the Birnie Trust and Mr. Davis' wife is a beneficiary. The Company has borrowed
funds from the Birnie Trust pursuant to promissory notes due and payable on
demand with the interest payable monthly. The Birnie Trust is also an investor
in the Company's private offering of debt securities, described below. The total
borrowings since July 1, 1992, were $2,269,000. However, the maximum principal
amount outstanding at any one time was $550,000.
In 1994 and 1995, the Company provided services to Signal Hill Petroleum,
Inc., Paramount Petroleum and Fletcher Oil in the aggregate amount of
approximately $345,000 and $293,000, respectively. These services include
remediation services, ground water monitoring and site investigations for
existing properties and environmental assessments in relation to property
acquisition. Mr. Barto, Chairman of the Company, is a 50 percent owner of these
businesses.
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In March and April 1995, the Company issued debt securities in a private
offering pursuant to which it raised $890,000. In exchange for each $10,000
invested, the 19 investors were given a warrant to acquire approximately 1,312
shares of Common Stock at approximately $1.20 per share, for an aggregate of
116,768 shares, and a Subordinated Note for the amount invested. The promissory
notes were due on March 1, 1996, with interest of 10 percent per annum payable
on the first day of each month commencing on April 1, 1995. Investors who held
Subordinated Notes in the aggregate amount of $680,000 are related to Company
management. The Birnie Trust held $400,000 of such Subordinated Notes and other
relatives of Mr. Davis held $230,000 of such Subordinated Notes. A relative of
Mr. Cotton held $50,000 of such Subordinated Notes. During August 1995, one of
the Subordinated Notes in the principal amount of $80,000 was repaid. During
November and December 1995, the 19 investors exercised their warrants to
purchase a total of 116,768 shares of Common Stock. Eighteen (18) of the
investors converted a total of $127,575 of the outstanding Subordinated Notes
and one investor paid $12,600 in cash to exercise his warrant. On March 1,
1996, the remaining balances were repaid on all Subordinated Notes except for
$471,800 (comprised of a $337,000 Note held by the Birnie Trust and $134,800 of
Notes held by relatives of Mr. Davis) which was rolled over into new Notes,
payable in one year with interest due monthly at ten percent per annum. On July
24, 1996, the Company borrowed an additional $200,000 from the Birnie Trust
under a Promissory Note payable in one year at 10% interest. On March 1, 1997
the Promissory Notes to the Birnie Trust totaling $537,000 and to the relatives
of Mr. Davis totaling $134,800 were extended to February 28, 1998.
In June 1995, the Company distributed an aggregate of $900,000 to certain
shareholders as follows: Craig C. Barto--$226,497; Douglas W. Cotton--$173,140;
Steven H. Davis--$349,423; and John G.L. Hopkins--$150,940, which aggregate
amount is approximately the amount of the tax liabilities of such shareholders
resulting from the Company's former Subchapter "S" tax status. The primary
source of funds for such distribution was the proceeds from the sale of the
Subordinated Notes. Immediately after such distribution these same shareholders
loaned an aggregate of $358,000 to the Company as follows: Mr. Barto--$94,467;
Mr. Cotton--$54,030; Mr. Davis--$175,233; and Mr. Hopkins--$34,280. Such
Shareholder Loans bore interest at 10% and were repaid out of the proceeds of
the Company's initial public offering in July 1995.
On April 30, 1996, the Company loaned $105,764.38 to John G. L. Hopkins, an
Officer and Director of the Company pursuant to a demand note which bears
interest at the rate of 8.25% per annum. Interest is payable monthly and
principal is due on demand. Since that date, several additional advances have
been made to Mr. Hopkins bringing the total amount of the loan to Mr. Hopkins to
approximately $148,000 (excluding accrued interest) as of December 31, 1996. On
February 27, 1997, these loans were repaid in full by Mr. Hopkins.
In order to meet short-term operating needs, the Company from time to time
borrows money from affiliates of the Company. On November 8, 1996, the Company
borrowed $545,000 from Signal Hill Petroleum, a company controlled by Craig C.
Barto, one of the Company's directors, pursuant to a 30 day note which bears
interest at 10% per annum. The due date on the note was extended to January 15,
1997, then repaid in the amount of $300,000 on January 15, 1997, and $250,129
(including accrued interest) on February 27, 1996.
All of these transactions were approved by the Board of Directors and were
made on terms as fair and reasonable to the Company as those that could be
obtained from non-affiliated third parties. Any future transactions between the
Company and its officers, directors, employees and affiliates that are outside
the scope of the Company's employment relationship with such persons will be
subject to the approval of a majority of the disinterested members of the Board
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<PAGE>
of Directors based upon a determination that the terms are at least as favorable
to the Company as those that could be obtained from unrelated parties.
APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The independent accounting firm of Grant Thornton LLP audited the financial
statements of the Company for the year ended December 31, 1996, and has been
selected in such capacity for the current fiscal year. At the direction of the
Board of Directors, this appointment is being presented to the shareholders for
ratification or rejection at the Annual Meeting of Shareholders. If the
shareholders do not ratify the appointment of Grant Thornton LLP, the
appointment of auditors will be reconsidered by the Board of Directors.
It is expected that representatives of Grant Thornton LLP, will be present
at the meeting and will be given an opportunity to make a statement if they
desire to do so. It is also expected that the representatives will be available
to respond to appropriate questions from shareholders.
OTHER BUSINESS
As of the date of this Proxy Statement, management of the Company was not
aware of any other matter to be presented at the Meeting other than as set forth
herein. However, if any other matters are properly brought before the Meeting,
the shares represented by valid proxies will be voted with respect to such
matters in accordance with the judgment of the persons voting them. A majority
vote of the shares represented at the meeting is necessary to approve any such
matters.
ANNUAL REPORT
The Company's Annual Report for the year ending December 31, 1996,
accompanies this Proxy Statement. The Annual Report is not incorporated into
this Proxy Statement and is not to be considered part of the solicitation
material.
DEADLINE FOR RECEIPT OF SHAREHOLDER PROPOSALS
FOR THE ANNUAL MEETING TO BE HELD IN MAY 1998
Any proposal by a shareholder intended to be presented at the Company's
Annual Meeting of Shareholders to be held in May 1998 must be received at the
offices of the Company, 7670 South Vaughn Court, Englewood, Colorado 80112, no
later than December 31, 1997, in order to be included in the Company's proxy
statement and proxy relating to that meeting.
STEVEN H. DAVIS, PRESIDENT
Englewood, Colorado
April 10, 1997
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<PAGE>
P R O X Y
CET ENVIRONMENTAL SERVICES, INC.
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Steven H. Davis with the power to appoint
his substitute, and hereby authorizes him to represent and to vote as designated
below, all the shares of common stock of CET Environmental Services, Inc. held
of record by the undersigned on April 10, 1997, at the Annual Meeting of
Shareholders to be held on May 15, 1997, or any adjournment thereof.
1. The election of seven (7) Directors of the Company to serve until the
next Annual Meeting of Shareholders and until their successors have been
duly elected and qualified:
/ / FOR all nominees listed below (except as marked to the contrary)
/ / WITHHOLD authority to vote for all the nominees listed below:
<TABLE>
<S> <C>
Craig C. Barto Douglas W. Cotton
Steven H. Davis John G. L. Hopkins
Robert S. Robert A. Taylor
Coldren Rick C. Townsend
</TABLE>
[INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, CROSS
OUT THAT NOMINEE'S NAME ABOVE.]
2. The ratification of the appointment of Grant Thornton LLP as the
Company's independent auditors for the fiscal year ending December 31,
1997.
/ / FOR / / AGAINST / / ABSTAIN
3. To transact such other business as may properly come before the meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR PROPOSALS 1 AND 2.
<PAGE>
SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AT THE MEETING IN ACCORDANCE
WITH THE SHAREHOLDER'S SPECIFICATIONS ABOVE. THIS PROXY CONFERS DISCRETIONARY
AUTHORITY IN RESPECT TO MATTERS NOT KNOWN OR DETERMINED AT THE TIME OF THE
MAILING OF THE NOTICE OF THE ANNUAL MEETING OF SHAREHOLDERS TO THE UNDERSIGNED.
The undersigned hereby acknowledges receipt of the Notice of Annual Meeting
of Shareholders, Proxy Statement and Annual Report.
Dated: ________________, 1996
_____________________________
_____________________________
Signature(s) of Shareholder(s)
Signature(s) should agree with
the name(s) stenciled hereon.
Executors, administrators,
trustees, guardians and
attorneys should indicate when
signing. Attorneys should
submit powers of attorney.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF CET
ENVIRONMENTAL SERVICES, INC. PLEASE SIGN AND RETURN THIS PROXY IN THE ENCLOSED
PRE-ADDRESSED ENVELOPE. THE GIVING OF A PROXY WILL NOT AFFECT YOUR RIGHT TO VOTE
IN PERSON IF YOU ATTEND THE MEETING.
