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As filed with the Securities and Exchange Commission on August 10, 1998
SEC Registration No. 333-
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U.S. SECURITIES AND EXCHANGE COMMISSION
FORM S-3 REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
CET ENVIRONMENTAL SERVICES, INC.
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(Exact Name of Registrant as Specified in its Charter)
California 33-0285964
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(State or Other Jurisdiction (IRS Employer Identification Number)
of Incorporation)
7670 South Vaughn Court, Suite 130, Englewood, Colorado 80112
(303) 708-1360
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(Address, Including Zip Code, and Telephone Number, Including
Area Code, of Registrant's Principal Executive Offices)
Steven H. Davis, President
7670 South Vaughn Court, Suite 130, Englewood, Colorado 80112
(303) 708-1360
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(Name, Address and Telephone Number of Agent for Service)
Copy to:
Jon D. Sawyer, Esq.
Krys Boyle Freedman & Sawyer, P.C.
600 17th Street, Suite 2700 South Tower
Denver, Colorado 80202
(303) 893-2300
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box: ___
If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box: _X_
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering: ___
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier registration statement for the
same offering: ___
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: ___
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CALCULATION OF REGISTRATION FEE
Proposed Proposed
Maximum Maximum
Title of Each Class Offering Aggregate Amount of
of Securities to be Amount to be Price Per Offering Registration
Registered Registered<FN1> Unit<FN2> Price<FN2> Fee
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<S> <C> <C> <C> <C>
Common Stock, No 1,161,316 $1.75 $2,032,303 $615.85
Par Value
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<FN>
<FN1>
In accordance with Rules 416 and 457 under the Securities Act of 1933, this
Registration Statement also covers an indeterminable number of shares of
Common Stock, no par value, as may become issuable upon conversion of the 4%
Convertible Preferred Stock and the exercise of the Common Stock Purchase
Warrants resulting from adjustments in the conversion price of the 4%
Convertible Preferred Stock or to prevent dilution resulting from stock splits
or stock dividends in accordance with the terms of the 4% Convertible
Preferred Stock and the Common Stock Purchase Warrants.
<FN2>
Estimated solely for the purpose of calculating the registration fee pursuant
to Rule 457(c) based on the closing price of the Common Stock on the American
Stock Exchange on August 7, 1998.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION
8(a), MAY DETERMINE.
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PROSPECTUS SUBJECT TO COMPLETION DATED AUGUST 10, 1998
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF
ANY STATE.
CET ENVIRONMENTAL SERVICES, INC.
1,161,316 Shares of Common Stock
This Prospectus relates to 1,161,316 shares of common stock, no par value
(the "Common Stock" or "Shares") of CET Environmental Services, Inc., a
California corporation (the "Company"), to be offered and sold from time to
time for the accounts of the Selling Shareholders set forth herein (the
"Selling Shareholders"). All of the 1,161,316 shares of Common Stock being
offered hereby are being registered at the Company's expense pursuant to
contractual obligations of the Company incurred in connection with a private
placement of its 4% Convertible Preferred Stock and common stock purchase
warrants under the Securities Act of 1933, as amended.
Up to 1,126,316 shares of Common Stock which are being offered by the
Selling Shareholders are issuable upon the conversion of 4% Convertible
Preferred Stock (the "Preferred Stock") held by the Selling Shareholders. The
Preferred Stock is convertible into shares of Common Stock based on the stated
value of $1,000 per share of Preferred Stock divided by the Conversion Price
on the Conversion Date. The Conversion Price will be equal to 85% of the
lowest closing price of the Common Stock as reported on the American Stock
Exchange during the six trading days immediately preceding the Conversion
Date. However, in no event will the Conversion Price exceed $3.35. The
Company has the option, upon receipt of a Conversion Notice, to allow the
conversion, in whole or in part, or to pay the holder in cash in an amount
equal to the number of shares of Common Stock that would have been issued
multiplied by the closing price on the American Stock Exchange on the day
prior to the Conversion Date. The Preferred Stock may be redeemed by the
Company under certain circumstances. Any shares of Preferred Stock
outstanding on June 30, 2001, will be automatically converted into Common
Stock.
This Prospectus also covers the offering by the Selling Shareholders of
up to 35,000 shares of Common Stock that are issuable upon exercise of common
stock purchase warrants (the "Warrants") which the holders of the Preferred
Stock received together with their Preferred Stock. Each Warrant is
exercisable to purchase one share of Common Stock at $3.00 per share during
the period commencing on July 24, 1999 and ending on December 31, 2001. The
Warrants may be exercised through the payment of cash or, at the option of the
holder, through a "cashless exercise" by tendering the warrant certificate to
the Company to receive a number of shares of Common Stock equal in market
value to the difference between the market value of the shares of Common Stock
issuable upon exercise of the Warrants being tendered and the total cash
exercise price thereof.
The date of this Prospectus is __________, 1998.
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The Company will receive no part of the proceeds of sales from the
offering of Shares by the Selling Shareholders. The Company could receive up
to $105,000 from the exercise of the Warrants held by the Selling
Shareholders. The Company has no knowledge of any Selling Shareholder
actually intending to sell any Shares.
The shares of Common Stock may be sold by the Selling Shareholders in
underwritten transactions, in ordinary brokerage transactions, in transactions
in which brokers solicit purchases, in negotiated transactions, or in a
combination of such methods of sale, at market prices prevailing at the time
of sale, at prices relating to such prevailing market prices or at negotiated
prices. See "PLAN OF DISTRIBUTION." All expenses of registration incurred in
connection with this offering are being borne by the Company, but all selling
and other expenses incurred by the Selling Shareholders will be borne by such
Selling Shareholders. None of the Common Stock offered pursuant to this
Prospectus has been registered prior to the filing of the Registration
Statement of which this Prospectus is a part.
The Common Stock is listed on the American Stock Exchange under the
symbol "ENV". On August 7, 1998, the closing sale price of the Common Stock,
as reported on the American Stock Exchange, was $1.75 per share.
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK. SEE
"RISK FACTORS" BEGINNING ON PAGE 5 OF THIS PROSPECTUS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
No person is authorized in connection with any offering made hereby to
give any information or to make any representations other than as contained in
this Prospectus, and, if given or made, such information or representations
must not be relied upon as having been authorized by the Company. This
Prospectus is not an offer to sell, or a solicitation of an offer to buy, by
any person in any jurisdiction in which it is unlawful for such person to make
such an offer or solicitation. Neither the delivery of this Prospectus nor any
sales made hereunder shall under any circumstances create any implication that
the information contained herein is correct as of any time subsequent to the
date hereof.
AVAILABLE INFORMATION
The Company is subject to certain informational reporting requirements of
the Securities Exchange Act of 1934, as amended (the "1934 Act"), and in
accordance therewith files reports and other information with the Securities
and Exchange Commission (the "Commission"). These reports, proxy statements
and other information can be inspected and copied at the public reference
facilities maintained by the Commission at Room 1024 of the Commission's
office at 450 Fifth Street, N.W., Judiciary Plaza, Washington, DC 20549, and
at its regional offices located at 7 World Trade Center, Suite 1300, New York,
NY 10048 and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, IL
60661. Copies of such reports, proxy statements and other information can be
obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Judiciary Plaza, Washington, DC 20549 at prescribed rates. The
Commission maintains a Web site (http://www.sec.gov) that contains reports,
proxy and information statements and other information regarding registrants
that file electronically. Additional updating information with respect to the
securities covered herein may be provided in the future to purchasers by means
of appendices to this Prospectus.
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The Company has filed with the Commission in Washington, DC a
registration statement (herein, together with all amendments and exhibits,
referred to as the "Registration Statement") under the 1933 Act with respect
to the securities offered or to be offered hereby. This Prospectus does not
contain all of the information included in the Registration Statement, certain
items of which are omitted in accordance with the rules and regulations of the
Commission. For further information about the Company and the securities
offered hereby, reference is made to the Registration Statement and the
exhibits thereto. The Registration Statement has been filed electronically
through the Commission's Electronic Data Gathering, Analysis and Retrieval
System and may be obtained through the Commission's Web site
(http://www.sec.gov.).
The Company will provide without charge to each person to whom this
Prospectus is delivered, on the written or oral request of such person, a copy
of any document incorporated herein by reference, excluding exhibits. Requests
should be made to CET Environmental Services, Inc., 7670 South Vaughn Court,
Suite 130, Englewood, Colorado 80112, telephone (303) 708-1360, and directed
to the attention of Steven H. Davis.
