SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
[Amendment No. _________]
Filed by the Registrant _X_
Filed by a Party other than the Registrant ___
Check the appropriate box:
___ Preliminary Proxy Statement
___ Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
_X_ Definitive Proxy Statement
___ Definitive Additional Materials
___ Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
CET ENVIRONMENTAL SERVICES, INC.
(Name of Registrant as Specified in Its Charter)
CET ENVIRONMENTAL SERVICE, INC.
(Name of Person(s) Filing Proxy Statement)
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CET ENVIRONMENTAL SERVICES, INC.
7670 South Vaughn Court
Englewood, Colorado 80112
(303) 708-1360
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 8, 1999
TO THE SHAREHOLDERS OF CET ENVIRONMENTAL SERVICES, INC.:
NOTICE HEREBY IS GIVEN that the Annual Meeting of Shareholders of CET
Environmental Services, Inc., a California corporation (the "Company"), will be
held at the Denver Marriott Courtyard Tech Center, 6565 South Boston Street,
Englewood, Colorado, on Tuesday, June 8, 1999, at 9:00 a.m., Mountain Time, and
at any and all adjournments thereof, for the purpose of considering and acting
upon the following matters.
1. The election of five (5) Directors of the Company to serve until the
next Annual Meeting of Shareholders and until their successors have been duly
elected and qualified;
2. The ratification of the appointment of Grant Thornton LLP, as the
Company's independent auditors; and
3. The transaction of such other business as may properly come before the
meeting or any adjournment thereof.
Only holders of the no par value common stock of the Company of record at
the close of business on April 14, 1999, will be entitled to notice of and to
vote at the Meeting or at any adjournment or adjournments thereof. The proxies
are being solicited by the Board of Directors of the Company.
All shareholders, whether or not they expect to attend the Annual Meeting
of Shareholders in person, are urged to sign and date the enclosed Proxy and
return it promptly in the enclosed postage-paid envelope which requires no addi
tional postage if mailed in the United States. The giving of a proxy will not
affect your right to vote in person if you attend the Meeting.
BY ORDER OF THE BOARD OF DIRECTORS
STEVEN H. DAVIS, PRESIDENT
Englewood, Colorado
April 30, 1999
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CET ENVIRONMENTAL SERVICES, INC.
7670 South Vaughn Court
Englewood, Colorado 80112
(303) 708-1360
______________________________
PROXY STATEMENT
______________________________
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 8, 1999
GENERAL INFORMATION
The enclosed Proxy is solicited by and on behalf of the Board of Directors
of CET Environmental Services, Inc., a California corporation (the "Company"),
for use at the Company's Annual Meeting of Shareholders to be held at the Denver
Marriott Courtyard Tech Center, 6565 South Boston Street, Englewood, Colorado,
on Tuesday, June 8, 1999, at 9:00 a.m., Mountain Time, and at any adjournment
thereof. It is anticipated that this Proxy Statement and the accompanying Proxy
will be mailed to the Company's shareholders on or about May 7, 1999.
Any person signing and returning the enclosed Proxy may revoke it at any
time before it is voted by giving written notice of such revocation to the
Company, or by voting in person at the Meeting. The expense of soliciting
proxies, including the cost of preparing, assembling and mailing this proxy
material to shareholders, will be borne by the Company. It is anticipated that
solicitations of proxies for the Meeting will be made only by use of the mails;
however, the Company may use the services of its Directors, Officers and
employees to solicit proxies personally or by telephone, without additional
salary or compensation to them. Brokerage houses, custodians, nominees and
fiduciaries will be requested to forward the proxy soliciting materials to the
beneficial owners of the Company's shares held of record by such persons, and
the Company will reimburse such persons for their reasonable out-of-pocket
expenses incurred by them in that connection.
All shares represented by valid proxies will be voted in accordance
therewith at the Meeting.
The Company's Annual Report for the year ended December 31, 1998, is being
simultaneously mailed to the Company's shareholders, but does not constitute
part of these proxy soliciting materials.
SHARES OUTSTANDING AND VOTING RIGHTS
All voting rights are vested exclusively in the holders of the Company's no
par value common stock, with each share entitled to one vote. Only shareholders
of record at the close of business on April 14, 1999, are entitled to notice of
and to vote at the Meeting or any adjournment thereof. On April 14, 1999, the
Company had 6,284,288 shares of its no par value common stock outstanding, each
share of which is entitled to one vote on all matters to be voted upon at the
Meeting. Under California law, shareholders are permitted to cumulate votes for
the election of directors whose names have been placed in nomination.
Therefore, in voting for directors, each outstanding share of Common Stock would
be entitled to five votes which may be cast for one candidate or distributed in
any manner among the nominees for director. However, the right to cumulate
votes in favor of one or more candidates may not be exercised until the
candidate or candidates have been nominated and any shareholder has given notice
at the Annual Meeting of the intention to cumulate votes.
