DEF 14A 1 pesi20170612_def14a.htm FORM DEF 14A pesi20170612_def14a.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

SCHEDULE 14A

 

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

 

Filed by the Registrant  ☑                            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))

Definitive Proxy Statement

Definitive Additional Materials

Soliciting Material Pursuant to §240.14a-12

 

Perma-Fix Environmental Services, Inc.

(Name of Registrant as Specified In Its Charter)

 

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

 

Payment of Filing Fee (Check the appropriate box):

 

No fee required.

 

Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

 

 

1)

Title of each class of securities to which transaction applies:

     

 

 

2)

Aggregate number of securities to which transaction applies:

     

 

 

3)

Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):

     

 

 

4)

Proposed maximum aggregate value of transaction:

     

 

 

5)

Total fee paid:

     

 

Fee paid previously with preliminary materials.

 

Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

 

 

1)

Amount Previously Paid:

     

 

 

2)

Form, Schedule or Registration Statement No.:

     

 

 

3)

Filing Party:

     

 

 

4)

Date Filed:

     

 



 

 
 

 

 

PERMA-FIX ENVIRONMENTAL SERVICES, INC.

8302 Dunwoody Place, Suite 250

Atlanta, Georgia 30350

 

NOTICE OF ANNUAL MEETING

To Be Held July 27, 2017

 

 

To the Stockholders of Perma-Fix Environmental Services, Inc.:

 

Notice is hereby given that the 2017 Annual Meeting of Stockholders (the “Meeting”) of Perma-Fix Environmental Services, Inc. (the “Company”) will be held at the Crowne Plaza Hotel, Atlanta Airport, 1325 Virginia Avenue, Atlanta, Georgia 30344, on Thursday, July 27, 2017, at 11:00 a.m. (EDST), for the following purposes:

 

 

1.

To elect six directors to serve until the next Annual Meeting of Stockholders or until their respective successors are duly elected and qualified (Proposal 1);

 

 

2.

To ratify the appointment of Grant Thornton, LLP as the independent registered public accounting firm of the Company for the 2017 fiscal year (Proposal 2);

 

 

3.

To approve, on an advisory basis, the 2016 compensation of our named executive officers as described herein (Proposal 3);

 

 

4.

To recommend, by non-binding vote, the frequency of future advisory votes on the executive compensation (Proposal 4);

 

 

5.

To approve the Fourth Amendment to the Company’s 2003 Outside Directors Stock Plan (Proposal 5);

 

 

6.

To approve the 2017 Stock Option Plan (Proposal 6); and

 

 

7.

To transact such other business as may properly come before the meeting and at any adjournments thereof.

 

Only stockholders of record at the close of business on June 8, 2017, will be entitled to notice of, and to vote at, the Meeting or at any postponement or adjournment thereof.

 

This Notice of Annual Meeting of Stockholders, our Annual Report for 2016 and the accompanying Proxy Statement and Proxy Card are being first mailed to stockholders on or about June 22, 2017.

 

The Company’s Annual Report for 2016 is enclosed for your reference.

 

By the order of the Board of Directors

Ben Naccarato

Secretary

 

 

Atlanta, Georgia

June 22, 2017

 

 

It is important that your shares be represented at the Meeting. Whether or not you plan to attend the Meeting, we urge you to vote your shares over the internet as described in the proxy material, or you may sign, date and mail the enclosed proxy card in the pre-paid envelope provided. If you decide to attend the Meeting, you may, if so desired, revoke the Proxy and vote in person.

 

 
 

 

 

PERMA-FIX ENVIRONMENTAL SERVICES, INC.

8302 Dunwoody Place, Suite 250

Atlanta, Georgia 30350

 

PROXY STATEMENT

FOR THE

2017 ANNUAL MEETING OF STOCKHOLDERS

 

Why am I receiving this Proxy Statement?

You are receiving this Proxy Statement from us because you were a stockholder of record of the common stock, par value $.001 (the “Common Stock”), of Perma-Fix Environmental Services, Inc. (“Perma-Fix”, the “Company”, “we”, “our”, or “us”) at the close of business on June 8, 2017 (the “Record Date”). This Proxy Statement is furnished in connection with the solicitation on behalf of the Board of Directors of the Company (the “Board of Directors” or the “Board”) of proxies to be used in voting at the 2017 Annual Meeting of Stockholders to be held at the Crowne Plaza Hotel, Atlanta Airport, 1325 Virginia Avenue, Atlanta, Georgia, 30344, on Thursday, July 27, 2017, at 11:00 a.m. (EDST), and any adjournments thereof (the “Meeting”). By use of a proxy, you may vote whether or not you plan to attend the Meeting. This Proxy Statement describes the matters on which the Board would like you to vote, and provides information on those matters, so that you can make an informed decision.

 

Who is entitled to vote at the Meeting?

Only the holders of our Common Stock at the close of business on the Record Date will have the right to receive notice of, and be entitled to vote at, the Meeting. At the close of business on the Record Date, 11,698,347 shares of Common Stock (which excludes 7,642 treasury shares) were outstanding. Each stockholder of record, as of the Record Date, is entitled to one vote for each share of Common Stock that the stockholder owned as of the Record Date on each matter to be voted upon at the Meeting.

 

What vote is required to approve the matters being considered?

 

 

Directors are elected by a plurality of the shares present in person or represented by proxy and entitled to vote at the Meeting.

 

 

The ratification of the appointment of Grant Thornton LLP as the independent registered public accounting firm requires the affirmative vote of a majority of the shares present in person or represented by proxy and entitled to vote at the Meeting.

 

 

The approval of the 2016 compensation of our named executive officers requires the affirmative vote of a majority of the shares present in person or represented by proxy and entitled to vote at the Meeting. While the Board of Directors intends to carefully consider the shareholder vote resulting from this proposal, the final vote will not be binding, and is advisory in nature.

 

 

The recommendation on the frequency of future advisory votes on executive compensation enables the stockholders to express their preference for one of three choices for future advisory votes on executive compensation—every year, every other year, or every three years. The Company will consider stockholders to have expressed a non-binding preference for the frequency option (one, two, or three years) that receives the most favorable votes. While the Board of Directors intends to carefully consider the stockholder vote resulting from this proposal, the final vote will not be binding, and is advisory in nature.

 

 

The approval of the Fourth Amendment to the Company’s 2003 Outside Directors Stock Plan requires the affirmative vote of a majority of the shares present in person or represented by proxy and entitled to vote at the Meeting.

 

 

The approval of the 2017 Stock Option Plan requires the affirmative vote of a majority of the shares present in person or represented by proxy and entitled to vote at the Meeting.

 

 
1

 

  

Are abstentions counted?

If your proxy indicates an abstention from voting on a proposal, the shares represented will be counted as present for the purpose of determining a quorum, but they will not be voted on such proposal at the Meeting. Because abstentions represent shares entitled to vote, if you abstain from voting on a proposal, your abstention (a) will have no effect on the election of directors, (b) will have the effect of a vote against the ratification of the appointment of the independent registered public accounting firm, (c) will have the effect of a vote against the resolution on executive compensation, (d) will have no effect on the vote on the frequency of future advisory votes on executive compensation, (e) will have the effect of a vote against the approval of the Fourth Amendment to the Company’s 2003 Outside Directors Stock Plan, and (f) will have the effect of a vote against the approval of the 2017 Stock Option Plan.

 

How do I cast my vote?

If you are a stockholder whose shares are registered in your name, you may vote your shares in person at the meeting or by one of the two following methods:

 

 

Vote by Internet, by going to the web address www.cstproxyvote.com and following the instructions for Internet voting.

 

 

Vote by Proxy Card, by completing, signing, dating and mailing the enclosed proxy card in the envelope provided. If you vote by Internet, please do not mail your proxy card.

 

If your shares are held in “street name” (through a broker, bank or other nominee), you may receive a separate voting instruction form with this Proxy Statement, or you may need to contact your broker, bank or other nominee to determine whether you will be able to vote electronically using the Internet.

 

Whether or not you plan to attend the 2017 Annual Meeting of Stockholders, please submit your vote either by internet or by written proxy card.

 

Can I change my mind after I vote?

Yes, you may change your mind at any time before the polls close at the Meeting. You can change your vote by:

 

 

executing and submitting a revised proxy;

 

 

providing a written revocation to the Secretary of the Company; or

 

 

voting in person at the Meeting.

 

What constitutes a quorum?

A majority of all of the outstanding shares of Common Stock entitled to notice of, and to vote at, the Meeting, represented in person or by proxy, will constitute a quorum for the holding of the Meeting. The failure of a quorum to be represented at the Meeting will necessitate adjournment and will subject the Company to additional expense. If your proxy indicates an abstention from voting on a proposal, the shares represented will nonetheless be counted as present for the purpose of determining a quorum.

 

Will my shares be voted if I do not provide my proxy?

No. If your shares are registered in your name, they will not be voted, unless you submit your proxy or vote in person at the Meeting. If you hold your shares directly in your own name, you must vote, either by completing, signing and delivering a proxy, voting by the internet, or attending the Meeting and voting at the Meeting.

 

Who votes shares held in “street name”?

If your shares of Common Stock are held by a bank, broker or other nominee as custodian on your behalf, you are considered a “beneficial” stockholder of those shares, which are said to be held in “street name.” As a beneficial stockholder, you must provide voting instructions to your broker, bank, or other nominee by the deadline provided in the proxy materials you receive from your broker, bank, or other nominee to ensure your shares are voted in the way you would like. If you do not provide voting instructions to your broker, bank, or other nominee, whether your shares can be voted on your behalf depends on the type of item being considered for vote. The NYSE has rules that govern brokers who have record ownership of listed company stock (including stock such as ours that is listed on The Nasdaq Capital Market) held in brokerage accounts for their clients who beneficially own the shares. Under these rules, brokers who do not receive voting instructions from their clients have the discretion to vote uninstructed shares on certain matters (“routine matters”), but do not have the discretion to vote uninstructed shares as to certain other matters (“non-routine matters”). A “broker non-vote” occurs when a broker has not received voting instructions from a beneficial owner on a non-routine matter and therefore cannot vote such beneficial owner’s shares on the matter. In these cases, the broker can register your shares as being present at the Meeting for purposes of determining the presence of a quorum, but will not be able to vote on these non-discretionary matters for which specific authorization is required. Under NYSE interpretations, Proposal 1 (election of directors), Proposal 3 (advisory vote on executive compensation), Proposal 4 (advisory vote on the frequency of future advisory votes on the compensation of the named executive officers), Proposal 5 (Fourth Amendment to the Company’s 2003 Outside Directors Stock Plan) and Proposal 6 (approval of the 2017 Stock Option Plan) are considered non-routine matters. However, since broker non-votes are not counted in any vote requiring a plurality of votes cast (Proposal 1 and Proposal 4) or a majority of the votes present in person or represented by proxy and entitled to vote (Proposal 3, 5, and 6), broker non-votes will have no effect on the outcome of any of these proposals. Proposal 2 (ratification of the selection of the independent registered public accounting firm for 2017) is considered a routine matter and, thus, we do not expect to receive any broker non-votes on this proposal.

 

 

 
2

 

 

Who will count the votes?

All votes will be tabulated by the inspector of election appointed for the Meeting, who will separately tabulate affirmative and negative votes and abstentions.

 

Where can I find the voting results of the Meeting?

We will announce the voting results at the Meeting and publish final results in a Form 8-K to be filed with the Securities and Exchange Commission within four business days after the Meeting.

 

Who is paying the cost of this solicitation?

The Company will pay the cost of preparing, printing, assembling, and mailing this Proxy Statement and the Proxy Card. In addition to solicitation by use of the mail, certain of the Company’s officers and employees may, without receiving additional compensation therefore, solicit the return of proxies by telephone, e-mail or personal interview. The Company has also engaged The Proxy Advisory Group, LLC to assist in the solicitation of proxies and provide related advice and informational support, for a service fee, plus customary disbursements, which are not expected to exceed $10,000 in total. The Company will reimburse brokerage houses and custodians, nominees, and fiduciaries for their reasonable out-of-pocket expenses in forwarding soliciting materials to their principals, the beneficial owners of Common Stock.

 

Is the stockholder list available for review?

A list of stockholders entitled to vote at the Meeting will be open to the examination of any stockholder for any purpose germane to the Meeting during ordinary business hours commencing 10 days before the Meeting. Prior to the Meeting, the list will be maintained at our principal executive offices located at 8302 Dunwoody Place, Suite 250, Atlanta, Georgia 30350.

 

PROPOSAL 1 - ELECTION OF DIRECTORS

 

The Company’s Certificate of Incorporation provides that each member of the Board of Directors shall hold office until the next Annual Meeting of Stockholders and their successors have been elected and qualified or until their earlier resignation or removal. Successors to those directors whose terms have expired are required to be elected by stockholder vote. The existing Board of Directors may fill vacancies for an unexpired term and any newly created directorships created by the Board of Directors’ action.

 

The six nominees for membership on our Board of Directors named below were recommended by our Corporate Governance and Nominating Committee to serve as members of the Board of Directors. All nominees are incumbent directors and meet the qualifications for membership on our Board of Directors as set forth in the Company’s Amended and Restated Bylaws, as amended (the “Bylaws”).

 

The Company’s Bylaws provide that the number of the Company’s directors shall be at least three and no more than eight, as may be determined from time to time by resolution adopted by affirmative vote of a majority of the entire Board of Directors. The Board of Directors has set the size of the Board at six members.

 

 

 
3

 

 

Director Not Standing for Re-election

Mr. John M. Climaco, age 48, has served as a Director since October 2013. Since June 2015, Mr. Climaco has also held the position of Executive Vice President of Perma-Fix Medical S.A. (“PF Medical”), a Polish corporation and majority-owned subsidiary of the Company. As a result of his position with PF Medical, among other things, the Company’s Board of Directors has determined that Mr. Climaco is not deemed to be an “independent director” as defined by Nasdaq Marketplace Rules (see “Board of Director Independence” below for further information regarding the determination as to the reasons Mr. Climaco is not deemed an “independent director”). The Corporate Governance and Nominating Committee and the Board of Directors have determined that it is in the best interest of the Company and its shareholders to maintain a board that has no more than one non-independent director. The Company currently has two “non-independent” directors, Mr. Climaco and Dr. Centofanti, who is the President and CEO of the Company. Mr. Climaco will continue to serve on our Board until the Meeting.