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TABLE OF CONTENTS
PAGE
THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
RISK FACTORS. . . . . . . . . . . . . . . . . . . . . . . . . . . 5
RECENT EVENTS . . . . . . . . . . . . . . . . . . . . . . . . . . 9
USE OF PROCEEDS . . . . . . . . . . . . . . . . . . . . . . . . . 10
SELLING SHAREHOLDERS. . . . . . . . . . . . . . . . . . . . . . . 10
PLAN OF DISTRIBUTION. . . . . . . . . . . . . . . . . . . . . . . 11
LEGAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . 13
EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE . . . . . . . . 13
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THE COMPANY
CET Environmental Services, Inc. (the "Company") was incorporated in
February 1988 under the name "Thorne Environmental, Inc." to conduct business
in environmental consulting, engineering, remediation and construction. The
Company's initial growth resulted from its successful performance of emergency
response cleanup services in certain western states and the Trust Territory of
the Pacific Islands for the U.S. Government. The Company has since developed
a broad range of expertise in non-proprietary technology-based environmental
remediation and water treatment techniques for both the public and private
sectors throughout North and South America and the Trust Territory of the
Pacific Islands. The Company was purchased by its existing majority
shareholders in November 1991, and for the last six years has engaged in a
program of expansion through internal client development and add-on contracts,
the acquisition of personnel and assets in desirable geographic locations, and
the acquisition of smaller companies involved with target growth technologies.
The Company has built a large backlog of government work through the award of
several multi-year contracts primarily with the Environmental Protection
Agency and the Department of Defense. The Company has achieved and maintains
a balance between its commercial and government sector business through an
aggressive industrial marketing strategy. To date, the Company has performed
remediation services for both public and private sector customers at more than
500 sites.
The Company's strategy has been to distinguish itself in the market by
providing full service environmental contracting, municipal and industrial
water and wastewater treatment, and emergency response services. Through
several major government contracts and a diversified commercial client base,
the Company provides turnkey waste management for a complete range of water,
soil and air pollution issues. The Company's personnel have developed
expertise in a broad range of remediation techniques such as bioremediation,
bioventing, vapor extraction, gas/air sparging, thermal desorption, soil
washing and groundwater remediation systems. The Company also offers a broad
range of services in support of municipal and industrial water and wastewater
treatment, military base closures, and other operations with significant
environmental components. The Company believes it has gained a solid
reputation for promptly providing cost effective and innovative remediation
solutions.
In November 1996, the Company relocated its corporate headquarters to
Englewood, Colorado from Tustin, California to be more centrally located for
its expanding business. The Company also maintains offices in Tustin,
California; Richmond, California; Portland, Oregon; Edmonds, Washington;
Pasadena, Texas; New Orleans, Louisiana; Jackson, Mississippi; and Mobile,
Alabama.
The Company's headquarters are located at 7670 South Vaughn Court, Suite
130, Englewood, Colorado 80112, and its telephone number is (303) 708-1360.
The Company's fax number is (303) 708-1349 and its internet address is
http://www.cetenvironmental.com.
RISK FACTORS
An investment in the securities being offered by this Prospectus involves
a high degree of risk. In addition to the other information contained in this
Prospectus or incorporated herein by reference, prospective investors should
carefully consider the risk factors discussed below before purchasing the
shares of Common Stock offered hereby.
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This Prospectus contains and incorporates by reference forward-looking
statements within the meaning of the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995. Such statements are based on
management's current expectations and are subject to a number of factors and
uncertainties which could cause actual results to differ materially from those
described in the forward-looking statements. Reference is made in particular
to the description of the Company's plans and objectives for future
operations, assumptions underlying such plans and objectives and other
forward-looking statements included or incorporated in this Prospectus.
Factors which could cause such results to differ materially from those
described in the forward-looking statements include those set forth in the
risk factors below.
1. COSTS OF COMPLIANCE WITH, AND POTENTIAL LIABILITY UNDER,
ENVIRONMENTAL LAWS AND REGULATIONS. Due to the nature of the Company's
business and the intense regulatory climate in which it operates, the services
of the Company are subject to extensive federal, state and local laws and
regulations which are constantly changing. Such regulations impose stringent
guidelines on companies which handle hazardous materials as well as other
companies involved in various aspects of the environmental remediation
services industry. Failure to comply with applicable federal, state and local
regulations could result in substantial costs to the Company, the imposition
of penalties or in claims not covered by insurance, any of which could have a
material adverse effect on the Company's business.
In addition to the burdens imposed on Company operations by various
environmental regulations, federal law imposes strict joint and several
liability upon present and former owners and operators of facilities that
release hazardous substances into the environment and the generators and
transporters of such substances as well as persons arranging for the disposal
of such substances. All such persons may be liable for the costs of waste site
investigation, waste site clean up, natural resource damages and related
penalties and fines. Such costs can be very substantial.
Environmental remediation operations may expose the Company's employees
and others to dangerous and potentially toxic quantities of petroleum or other
hazardous products. Such products can cause cancer and other debilitating
diseases. Although the Company takes extensive precautions to minimize worker
exposure and has not experienced any such claims from workers or others, there
can be no assurance that the Company will avoid liability to persons who
contract diseases which may be related to such exposure. Such persons
potentially include the Company's employees, persons occupying or visiting
facilities in which contaminants are being, or have been, removed or stored,
persons in surrounding areas, and persons engaged in the transportation and
disposal of waste material. In addition, the Company is subject to general
risks inherent in the construction industry. The Company may also be exposed
to liability from the acts of its subcontractors or other contractors on a
work site.
Currently, the Company has $6,000,000 per occurrence and $7,000,000
aggregate comprehensive general liability insurance coverage. In addition, the
Company carries environmental impairment liability insurance in the amount of
$2,000,000 per occurrence with a $2,000,000 aggregate. Errors and omissions
liability insurance for petroleum and chemical exposure for claims made in the
coverage period is also provided. While the Company has never been subject to
a claim relating to petroleum/chemical exposure and believes that its current
coverage is adequate, there can be no assurance that the Company will be able
to maintain its existing coverage, that claims will not exceed the amount of
insurance coverage or that there will not be claims relating to prior periods
that were not covered by insurance, any of which could have a material adverse
effect upon the Company. Because of the nature of the Company's operations and
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the industry in which it operates, the potential for liability and the extent
of such potential liability is very substantial. Any such liability could have
a material adverse impact on the Company's business and financial condition.
2. DEPENDENCE ON CONTINUED ENVIRONMENTAL REGULATION. The growth of the
environmental remediation services industry, as well as the growth of the
Company, has been largely attributable to, and tracks the increase in,
environmental regulation since the 1970s and the response of governmental and
commercial entities and financial institutions to public concern with
environmentally contaminated facilities. The demand for environmental
remediation services has been largely the result of facility and property
owners attempting to comply with, or avoid liability under, existing or newly
imposed environmental regulations at the federal, state and local levels.
Because of the burden imposed on industry in complying with such regulations,
efforts have been made by various groups to seek the relaxation or repeal of
certain forms of environmental regulation. While such efforts have been
largely unsuccessful to date, there can be no assurance that the scope or
growth of such regulation will not be curtailed in the future. Any relaxation
of environmental regulation may result in a decline in demand for
environmental remediation services and may adversely affect the operations of
the Company. For example, the Resource Conservation and Recovery Act ("RCRA")
mandates that by December 31, 1998, every single walled underground storage
tank ("UST") in the United States must be removed and replaced with a double
walled tank, and that any environmental damage to the soil or water caused by
tank leakage must be remediated. As a result, the Company's business in UST
removals and installations will likely be reduced after that date. Management
doesn't expect that this reduction after December 31, 1998, will have a
material adverse effect on the Company because this line of business
represents less than ten percent of the Company's business at the present
time.
3. DEPENDENCE ON MAJOR CUSTOMER. The Company is dependent upon its
relationship and contract with the EPA which accounted for approximately 38.8%
and approximately 20% of the Company's revenues in 1997 and 1996,
respectively. While the Company intends to increase the amount of work
performed for entities other than the EPA and thereby reduce its dependence on
the EPA, the Company will continue to be significantly dependent on EPA
contracts for the foreseeable future.
4. DEPENDENCE ON SPENDING LEVELS OF GOVERNMENTAL AND INDUSTRIAL
ENTITIES. Because of the nature of sites requiring environmental remediation
services, the growing public emphasis on environmental matters and the cost of
environmental remediation services, a significant portion of all funds spent
for such services has been spent by governmental agencies and large industrial
concerns. While third party reimbursement may be sought in various cleanups,
most Superfund cleanups as well as weapons and other nuclear facility cleanups
involve significant spending by governmental agencies. As budget constraints
and emphasis on employment, international competition and other considerations
grow, certain governmental agencies and industrial concerns may choose to
delay or curtail expenditures for environmental remediation services. Any
curtailment or delays in spending for environmental remediation services by
governmental agencies or large industrial concerns can be expected to have a
material adverse effect on the environmental remediation services industry
generally, and on the operations and financial results of the Company.
5. MANAGEMENT OF GROWTH. The Company has experienced a period of rapid
growth in its operations. This growth has resulted in an increase in the level
of responsibility for members of the Company's management team. Few of these
managers have had experience managing businesses which have experienced a rate
of growth similar to that of the Company. The Company's ability to manage
growth successfully will require it to continue to improve its operational,
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management and financial systems and controls and to expand, train, manage and
retain its employee base. Failure of the Company's management to do so could
have a material adverse effect on the Company's business, operating results
and financial condition.
6. BUSINESS SUBJECT TO WEATHER CONDITIONS. While the Company provides
its services on a year round basis, the Company's services provided outdoors
or outside of a sealed environment may be adversely affected by inclement
weather conditions. Extended periods of rain, cold weather or other inclement
weather conditions may result in delays in commencing or completing projects,
in whole or in part. Any such delays may adversely affect the Company's
operations and financial results and may adversely affect the performance of
other projects due to scheduling and staffing conflicts.