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The proxy holders (if authority to vote for one or more nominees is not
withheld) will have full discretion and authority to vote cumulatively and to
allocate votes among any or all of the Board of Directors nominees as they may
determine or, if authority to vote for a specified candidate or candidates has
been withheld, among those candidates for whom authority to vote has not been
withheld.
A majority of the Company's outstanding common stock represented in person
or by proxy shall constitute a quorum at the Meeting.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the number and percentage of shares of the
Company's no par value common stock owned beneficially, as of April 14, 1999, by
any person, who is known to the Company to be the beneficial owner of 5% or more
of such common stock, and, in addition, by each Director, Nominee for Director,
and Executive Officer of the Company, and by all Directors, Nominees for
Director and Executive Officers of the Company as a group. Information as to
beneficial ownership is based upon statements furnished to the Company by such
persons.
NAME AND ADDRESS AMOUNT AND NATURE OF PERCENT
OF BENEFICIAL OWNERS BENEFICIAL OWNERSHIP OF CLASS
Craig C. Barto 703,554 11.2%
2440 Bayshore Drive
Newport Beach, CA 92663
Douglas W. Cotton 634,314 (1) 10.1%
Four Bowditch
Irvine, CA 92720
Steven H. Davis 1,338,763 (2) 21.3%
7670 S. Vaughn Court
Englewood, CO 80112
Robert A. Taylor 10,496 0.2%
9870 East Alameda
Denver, CO 80231
George Pratt 1,000 *
2208 Argyle Circle
Plano, TX 75023
Paul C. Kelly 4,000 (3) *
10401 Owens Circle
Westminster, CO 80021
John G. L. Hopkins 438,725 7.0%
24111 Dove Lane, N.W.
Poulsbo, WA 98370
Scott Schulein 3,000 (3) *
7670 S. Vaughn Court
Englewood, CO 80112
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Don W. Edgington 3,000 (3) *
150 Noel Avenue
Mobile, AL 36607
All directors, nominees for 2,698,127 42.9%
director and executive officers
as a group (8 persons)
__________________
* Less than 0.1%.
(1) Includes 632,314 shares held directly and 2,000 shares underlying
stock options exercisable within 60 days held by Mr. Cotton's wife.
(2) Includes 1,187,907 shares held directly and 77,200 shares held by the
wife of Mr. Davis. Also includes 73,656 shares held by relatives of
Mr. Davis of which he disclaims beneficial ownership.
(3) Represents shares underlying stock options exercisable within 60 days
held by the named person.
There are no known agreements, the operation of which may at a subsequent
date result in a change in control of the Company.
ELECTION OF DIRECTORS
Effective at the Annual Meeting of Shareholders the number of Directors of
the Company will be set at five members. The Board of Directors recommends the
election as Directors of the five (5) nominees listed below, to hold office
until the next Annual Meeting of Shareholders and until their successors are
elected and qualified or until their earlier death, resignation or removal.
Each of the current members of the present Board of Directors has been nominated
for reelection. The persons named as "Proxies" in the enclosed form of Proxy
will vote the shares represented by all valid returned proxies in accordance
with the specifications of the shareholders returning such proxies. If at the
time of the Meeting any of the nominees named below should be unable to serve,
which event is not expected to occur, the discretionary authority provided in
the Proxy will be exercised to vote for such substitute nominee or nominees, if
any, as shall be designated by the Board of Directors.
The following table sets forth the name and age of each nominee for
Director, indicating all positions and offices with the Company presently held,
and the period during which each person has served as a Director:
POSITIONS AND OFFICES
NAME AGE HELD AND TERM AS A DIRECTOR
Craig C. Barto 40 Director since 1991
Douglas W. Cotton 48 Executive Vice President and Director
since 1991
Steven H. Davis 45 Chief Executive Officer, President
and Director since 1991
Robert A. Taylor 53 Director since 1996
George Pratt 66 Director since 1998
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There is no family relationship between any Director, Nominee for Director
or Executive Officer of the Company.
The Company has no Nominating Committee, but does have an Audit Committee
and a Compensation Committee.
The Audit Committee presently consists of Craig C. Barto and Robert A.
Taylor. The Audit Committee reviews financial statements and data with the
Company's independent accountants before the information and data are released
to the public. During 1998, the Audit Committee met one (1) time.
The Compensation Committee presently consists of Craig C. Barto and Robert
A. Taylor. The Compensation Committee reviews compensation matters relating to
the Executive Officers of the Company and makes recommendations to the Board of
Directors. The Compensation Committee did not meet during 1998.
Paul C. Kelly currently serves as an advisor to the Audit Committee, and
Steven H. Davis serves as an advisor to the Compensation Committee.