 

Nominees for Directors

The following biographical information includes a discussion of the specific experience, qualifications, attributes or skills that led to the conclusion by our Corporate Governance and Nominating Committee that each of the nominees is qualified to serve as one of our Directors:

 

Dr. Louis F. Centofanti

Director

Age: 73

Dr. Centofanti is currently the Company’s President and Chief Executive Officer (“CEO”), positions he has held since March 1996 and also from February 1991 to September 1995. Dr. Centofanti served as Chairman of our Board from the Company’s inception in February 1991 until December 16, 2014, at which time Mr. Larry M. Shelton, an independent member of our Board, was appointed Chairman. Dr. Centofanti continues to serve as a member of our Board. In January 2015, Dr. Centofanti was appointed by the U.S Secretary of Commerce Penny Prizker to serve on the U.S. Department of Commerce’s Civil Nuclear Trade Advisory Committee (“CINTAC”). The CINTAC is composed of industry representatives from the civil nuclear industry and meets periodically throughout the year to discuss the critical trade issues facing the U.S. civil nuclear sector. Effective June 2, 2015, Dr. Centofanti was elected to the Supervisory Board of Perma-Fix Medical S.A. (“PF Medical”), a majority-owned Polish subsidiary of the Company involved in the research and development (“R&D”) of a new medical isotope production technology. From 1985 until joining the Company, Dr. Centofanti served as Senior Vice President (“SVP”) of USPCI, Inc., a large publicly-held hazardous waste management company, where he was responsible for managing the treatment, reclamation and technical groups within USPCI. In 1981, he founded PPM, Inc. (later sold to USPCI), a hazardous waste management company specializing in treating PCB contaminated oil. From 1978 to 1981, Dr. Centofanti served as Regional Administrator of the U.S. Department of Energy for the southeastern region of the United States. Dr. Centofanti has a Ph.D. and a M.S. in Chemistry from the University of Michigan, and a B.S. in Chemistry from Youngstown State University.

 

As founder of Perma-Fix and PPM, Inc., and as a senior executive at USPCI, Dr. Centofanti combines extensive business experience in the waste management industry with a drive for innovative technology which is critical for a waste management company. In addition, his service in the government sector provides a solid foundation for the continuing growth of the Company, particularly within the Company’s Nuclear business. Dr. Centofanti’s comprehensive understanding of the Company’s operations and his extensive knowledge of its history, coupled with his drive for innovation and excellence, positions Dr. Centofanti to optimize our role in this competitive, evolving market, and led the Board to conclude that he should serve as a director.

 

 

 
4

 

 

S. Robert Cochran, Director

Age 64

Mr. Cochran was appointed by the Board as a director effective January 13, 2017 to fill the vacancy left by Jack Lahav, who retired from the Board effective October 27, 2016. Since November 2015, Mr. Cochran has been President and CEO of CTG, LLC, a company that provides strategic business development support, as well as acquisitions and business/management restructuring activity support. Since April 2012, Mr. Cochran has been a director of Longenecker & Associates, Inc., a privately held consulting firm that provides highly specialized, fast-response technical-management support to nuclear and environmental industries. From March 2012 to November 2015, Mr. Cochran served as President and Officer Director of CB&I Federal Services, LLC (a subsidiary of Chicago Bridge & Iron Company, NYSE: CBI), which provides mission-critical services primarily to the U.S. federal government. From 2006 to 2011, Mr. Cochran served as President of B&W Technical Service Group, Inc., an operating group of The Babcock & Wilcox Company (NYSE: BW), which provides support to government and commercial clients, including management and operation of complex high-consequence nuclear facilities, nuclear material processing and manufacturing, classified component manufacturing, engineering, procurement and construction of major capital projects, nuclear safeguards and security, environmental cleanup and remediation, and nuclear-facility deactivation. From 2007 to 2011, Mr. Cochran served as Chairman of the Board of Pantex LLC and B&W Y-12, where he had direct responsibility for the performance and operations associated with nuclear weapons production enterprise. Before joining The Babcock & Wilcox Company, Mr. Cochran worked for more than 20 years in operations and development within the engineering, construction, facilities management and operations, environmental technology, and remediation industries. This experience includes serving as President and CEO of MAGma LLC, a privately-held company that provided management and operational restructuring, strategic development, and acquisition/divestiture services to the public utility, engineering and construction, and Department of Energy business sectors. Additionally, as its SVP, Mr. Cochran led Tyco Infrastructure’s development and delivery of services, opening new markets and service areas valued at more than $1 billion. Mr. Cochran received an executive M.B.A. from the University of Richmond’s Robins School of Business and a B.S. from James Madison University.

 

Mr. Cochran has extensive career in solving and overseeing solutions to complex issues involving both domestic and international concerns. In addition, his government-related services expertise provides a valuable resource for the continuing growth of the Company’s Treatment and Services Segments. His extensive knowledge and problem-solving experience enhances the Board’s ability to address significant challenges in the nuclear market, and led the Board to conclude that he should serve as a director.

   

Dr. Gary Kugler, Director

Age: 76

 

Dr. Gary Kugler, a director since September 2013, served as the Chairman of the Board of the Nuclear Waste Management Organization (“NWMO”) from 2006 to June 2014, where he led its oversight through the work of four committees, including an Audit-Finance-Risk Committee. NWMO was established under the Canadian Nuclear Fuel Waste Act (2002) to investigate and implement approaches for managing Canada’s used nuclear fuel. Dr. Kugler also served on the Board of Ontario Power Generation, Inc. (“OPG”) from 2004 to March 2014 where he served as a member on four different committees, including the Audit, Finance, and Risk Committee from 2004 to 2008. OPG is one of Canada’s largest electricity generation companies, owning 18 nuclear, 65 hydro, and two biomass power plants. Dr. Kugler served as a member of the Supervisory Board of PF Medical from June 2015 to December 2016. Dr. Kugler has had an extensive career in the nuclear industry, both nationally and internationally. He retired from Atomic Energy of Canada Limited (“AECL”) as SVP, Nuclear Products & Services, in 2004, where he was responsible for all of AECL’s commercial operations, including nuclear power plant sales and services world-wide. During his 34 years with AECL, he held various technical, project management, business development, and executive positions. Prior to joining AECL, Dr. Kugler served as a pilot in the Canadian air force. He holds a Ph.D. in nuclear physics from McMaster University and is a graduate of the Directors Education Program of the Institute of Corporate Directors.

 

Dr. Kugler’s extensive career in the nuclear industry, both nationally and internationally, brings valuable insight and knowledge to the Company as it expands its business internationally, and led the Board to conclude that he should serve as a director. 

 

 

 
5

 

 

Hon. Joe R. Reeder, Director

Age: 69

Mr. Reeder, a director since April 2003, served as the Shareholder-in-Charge of the Mid-Atlantic Region (1999-2008) for Greenberg Traurig LLP, one of the nation's largest law firms, with 38 offices and approximately 2,000 attorneys worldwide. Currently, a principal shareholder in the law firm, Mr. Reeder’s clientele includes sovereign nations, international corporations, and law firms throughout the U.S. As the 14th Undersecretary of the U.S. Army (1993-97), Mr. Reeder also served for three years as Chairman of the Panama Canal Commission's Board where he oversaw a multibillion-dollar infrastructure program, and, for the past fourteen years he has served on the International Advisory Board of the Panama Canal.   He has served on the boards of the National Defense Industry Association (NDIA) (and chaired NDIA’s Ethics Committee), the Armed Services YMCA, and many other private companies and charitable organizations. Following successive appointments by Virginia governors Mark Warner and Tim Kaine, Mr. Reeder served seven years as Chairman of two Commonwealth of Virginia military boards and served ten years on the National USO Board. Mr. Reeder was appointed by Governor Terry McCauliffe to the Virginia Military Institute’s Board of Visitors (2014). Mr. Reeder is also a television commentator on legal and national security issues.  Among other corporate positions, he has been a director since September 2005 for ELBIT Systems of America, LLC, a wholly-owned subsidiary of Elbit Systems Ltd. (NASDAQ: ESLT), that provides product and system solutions focusing on defense, homeland security, and commercial aviation. Mr. Reeder also serves as a Board member for Washington First Bank (since April 2004), and of its parent bank holding company, Washington First Bankshares, Inc. (since 2009). A graduate of West Point who served in the 82nd Airborne Division following Ranger School, Mr. Reeder earned his J.D. from the University of Texas and his L.L.M. from Georgetown University.   

 

Mr. Reeder has a distinguished career in solving and overseeing solutions to complex issues involving both domestic and international concerns. His extensive knowledge and problem-solving experience has enhanced the Board’s ability to address significant challenges in the nuclear market, and led the Board to conclude that he should serve as a director. 

   

Larry M. Shelton

Board Chairman

Age: 63

Mr. Shelton, a director since July 2006, is also the Chairman of the Board of the Company, a position he has held since December 16, 2014. Mr. Shelton currently is the Chief Financial Officer (“CFO”) (since 1999) of S K Hart Management, LLC, a private investment management company. In January 2013, Mr. Shelton was elected President of Pony Express Land Development, Inc. (an affiliate of SK Hart Management, LLC), a privately-held land development company, for which he has served on the Board since December 2005. In March 2012, he was appointed Director and CFO of S K Hart Ranches (PTY) Ltd, a private South African Company involved in agriculture. Mr. Shelton served as a member of the Supervisory Board of PF Medical from April 2014 to December 2016. Mr. Shelton has over 18 years of experience as an executive financial officer for several waste management companies, including as CFO of Envirocare of Utah, Inc. (now Energy Solutions (1995–1999)), and CFO of USPCI, Inc. (1982–1987), a NYSE- listed company. Since July 1989, Mr. Shelton has served on the Board of Subsurface Technologies, Inc., a privately-held company specializing in providing environmentally sound innovative solutions for water well rehabilitation and development. Mr. Shelton has a B.A. in accounting from the University of Oklahoma.

 

 

 
6

 

 

  With his years of accounting experience as CFO for various companies, including a number of waste management companies, Mr. Shelton combines extensive knowledge and understanding of accounting principles, financial reporting requirements, evaluating and overseeing financial reporting processes and business matters. These factors led the Board to conclude that he should serve as a director.
   

Mark A. Zwecker, Director

Age: 66

Mark Zwecker, a director since the Company's inception in January 1991, currently serves as the CFO and a Board member for JCI US Inc., a telecommunications company and wholly-owned subsidiary of Japan Communications, Inc. (Tokyo Stock Exchange (Securities Code: 9424)), which provides cellular service for M2M (machine to machine) applications. From 2006 to 2013, Mr. Zwecker served as Director of Finance for Communications Security and Compliance Technologies, Inc., a wholly-owned subsidiary of JCI US Inc. that develops security software products for the mobile workforce. From 1997 to 2006, Mr. Zwecker served as President of ACI Technology, LLC, an IT services provider, and from 1986 to 1998, he served as Vice President of Finance and Administration for American Combustion, Inc., a combustion technology solutions provider. In 1983, with Dr. Centofanti, Mr. Zwecker co-founded a start-up, PPM, Inc., a hazardous waste management company. He remained with PPM, Inc. until its acquisition in 1985 by USPCI. Mr. Zwecker has a B.S. in Industrial and Systems Engineering from the Georgia Institute of Technology and an M.B.A. from Harvard University.

 

As a director since our inception, Mr. Zwecker’s understanding of our business provides valuable insight to the Board. With years of experience in operations and finance for various companies, including a number of waste management companies, Mr. Zwecker combines extensive knowledge of accounting principles, financial reporting rules and regulations, the ability to evaluate financial results, and understanding of financial reporting processes. He has an extensive background in operating complex organizations. Mr. Zwecker’s experience and background position him well to serve as a member of our Board. These factors led the Board to conclude that he should serve as a director.

   

THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE “FOR” THE ELECTION OF THE SIX NOMINEES AS THE COMPANY’S DIRECTORS.

 

Board of Director Independence

Our Common Stock is listed on the Nasdaq Capital Market. Rule 5605 of the Nasdaq Marketplace Rules requires a majority of a listed company's board of directors to be comprised of independent directors. In addition, the Nasdaq Marketplace Rules require that, subject to specified exceptions, each member of a listed company's audit, compensation and nominating and corporate governance committees be independent under applicable provisions of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Audit committee members must also satisfy independence criteria set forth in Rule 10A-3 under the Exchange Act, and compensation committee members must also satisfy the independence criteria set forth in Rule 10C-1 under the Exchange Act. Under Nasdaq Rule 5605(a)(2), a director will only qualify as an "independent director" if, in the opinion of our Board of Directors, that person does not have a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. In order to be considered independent for purposes of Rule 10A-3 under the Exchange Act, a member of an audit committee of a listed company may not, other than in his or her capacity as a member of the audit committee, the board of directors, or any other board committee, accept, directly or indirectly, any consulting, advisory, or other compensatory fee from the listed company or any of its subsidiaries or otherwise be an affiliated person of the listed company or any of its subsidiaries. In order to be considered independent for purposes of Rule 10C-1, the board must consider, for each member of a compensation committee of a listed company, all factors specifically relevant to determining whether a director has a relationship to such company which is material to that director's ability to be independent from management in connection with the duties of a compensation committee member, including, but not limited to: the source of compensation of the director, including any consulting advisory or other compensatory fee paid by such company to the director; and whether the director is affiliated with the company or any of its subsidiaries or affiliates.

 

 
7

 

  

Our Board annually undertakes a review of the composition of our Board of Directors and its committees and the independence of each director. Based upon information requested from and provided by each director concerning his or her background, employment and affiliations, including family relationships, our Board of Directors has determined that each of Messrs. S. Robert Cochran, Dr. Gary Kugler, Honorable Joe R. Reeder, Larry M. Shelton and Mark A. Zwecker is an "independent director" as defined under the Nasdaq Marketplace Rules and Jack Lahav, who retired from the Board effective October 27, 2016, was an “independent director” as defined under the Nasdaq Marketplace Rules. Our Board of Directors has also determined that Mr. Mark A. Zwecker (Chairperson), Dr. Gary G. Kugler, Mr. S. Robert Cochran, Mr. Larry M. Shelton (who was a member of the Audit Committee until April 20, 2017), and Mr. Jack Lahav (who was a member of the Audit Committee until his retirement from the Board on October 27, 2016), who comprise/comprised our Audit Committee, and Dr. Gary G. Kugler (Chairperson), Mr. Larry M. Shelton, the Honorable Joe R. Reeder, and Mr. Mark A. Zwecker (who was a member of the Compensation and Stock Option Committee until October 27, 2016), who comprise/comprised our Compensation and Stock Option Committee, satisfy/satisfied the independence standards for such committees established by the Securities and Exchange Commission and the Nasdaq Marketplace Rules, as applicable. In making such determination, our Board of Directors considered the relationships that each such non-employee director has with our Company and all other facts and circumstances our Board of Directors deemed relevant in determining independence, including the beneficial ownership of our capital stock by each non-employee director.