7. DEPENDENCE ON ABILITY TO SECURE BONDING. In order to successfully
bid on and secure contracts to perform environmental remediation services of
the nature offered by the Company, the Company oftentimes must provide surety
bonds with respect to each respective project. Thus the number and size of
contracts which the Company can perform is directly dependent upon the
Company's ability to obtain bonding which, in turn, is dependent upon the
Company's net worth and liquid working capital. There can be no assurance that
the Company will have adequate bonding capacity to bid on all of the projects
which it would otherwise bid upon were it to have such bonding capacity or
that it will in fact be successful in obtaining additional contracts on which
it may bid.
8. FIXED PRICE AND PER UNIT CONTRACTS. Historically, less than 10% of
the Company's remediation contracts are on a fixed price or per unit basis.
Cost overruns on projects covered by such contracts due to such things as
unanticipated price increases, unanticipated problems, inefficient project
management, inaccurate estimation of labor or material costs or disputes over
the terms and specifications of contract performance could have a material
adverse effect on the Company and its operations. There can be no assurance
that cost overruns will not occur in the future and have a material adverse
effect on the Company. In addition, in order to remain competitive in the
future, the Company may have to agree to enter into more fixed price and per
unit contracts than in the past.
9. LACK OF SIGNIFICANT OPERATING HISTORY. The Company has been in
existence since 1988 and was acquired by current management in November 1991.
As such, the Company is subject to many of the risks common to enterprises
with a limited operating history, including potential under capitalization,
limitations with respect to personnel, financial and other resources and
limited customers and revenues. There is no assurance that the Company's
activities will be successful and the likelihood of success must be considered
in light of its current stage of development.
10. FUTURE CAPITAL NEEDS AND UNCERTAINTY OF ADDITIONAL FINANCING. The
Company's long term capital requirements will depend on many factors,
including, but not limited to, cash flow from operations, the level of capital
expenditures, working capital requirements and the growth in its business.
Historically, the Company has relied upon commercial borrowings, a public
offering, borrowings from shareholders and affiliates of shareholders and
retained earnings to fund its operations and capital needs. The Company has
established a line of credit with a commercial bank which provides up to $9
million in credit depending on the amount of eligible accounts receivable and
contracts in progress. As of June 30, 1998, there was $7,996,568 outstanding
under this line of credit. The Company may need to incur additional
indebtedness to fund the capital needs related to its growth. To the extent
additional debt financing cannot be raised on acceptable terms, the Company
may need to raise additional funds through public or private equity
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financings. No assurance can be given that additional equity financing will be
available or that, if available, the terms of such financing will be favorable
to the Company or to its shareholders without substantial dilution of their
ownership and rights. If adequate funds are not available, the Company may be
required to curtail its future operations significantly or to forego market or
expansion opportunities.
11. COMPETITION. Competition in the environmental remediation services
industry is intense, and the success of the Company is dependent upon its
ability to secure contracts. Government, state and local contracts are awarded
based upon competitive bidding, and the Company is not always the lowest
bidder. The Company's future success will be dependent upon the Company's
ability to competitively bid contracts and to perform them on a profitable
basis. In addition, the Company will need to grow in order to remain
competitive with larger competitors.
The industry is dominated by a few large engineering construction firms.
Such firms are called upon to serve as primary contractors and consultants on
a large portion of the federal and state government projects. Additionally,
many smaller engineering firms, construction firms, consulting firms and other
specialty firms have entered the environmental remediation services industry
in recent years and additional firms can be expected to enter into the
industry in the future. Many of the firms with which the Company competes in
the environmental remediation services industry have significantly greater
financial resources and more established market positions than the Company.
While management believes that the Company's experience and expertise in the
broad range of services which it offers allows the Company to compete
successfully, there can be no assurance that this will continue or that other
firms will not expand into or develop expertise in the areas in which the
Company specializes, thus increasing competition to the Company.
12. CONCENTRATION OF CREDIT RISK. The Company contracts with a limited
number of customers which are involved in a wide range of industries. A small
number of customers may therefore be responsible for a majority of revenues at
any time. While management assesses the credit risk associated with each
proposed customer prior to the execution of a definitive contract, no
assurances can be given that such assessments will be correct and that the
Company will not sustain substantial, noncollectible accounts receivable.
13. DEPENDENCE ON EXECUTIVE MANAGEMENT AND OTHER QUALIFIED PERSONNEL.
The operations of the Company are substantially dependent on its executive
officers who are also its principal shareholders and directors. The Company
has no employment contracts with these persons. The loss of their services
could have a material adverse effect on the Company. The Company's further
success will also depend significantly on its ability to attract and retain
additional skilled personnel, including highly trained technical personnel,
project managers and supervisors. The Company believes it currently has
adequate qualified supervisory personnel, but there is no assurance that
experienced and qualified management level personnel will be available to the
Company in the future to fill positions as needed.
14. CONTROL BY OFFICERS, DIRECTORS AND MAJOR SHAREHOLDERS. Officers and
directors and principal shareholders of the Company, beneficially own an
aggregate of approximately 55% of the issued and outstanding shares of the
Company's Common Stock. Under California law, shareholders of the Company have
cumulative voting rights; however, it is likely that despite such rights,
present management and principal shareholders will continue to be able to
control the Board of Directors of the Company.
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15. DIVIDENDS. The Company does not anticipate paying any cash
dividends for the foreseeable future. The Company expects that future
earnings, if any, will be used to finance growth. No person seeking dividend
income from an investment should invest in this offering.
RECENT EVENTS
In July 1998, the Company announced that its Water Quality Management
Corporation (WQM) subsidiary had been awarded a contract to create a new
wastewater system for two communities and a number of large agricultural users
in the Texas Panhandle. The contract, which is expected to be completed
within two years, includes the design, construction and operation of a new
wastewater treatment plant as a joint privatization effort involving the
cities of Cactus and Etter, Texas and three major industrial facilities in an
area north of Amarillo, Texas. Phase I of the project, which is expected to
be performed over the next eight months, is valued at approximately $3
million.
In July 1998, the Company's Board of Directors elected George Pratt to
serve as an additional Director of the Company. Mr. Pratt (age 66) is the
former Chairman and Chief Executive Officer of Computer Automation, Inc. He
currently also serves as a Director of Global Spectrum, Inc. and Wireless
International Corporation, Ltd.
In July 1998, the Company announced that it had engaged the investment
banking firm of Sanders Morris Mundy to assist the Company to explore
acquisition and divestiture strategies including further expansion into the
water and wastewater treatment market. The Company further announced that it
was committed to repositioning itself toward the water and wastewater
treatment segments of its business.
In June 1998, the Company announced that it is part of a team which had
been awarded a $250 million remedial action contract for environmental
restoration projects on naval facilities in four western states. The
Company's portion of this contract is estimated at $30 million. The contract
is for a period of seven years and initial work is scheduled to begin in
October 1998.
Effective June 26, 1998, John G-L Hopkins, who has served as Vice
President - Federal Programs, resigned as an officer and employee of the
Company. Mr. Hopkins also served as a Director of the Company until June 2,
1998, when he declined to stand for reelection. Mr. Hopkins has agreed to
continue to provide services to the Company on a consulting basis, as needed.
As a result of the loss incurred during the quarter ended March 31, 1998,
the Company was in breach of loan covenants with the National Bank of Canada
relating to a $9,000,000 credit line and $1,000,000 equipment term loan. The
loan covenants require the Company to break even and maintain a certain ratio
between operating income and interest expense each quarter. The Company is
not in default on any loan payments due to the Bank. In June 1998, the
Company received a written waiver from the Bank concerning the breach for the
quarter ended March 31, 1998.
On March 2, 1998, the Company's WQM subsidiary entered into a Service
Agreement with the Town of Keystone, South Dakota to design, build and operate
for 20 years a municipal wastewater treatment plant. In conjunction with this
Agreement, Keystone issued economic development revenue bonds totaling
$2,710,000. The proceeds of this bond issue were loaned by Keystone to WQM
for construction of the facility. This loan will be repaid from payments made
by Keystone to WQM for wastewater treatment services provided under the
Service Agreement.
9
<PAGE>
<PAGE>
USE OF PROCEEDS
To the extent that any of the Warrants are exercised for cash, up to
$105,000 may be received by the Company. Any net proceeds received from the
exercise of the Warrants will be used for general corporate purposes.
SELLING SHAREHOLDERS
1,161,316 shares are being offered for resale by certain shareholders of
the Company. Up to 1,126,316 of those shares are issuable upon conversion by
the holders of 4% Convertible Preferred Stock ("Preferred Stock"). Up to
35,000 shares are issuable upon exercise of the Warrants held by the holders
of the Preferred Stock. All shares, to the extent they are being offered, are
being offered for the account of the following shareholders and their donees
or pledgees (the "Selling Shareholders").