Set forth below are the names of all directors, nominees for director and
executive officers of the Company, all positions and offices with the Company
held by each such person, the period during which he has served as such, and the
principal occupations and employment of such persons during at least the last
five years:
CRAIG C. BARTO has been a Director of the Company since 1991. He is also
the President and Chairman of the Board of Directors of Signal Hill Petroleum,
Inc., Barto/Signal Petroleum, Inc., Signal Hill Operating, Inc., and Signal Oil
and Refining, Inc., which operate businesses such as Paramount and Fletcher oil
refineries. A graduate of UCLA with a degree in Economics, Mr. Barto was
instrumental in the growth of the Signal Hill Petroleum companies in the oil
business in 1979 with the reclamation of a marginal operation in the West
Newport Oil Field in Orange County, California. In addition to the oil and gas
operations, Mr. Barto is also responsible for the commercial and residential
development of over 100 acres of some of the last undeveloped hilltop property
in Southern California.
DOUGLAS W. COTTON has served as the Company's Executive Vice President and
a Director since 1991 and is responsible for all aspects of the Company's
operations in the Southwest, and provides guidance for marketing and sales to
commercial clients nationwide. He also served as Chief Operating Officer from
October 1996 to April 1999. Prior to joining the Company, Mr. Cotton served as
Vice President of Ecova Corporation and worked for 13 years at IT Corporation
where he held various positions culminating in serving as General Manager for
the Gulf Coast Region. He has more than 20 years of experience managing on-site
biological, chemical and physical remediation of hazardous wastes in sludge,
soil and groundwater using a variety of innovative technologies. His knowledge
of the industry has been gained at more than 100 remediation projects ranging
from $100,000 to $45 million, including Superfund sites, emergency response
cleanups and large excavation/on-site treatment projects.
STEVEN H. DAVIS has served as the Company's Chief Executive Officer,
President and a Director since 1991. Prior to that time he was operating partner
of Lincoln Property Company which developed over 3 million square feet of
buildings in California, Nevada and Colorado. He has almost 20 years of
experience in construction, financing and developing industrial real estate. Mr.
Davis graduated from Brown University with an emphasis in Economics and obtained
an MBA from the University of Southern California. As President, Mr. Davis
manages the Company's business affairs and has been instrumental in securing
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financing, negotiating bonding agreements, projecting and analyzing the
feasibility of expansion, mergers and acquisitions, and formulating business
relationships with customers, financial entities and the legal community.
ROBERT A. TAYLOR has been a Director of the Company since 1996. He is a
veterinarian and manages the Alameda East Veterinary Hospital in Denver,
Colorado which he started in 1971. Currently, Alameda East Veterinary Hospital
employs 55 persons and provides a small animal practice specializing in
orthopedic and rehabilitation services. Dr. Taylor received a B.S. degree in
Animal Science from Texas A&M University in 1969, a D.V.M. degree from Texas A&M
University in 1970, and a M.S. degree in Veterinary Surgery from Colorado State
University in 1978.
GEORGE PRATT has been a Director of the Company since July 1998. Since
June 1993, Mr. Pratt has been employed by Pratt Associates, Inc, which provides
professional services in the area of corporate finance, merger-acquisition
analysis for small high technology companies, and providing services to the
legal profession such as valuations of securities and privately owned companies
for estate purposes and research and testimony for securities-related
litigation. From April 1988 to January 1993, he was Chairman and Chief
Executive Officer of Computer Automation, Inc., a manufacturer of computer
systems and automotive test equipment. Mr. Pratt received a B.B.A. Degree in
Finance from Hofstra University in 1958.
PAUL C. KELLY has been Executive Vice President and Chief Financial Officer
since March 8, 1999. From November 1997 to March 1999, Mr. Kelly was Vice
President of Finance and Business Development for Technology Management Advisors
in Englewood, Colorado, where he assisted start-up companies to develop business
plans and obtain long-term financing. From December 1985 to September 1997, he
worked in several capacities affiliated with the Adolph Coors Company in Golden,
Colorado, and from October 1991 to September 1997 served as Controller-Membranes
Separations Unit for Golden Technologies Company. From May 1985 to December
1985, Mr. Kelly was Financial Reporting Manager for Trifund Asset Management
Company which managed public limited partnerships. From April 1982 to May 1985,
he was an Audit Manager for Price Waterhouse. Mr. Kelly also served as an Audit
Senior for Arthur Young & Co. from September 1978 to April 1982. He received a
B.A. Degree in Accounting from Eastern Michigan University in 1997 and an MS
Degree in Financial Accounting from Colorado State University in 1978. Mr.
Kelly is a Certified Public Accountant in the State of Colorado. He is 44 years
old.
SCOTT SCHULEIN has served as the Company's Vice President - Federal Program
since 1998. Prior to that time he served as General Manager - Federal Programs,
Regional Manager and Operations Manager for the Company's Rocky Mountain Region.