 

Our Board of Directors has determined that Dr. Centofanti is not deemed to be an “independent director” because of his employment as a senior executive of the Company. Our Board of Director also has determined that Mr. Climaco, who is not standing for re-election, does not qualify as an “independent director” because of his employment as EVP of PF Medical, a majority-owned Polish subsidiary of the Company, and because he is also a director of Digirad Corporation, with which PF Medical entered into a supplier agreement and a subscription agreement (together, the “Digirad Agreement”) on July 24, 2015 (see “John Climaco” under “Certain Relationships and Related Transactions – Related Party Transactions” for further discussion of his position with PF Medical and a description of the Digirad Agreement).

 

Board Leadership Structure

We currently separate the roles of Chairman of the Board and CEO. The Board believes that its current leadership structure, with Dr. Centofanti serving as President and CEO and Mr. Shelton serving as our independent non-executive Chairman of the Board, is appropriate for the Company at this time, as this structure promotes balance between the Board’s independent authority to oversee our business, and the CEO and his management team, who manage the business on a day-to-day basis.

 

The Company does not have a written policy with respect to the separation of the positions of Chairman of the Board and CEO. The Company believes it is important to retain its flexibility to allocate the responsibilities of the offices of the Chairman and CEO in any way that is in the best interests of the Company at a given point in time; therefore, the Company’s leadership structure may change in the future as circumstances may dictate.

 

Mr. Mark Zwecker, a current member of our Board, continues to serve as the Independent Lead Director, a position he has held since February 2010. The Lead Director’s role includes:

 

 

convening and chairing meetings of the non-employee directors as necessary from time to time and Board meetings in the absence of the Chairman of the Board;

 

acting as liaison between directors, committee chairs and management;

 

serving as information sources for directors and management; and

 

carrying out responsibilities as the Board may delegate from time to time.

 

Meetings and Committees of the Board of Directors

During 2016, the Board of Directors held seven meetings, which included three meeting held via conference call. No director attended fewer than 75% of the aggregate number of meetings held by the Board of Directors and the committees on which he served during 2016. The Company does not currently have a policy with respect to the attendance of its directors at annual meetings; however, the Company encourages each of its directors to attend whenever possible. All members of our Board of Directors attended our 2016 Annual Meeting of Stockholders. The Board of Directors has a standing Audit Committee, Compensation and Stock Option Committee, Corporate Governance and Nominating Committee, Research and Development Committee, and Strategic Advisory Committee.

 

 

 
8

 

 

Audit Committee: 

The Audit Committee assists the Board of Directors in monitoring the integrity of the financial statements of the Company, the independent auditor’s qualifications and independence, the performance of the Company’s internal audit function and independent auditor, and the Company’s compliance with legal and regulatory requirements. In carrying out these purposes, the Audit Committee, among other things:

 

 

appoints, evaluates, and approves the compensation of the Company’s independent auditor;

 

 

pre-approves all auditing services and permitted non-audit services;

 

 

annually considers the qualifications and independence of the independent auditors;

 

 

reviews recommendations of independent auditors concerning the Company’s accounting principles, internal controls, and accounting procedures and practices;

 

 

reviews and approves the scope of the annual audit;

 

 

reviews and discusses with the independent auditors the audited financial statements; and

 

 

performs such other duties as set forth in the Audit Committee Charter.

 

The Audit Committee was established in accordance with the requirements of the Exchange Act and the listing requirements of the Nasdaq, and is governed by an Audit Committee Charter. A copy of the Audit Committee Charter is available on our website at www.perma-fix.com. The Audit Committee has established procedures for the receipt, retention, and treatment of complaints received by the Company regarding accounting, internal accounting controls or auditing matters, and the confidential, anonymous submission of concerns by employees of the Company regarding accounting or auditing matters.

 

The Audit Committee members during 2016 were Mark A. Zwecker (Chairperson), Larry M. Shelton, Jack Lahav, and Dr. Gary G. Kugler, who replaced Mr. Lahav upon Mr. Lahav’s retirement from the Board effective October 27, 2016. Mr. Lahav’s retirement from the Board was based on personal reasons and was not as a result of any disagreement with the Company or due to any matter relating to the Company’s operations, policies or practices. Effective April 20, 2017, Mr. S. Robert Cochran replaced Mr. Shelton as an Audit Committee member. The Board of Directors has determined that each member of the Audit Committee is/was “independent,” as that term is defined for an audit committee member under the Exchange Act and Nasdaq Rule 5605(c) and is/was an “audit committee financial expert” as defined by Item 407(d)(5)(ii) of Regulation S-K of the Exchange Act. The Audit Committee meets at least quarterly and at such additional times as necessary or advisable. The Audit Committee held nine meetings during 2016.

 

Compensation and Stock Option Committee:

The Compensation and Stock Option Committee (“Compensation Committee”) reviews and recommends to the Board of Directors the compensation and benefits of all of the Company’s officers and reviews general policy matters relating to compensation and benefits of the Company’s employees. The Compensation Committee also administers the Company’s stock option plans. The Compensation Committee has the sole authority to retain and terminate a compensation consultant, as well as to approve the consultant’s fees and other terms of engagement. It also has the authority to obtain advice and assistance from internal or external legal, accounting or other advisors. No compensation consultant was employed during 2016. Members of the Compensation Committee during 2016 were Dr. Gary G. Kugler (Chairperson), Larry M. Shelton, Joe R. Reeder, and Mark A. Zwecker (who no longer was a member of the Compensation Committee effective October 27, 2016). The Compensation Committee meets as often as may be deemed necessary or appropriate in its judgment. The Compensation Committee held four meetings in 2016. All members of the Compensation Committee in 2016 were "independent" as that term is defined by current Nasdaq listing standards, and each current member of the Compensation Committee is “independent” under such definition. The Compensation Committee is governed by the Company’s Compensation and Stock Option Committee Charter, which is available on our website at www.perma-fix.com.

 

 

 
9

 

 

Corporate Governance and Nominating Committee: 

The Corporate Governance and Nominating Committee (“Nominating Committee”) recommends to the Board of Directors candidates to fill vacancies on the Board and the nominees for election as directors at each annual meeting of stockholders. In making such recommendation, the Nominating Committee takes into account information provided to them from the candidate, as well as the Nominating Committee’s own knowledge and information obtained through inquiries to third parties to the extent the Nominating Committee deems appropriate. The Company’s Bylaws sets forth certain minimum director qualifications to qualify for nomination for elections as a director. To qualify for nomination or election as a director, an individual must:

 

 

be an individual at least 21 years of age who is not under legal disability;

 

have the ability to be present, in person, at all regular and special meetings of the Board of Directors;

 

not serve on the boards of more than three other publicly held companies;

 

satisfy the director qualification requirements of all environmental and nuclear commissions, boards or similar regulatory or law enforcement authorities to which the Corporation is subject so as not to cause the Corporation to fail to satisfy any of the licensing requirements imposed by any such authority;

 

not be affiliated with, employed by or a representative of, or have or acquire a material personal involvement with, or material financial interest in, any “Business Competitor” (as defined);

 

not have been convicted of a felony or of any misdemeanor involving moral turpitude; and

 

have been nominated for election to the Board of Directors in accordance with the terms of the Bylaws.

 

In addition to the minimum director qualifications as mentioned above, in order for any proposed nominee to be eligible to be a candidate for election to the Board of Directors, such candidate must deliver to the Nominating Committee a completed questionnaire with respect to the background, qualifications, stock ownership and independence of such proposed nominee. The Nominating Committee reviews each candidate’s qualifications to include considerations of:

 

 

standards of integrity, personal ethics and value, commitment, and independence of thought and judgment;

 

ability to represent the interests of the Company’s stockholders;

 

ability to dedicate sufficient time, energy and attention to fulfill the requirements of the position; and

 

diversity of skills and experience with respect to accounting and finance, management and leadership, business acumen, vision and strategy, charitable causes, business operations, and industry knowledge.

 

The Nominating Committee does not assign specific weight to any particular criteria and no particular criterion is necessarily applicable to all prospective nominees. The Nominating Committee does not have a formal policy for the consideration of diversity in identifying nominees for directors. However, the Company believes that the backgrounds and qualifications of the directors, considered as a group, should provide a significant composite mix of experience, knowledge, and abilities that will allow the Board to fulfill its responsibilities.

 

Stockholder Nominees

The Nominating Committee will consider properly submitted stockholder nominations for candidates for membership on the Board of Directors from stockholders who meet each of the requirements set forth in the Bylaws, including, but not limited to, the requirements that any such stockholder own at least 1% of the Company’s shares of the Common Stock entitled to vote at the meeting on such election, has held such shares continuously for at least one full year, and continuously holds such shares through and including the time of the annual or special meeting. Nominations of persons for election to the Board of Directors may be made at any Annual Meeting of Stockholders, or at any Special Meeting of Stockholders called for the purpose of electing directors. Any stockholder nomination (“Proposed Nominee”) must comply with the requirements of the Company’s Bylaws and the Proposed Nominee must meet the minimum qualification requirements as discussed above. For a nomination to be made by a stockholder, such stockholder must provide advance written notice to the Nominating Committee, delivered to the Company’s principal executive office address (i) in the case of an Annual Meeting of Stockholders, no later than the 90th day nor earlier than the 120th day prior to the anniversary date of the immediately preceding Annual Meeting of Stockholders; and (ii) in the case of a Special Meeting of Stockholders called for the purpose of electing directors, not later than the 10th day following the day on which public disclosure of the date of the Special Meeting of Stockholders was made.

 

 

 
10

 

 

The Nominating Committee will evaluate the qualification of the Proposed Nominee and the Proposed Nominee’s disclosure and compliance requirements in accordance with the Company’s Bylaws. If the Board of Directors, upon the recommendation of the Nominating Committee, determines that a nomination was not made in accordance with the Company’s Bylaws, the Chairman of the Meeting shall declare the nomination defective and it will be disregarded.

 

Members of the Nominating Committee during 2016 were Joe R. Reeder (Chairperson), Dr. Gary G. Kugler, Jack Lahav, and Mark A. Zwecker, who replaced Mr. Jack Lahav upon Mr. Lahav’s retirement from the Board effective October 27, 2016. The Nominating Committee meets at least quarterly and at such times as necessary or advisable and held five meetings in 2016. Effective April 20, 2017, Mr. S. Robert Cochran replaced Mr. Zwecker as a member of the Nominating Committee. The Nominating Committee is governed by a Corporate Governance and Nominating Committee Charter, which is available on our website at www.perma-fix.com. All members of the Nominating Committee in 2016 were "independent" as that term is defined by current Nasdaq listing standards, and each current member of the Nominating Committee is “independent” under such definition.

 

Research and Development Committee:

The Research and Development Committee (the “R&D Committee”) outlines the structures and functions of the Company’s research and development strategies, the acquisition and protection of the Company’s intellectual property rights and assets, and provides its perspective on such matters to the Board of Directors. Members of the R&D Committee during 2016 were Dr. Gary Kugler and Dr. Louis Centofanti. The R&D Committee held four meetings in 2016. The R&D Committee does not have a charter.

 

Strategic Advisory Committee:    

The primary functions of the Strategic Advisory Committee (“Strategic Committee”) are to investigate and evaluate strategic alternatives available to the Company and to work with management on long-range strategic planning and identifying potential new business opportunities. The members of the Strategic Committee during 2016 were John M. Climaco (Chairperson), Joe R. Reeder, Mark A. Zwecker, and Larry M. Shelton. The Strategic Committee held four meetings in 2016. Effective April 20, 2017, Mr. S. Robert Cochran became a member of the Strategic Committee. The Strategic Committee does not have a charter.

 

Risk Oversight by Our Board

The Board is responsible for understanding the risks the Company faces, what steps management is taking to manage those risks and if the steps taken are effective in managing those risks. It is also important that the Board understands what level of risk is appropriate for the Company. While the Board has the ultimate oversight responsibility for the risk management process, certain committees play an integral part in fulfilling the Board’s oversight responsibilities in certain areas of risk. In particular, the Audit Committee focuses on financial and enterprise risk exposures, including internal controls. The Audit Committee reviews and discusses with management and internal audit our major financial risk exposures, including risks related to fraud, liquidity and regulatory compliance, our policies with respect to risk assessment and risk management, and the steps management has taken to monitor and control such exposures at least quarterly and whenever warranted. The Compensation Committee strives to create incentives that do not encourage excessive risk-taking beyond the Company’s ability to effectively identify and manage risk. To monitor such risks, the Board receives regular updates from management of higher risk activities that we face, such as our closure policies and status of our pending litigation. Each of our directors has access to our named executive officers and any other members of our management to discuss and monitor potential risks.

 

Code of Ethics

We have adopted a Code of Ethics that applies to all our executive officers, including our principal executive officer, principal financial officer, and controller. Our Code of Ethics is available on our website at www.perma-fix.com. If any amendments are made to the Code of Ethics or any grants of waivers are made to any provision of the Code of Ethics to any of our executive officers, we will promptly disclose the amendment or waiver and nature of such amendment of waiver on our website.

 

 

 
11

 

 

Compensation of Directors

Directors who are employees receive no additional compensation for serving on the Board of Directors or its committees. In 2016, we provided the following annual compensation to each of our directors who are not employees:

 

 

options to purchase 2,400 shares of our Common Stock with each option having a 10-year term and being fully vested after six months from grant date;

 

a quarterly director fee of $8,000;

 

an additional quarterly fee of $5,500 and $7,500 to the Chairman of our Audit Committee and Chairman of the Board (non-employee), respectively; and

 

a fee of $1,000 for each board meeting attendance and a $500 fee for meeting attendance via conference call.

 

Each director may elect to have either 65% or 100% of such fees payable in Common Stock under the 2003 Outside Directors Stock Plan, with the balance, if any, payable in cash. A director who fails to make such election in a timely manner shall be deemed to have elected to receive 100% of the applicable fees payable to such director in stock.

 

Both Mr. John Climaco and Dr. Louis Centofanti, current members of the Board, are not eligible to receive compensation for their services as directors of the Company as they are employees of the Company or one of its subsidiaries. Mr. Climaco is EVP of PF Medical, the Company’s majority-owned Polish subsidiary and Dr. Centofanti is the President and CEO of the Company.

 

The table below summarizes the director compensation expenses recognized by the Company for the director option and stock awards (resulting from fees earned) for the year ended December 31, 2016. The terms of the 2003 Outside Directors Stock Plan are further described below under “2003 Outside Directors Stock Plan.”