The following table sets forth certain information with respect to the
Selling Shareholders for whom the Company is registering the Common Stock for
resale to the public, including: (i) the number of shares of Preferred Stock
owned by each Selling Shareholder, (ii) the maximum number of shares issuable
upon conversion of the Preferred Stock,(iii) the number of shares issuable
upon exercise of the Warrants, (iv) the percentage of class owned (assuming
the maximum number of shares were issued upon conversion); and (v) the maximum
number of shares offered by each Selling Shareholder (assuming the maximum
number of shares were issued upon conversion). The Company has no knowledge
of the intentions of any Selling Shareholder to actually sell any of the
shares listed under the columns "Maximum Shares Issuable Upon Conversion" or
"Shares Issuable Upon Exercise of Warrants." There are no material
relationships between any of the Selling Shareholders and the Company other
than as disclosed below.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP BEFORE OFFERING<FN1>
----------------------------------------
Number of Shares Shares
Shares of Issuable Issuable
Preferred Upon Upon Exer- Percent- Shares
Selling Stock Conversion cise of age of Offered
Shareholder Owned <FN2> Warrants Class <FN3>
- ------------ --------- ---------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C>
Balmore Funds S.A. 500 281,579 8,750 5.0% 290,329
Austost Anstalt Schaan 500 281,579 8,750 5.0% 290,329
AMRO International S.A. 1,000 563,158 17,500 10.0% 580,658
----- --------- ------ ---------
Total 2,000 1,126,316 35,000 1,161,316
- ----------------------
<FN>
<FN1>
No information is given with respect to beneficial ownership after the
offering because the number of shares of Preferred Stock that will be
converted into Common Stock, as well as the number of shares issuable upon
conversion, is indeterminate.
<FN2>
Assumes the conversion of all of the Preferred Stock into the maximum number
of shares of Common Stock that the Company will allow to be issued in such
conversions. In order to comply with American Stock Exchange rules, the
Company will only allow the Preferred Stock to be converted into a number of
shares of Common Stock which would be less than 20% of the Company's
10
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<PAGE>
outstanding Common Stock. In the event that the Company receives any requests
to convert Preferred Stock which would result in a greater number of shares
being issued, the Company will exercise its right to pay the holder cash equal
to the market value of the shares of Common Stock which would have been issued
instead of issuing such shares.
<FN3>
Assumes the conversion of all of the Preferred Stock and the exercise all of
the warrants in cash transactions.
</FN>
</TABLE>
The information concerning the Selling Shareholders may change from time
to time and will be set forth in Supplements to this Prospectus.
PLAN OF DISTRIBUTION
The purpose of this Prospectus is to permit the Selling Shareholders, if
they desire, to offer and sell up to 1,161,316 Shares (the "Selling
Shareholder Shares") at such times and at such places as the Selling
Shareholders choose.
The decision to convert the Preferred Stock into Shares, to exercise the
Warrants, or to sell any shares, is within the sole discretion of the holders
thereof. There can be no assurance that any of the Preferred Stock will be
converted or any of the Warrants will be exercised, or any shares will be sold
by the Selling Shareholders.
The distribution of the Selling Shareholder Shares may be effected from
time to time in one or more transactions. Any of the Selling Shareholder
Shares may be offered for sale, from time to time, by the Selling
Shareholders, or by permitted transferees or successors of the Selling
Shareholders, on the American Stock Exchange, or otherwise, at prices and on
terms then obtainable, at fixed prices, at prices then prevailing at the time
of sale, at prices related to such prevailing prices, or in negotiated
transactions at negotiated prices or otherwise. The Selling Shareholder
Shares offered hereby may be sold by one or more of the following: (i) through
underwriters, or through underwriting syndicates; (ii) through one or more
dealers or agents (which may include one or more underwriters), including, but
not limited to: (a) block trades in which the broker or dealer acts as
principal to facilitate the transactions; (b) purchases by a broker or dealer
as principal and resale by such broker or dealer for its account pursuant to
this Prospectus; (c) ordinary brokerage transactions; and (d) transactions in
which the broker solicits purchasers; (iii) directly to one or more
purchasers; or (iv) a combination of these methods. The names of any
underwriters or agents involved in the sale of the Selling Shareholder Shares
will be set forth in a Prospectus Supplement. In connection with the
distribution of the Selling Shareholder Shares or otherwise, the Selling
Shareholders may enter into hedging transactions with broker-dealers or other
financial institutions. In connection with such transactions, broker-dealers
or other financial institutions may engage in short sales of Common Stock in
the course of hedging the positions they assume with the Selling Shareholders.
The Selling Shareholders may also sell Common Stock short and redeliver the
shares to close out such short positions. The Selling Shareholders may also
enter into options or other transactions with broker-dealers or other
financial institutions which require the delivery to such broker-dealers or
other financial institutions of the Selling Shareholder Shares, which shares
such broker-dealers or financial institutions may resell pursuant to this
Prospectus (as supplemented or amended to reflect this transaction). The
Selling Shareholders may also pledge the Selling Shareholder Shares registered
hereunder to a broker-dealer or other financial institution and, upon a
default, such broker-dealer or other financial institution may effect sales of
the pledged shares pursuant to this Prospectus (as supplemented or amended to
11
<PAGE>
<PAGE>
reflect such transaction). In addition, any Selling Shareholder Shares
covered by this Prospectus that qualify for sale pursuant to Rule 144 under
the Securities Act may be sold under Rule 144 rather than pursuant to this
Prospectus.
The Selling Shareholders or their underwriters, dealers or agents may
sell the Selling Shareholder Shares to or through underwriters, dealers or
agents, and such underwriters, dealers or agents may receive compensation in
the form of discounts or concessions allowed or reallowed. Underwriters,
dealers, brokers or other agents engaged by the Selling Shareholders may
arrange for other such persons to participate. Any fixed public offering
price and any discounts and concessions may be changed from time to time.
Underwriters, dealers and agents who participate in the distribution of the
Selling Shareholder Shares may be deemed to be underwriters within the meaning
of the Securities Act, and any discounts or commissions received by them or
any profit on the resale of shares by them may be deemed to be underwriting
discounts and commissions thereunder. The proposed amounts of Selling
Shareholder Shares, if any, to be purchased by underwriters and the
compensation, if any, of underwriters, dealers or agents will be set forth in
a Prospectus Supplement.
Unless granted an exemption by the Commission from Rule 10b-6 under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), or unless
otherwise permitted under Rule 10b-6A, the Selling Shareholders will not
engage in any stabilization activity in connection with the Company's
securities, will furnish each broker or dealer engaged by the Selling
Shareholders and each other participating broker or dealer the number of
copies of this Prospectus required by such broker or dealer, and will not bid
for or purchase any securities of the Company or attempt to induce any person
to purchase any of the Company's securities other than as permitted under the
Exchange Act.
The Company will not receive any proceeds from any sales of the Selling
Shareholder Shares, but will receive the proceeds from the exercise of the
warrants held by the Selling Shareholders, which proceeds, if any, will be
used for general corporate purposes.
In connection with the registration by the Company, the Company shall use
its best efforts to prepare and file with the Commission such amendments and
supplements to the registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration statement
effective and to comply with the provisions of the Securities Act with respect
to the disposition of the Shares covered by the registration statement for the
period required to effect the distribution of such Shares.
The Company is paying certain expenses (other than commissions and
discounts of underwriters, dealers or agents) incident to the offering and
sale of the Shares to the public, which are estimated to be approximately
$12,000. If the Company is required to update this Prospectus during such
period, it may incur additional expenses in excess of the amount estimated
above.
In order to comply with certain states' securities laws, if applicable,
the Shares will be sold in such jurisdictions only through registered or
licensed brokers or dealers. In certain states the Shares may not be sold
unless they have been registered or qualify for sale in such state or an
exemption from registration or qualification is available and is complied
with.
12
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<PAGE>
LEGAL MATTERS
The legality of the Common Stock offered hereby is being passed upon for
the Company by Krys Boyle Freedman & Sawyer, P.C., 600 17th Street, Suite 2700
South, Denver, Colorado 80202.
EXPERTS
The financial statements as of December 31, 1997 and 1996, and for the
years then ended, contained in the Company's Annual Report on Form 10-K
incorporated by reference in this Prospectus, have been audited by Grant
Thornton LLP, independent auditors, as stated in their report appearing
herein, and have been so included in reliance upon the reports of such firm
given upon the authority of that firm as experts in accounting and auditing.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents filed by the Company with the Commission are
incorporated herein by reference:
(a) The Company's Annual Report on Form 10-K for the year ended December
31, 1997, filed pursuant to Section 13 or 15(d) of the 1934 Act (File Number
1-13852).
(b) The Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1998, filed pursuant to Section 13 or 15(d) of the 1934 Act (File
No. 1-13852).
(c) The Company's Proxy Statement for its Annual Meeting of Shareholders
held on June 2, 1998 (File No. 1-13852).
(d) The description of the Company's capital stock contained in the
Company's Registration Statement on Form 8-A (File No. 1-13852) declared
effective on July 18, 1995.
All reports and other documents subsequently filed by the Company with
the Commission pursuant to Sections 13(a), 13(c), 14 and 15(d) of the 1934
Act, prior to the filing of a post-effective amendment which indicates that
all securities covered by this Prospectus have been sold or which deregisters
all such securities then remaining unsold, shall be deemed to be incorporated
by reference herein and to be a part hereof from the date of the filing of
such reports and documents.