Mr. Schulein joined the Company in 1994 opening the Denver office. Prior to
joining the Company, Mr. Schulein was the Operations Manager for a national low-
temperature remediation company and worked for USPCI, a subsidiary of Union
Pacific Corporation. He has more than 15 years of experience conducting site
investigations and managing remediations of toxic and hazardous wastes at more
than 300 sites throughout the United States. Mr. Schulein is currently
responsible for the Company's operations in the Northwest and all Federal
Government programs. Mr. Schulein is a Registered Geologist and received his
Bachelor of Science Degree in Geology from the University of Vermont in 1984.
He is 37 years old.
DON W. EDGINGTON has been a Vice President of the Company since August
1998. Mr. Edgington has been employed by the Company since April 1995, first as
a Regional Manager and since March 1998 as Gulf Coast General Manager. From
March 1993 to April 1995, he was a District Manager for Ridel/Peterson, an
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environmental services company in Mobile, Alabama. Mr. Edgington received a
Bachelors Degree in Business Administration and Marketing from Louisiana Tech
University in 1977. He is 44 years old.
The Company's Board of Directors held seven (7) meetings during the year
ended December 31, 1998. Each Director attended at least 75% of the aggregate
number of meetings held by the Board of Directors and its Committees during the
time each such Director was a member of the Board or of any Committee of the
Board, except for John G.L. Hopkins, whose term as a Director ended on June 2,
1998, who only attended 50% of the meetings held during that part of the year.
The Company's executive officers hold office until the next annual meeting
of directors of the Company, which currently is scheduled for June 8, 1999.
There are no known arrangements or understandings between any director or exe
cutive officer and any other person pursuant to which any of the above-named
executive officers or directors was selected as an officer or director of the
Company.
No event occurred during the past five years which is material to an
evaluation of the ability or integrity of any Director or person nominated to be
Director or Executive Officer of the Company.
SECTION 16(A) BENEFICIAL REPORTING COMPLIANCE
Based solely on a review of Forms 3 and 4 and amendments thereto furnished
to the Company during its most recent fiscal year, and Forms 5 and amendments
thereto furnished to the Company with respect to its most recent fiscal year and
certain written representations, three persons who were officers and directors
of the Company failed to file on a timely basis reports required by Section
16(a) of the Exchange Act during the most recent fiscal year. George Pratt, a
Director, filed a Form 3 late and amended that Form 3 three days after filing to
report holdings not included in the original Form 3. In addition, Scott
Schulein and Don W. Edgington, Vice Presidents of the Company, each filed Form
3's late.
COMPENSATION
The following table sets forth information concerning the compensation
received for services rendered in all capacities to the Company for the years
ended December 31, 1998, 1997 and 1996, by the Company's President and each
other executive officer whose compensation exceeded $100,000 during such years.
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<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
LONG-TERM COMPENSATION
---------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
------------------------------ ----------------- ---------------
SECURI-
TIES
OTHER UNDERLY-
ANNUAL RE- ING ALL
COMPEN- STRICTED OPTIONS/ OTHER
NAME AND PRINCIPAL SATION STOCK SARs LTIP COMPEN-
POSITION YEAR SALARY BONUS <FN1> AWARD(S) (NUMBER) PAYOUTS SATION
- ------------------ ---- ------ ----- ------ -------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Steven H. Davis, 1998 $123,820 $ 0 $ 984 0 0 0 $0
Chief Executive 1997 $ 84,907 $ 0 $1,003 0 0 0 $0
Officer 1996 $ 79,150 $ 0 $ 951 0 0 0 $0
John G.L. Hopkins, 1998 $ 61,592 $ 0 $ 28 0 0 0 $0
Senior Vice Presi- 1997 $123,183 $ 0 $ 0 0 0 0 $0
dent - Federal 1996 $125,000 $ 0 $ 0 0 0 0 $0
Programs<FN2>
Douglas W. Cotton, 1998 $120,841 $ 0 $1,105 0 0 0 $0
Executive Vice 1997 $ 32,147 $ 0 $ 425 0 0 0 $0
President and 1996 $ 63,831 $ 0 $1,038 0 0 0 $0
Chief Operating
Officer
Rick C. Townsend, 1998 $132,011 $ 0 $1,632 0 0 0 $0
Chief Financial 1997 $125,587 $ 0 $ 958 0 0 0 $0
Officer<FN3> 1996 $ 16,827 $ 0 $ 0 0 60,000 0 $0
_______________
<FN>
<FN1>
Includes matching 401K contributions by the Company and automobile expenses.
<FN2>
Mr. Hopkins resigned on July 1, 1998.
<FN3>
Mr. Townsend's employment was terminated on August 18, 1998.