 

Director Compensation

 

 

Name

 

Fees

Earned or

Paid

In Cash

   

Stock

Awards

   

Option

Awards

   

Non-Equity

Incentive Plan Compensation

   

Change in

Pension Value

and

Nonqualified

Deferred

Compensation

Earnings

   

All Other Compensation

   

Total

 
   

($) (1)

   

($) (2)

   

($) (3)

   

($)

   

($)

   

($)

   

($)

 
                                                         

Dr. Gary G. Kugler

    13,125       32,502       7,200                         52,827  

Jack Lahav (4)

          41,801       7,200                         49,001  

Joe R. Reeder

          48,672       7,200                         55,872  

Larry M. Shelton

    23,625       58,502       7,200                         89,327  

Mark A. Zwecker

    20,825       51,567       7,200                         79,592  

 

(1)

Under the 2003 Outside Directors Plan, each director shall receive, at the director’s option, 65% or 100% of the director’s fees in shares of our Common Stock. The amounts set forth above represent the portion of the director’s fees paid in cash and exclude the value of the directors’ fee elected to be paid in Common Stock under the 2003 Outside Director Plan, which values are included under “Stock Awards.”

 

(2)

The number of shares of Common Stock comprising stock awards granted under the 2003 Outside Directors Plan is calculated based on 75% of the closing market value of the Common Stock as reported on the Nasdaq on the business day immediately preceding the date that the quarterly fee is due. Such shares are fully vested on the date of grant. The value of the stock award is based on the market value of our Common Stock at each quarter end times the number of shares issuable under the award. The amount shown is the fair value of the Common Stock on the date of the award.

 

(3)

Options granted under the Company’s 2003 Outside Directors Plan resulting from re-election to the Board of Directors on July 28, 2016. Options are for a 10 year period with an exercise price of $4.60 per share and are fully vested in six months from grant date. The value of the option award for each outside director is calculated based on the fair value of the option per share ($3.00) on the date of grant times the number of options granted, which was 2,400 for each director, pursuant to Accounting Standards Codification (“ASC”) 718, “Compensation – Stock Compensation.” Mr. Climaco was not eligible to receive options under the 2003 Outside Directors Plan upon re-election to the Company’s Board as he became an employee of the Company upon being named the EVP of PF Medical effective June 2, 2015. The following is the aggregate number of outstanding non-qualified stock options held by the Company’s directors at December 31, 2016. Dr. Centofanti, the President, CEO and a Board member of the Company, had no option at December 31, 2016:

 

 

 
12

 

 

   

Options Outstanding as of

 

Name

 

December 31, 2016

 

John M. Climaco

    8,400  

Dr. Gary G. Kugler

    7,200  

Joe R. Reeder

    24,000  

Larry M. Shelton

    24,000  

Mark A. Zwecker

    24,000  

Total

    87,600  

 

(4)

Mr. Lahav retired from the Board effective October 27, 2016. Mr. Lahav’s decision to retire was based on personal reasons and was not as a result of any disagreement with the Company or due to any matter relating to the Company’s operations, policies or practices.

 

2003 Outside Directors Stock Plan

We believe that it is important for our directors to have a personal interest in our success and growth and for their interests to be aligned with those of our stockholders; therefore, under our 2003 Outside Directors Stock Plan, as amended (“2003 Outside Directors Stock Plan”), each outside director is granted a 10-year option to purchase up to 6,000 shares of Common Stock on the date such director is initially elected to the Board, and receives on each re-election date an option to purchase up to another 2,400 shares of our Common Stock, with the exercise price being the fair market value of the Common Stock preceding the option grant date. No option granted under the 2003 Outside Directors Stock Plan is exercisable until after the expiration of six months from the date the option is granted and no option shall be exercisable after the expiration of ten years from the date the option is granted. As of the date of this Proxy Statement, options to purchase 163,200 shares of Common Stock are outstanding under the 2003 Outside Directors Stock Plan.

 

As a member of the Board, each director may elect to receive either 65% or 100% of the director's fee in shares of our Common Stock. A director who fails to make such election in a timely manner shall be deemed to have elected to receive 100% of the applicable fees payable to such director in stock. The number of shares received by each director is calculated based on 75% of the fair market value of the Common Stock determined on the business day immediately preceding the date that the quarterly fee is due. The balance of each director’s fee, if any, is payable in cash. In 2016, the fees earned by our outside directors totaled approximately $291,000. Reimbursements of expenses for attending meetings of the Board are paid in cash at the time of the applicable Board meeting. As a management director, Dr. Centofanti is not eligible to participate in the 2003 Outside Directors Stock Plan. Although Dr. Centofanti is not compensated for his services provided as a director, Dr. Centofanti is compensated for his services rendered as an officer of the Company. See “EXECUTIVE COMPENSATION — Summary Compensation Table.” As EVP of PF Medical, Mr. Climaco is also not eligible to participate in the 2003 Outside Directors Stock Plan. As the EVP of PF Medical, Mr. Climaco is provided an annual salary of $150,000 from PF Medical. See “Certain Relationships and Related Transactions” and “Board of Director Independence” for further information on Mr. Climaco.

 

As of the date of this Proxy Statement, we have issued 515,351 shares of our Common Stock in payment of director fees since the inception of the 2003 Outside Directors Stock Plan.

 

In the event of a “change of control” (as defined in the 2003 Outside Directors Stock Plan), each outstanding stock option and stock award shall immediately become exercisable in full notwithstanding the vesting or exercise provisions contained in the applicable stock option agreement.

 

Communications with the Board

The Company’s Board of Directors believes that it is important for the Company to have a process that enables stockholders to send communications to the Board.  Accordingly, stockholders who wish to communicate with the Board of Directors or a particular director may do so by sending a letter to the Secretary of the Corporation, at 8302 Dunwoody Place, Suite 250, Atlanta, Georgia 30350.  The mailing envelope must clearly indicate that the enclosed letter is a “Stockholder-Board Communication” or “Stockholder-Director Communication.”  All such letters must identify the author as a stockholder and clearly state whether the intended recipients are all members of the Board of Directors or only certain specified individual directors. The Secretary of the Corporation will make copies of all such letters and circulate them to the appropriate director or directors.

 

 

 
13

 

 

Family Relationships

There are no family relationships between any of the Company’s existing directors, executive officers, or persons nominated or chosen to become a director or executive officer. Dr. Centofanti and John Climaco are the only directors who are employees of the Company.

 

Certain Relationships and Related Transactions

 

Audit Committee Review

 

Our Audit Committee Charter provides for the review by the Audit Committee of any related party transactions, other than transactions involving an employment relationship with the Company, which are reviewed by the Compensation Committee. Although we do not have written policies for the review of related party transactions, the Audit Committee reviews transactions between the Company and its directors, executive officers, and their respective immediate family members. In reviewing a proposed transaction, the Audit Committee takes into account, among other factors it deems appropriate:

 

 

(1)

the extent of the related person’s interest in the transaction;

 

(2)

whether the transaction is on terms generally available to an unaffiliated third-party under the same or similar circumstances;

 

(3)

the cost and benefit to the Company;

 

(4)

the impact or potential impact on a director’s independence in the event the related party is a director, an immediate family member of a director or an entity in which a director is a partner, stockholder or executive officer;

 

(5)

the availability of other sources for comparable products or services;

 

(6)

the terms of the transaction; and

 

(7)

the risks to the Company.

 

Related party transactions are reviewed by the Audit Committee prior to the consummation of the transaction. With respect to a related party transaction arising between Audit Committee meetings, the CFO may present it to the Audit Committee Chairperson, who will review and may approve the related party transaction subject to ratification by the Audit Committee at the next scheduled meeting. Our Audit Committee shall approve only those transactions that, in light of known circumstances are not inconsistent with the Company’s best interests.

 

Related Party Transactions

 

Mr. David Centofanti. Mr. David Centofanti serves as the Company’s Vice President of Information Systems. For such position, he received annual compensation of $168,000 in 2016. Mr. Centofanti is the son of Dr. Louis F. Centofanti, our CEO, President and a Board member. We believe the compensation received by Mr. Centofanti for the technical expertise he provides to the Company is competitive and comparable to compensation we would have to pay to an unaffiliated third party with the same technical expertise.

 

Mr. Robert L. Ferguson. Mr. Robert L. Ferguson serves as an advisor to the Company’s Board and is also a member of the Supervisory Board of PF Medical, a majority-owned Polish subsidiary of the Company. Mr. Ferguson previously served as a Board member for the Company from June 2007 to February 2010 and again from August 2011 to September 2012. As an advisor to the Company’s Board, Mr. Ferguson is paid $4,000 monthly plus reasonable expenses. For such services, Mr. Ferguson received compensation of approximately $59,000 for the year ended December 31, 2016. On August 2, 2013, the Company completed a lending transaction with Messrs. Robert Ferguson and William Lampson (“collectively, the “Lenders”), whereby the Company borrowed from the Lenders the sum of $3,000,000 (which was paid off by the Company in August 2016) pursuant to the terms of a Loan and Security Purchase Agreement and promissory note (the “Loan”). As consideration for the Company receiving the Loan, each Lender received 45,000 shares of the Company’s Common Stock. Additionally, each Lender received a Warrant to purchase up to 35,000 shares of the Company’s Common Stock at an exercise price of $2.23 per share. On August 2, 2016, each Lender exercised his Warrant for the purchase of 35,000 shares of our Common Stock, resulting in total proceeds paid to the Company of approximately $156,000.

 

 

 
14

 

 

Mr. John Climaco. On June 2, 2015, Mr. Climaco, a current member of the Company’s Board and a member of the Strategic Committee of the Board, was elected as the EVP of PF Medical. As EVP of PF Medical, Mr. Climaco receives an annual salary of $150,000 and is not eligible to receive additional compensation for serving on the Company’s Board. Mr. Climaco is not standing for re-election as a director at the 2017 Annual Meeting of Stockholders.

 

Mr. Climaco is also a Director of Digirad Corporation, a publicly held company the common stock of which is listed on the Nasdaq (“Digirad”). On July 24, 2015, PF Medical and Digirad entered into a multi-year Tc-99m Supplier Agreement (the “Supplier Agreement”) and a Series F Stock Subscription Agreement (the “Subscription Agreement” and, together with the Supplier Agreement, the “Digirad Agreements”). The Supplier Agreement became effective upon the completion of the Subscription Agreement. Pursuant to the terms of the Digirad Agreements, Digirad purchased, in a private placement, 71,429 shares of PF Medical’s restricted Series F Stock for an aggregate purchase price of $1,000,000. The 71,429 share investment made by Digirad constituted approximately 5.4% of the outstanding common shares of PF Medical. The Supplier Agreement provides, among other things, that upon PF Medical’s commercialization of certain Tc99m generators, Digirad will purchase agreed upon quantities of Tc-99m for its nuclear imaging operations either directly or in conjunction with its preferred nuclear pharmacy supplier and PF Medical will supply Digirad, or its preferred nuclear pharmacy supplier, with Tc-99m at a preferred pricing, subject to certain conditions. To date, PF Medical is still in the R&D stage of its commercialization efforts, and no amounts of Tc99m have been sold to Digirad under the Supplier Agreement.

 

Employment Agreements and Management Incentive Plans (“MIPs”). We have employment agreements (each dated July 10, 2014 and effective for four years, as amended) with each of Dr. Centofanti (our President and CEO) and Ben Naccarato (our CFO). Each employment agreement provides for annual base salaries, bonuses (including MIPs as approved by our Board), and other benefits commonly found in such agreements. In addition, each employment agreement provides that in the event of termination of such officer without cause or termination by the officer for good reason (as such terms are defined in the employment agreement), the terminated officer shall receive payments of an amount equal to benefits that have accrued as of the termination but had not yet been paid, plus an amount equal to one year’s base salary at the time of termination. In addition, each of the employment agreements provide that in the event of a change in control (as defined in the employment agreements), all outstanding stock options to purchase our Common Stock granted to, and held by, the officer covered by the employment agreement to be immediately vested and exercisable. Mr. John Lash, our previous Chief Operating Officer (“COO”) who retired from the position effective September 30, 2016 and who remained a part-time employee through December 31, 2016, also had an employment agreement dated July 10, 2014 with substantially the same provisions as described above. Upon Mr. Lash’s resignation as COO effective September 30, 2016, his employment agreement also terminated. No amount was payable under Mr. Lash’s employment agreement upon his resignation as COO.

 

On January 19, 2017, the Company entered into an employment agreement (the “EVP/COO Employment Agreement”) with Mr. Mark Duff, EVP/COO, which was effective as of June 11, 2016, the effective date of Mr. Duff’s employment with the Company. The EVP/COO Employment Agreement has a term of three years from June 11, 2016 and provides substantially the same provisions as the employment agreements described above for the CEO and CFO.

 

On January 19, 2017, our Board and Compensation Committee approved individual MIPs for our CEO, EVP/COO, and CFO. The MIPs are effective January 1, 2017. Each MIP provides guidelines for the calculation of annual cash incentive based compensation, subject to Compensation Committee oversight and modification. Each MIP awards cash compensation based on achievement of performance thresholds, with the amount of such compensation established as a percentage of base salary. The potential target performance compensation ranges from 5% to 100% of the 2017 base salary for the CEO ($13,962 to $279,248), 5% to 100% of the 2017 base salary for the EVP/COO ($13,350 to $267,000), and 5% to 100% of the 2017 base salary for the CFO ($11,033 to $220,667). See “2017 MIPs.”

 

 

 
15

 

 

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act, and the regulations promulgated thereunder require our executive officers and directors and beneficial owners of more than 10% of our Common Stock to file reports of ownership and changes of ownership of our Common Stock with the Securities and Exchange Commission, and to furnish us with copies of all such reports. Based solely on a review of the copies of such reports furnished to us and written information provided to us, we believe that during 2016 none of our executive officers, directors, or beneficial owners of more than 10% of our Common Stock failed to timely file reports under Section 16(a).

 

Audit Committee Report

The Audit Committee is responsible for providing independent objective oversight of the Company’s accounting functions and internal controls. In accordance with rules adopted by the Securities and Exchange Commission, the Audit Committee of the Company states that:

 

 

The Audit Committee has reviewed and discussed with management the Company’s audited financial statements for the fiscal year ended December 31, 2016.

 

 

The Audit Committee has discussed with Grant Thornton LLP, the Company’s independent registered public accounting firm for the year ended December 31, 2016, the matters required to be discussed by Public Company Accounting Oversight Board (“PCAOB”) Auditing Standards No. 16 (“Communications with Audit Committees”), as modified or supplemented.

 

 

The Audit Committee has received the written disclosures and the letter from Grant Thornton LLP, required by PCAOB Rule 3526, “Communication with Audit Committees Concerning Independence,” as modified or supplemented, and has discussed with Grant Thornton LLP, the independent registered public accounting firm’s independence.

 

In connection with the Audit Committee’s discussion with Grant Thornton LLP, as described above, the Audit Committee discussed and considered the nature and scope of the audit services performed by Grant Thornton LLP for the year ended December 31, 2016, and determined that the audit services provided by Grant Thornton LLP were compatible with maintaining the independence of Grant Thornton LLP.