13
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<PAGE>
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following expenses incurred in connection with the sale of the
securities being registered will be borne by the Registrant. Other than the
registration fee, the amounts stated are estimates.
Registration Fees . . . . . . . . . . . . . . $ 615.85
Legal Fees and Expenses . . . . . . . . . . . 8,000.00
Accounting Fees and Expenses. . . . . . . . . 2,000.00
Miscellaneous . . . . . . . . . . . . . . . . 1,384.15
----------
TOTAL . . . . . . . . . . . . . . . . . . $12,000.00
ITEM 15. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
In accordance with the California Corporations Code, the Registrant has
included provisions in its Articles of Incorporation to indemnify its officers
and directors and to limit the personal liability of its directors to the
fullest extent possible under California law.
ITEM 16. EXHIBITS.
Exhibit
Number Description
- ------- -----------
4.1 Certificate of Amendment to Articles of Incorporation
4.2 Certificate of Determination of the 4% Convertible Preferred
Stock
5 Opinion of Krys Boyle Freedman & Sawyer, P.C., with respect to
the legality of the securities being registered
23.1 Consent of Grant Thornton LLP
23.2 Consent of Krys Boyle Freedman & Sawyer, P.C. (contained in
Exhibit 5)
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
1933 Act;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
II-1
<PAGE>
<PAGE>
deviation from the low or high end of the estimated maximum offering range may
be reflected in the form of prospectus filed with the Commission pursuant to
Rule 424(b) ([Section] 230.424(b) of this chapter) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of Registration Fee"
table in the effective registration statement.
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;
Provided, however, that paragraphs (l)(i) and (l)(ii) do not apply if the
registration statement is on Form S-3 or Form S-8, and the information
required to be included in a post-effective amendment by those paragraphs is
contained in periodic reports filed by the registrant pursuant to Section 13
or Section 15(d) of the 1934 Act that are incorporated by reference in the
registration statement.
(2) That, for the purpose of determining any liability under the 1933
Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination
of the offering.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the 1933 Act, each filing of the registrant's
annual report pursuant to section 13(a) or section 15(d) of the 1934 Act (and,
where applicable, each filing of an employee benefit plan's annual report
pursuant to section 15(d) of the 1934 Act) that is incorporated by reference
in the registration statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
Insofar as indemnification for liabilities arising under the 1933 Act may
be permitted to directors, officers and controlling persons of the registrant
pursuant to the foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Commission such indemnification is against
public policy as expressed in the 1933 Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the 1933 Act and will be governed by the final
adjudication of such issue.
II-2
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant certifies that it has reasonable grounds to believe that it
meets all of the requirements for filing on Form S-3 and has duly caused this
Registration Statement on Form S-3 to be signed on its behalf by the
undersigned, hereunto duly authorized, in Englewood, Colorado, on August 7,
1998.
CET ENVIRONMENTAL SERVICES, INC.
By:/s/ Steven H. Davis
Steven H. Davis, President and Chief
Executive Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
SIGNATURES TITLE DATE
/s/ Steven H. Davis President, Chief Executive August 7, 1998
Steven H. Davis Officer and Director
/s/ Rick C. Townsend Executive Vice President, August 7, 1998
Rick C. Townsend Chief Financial Officer
(Principal Accounting
Officer), and Director
/s/ Craig C. Barto Director August 7, 1998
Craig C. Barto
/s/ Douglas W. Cotton Executive Vice President, August 7, 1998
Douglas W. Cotton Chief Operating Officer
and Director
/s/ Robert A. Taylor Director August 7, 1998
Robert A. Taylor
/s/ George Pratt Director August 7, 1998
George Pratt
<PAGE>
<PAGE>
CET ENVIRONMENTAL SERVICES, INC.
INDEX TO EXHIBITS FILED WITH
FORM S-3 REGISTRATION STATEMENT
Exhibit
Number Description
- ------- -----------
4.1 Certificate of Amendment to Articles of Incorporation
4.2 Certificate of Determination of the 4% Convertible Preferred
Stock
5 Opinion of Krys Boyle Freedman & Sawyer, P.C., with respect
to the legality of the securities being registered
23.1 Consent of Grant Thornton LLP
23.2 Consent of Krys Boyle Freedman & Sawyer, P.C. (contained
in Exhibit 5)
CERTIFICATE OF AMENDMENT
OF
ARTICLES OF INCORPORATION
CET ENVIRONMENTAL SERVICES, INC.
Steven H. Davis and Rick C. Townsend certify that:
1. They are the President and the Secretary, respectively, of CET
Environmental Services, Inc., a California corporation.
2. The Board of Directors has approved the following amendment to
Article III of the Articles of Incorporation of the corporation:
" III
The aggregate number of shares which this Corporation shall have
authority to issue is Twenty Million (20,000,000) shares, no par value each,
which shares shall be designated "Common Stock"; and Five Million (5,000,000)
shares, no par value each, which shares shall be designated "Preferred Stock"
and which may be issued in one or more series at the discretion of the Board
of Directors. In establishing a series the Board of Directors shall give to
it a distinctive designation so as to distinguish it from the shares of all
other series and classes, shall fix the number of shares in such series, and
the preferences, rights and restrictions thereof. All shares of any one
series shall be alike in every particular. Prior to the issuance of the
Preferred Stock as a single class or of a series of Preferred Stock, a
Certificate of Determination shall be filed with the California Secretary of
State setting forth the resolution of the Board of Directors establishing the
specific rights, preferences, privileges, and restrictions of the class or
series, as required under Corporations Code Section 401(a).
1. Dividends. Dividends in cash, property or shares shall be paid
upon the Preferred Stock for any year on a cumulative or noncumulative basis
as determined by a resolution of the Board of Directors prior to the issuance
of such Preferred Stock, to the extent earned surplus for each such year is
available, in an amount as determined by a resolution of the Board of
Directors. Such Preferred Stock dividends shall be paid pro rata to holders
of Preferred Stock in any amount not less than nor more than the rate as
determined by a resolution of the Board of Directors prior to the issuance of
such Preferred Stock. No other dividend shall be paid on the Preferred Stock.
Dividends in cash, property or shares of the Corporation may be paid
upon the Common Stock, as and when declared by the Board of Directors, out of
funds of the Corporation to the extent and in the manner permitted by law,
except that no Common Stock dividend shall be paid for any year unless the
holders of Preferred Stock, if any, shall receive the maximum allowable
Preferred Stock dividend for such year.
2. Distribution in Liquidation. Upon any liquidation, dissolution
or winding up of the Corporation, and after paying or adequately providing for
the payment of all its obligations, the remainder of the assets of the
Corporation shall be distributed, either in cash or in kind, first pro rata to
<PAGE>
<PAGE>
the holders of the Preferred Stock until an amount to be determined by a
resolution of the Board of Directors prior to issuance of such Preferred Stock
has been distributed per share, and, then, the remainder pro rata to the
holders of the Common Stock.
3. Redemption. The Preferred Stock may be redeemed in whole or in
part as determined by a resolution of the Board of Directors prior to the
issuance of such Preferred Stock, upon prior notice to the holders of record
of the Preferred Stock, published, mailed and given in such manner and form
and on such other terms and conditions as may be prescribed in the Articles of
Incorporation or in a Certificate of Determination issued under the authority
of the Articles of Incorporation, by payment in cash for each share of the
Preferred Stock to be redeemed, as determined by a resolution of the Board of
Directors prior to the issuance of such Preferred Stock. No such redemption
shall be made if the capital of the Corporation would be impaired thereby.
If less than all the outstanding shares are to be redeemed, such
redemption may be made by lot or pro rata as may be prescribed by resolution
of the Board of Directors; provided, however, that the Board of Directors may
alternatively invite from shareholders offers to the Corporation of Preferred
Stock at less than an amount to be determined by a resolution of the Board of
Directors prior to issuance of such Preferred Stock, and when such offers are
invited, the Board of Directors shall then be required to buy at the lowest
price or prices offered, up to the amount to be purchased.
From and after the date fixed in any such notice as the date of
redemption (unless default shall be made by the Corporation in the payment of
the redemption price), all dividends on the Preferred Stock thereby called
for redemption shall cease to accrue and all rights of the holders thereof as
stockholders of the Corporation, except the right to receive the redemption
price, shall cease and terminate.
Any purchase by the Corporation of the shares of its Preferred Stock
shall not be made at prices in excess of said redemption price.
4. Voting Rights. Each outstanding share of Common Stock shall be
entitled to one vote. Shares of Preferred Stock shall only be entitled to
such vote as is determined by the Board of Directors prior to the issuance of
such stock, except as required by law, in which case each share of Preferred
Stock shall be entitled to one vote.
5. Conversion Rights. Holders of shares of Preferred Stock may be
granted the right to convert such Preferred Stock to Common Stock of the
Corporation on such terms as may be determined by the Board of Directors prior
to issuance of such Preferred Stock."