</FN>
</TABLE>
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AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
SECURITIES
UNDERLYING VALUE OF UNEXER-
SHARES UNEXERCISED CISED IN-THE
ACQUIRED OPTIONS MONEY OPTIONS/
ON SARs AT FY-END SARs AT FY-END
EXERCISE VALUE EXERCISABLE/ EXERCISABLE/
NAME (NUMBER) REALIZED UNEXERCISABLE UNEXERCISABLE
---- -------- -------- -------------- ---------------
Steven H. Davis -0- -0- 0/0 $0 / $0
John G. L. Hopkins -0- -0- 0/0 $0 / $0
Douglas W. Cotton -0- -0- 0/0 $0 / $0
Rick C. Townsend -0- -0- 0/0 $0 / $0
The Company has no formal employment agreements with any of its Executive
Officers. The Company does have a letter agreement dated March 8, 1999, with
Paul C. Kelly, the Company's Executive Vice President and Chief Financial
Officer, regarding his employment which provides that he is to receive an
annual salary of $100,000 and bonuses to be determined at a later date.
Either the Company or Mr. Kelly may terminate his employment without notice.
However, Mr. Kelly is entitled to three months' severance pay if terminated
during the first year of employment and six months' severance pay thereafter.
Pursuant to the terms of the letter agreement he also received options to
purchase 20,000 shares of Common Stock at an exercise price of $1.62 per
share. The options vest over a five year period.
COMPENSATION OF DIRECTORS
Beginning in August 1998, members of the Board of Directors receive a fee
of $1,000 per Board meeting attended, including telephone meetings. They are
also entitled reimbursement of reasonable travel expenses incurred by them in
attending board or committee meetings.
On August 7, 1998, the Board of Directors granted each of the Company's
three non-employee Directors options to purchase 10,000 shares of Common Stock
at $1.75 per share. These options were not granted under any plan. The
options are exercisable commencing August 7, 1999 until August 7, 2003, except
that they will expire three months after the termination of serving as a
Director of the Company, for reasons other than death, and one year after
termination as a result of death.
401K PLAN
The Company has a Non-standardized Cash or Deferred Profit Sharing Plan
pursuant to which all eligible employees may contribute a portion of their
income. Company contributions to the Profit Sharing Plan are discretionary.
The Company does, however, make a matching contribution in the amount of 25
percent of the first six percent of all elective deferrals.
STOCK OPTION PLAN
On March 1, 1995, the Company adopted an Incentive Stock Option Plan (the
"Plan") for key personnel. A total of 550,000 shares of Common Stock are
reserved for issuance pursuant to the exercise of stock options (the
"Options") which may be granted to full-time employees of the Company. The
Plan is currently administered by the Board of Directors. In addition to
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determining who will be granted Options, the Board of Directors has the
authority and discretion to determine when Options will be granted and the
number of Options to be granted. The Board of Directors may grant Options
intended to qualify for special treatment under the Internal Revenue Code of
1986, as amended ("Incentive Stock Options") and may determine when each
Option becomes exercisable, the duration of the exercise period for Options
and the form of the instruments evidencing Options granted under the Plan. The
Board of Directors may adopt, amend and rescind such rules and regulations as
in its opinion may be advisable for the administration of the Plan. The Board
of Directors may also construe the Plan and the provisions in the instruments
evidencing the Options granted under the Plan and make all other
determinations deemed necessary or advisable for the administration of the
Plan.
The Board of Directors has broad discretion to determine the number of
shares with respect to which Options may be granted to participants. The
maximum aggregate fair market value (determined as of the date of grant) of
the shares as to which the Incentive Stock Options become exercisable for the
first time during any calendar year may not exceed $100,000. The Plan provides
that the purchase price per share for each Incentive Stock Option on the date
of grant may not be less than 100 percent of the fair market value of the
Common Stock on the date of grant. However, any Option granted under the Plan
to a person owning more than 10 percent of the Common Stock shall be at a
price of at least 110 percent of such fair market value.
If an optionee ceases to be employed by the Company for any reason other
than death or disability, the optionee may exercise all Options within three
months following such cessation to the extent exercisable on the date of
cessation. If an optionee dies while employed by the Company, or during the
three-month period following termination of the optionee's employment, or if
the optionee becomes disabled, the optionee's Options, unless previously
terminated, may be exercised, whether or not otherwise exercisable, by the
optionee or his legal representative or the person who acquires the Options by
bequest or inheritance at any time within one year following the date of death
or disability of the optionee.
An Option granted under the Plan is not transferable by the optionee
other than by will or by the laws of descent and distribution and, during the
lifetime of the optionee, may be exercised only by the optionee, his guardian
or legal representative.
In August 1996, the Company filed a registration statement on Form S-8 to
register the 550,000 shares of the Company's Common Stock reserved for
issuance under the Company's Incentive Stock Option Plan.
During 1998, unvested options totaling an aggregate amount of 44,800
shares with exercise prices ranging from $3.50 to $7.00 per share were
cancelled due to the termination of five employees. In addition, vested
options totaling 69,900 shares with exercise prices ranging from $3.50 to
$7.00 per share were cancelled due to the termination of seven employees who
did not exercise their options prior to the expiration date stipulated in the
option agreement. During 1998, one employee exercised options to purchase
4,000 shares at an exercise price of $3.50 per share.