 

Based upon the review and discussions referred to above, the Audit Committee recommended to the Board of Directors that the Company’s audited financial statements be included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016, for filing with the Securities and Exchange Commission. The Audit Committee has appointed Grant Thornton, LLP as the Company’s independent registered public accounting firm for 2017.

 

This report is submitted on behalf of the members of the Audit Committee:

 

Mark A. Zwecker (Chairperson)

Gary G. Kugler

S. Robert Cochran

 

The Report of the Audit Committee shall not be deemed to be “soliciting material” or to be “filed” with the Securities and Exchange Commission, nor shall it be incorporated by any general statement incorporating by reference this Proxy Statement into any filing under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act, except to the extent that the Company specifically incorporates this information by reference and shall not otherwise be deemed filed under such Acts.

 

EXECUTIVE OFFICERS

The following table sets forth, as of the date hereof, information concerning our executive officers:

 

NAME

AGE

POSITION

Dr. Louis Centofanti

73

President, CEO, and Director

Mr. Ben Naccarato

54

CFO, Vice President, and Secretary

Mr. Mark Duff

54

EVP and COO

 

Dr. Louis F. Centofanti

See “Election of Directors – Dr. Louis F. Centofanti” for further information on Dr. Centofanti.

 

 

 
16

 

 

Mr. Ben Naccarato

Mr. Naccarato has served as the CFO since February 26, 2009. Mr. Naccarato joined the Company in September 2004 and served as Vice President, Finance of the Company’s Industrial Segment until May 2006, when he was named Vice President, Corporate Controller/Treasurer. From December 2002 to September 2004, Mr. Naccarato was the CFO of Culp Petroleum Company, Inc., a privately held company in the fuel distribution and used waste oil industry. In July 2015, Mr. Naccarato was named the CFO of PF Medical, the Company’s majority-owned Polish subsidiary involved in the research and development of a new medical isotope technology. Effective December 22, 2015, Mr. Naccarato was appointed to the Management Board of PF Medical. Mr. Naccarato is a graduate of University of Toronto having received a Bachelor of Commerce and Finance Degree and is a Chartered Professional Accountant, Certified Management Accountant (CPA, CMA).

 

Mr. Mark Duff

On May 15, 2016, the Board appointed Mr. Mark Duff to the position of EVP, effective June 11, 2016. Mr. Duff brings additional experience and leadership to the Company to support and help accelerate anticipated revenue growth and profitability. Upon Mr. John Lash’s retirement as COO of the Company effective September 30, 2016 (see “Resignation of Executive Officer” below), Mr. Duff assumed the additional position of the Company’s COO, and continues his position as EVP of the Company. Mr. Duff has 30 years of management and technical experience in the U.S Department of Energy (“DOE”) and U.S. Department of Defense (“DOD”) environmental and construction markets as a corporate officer, senior project manager, co-founder of a consulting firm, and federal employee. For the past five years, Mr. Duff has been responsible for the successful completion of over 70 performance-based projects at the Paducah Gaseous Diffusion Plant (“PGDP”) in Paducah, KY. At the PGDP, he served as the Project Manager for the Paducah Remediation Contract, which was a five-year project with a total value of $458 million. Prior to the PGDP project, Mr. Duff was a senior manager supporting Babcock and Wilcox (“B&W”), leading several programs that included building teams to solve complex technical problems. These programs included implementation of the American Recovery and Reinvestment Act (“ARRA”) at the DOE Y-12 facility with a $245 million budget for new cleanup projects completed over a two year period. During this period, Mr. Duff served as project manager leading a team of senior experts in support of Toshiba Corporation in Tokyo, Japan to integrate United States technology in the recovery of the Fukushima Daiichi Nuclear Reactor disaster. This project included arriving in Japan within three weeks after the earthquake to coordinate technologies associated with water treatment, radiation protection and shielding. Prior to joining B&W, Mr. Duff served as the president of Safety and Ecology Corporation (“SEC”). As President of SEC, he helped grow the company from $50 million to $80 million in annual revenues with significant growth in infrastructure, marketing, and client diversification. Mr. Duff has an MBA from the University of Phoenix and received his B.S. from the University of Alabama.

 

Resignation of Executive Officer

On September 12, 2016, the Company accepted the retirement of Mr. John Lash as Vice President and COO of the Company, which became effective September 30, 2016. Mr. Lash remained a part-time employee of the Company assisting with Company business matters from October 1, 2016, through December 31, 2016, at which time Mr. Lash retired from the Company. Mr. Lash’s retirement as COO of the Company was not due to a disagreement with the Company.

 

 

 
17

 

 

EXECUTIVE COMPENSATION

 

Summary Compensation Table

The following table summarizes the total compensation paid or earned by each of the named executive officers (“NEOs”) for the fiscal years ended December 31, 2016 and 2015.

 

Name and Principal Position

Year

Salary

Bonus

 

Option Awards

 

Non-Equity Incentive Plan Compensation

 

All other Compensation

Total Compensation

   

($)

($) 

 

($) (2)

 

($) (3)

 

($) (4)

($)

                     

Dr. Louis Centofanti

2016

   279,248

 

 

 

           31,763

        311,011

President and CEO

2015

   271,115

 

 

             82,691

 

           31,446

        385,252

                     

Ben Naccarato

2016

   220,667

 

 

 

           37,537

        258,204

Vice President and CFO

2015

   214,240

 

 

             65,343

 

           37,710

        317,293

                     

Mark Duff (1)

2016

   136,581

 

100,094

 

 

           40,800

        277,475

EVP/COO

2015

 

 

 

                     

John Lash (1)

2016

   215,000

 

 

 

           26,925

        241,925

Vice President and COO

2015

   215,000

 

 

             65,575

 

           26,863

        307,438

 

(1)

Mr. Duff was appointed as EVP by the Company on May 15, 2016 (effective June 11, 2016). Upon Mr. Lash’s retirement from the position of COO, effective September 30, 2016, Mr. Duff also assumed the additional position of COO. Mr. Lash remained a part time employee of the Company from October 1, 2016 to December 31, 2016, at which time Mr. Lash retired from the Company. As EVP/COO, Mr. Duff was provided the following compensation:

 

 

Annual base salary of $267,000;

 

Incentive stock options for purchase up to 50,000 shares of the Company’s Common Stock (see footnote 2 below);

 

Eligibility to participate in the Company’s performance incentive compensation bonus program (see footnote 3 below);

 

Up to $40,000 relocation expenses, of which Mr. Duff incurred $26,695 in relocation expenses (see footnote 4 below); and

 

Car allowance of $750 per month.

 

Amount noted in chart above for 2016 reflect amount earned by Mr. Duff from his date of employment in June 2016.

 

(2)

Reflects the aggregate grant date fair value of awards computed in accordance with ASC 718, “Compensation – Stock Compensation.” No options were granted to any other NEOs in 2016 other than Mr. Duff. No options were granted to NEOs in 2015.

 

(3)

Represents performance compensation earned under the Company’s Management Incentive Plan (“MIP”) with respect to each NEO. The MIP for each NEO is described under the heading “2016 Management Incentive Plans (“MIP”).” No compensation was earned by any named executive officer under his respective MIP for 2016. Mr. Duff did not have a MIP for 2016.

 

(4)

The amount shown includes a monthly automobile allowance ($500 or $750), insurance premiums (health, disability and life) paid by the Company on behalf of the executive, and 401(k) matching contribution. For Mr. Duff, amount included relocation expense paid by the Company.

 

   

Insurance

                                 

Name

 

Premium

   

Auto Allowance

   

401(k) match

   

Relocation

   

Total

 

Dr. Louis Centofanti

  $ 17,028     $ 9,000     $ 5,735           $ 31,763  

Ben Naccarato

  $ 24,039     $ 9,000     $ 4,498           $ 37,537  

Mark Duff

  $ 8,720     $ 4,846     $ 539       26,695     $ 40,800  

John Lash

  $ 17,028     $ 6,000     $ 3,897           $ 26,925  

 

 

 
18

 

 

Outstanding Equity Awards at Fiscal Year

 

The following table sets forth unexercised options held by the NEOs as of the fiscal year-end.

 

Outstanding Equity Awards at December 31, 2016

 

 

   

Option Awards

 

Name

 

Number of Securities Underlying Unexercised Options (#) Exercisable

   

Number of Securities Underlying Unexercised Options (#) (1) Unexercisable

   

Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#)

   

Option Exercise Price ($)

   

Option Expiration Date

 
                                         

Dr. Louis Centofanti

                             
                                         

Ben Naccarato

                               
                                         

Mark Duff

          50,000 (2)           3.97    

5/15/2022

 
                                         

John Lash (3)

    30,000                   5.00    

3/31/2017

 

 

(1) In the event of a change in control (as defined in the 2010 Stock Option Plan) of the Company, each outstanding option and award shall immediately become exercisable in full notwithstanding the vesting or exercise provisions contained in the stock option agreement.

 

(2) Incentive stock option granted on May 15, 2016 under the Company’s 2010 Stock Option Plan. The option is for a six year term and vests over a three year period, at one third increments per year.

 

(3) Mr. Lash retired from the position of COO effective September 30, 2016 and remained a part-time employee of the Company from October 1, 2016 to December 31, 2016 at which time he retired from the Company. Pursuant to the provisions of the 2010 Stock Option Plan, upon retirement, Mr. Lash had till March 31, 2017 to exercise his vested options, which was forfeited by Mr. Lash on March 31, 2017.

 

None of the Company’s NEOs exercised options during 2016.

 

Employment Agreements

Each of our CEO and CFO has an employment agreements dated July 10, 2014 with the Company. The employment agreements dated July 10, 2014 with our CEO and CFO are collectively referred to as the “Employment Agreements” and each as an “Employment Agreement.” These Employment Agreements provided that Dr. Centofanti, CEO, was entitled to receive an annual base salary of $271,115 and Mr. Naccarato, CFO, was entitled to receive an annual base salary of $214,240. The base salary is subject to adjustment as determined by the Compensation Committee. In addition to base salary, each of these executive officers is entitled to participate in the Company's benefits plans and to any performance compensation payable under an individual MIP for the CEO and CFO. No compensation was earned under each of the MIP for the CEO and CFO in 2016 (see further detail of each MIP below under the heading “2016 Management Incentive Plans (“MIPs”)”).

 

Each of the Employment Agreements was effective for three year. On May 30, 2017, with the approval of the Compensation Committee and the Board, the Company entered into an amendment to the Employment Agreement with each the CEO and CFO which extended the termination date of the agreement to July 10, 2018. No other terms of the Employment Agreement were amended. Each Employment Agreement may be terminated prior to its expiration by the Company with or without “cause” (as defined in the agreement) or by the executive officer for “good reason” (as defined in the agreement) or any other reason. If the NEO’s employment is terminated due to death, disability or for cause, we will pay to the NEO or to his estate a lump sum equal to the sum of any unpaid base salary through the date of termination and any benefits otherwise due at that time under any employee benefit plan, excluding any severance program or policy (the “Accrued Amounts”).

 

 

 
19

 

 

If the NEO terminates his employment for “good reason” or is terminated without cause, we will pay the NEO a sum equal to the total Accrued Amounts, plus one year of full base salary. If the NEO terminates his employment for a reason other than for good reason, we will pay to him the amount equal to the Accrued Amounts. If there is a Change in Control (as defined in the agreement), all outstanding stock options to purchase common stock held by the NEO will immediately become vested and exercisable in full. Severance benefits payable with respect to a termination (other than Accrued Amounts) shall not be payable until the termination constitutes a “separation from service” (as defined under Treasury Regulation Section 1.409A-1(h)).

 

Mr. John Lash, who retired from the position of COO, effective September 30, 2016, also had an employment agreement (“COO Employment Agreement”) dated July 10, 2014 with substantially the same provisions as in the Employment Agreements discussed above, in additional to an individual MIP for 2016. Upon Mr. Lash’s retirement from the position of COO, the COO Employment Agreement terminated. No compensation was earned by the COO under his 2016 MIP (see further detail of the COO’s 2016 MIP below under the heading “2016 Management Incentive Plans (“MIPs”)”).

 

On January 19, 2017, the Company entered into an employment agreement (the “EVP/COO Employment Agreement”) with Mr. Mark Duff, EVP/COO. Upon Mr. Lash’s retirement as COO effective September 30, 2016 as discussed above, Mr. Duff assumed the additional position of COO and continued his position of EVP of the Company. The EVP/COO Employment Agreement is effective June 11, 2016, Mr. Duff’s commencement date of employment as EVP, and has a term of three years. Pursuant to the EVP/COO Employment Agreement, Mr. Duff will serve as the Company’s EVP/COO with an annual base salary of $267,000. In addition, Mr. Duff is entitled to participate in the Company's broad-based benefits plans and to certain performance compensation payable under a separate MIP as approved by the Company’s Compensation Committee and Board. See MIPs approved by the Compensation Committee for each of the EVP/COO, CEO, and CFO for 2017 below. The terms of each 2017 MIP, which are each effective as of January 1, 2017, are described below under the heading “2017 MIPs.”

 

The EVP/COO Employment Agreements is effective for three years, unless earlier terminated by the Company with or without “cause” (as defined in the agreement) or by the EVP/COO for “good reason” (as defined in the agreement) or any other reason. If the EVP/COO’s employment is terminated due to death, disability or for cause, the Company will pay to the EVP/COO or to his estate a lump sum equal to the sum of any unpaid base salary through the date of termination and any benefits due to the EVP/COO under any employee benefit plan, excluding any severance program or policy (the “Accrued Amounts”).

 

If the EVP/COO terminates his employment for good reason or is terminated without cause, the Company will pay the EVP/COO a sum equal to the total Accrued Amounts, plus one year of full base salary. If the EVP/COO terminates his employment for a reason other than for good reason, the Company will pay to the EVP/COO the amount equal to the Accrued Amounts. If there is a Change in Control (as defined in the agreement), all outstanding stock options to purchase common stock held by the EVP/COO will immediately become exercisable in full. Severance benefits payable with respect to a termination (other than Accrued Amounts) shall not be payable until the termination constitutes a “separation from service” (as defined under Treasury Regulation Section 1.409A-1(h)).

 

Potential Payments

The following table sets forth the potential (estimated) payments and benefits to which our NEOs, Dr. Centofanti, Mark Duff, and Mr. Naccarato would be entitled upon termination of employment or following a Change in Control of the Company, as specified under each Employment Agreement with the Company, assuming each circumstance described below occurred on December 31, 2016, the last day of our fiscal year. Mr. John Lash’s Employment Agreement terminated effective September 30, 2016, upon his retirement from the position of COO.