3. The amendment has been approved by the required vote of the
shareholders in accordance with Section 902 of the California Corporations
Code. The corporation has only one class of shares. Each outstanding share
is entitled to one vote. The total number of shares entitled to vote with
respect to the amendment was 5,809,485 shares. The number of shares voting in
favor of the amendment exceeded the vote required, in that the affirmative
vote of a majority of the outstanding shares was required for approval of the
amendment and the amendment was approved by the affirmative vote of 3,644,428
shares.
2
<PAGE>
<PAGE>
Each of the undersigned declares under penalty of perjury that the
matters set forth in the foregoing certificate are true and correct of his own
knowledge.
Dated: June 2, 1998
/s/ Steven H. Davis
Steven H. Davis, President
/s/ Rick C. Townsend
Rick C. Townsend, Secretary
3
CERTIFICATE OF DETERMINATION
OF RIGHTS AND PREFERENCES OF THE
4% CONVERTIBLE PREFERRED STOCK OF
CET ENVIRONMENTAL SERVICES, INC.
PURSUANT TO SECTION 401(a) OF THE
CALIFORNIA CORPORATIONS CODE
We, Steven H. Davis, the President, and Rick C. Townsend, the Secretary,
of CET Environmental Services, Inc., a corporation organized and existing
under the laws of the State of California (hereinafter the "Corporation"), DO
HEREBY CERTIFY:
FIRST: That they are the President and Secretary, respectively, of the
Corporation.
SECOND: That this Certificate of Determination establishes a series of
Preferred Stock consisting of 2,000 shares of 4% Convertible Preferred Stock.
None of the shares of this series have been issued.
THIRD: That pursuant to authority expressly granted and vested in the
Board of Directors of said Corporation by the provisions of the Articles of
Incorporation, said Board of Directors adopted the following resolution
determining the designations, powers, preferences and rights of its 4%
Convertible Preferred Stock :
RESOLVED: That the designations, powers, preferences and rights of the
4% Convertible Preferred Stock be, and hereby are, as set forth below:
1. Number of Shares of 4% Convertible Preferred Stock. Of the
5,000,000 shares of authorized but unissued Preferred Stock, no par value
("Preferred Stock") of the Corporation, two thousand (2,000) shares shall be
designated and known as "4% Convertible Preferred Stock."
2. Voting.
(a) Each holder of outstanding shares of 4% Convertible
Preferred Stock at each meeting of stockholders of the Corporation (and
written actions of stockholders in lieu of meetings) with respect to any and
all matters presented to the stockholders of the Corporation for their action
or consideration shall be entitled to the number of votes equal to the number
of whole shares of Common Stock, as hereinafter defined, into which the shares
of 4% Convertible Preferred Stock held by such holder are convertible on the
record date established for such meeting. Except as provided by law, by the
provisions of Subparagraph 2(b) below, or by the provisions establishing any
other series of Preferred Stock, holders of 4% Convertible Preferred Stock
shall vote together with the holders of all other classes and series of
securities of the Corporation as a single class.
(b) The Corporation shall not amend, alter or repeal the
preferences, special rights or other powers of the 4% Convertible Preferred
Stock so as to affect adversely the 4% Convertible Preferred Stock, without
the written consent or affirmative vote of the holders of at least 85% of the
then outstanding shares of 4% Convertible Preferred Stock to be affected by
amendment, alteration or repeal, given in writing or by vote at a meeting,
consenting or voting (as the case may be) separately as a class. For this
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<PAGE>
purpose, without limiting the generality of the foregoing, the authorization
or issuance of any series of Preferred Stock with preference or priority over
or on a parity with the 4% Convertible Preferred Stock as to the right to
receive either dividends or amounts distributable upon liquidation,
dissolution or winding up of the Corporation shall be deemed to affect
adversely the designated class of 4% Convertible Preferred Stock.
3. Dividends. The holders of shares of 4% Convertible Preferred
Stock shall be entitled to receive, before any cash dividend shall be declared
and paid upon or set aside for the Common Stock in any fiscal year of the
Corporation, only when, as and if declared by the Board of Directors of the
Corporation out of funds legally available for that purpose, cumulative
dividends payable in cash or Common Stock (at the sole election of the
Corporation) in an amount per share for such fiscal year equal to $40.00. Such
dividend shall be payable in equal quarterly installments on March 31, June
30, September 30 and December 31 of each year, commencing September 30, 1998.
In the event that the Corporation shall elect to pay any such dividend payment
in the form of Common Stock, such Common Stock shall be valued at the Market
Price on the dividend declaration date, as defined in Paragraph 5 below.
4. Liquidation. In the event of a voluntary or involuntary
dissolution, liquidation, or winding up of the Corporation, the holders of
shares of 4% Convertible Preferred Stock shall be entitled to receive out of
the assets of the Corporation legally available for distribution to holders of
its capital stock, before any payment or distribution shall be made to holders
of Common Stock or any other class of stock ranking junior to 4% Convertible
Preferred Stock, an amount per share equal to $1,000 (the "Stated Value") of
such shares of 4% Convertible Preferred Stock plus all dividends which have
accrued and are unpaid and therefore are in arrears. If upon such
liquidation, dissolution or winding up of the Corporation, whether voluntary
or involuntary, the assets to be distributed among the holders of 4%
Convertible Preferred Stock shall be insufficient to permit payment to the
holders of 4% Convertible Preferred Stock of the amount distributable as
aforesaid, then the entire assets of the Corporation to be so distributed
shall be distributed ratably among the holders of 4% Convertible Preferred
Stock. Upon any such liquidation, dissolution or winding up of the
Corporation, after the holders of 4% Convertible Preferred Stock shall have
been paid in full the amounts to which they shall be entitled, the remaining
net assets of the Corporation may be distributed to the holders of stock
ranking on liquidation junior to the 4% Convertible Preferred Stock. Written
notice of such liquidation, dissolution or winding up, stating a payment date,
the amount of the liquidation payments and the place where said liquidation
payments shall be payable, shall be given by mail, postage prepaid or by telex
or facsimile to non-U.S. residents, not less than 10 days prior to the payment
date stated therein, to the holders of record of 4% Convertible Preferred
Stock, such notice to be addressed to each such holder at its address as shown
by the records of the Corporation. For purposes hereof, the Common Stock
shall rank on liquidation junior to the 4% Convertible Preferred Stock.
5. Optional Conversion. The holders of shares of 4% Convertible
Preferred Stock shall have the following conversion rights:
(a) Right to Convert; Conversion Price. Subject to the terms,
conditions, and restrictions of this Paragraph 5, the holder of any share or
shares of 4% Convertible Preferred Stock shall have the right to convert each
such share of 4% Convertible Preferred Stock (except that upon any liquidation
of the Corporation, the right of conversion shall terminate at the close of
business on the business day fixed for payment of the amount distributable on
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the 4% Convertible Preferred Stock) into an amount of shares of Common Stock
equal to the Stated Value of such share or shares of 4% Convertible Preferred
Stock divided by (i) the lowest closing price of the Common Stock, as reported
by the American Stock Exchange (or the principal market for the Corporation s
Common Stock if such Common Stock is not then listed on the American Stock
Exchange) during the period of six trading days immediately preceding the
date of conversion (the "Conversion Date") (the "Market Price"), after (ii)
discounting the Market Price by fifteen percent (15%) to determine the
conversion price (the "Conversion Price"). To illustrate, if the Market Price
on the Conversion Date is $6.00 and 100 shares of 4% Convertible Preferred
Stock are being converted, the Stated Value for which would be $100,000, then
the Conversion Price shall be $5.10 per share of Common Stock ($6.00 x .85),
whereupon the Stated Value of $100,000 of 4% Convertible Preferred Stock would
entitle the holder thereof to convert the 100 shares of 4% Convertible
Preferred Stock into 19,607 shares of Common Stock ($100,000 divided by $5.10
equals 19,607). However, in no event shall the Conversion Price be greater
than 145% of Market Price on the Original Issuance Date, as defined in the
next paragraph (the "Maximum Conversion Price"). In addition, if the
Conversion Price on any Conversion Date is less than $6.00, then the
Corporation shall have the option, upon receipt of a Conversion Notice from
the holder, to pay the holder in shares of Common Stock as set forth above, or
else, in whole or in part, in cash in an amount equal to (i) the closing price
on the American Stock Exchange on the day prior to the Conversion Date
multiplied by (ii) the number of shares of Common Stock which would otherwise
be issuable to the holder upon such conversion. Such cash must be paid within
five business days from the date of the Conversion Notice. Upon notice of the
Company s election to pay such conversion in cash, the holder shall have the
right to rescind such Conversion Notice.
(b) Conversion Date. The holder of any share or shares of 4%
Convertible Preferred Stock may not convert any of such shares for a period of
at least one hundred twenty (120) calendar days following the date upon which
the 4% Convertible Preferred Stock was originally issued (the "Original
Issuance Date").
(c) Notice of Conversion. The right of conversion shall be
exercised by the holder thereof by giving written notice (the "Conversion
Notice") to the Corporation, by facsimile or by registered mail or overnight
delivery service, that the holder elects to convert a specified number of
shares of 4% Convertible Preferred Stock representing a specified Stated Value
thereof into Common Stock and, if such conversion will result in the
conversion of all of such holder s shares of 4% Convertible Preferred Stock,
by surrender of a certificate or certificates for the shares so to be
converted to the Corporation at its principal office (or such other office or
agency of the Corporation as the Corporation may designate by notice in
writing to the holders of the 4% Convertible Preferred Stock) at any time
during its usual business hours on the date set forth in the Conversion
Notice, together with a statement of the name or names (with address) in which
the certificate or certificates for shares of Common Stock shall be issued.