As of December 31, 1998, options for 112,100 shares were outstanding at
prices ranging from $3.50 to $7.00 per share.
On January 22, 1999, the Board of Directors granted options to 20
employees to purchase an aggregate of 185,000 shares at exercise prices
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ranging from $1.75 to $1.925 per share. The options vest over a period of
five years and expire five to ten years after the date of grant. In
connection with these grants, options to purchase 62,500 shares at exercise
prices ranging from $3.50 to $7.70 per share were cancelled.
In October 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-
Based Compensation", which requires entities to calculate the fair value of
stock awards granted to employees. This statement provides entities with the
option of either electing to expense the fair value of employee stock-based
compensation or continuing to recognize compensation expense under existing
accounting pronouncements and to provide proforma disclosures of net income
and, if presented, income per share, as if the above-mentioned fair market
value method of accounting was used in determining compensation expense.
Additionally, the statement requires that all equity awards granted to
nonemployees such as suppliers of goods and services be recognized based on
fair value.
The Company has elected the proforma method of disclosure. Under this
method, the fair value of each option grant is estimated on the date of grant
using the Black-Scholes options-pricing model with the following weighted-
average assumptions for grants used in 1998, 1997 and 1996: no expected
dividends; expected volatility of 74.77%; risk free interest rate of 6.07%;
and expected lives of five years.
Using these assumptions, the Company's net income(loss) and
earnings(loss) per common share would have been:
1998 1997 1996
Net income(loss)
As reported $528,478 $(347,291) $(3,756,450)
Pro Forma 454,233 (495,586) (3,854,017)
Earnings(loss) per common share
As reported $ 0.09 $ (0.06) $ (0.74)
Pro Forma 0.08 (0.09) (0.76)
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
OVERVIEW AND PHILOSOPHY
The Board of Directors approved the formation of a Compensation Committee
on December 5, 1997. The Compensation Committee has responsibility to
recommend salaries and short-term incentive compensation levels for all
executive officers. It also will make recommendations concerning bonuses and
other incentive compensation for their personnel.
The Compensation Committee currently consists of one independent non-
employee director and one non-employee director who has an ownership interest
in excess of 10% and certain other interlocking relationships as, defined by
the Securities and Exchange Commission. The President and the CEO serves in
an advisory capacity.
The philosophy of the Compensation Committee is to provide a compensation
package for each executive officer that incentivizes the individual to fully
support the Company's business objectives and to maximize stockholder value.
These compensation packages will generally consist of a base salary, short-
term incentives in the form of discretionary cash bonuses, and long-term
incentives in the form of stock options.
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EXECUTIVE OFFICER COMPENSATION
The Company's compensation program for executive officers is based on the
following principals:
* Compensation should be reflective of overall Company financial
performance and an individual's contribution to the Company's
success.
* Compensation packages should be based on Competitive practices.
* A significant portion of overall compensation should be
performance based.
* Long-term incentive compensation should be structured to closely
follow increases in stockholder return.
During 1998, salary increases included a $15,000 increase to Mr.
Edgington and a $33,500 increase to Mr. Schulein. The compensation to Mr.
Davis and Mr. Cotton remained at their previous levels.
Cash bonuses are generally provided on a purely discretionary basis. In
1998 there were no bonuses paid to executive officers.
The CEO and one other executive officer have significant ownership
interests (over 5%) and as a result are highly motivated to maximize
stockholder value. The executive officers are also eligible to participate in
the Company's Incentive Stock Option Plan. In 1998 there were no stock
options granted to executive officers.
In 1996, Mr. Cotton, Executive Vice President of the Company, took a
voluntary reduction in salary from $125,000 to $25,000. His salary was
reinstated to $125,000 in December 1997 and is currently set at that level.
On April 5, 1999, the Board of Directors authorized the payment of $157,692 in
deferred salary to Mr. Cotton.
CHIEF EXECUTIVE OFFICER COMPENSATION
Mr. Davis has been CEO of the Company since 1991. As noted above, in
1996 he took a voluntary reduction in base salary from $125,000 to $65,000.
His salary was reinstated to $125,000 in August 1997, and is currently set at
that level. The Board of Directors authorized payment of $75,000 in deferred
salary to Mr. Davis on April 5, 1999.
As a result of the Company not achieving profitability goals in 1998, Mr.
Davis was not awarded any cash bonuses, stock options or other form of
incentive compensation.
The Compensation Committee believes Mr. Davis has managed the Company
well, and future compensation will be based on further improvements in Company
performance.
Members of the Compensation Committee: Craig C. Barto
Robert A. Taylor
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STOCKHOLDER RETURN PERFORMANCE PRESENTATION
The performance graph shown below was prepared using data prepared by
Carl Thompson & Associates, Inc. As required by applicable rules of the SEC,
the graph was prepared based upon the following assumptions:
1. $100 was invested in Common Stock, the S&P 500 Composite Index and
the Peer Group (as defined below) on July 20, 1995 (the date of the Company's
initial public offering).
