Item
5.02 – Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory
Arrangements of Certain Officers.
New
Executive Officer of the Company
Executive
Vice President (“EVP”) of Nuclear and Technical Services
On
January 16, 2020, Perma-Fix Environmental Services, Inc.’s (the “Company”) Board of Directors (the “Board”)
elected Mr. Andy Lombardo (age 60) to the position of EVP of Nuclear and Technical Services and an executive officer of the Company.
Since joining the Company in 2011, Mr. Lombardo has held the positions of Senior Vice President of Nuclear and Technical Services
of a subsidiary of the Company.
Mr.
Andrew Lombardo, a Certified Health Physicist (“CHP”), has over 35 years of management and technical experience in
the commercial nuclear reactor market, the U.S Department of Energy (“DOE”) and the U.S. Department of Defense (“DOD”)
environmental and construction markets as a senior director, senior project manager, senior CHP and chemist. Prior to joining
the Company, Mr. Lombardo held the position of Vice President of Technical Services for Safety and Ecology Corporation (“SEC”)
prior to the acquisition of SEC by the Company in 2011. In his positions with both the Company and SEC, Mr. Lombardo procured
and performed greater than $20M a year in health physics and radioactive material management projects across the DOE and DOD complex
while managing a professional staff of engineers and health physicists and an instrumentation laboratory. Prior to his employment
with the Company and SEC, he managed decommissioning projects for two engineering firms which included the successful deployment
of soil segregation technology, resulting in client savings of more than $100M in transportation and disposal costs. During this
time, he developed an expertise characterizing and managing naturally occurring radioactive material (“NORM”) and
technologically enhanced NORM (“TENORM”) waste streams across multiple industries including oil and gas exploration
and production. As a result of his expertise, he was recently appointed to the National Council on Radiation Protection and Measurement
Committee to provide a commentary on the generation and disposal of TENORM waste. Mr. Lombardo began his career as a chemist and
health physicist for the Duquesne Light Company at two commercial reactor sites and one joint DOE/Naval Reactors Duquesne Light
test reactor in Shippingport, PA. Mr. Lombardo is certified in comprehensive practice of health physics, has a M.S. degree in
Health Physics from the University of Pittsburgh and a B.S. in Natural Sciences from Indiana University of Pennsylvania.
There
is no family relationship between Mr. Lombardo and any director or executive officer of the Company.
There
are no transactions involving Mr. Lombardo and the Company requiring to be reported under Item 404(a) of Regulation S-K except
as disclosed below.
Executive
Compensation:
Salary
On
January 16, 2020, the Board, with the approval of the Compensation and Stock Option Committee (the “Compensation Committee”),
approved the following salary increase for the Company’s following officers effective January 1, 2020:
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Annual
base salary for Mark Duff, CEO and President, was increased to $344,400 from $287,000.
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Annual
base salary for Ben Naccarato, who was promoted to EVP and CFO from VP and CFO, was increased to $280,000 from $235,231; and
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Annual
base salary for Andy Lombardo, who was promoted to EVP of Nuclear and Technical Services as discussed above, was increased
to $280,000 from $258,662, which was the amount that Mr. Lombardo was receiving prior to being named an executive officer
of the Company.
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Management
Incentive Plans (“MIPs”)
On
January 16, 2020, the Company’s Compensation Committee and the Board approved individual MIPs for the calendar year 2020
for Mark Duff, our Chief Executive Officer (the “CEO”); Ben Naccarato, our EVP and Chief Financial Officer (the “CFO”);
Dr. Louis Centofanti, our EVP of Strategic Initiatives and Andy Lombardo, our EVP of Nuclear and Technical Services. The MIPs
are effective January 1, 2020 and applicable for year 2020. 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 150% of the 2020 base salary for the CEO ($17,220 to $516,600), 5% to 100% of the 2020
base salary for the CFO ($14,000 to $280,000), 5% to 100% of the 2020 base salary for the EVP of Strategic Initiatives ($11,667
to $233,336) and 5% to 100% of the 2020 base salary for the EVP of Nuclear and Technical Services ($14,000 to $280,000).
The
performance compensation payable under each MIP for the CEO, CFO and EVP of Strategic Initiatives is based upon meeting certain
corporate revenue, earnings before interest, taxes, depreciation and amortization (“EBITDA”), health and safety, and
environmental compliance (permit and license violations) targets and objectives during fiscal year 2020 from our operations, with
such targets and objectives approved by the Company’s Board. The performance compensation payable under the MIP for the
EVP of Nuclear and Technical Services is based upon meeting certain corporate revenue, EBITDA, health and safety, and cost performance
index (“CPI”) (a metric used in measuring project performance) The Compensation Committee believe performance compensation
payable under each of the MIPs should be based on achievement of EBITDA, a non-GAAP (Generally Accepted Accounting Principles)
financial measurement, as the Company believes that this target provides a better indicator of operating performance as it excludes
certain non-cash items. 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.
Performance
compensation is paid on or about 90 days after year-end, or sooner, based on finalization of our audited financial statements
for 2020.
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 paid to the CEO, CFO, EVP of Strategic Initiatives and EVP of Nuclear and Technical Services will not exceed 50% of the
Company’s pre-tax net income prior to the calculation of performance compensation.
Each
MIP is briefly described below, and the descriptions contained herein are qualified by reference to the respective MIPs attached
as exhibits 99.1 to 99.4 to this Report.