The Conversion Notice shall include therein the Stated Value of shares of 4%
Convertible Preferred Stock to be converted, and a calculation (i) of the
Market Price, (ii) the Conversion Price, and (iii) the number of shares of
Common Stock to be issued in connection with such conversion.
(d) Issuance of Certificates; Time Conversion Effected.
Promptly, but in no event more than three business days, after the receipt of
the Conversion Notice referred to in Subparagraph 5(c) and surrender of the
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certificate or certificates for the share or shares of 4% Convertible
Preferred Stock to be converted, the Corporation shall issue and deliver, or
cause to be issued and delivered, to the holder, registered in such name or
names as such holder may direct, a certificate or certificates for the number
of whole shares of Common Stock into which such shares of 4% Convertible
Preferred Stock are converted. To the extent permitted by law, such
conversion shall be deemed to have been effected as of the close of business
on the date on which such Conversion Notice shall have been received by the
Corporation, and at such time the rights of the holder of such share or shares
of 4% Convertible Preferred Stock shall cease, and the person or persons in
whose name or names any certificate or certificates for shares of Common Stock
shall be issuable upon such conversion shall be deemed to have become the
holder or holders of record of the shares represented thereby. Issuance of
shares of Common Stock issuable upon conversion which are requested to be
registered in a name other than that of the registered holder shall be subject
to compliance with all applicable federal and state securities laws.
(e) Fractional Shares; Dividends. No fractional shares shall
be issued upon conversion of 4% Convertible Preferred Stock into Common Stock.
All fractional shares shall be rounded down to the nearest whole share. Any
accrued but unpaid dividends shall be paid upon conversion.
(f) Reorganization or Reclassification. If any capital
reorganization or reclassification of the capital stock of the Corporation
shall be effected in such a way that holders of Common Stock shall be entitled
to receive stock, securities or assets with respect to or in exchange for
Common Stock, then, as a condition of such reorganization or reclassification,
lawful and adequate provisions shall be made whereby each holder of a share or
shares of 4% Convertible Preferred Stock shall thereupon have the right to
receive, upon the basis and upon the terms and conditions specified herein and
in lieu of the shares of Common Stock immediately theretofore receivable upon
the conversion of such share or shares of 4% Convertible Preferred Stock, such
shares of stock, securities or assets as may be issued or payable with respect
to or in exchange for a number of outstanding shares of such Common Stock
equal to the number of shares of such Common Stock immediately theretofore
receivable upon such conversion had such reorganization or reclassification
not taken place, and in any such case appropriate provisions shall be made
with respect to the rights and interests of such holder to the end that the
provisions hereof (including without limitation provisions for adjustments of
the conversion rights) shall thereafter be applicable, as nearly as may be, in
relation to any shares of stock, securities or assets thereafter deliverable
upon the exercise of such conversion rights.
(g) Adjustments for Splits, Combinations, etc. The Conversion
Price and the number of shares of Common Stock into which the 4% Convertible
Preferred Stock shall be convertible shall be adjusted for stock splits,
combinations, or other similar events. Additionally, an adjustment will be
made in the case of an exchange of Common Stock, consolidation or merger of
the Company with or into another corporation or sale of all or substantially
all of the assets of the Company in order to enable the holder of 4%
Convertible Preferred Stock to acquire the kind and the number of shares of
stock or other securities or property receivable in such event by a holder of
the number of shares of Common Stock that might otherwise have been issued
upon the conversion of the 4% Convertible Preferred Stock. No adjustment to
the Conversion Price will be made for dividends (other than stock dividends),
if any, paid on the Common Stock or for securities issued pursuant to exercise
for fair value of options, warrants, or restricted stock.
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6. Mandatory Conversion.
(a) Mandatory Conversion Date. If on June 30, 2001 (the
"Mandatory Conversion Date"), there remain issued and outstanding any shares
of 4% Convertible Preferred Stock, then the Corporation shall require all
holders of shares of 4% Convertible Preferred Stock then outstanding to
convert their shares of 4% Convertible Preferred Stock into shares of Common
Stock at the then effective Conversion Price pursuant to Subparagraph 5(a).
The Corporation shall provide written notice (the "Mandatory Conversion
Notice") to the holders of shares of 4% Convertible Preferred Stock of such
mandatory conversion. The Mandatory Conversion Notice shall include (i) the
Stated Value of the shares of 4% Convertible Preferred Stock to be converted,
(ii) the Conversion Price on the Mandatory Conversion Date, and (iii) the
number of shares of the Corporation's Common Stock to be issued upon such
mandatory conversion at the then applicable Conversion Price.
(b) Surrender of Certificates. On or before the Mandatory
Conversion Date, each holder of shares of 4% Convertible Preferred Stock shall
surrender his or its certificate or certificates for all such shares to the
Corporation at the place designated in such Mandatory Conversion Notice (or an
affidavit of lost certificate in form and content reasonably satisfactory to
the Corporation), and shall thereafter receive certificates for the number of
shares of Common Stock to which such holder is entitled. On the Mandatory
Conversion Date, all rights with respect to the 4% Convertible Preferred Stock
so converted, including the rights, if any, to receive notices and vote, will
terminate. All certificates evidencing shares of 4% Convertible Preferred
Stock that are required to be surrendered for conversion in accordance with
the provisions hereof, from and after the Mandatory Conversion Date, shall be
deemed to have been retired and cancelled and the shares of 4% Convertible
Preferred Stock represented thereby converted into Common Stock for all
purposes, notwithstanding the failure of the holder or holders thereof to
surrender such certificates on or prior to such date. The Corporation may
thereafter take such appropriate action as may be necessary to reduce the
authorized 4% Convertible Preferred Stock accordingly.
7. Redemption of 4% Convertible Preferred Stock.
(a) Right to Redeem 4% Convertible Preferred Stock. At any
time, and from time to time, on and after the expiration of the earlier of (i)
six months from the Original Issuance Date or (ii) closing of a registered
primary offering of equity securities by the Corporation for cash, the
Corporation may, in its sole discretion, but shall not be obligated to,
redeem, in whole or in part, the then issued and outstanding shares of 4%
Convertible Preferred Stock, at a price equal to the greater of (i) $1,350 per
share of such 4% Convertible Preferred Stock or (ii) the closing price of the
Common Stock into which such share of 4% Convertible Preferred Stock could be
converted on the date of such notice (the "Redemption Price"). Any partial
redemption shall be made on a pro rata basis.
(b) Notice of Redemption. The Corporation shall provide each
holder of record of the 4% Convertible Preferred Stock being redeemed with
written notice of redemption (the "Redemption Notice") not less than 30 days
prior to any date stipulated by the Corporation for the redemption of the 4%
Convertible Preferred Stock (the "Redemption Date"). The Redemption Notice
shall contain (i) the Redemption Date, (ii) the number of shares of 4%
Convertible Preferred Stock to be redeemed from the holder to whom the
Redemption Notice is delivered, (iii) instructions for surrender to the
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Corporation of the certificate or certificates representing the shares of 4%
Convertible Preferred Stock to be redeemed, and (iv) a procedure for the
holder to specify the number of shares of 4% Convertible Preferred Stock to be
converted into Common Stock pursuant to Paragraph 5.
(c) Right to Convert 4% Convertible Preferred Stock upon
Receipt of Redemption Notice. Upon receipt of the Redemption Notice, the
recipient thereof shall have the option, at its sole election, to specify what
portion of the 4% Convertible Preferred Stock called for redemption in the
Redemption Notice shall be redeemed as provided in this Paragraph 7 or
converted into Common Stock in the manner provided in Paragraph 5. If the
holder of the 4% Convertible Preferred Stock called for redemption elects to
convert any of such shares, then such conversion shall take place on the
Redemption Date, in accordance with the terms of Paragraph 5.
(d) Surrender of Certificates; Payment of Redemption Price. On
or before the Redemption Date, each holder of the shares of 4% Convertible
Preferred Stock to be redeemed shall surrender the required certificate or
certificates representing such shares to the Corporation, in the manner and at
the place designated in the Redemption Notice, and upon the deposit of the
Redemption Price with the Depository as set forth in the next paragraph, each
such surrendered certificate shall be cancelled and retired. If a certificate
is surrendered and all the shares evidenced thereby are not being redeemed,
the Corporation shall issue new certificates to be registered in the names of
the person(s) whose name(s) appear(s) as the owners on the respective
surrendered certificates and deliver such certificate to such person(s).