2. Peer Group investment is weighted based on the market capitalization
of each individual company within the Peer Group at the beginning of each
year.
3. Dividends are reinvested on the ex-dividend dates.
The companies that comprise the Company's Peer Group are as follows:
Sevenson Environmental Services, Inc.; ThermoRetic Corporation; EMCON; Versar,
Inc.; and IT Group, Inc. OHM Corporation, which had previously been included
in the Company's Peer Group, was acquired by IT Group, Inc. in June 1998.
CET ENVIRONMENTAL SERVICES, INC.
COMPARATIVE CUMULATIVE TOTAL RETURNS
CET ENVIRONMENTAL SERVICES, INC.
S&P 500 INDEX AND PEER GROUP
(Performance results through December 31, 1998)
[STOCK PERFORMANCE GRAPH INSERTED HERE]
7/20/95 12/31/95 12/31/96 12/31/97 12/31/98
CET Environmental
Services, Inc. $100.00 $187.50 $115.00 $138.75 $ 25.00
Peer Group $100.00 $102.71 $ 83.81 $ 92.80 $ 75.89
S&P 500 $100.00 $112.52 $138.34 $184.48 $237.19
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
From July 1992 to December 1998, the Company relied upon financing from
the Birnie Trust. The mother-in-law of Steven Davis, the Company's President,
is trustee of the Birnie Trust and Mr. Davis' wife is a beneficiary. The
Company borrowed funds from the Birnie Trust pursuant to one-year promissory
notes which bore interest at 10% per annum. The Birnie Trust was also an
investor in the Company's private offering of debt securities, described
below. The maximum principal amount outstanding at any one time was $671,800.
In March and April 1995, the Company issued debt securities in a private
offering pursuant to which it raised $890,000. The Birnie Trust held $400,000
of such Subordinated Notes and other relatives of Mr. Davis held $230,000 of
such Subordinated Notes. A relative of Mr. Cotton held $50,000 of such
Subordinated Notes. On March 1, 1996, the remaining balances were repaid on
all Subordinated Notes except for $471,800 (comprised of a $337,000 Note held
by the Birnie Trust and $134,800 of Notes held by relatives of Mr. Davis)
which was rolled over into new Notes, payable in one year with interest due
monthly at ten percent per annum. On July 24, 1996, the Company borrowed an
additional $200,000 from the Birnie Trust under a Promissory Note payable in
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one year at 10% interest. On December 31, 1997, the Promissory Notes to the
Birnie Trust totaled $537,000 and to the relatives of Mr. Davis totaled
$134,800. These notes were paid in full in December 1998.
In 1998, 1997 and 1996, the Company provided services to Signal Hill
Petroleum, Inc., Paramount Petroleum and Fletcher Oil in the aggregate amount
of approximately $273,000, $835,000 and $340,000, respectively. These services
include remediation services, ground water monitoring and site investigations
for existing properties and environmental assessments in relation to property
acquisition. Mr. Barto, Chairman of the Company, is a 50 percent owner of
these businesses.
On April 30, 1996, the Company loaned $105,764.38 to John G. L. Hopkins,
a former Officer and Director of the Company pursuant to a demand note which
bears interest at the rate of 8.25% per annum. Interest is payable monthly
and principal is due on demand. Since that date, several additional advances
were made to Mr. Hopkins bringing the total amount of the loan to
approximately $148,000 (excluding accrued interest) as of December 31, 1996.
On February 27, 1997, these loans were repaid in full by Mr. Hopkins. During
1997, the Company made additional advances to Mr. Hopkins and the balance due
at December 31, 1998, was $124,036. Interest is payable monthly, and
principal is due on demand.
On November 8, 1996, the Company borrowed $545,000 from Signal Hill
Petroleum, a company controlled by Craig C. Barto, one of the Company's
directors, pursuant to a 30 day note which bears interest at 10% per annum.
The due date on the note was extended to January 15, 1997, then repaid in the
amount of $300,000 on January 15, 1997, and $250,129 (including accrued
interest) on February 27, 1997.
On November 30, 1998, the Company borrowed $200,000 from Craig C. Barto,
one of the Company's directors, pursuant to a 60-day note which bore interest
at 10% per annum. The due date on the note was extended to November 30, 1998,
and the note was paid in full by the Company in December 1998.
On November 24, 1998, the Company borrowed $500,000 from Davis Real
Estate Holdings, LLP, owned by Steven Davis, the Company's President, Mr.
Davis' wife, Craig C. Barto, one of the Company's Director, and Mr. Barto's
wife. The 30-day note bore interest at 10% per annum and was repaid in full
by the Company in December 1998.
All of these transactions were approved by the Board of Directors and
were made on terms as fair and reasonable to the Company as those that could
be obtained from non-affiliated third parties. Any future transactions between
the Company and its officers, directors, employees and affiliates that are
outside the scope of the Company's employment relationship with such persons
will be subject to the approval of a majority of the disinterested members of
the Board of Directors based upon a determination that the terms are at least
as favorable to the Company as those that could be obtained from unrelated
parties.
APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The independent accounting firm of Grant Thornton LLP audited the
financial statements of the Company for the year ended December 31, 1998, and
has been selected in such capacity for the current fiscal year. At the
direction of the Board of Directors, this appointment is being presented to
the shareholders for ratification or rejection at the Annual Meeting of Share
holders. If the shareholders do not ratify the appointment of Grant Thornton
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LLP, the appointment of auditors will be reconsidered by the Board of
Directors.
It is expected that representatives of Grant Thornton LLP, will be
present at the meeting and will be given an opportunity to make a statement if
they desire to do so. It is also expected that the representatives will be
available to respond to appropriate questions from shareholders.
OTHER BUSINESS
As of the date of this Proxy Statement, management of the Company was not
aware of any other matter to be presented at the Meeting other than as set
forth herein. However, if any other matters are properly brought before the
Meeting, the shares represented by valid proxies will be voted with respect to
such matters in accordance with the judgment of the persons voting them. A
majority vote of the shares represented at the meeting is necessary to approve
any such matters.
ANNUAL REPORT
The Company's Annual Report for the year ending December 31, 1998,
accompanies this Proxy Statement. The Annual Report is not incorporated into
this Proxy Statement and is not to be considered part of the solicitation
material.
DEADLINE FOR RECEIPT OF SHAREHOLDER PROPOSALS
FOR THE ANNUAL MEETING TO BE HELD IN MAY 2000
Any proposal by a shareholder intended to be presented at the Company's
Annual Meeting of Shareholders to be held in May 2000 must be received at the
offices of the Company, 7670 South Vaughn Court, Englewood, Colorado 80112, no
later than December 31, 1999, in order to be included in the Company's proxy
statement and proxy relating to that meeting.
Shareholders intending to bring any business before the Annual Meeting of
Shareholders to be held in May 2000 that is not to be included in the
Company's proxy statement and proxy related to that meeting must notify the
Company, in writing, prior to March 23, 2000, of the business to be presented.
Any such notices received after said date will be considered untimely under
Rule 14a(c)(1) under the Securities Exchange Act of 1934, as amended.
STEVEN H. DAVIS, PRESIDENT
Englewood, Colorado
April 30, 1999
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P R O X Y
CET ENVIRONMENTAL SERVICES, INC.
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Steven H. Davis with the power to appoint
his substitute, and hereby authorizes him to represent and to vote as
designated below, all the shares of common stock of CET Environmental
Services, Inc. held of record by the undersigned on April 14, 1999, at the
Annual Meeting of Shareholders to be held on June 8, 1999, or any adjournment
thereof.
1. The election of five (5) Directors of the Company to serve until the
next Annual Meeting of Shareholders and until their successors have been duly
elected and qualified:
___ FOR all nominees listed below (except as marked to the
contrary).
___ WITHHOLD authority to vote for all the nominees listed
below:
Craig C. Barto Douglas W. Cotton
Robert A. Taylor George Pratt
Steven H. Davis
[INSTRUCTION: To withhold authority to vote for any individual nominee,
cross out that nominee's name above.]
2. The ratification of the appointment of Grant Thornton LLP as the
Company's independent accountants for the fiscal year ending December 31,
1999:
___ FOR ___ AGAINST ___ ABSTAIN
3. The transaction of such other business as may properly come before
the meeting or any adjournment thereof.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF CET
ENVIRONMENTAL SERVICES, INC. PLEASE SIGN AND RETURN THIS PROXY IN THE
ENCLOSED PRE-ADDRESSED ENVELOPE. THE GIVING OF A PROXY WILL NOT AFFECT YOUR
RIGHT TO VOTE IN PERSON IF YOU ATTEND THE MEETING.
(To be signed on the other side)
<PAGE>
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CET ENVIRONMENTAL SERVICES, INC.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR PROPOSALS 1 AND 2.
SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AT THE MEETING IN ACCORDANCE
WITH THE SHAREHOLDER'S SPECIFICATIONS ABOVE. THIS PROXY CONFERS DISCRETIONARY
AUTHORITY IN RESPECT TO MATTERS NOT KNOWN OR DETERMINED AT THE TIME OF THE
MAILING OF THE NOTICE OF THE ANNUAL MEETING OF SHAREHOLDERS TO THE
UNDERSIGNED.
The undersigned hereby acknowledges receipt of the Notice of Annual Meeting of
Shareholders and Proxy Statement.
Dated: ______________, 1999 _______________________________________
Signature(s) of Shareholder(s)
_______________________________________
Signature(s) of Shareholder(s)
Signature(s) should agree with the name(s) stenciled hereon. Executors,
administrators, trustees, guardians and attorneys should indicate when
signing. Attorneys should submit powers of attorney.