 

 
20

 

 

 

             

By Employee for

         
     

Disability,

     

Good Reason or by

         

Name and Principal Position

   

Death,

     

Company Without

     

Change in Control

 

Potential Payment/Benefit

   

or For Cause

     

Cause

     

of the Company

 
                         

Dr. Louis Centofanti

                       

President, CEO and Director

                       

Severance

 

$

──

   

$

279,248

   

$

──

 

Stock Options

 

$

──

(1)

 

$

──

(1)

 

$

──

(1)

                         

Mr. Mark Duff

                       

EVP/COO

                       

Severance

 

$

──

   

$

267,000

   

$

──

 

Stock Options

 

$

──

(2)

 

$

──

(2)

 

$

──

(3)

                         

Ben Naccarato

                       

CFO

                       

Severance

 

$

──

   

$

220,667

   

$

──

 

Stock Options

 

$

──

(1)

 

$

──

(1)

 

$

──

(1)

 

(1)

No stock option outstanding as of December 31, 2016.

 

(2)

Benefit is zero since no options were vested as of December 31, 2016.

 

(3)

Benefit is zero since the number of stock options outstanding that were in-the-money as of December 31, 2016 (as reported on Nasdaq) was zero.

 

No performance compensation under the NEO’s MIP would have been payable at December 31, 2016 under any of the circumstances described in the table above. Pursuant to each MIP, if the participant’s employment with the Company is voluntarily or involuntarily terminated prior to the annual payment of the MIP compensation payment period, no MIP payment is payable. The payment is otherwise payable under each MIP on or about 90 days after year-end, or sooner, based on finalization of our financial statements for year-end. See “2016 Management Incentive Plans (“MIPs”)” below.

 

The amounts payable with respect to a termination (other than base salary and amounts otherwise payable under any Company employee benefit plan) are payable only if the termination constitutes a “separation from service” (as defined under Treasury Regulation Section 1.409A-1(h)).

 

2016 Executive Compensation Components

For the fiscal year ended December 31, 2016, the principal components of compensation for executive officers were:

 

 

base salary;

 

performance-based incentive compensation;

 

long term incentive compensation;

 

retirement and other benefits; and

 

perquisites.

 

Based on the amounts set forth in the Summary Compensation table, during 2016, salary accounted for approximately 78.2% of the total compensation of our NEOs, while equity option awards, bonus, MIP compensation, and other compensation accounted for approximately 21.8% of the total compensation of the NEOs.

 

Base Salary

The NEOs, other officers, and other employees of the Company receive a base salary during the fiscal year. Base salary ranges for executive officers are determined for each executive based on his or her position and responsibility by using market data and comparisons to the Peer Group.

 

 

 
21

 

 

During its review of base salaries for executives, the Compensation Committee primarily considers:  

 

 

market data and Peer Group comparisons;

 

 

internal review of the executive’s compensation, both individually and relative to other officers; and

 

 

individual performance of the executive.

 

Salary levels are typically considered annually as part of the performance review process as well as upon a promotion or other change in job responsibility. Merit based salary increases for executives are based on the Compensation Committee’s assessment of the individual’s performance. The base salary and potential annual base salary adjustments for the CEO, CFO, and EVP/COO are set forth in their respective Employment Agreements.

 

Performance-Based Incentive Compensation

The Compensation Committee has the latitude to design cash and equity-based incentive compensation programs to promote high performance and achievement of our corporate objectives by directors and the NEOs, encourage the growth of stockholder value and enable employees to participate in our long-term growth and profitability. The Compensation Committee may grant stock options and/or performance bonuses. In granting these awards, the Compensation Committee may establish any conditions or restrictions it deems appropriate. In addition, the CEO has discretionary authority to grant stock options to certain high-performing executives or officers, subject to the approval of the Compensation Committee. The exercise price for each stock options granted is at or above the market price of our Common Stock on the date of grant. Stock options may be awarded to newly hired or promoted executives at the discretion of the Compensation Committee. Grants of stock options to eligible newly hired executive officers are generally made at the next regularly scheduled Compensation Committee meeting following the hire date.

 

2016 Management Incentive Plans (“MIPs”)

On February 4, 2016, the Board and the Compensation Committee approved individual MIPs for our CEO, previous COO (who retired from the position of COO effective September 30, 2016), and CFO. The MIPs were effective as of January 1, 2016. Each MIP provided guidelines for the calculation of annual cash incentive based compensation, subject to Compensation Committee oversight and modification. Each MIP awarded cash compensation based on achievement of performance thresholds (as discussed below), with the amount of such compensation established as a percentage of base salary. The potential target performance compensation ranged from 5% to 100% of the 2016 base salary for the CEO ($13,962 to $279,248), 5% to 100% of the 2016 base salary for our previous COO ($10,750 to $215,000) , and 5% to 100% of the 2016 base salary for the CFO ($11,033 to $220,667) .

 

Performance compensation under the Company’s MIPs is to be paid on or about 90 days after year-end, or sooner, based on finalization of our audited financial statements for 2016. If the MIP participant’s employment with the Company is voluntarily or involuntarily terminated prior to a regularly scheduled MIP compensation payment date, no MIP payment will be payable for and after such period.  

 

The Compensation Committee retains the right to modify, change or terminate each MIP and may adjust the various target amounts described below, at any time and for any reason.

 

The total performance compensation paid to the CEO, our previous COO, and CFO as a group was not to exceed 50% of the Company’s pre-tax net income (exclusive of PF Medical, the Company’s majority-owned Polish subsidiary) prior to the calculation of performance compensation.

 

No performance incentive compensation was earned under each of the MIPs for the CEO, previous COO, and CFO for 2016 as described below.

 

The following describes the principal terms of each MIP:

 

 

 
22

 

 

CEO MIP:

2016 CEO performance compensation was based upon meeting corporate revenue, earnings before interest, taxes, depreciation and amortization (“EBITDA”), health and safety, and environmental compliance (permit and license violations) objectives during fiscal year 2016 from our continuing operations (excluding PF Medical). The Compensation Committee believes performance compensation payable under each of the 2016 MIPs as discussed herein and below should be based on achievement of an EBITDA target as this target, which excludes certain non-cash items, provides a better indicator of operating performance. However, EBITDA has certain limitations as it does not reflect all items of income or cash flows that affect the Company’s financial performance under GAAP. At achievement of 70% to 119% of the revenue and EBITDA targets, the potential performance compensation was payable at 5% to 50% of the CEO’s 2016 base salary. For this compensation, 60% was based on EBITDA goal, 10% on revenue goal, 15% on the number of health and safety claim incidents that occurred during fiscal year 2016, and the remaining 15% on the number of notices alleging environmental, health or safety violations under our permits or licenses that occurred during the fiscal year 2016.  At achievement of 120% to 160%+ of the revenue and EBITDA targets, the potential performance compensation was payable at 65% to 100% of the CEO’s 2016 base salary. For this compensation, the amount payable was based on the four objectives noted above, with the payment of such performance compensation being weighted more heavily toward the EBITDA objective. Each of the revenue and EBITDA components was based on our Board-approved revenue target and EBITDA target. The 2016 target performance incentive compensation for our CEO was as follows:

 

Annualized Base Pay:

  $ 279,248  

Performance Incentive Compensation Target (at 100% of MIP):

  $ 139,624  

Total Annual Target Compensation (at 100% of MIP):

  $ 418,872  

 

 

                           

TARGET

                         
                                                         

Revenue Target

 

<$

56,000,000      $ 56,000,000     $ 68,000,000     $ 80,000,000     $ 96,000,000     $ 112,000,000     $ 128,000,000  

EBITDA Target

 

<$

6,370,000     $ 6,370,000     $ 7,735,000     $ 9,100,000     $ 10,920,000     $ 12,740,000     $ 14,560,000  
                                                         
                                                         

% of Performance Incentive Target

    0 %     10 %     50 %     100 %     130 %     170 %     200 %

% of Target Achieved

 

<70

    70%-84 %     85%-99 %     100%-119 %     120%-139 %     140%-159 %  

160

%+
                                                         

Revenue

  $ -     $ 1,397     $ 6,981     $ 13,962     $ 19,945     $ 27,924     $ 33,908  

EBITDA

    -       8,377       41,887       83,774       119,678       167,549       203,452  

Health and Safety

    -       2,094       10,472       20,944       20,944       20,944       20,944  

Permit & License Violations

    -       2,094       10,472       20,944       20,944       20,944       20,944  
    $ -     $ 13,962     $ 69,812     $ 139,624     $ 181,511     $ 237,361     $ 279,248  

 

1)

Revenue was defined as the total consolidated third party top line revenue from continuing operations (excluding PF Medical) as publicly reported in the Company’s financial statements. The percentage achieved was determined by comparing the actual consolidated revenue from continuing operations to the Board-approved revenue target from continuing operations, which was $80,000,000. The Board reserved the right to modify or change the revenue targets as defined herein in the event of the sale or disposition of any of the assets of the Company or in the event of an acquisition.

 

2)

EBITDA was defined as earnings before interest, taxes, depreciation, and amortization from continuing operations (excluding PF Medical). The percentage achieved was determined by comparing the actual EBITDA to the Board approved EBITDA target, which was $9,100,000. The Board reserved the right to modify or change the EBITDA targets as defined herein in the event of the sale or disposition of any of the assets of the Company or in the event of an acquisition.

 

3)

The health and safety incentive target was based upon the actual number of Worker’s Compensation Lost Time Accidents, as provided by the Company’s Worker’s Compensation carrier. The Corporate Controller submitted a report on a quarterly basis documenting and confirming the number of Worker’s Compensation Lost Time Accidents, supported by the Worker’s Compensation Loss Report provided by the Company’s carrier or broker. Such claims were identified on the loss report as “indemnity claims.” The following number of Worker’s Compensation Lost Time Accidents and corresponding Performance Target Thresholds were established for the annual incentive compensation plan calculation for 2016.

 

 

 
23

 

 

Claim Number

   

Target

 
           
6       70%-84%  
5       85%-99%  
4       100%-119%  
3       120%-139%  
2       140%-159%  
1       160% +  

 

4)

Permits or license violations incentive was earned/determined according to the scale set forth below:  An “official notice of non-compliance” was defined as an official communication from a local, state, or federal regulatory authority alleging one or more violations of an otherwise applicable Environmental, Health or Safety requirement or permit provision, which resulted in a facility’s implementation of corrective action(s).

 

Permit and

   

Performance

 

License Violations

   

Target

 
           
6       70%-84%  
5       85%-99%  
4       100%-119%  
3       120%-139%  
2       140%-159%  
1       160% +  

 

5)

No performance incentive compensation was payable for achieving the health and safety, permit and license violation, and revenue targets unless a minimum of 70% of the EBITDA target was achieved.

 

COO MIP:

2016 COO performance compensation was based upon meeting corporate revenue, EBITDA, health and safety, and environmental compliance (permit and license violations) objectives during fiscal year 2016 from our continuing operations (excluding PF Medical). At achievement of 70% to 119% of the revenue and EBITDA targets, the potential performance compensation was payable at 5% to 50% of the COO’s 2016 base salary. For this compensation, 60% was based on EBITDA goal, 10% on revenue goal, 15% on the number of health and safety claim incidents that occurred during fiscal year 2016, and the remaining 15% on the number of notices alleging environmental, health or safety violations under our permits or licenses that occurred during the fiscal year 2016.  At achievement of 120% to 160%+ of the revenue and EBITDA targets, the potential performance compensation was payable at 65% to 100% of the COO’s 2016 base salary. For this compensation, the amount payable was based on the four objectives noted above, with the payment of such performance compensation being weighted more heavily toward the EBITDA objective. Each of the revenue and EBITDA components was based on our Board approved revenue target and EBITDA target. The 2016 target performance incentive compensation for our COO was as follows:

 

Annualized Base Pay:

  $ 215,000  

Performance Incentive Compensation Target (at 100% of MIP):

  $ 107,500  

Total Annual Target Compensation (at 100% of MIP):

  $ 322,500  

 

 

 
24

 

 

                           

TARGET

                         
                                                         

Revenue Target

 

<$

56,000,000     $ 56,000,000     $ 68,000,000     $ 80,000,000     $ 96,000,000     $ 112,000,000     $ 128,000,000  

EBITDA Target

 

<$

6,370,000      $ 6,370,000     $ 7,735,000     $ 9,100,000     $ 10,920,000     $ 12,740,000     $ 14,560,000  
                                                         
                                                         

% of Performance Incentive Target

    0 %     10 %     50 %     100 %     130 %     170 %     200 %

% of Target Achieved

 

<70

%     70%-84 %     85%-99 %     100%-119 %     120%-139 %     140%-159 %  

160

%+
                                                         

Revenue

  $ -     $ 1,074     $ 5,374     $ 10,750     $ 15,357     $ 21,500     $ 26,107  

EBITDA

    -       6,450       32,250       64,500       92,143       129,000       156,643  

Health and Safety

    -       1,613       8,063       16,125       16,125       16,125       16,125  

Permit & License Violations

    -       1,613       8,063       16,125       16,125       16,125       16,125  
    $ -     $ 10,750     $ 53,750     $ 107,500     $ 139,750     $ 182,750     $ 215,000  

 

1)

Revenue was defined as the total consolidated third party top line revenue from continuing operations (excluding PF Medical) as publicly reported in the Company’s financial statements. The percentage achieved was determined by comparing the actual consolidated revenue from continuing operations to the Board-approved revenue target from continuing operations, which was $80,000,000. The Board reserved the right to modify or change the revenue targets as defined herein in the event of the sale or disposition of any of the assets of the Company or in the event of an acquisition.

 

2)

EBITDA was defined as earnings before interest, taxes, depreciation, and amortization from continuing operations (excluding PF Medical). The percentage achieved was determined by comparing the actual EBITDA to the Board approved EBITDA target, which was $9,100,000. The Board reserved the right to modify or change the EBITDA targets as defined herein in the event of the sale or disposition of any of the assets of the Company or in the event of an acquisition.

 

3)

The health and safety incentive target was based upon the actual number of Worker’s Compensation Lost Time Accidents, as provided by the Company’s Worker’s Compensation carrier. The Corporate Controller submitted a report on a quarterly basis documenting and confirming the number of Worker’s Compensation Lost Time Accidents, supported by the Worker’s Compensation Loss Report provided by the Company’s carrier or broker. Such claims were identified on the loss report as “indemnity claims.” The following number of Worker’s Compensation Lost Time Accidents and corresponding Performance Target Thresholds were established for the annual incentive compensation plan calculation for 2016.