(e) Deposit of Redemption Price. On the Redemption Date in
respect to any shares of 4% Convertible Preferred Stock, or prior thereto, the
Corporation shall deposit with any bank or trust company having a capital and
surplus of at least $50,000,000 or with its transfer agent for its Common
Stock (the "Depository"), a sum equal to (i) the aggregate Redemption Price of
all such shares called for redemption, less (ii) the aggregate Redemption
Price for those shares of 4% Convertible Preferred Stock in respect of which
the Corporation has received notice from the holder thereof of its election,
pursuant to Subparagraph 7(c), to convert shares of 4% Convertible Preferred
Stock into Common Stock. The Corporation shall provide instructions and
authority to the Depository to pay, on or after the Redemption Date, the
Redemption Price to the respective holders upon the surrender of their share
certificates. The deposit of the Redemption Price by the Corporation with the
Depository shall constitute full payment for the shares of 4% Convertible
Preferred Stock to be redeemed, and from and after that date of the deposit,
the redeemed shares shall be deemed to be no longer issued and outstanding,
and the holders thereof shall cease to be holders with respect to such shares
and shall have no rights with respect thereto, except the right to receive
from the Depository payment of the Redemption Price, without interest, upon
surrender of their certificates therefor. Any funds so deposited and
unclaimed at the end of one year from the Redemption Date shall be released
and delivered to the Corporation, after which the former holders of shares of
4% Convertible Preferred Stock called for redemption shall be entitled to
receive payment of the Redemption Price in respect of their shares only from
the Corporation. If the Corporation shall fail to deposit the funds for the
aggregate Redemption Price with the Depository by the close of business on the
Redemption Date, then the Redemption Notice shall be void, and the Corporation
shall have no further right to redeem such shares at any later date.
8. Notices. In case at any time:
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(a) the Corporation shall declare any dividend upon its Common
Stock payable in cash or stock or make any other pro rata distribution to the
holders of its Common Stock; or
(b) the Corporation shall offer for subscription pro rata to
the holders of its Common Stock any additional shares of stock of any class or
other rights; or
(c) there shall be any capital reorganization or
reclassification of the capital stock of the Corporation, or a consolidation
or merger of the Corporation with or into, or a sale of all or substantially
all its assets to, another entity or entities; or
(d) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Corporation;
then, in any one or more of said cases, the Corporation shall give,
by first class mail, postage prepaid, or by telex or facsimile or by
recognized overnight delivery service to non-U.S. residents, addressed to each
holder of any shares of 4% Convertible Preferred Stock at the address of such
holder as shown on the books of the Corporation, (i) at least 10 days' prior
written notice of the date on which the books of the Corporation shall close
or a record shall be taken for such dividend, distribution or subscription
rights or for determining rights to vote in respect of any such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding up and (ii) in the case of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding up, at least 10 days' prior written notice of the date when the same
shall take place. Such notice in accordance with the foregoing clause (i)
shall also specify, in the case of any such dividend, distribution or
subscription rights, the date on which the holders of Common Stock shall be
entitled thereto and (ii) shall also specify the date on which the holders of
Common Stock shall be entitled to exchange their Common Stock for securities
or other property deliverable upon such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding up, as the
case may be.
9. Stock to be Reserved. The Corporation, upon the effective date
of this Certificate of Determination, has a sufficient number of shares of
Common Stock available to reserve for issuance upon the conversion of all
outstanding shares of 4% Convertible Preferred Stock. The Corporation will at
all times reserve and keep available out of its authorized Common Stock,
solely for the purpose of issuance upon the conversion of 4% Convertible
Preferred Stock as herein provided, such number of shares of Common Stock as
shall then be issuable upon the conversion of all outstanding shares of 4%
Convertible Preferred. The Corporation covenants that all shares of Common
Stock which shall be so issued shall be duly and validly issued, fully paid
and non-assessable. The Corporation will take all such action as may be so
taken without violation of any applicable law or regulation, or of any
requirement of any national securities exchange upon which the Common Stock
may be listed. The Corporation will not take any action which results in any
adjustment of the conversion rights if the total number of shares of Common
Stock issued and issuable after such action upon conversion of the 4%
Convertible Preferred Stock would exceed the total number of shares of Common
Stock then authorized by the Corporation's Articles of Incorporation, as
amended.
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10. No Reissuance of 4% Convertible Preferred Stock. Shares of 4%
Convertible Preferred Stock which are converted into shares of Common Stock as
provided herein shall not be reissued.
11. Issue Tax. The issuance of certificates for shares of Common
Stock upon conversion of 4% Convertible Preferred Stock shall be made without
charge to the holder for any United States issuance tax in respect thereof,
provided that the Corporation shall not be required to pay any tax which may
be payable in respect of any transfer involved in the issuance and delivery of
any certificate in a name other than that of the holder of the 4% Convertible
Preferred Stock which is being converted.
12. Closing of Books. The Corporation will at no time close its
transfer books against the transfer of any 4% Convertible Preferred Stock or
of any shares of Common Stock issued or issuable upon the conversion of any
shares of 4% Convertible Preferred Stock in any manner which interferes with
the timely conversion of such 4% Convertible Preferred Stock, except as may
otherwise be required to comply with applicable securities laws.
13. Definition of Common Stock. As used in this Certificate of
Determination, the term "Common Stock" shall mean and include the
Corporation's authorized Common Stock, no par value, as constituted on the
date of filing of these terms of the 4% Convertible Preferred Stock, and shall
also include any capital stock of any class of the Corporation thereafter
authorized which shall neither be limited to a fixed sum or percentage of par
value in respect of the rights of the holders thereof to participate in
dividends nor entitled to a preference in the distribution of assets upon the
voluntary or involuntary liquidation, dissolution or winding up of the
Corporation; provided that the shares of Common Stock receivable upon
conversion of shares of 4% Convertible Preferred Stock shall include only
shares designated as Common Stock of the Corporation on the date of filing of
this instrument, or in case of any reorganization, reclassification, or stock
split of the outstanding shares thereof, the stock, securities or assets
provided for in Subparagraph 7(f) and (g).
FOURTH: That said determination of the designation, preferences and
relative, participating, optional or other rights, and the qualifications,
limitations or restrictions thereof, relating to the 4% Convertible Preferred
Stock, was duly made by the Board of Directors pursuant to the provisions of
the Corporation s Articles of Incorporation and in accordance with the
provisions of Section 401(a) of the California Corporations Code.
IN WITNESS WHEREOF, each of the undersigned declares under penalty of
perjury that the statements contained in the foregoing Certificate are true of
their own knowledge. Executed at Denver, Colorado on July 14, 1998.
/s/ Steven H. Davis
Steven H. Davis, President
/s/ Rick C. Townsend
Rick C. Townsend, Secretary
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KRYS BOYLE FREEDMAN & SAWYER, P.C.
ATTORNEYS AT LAW
Telephone 600 17th Street, Suite 2700 S Facsimile
(303) 893-2300 Denver, Colorado 80202 (303) 893-2882
August 7, 1998
CET Environmental Services, Inc.
7670 Vaughn Court, Suite 130
Englewood, Colorado 80112
Gentlemen:
We have acted as counsel to CET Environmental Services, Inc., a
California corporation (the "Company"), in connection with the preparation and
filing with the Securities and Exchange Commission of a Registration Statement
on Form S-3 (the "Registration Statement"), pursuant to which the Company is
registering under the Securities Act of 1933, as amended, 1,161,316 shares
(the "Shares") of its common stock, no par value (the "Common Stock") which
may be sold by Selling Shareholders. Of the Shares of Common Stock which may
be sold, 1,126,316 Shares are issuable upon the conversion of 4% Convertible
Preferred Stock and 35,000 Shares are issuable upon the exercise of Common
Stock Purchase Warrants. This opinion is being rendered in connection with
the filing of the Registration Statement. All capitalized terms used herein
and not otherwise defined shall have the respective meanings given to them in
the Registration Statement.
In connection with this opinion, we have examined the Company's Articles
of Incorporation and Bylaws, both as currently in effect; such other records
of the corporate proceedings of the Company and certificates of the Company's
officers as we have deemed relevant; and the Registration Statement and the
exhibits thereto.
In our examination, we have assumed the genuineness of all signatures,
the legal capacity of natural persons, the authenticity of all documents
submitted to us as originals, the conformity to original documents of all
documents submitted to us as certified or photostatic copies and the
authenticity of the originals of such copies.
Based upon the foregoing and in reliance thereon, and subject to the
limitations set forth below, we are of the opinion that the 1,126,316 shares
of Common Stock issuable upon the conversion of the 4% Convertible Preferred
Stock and the 35,000 shares of Common Stock issuable upon exercise of the
outstanding Common Stock Purchase Warrants in accordance with their respective
terms, when issued, will be duly and validly authorized, legally issued, fully
paid and non-assessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement. We hereby further consent to the reference to us
under the caption "Legal Matters" in the prospectus included in the
Registration Statement.
Very truly yours,
KRYS BOYLE FREEDMAN & SAWYER, P.C.
By:/s/ Jon D. Sawyer
Jon D. Sawyer
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CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the incorporation by reference in this Registration
Statement on Form S-3 of CET Environmental Services, Inc. of our report dated
March 6, 1998, which report appears in the Annual Report on Form 10-K of
CET Environmental Services, Inc., for the year ended December 31, 1997, and to
the reference to our firm under the heading "Experts" in the Registration
Statement.
/s/ Grant Thornton LLP
GRANT THORNTON LLP
Denver, Colorado
August 7, 1998