CEO
MIP:
2020
CEO performance compensation is based upon meeting certain corporate revenue, EBITDA, health and safety, and environmental compliance
(permit and license violations) objectives during fiscal year 2020 from our operations. At achievement of 60% to 110% of each
of the revenue and EBITDA targets, the potential performance compensation is payable at 5% to 50% of the CEO’s 2020 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 2020, 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 2020. At achievement of 111% to 150%+ of
each of the revenue and EBITDA targets, the potential performance compensation is payable at 75% to 150% of the CEO’s 2020
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. No performance incentive compensation will be payable to
the CEO for achieving the health and safety, permit and license violation, and revenue targets unless a minimum of 60% of the
EBITDA target is achieved. Each of the revenue and EBITDA components is based on our Board-approved revenue target and EBITDA
target. The 2020 target performance incentive compensation for our CEO is as follows:
Annualized Base Pay:
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$
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344,400
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Performance Incentive Compensation Target (at 100% of MIP):
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$
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172,200
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Total Annual Target Compensation (at 100% of MIP):
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$
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516,600
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CFO
MIP:
2020
CFO performance compensation is based upon meeting certain corporate revenue, EBITDA, health and safety, and environmental compliance
(permit and license violations) objectives during fiscal year 2020 from our operations. At achievement of 60% to 110% of each
of the revenue and EBITDA targets, the potential performance compensation is payable at 5% to 50% of the CFO’s 2020 base
salary. For this compensation, 75% is based on EBITDA goal, 10% on revenue goal, 7.5% on the number of health and safety claim
incidents that occur during fiscal year 2020, and the remaining 7.5% on the number of notices alleging environmental, health or
safety violations under our permits or licenses that occur during the fiscal year 2020. Upon achievement of 111% to 150%+ of each
of the revenue and EBITDA targets, the potential performance compensation is payable at 65% to 100% of the CFO’s 2020 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. No performance incentive compensation will be payable to
the CFO for achieving the health and safety, permit and license violation, and revenue targets unless a minimum of 60% of the
EBITDA target is achieved. Each of the revenue and EBITDA components is based on our Board approved revenue target and EBITDA
target. The 2020 target performance incentive compensation for our CFO is as follows:
Annualized Base Pay:
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$
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280,000
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Performance Incentive Compensation Target (at 100% of Plan):
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$
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140,000
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Total Annual Target Compensation (at 100% of Plan):
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$
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420,000
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EVP
of Strategic Initiatives MIP:
2020
EVP of Strategic Initiatives performance compensation is based upon meeting certain corporate revenue, EBITDA, health and safety,
and environmental compliance (permit and license violations) objectives during fiscal year 2020 from our operations. At achievement
of 60% to 110% of each of the revenue and EBITDA targets, the potential performance compensation is payable at 5% to 50% of the
EVP of Strategic Initiatives’ 2020 base salary. For this compensation, 75% is based on EBITDA goal, 10% on revenue goal,
7.5% on the number of health and safety claim incidents that occur during fiscal year 2020, and the remaining 7.5% on the number
of notices alleging environmental, health or safety violations under our permits or licenses that occur during the fiscal year
2020. Upon achievement of 111% to 150%+ of each of the revenue and EBITDA targets, the EVP of Strategic Initiatives’ potential
performance compensation is payable at 65% to 100% of the EVP of Strategic Initiatives’ 2020 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. No performance incentive compensation will be payable to the EVP of Strategic Initiatives
for achieving the health and safety, permit and license violation, and revenue targets unless a minimum of 60% of the EBITDA target
is achieved. Each of the revenue and EBITDA components is based on our board approved revenue target and EBITDA target. The 2020
target performance incentive compensation for our EVP of Strategic Initiatives is as follows:
Annualized Base Pay:
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$
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233,336
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Performance Incentive Compensation Target (at 100% of Plan):
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$
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116,668
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Total Annual Target Compensation (at 100% of Plan):
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$
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350,004
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EVP
of Nuclear and Technical Services MIP:
2020
EVP of Nuclear and Technical Services performance compensation is based upon meeting certain corporate revenue, EBITDA, health
and safety, and CPI objectives during fiscal year 2020 from our operations. At achievement of 60% to 110% of each of the revenue
and EBITDA targets, the potential performance compensation is payable at 5% to 50% of the EVP of Nuclear and Technical Services’
2020 base salary. For this compensation, 60% is based on EBITDA goal, 10% on revenue goal, 15% on CPI goal and the remaining 15%
on the number of health and safety claim incidents that occur during fiscal year 2020. Upon achievement of 111% to 150%+ of each
of the revenue and EBITDA targets, the EVP of Nuclear and Technical Services’ potential performance compensation is payable
at 65% to 100% of the EVP of Nuclear and Technical Services’ 2020 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. No performance incentive compensation will be payable to the EVP of Nuclear and Technical Services for achieving
the health and safety, CPI target, and revenue targets unless a minimum of 60% of the EBITDA target is achieved. Each of the revenue
and EBITDA components is based on our Board approved revenue target and EBITDA target. The 2020 target performance incentive compensation
for our EVP of Nuclear and Technical Services is as follows:
Annualized Base Pay:
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$
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280,000
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Performance Incentive Compensation Target (at 100% of Plan):
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$
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140,000
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Total Annual Target Compensation (at 100% of Plan):
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$
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420,000
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