 

Claim Number

   

Target

 
           
6       70%-84%  
5       85%-99%  
4       100%-119%  
3       120%-139%  
2       140%-159%  
1       160% +  

 

 

4)

Permits or license violations incentive was earned/determined according to the scale set forth below:  An “official notice of non-compliance” was defined as an official communication from a local, state, or federal regulatory authority alleging one or more violations of an otherwise applicable Environmental, Health or Safety requirement or permit provision, which resulted in a facility’s implementation of corrective action(s).

 

 

 
25

 

 

Permit and

   

Performance

 

License Violations

   

Target

 
           
6       70%-84%  
5       85%-99%  
4       100%-119%  
3       120%-139%  
2       140%-159%  
1       160% +  

 

5)

No performance incentive compensation was payable for achieving the health and safety, permit and license violation, and revenue targets unless a minimum of 70% of the EBITDA target was achieved.

 

CFO MIP:

2016 CFO performance compensation was based upon meeting corporate revenue, EBITDA, health and safety, and environmental compliance (permit and license violations) objectives during fiscal year 2016 from our continuing operations (excluding PF Medical). At achievement of 70% to 119% of the revenue and EBITDA targets, the potential performance compensation was payable at 5% to 50% of the CFO’s 2016 base salary. For this compensation, 60% was based on EBITDA goal, 10% on revenue goal, 15% on the number of health and safety claim incidents that occurred during fiscal year 2016, and the remaining 15% on the number of notices alleging environmental, health or safety violations under our permits or licenses that occurred during the fiscal year 2016.  At achievement of 120% to 160%+ of the revenue and EBITDA targets, the potential performance compensation was payable at 65% to 100% of the CFO’s 2016 base salary. For this compensation, the amount payable was based on the four objectives noted above, with the payment of such performance compensation being weighted more heavily toward the EBITDA objective. Each of the revenue and EBITDA components was based on our Board approved revenue target and EBITDA target. The 2016 target performance incentive compensation for our CFO was as follows:

 

Annualized Base Pay:

  $ 220,667  

Performance Incentive Compensation Target (at 100% of Plan):

  $ 110,334  

Total Annual Target Compensation (at 100% of Plan):

  $ 331,001  

 

                           

TARGET

                         
                                                         

Revenue Target

 

<$

56,000,000     $ 56,000,000     $ 68,000,000     $ 80,000,000     $ 96,000,000     $ 112,000,000     $ 128,000,000  

EBITDA Target

 

<$

6,370,000      $ 6,370,000     $ 7,735,000     $ 9,100,000     $ 10,920,000     $ 12,740,000     $ 14,560,000  
                                                         
                                                         

% of Performance Incentive Target

    0 %     10 %     50 %     100 %     130 %     170 %     200 %

% of Target Achieved

 

<70

%     70%-84 %     85%-99 %     100%-119 %     120%-139 %     140%-159 %  

160

%+
                                                         

Revenue

  $ -     $ 1,103     $ 5,517     $ 11,034     $ 15,762     $ 22,067     $ 26,795  

EBITDA

    -       6,620       33,100       66,200       94,572       132,400       160,772  

Health and Safety

    -       1,655       8,275       16,550       16,550       16,550       16,550  

Permit & License Violations

    -       1,655       8,275       16,550       16,550       16,550       16,550  
    $ -     $ 11,033     $ 55,167     $ 110,334     $ 143,434     $ 187,567     $ 220,667  

 

1)

Revenue was defined as the total consolidated third party top line revenue from continuing operations (excluding PF Medical) as publicly reported in the Company’s financial statements. The percentage achieved was determined by comparing the actual consolidated revenue from continuing operations to the Board-approved revenue target from continuing operations, which was $80,000,000. The Board reserved the right to modify or change the revenue targets as defined herein in the event of the sale or disposition of any of the assets of the Company or in the event of an acquisition.

 

2)

EBITDA was defined as earnings before interest, taxes, depreciation, and amortization from continuing operation (excluding PF Medical). The percentage achieved was determined by comparing the actual EBITDA to the Board approved EBITDA target, which was $9,100,000. The Board reserved the right to modify or change the EBITDA targets as defined herein in the event of the sale or disposition of any of the assets of the Company or in the event of an acquisition.

 

 

 
26

 

 

3)

The health and safety incentive target was based upon the actual number of Worker’s Compensation Lost Time Accidents, as provided by the Company’s Worker’s Compensation carrier. The Corporate Controller submitted a report on a quarterly basis documenting and confirming the number of Worker’s Compensation Lost Time Accidents, supported by the Worker’s Compensation Loss Report provided by the Company’s carrier or broker. Such claims were identified on the loss report as “indemnity claims.” The following number of Worker’s Compensation Lost Time Accidents and corresponding Performance Target Thresholds were established for the annual incentive compensation plan calculation for 2016.

 

Claim Number

   

Target

 
           
6       70%-84%  
5       85%-99%  
4       100%-119%  
3       120%-139%  
2       140%-159%  
1       160% +  

 

4)

Permits or license violations incentive was earned/determined according to the scale set forth below:  An “official notice of non-compliance” was defined as an official communication from a local, state, or federal regulatory authority alleging one or more violations of an otherwise applicable Environmental, Health or Safety requirement or permit provision, which resulted in a facility’s implementation of corrective action(s).

 

Permit and

   

Performance

 

License Violations

   

Target

 
           
6       70%-84%  
5       85%-99%  
4       100%-119%  
3       120%-139%  
2       140%-159%  
1       160% +  

 

5)

No performance incentive compensation was payable for achieving the health and safety, permit and license violation, and revenue targets unless a minimum of 70% of the EBITDA target was achieved.

 

2016 MIP Targets

As discussed above, 2016 MIPs approved for the CEO, COO, and CFO by the Board and the Compensation Committee provided for the award of cash compensation based on achievement of performance targets which included revenue and EBITDA targets as approved by our Board. The 2016 MIP revenue target of $80,000,000 and EBITDA target of $9,100,000 were set by the Compensation Committee taking into account the Board-approved budget for 2016 as well as the committee’s expectations for performance that in its estimation would warrant payment of incentive cash compensation. In formulating the revenue target of $80,000,000, the Board considered 2015 results, current economic conditions, and forecasts for 2016 government (U.S DOE) spending. The Compensation Committee believed the performance targets were likely to be achieved, but not assured. No cash incentive based compensation under the 2016 MIPs was paid to the CEO, COO or CFO.

 

2017 MIPs

On January 19, 2017, the Board and the Compensation Committee approved individual MIPs for our CEO, EVP/COO, and CFO. The MIPs are effective January 1, 2017 for the 2017 calendar year. Each MIP provides guidelines for the calculation of annual cash incentive based compensation, subject to Compensation Committee oversight and modification. Each MIP awards cash compensation based on achievement of performance thresholds, with the amount of such compensation established as a percentage of base salary. The potential target performance compensation ranges from 5% to 100% of the 2017 base salary for the CEO ($13,962 to $279,248), 5% to 100% of the 2017 base salary for the EVP/COO ($13,350 to $267,000), and 5% to 100% of the 2017 base salary for the CFO ($11,033 to $220,667). Effective April 20, 2017, the Compensation Committee and the Board approved an increase to the CFO’s base salary to $229,494; however, the potential target performance compensation ranges payable as a percentage of base salary under the 2017 MIP remains under the base salary prior to the salary increase.

 

 
27

 

 

 

Performance compensation is paid on or about 90 days after year-end, or sooner, based on finalization of our audited financial statements for 2017. If the MIP participant’s employment with the Company is voluntarily or involuntarily terminated prior to a regularly scheduled MIP compensation payment date, no MIP payment will be payable for and after such period.  

 

The Compensation Committee retains the right to modify, change or terminate each MIP and may adjust the various target amounts described below, at any time and for any reason.

 

The total performance compensation paid to the CEO, EVP/COO, and CFO as a group is not to exceed 50% of the Company’s pre-tax net income (exclusive of PF Medical) prior to the calculation of performance compensation.

 

The following describes the principal terms of each MIP:

 

CEO MIP:

2017 CEO performance compensation is based upon meeting corporate revenue, EBITDA, health and safety, and environmental compliance (permit and license violations) objectives during fiscal year 2017 from our continuing operations (excluding PF Medical). The Compensation Committee believes performance compensation payable under each of the 2017 MIPs as discussed herein and below should be based on achievement of an EBITDA target, which excludes certain non-cash items, as this target provides a better indicator of operating performance. However, EBITDA has certain limitations as it does not reflect all items of income or cash flows that affect the Company’s financial performance under GAAP. At achievement of 70% to 119% of the revenue and EBITDA targets, the potential performance compensation is payable at 5% to 50% of the CEO’s 2017 base salary. For this compensation, 60% is based on the EBITDA goal, 10% on the revenue goal, 15% on the number of health and safety claim incidents that occur during fiscal year 2017, and the remaining 15% on the number of notices alleging environmental, health, or safety violations under our permits or licenses that occur during the fiscal year 2017. At achievement of 120% to 160%+ of the revenue and EBITDA targets, the potential performance compensation is payable at 65% to 100% of the CEO’s 2017 base salary. For this compensation, the amount payable is based on the four objectives noted above, with the payment of such performance compensation being weighted more heavily toward the EBITDA objective. Each of the revenue and EBITDA components is based on our Board approved revenue target and EBITDA target. The 2017 target performance incentive compensation for our CEO is as follows:

 

Annualized Base Pay:

  $ 279,248  

Performance Incentive Compensation Target (at 100% of MIP):

  $ 139,624  

Total Annual Target Compensation (at 100% of MIP):

  $ 418,872  

 

 

CEO MIP MATRIX

2017

 

Performance Target Column:

           

(a)

   

(b)

     

(c)

 

(d)

   

(e)

   

(f)

 
                                                           
                             

TARGET

                         
                                                           

Revenue Target

  < $ 56,000,000     $ 56,000,000     $ 68,000,000     $ 80,000,000     $ 96,000,000     $ 112,000,000     $ 128,000,000  

EBITDA Target

 

$ 6,510,000     $ 6,510,000     $ 7,905,000     $ 9,300,000     $ 11,160,000     $ 13,020,000     $ 14,880,000  
                                                           
                                                           

% of Performance Incentive Target

    0 %     10 %     50 %     100 %     130 %     170 %     200 %

% of Target Achieved

   

<70

%     70%-84 %     85%-99 %     100%-119 %     120%-139 %     140%-159 %  

160

%+
                                                           

Revenue

  $ -     $ 1,397     $ 6,981       13,962     $ 19,945     $ 27,924     $ 33,908  

EBITDA

    -       8,377       41,887       83,774       119,678       167,549       203,452  

Health and Safety

    -       2,094       10,472       20,944       20,944       20,944       20,944  

Permit & License Violations

    -       2,094       10,472       20,944       20,944       20,944       20,944  
      $ -     $ 13,962     $ 69,812     $ 139,624     $ 181,511     $ 237,361     $ 279,248  

 

1)

Revenue is defined as the total consolidated third party top line revenue from continuing operations (excluding PF Medical) as publicly reported in the Company’s 2017 financial statements. The percentage achieved is determined by comparing the actual consolidated revenue from continuing operations to the Board-approved revenue target from continuing operations, which is $80,000,000. The Board reserves the right to modify or change the revenue targets as defined herein in the event of the sale or disposition of any of the assets of the Company or in the event of an acquisition.

 

 

 
28

 

 

2)

EBITDA is defined as earnings before interest, taxes, depreciation, and amortization from continuing operations (excluding PF Medical). The percentage achieved is determined by comparing the actual EBITDA to the Board approved EBITDA target for 2017, which is $9,300,000. The Board reserves the right to modify or change the EBITDA targets as defined herein in the event of the sale or disposition of any of the assets of the Company or in the event of an acquisition.

 

3)

The health and safety incentive target is based upon the actual number of Worker’s Compensation Lost Time Accidents, as provided by the Company’s Worker’s Compensation carrier. The Corporate Controller will submit a report on a quarterly basis documenting and confirming the number of Worker’s Compensation Lost Time Accidents, supported by the Worker’s Compensation Loss Report provided by the company’s carrier or broker. Such claims will be identified on the loss report as “indemnity claims.” The following number of Worker’s Compensation Lost Time Accidents and corresponding Performance Target Thresholds has been established for the annual incentive compensation plan calculation for 2017.

 

Work Comp.

Claim Number

 

Performance

Target Payable Under Column

6

 

(a)

5

 

(b)

4

 

(c)

3

 

(d)

2

 

(e)

1

 

(f)

 

 

4)

Permits or license violations incentive is earned/determined according to the scale set forth below:  An “official notice of non-compliance” is defined as an official communication during 2017 from a local, state, or federal regulatory authority alleging one or more violations of an otherwise applicable Environmental, Health or Safety requirement or permit provision, which results in a facility’s implementation of corrective action(s).

 

Permit and

License Violations

 

Performance

Target Payable Under Column

6

 

(a)

5

 

(b)

4

 

(c)

3

 

(d)

2

 

(e)

1

 

(f)

 

5)

No performance incentive compensation will be payable for achieving the health and safety, permit and license violation, and revenue targets unless a minimum of 70% of the EBITDA target is achieved.

 

 

 
29

 

 

EVP/COO MIP:

2017 EVP/COO performance compensation is based upon meeting corporate revenue, EBITDA, health and safety, and environmental compliance (permit and license violations) objectives during fiscal year 2017 from our continuing operations (excluding PF Medical). At achievement of 70% to 119% of the revenue target and 60% to 119% of the EBITDA target, the potential performance compensation is payable at 5% to 50% of the 2017 base salary. For this compensation, 60% is based on EBITDA goal, 10% on revenue goal, 15% on the number of health and safety claim incidents that occur during fiscal year 2017, and the remaining 15% on the number of notices alleging environmental, health or safety violations under our permits or licenses that occur during the fiscal year 2017. Upon achievement of 120% to 160%+ of the revenue and EBITDA targets, the potential performance compensation is payable at 65% to 100% of the EVP/COO’s 2017 base salary. For this compensation, the amount payable is based on the four objectives noted above, with the payment of such performance compensation being weighted more heavily toward the EBITDA objective. Each of the revenue and EBITDA components is based on our Board approved revenue target and EBITDA target. The 2017 target performance incentive compensation for our EVP/COO is as follows:

 

Annualized Base Pay:

  $ 267,000  

Performance Incentive Compensation Target (at 100% of Plan):

  $ 133,500  

Total Annual Target Compensation (at 100% of Plan):

  $ 400,500  

 

EVP/COO MIP MATRIX

2017

 

Performance Target Column:

           

(a)

   

(b)

   

(c)

   

(d)

   

(e)

   

(f)

 
                                                           
                             

TARGET

                         
                                                           

Revenue Target

<

  $ 56,000,000     $ 56,000,000     $ 63,586,000     $ 80,000,000     $ 96,000,000     $ 112,000,000     $ 128,000,000  

EBITDA Target

<

  $ 5,600,000     $ 5,600,000     $ 6,358,600     $ 9,300,000     $ 11,160,000     $ 13,020,000     $ 14,880,000  
                                                           
                                                           

% of Performance Incentive Target

    0 %     10 %     50 %     100 %     130 %     170 %     200 %

% of Revenue Target Achieved

   

<70

%     70%-78 %     79%-99 %     100%-119 %     120%-139 %     140%-159 %  

160

%+

% of EBITDA Target Achieved

   

<60

%     60%-67 %     68%-99 %     100%-119 %     120%-139 %     140%-159 %  

160

%+
                                                           

Revenue

  $ -     $ 1,334     $ 6,674     $ 13,350     $ 19,071     $ 26,700     $ 32,421  

EBITDA

    -       8,010       40,050       80,100       114,429       160,200       194,529  

Health and Safety

    -       2,003       10,013       20,025       20,025       20,025       20,025  

Permit & License Violations

    -       2,003       10,013       20,025       20,025       20,025       20,025  
      $ -     $ 13,350     $ 66,750     $ 133,500     $ 173,550     $ 226,950     $ 267,000  

 

1)

Revenue is defined as the total consolidated third party top line revenue from continuing operations (excluding Medical) as publicly reported in the Company’s 2017 financial statements. The percentage achieved is determined by comparing the actual consolidated revenue from continuing operations to the Board-approved revenue target from continuing operations, which is $80,000,000. The Board reserves the right to modify or change the revenue targets as defined herein in the event of the sale or disposition of any of the assets of the Company or in the event of an acquisition.

 

2)

EBITDA is defined as earnings before interest, taxes, depreciation, and amortization from continuing operations, excluding PF Medical. The percentage achieved is determined by comparing the actual EBITDA to the Board approved EBITDA target for 2017, which is $9,300,000. The Board reserves the right to modify or change the EBITDA targets as defined herein in the event of the sale or disposition of any of the assets of the Company or in the event of an acquisition.

 

3)

The health and safety incentive target is based upon the actual number of Worker’s Compensation Lost Time Accidents, as provided by the Company’s Worker’s Compensation carrier. The Corporate Controller will submit a report on a quarterly basis documenting and confirming the number of Worker’s Compensation Lost Time Accidents, supported by the Worker’s Compensation Loss Report provided by the company’s carrier or broker. Such claims will be identified on the loss report as “indemnity claims.” The following number of Worker’s Compensation Lost Time Accidents and corresponding Performance Target Thresholds has been established for the annual incentive compensation plan calculation for 2017.

 

 
30

 

 

Work Comp.

Claim Number

 

Performance

Target Payable Under Column

     

6

 

(a)

     

5

 

(b)

     

4

 

(c)

     

3

 

(d)

     

2

 

(e)

     

1

 

(f)

 

4)

Permits or license violations incentive is earned/determined according to the scale set forth below:  An “official notice of non-compliance” is defined as an official communication during 2017 from a local, state, or federal regulatory authority alleging one or more violations of an otherwise applicable Environmental, Health or Safety requirement or permit provision, which results in a facility’s implementation of corrective action(s).

 

Permit and

License Violations

 

Performance

Target Payable Under Column

     

6

 

(a)

     

5

 

(b)

     

4

 

(c)

     

3

 

(d)

     

2

 

(e)

     

1

 

(f)

 

5)

No performance incentive compensation will be payable for achieving the health and safety, permit and license violation, and revenue targets unless a minimum of 60% of the EBITDA target is achieved.

 

CFO MIP:

2017 CFO performance compensation is based upon meeting corporate revenue, EBITDA, health and safety, and environmental compliance (permit and license violations) objectives during fiscal year 2017 from our continuing operations (excluding PF Medical). At achievement of 70% to 119% of the revenue and EBITDA targets, the potential performance compensation is payable at 5% to 50% of the 2017 base salary. For this compensation, 60% is based on EBITDA goal, 10% on revenue goal, 15% on the number of health and safety claim incidents that occur during fiscal year 2017, and the remaining 15% on the number of notices alleging environmental, health or safety violations under our permits or licenses that occur during the fiscal year 2017. Upon achievement of 120% to 160%+ of the revenue and EBITDA targets, the CFO’s potential performance compensation is payable at 65% to 100% of the CFO’s 2017 base salary. For this compensation, the amount payable is based on the four objectives noted above, with the payment of such performance compensation being weighted more heavily toward the EBITDA objective. Each of the revenue and EBITDA components is based on our board approved revenue target and EBITDA target. The 2017 target performance incentive compensation for our CFO is as follows:

 

Annualized Base Pay:

  $ 220,667  

Performance Incentive Compensation Target (at 100% of Plan):

  $ 110,334  

Total Annual Target Compensation (at 100% of Plan):

  $ 331,001  

 

 

 
31

 

 

CFO MIP MATRIX

2017

 

Performance Target Column:

           

(a)

   

(b)

   

(c)

   

(d)

   

(e)

   

(f)

 
                                                           
                             

TARGET

                         
                                                           

Revenue Target

<

  $ 56,000,000     $ 56,000,000     $ 68,000,000     $ 80,000,000     $ 96,000,000     $ 112,000,000     $ 128,000,000  

EBITDA Target

<

  $ 6,510,000     $ 6,510,000     $ 7,905,000     $ 9,300,000     $ 11,160,000     $ 13,020,000     $ 14,880,000  
                                                           
                                                           

% of Performance Incentive Target

    0 %     10 %     50 %     100 %     130 %     170 %     200 %

% of Target Achieved

   

<70

%     70%-84 %     85%-99 %     100%-119 %     120%-139 %     140%-159 %  

160

%+
                                                           

Revenue

  $ -     $ 1,103     $ 5,517     $ 11,034     $ 15,762     $ 22,067     $ 26,795  

EBITDA

    -       6,620       33,100       66,200       94,572       132,400       160,772  

Health and Safety

    -       1,655       8,275       16,550       16,550       16,550       16,550  

Permit & License Violations

    -       1,655       8,275       16,550       16,550       16,550       16,550  
      $ -     $ 11,033     $ 55,167     $ 110,334     $ 143,434     $ 187,567     $ 220,667  

 

1)

Revenue is defined as the total consolidated third party top line revenue from continuing operations (excluding PF Medical) as publicly reported in the Company’s 2017 financial statements. The percentage achieved is determined by comparing the actual consolidated revenue from continuing operations to the Board-approved revenue target from continuing operations, which is $80,000,000. The Board reserves the right to modify or change the revenue targets as defined herein in the event of the sale or disposition of any of the assets of the Company or in the event of an acquisition.

 

2)

EBITDA is defined as earnings before interest, taxes, depreciation, and amortization from continuing operations (excluding PF Medical). The percentage achieved is determined by comparing the actual EBITDA to the Board approved EBITDA target for 2017, which is $9,300,000. The Board reserves the right to modify or change the EBITDA targets as defined herein in the event of the sale or disposition of any of the assets of the Company or in the event of an acquisition.

 

3)

The health and safety incentive target is based upon the actual number of Worker’s Compensation Lost Time Accidents, as provided by the Company’s Worker’s Compensation carrier. The Corporate Controller will submit a report on a quarterly basis documenting and confirming the number of Worker’s Compensation Lost Time Accidents, supported by the Worker’s Compensation Loss Report provided by the company’s carrier or broker. Such claims will be identified on the loss report as “indemnity claims.” The following number of Worker’s Compensation Lost Time Accidents and corresponding Performance Target Thresholds has been established for the annual incentive compensation plan calculation for 2017.

 

Work Comp.

Claim Number

 

Performance

Target Payable Under Column

     

6

 

(a)

     

5

 

(b)

     

4

 

(c)

     

3

 

(d)

     

2

 

(e)

     

1

 

(f)

 

4)

Permits or license violations incentive is earned/determined according to the scale set forth below:  An “official notice of non-compliance” is defined as an official communication during 2017 from a local, state, or federal regulatory authority alleging one or more violations of an otherwise applicable Environmental, Health or Safety requirement or permit provision, which results in a facility’s implementation of corrective action(s).

 

 

 
32

 

 

Permit and

License Violations

 

Performance

Target Payable Under Column

     

6

 

(a)

     

5

 

(b)

     

4

 

(c)

     

3

 

(d)

     

2

 

(e)

     

1

 

(f)

 

5)

No performance incentive compensation will be payable for achieving the health and safety, permit and license violation, and revenue targets unless a minimum of 70% of the EBITDA target is achieved.

 

2017 MIP Targets

As discussed above, 2017 MIPs approved for the CEO, EVP/COO, and CFO by Board and the Compensation Committee provide for the award of cash compensation based on achievement of performance targets which included Revenue and EBITDA targets as approved by our Board. The 2017 MIP revenue target of $80,000,000 and EBITDA target of $9,300,000 were set by the Compensation Committee taking into account the Board-approved budget for 2017 as well as the committee’s expectations for performance that in its estimation would warrant payment of incentive cash compensation. In formulating the revenue target of $80,000,000, the Board considered 2016 results, current economic conditions, and forecasts for 2017 government (U.S DOE) spending. The Compensation Committee believes the performance targets are likely to be achieved, but not assured

 

Long-Term Incentive Compensation

 

Employee Stock Option Plans

The 2010 Stock Option Plan (the “2010 Option Plan”) encourages participants to focus on long-term performance and provides an opportunity for executive officers and certain designated key employees to increase their stake in the Company. Stock options succeed by delivering value to the executive only when the value of our stock increases. The 2010 Option Plan authorizes the grant of Non-Qualified Stock Options (“NQSOs”) and Incentive Stock Options (“ISOs”) for the purchase of our Common Stock.

 

The 2010 Option Plan assists the Company to:

 

 

enhance the link between the creation of stockholder value and long-term executive incentive compensation;

 

 

provide an opportunity for increased equity ownership by executives; and

 

 

maintain competitive levels of total compensation.

 

Stock option award levels are determined based on market data, vary among participants based on their positions with us and are granted generally at the Compensation Committee’s regularly scheduled August or September meeting. Newly hired or promoted executive officers who are eligible to receive options are generally awarded such options at the next regularly scheduled Compensation Committee meeting following their hire or promotion date.

 

Options are awarded with an exercise price equal to or not less than the closing price of the Company’s Common Stock on the date of the grant as reported on the NASDAQ. In certain limited circumstances, the Compensation Committee may grant options to an executive at an exercise price in excess of the closing price of the Company’s Common Stock on the grant date.

 

 
33

 

 

On May 15, 2016, the Company granted 50,000 ISOs from the Company’s 2010 Stock Option Plan to our newly named EVP/COO. The ISOs granted were for a contractual term of six years with one-third vesting annually over a three year period. The exercise price of the ISOs was $3.97 per share, which was equal to the fair market value of the Company’s Common Stock on the date of grant.

 

Pursuant to the 2010 Stock Option plan, vesting of option awards ceases upon termination of employment and exercise right of the vested option amount ceases upon three months from termination of employment except in the case of death or retirement (subject to a six month limitation), or disability (subject to a one year limitation). Prior to the exercise of an option, the holder has no rights as a stockholder with respect to the shares subject to such option.

 

In the event of a “change of control” (as defined in the 2010 Stock Option Plan) of the Company, each outstanding option and award granted under the plans shall immediately become exercisable in full notwithstanding the vesting or exercise provisions contained in the stock option agreement.

 

Accounting for Stock-Based Compensation

We account for stock-based compensation in accordance with ASC 718, “Compensation – Stock Compensation.” ASC 718 establishes accounting standards for entity exchanges of equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity’s equity instruments or that may be settled by the issuance of those equity instruments. ASC 718 requires all stock-based payments to employees, including grants of employee stock options, to be recognized in the income statement based on their fair values. The Company uses the Black-Scholes option-pricing model to determine the fair-value of stock-based awards which requires subjective assumptions. Assumptions used to estimate the fair value of stock options granted include the exercise price of the award, the expected term, the expected volatility of the Company’s stock over the option’s expected term, the risk-free interest rate over the option’s expected term, and the expected annual dividend yield. We recognize stock-based compensation expense using a straight-line amortization method over the requisite period, which is the vesting period of the stock option grant.

 

Retirement and Other Benefits

 

401(k) Plan

We adopted the Perma-Fix Environmental Services, Inc. 401(k) Plan (the “401(k) Plan”) in 1992, which is intended to comply with Section 401 of the Internal Revenue Code and the provisions of the Employee Retirement Income Security Act of 1974. All full-time employees who have attained the age of 18 are eligible to participate in the 401(k) Plan. Eligibility is immediate upon employment but enrollment is only allowed during four quarterly open periods of January 1, Apri1 1, July 1, and October 1. Participating employees may make annual pretax contributions to their accounts up to 100% of their compensation, up to a maximum amount as limited by law. We, at our discretion, may make matching contributions based on the employee’s elective contributions. Company contributions vest over a period of five years. In 2016, the Company contributed approximately $307,000 in 401(k) matching funds, of which approximately $15,000 was for our NEOs (see the “Summary Compensation Table” under “Executive Compensation” for 401(k) matching fund contributions made for the NEOs for 2016).

 

Perquisites and Other Personal Benefits

The Company provides executive officers with limited perquisites and other personal benefits (health/disability/life insurance) that the Company and the Compensation Committee believe are reasonable and consistent with its overall compensation program to better enable the Company to attract and retain superior employees for key positions. The Compensation Committee periodically reviews the levels of perquisites and other personal benefits provided to executive officers. The executive officers are provided an auto allowance.

 

Consideration of Stockholder Say-On-Pay Advisory Vote.

At our Annual Meeting of Stockholders held on July 28, 2016, our stockholders voted, on a non-binding, advisory basis, on the compensation of our NEOs for 2015. A substantial majority (approximately 80%) of the total votes cast on our say-on-pay proposal at that meeting approved the compensation of our NEOs for 2015 on a non-binding, advisory basis. The Compensation Committee and the Board believes that this affirms our stockholders’ support of our approach to executive compensation. The Compensation Committee expects to continue to consider the results of future stockholder say-on-pay advisory votes when making future compensation decisions for our NEOs. We will hold an advisory vote on the compensation of our NEOs at our 2017 annual meeting of stockholders.

 

 
34

 

 

 

Equity Compensation Plans

The following table sets forth information as of December 31, 2016, with respect to our equity compensation plans.

 

   

Equity Compensation Plan

 

Plan Category

 

Number of securities to

be issued upon exercise

of outstanding options

warrants and rights

   

Weighted average

exercise price of

outstanding

options, warrants

and rights

   

Number of securities

remaining available fo